This might be all she wrote in terms of a market retest: Strategist

Sam Stovall, CFRA Strategist, joined Yahoo Finance's Jen Rogers, Myles Udland, Akiko Fujita, Andy Serwer, and Rick Newman to recap today's market action.

Video Transcript

JEN ROGERS: All right, moving forward, let's go back to talking about stocks. I want to bring in Sam Stovall, CFRA chief investment strategist. So Sam, you have a great mind when it comes to looking at this market from a historical perspective. And we've used so many superlatives to describe where we are, how fast we've gotten there. Everybody is talking about, have we seen the bottom? Are we retesting the bottom? What do you see when you look back, in terms of if that has possibly happened?

SAM STOVALL: Well, when I looked, Jen, to the chart itself and I see the bottom on March 23rd, but then I look and I've seen we've already had one semi retest where, in a sense, we've pivoted, come back down a bit, and then worked our way higher, and we're going through that process once again.

So I would tend to say that depending on how the market plays out over the next couple of days, this might be all she wrote in terms of a retest. What I find is that so many strategists are calling for a retest that Mr. Market will try to embarrass the greatest number of strategists at any one point in time. And this might be how they do it.

RICK NEWMAN: Hey, Sam. I'll jump in here. It's Rick.

SAM STOVALL: Hey, Rick.

RICK NEWMAN: What are-- so I mean, when do we reopen, and at what pace do we reopen? Obviously, the biggest question right now. What does the market think the timeline is for reopening? What do you read from the market?

SAM STOVALL: Well, first off, what the market is reading is it doesn't really care who has the authority, whether it's the president, whether it's the governors. The market is just thrilled that now we are talking about reopening because that reestablishes the opportunity for some sort of a V-shaped recovery.

We subscribe to Action Economics, and they're looking for about a 5% decline in real GDP in the first quarter, a 25% decline in the second quarter, but then rebounding by 20% in the third and 10% in the fourth quarter. So if we can get the states to reopen and maybe it'll be by-- you know, the president is asking for May 1st, the governors are saying, no, May 30th. So it's like you hopefully end up somewhere in between, but still, that is a [AUDIO OUT] anticipating.

ANDY SERWER: Hey, Sam. Maybe you can turn to your sundial a little bit for this one. Isn't it 1,000% sure that the market's just going to go sideways for the next 18 months? Come on.

SAM STOVALL: Well, just between you and me, no, I mean, I would actually say that the market wants to work its way higher. It's very interesting because the market tends to look beyond the valley. And even though this valley continues to get deeper and longer, just this morning, opened up S&P Capital IQ consensus earnings estimates, and we find now that we're expected to fall by 15% this year, down 12 and 1/2% in the first quarter, and almost 28% in earnings in the second quarter.

But then we start to work our way higher as the year progresses. That's what Wall Street is focusing on. And if we end up seeing some sort of an improvement in earnings estimates as the year progresses, then I think we could actually be seeing a positive second half.

MYLES UDLAND: You know, Sam, to that point on earnings, I'm looking at this note, and it feels to me like we're still being conservative-- or the Street, rather, is still being conservative in just how far earnings are going to drop. I mean, you're looking at multiple sectors of the economy looking at 70%, 80% revenue declines.

We had an analyst on yesterday saying that Disney is going to see a 50% drop in revenue. A company of that quality seeing revenues cut in half, it would seem like-- I mean, if I could take 25% drop in earnings, I'd take it today and run. Is there a risk that as we get more cuts to earnings, that the market starts reacting negatively to that?

SAM STOVALL: Absolutely. I think we sort of got a feeling yesterday when we got the much weaker than expected retail sales, the weaker than expected industrial production, a Empire State survey that Wall Street was saying, wait a minute. Maybe we're a little underestimating things. But today, we got the unemployment claims that seem to have a silver lining toward them.

And so Wall Street is basically saying, you know what? We've already factored in possibly a worst case scenario. Maybe we don't injure ourselves by falling out of a basement window and that if we're going to be surprised, it'll be surprised to the upside, not to the downside.

RICK NEWMAN: Sam, I've been fielding questions from the Yahoo Finance audience and answering them in articles. And everybody wants to know, is it a good time to buy stocks? I know it's not a simple answer, but how do you even start thinking about the question?

SAM STOVALL: Well, I think you ask yourself, last year, which stocks were you kicking yourself for not owning? And if you were kicking yourself in December, then ask yourself, OK, well, when was the last time that this stock was trading where it is today? If you find that it was this time last year or even earlier, then basically what you're saying is that 2019 is a redo.

So I would take a look at companies if you are a growth investor by focusing on the price. If you're an income investor, ask yourself, what about these high quality companies, those with S&P quality rankings of A minus, A plus, that are now yielding 3 and 1/2%, 4%, 4 and 1/2%, 5% that you can pretty much buy and live off of the dividends, rather than dipping into principal after retirement? You know, maybe those are the kind of stocks you want to be nibbling at today.

JEN ROGERS: Sam Stovall, great to get a chance to talk with you with CFRA.

SAM STOVALL: Thanks, Jen.