'We think when we do snap out of this… we’re thinking the recession will be U-shaped': Strategist on post-pandemic

As the coronavirus continues to spread globally, investors are questioning where to put their money. J.P. Morgan Asset Management Global Market Strategist Samantha Azzarello joins Yahoo Finance’s On The Move panel to discuss.

Video Transcript

JULIE HYMAN: I want to broaden it out now and talk about how Wall Street is thinking about what's going on in the markets right now. Samantha Azzarello is JP Morgan Asset Management global market strategist. She is joining us now.

Samantha, it's good to see you. How are you guys thinking about what's going on now, especially having heard what Carson was just talking about and this sort of not perhaps the best appreciation of risk going into this situation?

SAMANTHA AZZARELLO: Well, I mean, this is the perfect example of an unknown unknown. I know it sounds cliche, but coming into the beginning of the year, what was everyone saying? Everybody was saying that the cycle was going to keep on keeping on. And yet now we know we're in a really deep recession.

I would just say, in our view, this really all comes down to the fiscal stimulus. I've been referring to it as a bridge, basically, from where we are right now to where we need to be on the other side of this abyss. And we need that bridge to be wide, and we need it to be long. So we actually need a lot more support for small business and for individuals.

ADAM SHAPIRO: Hey, it's Adam Shapiro. I had a quick question for you. You're somewhat optimistic about how quickly we'll recover once we get through the crisis. Can you explain to us, share with us, the reason for your optimism and what it looks like?

SAMANTHA AZZARELLO: So this time around, this is not, in our view, a cyclical recession or a structural recession. This is event driven. So even though this is unheard of and many of us have never experienced anything like this, this would be more similar to a shock in terms of a war or a natural disaster.

So we think that when we do snap out of this-- and for the record, we could be in this for a while-- we're thinking the recession is going to be U-shaped, like a letter U. The issue is how long do we stall at the bottom? But we think once we're done stalling at the bottom-- and in our view, we need to see a vaccine in order for us to get out of this-- at least, meaningfully, we think we're going to surge on the other side with pent-up demand.

And I would just say quickly, you look at early news coming out of China, it seems that economic activity is coming back there, right? And consumer demand is coming back. So we do expect that on our side as well.

MELODY HAHM: Hi, Samantha, Melody here. When you think about the earnings season that we are kind of being thrust into right now, it's interesting to see the likes of Pinterest yesterday sort of bearing the news to a certain extent, or investors aren't paying as close attention, right? Just with a lot of macro factors at play.

And then this morning, even with McDonald's' really dismal sales numbers, how are you anticipating even this lack of guidance going forward? How are analysts and folks like yourself able to forecast based on what they're saying, which, to be honest, we don't really know is credible at this point.

SAMANTHA AZZARELLO: That is such a key point that you're making, right? There is a real significant lack of guidance. This didn't actually start in the corporate sector. If you think about what the Federal Reserve did when they did the emergency cut, they didn't update their economic projections. So that was their way of saying, we just don't know.

And I think corporate, believe it or not, have taken a lead from the Federal Reserve by saying we just don't know. And they're not willing, to your point exactly, to give earnings guidance with any amount of certainty. So this is really problematic because we can't know when the market bottoms, unless we have an understanding of how much pain there's going to be with respect to corporate earnings.

JULIE HYMAN: So Samantha, how do you know what to buy? Do you go in at this point and look at the entire market and just buy an index fund or an ETF if you're a retail investor? Or do you sort of try to look at the larger trends as best you can right now and look at specific sectors?

SAMANTHA AZZARELLO: That's a great question. It's going to depend on the client type. I do think younger millennials or newer investors who are now intrigued by the market and this idea that the market is discounted, I would say go forth and look at an S&P 500 index, right? That's still going to be the 500 largest stocks in the US. It makes a lot of sense.

For clients who have more nuance-- they've seen market cycles perhaps-- we would say, look at a few sectors that we think are either going to come out stronger on the other side of this or are also going to do well in a recession. So in our view, that's going to be consumer staples. And then arguably, it's also going to be the tech sector, and it's going to be health care.

Technology coming into this was unbelievably strong, and nothing about that thesis has changed. So that's actually COVID agnostic, to be honest. And then health care, I think we're all realizing there's going to be significant amounts of health care investment after this is all said and done.

And the last point I would make on this is health care is an interesting sector. It's normally quite defensive, which means you would want it in a recession anyways. But it's been infused with some innovation. And I would argue the sector has transformed to be a little bit more growthy, which is also good when we come out when we do rebound.

JULIE HYMAN: Interesting. All right, Samantha, thanks for your time. Appreciate it. Stay well. Samantha Azzarello is JP Morgan Asset Management global market strategist.