Here's what the economy could look like post-covid, inauguration

Julian Emanuel - Chief Equity & Derivatives Strategist at BTIG joins Yahoo Finance Live to discuss what the economy could look like in 2021.

Video Transcript

- And we are still joined by Julian Emanuel. He is the chief equity and derivatives strategist over at BTIG. Julian, we talked in the last segment a bit broadly about, you know, kind of how you're thinking about the setup right now, things to look out for in 2021. What are some areas of the market right now that you like, some areas you don't, and is this kind of rotational trade that has really become the topic du jour on Wall Street-- it that something that interests you with, you know, small caps, financials? You know, just a classic cyclical-type rally?

JULIAN EMANUEL: We do think there is a great deal to be said about this rotational trade. If you look at it, if you look at 2020 in its entirety, you look at the things that led to the downside during, you know, the height of the panic in February and March. Those were small caps. Those were financials-- you know, energy, all of the deep cyclical things correctly discounting the imminent recession that we had.

But the work that we did in getting more positive on the markets in April shows that sustained bull markets by definition need to see a period of outperformance from those very stocks that were laggards. And what we've seen over the course of the year, you know, particularly zeroing in on the fact that the NASDAQ 100 made its top on September the 2nd, and if you look at the last week and a half, it's the only major index in the US that hasn't made a new all-time high. There is information there.

And the information is that the market is looking forward to a resumption of more normalized growth. It may be delayed until the second half of next year, but the fact that we've got this, you know, incredibly great news in terms of multiple vaccine efficacies that we know has a finite end point to the situation we're in means that the confidence in investing in these deeply cyclical names with very depressed valuations and the potential for extremely large earning gains next year really is something that, you know, the rotation is likely to continue.

BRIAN SOZZI: Julian, do you think 2021 will be all about the big growth stock hangover? I look at a company like Lowe's out this morning, sales up over 30%. You look at quarters from Zoom recently, a company like DocuSign. How are their growth rates going to look any better next year as we start to get back to work? The reality is they won't, so should the stocks come under pressure?

JULIAN EMANUEL: Well-- look. They-- relatively speaking they are likely to come under pressure as this rotation occurs in an absolute sense because of the backdrop of liquidity and the Fed and the potential for earnings growth in general to resume. They're not going to have negative year-on-year comps in all likelihood. They'll grow at a more modest rate, and so what we could potentially see is things that we've seen in the FANG names, if you look back over the course of the last seven, eight years, you know, everyone remembers that these stocks were up 500, 600 700%.

But there are multiple periods of a year, two years, where they go sideways. They are market performers. They're slightly underperformers. We think that's more likely the scenario. So for patient long-term investors, those names still make sense, but are you going to be rewarded in the near term? Likely not.

- All right. Julian Emanuel is the chief equity and derivatives strategist over at BTIG. Julian, great to have you on the program this morning. Hopefully we'll have you back soon.

JULIAN EMANUEL: Great to be with you.