Don't chase election headlines: strategist

Crossmark Global Investment's Victoria Fernandez tells Reuters' Fred Katayama why investors should focus on the coronavirus, not the minute-by-minute election updates.

Video Transcript

FRED KATAYAMA: Tech stocks extending their heated rally Thursday, the major index is up for a fourth straight session. The Fed holding policy steady. It's just out with its policy statement. For more on that, let's go to Houston, where we're joined by Crossmark Global Investments Chief Market Strategist Victoria Fernandez. Good afternoon, Victoria.

VICTORIA FERNANDEZ: Hi, Fred. How are you today?

FRED KATAYAMA: Well Victoria, the Fed statement was virtually unchanged from the one it issued last time, pledging to use its full range of tools. What's your takeaway?

VICTORIA FERNANDEZ: I think it's exactly what we expected, Fred. I mean, we look at some of the things that came out of their message today. Growth is continuing, but slower than pre-pandemic levels. That makes sense. Inflation is being held down because demand on the services side. That makes sense.

I think the most important component of the message today is that they went back to that statement that the path of the recovery is going to depend on the path of COVID recovery. And we have talked about that before, and how important that was, and how consumption was so important, with all of the extra funding that was coming from the government for the unemployed. So I think, even though we're in the middle of a crazy election time here this week, I think it allows us to take a step back and say, wait a minute. We need to refocus on what's really driving the economy. And I think that this is back in the pandemic realm.

FRED KATAYAMA: Well, Victoria, is there now more pressure on the Fed to do even more, given that it's likely we'll have a split Congress, and that could possibly mean that we'll see a smaller fiscal stimulus package than we expected?

VICTORIA FERNANDEZ: You know, if we had this conversation on Tuesday, I think I would have said, maybe what we heard from the Fed today would be that they're going to start purchasing some of their bonds further out the yield curve, that longer end of the curve, to help keep those longer yields down. However, since we saw yields come back in on their own, with the concept of a divided government, as you mentioned, I think that puts the Fed back in the spot of saying, look, we need it from the fiscal side. We need to have that stimulus come from the fiscal side. Monetary side has done most of what it can do at this point in time.

Yes, they can tweak a few things here and there. But yes, they have to try to figure out how they can continue to support the economy, while we figure out exactly where we stand in Washington.

- Well, it's already turning out to be the best week for stocks since April, following that sharp decline last week. Should investors who felt they missed out on a buying opportunity last week be chasing stocks this week?

VICTORIA FERNANDEZ: So you know me well enough to want to want to want to know that I never want anyone to chase the market. It's very important that when you're building your portfolio, you look longer term. You've got to look and see what you think trends are going to be, going out more than just the volatility you're seeing over a couple days' time. Just think if you were trading daily over the last three or four trading days, the whipsaw that you would have gotten from the end of last week to the beginning of this week, and what that would have done to your portfolio.

So look at those longer growth trends that you see that are out there, whether that's coming from COVID, pandemic type of changes to the way people are reacting in their daily lives, whether it's due to Washington, the situation we're in, and health care you think maybe, we'll start to do better. There's different things you can look at that are not trading on headlines. And that's what we recommend. Look for the longer term.

FRED KATAYAMA: Once the elections are over, Victoria, do you think that the market focus will turn back to the coronavirus? And if so, are investors-- what does it mean for the markets, given that we just hit a new one day record for new coronavirus cases?

VICTORIA FERNANDEZ: Absolutely, and really, when you look at the reaction we've seen from the market over the past couple of days, a lot of it has to do, especially in the fixed income markets, with the idea of getting more stimulus. And that all flows back to the pandemic, right? So a lot of the movement that we're seeing is still tied to what's happening with the path and the recovery of COVID. It's just tied in with the election.

So if we can remove the uncertainty of the election, I think we do go back and say, how are cities and states opening up? Are we getting it under control, in regards to mask wearing, and to group sizes, and to what's going on with different cities around the country? That is going to be key, going forward. And that's where you need to put that focus.

FRED KATAYAMA: And finally, Victoria, to play this market, are we still holding on to that barbell approach?

VICTORIA FERNANDEZ: We are. I mean, look at the volatility we've seen. That allows you to have a portfolio that can benefit from different moves in the market, without what we were saying a minute ago-- chasing the market. So continue to have some of those secular growth names-- those 5G Broadcom type names that get you can have other entities as well, names like a Visa or a Walmart, to even out that portfolio.

FRED KATAYAMA: Well thank you, Victoria.

VICTORIA FERNANDEZ: My pleasure.

FRED KATAYAMA: Our thanks to Victoria Fernandez of Crossmark Global Investments in Houston. I'm Fred Katayama in New York. This is Reuters.