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Market Recap: Tuesday, April 13

Stocks traded mixed on Tuesday after U.S. federal health officials called for a pause in the rollout of Johnson & Johnson's COVID-19 vaccine amid concerns over rare blood clots in some individuals who received the inoculation. The Dow dipped, extending losses from the pre-market session following the joint announcement between the U.S. Food and Drug Administration and Centers for Disease Control and Prevention, which could complicate the vaccine distribution process as the country paces toward achieving herd immunity. The Nasdaq gained as technology shares advanced, while the S&P 500 was little changed. George Young, PM, Villere Balanced Fund and Brigg Macadam Founding Partner Greg Swenson joined Yahoo Finance Live to discuss.

Video transcript

- About two minutes to go until the closing bell and we have full coverage for you. We want to bring in George Young. He's a portfolio manager at Villere Balanced Fund. We also have Greg Swenson, Brigg Macadam founding partner, and, of course, Jared Blikre closely watching some of these names into the close. Jared, first to you. What's catching your eye?

JARED BLIKRE: And away we go. We got a rotation underway on Wall Street. DOW's down, off just fractionally. S&P 500 up 1/3 third of a percent. The NASDAQ here, that is up 1%. Small caps, a little bit down-- 2/10 of a percent. If you take a look at the NASDAQ 100, that's where the action is. Mega caps popping nicely, Apple up 2%.

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Check out Tesla. Tesla's up over 8%. You take a look at the year-to-date, it's kind of been struggling here, but it looks like it has cleared these lows and it's making a race for its prior highs.

Also taking a look at some of the biggest winners and losers here, they're in work-from-home. Haven't heard a lot of these names in a while. We got Shopify up 3%, Zoom up nearly 6 and 1/2%, and also Peloton, that's up about 2 and 1/2%.

But the travel space not faring as well today. We do have some green creeping in, that's nice to see. United is now up 1%, JetBlue is up over 1%, but American Airlines still mired in the red, down over 1.25%, and Alaska Airlines right there along with it. But we got to talk banks because we got the big earnings tomorrow from JP Morgan, Wells Fargo, Goldman Sachs, all of them down, 1% to 2% or so, so not getting the best action today. But not really a surprise because we do have a lot going on in the bond market, as well.

Here is the VIX. Just want to point out something-- even with the J&J news earlier today, not much of a pop here on the VIX. Doesn't seem to be a lot of concern. Also seeing just a little bit of action in the US, [INAUDIBLE], a little bit of weakness. Pretty much the opposite what you would think if this were a problem. Here's the closing bell on Wall Street, guys.

- And that does it for the trading day today. Again, as we rack up the final trades, we're looking at a mixed picture here with the DOW under pressure, the only major average to close in the red today. Off just 65 points, so not a heck of a lot of movement there. S&P, though, holding on to gains up 3/10 of a percent.

The NASDAQ was the outperformer and that was the big story in the market today. We saw a rotation back into some of those big tech names that were under a bit of pressure yesterday, so the NASDAQ closing up just around 1%. The reopening plays-- investors keeping a close eye on many of those names throughout the trading day after we got the headlines out from J&J this morning, but they ended mixed like Jared was just saying. Some of the big names like American, Delta, Royal Caribbean, though, still closing under pressure.

We want to bring in George Young and, of course, Greg Swenson standing by here. And Greg, first to you, this rotation back into some of those mega cap tech names that Jared was just talking about after the pullback that we saw yesterday-- what stands out to you about this rotation today?

GREG SWENSON: Well, I think it's a short-term rotation. I think you saw the bad news from J&J, so maybe the reopening trade took a little pause today, and this might be an opportunity to buy some of those financials that traded off today. I still think the right trade is leveraging the GDP growth and the cyclical trade. So banks and other cyclicals, industrials, I think there's a chance to buy those a bit cheaper after today's sell-off. And I think it's still the beginning of that trade where you want to be levered to economic growth and GDP growth.

JARED BLIKRE: George, I want to get your take on the rotation, not only the one that we're seeing today, but really the ones that we've seen since November, since the election. The reflation the reopening, all these things we've seen it kind of risk-on, risk-off sometimes one day to the next. What are you making all of this?

GEORGE YOUNG: Well, it has been a little unnerving. I can understand where the average investor's saying, what the hell's going on here? But it's interesting when you think about it and notice the big change. 2020, we saw that the S&P was up 56%. If you'd taken out all of the FANG stocks, it would have been up only 11%. So those FANG stocks have really been what's motivated this market.

Big shift has been to the Russell 2000 in the last six months, however, because S&P is up 19% of that time, but look at these small cap stocks. They're up 48%. So there's been a huge change.

I can't say that stocks are cheap right now, and this is the time to be selective. And there's a number of stocks that stand out, and we're always looking for opportunity to see what we can find. We're more small-, mid-cap oriented.

- George, what are some of those names that you like that stand out to you right now?

GEORGE YOUNG: Sure. Specifically, eHealth makes a lot of sense right now. This is a company that sells Medicare supplements. You've got to recognize there's 10,000 Americans turning 65 every day. Everybody gets Medicare, that's great from the government standpoint, but on the other hand, you need to have supplements to make sure that you're properly insured and your health is covered. So with that many people out there, it's a huge addressable market, and eHealth is making great inroads in selling those properly to those over 65 and to make sure that they're properly COVID as they need for health insurance.

The other one that's important, we think, is Palomar. It's a specialty risk insurance company, so they cover fire, they cover earthquake. They had a little bit of a slip a couple of quarters ago. I think they've learned from that, the old adage "Once bitten, twice shy." I think they're great. They've got a strong combined ratio and it's something that we think merits probably a growth of 20% over the next couple of years.

JARED BLIKRE: Greg, I want to talk about the Federal Reserve and get your take on what's going on there. We can get into nitty gritty of policy action, but as one of our former guests, [INAUDIBLE], was pointing out, Jay Powell was just on 60 Minutes saying growth. Despite his conservative tone, isn't that somewhat bullish? And what is that saying to the American people?

GREG SWENSON: Yeah. Look, I'm confused. Both the US government as well as the Fed have never spent and injected so much money supply into the system while there's a hot economy. I mean, they did do this kind of spending in the 1940s, but we had to arm the military to fight World War II, and it also helped get out of a sluggish economy.

Now we have an expansion. You had 4% GDP growth in Q4, you're looking at 8% by some estimates in the first quarter, and I think the consensus around the street is 6% to 9% for the year, and yet you have the Fed printing money.

My favorite chart is this M2 to inflation chart. It's always correlated, always has been. You look at 1943, you look at the '70s and '80s, and if you look at the M2 that's occurred, the M2 expansion, in the last year, you absolutely have to think that inflation follows, and I think the Fed is going to make a mistake here.

- George, there's lots of talk with President Biden with his infrastructure plan and, of course, how we're going to pay for it. We could see higher taxes as a result. How are you looking at this and what is the market anticipating that we'll see?

GEORGE YOUNG: Well, I think you're right. Biden's been pretty clear that he's going to be raising taxes, and that's unnerved some people. But again, you've got to pay for this infrastructure, and I think nobody would disagree that infrastructure needs to be rebuilt and addressed throughout the entire country. So what that's going to mean, it's going to be a huge injection into the economy. That's going to be strong.

But also you've got pent-up demand from the consumer, and the consumer represents about 65% of the economy right there. So all the cash that people have been saving, not spending-- maybe they've been spending on their home projects, et cetera-- for the most part, that means that money is going to be coming to the forefront, being injected into the economy. That's yet another push for stocks.

So it augurs well for good growth going into the future across the board. But again, you've got to be a little selective because bond yields right now, 10 years at about 1.6%, that's not real attractive. Cash is paying nothing.

Good news for that is it means that a lot of people are going to be flocking to stocks, and I think we've all seen the stats on the amount of money that's been going to the stock market in the last year compared to the last 20 years. It's been incredible. So stocks, not a new game, so it's time to be selective on what you're buying.

- George Young, portfolio manager with Villere Balanced Fund, always great to have you. And, of course, our thanks to Greg Swenson, Brigg Macadam founding partner.