The stock market is not the economy: Thornburg Co-Head of Investments

Ben Kirby, Co-Head of Investments at Thornburg Investment Management, joins The Final Round to discuss how investors are managing market volatility and his forecast for what's next.

Video Transcript

MYLES UDLAND: All right, welcome back to "The Final Round" here on Yahoo Finance. Myles Udland with you in New York. And we're joined now by Ben Kirby. He's the co-head of investments at Thornburg Investment Management. And Ben, I want to start kind of right at the top here. You have in your note that you tell your team that the stock market is not the economy, and it's a perpetual topic of debate. And I guess in this context, what is-- like, how are you explaining that potential, you know, divide, and is that enough maybe to help, whether it's your team or clients, understand why we're seeing what we're seeing, both in markets and the real economy?

BEN KIRBY: Yeah, thanks, Myles. Glad to be here. So it's a question we get a lot from clients. And people often ask, you know, unemployment's very high. How can the stock market be also at an all-time high. How does that make any sense? The answer is very simple, the stock market is not the economy. They're related to each other in a complex and dynamic way, but they're different things. So the stock market is forward looking. Economic indicators are backward looking.

And you know, today, actually, a lot of good stuff is happening. There's hope for a vaccine. We have 70 companies working on a vaccine. We have-- I-- you know, I think Americans are tired of being locked in their houses, and they want to get out and they want to spend. And you know, the information that on Popeyes earlier, you know, people want to get out live their lives. So there's a lot of pent up demand. And the stock market trades on those forward expectations.

SEANA SMITH: Hey, Ben. How-- when you take a look at how China plays into all this, because it's almost a narrative that we've forgotten as the market seems to be focused and really the economy, this obvious impact that we've had from coronavirus, but the headline that we got today, the fact that President Trump has now announced that he will hold a news conference in China on Friday, how are you-- how do investors digest that information? And how worried, I guess, are you about a potential escalation between the US and China?

BEN KIRBY: I'm worried about it. So we've been focused on coronavirus for, you know, the last three or four months because it's the most important thing to happen in the last 10 years. But as that begins to fade, the reality is coronavirus didn't improve any of the geopolitical tensions existing in the world. In fact, it accelerated a lot of trends from digitization to a lot of these geopolitical tensions are still there. And in many ways, they're worse.

So I think the Republicans and Democrats will be competing for who can be the biggest hawk on China as we go into the election this year. It's going to be a big topic. It's going to continue to heat up.

MYLES UDLAND: And then Ben, I just want to get your thoughts on a couple of names that you like in this environment and also, I mean, maybe how do you even go about valuing a business in this environment? We had a guest on earlier who said you just got to throw out 2020 earnings. And OK, it's fine to do that, but that certainly changes the way that the process works. So what names do you like, and how have you gone about, you know, finding-- are these names you're sticking with or names that you kind of found as the market sold off?

BEN KIRBY: Sure. So the way that I think about value today is I don't really want to reach for the most beaten up value names. So you know, maybe it's airlines, maybe it's, you know, some of the US oil plays. They're only going to work if we get a sharp, V-shaped recovery. So I don't want to bet on that. I also don't really want to bet on some of the high-flying tech names. And you know, they've really outperformed. The most aggressive growth names are up a lot.

So what's in the middle? Well, there's actually a whole bunch of attractive companies who will benefit when the economy comes back. But if the economy doesn't come back as sharply as we're hoping, they're still going to be around. One example would be Visa, so one of the best companies in the world, large-cap quality company. And you know what? If we get a double dip and a triple dip and a quadruple dip, Visa is still going to be around.

Visa is still going to be Visa. They're going to be OK. They're not going to go out of business. And on the other side, if people start traveling again, they start eating out again, credit card spending increases, Visa is going to be there to benefit from that. So that's an example of a name I think you can own in a variety of environments that we own in several of our portfolios, and we're sticking with it.

MYLES UDLAND: All right, Ben Kirby with Thornburg Investment Management, thanks so much for joining the program. We'll talk to you soon.