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Unemployment checks are 'hurting the labor market': The Wealth Consulting Group CEO

The Wealth Consulting Group CEO Jimmy Lee joins Yahoo Finance Live to break down the latest market action.

Video Transcript

AKIKO FUJITA: Last week falling 39,000 from the previous week to 586,000. We're now talking about two consecutive weeks of claims below that 600,000 level. That is the lowest level we have seen since early 2020. Let's bring in Jimmy Lee, the CEO of the Wealth Consulting Group. Jimmy, that certainly seems to point in the right direction. But it sounds like you're a little skeptical about how quickly things are going to be opening up.

JIMMY LEE: I am, Akiko. I think the unemployment checks that many Americans are still getting is hurting the labor market. And I'm a little concerned about the supply shock that I expected that we may get when the economy reopens. And we're seeing that with chip shortages affecting lots of industries and other commodities that are in need, that are hurting automobile industries and other related. So, again, I think that we might get a resumption in interest rates rising later on this year that might create some volatility for stocks. But overall, I'm very bullish for the equity market in 2021.

ZACK GUZMAN: Yeah, I mean, when we talk about performance, obviously, the last time interest rates spiked and kind of caused the jitters we saw a few months ago, it was growth that got hit the hardest. And when you kind of plan that out for maybe that to happen again on the interest rate front, I mean, are you projecting the same thing again? Or how should investors maybe be balancing portfolios ahead of that?

JIMMY LEE: Zack, I think you're right on. I think the 10-year backing off under 1.6, where we're at right now, is giving an opportunity to investors-- for investors to get back into some of the mega cap tech stocks that led the market for the last five years. And so you're seeing the FAANG names rally over the last several weeks, as rates have stabilized.

But as interest rates may go up in the second half of this year, I think you then see a further rotation out of those names and into the other sectors that, quite frankly, have led the market for the last three to six months. Year to date, you've got large cap value stocks leading growth stocks for sure, but also small and mid-cap stocks in the US doing very well. I also think with pressure on the dollar, as we see more stimulus, that international investments or allocations will catch up to the US a little bit this year.

AKIKO FUJITA: Jimmy, the last time we spoke, you were talking about this rotation from growth into value. But it sounds like you've got your eye back on growth now, largely because we've seen the 10-year yield stabilize. What specifically are you seeing and what kind of opportunities do you see, especially given the declines that we have seen, especially in mega cap tech stocks?

JIMMY LEE: Akiko, you're right. I mean, we've been speaking about the rotation, if it ever was going to happen, out of the large cap growth into value. We've seen that for the last three to six months. And those asset classes have performed better. But I haven't given up. I mean, technology stocks, I think, are still going to do well. And as far as the names that we're talking about, they're the most widely held names in all the different index products out there, ETFs, and very commonly owned by many investors.

So the FAANG names, I think, are going to do OK over the next few months. But as we see interest rates rise in the future, I think you'll see pressure on those names again. And so, I think you've had a little bit of a short-term opportunity with those names, but overall, I highly recommend investors look inside of their portfolios, do an X-ray, make sure that they're not still too overweighted in a lot of those names, because a lot of index products still have the-- a big percentage in the top mega cap companies and a lot of the market cap weighted products out there.

And so, investors should be diversified-- small caps, midcaps, large caps, international. And most importantly, for fixed income investors, with the-- finally, the prospect of interest rates going up in a sustained way, I think will have an impact on fixed income investors. So I think rotating out of the very safe long-term duration of government bonds is important. And we've seen a big hit already this year. So making sure you have the right asset allocation with your fixed income is critical today.

ZACK GUZMAN: Jimmy, I'd be curious, too, just to wrap up here. There was an interesting note-- I can't remember which firm exactly put it out. But there was a lot of discussions about hedge funds perhaps kind of caught in the last weekend sell-off in the crypto space, maybe deleveraging portfolios because of that hit, and the cross impact between the crypto market as it gets bigger and more impactful that could have on the overall stock market. So when you look at that, I mean, are you worried about maybe some of the potential bubble building on the crypto side and how those two could interplay moving forward?

JIMMY LEE: I am, Zack. Overall, as I said, I'm very bullish on equities this year. But I do believe there could be some bubbles inside the market. One area was SPACs and another area. And we've seen that come back in other areas in the crypto space. But I think it's short term as I think that the adoption of crypto and Bitcoin amongst institutional investors. And I think that this year may be the year that we end up getting that ETF that's available to retail investors.

And as you and I and other investors-- you probably own a lot already-- but as you and I and other investors that are more traditional investors started investing into that space, I think it will give it support. So I think in the long run, there's opportunity there. And I hope there is regulation and more transparency so that it's not such a mystery for many investors. I really honed up my knowledge in the space. And I'm happy I did that.

AKIKO FUJITA: We'll have to have you back on the show for that. Jimmy Lee, the CEO of Wealth Consulting Group, it's good to talk to you today.