Market strategist: ‘It’s not just yields’ that will boost bank stocks

Crossmark Global Investments Chief Market Strategist Victoria Fernandez joins Yahoo Finance Live to discuss the outlook on the market for investors in 2022.

Video Transcript

BRIAN SOZZI: The NASDAQ in correction territory. Is a time to go bottom fishing? Victoria Fernandez is the chief market strategist at Crossmark Global Investments. Victoria, always nice to get some time with you here. You have liked tech coming into this year, but you know, these prices have come down, I would argue not because of fundamentals really, because of just changing market dynamics. What's the move here?

VICTORIA FERANDEZ: Yeah. So Brian, you're right. We did like tech, and we were actually overweight the growth component for the majority of the last 12, 18 months. But we started trimming those names about the third quarter of last year. We started trimming and going into more of some of the cyclical and value names. And when we look at our expectations, the last week of the year last year, we came out with our predictions. And financials and energy are the two sectors where we really wanted to focus.

Now, we didn't know we would see such a move in the first week or two of the year in those sectors, but we think that longer term looking throughout 2022, those are probably going to be areas that will do better than tech as we see yields continue to grow higher. That doesn't mean that you don't want to have some exposure there. So you do want it in your portfolio, but just don't overweight it as we had been doing previously.

BRIAN SOZZI: You know, maybe this is a simple question, Victoria, but if one is owning Apple right now-- it's one of the most own stocks in the entire market-- what should you do? Should you buy more? Or just given the selling we are seeing in the marketplace, do you lighten the load on a name like that?

VICTORIA FERANDEZ: So we actually had gone a little below weight on Apple, because we had been trimming the name, and it had pulled back a little bit. So we bought some on the last pullback to get us back to neutral on Apple weight. You know, so many times, Apple is really seen as more of a defensive stock. We noticed that over the last maybe 6 weeks, when a lot of the other tech names were down, Apple continued to do well. So if you don't have it in your portfolio, again, we're longer term investors, wait for that pullback and add some of that to your holdings for more of a base holding in your portfolio.

JULIE HYMAN: Hey, Victoria, it's Julie here. So on the flip side, away from tech for a sec. I know that you guys have been looking at financial, some of the large banks, and it's been an interesting and unexpected beginning to 2022 in that, we've heard from so many investors who like the financials, and yet the financials as a group have kind of fallen flat here year to date, which has been a little surprising given those rising yields. What do you make of that, and do you think we're going to see them kind of bounce and recover here?

VICTORIA FERANDEZ: So Julie, you're right. I mean, they have come back a little bit over the last week. Look at that first week to 10 days of the month and we had a huge run up in financials as yields made that big move from around 151 or so at the end of the year up to the mid 180s where we are now. But it's not just yields that we think gives financials a little bit of a boost throughout this year.

You look at their balance sheets, they are in a better position than they have been in a long time. We think we're going to see increased dividends into 2022. And even with the JPMorgan and the Bank of America earnings that came out, JPMorgan talked about the increased cost that they were seeing. And we understand that, but we're also seeing good loan growth.

Bank of America talked about their loan growth. That's an area where they've been lagging over the last year. So when we look at all of the factors put together out over the next couple of quarters, we still think financials are going to do well. And the two names I mentioned, we own them both, and those are our favorite names in the financial sector right now.

BRIAN SOZZI: Victoria, more than a few folks have told us they are looking for a pretty big correction in the markets in the first half of this year. And I can't say earnings season has done anything just to poke holes in that thesis. Are you in that camp?

VICTORIA FERANDEZ: Yeah. So one of our predictions for this year was that we would expect to see about a 10% pullback. And as of yesterday, we saw that in the NASDAQ already with the tech names. So we do think there's going to be a lot of volatility this year. I mean, just look at the things that we're facing in regards to the Fed, in regards to rising rates. There's concerns over earnings and growth. So I think there's a lot of issues, geopolitical issues that are going on. There's going to be a lot of volatility.

We've seen the VIX move quite a bit higher over the last couple of weeks as well. So with that, I think, though, you become opportunistic. Use those pullbacks to get names that are on your shopping list, names that have pulled back. You don't have to do complete sectors. You can find certain names in areas that you like. But use those pullbacks, because we do think we're going to see some significant moves this year.

BRIAN SOZZI: The only thing on my shopping list, Victoria, is a new set of golf clubs this spring. This market is very, very challenging. Victoria Fernandez, chief market strategist at Crossmark Global Investments, always nice to see you.

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