We're going to be re-testing the lows in the markets: Lee Munson

Lee Munson, Portfolio Wealth Advisors President & CIO, spoke with Yahoo Finance about how the markets are faring during the ongoing coronavirus pandemic.

Video Transcript

JEN ROGERS: Lee, there are battle lines drawn all over the Street, whether or not we have bottomed. There really are two camps in here. There are smart people on both sides of this. Where do you fall? Have we bottomed?

LEE MUNSON: I don't know if we've bottomed. Now my personal opinion is we haven't, right? But that doesn't really mean anything. What I do think is that we're going to retest the lows. And retesting the lows doesn't mean we're going to make a lower low from that March 23rd low. It just means we're going to head there.

So I've got buddies like Tony Dwyer who say, maybe buy, like, 5% above or something like that. We've got my queen of all technical analystst, Helene Meisler, who says, we're definitely going to fill in that gap around those lows. I'm in that camp.

So while I can't say we're going to go lower, even though that might be an opinion of mine, I do think that we're going to try to get down into that region. And I think that that's what the most important thing is. And that's-- and then you have people like Doug Kass, who I've been reading for a long time, who seems to think that the low is in and we head higher. So it's very stressful, let me tell you.

But what we've done is yesterday, near the close, I made a tough decision where we decided to go and raise cash. And while we still have a lot of equity exposure, we're at the lowest amount of equity exposure that our investment policy statements allow us right now. And so I think that that speaks volumes about where I'm at.

MYLES UDLAND: So Lee, it sounds like you're using this mini rally here-- and it's not mini anymore. We're up 20% from the lows-- as an opportunity to lighten up in anticipation of something in the future. So I guess as you see this move, what, to you, are the biggest drivers of what the market is seeing right now? Is it as simple as case counts look a little better in Italy and New York, and that's enough? Or is there something else at play here?

LEE MUNSON: No, you know, I said a few weeks ago, once we can see the peak, not at the peak, but once we can see that peak of peak whatever-- peak death, peak infection, peak exponential-- then the market is going to rally, and it's going to rally hard. But that's a bear market rally. We still have to contend with the recession.

Nine months ago, I was talking on this show about the inverted yield curve and how that's going to foretell, you know, whether it's 18, 24 months from now, we're going to get some type of recession. So says an indicator that's worked 100% of the time. Obviously, COVID has pushed that frame much quicker than just a year later. It pushed it in about seven, eight months later.

But just the fact that we might get over the health scare, the bottom line is-- I was drinking beer with my buddy last night, 20 feet away on the street, and he said, why is it, Lee, that you think the market can go lower? I said, on May 1st, are you going to take your kids out to a restaurant? And he told me, very grimly, I'm not taking my kids to a restaurant until there's a vaccine. I said, that's your answer right there.

So I would use this rally, do whatever you want with it. I used yesterday's rally to raise some cash. If it goes higher, I've got more shares to sell. But I think we retest. If I'm wrong, I'm wrong. I've been doing this for 22 years, and we'll see. Nobody knows.

JEN ROGERS: Hey, Lee, we talked on the phone one day when things were really crazy. And you told me that the time to buy was going to be when you wanted to go outside and throw up, and that that's when you should get in.

LEE MUNSON: Yes.

JEN ROGERS: Did you-- were able to execute on that? Did you ever get to that point in this craziness?

LEE MUNSON: Yeah. Yeah, I felt really physically ill a few days before the low on that Monday. So we were buying around 2350, 2400. And we saw that volatility. And I definitely felt physically ill, which is why I'm not so certain we're going to pierce through new lows.

I'm still going to look to purchase near the retest of the lows, and I think people like my favorite people like Dwyer and Meisler, I think that they have some good information, that you should check them out and pay them some money to find out how those people are playing that.

And the way I play it personally is somewhere around 2350 is the first time I start loading up the truck with this cash. But please keep in mind, we can go lower. And so I wouldn't shoot all your ammunition just at the December, you know, Christmas Eve 2018 retest. I think that that would be foolish. I think that the only thing I would sort of add in my own personal opinion, I'm not convinced we're going to have three or four bear market rallies.

This is extremely fast, and I think the recovery could be quicker than people realize. And so I think if you're thinking you're going to play bear market rallies three or four times like we had in the great financial crisis, I don't think that's going to happen. I think it's going to be a faster version of what we saw in 2001 through 2003. But at this point, we're just guessing. I'll let you know when I feel physically ill. I'll feel physically ill when we break about 2,100. And at 2,000, if we break 2,000 on the S&P, I'll be buying, and I'll feel sick.

JEN ROGERS: I like to have all my indicators, you know? There's a lot of different ones out there. But I think that's possibly a reliable one. Lee Munson, as you said, sold some equities, raised some cash into this week's surge. Great to get a chance to talk with you with Portfolio Wealth Advisors. He's the president and CIO over there. We'll see you later, Lee.