Stock market jittery after ‘fierce’ rally, analyst says

eToro USA US Investment Analyst Callie Cox joins Yahoo Finance Live to discuss the stock market rally that kicked off the fourth quarter, portfolio strategies, and parsing through the noise when looking at economic data.

Video transcript

- Welcome back. The bulls seem in control after the third quarter kicked off with a big two-day rally. But a slew of economic data ahead could alter the market optimism. And I want to get a quick check of the Wi-Fi Interactive where we can see energy in the forefront today, followed by communication services, tech, and consumer discretionary. Those are at the top, what you see in green. To the downside, utilities is down almost 2%, followed by real estate and health care. All of those are defensive sectors.

And let's get a check of the majors now and we can see a mixed board. NASDAQ just barely in the green by 7 basis points. It's been fluctuating all day. And then the Dow is down about 1/3 of a percent and the S&P 500 down 1/5 of percent. So, without further ado, we want to talk about the current market action, and that is with Callie Cox. She is eToro's U.S. Investment analyst. And Callie, always great to see you here. We've done a number of webinars together and we've talked about some of the statistics in the S&P 500. And I think you and I were looking at some of the same data this week, and what were you looking at? What were some of the conclusions that you came to?

CALLIE COX: Yeah, Jared. We were looking at some of the same data. I mean, the rally we've seen so far this week, or at least on Monday and Tuesday, has been fierce. I think we can all agree on that. But it's so fierce, I mean, it's the first time the S&P has rallied 2.5% or more in back-to-back days since December 2008. And you and I both ran the data, right? We see these kinds of rallies either deep in bear markets or in the first few days after a bull market starts, which is exact opposite scenarios there. And it just goes to show just how complicated this environment is for investors, how emotion-fueled and panicky it feels. And you know it's quite a tough position to be in because we could be staring down two different paths here.

- And so investors who are nervous right now. what is your advice to them? Hopefully, everybody's sitting on piles of cash. But that's not necessarily the case. I know that I have a significant amount deployed. Got some on the sidelines here ready to be deployed. What are you telling your clients right now?

CALLIE COX: Yeah, well, it's interesting you say that, because seeing the sentiment and the sour mood that the market is in, I'd expect there to be more cash on the sidelines than we think. But at the same time, we're telling our clients to really manage your emotions here, to understand where the market environment is. But also the fact that it could be very costly to miss out on the first few days of a bull market. We really like a barbell strategy here, holding on to some risk but being defensive at the same time.

- And where do you see the market opportunities when this market finally turns around? Maybe it already has. Maybe the low's in, but that's not necessarily the sure bet right now. What kind of sectors are styles are you looking at?

CALLIE COX: Yeah, well, if this market really is bottoming, we would expect to see more of an uptick in risk here, more of a surge in growth year assets here. We really like quality risk, though, at the moment. I mean, there are a lot of different flavors of growth stocks, we all know that. With tech you could look at the more speculative concept stocks. Or, you could look at big tech. We think big tech is a good example of quality risk with strong financials. And at the same time, we really like cyclicals here, but we're feeling a little more cautious at the moment, only because we don't know what the future holds for us here. And if we see growth deteriorate much more, we could see that reflected in cyclical stocks.

- Callie, I was writing our newsletter this morning, "The Morning Brief"-- actually I wrote it yesterday afternoon for publication this morning-- but it was about those very same market statistics that you were talking about. After I ran the data and I saw kind of a mixed bag there, I kind of went off on a rant. And you and I love to parse the data and look for things. Sometimes we don't always find an edge. Maybe you did, maybe I didn't, but I think my message for investors is sometimes you just got to turn off the news. Not Yahoo Finance, of course, while you're watching this broadcast. But you've got to filter out the noise. Just wondering what you're thinking about this as you also talk to some of your clients.

CALLIE COX: Oh, it's so hard because it's so noisy these days. And there are so many things you can look at to find that signal. And I mean, Jared, you know I like parsing through data, you just said that, but I always try to remind people that when we see these big and up-and-down days, there's something significant. Happening what that moment or significance is, we're not really sure yet. And I know that's not super helpful, but you have to really remember your own goals and your own needs especially strongly in times like this. Really focus on why you're investing and what kind of time horizon you have. Because that will help you determine which market and which voices you listen to.

- That's right. Focus on risk management and your time frame. Lots of signal in that interview, not a lot of noise. Thank you for that, Callie Cox. eToro USA investment analyst.