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Investors shouldn't make knee-jerk reactions based on headlines: Strategist

Arian Vojdani, MV Financial Investment Strategist joins the On the Move panel to discuss the latest market action.

Video Transcript

JULIE HYMAN: We want to look at markets now and the sell-off that we are seeing across the major averages. Arian Vojdani is joining us now. He is MV Financial Investment strategist. He's joining us from Bethesda, Maryland. Now, it seems as though there are a lot of different factors going into the sell-off today. One of them might be politics, Arian. And I think it's interesting that you're advising your-- your clients not to play the election when it comes to your portfolio. Is-- is it just too much of a risk? Is it just something you don't want to get bogged down in?

ARIAN VOJDANI: That's a great question. I think politics plays a shorthand into the markets, you know? If you think of this-- if you think we're flirting with a correction now and you think that's mostly political nature, I mean, look back to 2016, right? Every time leading up to the election there was-- not to be political, but any time there was, you know, a hint that Trump was starting to gain ground, the markets would go downwards. You know, Comey came out, the markets went downwards.

Then Trump won, and the markets decided that, hey, actually this is a great thing. Animal spirits woke up. You-- you remember the Trump trade we all talked about and heard about back in that time, that deflated early next year. So, you know, you don't want to be in these kind of, you know, pulling in and pulling out of the tide unless you're a trader. But if you're an investor, you don't want to get caught up and make a poor decision based around headline and knee-jerk reaction fear type triggers.

ADAM SHAPIRO: So, Arian, what if you're a worrywart, which I am, and you want to have some money in-- you know, some investment in fixed income, which has no return right now unless you take on higher risk, what do you do? Because the next year to two years looks really volatile.

ARIAN VOJDANI: Yeah, and I think you're seeing-- I think people are starting to forget when the markets became complacent. They have been. I've been saying that. And you're seeing volatility wake up. Do you-- do I believe this is going to be a protracted downturn? I don't really think so. But if you are someone that's more conservative-- and we've been saying this, and we've said this to most of our clients-- we are taking a more hedged outlook to the market.

You know, our equity exposure is somewhat less than typical. We're-- we're less in risk-on sectors like international, emerging markets, small midcaps. You really want to start to crowd your chips into large US equities, companies that, you know, really stand the test of time throughout uncertain market cycles. Because like you said, fixed income is a non-factor at this point. It's solely a cash tool to preserve your principle.

RICK NEWMAN: Hey, Arian, Rick Newman here. Are markets getting jittery because there appears to be no additional stimulus bill coming out of Congress? And is the market sending a message to Congress, get your act together?

ARIAN VOJDANI: I think that's definitely a part of it. Obviously, that's not great news. And that along with other potential negative news points, given the heightened sense of uncertainty we feel around COVID, the fact that this is going to potentially-- you've heard vaccine news coming around next-- middle of next year.

If this continued economic slowdown continues, along with Fed minutes kind of signaling the rates won't even go up until 2023, I mean, you're seeing more of this more slow kind of hampered growth for longer. And the lack of easing on the Congress side does not help the whole picture, and I think investors are starting to bring that into their investing schema.

JULIE HYMAN: Arian, how are you thinking about the-- the whole narrative of 2020 in terms of tech stocks being sort of too overwhelming in the market? Now that we've gotten a pullback in many of those stocks, is that something to get back into, or-- or not get back into, but maybe expand your holdings of those? Or do you just kind of sit back and let it ride?

ARIAN VOJDANI: That's a great question, and one that I flirt with every day, especially as we see something like Apple, you know, start to pull back. And-- and we know this market is completely-- not completely, but very much driven by these tech. Such a narrow rally around tech. If your exposure is already high, you might not need more. But if you're looking to get in, is this a good opportunity to do so? I think it might be. It might become a better opportunity to do so.

But, you know, the-- the amount to which tech has started to kind of make up, for example, even the market cap of the S&P, I mean, you look at consumer discretionary, which is not the tech sector, but we think of Amazon almost as a tech company within the consumer discretion, it's almost 50% of the sector. So it's a little bit alarming how much these big tech companies are starting to overtake and drive the market narrative. But again, you're going to be losing if you don't have them in your portfolio. So the question is, what is the right balance?

ADAM SHAPIRO: Sorry about that. I had to unmute there. When you talk about the right balance, and I want to get back to fixed income, for those who might have some protection right now keeping money in fixed income, there's an inflation threat that's coming. Do you have any timing as to when those people should consider shifting back?

ARIAN VOJDANI: Yeah, that's-- so one-- one thing is, if you look at inflation, you know, we-- we wrestle with the idea when does inflation come, and Fed's signaling is important. Obviously, we've-- we've had trouble seeing inflation come around. I think that, you know, some mixture of tips, short-term fixed income, like I've been saying to you all for quite a while now, are the right-- are the right kind of instruments to have.

The timing as to when you come back is really anyone's guess. I think if you're-- again, if you're an investor, timing is a fool's game because you will ultimately lose against time. And you may get it right once, but 9 out of 10 times you probably won't get it back. So you need to determine what your proper risk allocation equities is, and you need to start buying in slowly to the market if you've been a little shy. Again, fixed income, if you're a conservative investor, should just be a portfolio preservation move at this point.

JULIE HYMAN: Arian Vojdani MV Financial, good to see you. Thank you.

ARIAN VOJDANI: Good to see you. Thanks, guys.