Wall Street catches breath after Dow hits 30K

Courtney Dominguez, Payne Capital Management Senior Wealth Advisor, joins Yahoo Finance to discuss the days market action.

Video Transcript

KRISTIN MYERS: So I want to bring on Courtney Dominguez. She's a Payne Capital Management senior wealth advisor. Courtney, always great chatting with you. So we're seeing the markets right now letting off some steam, especially after that record high that we saw yesterday.

Now you mentioned in your note that you actually see investor enthusiasm waning right now, as, of course, we're seeing the markets at record highs. How do you think that's going to be playing that kind of disconnect going forward in the next couple of months, especially as we see coronavirus cases continue to surge around the country?

COURTNEY DOMINGUEZ: Yeah, which this seems like a negative sign that investors are actually less bullish than they were a week ago. But believe it or not, that can actually be a good thing for the markets, because markets hit highs when you have this euphoria that the markets can only keep going higher. We are absolutely not seeing that right now. There's a lot of nervousness with COVID still out there, cases still rising. People are nervous that the markets can't go higher, especially after hitting the milestone they did yesterday.

But what they're doing with that nervousness is holding onto a lot of cash right now. Like, individual investors, their cash levels are almost 30% higher than they were a year ago. And it's not even just investors like you and I. You have your institutional money managers also have about 30% more cash than they did earlier in the year.

And the cash has to go somewhere. Because with yields being so low right now, bonds and money market funds and any short-term investments aren't really getting any sort of yield or a return. And eventually, that money has got to make its way back in. And that can actually continue to bring the markets even higher.

KRISTIN MYERS: All right, so then what do you think is going to be the next catalyst? I know what you're saying. Investors really have no other options right now other than in equities. But what is going to be the next catalyst, especially if we don't-- if we continue to stay under this 30,000 level going forward, what is going to be the next thing to push the markets higher?

COURTNEY DOMINGUEZ: I think we're just going to keep getting good data coming out that's showing that. We're going to get mixed data. Like, actually, earlier, you did bring up unemployment, which wasn't really what everybody was expecting.

But I mean, that set aside, we're getting a lot of other positive news here. Earnings well more than beat expectations. Companies are actually getting through this a lot faster than anybody expected. Consumers have been saving and actually are continuing to spend their money on goods, which is a great thing.

And I think as we continue to see this data improve and as we hopefully continue to see vaccine news, people are going to shift from all of these work at home stocks into the things that are going to benefit from an open economy. And those things are still lagging.

So even with the Dow at 30,000, there's a lot of investments, like our small caps, our value companies, our international companies, that are still making their recovery here. And so, I think there's still a lot of places to invest, even if the general markets are at their high, and they still have a lot of room to grow going forward here.

KRISTIN MYERS: So picking up on earnings, Courtney, I am wondering, however, how much of that was companies just doing incredibly well in the quarter and how much were those beats? Was it really more down to the fact that expectations were probably a little bit more pessimistic than they needed to be?

COURTNEY DOMINGUEZ: Probably, right? But I mean, that's where you're going to get the pricing in the markets, is where people think that things are going to be in the future and I think seeing things recover so much faster than even the analysts were expecting. This wasn't a small beat we saw. This was a very significant beat that, generally, earnings were recovering.

And it's not even just one sector. Like, previously, we were talking last quarter, it was mostly our technology firms that were doing well, beating our expectations. We're seeing that kind of across the board now, which means it's not just a few companies that are doing well and recovering. We're seeing the entire economy starting to do that. And that's really what we've been waiting for and we're starting to see come to fruition.

KRISTIN MYERS: Courtney, I have a really, really quick question for you here. I have less than a minute now. Just wondering going forward, how are you advising clients? How should investors really be approaching this push and pull in the market with all of these near-term risks to the downside? Then of course, looking out ahead into 2021, so much enthusiasm and optimism about much clearer skies ahead.

COURTNEY DOMINGUEZ: Yeah, and I think what we need to do is use any sort of dips that we have now between the end of the year, if there are any, just to take them as buying opportunities. And I think there's a lot of places to do so. Like, for example, we're making sure that we're looking globally right now. That's a place that's paying really good dividends. It has been hit harder than anything.

But especially with a Biden administration, we very well may see inflation, which means a lower dollar, which actually a good thing for some of our foreign markets. So there's definitely some places you can kind of pick and choose to get some value here. But it's really worth taking a look and just getting that money to work.

KRISTIN MYERS: All right, senior wealth advisor at Payne Capital Management, Courtney Dominguez, always great chatting with you. Have a great holiday. Thanks for joining us.

COURTNEY DOMINGUEZ: Thanks for having me.