Capital Wealth Planning Chief Market Strategist Jeff Saut joins Yahoo Finance’s Kristin Myers to discuss his outlook on the markets following the August jobs report.

Video Transcript

KRISTIN MYERS: For another look at the markets, we are joined now by Jeff Saut, Capital Wealth Planning Chief Market Strategist. So Jeff, I want to start, you know, with what we're seeing with this sell off. Back in July, you said that the S&P 500 would actually skyrocket to a level of 4,000. And right now, it's actually at 3,424.

And two weeks ago, you were actually saying that the markets could go higher than the peak. Of course, we now have this pullback, although we are seeing all three major indices starting to pare some of those losses. I'm wondering if you are still seeing things that way, if that level of 4,000 can be reached in a year, and if you think that the markets are going to go higher than the peaks that we had seen?

JEFF SAUT: Yeah, I also wrote two weeks ago that we have three basic models, long term model, which turned positive in October of '08 and it's never turned negative since then. We have an intermediate and a short term model. The short term and the intermediate term models, if you read my stuff, turned negative last week. And we wrote about it and said, we're looking for a trading peak and a pullback.

I have no idea how deep it will be, but it does not disturb our long term secular bull market call that actually began in October of 2008 when the majority of stocks bottomed. The averages went lower into March of '09 because the financials went lower, but the majority of stocks, 92.6% of stocks traded, made their lows in October of '08. So secular bull markets tend to last 15 to 20 years. If you go back and look at them, the 1949 to 1966 secular bull markets. The 1982 to 2000 secular bull market.

And these so-called market experts think that the bull market ends because you had a 37% pullback. And you had a 22.6% crash in October of '08, but the secular bull market went on for another 13 years. So a lot of these people that say we began a new bull market in March of '09, no, that's totally wrong. The secular bull market began, I guess from an actual industry standpoint, in March of '09. I actually think it began in October of '08.

But from an index standpoint, it began in March of '09. It ought to last 15 to 20 years, so we ought to have another, I don't know, five to 10 years left in this thing. And quite frankly, nobody believes it, because there's not many of us old enough that have been around 50 plus years in this business that have seen what a real secular bull market looks like.

KRISTIN MYERS: Well, this is our we're glad we have you on to give us all of this expertise and obviously historical insight. I want to ask you about something that Kim Catechis over at Martin Currie said yesterday. He said he didn't think this is going to actually be a part of a broader correction. I'm wondering what your thoughts are on that. Is this going to be just a two day slide?

JEFF SAUT: I don't think it's going to be that deep. I don't think it's going to be that broad. I don't think it ends. I mean, one of my mantras over 51 years in this business has been never on a Friday, meaning once markets breakdown, they rarely bottom on Fridays, because they give participants over the weekend to brood about their losses, have to tell their wife they can buy the new Mercedes Benz that she wants, and people typically show up, you know, in the next week-- although we've got a holiday on Monday-- typically show up the next week in sell mode.

So I'd be a little cautious right here. I raised cash a little bit too soon. I raised cash last week. I didn't raise a lot, because I think we're still in a secular bull market that has years left to run, but I raised a little cash on a trading basis, and I'm looking to put it back to work in the next week or two.

KRISTIN MYERS: So to that point, how should investors be approaching their portfolios right now, particularly if they've been overbought on tech? That was leading the way lower yesterday, although that is not the case today.

JEFF SAUT: Well, you know, technology has been the leading group, and the reason it's the leading group is because they've got the best growth characteristics, and the stock market and stock market participants will always, always, always pay up for true growth. I mean, I've been looking at markets for 56 years with my dad, who was a portfolio manager, and markets will always pay up for true growth stocks. And the problem that a lot of people have is they look at the valuations, and they say, well, they're too expensive. Well, a lot of the true growth stocks have looked too expensive for 20 years, and yet, you should have bought them.

KRISTIN MYERS: So I have to ask then, to that point about tech, do you think they're going to be ceding their leadership position anytime soon? And if so, who is going to be taking that top spot? Is it going to be cyclicals, anything else?

JEFF SAUT: Well, I think the economy is a lot stronger than people think. So I think cyclicals, you know, have a place in portfolios, but I think technology is still going to lead. But quite frankly, I like just about all the sectors. If I had to, and I won't say underweight, because I don't own them. But I would not own utilities here, and I would not own consumer durables like Procter & Gamble.

There's too many portfolio managers I know that have not believed this rally, and yet, they've had money come in over the transom, and they've had to put it to work. And because they've been afraid of the markets because of the valuation metrics, which if you look at the valuation metrics based on where the current interest rates are, stocks are not all that expensive. But they've been afraid of the valuations on a historic basis, and so they've had to put money to work, and they put money to work in utilities and consumer durables. And quite frankly, from a historic standpoint, those two sectors have become quite expensive.

KRISTIN MYERS: All right, we'll have to leave that there. Jeff Saut, Capital Wealth Planning Chief Market Strategist, thanks for joining us. Have a great holiday weekend.

JEFF SAUT: Thank you.