Invesco Chief Global Market Strategist Kristina Hooper joins Yahoo Finance’s Seana Smith to break down the latest weekly jobless claims data, as another 2.438 million people file for unemployment benefits.

Video Transcript

SEANA SMITH: Kristina Hooper, Chief Global Market Strategist at Invesco. And Kristina, it's great to have you on the show this afternoon. Let's start with that jobless claims number. 2.4 million more Americans filing for unemployment benefits last week. How are investors looking at this number today?

KRISTINA HOOPER: Well, I don't think investors are too rattled by it. We are expecting, and should expect really poor jobs numbers. That is part and parcel of what happens when you essentially shut down an economy and then slowly reopen it. Also, we of course, have had extraordinary accommodation coming out of the Fed. And that has really created a phenomenon we saw in the global financial crisis, where markets have really decoupled from the economy. So that market participants, investors, are far more concerned about that, and that's really what's driving markets, as opposed to any kind of economic data, like jobs.

SEANA SMITH: Yeah, Kristina I wanted to ask you about that, the fact, when we talk about this time and time again here on "Yahoo Finance," how we're seeing this decoupling here between the market and what's going on in the economy. The gap though, it's interesting, because it's pretty wide. I guess my question to you is, how long do you think this can continue for?

KRISTINA HOOPER: Well, I think we can use the global financial crisis as a guide. It can continue for a long time. If we think about it, we really had stocks get way, way ahead of the economic recovery. And that really was driven by the Bernanke put. Well now we have a Powell put that's even bigger than the Bernanke put. And it really depends now on how big and how effective fiscal stimulus is. Because that will dictate how closely the economic recovery really follows the recovery in the stock market.

SEANA SMITH: Kristina, how effective do you think the fiscal stimulus and the monetary stimulus has been so far? Because a lot of people are saying that this has put in a floor here for the markets, and then that also begs the question about whether or not we will need more stimulus down the road.

KRISTINA HOOPER: So monetary stimulus has been quite effective in helping the stock market. And actually, I think that in general, Jay Powell has channeled his inner Mario Draghi, in terms of doing whatever it takes, and assuring markets that he will continue to do whatever it takes. But we have to recognize that monetary policy is a blunt instrument. It's not a surgical tool. So it has a much greater impact on markets than it has on the economy.

So when we turn to fiscal stimulus, thus far, it has been certainly adequate, and relatively effective, although it remains to be seen. We're watching it unfold, and already, we know that there are some flaws in this. But we should be expected, given how quickly it was rolled out. The key question, of course, is how much more fiscal stimulus are we going to get? It's clear, Jay Powell has been clear about this, that more fiscal stimulus is needed.

And so we need to watch to see how much Congress is willing to give. In particular, we need some support for state and local governments. As Jay Powell noted, 13% of jobs are coming from state and local governments. So many of them have balanced budget requirements that would force very harsh budget cuts that would likely create very significant losses. So thus far, fiscal stimulus has been relatively good, but it needs to continue. It can't stop here.

SEANA SMITH: Yeah, Kristina, when we talk about all this uncertainty, it also begs the question about where investors should be putting their money at this point. We know that investors have been favoring growth stocks over the last several weeks. Do you think that this trade still has room to run or is it too crowded at this point?

KRISTINA HOOPER: Well, trades can be crowded for a long time. And I suspect this has room to run. The rationale is, that if we see a more muted recovery, especially in the initial stages, that suggests that the more defensive secular growth names will perform better. It's only in a scenario where we would see a V shape recovery in the initial stages that cyclicals would be likely to outperform.

So of course, on a day like Monday, when we got news about progress with a vaccine, there was this expectation that perhaps we would see a V shape recovery. And of course, cyclicals outperformed. That's probably less likely than the base case scenario that we have, which is a more halting and uneven slow initial recovery that then gains momentum over time, at which point, cyclicals would likely outperform.

SEANA SMITH: All right, Kristina Hooper, Invesco Chief Global Market Strategist, thanks so much for your insight.