The first couple of trading days for 2024 have been a mixed bag as 2023's Santa Claus rally came to an end with the Nasdaq (^IXIC) down 3.7% in the past five trading days. However, while the market may be off to a rocky start, many on Wall Street are feeling more bullish after many signs point to inflation cooling.

Truist Co-Chief Investment Officer and Chief Market Strategist Keith Lerner joins Yahoo Finance to discuss where there are opportunities to buy in the stock market during this rocky start to 2024.

"I do think small caps, especially for longer-term investors, look attractive. They went up 25% from the October lows so now you're pulling back and likely also going to consolidate," Lerner explains. "But I will say this, the relative valuations are still at the lowest level, towards the lowest level we have seen in 20, 25 years. The underperformance, we're still in extreme for the whole year, as well. They were also getting hit a lot by the Fed moving rates higher because they have a lot more floating rate debt. As interest rates or the Fed starts to pivot, that should be a positive."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino.

Video Transcript

RACHELLE AKUFFO: Well, stocks climbing but jittery this morning after opening 2024 on a downtrend. This of course, followed the year end rally we saw to close out 2023. Our next guest suggests that investors should use these pullbacks as opportunities in the market. Joining me now is Keith Lerner, Truist Co-Chief Investment Officer and Chief Market Strategist.

Good to have you back on the show here. So for investors who are feeling a little bit jittery not sure of where they stand at the moment, especially after the Fed threw some cold water on how long they'll be holding rates for, how are you gauging buying the dip in this environment? Where do you see the opportunities?

KEITH LERNER: Yeah. Well, first, great to be with you this year, Rachelle. As you mentioned, we had a tremendous rally at the end of last year. We had a nine week winning streak for the overall market. That's the longest winning streak since 2004. So our expectation is coming into this year is the first part of the year would be somewhat choppy, at least the first quarter would be somewhat choppy because you've had such a strong move.

But I will say this, you hear the term a lot, the market's overbought, and you can say statistically, it is, but we've done some work around this. And if you look at something called the relative strength index, which I'm sure a lot of your viewers are familiar with, it's a momentum indicator, and it got above 80 for only the 15th time or sorry, the 16th time since 1980.