We might see this for a bit: Analyst on market headwinds

Baird Investment Strategy Analyst Ross Mayfield joined Yahoo Finance Live to break down why the market may experience headwinds for some time.

Video Transcript

SEANA SMITH: I want to bring in Ross Mayfield. He's investment strategy analyst with Baird. And Ross, great to speak with you again. We were talking about the NASDAQ being the outperformer in this market today, hitting an intraday record in earlier trading. What do you make of today's action and what that sets us up to see maybe for the remainder of the week?

ROSS MAYFIELD: Sure, so today has been, really, a continuation of what we saw last week, where the cyclical rotation that had really gone vertical since the Pfizer vaccine was first announced in November kind of took a pause. And you saw a little bit of reassertion from some of the big tech names, the FAANG names. I think Netflix earnings mid last week had a little bit of something to do with that.

But more than anything, just kind of a pause in the momentum that we've seen out of this cyclical trade that had really, really gone on a run for a couple of months there. I think it's likely that this could continue for a little bit.

ADAM SHAPIRO: Ross, I love my props, and I'm holding up your note from last week. I'm going to post them because you seem to be prescient ahead of everybody else when you say that we're going to have a smaller package regarding stimulus focused on additional income replacement. But it's the second will be a larger package focused on infrastructure.

So we heard the Biden administration spokesperson talk, or the congressman rather, in the last segment, talk about reconciliation. They can do the big giant reconciliation on infrastructure after October 1. Is that if I'm an investor, I should have in the back of my head if I'm looking at, like, Caterpillar or infrastructure tied stock?

ROSS MAYFIELD: I think that's fair. Putting specific dates on it is not really something that I'm comfortable doing, given my knowledge and expertise. But I do think down the road, that's going to be a big focus, the build America better, the focus on infrastructure, climate, green energy. I think that by whatever process they can come up with, they're going to be pushing for that.

I think in the immediate term, you do have to focus on the coronavirus. You have to focus on income replacement. And they will. But down the road, there's certainly no hiding the aspirations of what this administration wants to get done.

SEANA SMITH: So, Ross, with that in mind with what you said before, this pause in the momentum out of the cyclical gold trade that we've seen so far over the last couple of days, where are you positioned right now?

ROSS MAYFIELD: I think the cyclical trade in the near term still makes sense. I mean, this was never going to be a straight line up. We're dealing with a global pandemic with any-- an unlimited number of factors that are affecting this-- new strains, local and regional lockdowns, vaccine rollouts that have been challenged and vary from country to country.

So the cyclical rotation that was predicated on kind of an economic boom in 2021, or at least in the second half of 2021, widespread vaccination, unleashed pent-up demand, particularly for services, I think that still makes sense. I think we're still on a path for that. But there was never going to be a truly straight line, especially given all of the headline volatility that we see given the pandemic on the ground, given some of the really challenged economic data that came out of towards the end of Q4. So we still think the--

ADAM SHAPIRO: Ross, real quick--

ROSS MAYFIELD: --cyclical trade mix-- oh, go ahead, yes.

ADAM SHAPIRO: Real quick, how strong is that pent-up demand going to be for stocks? We know Delta just said they're bring back 400 pilots in anticipation of travel in the summer.

ROSS MAYFIELD: I think it's going to be really strong. I think Americans are in a really-- in the aggregate at least-- are in really strong consumer balance sheets, really strong financial position. There's an appetite to spend. There's an appetite to travel, to go to concerts, to go to the movies. I think there's a big pent-up demand. And I think assuming the vaccine rollout doesn't hit any big hiccups or we have any true tail risk scenarios with virus variants, I think the demand is going to be big.

SEANA SMITH: And Ross, real quick, what do you make of the 10-year? We're seeing it come back a little bit, falling closer to that 1% level. Where do you see it going, I guess, in the short to medium term?

ROSS MAYFIELD: I think that if our expectation is for big economic growth in 2021, as I believe it is, as I kind of laid out just a moment ago, I think it might be choppy, but the path is ultimately higher. I don't want to put necessarily a price target on it, but I certainly think some of the Street expectations coming into the year were a little low and didn't quite square with the GDP expectations for the year or so.

There's going to be some choppiness. There's going to be some volatility. We'll see it in Treasury rates. We'll see it in the stock market. We'll see it in the headlines. But I think ultimately, on the back of that pent-up demand and economic growth towards the back half of this year, we'll see the 10-year climb higher as well.

SEANA SMITH: All right, Ross Mayfield, great to have you back, investment strategy analyst with Baird. Thanks for taking the time.

ROSS MAYFIELD: Thanks for having me.