Shocking May jobs report, here's why you should 'take all of these reports with a grain of salt'

Erin Gibbs, Gibbs Wealth Management President, joins Yahoo Finance's Alexis Christoforous and Brian Sozzi to discuss the May jobs report and Wall Street's reaction.

Video Transcript

ERIN GIBBS: So, yeah, I think given that we saw such a positive surprise form the ADP, I think we were somewhat ready for this report as well coming out for today. But overall, the market really has been shrugging off a lot of these job reports. It really hasn't been as focused.

I think we understand that still a lot of people are going to be filing or continue to file, that there's a definite delay in actual reporting. And so I don't see this being as big of a mover for today, as just more of the sentiment around the reopening of the economy.

ALEXIS CHRISTOFOROUS: So Erin, do you think that today's nice big rally is the market just getting ahead of itself a little bit? Are we being too enthusiastic here? Because when you look at fresh economic data, like continuing jobless claims, they actually rose in the latest week. We still have 22 million people drawing unemployment claims in this country. So we're still in a pretty deep hole, wouldn't you say?

ERIN GIBBS: Yeah, that's, I mean, when we're looking at overall unemployment and looking at just economic data that's a little more lagged. But certainly, when you look at the overall expectations of where we're going to come into the recovery, and how long this is going to take, we're looking at 12 to 24 months. I see this rally early just for today, and then this morning coming off of somewhat of a slightly negative day.

The growth stocks really got hit. Value really was the better of the outperformer yesterday. And so it's not unexpected that we see a bit of a bounce back after yesterday's action. So I'm not so sure that this is going to be necessarily continued, that we'll be saying this by the end of the day. There might be a little more of a subdued nature.

And then again, you know, we knew it going to be positive just because of the previous ADP report. So I think you have to take all of these reports with a grain of salt, because we know that the numbers are changing so quickly. There's so much volatility. And there's just issues with actually reporting and people actually reporting jobs and employment numbers.

BRIAN SOZZI: And again worth noting, we're still waiting for President Trump to give a press conference following the surprising jobs report. Erin, what specific stocks do you like off a report like this?

ERIN GIBBS: So I've been really focused on balance sheet and strong cash flow, as well as credit worthiness, high quality stocks, particularly as we've seen and just a slew of bankruptcies come out. And I think this is just the beginning. Again, we're looking at, like, a 12 to 24 month recovery. So you've got to be able to have a good strong balance sheet to be able to withstand retracted and prolonged retracted business activity.

And so some of the stocks I like are the cloud services, software services, so F5 Networks, Microsoft, IBM. I also like a few specialty retailers that particularly to do well during recessionary periods, and so Home Depot, Lowe's, Sherwin William, all of those sort of home improvement stocks. They've often done well, particularly as you're confined.

And we're also seeing a lot of people move out of cities and try to move into new homes. We're actually seeing good new construction builds. And so again, these are the types of stocks that would do well, whether you're either buying a new home, moving out of the cities, or if again, if we're still very much focused on staying in home a lot more, you might want to put a new coat of paint on those four walls that you have to look at so much longer.

ALEXIS CHRISTOFOROUS: Yeah, that sounds good. A little refresher, Erin, in the home, I hear you. What do you make of those stocks that have been beaten down the most during this pandemic, namely the travel stocks, hotel and airline stocks, cruise liners, which are actually doing quite well today, as Jared pointed out earlier, as people sort of take advantage of those rock bottom prices in some areas? But do you-- are you invested in those in those sectors? And are you bullish on them?

ERIN GIBBS: Yeah, I think those, for me, they're very short-term trading. And you know, we saw a bit of a pop with the airlines yesterday as well. So for me, I think those are the industries where we know there's going to be consolidation. It's very unlikely when we come out of this, you know, two years later, we're going to have the same number of airlines and just as many hotels.

You're really not sure who's going to be able to avoid bankruptcy, or if we're going to see just more consolidation and avoidance. We also know that business travel is very likely going to be hit. We've all gotten used to be able to be doing video conferencing.

You know, we've all become very adept, whether it's Zoom, or Webex, or your Google, Microsoft Meets. And so that was one of the major profit centers for a lot of these travel, both hotel and airlines. And I see that as being a long term secular trend of less business travel.

And so I really feel that, given that you're looking at an industry that could be continuing to see a decline even as the economy recovers, this isn't an area that I necessarily want to be invested in. And that's why I'm more focused on software, or technology, cloud services, as we move more and more into that space and this being a longer-term trend.

BRIAN SOZZI: Erin, when you talk to clients, and Alexis mentioned this earlier, do you sense a rational exuberance starting to form? Are people starting to just foam at the mouth, like I want to get in this market, and I'm getting concerned I'm missing out?

ERIN GIBBS: Actually, my clients are saying, I can't believe this market is so high. So I don't see a lot of people missing out or are being concerned that they aren't invested. Most of my clients stayed invested and didn't take out, or if they did take out, they took out in March, and they're very comfortable with that.

I think what we're really most-- and most large money managers are really concerned that we're looking at such extraordinary valuations. And the market really isn't moving off of fundamentals. We're moving off of sentiment around, you know, case numbers, how whether we're reopening an economy, vaccines, so really, you know, basic economic numbers.

So, you know, the jobs report certainly has a short-term effect but for the very most, it's really sentiment about the virus and opening up the economy, rather than looking at fundamentals. And part of it is just so hard to predict what's going to happen. It's such a volatile and unprecedented and unpredictable environment.

And so it does make me a little concerned that it'd be very hard to sustain these types of levels when we're looking at such a, again, definitely a recession coming ahead and a global recession. And it is a bit concerning about some of these levels and some of these stocks.

ALEXIS CHRISTOFOROUS: Erin, what kind of clues are you seeing the treasury market sending us? The 10-year treasury yield pushing above 0.8% percent now, bond market seems to be breaking out of its doldrums, what does that tell you about investor sentiment right now?

ERIN GIBBS: Well, part of it, we knew we had a lot of cash on the sidelines. You know, I think maybe people are a little more willing to, perhaps, move into equities that aren't as conservative or as risk averse. There is, I think, again, with the stories around, particularly once we really started seeing more and more stories around cities reopening, I think that has-- really, again, we had four days of an upmarket in the S&P 500.

And so then you're seeing the bond prices come down. So I think it's just more-- again, it's a sentiment. People are more confident, a little less risk averse. But it's really more about day-to-day life, rather than actual fundamentals.

BRIAN SOZZI: All right, we'll leave it there. Erin Gibbs, President of Gibbs Wealth Management. Always good to see you. Have a great weekend.