MJP Wealth Advisors President Brian Vendig joined Yahoo Finance Live to break down why the market may take off and what this means for investors.
ADAM SHAPIRO: We want to keep talking about markets and where we're headed right now. We're going to do that by inviting into the stream Brian Vendig. He's president MGP Wealth Advisors. Good to have you here. There's a lot we could talk about. I mean, I keep hearing analysts on Yahoo Finance and on other kinds of network programming talk about this market is just going to take off, and we're at the beginning of what would be a new bull run. Do you think they're missing something, or do you agree?
BRIAN VENDIG: Well, I think for the balance of the year, it's good to stay constructive on the markets. I think it's tough to look out past this year due to some of the variables that we're all still comprehending. As investors, we definitely are constructive for US GDP to expand this year to levels that we haven't seen since 2005 in an overall global economic recovery.
I think at the same point in time, this is coupled with improvements in vaccine rollouts, as well as we're still consider-- still seeing strong earnings from publicly traded companies recently. Analysts' estimates were more pessimistic than what's going on in the underlying economy. So I think for this year, we're definitely constructive on equities, but we need to keep a watchful eye on inflation and interest rates, as well as policy decisions moving forward, which will then fall into that base case for continued appreciation moving forward, Adam.
SEANA SMITH: Brian, you mentioned that you're closely watching the yield AND what's going on in the bond market. What levels are you specifically looking for as to you might stop and say, hey, this is a little bit concerning at this point for equities?
BRIAN VENDIG: Absolutely, that's a great question. So for a balance of the year perspective, we definitely think that core inflation will move up as we get to the end of the year, and probably reach levels over 2%, somewhere between 2% to 2 and 1/2%. And we still have a base case of the 10-year Treasury maybe reaching somewhere between 1 and 1/2% to 1.75%.
I think what we're seeing in the short-term is a little bit of rebalancing still coming off of last year. We need to keep in mind that the technology sector really attributed to almost 2/3 of the overall market gains. And specifically, today, we see that some of those large mega cap technology names are selling off, or at least, coming down a little bit, based on valuations from last year.
But at the same point in time, we're seeing an improvement in valuation coming from more cyclical own sectors, as well as parts of the market that are tied to economic expansion or GDP growth. So we are robust on owning industrials, basic materials, as well as financials, assuming interest rates going up. Because this does move in lockstep. Rates should go up, as we see economic expansion improve.
ADAM SHAPIRO: For a lot of investors-- and forgive me for what would be a kind of a simple question, but it's what many of us actually do-- we're index investors. So we might be tied to the S&P 500. When you talk about the big tech companies, I mean, I can have exposure to those through the S&P 500, but a lot of people watching right now may be thinking, do I need to look elsewhere outside of a traditional index fund, where even if tech, the rotation is out of tech, that's still where the growth is going to be over several years. Should I be looking for some kind of fund that takes me there?
BRIAN VENDIG: Thanks, Adam. That's a classic debate, right? We are proposing to ourselves and saying, is it passive versus active? But in our mind, as a firm, we think both have a seat at the table. So, for example, you could stay in the classic index world, and maybe instead of being just buying the S&P 500, maybe it's worth buying an evenly weighted S&P 500, where it holds all these sectors equally distributed from a valuation point of view. That might be one way to stay broadly diversified, while, at the same point in time, staying true to the attributes that the investor appreciates.
On the flip side, when you think about valuations moving forward, it might make sense to be a little bit more active in the small cap international equity space, especially because that's where active management is shown to support outperformance. And I think also when you think about the base case for the balance of the year, we're also seeing a weakening dollar. And we think that's something that's also going to continue moving forward. And I think active management would help on an international equity side to take advantage of that trend as well.
ADAM SHAPIRO: It is always difficult to do it yourself, unless you can do it every day and check what's going on. We appreciate your insight. Brian Vendig, president MJP Wealth Advisors, good to have you here. When we come back, another grim milestone, as the United States tries to ramp up vaccine distribution. We have our COVID update for you right after this.
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