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Investors should forget about politics and focus on earnings: Analysts

  • Investors should ignore politics during earnings season, said Jeffrey Kleintop, Charles Schwab chief global investment strategist.
  • Earnings for skyrocketing sectors "have to deliver," Kleintop said.
  • Financials could become magnets for dividend funds, said a portfolio manager at Federated Investors.

While Washington, D.C., roils over the latest White House bombshell, some analysts think investors would do well to cut out the political noise and focus on the signal — namely, earnings.

In the coming months, questions surrounding the future of free trade agreements and U.S.-North Korea relations may bring politics to the fore for investors, but today's headlines should take a back seat to earnings season, according to Jeffrey Kleintop, Charles Schwab's chief global investment strategist.

The news of White House Press Secretary Sean Spicer's resignation on Friday ranks "not very highly" in terms of investors' priorities, Kleintop said Friday on CNBC's "Power Lunch," "at least not right now."

"Look, politics nudge markets one way or another from one day to the next, but the underlying trend is firmly rooted in earnings," he said.

Kleintop said earnings reports are especially important for the sectors that are starting to look like potential bubbles, such as biotech and internet retail.

"Earnings have to deliver," Kleintop said while assuring that the current "froth in the market" is wholly different from the bubbles of the past few decades that rocked the economy.

Those bubbles, he said, "became embedded in the overall economy, and they took down markets beyond those limited industries that investors were focused on." Even if earnings underwhelmed in biotech, for example, "it wouldn't have the same spillover effect," Kleintop said.

But with the stock market at all-time highs, finding the best values can be a challenge.

White House Press Secretary Sean Spicer speaks at the Newseum during their 'The President and The Press, The First Amendment in the First 100 Days' event April 12, 2017 in Washington, DC.
Aaron P. Bernstein | Stringer | Getty Images
White House Press Secretary Sean Spicer speaks at the Newseum during their 'The President and The Press, The First Amendment in the First 100 Days' event April 12, 2017 in Washington, DC.

"We really like financials," said Steven Chiavarone, portfolio manager at Federated Investors, on "Power Lunch." "It's probably our area of highest conviction."

Chiavarone said Bank of America or JPMorgan Chase could become a magnet for dividend funds.

"What I don't think people realize is that financials used to be dividend darlings," Chiavarone said. "The yield on several of these names are north of two-and-a-half, approaching three percent, and we think they're going to become attractive, specifically because they're the anti-bond proxies."