BMO Wealth Management Chief Investment Strategist Yung-Yu Ma joins Yahoo Finance to discuss market growth not meeting expectations, investment in clean energy, and the Delta variant's effect on the economy.

Video Transcript

BRIAN SOZZI: Stocks have been a little wobbly so far in September as traders fret about the ongoing pandemic's impact on the economy and potential shift in Fed policy. So is a market correction brewing? Joining us now is Yung-Yu Ma, Chief Investment Strategist at BMO Wealth Management. Good to see you, Yung-Yu.

We've been talking a good bit about how Wall Street is now, I think, starting to realize that the economy is not growing at the pace that they would have thought a couple of months ago. Do you think this is, what we're seeing in the economy, is correction-worthy for the markets?

YUNG-YU MA: We don't think it's correction-worthy at this point. We think the fundamental drivers of strong earnings and accommodative Fed and still a healthy appetite for risk-taking are really what's going to support the market for the rest of the year. So although there's some caution starting to creep in, some acknowledgment that growth is not as robust as we might have expected, I think the fundamental drivers are still there to underpin the market.

JULIE HYMAN: Well, and Yung-Yu, it's Julie here. I would also ask, you know, what better alternative is there, right? You know, you hear some of these strategists this morning going underweight US stocks, but where are there-- where could there be better returns here? Do you think that the US is still going to provide the best opportunities?

YUNG-YU MA: We think so. We're still overweight US stocks. We think relative to other areas, other investable assets, US equities still looks very positive. That's right. What are the alternatives out there? They're not-- there aren't other alternatives that stand out as being noticeably more attractive than US equities at this point. So, you know, we're seeing some stabilization in Europe, but also not great growth prospects either. Emerging markets have various challenges, although we are seeing or are expecting somewhat of a rebound in emerging markets.

But overall, if we're looking at stability, if we're looking at accommodative monetary policy-- which we still think that's the case with the Fed-- we think the US is still a healthy market here.

BRIAN SOZZI: What sectors do you gravitate towards in the US?

YUNG-YU MA: No, we're pretty balanced here. We think cyclicals can stage a bit of a rebound once the infrastructure talks get along a little bit further. We like financials here. We think interest rates are going to modestly climb. And in general, we're taking a relatively balanced approach in US equities. We think technology's going to continue to do well. We think valuations are going to hold up. Profit margins will broadly hold up-- perhaps come in a bit, but broadly hold up.

So we're not really leaning in too heavily to one sector, one theme. We think it's pretty broad-based here.

JULIE HYMAN: And Yung-Yu, we were just talking about some new plans, new ambitious plans from the administration in terms of solar power, right? Targeting 45% of the country's electricity to come from solar power by 2050. You mentioned, you know, looking at some infrastructure plays, et cetera. Do you think-- I mean, there aren't much specifics to this plan yet, and it seems like it's going to be up to Congress to enact ways to get to that goal.

But where are we in terms of alternative energy investment, in terms of infrastructure investment? How should investors be thinking about this in terms of the sort of life cycle?

YUNG-YU MA: Well, it's going to accelerate. We're still early. So although there's been a lot of discussion, and, of course, improvements and positive developments, we're still early. As you could see, the administration laid out we're at 4% solar now, laid out trying to get to 45% solar. That's tremendous. But of course, let's not ignore wind power as well. There's going to be a lot of developments along those lines. Electrification is going to be a major theme going forward for years to come.

So we still think we're early. We still think there's a lot of runway, a lot of spending, a lot of capital expenditures that are going to flow through because of this. So that's going to be a theme that's with us for quite some time, still.

BRIAN SOZZI: You know, it's clear, Yung, the economy is in-- it's in a weird spot. I mean, we were just talking about some notes by other strategists looking at, you know, we have people-- consumers-- going back out there, chopping another subset of consumers staying at home. I mean, why shouldn't the market go down 10%?

YUNG-YU MA: It is a weird spot. I think that's worth acknowledging. I think it's a very good point that it's this mix that's a little bit uncomfortable right now, because it's not a straight line. It's not one theme. It's not-- it's not a clear path forward because we're having these bumps, whether it's with the Delta variant or uncertainty with the Fed with inflation. There are a mix of crosscurrents right now.

What we go back to are two things. One is that earnings growth still looks pretty healthy. Companies have found ways, by and large, to grow their earnings in this environment. We think that will be the case. We think corporate spending will continue to hang in strong, and we think right now the Fed is still quite accommodative. So those things, if we sort of strip away some of the headwinds or strip away some of the crosscurrents that are happening, we think those underpinnings really carry us through.

But it is a good point. There is-- it is worth acknowledging. There's more caution and a bit of uncertainty creeping in because of these things. So it's not the-- it's not the straight-line story that it might have been very early in the year, that's for sure.

BRIAN SOZZI: Point well taken. Yung-Yu Ma, Chief Investment Strategist at BMO Wealth Management. Good to see you.