Kim Catechis, Head of Investment Strategy at Martin Currie, joins Yahoo Finance's Kristin Myers to break down the latest market action as another 721,000 Americans file for unemployment.

Video Transcript

KRISTIN MYERS: I want to bring on Kim Catechis, Head of Investment Strategy at Martin Currie, now to chat some of these market moves, but, also, the jobless numbers that we got a little bit earlier today. So, Kim, we have the job report out tomorrow. The ADP figures, they weren't great, but these jobless claims are beating expectations today, obviously, creating even more optimism in the markets. So I'm wondering what you're expecting tomorrow and if you think that the coronavirus surge that we've been seeing all across this country is going to be appearing in tomorrow's report.

KIM CATECHIS: Look, I can't answer the last bit, you know, but I would be surprised if it doesn't appear in the next few weeks anyway and, you know, over the next month or so because, clearly, the numbers that you were mentioning in the section just before, you know, was at 200,000 just yesterday and 100,000 hospitalizations. These things have-- absolutely have an impact on the economy.

But we're coming from quite a place in the sense that, although, you know, it's just one number, you know, it's better than expected. Yesterday, that's-- that's good. It bodes well. And this is why the market is excited for things like consumer spending, et cetera, which has been, albeit, not shooting the lights out, it's been coming back steadily.

You know, October's manufacturing numbers were better as well. You know, the economy is clearly trying to bounce back, but, as we said, you know, the last time you had me on, we were discussing a similar subject. You know, the outlook is cloudy because you need to get COVID-19 beat before you can actually start to have confidence in forecasts.

There is one little fly in the ointment, and that is that, you know, some economists have been drawing attention to the fact that the numbers you're talking about from yesterday, the jobless claims, cover the weekend or the holiday period, you know, Thanksgiving. So, typically, that's a bit anomalous. You know, it may take-- it may delay some numbers coming through, but I think, overall, I wouldn't worry about it too much. Take it with a pinch of salt. You know, the direction we know is upwards, and that's probably what's feeding through to the-- to the market.

KRISTIN MYERS: I want to ask you now about stimulus, Senate Majority Leader Mitch McConnell saying that he's hopeful a stimulus deal could get done before the end of the year. Given all of this great news that we've had on vaccine-- and we've been talking about euphoria in the markets right now-- wondering how much markets need a stimulus news, or if you think that there's enough, you know, enthusiasm out there really to keep this party going.

KIM CATECHIS: Look, if you recall, two months ago, we were on-- I was on again. And we talked about how there was going to be a pop of excitement when the news of the first vaccine, you know, that had realistically good numbers, you know, was coming. And I think we're still living that pop.

We've seen three serious contenders for vaccines. One has actually got approval in the UK government, apparently, today. And we-- that always, inevitably, is going to be producing that pop we're talking about.

Having said that, we know, realistically, it's going to take a few months. And I think your previous speaker was mentioning next summer in the case of the US. You know, that's-- that's still quite a long way away. So we need that to get out of the way first.

In terms of, you know, other things to look for, I mean, you know, one of the things you mentioned in an earlier segment I was listening to is how energy stocks have bounced. You know, that's a slightly separate issue. You know, that's to do with things like OPEC-plus having agreed an increase in production of only 500,000 barrels. Now that's quite important for the markets, not so much in the number itself, but just because we know that they've got an agreement.

OPEC is, obviously, as you know, the group of oil-producing countries, the majority of them. Plus stands for Russia, which is not a member, but cooperates. And they had a big fight, literally, at the weekend.

Saudi wanted to cut back production for another three months to keep it going upwards, and the others wanted to increase production by 2 million barrels per day. They've got to a compromise today, 500,000 barrels. There was a slight bump, I think, in the oil price. You've got the Brent at about 48 and WTI at 45.

Now, the reason I mention that is because I think, when investors look at the market as a whole, they're looking for as many signals as possible. And, coupled with the decent numbers that were mentioned on jobless, you know, this is-- this is another source of optimism at least for a period.

KRISTIN MYERS: So, Kim, you're hinting at-- you know, at something that I had wanted to ask you about. So what sectors are you liking in 2021? How much do you think tech is going to be under pressure? And just, more broadly, really how should investors really be navigating through the next year? The next three months seem to have a lot of downside risks still out there, but there's a lot of reason to be optimistic into next year.

KIM CATECHIS: Yeah, look, I mean, you don't last very long as an investment professional if you're not optimistic. I think the fact of the matter is, you know, there are absolutely grounds for optimism. Let's not underplay the risks, and the risks are not just near-term. The risks are there all the time. It just so happens we've got this big elephant to deal with, which is COVID-19. And, until we get enough vaccinations, literally, done, we're not really going to be in a position where we're able to develop that confidence.

Now, in terms of sectors, I mean, you mentioned some of the ones that have already moved, you know, the bombed out ones, you know, cruise lines, et cetera. Those are the ones you'd expect to pop first on the news of a vaccine. There's a long way to go before numbers of people going on cruises is back to, you know, where it was 2019. So I would suggest there's no rush really there.

I would-- I don't think technology is overcooked. I think, selectively, valuations are demanding, and we would need these companies to deliver. I mean one obvious cloud on the horizon for technology companies, especially the big-- the FANGs is they are all companies that are-- how shall I say-- spectacularly profitable, don't need debt. And a lot of people are paying attention saying, well, actually, they're really not paying the tax they ought to.

So it's not just the European Union wanting to get some tax out of them. I think it's, you know, congressmen and senators are also thinking similarly. So I think there may well be an increase of tax. And, if you are going to look around for sources of revenue for next year, if you were sitting in the White House, you would look at these companies because, literally, they're just oozing cash, right?

KRISTIN MYERS: Right.

KIM CATECHIS: That's just a short term kind of-- this doesn't mean that-- that you wouldn't go there. I would go back and look at abroad as well. I would look at the European green energy sector. And I think we've talked a little bit about that before. I think that European Union's position, as being on the vanguard of legislation that's going to govern trade and goods coming into that, the biggest market, consumer market, in the world right now, that's going to drive a lot of activity in that direction. And that's going to be fruitful for investors to pay attention to.

KRISTIN MYERS: Lots of good insights, as always, Kim Catechis, Head of Investment Strategy at Martin Currie, always great chatting with you. Thanks so much for joining us today.

KIM CATECHIS: Thank you for having me.