WEBVTT - Bloomberg Markets: Detrick Sees Fall Pullback, December Hike 0:00:01.240 --> 0:00:04.120 Global Business new is twenty four hours a day at 0:00:04.280 --> 0:00:07.240 Bloomberg dot com. The radio blows mobile Labe and on 0:00:07.320 --> 0:00:12.240 your radio. He's a Bloomberg Business label from Bloomberg World Headquarters. 0:00:12.360 --> 0:00:16.919 I'm Charlie Pellotondal. The SMPNZDAC all advancing stocks are rising 0:00:16.960 --> 0:00:20.680 for a fourth day. The dollar is strengthening after data 0:00:20.720 --> 0:00:23.800 bolstered optimism that the U. S. Economy is on firm footing. 0:00:24.320 --> 0:00:26.920 SMP five hundred index up ten a gain of four 0:00:27.000 --> 0:00:29.800 tenths of one percent, the Dow up eleven, a gain 0:00:29.840 --> 0:00:33.080 of one tenth of one percent. Nestack hired by sixty 0:00:33.080 --> 0:00:36.280 one points, up one percent. The ten year down three 0:00:36.320 --> 0:00:39.880 thirty seconds, the yield two point one four percent, Gold 0:00:39.880 --> 0:00:42.760 down for eight ounce down four tenths of one percent. 0:00:43.040 --> 0:00:46.760 Crude oil West Texas Intermediate down one percent to forty 0:00:46.880 --> 0:00:51.320 five ninety nine of barrel gasoline surging now by six 0:00:51.560 --> 0:00:55.440 point two percent. I'm Charlie Pelloton. That's a Bloomberg Business flash, 0:00:55.480 --> 0:00:57.360 all right, got it, Charlie, Thank you so much. You 0:00:57.440 --> 0:00:59.520 are listening to Bloomberg Markets. It is time for the 0:00:59.520 --> 0:01:01.760 Bloomberg e t F Report, brought to you by black 0:01:01.840 --> 0:01:06.319 Rock worried about market volatility. Minimum volatility strategies may be 0:01:06.400 --> 0:01:09.400 able to help. To learn more, please visit black Rock 0:01:09.480 --> 0:01:13.280 dot com slash factors prepared by black Rock Investments LLC. 0:01:13.720 --> 0:01:16.680 Here at the Bloomberg et F Report Bloomberg's Julie Hyman, 0:01:17.480 --> 0:01:20.640 I'm here with Eric baltoonist of Bloomberg Intelligence. The United 0:01:20.680 --> 0:01:23.160 States oil fund Erica is the world's largest and most 0:01:23.160 --> 0:01:25.560 traded oil et F. But you see it hasn't actually 0:01:25.600 --> 0:01:28.679 been a great investment. Why not, Well, it's because it 0:01:28.760 --> 0:01:31.880 holds oil futures and you always have to manage that position. 0:01:31.959 --> 0:01:34.120 And I won't go into the gritty details, but basically 0:01:34.160 --> 0:01:36.920 that's called rolling, and that will cost you anywhere from 0:01:36.959 --> 0:01:39.640 ten to four percent a year. And so what people 0:01:39.680 --> 0:01:42.880 don't realize is that the oil market, the spot oil 0:01:42.920 --> 0:01:45.240 could go up like it is this year, and yet 0:01:45.319 --> 0:01:47.320 the oil et F could be flat if you hold 0:01:47.319 --> 0:01:49.680 a long term That's why it's better used as a 0:01:49.720 --> 0:01:52.639 short term trading vehicle and not a long term holding. 0:01:53.040 --> 0:01:55.360 Is there a chance though that it could improve? Yeah, 0:01:55.440 --> 0:01:58.760 So the amount of roll cost changes as the oil 0:01:59.000 --> 0:02:01.680 future's curve changes, and it's getting a little flatter, which 0:02:01.720 --> 0:02:04.160 is good. News, but who knows how long never last, 0:02:04.200 --> 0:02:06.960 and it's not something that you really should bank on. Gotcha, 0:02:07.040 --> 0:02:10.920 So the USO better trading tool than a long term investment. 0:02:11.000 --> 0:02:13.920 Thanks Eric. I'm Julie Hyman with the Bloomberg et F Report. 0:02:14.560 --> 0:02:18.360 You're listening to Bloomberg Markets with Carol Messer and Corey 0:02:18.440 --> 0:02:27.920 Johnson on Bloomberg Radio. Let's up with a little bit 0:02:27.919 --> 0:02:31.280 about making money in this financial market. Our next guest 0:02:31.320 --> 0:02:33.720 does look at the market on a technical basis, notes 0:02:33.760 --> 0:02:37.160 that the stock market, specifically that the latest stretch without 0:02:37.160 --> 0:02:39.919 a three percent pullback is one of the longest ever, 0:02:40.080 --> 0:02:42.240 something we've heard our Bloomberg stocks Colm the stab Wilson 0:02:42.800 --> 0:02:45.480 Uh point out as well. Let's get more from Ryan 0:02:45.520 --> 0:02:48.760 Dietrich back with us, senior market strategist at LPL Financial 0:02:48.919 --> 0:02:53.160 on the phone in Charlotte, North Carol, Carolina. Ryan, good 0:02:53.160 --> 0:02:54.480 to have you back with us. Tell us a little 0:02:54.480 --> 0:02:58.040 bit about uh about this stretch where we have not 0:02:58.280 --> 0:03:01.840 seen a three percent pull back on a technical basis. 0:03:02.680 --> 0:03:06.240 What's significant about that? Well, that's right, Carol, thanks for 0:03:06.240 --> 0:03:08.720 having me back. First off, so you know what's happened 0:03:08.720 --> 0:03:11.160 in the market since the election, Well, we haven't seen 0:03:11.200 --> 0:03:14.720 a three correction. So we're going on almost ten months now. 0:03:14.800 --> 0:03:18.520 Going back to this, the SMP fire is the second 0:03:18.760 --> 0:03:22.440 longest stretch without so much as a three correction on 0:03:22.480 --> 0:03:25.160 the SMP five hundred. When you consider the fact that 0:03:25.200 --> 0:03:29.400 we're entering into the dreaded month of September and historically 0:03:29.440 --> 0:03:33.359 the worst return since on the s on the SMP fire, 0:03:33.440 --> 0:03:35.880 it's been down the last three years, worst return to 0:03:35.920 --> 0:03:37.839 past twenty years. You know, we've got his long run 0:03:38.560 --> 0:03:41.120 really not a lot of volatility, and September is around 0:03:41.160 --> 0:03:43.280 the table. So to us, it makes sense to maybe 0:03:43.320 --> 0:03:44.960 lighten up a little bit here and kind of look 0:03:45.040 --> 0:03:48.640 for potentially some well deserved volatility, because markets they can't 0:03:48.640 --> 0:03:50.160 be volatile. We haven't seen it in a while, but 0:03:50.200 --> 0:03:53.840 we wouldn't be shocked if that came back to us here, right, 0:03:53.920 --> 0:03:56.360 I get that, Um, but I mean markets don't just 0:03:56.400 --> 0:04:01.040 sell off because it's time to sell off a little checklist. 0:04:01.280 --> 0:04:05.120 So fundamentally, when you look at things and I know, valuations, Uh, 0:04:05.320 --> 0:04:07.760 you know, people talk about how that they you know, 0:04:07.800 --> 0:04:11.560 we see a market that's overvalued generally speaking. Uh, you 0:04:11.600 --> 0:04:16.760 know what else says to you that it's troubling Some 0:04:16.839 --> 0:04:21.120 of the underpinnings of this financial market. Sure, well, when 0:04:21.120 --> 0:04:22.919 you look under the surface a little bit, you know, 0:04:23.000 --> 0:04:25.560 some of those advanced decline lines when we get technical. Honest, 0:04:25.600 --> 0:04:28.560 you know, we haven't quite seen the strong, broad participation 0:04:28.680 --> 0:04:32.320 that we normally see during healthy markets. Now again, this 0:04:32.400 --> 0:04:35.160 is just more near term concerns. I mean, you know, Carol, 0:04:35.240 --> 0:04:39.680 you mentioned valuations. Valuations absolutely are stretched historically, but when 0:04:39.680 --> 0:04:42.080 you factor in the very low inflation that we've been seeing, 0:04:42.160 --> 0:04:45.240 we think valuations are relatively actually um kind of right 0:04:45.320 --> 0:04:47.640 in line where they should be. But in the end, 0:04:47.640 --> 0:04:49.160 it does come down to the economy. You know, we've 0:04:49.160 --> 0:04:52.520 looked at two straight double digit earnings um your your 0:04:52.560 --> 0:04:55.640 earnings growth first time since two thousand eleven, and all 0:04:55.640 --> 0:04:57.240 in all, you know, look at the day's data on 0:04:57.360 --> 0:05:00.960 three percent GDP print. Now that's backward looking. Nonetheless, we 0:05:00.960 --> 0:05:03.400 continue to see your most positive signs in economy. So 0:05:03.600 --> 0:05:05.880 if the economy looks good, it's just the facts and 0:05:05.960 --> 0:05:08.440 little internal weakness going on inside the market. You know, 0:05:08.480 --> 0:05:12.080 small caps and transports specifically have underperformed. Those can be 0:05:12.120 --> 0:05:14.359 a little bit of that canary in the coal mine. 0:05:14.600 --> 0:05:18.239 But again, you know, historically speaking about five three percent 0:05:18.279 --> 0:05:20.400 corrections a year. We haven't had one in ten months. 0:05:20.520 --> 0:05:22.720 We're not calling into the world by any means here 0:05:22.760 --> 0:05:24.599 would still be a buyer of a dip. We just think, 0:05:24.600 --> 0:05:26.880 you know, getting a little long in the tooth and 0:05:26.920 --> 0:05:29.560 maybe being a little patient here makes a lot more sense. 0:05:29.760 --> 0:05:32.200 You know, we have an earlier guest, UH worked at 0:05:32.200 --> 0:05:37.320 the Dallas Federal Reserve. She's a Bloomberg Profit columnist, Danielle 0:05:37.360 --> 0:05:39.920 di Martino Booth, and she said, you know, I could 0:05:39.920 --> 0:05:41.960 pretty much make the case for why we might actually 0:05:42.000 --> 0:05:45.040 get a FED rate cut versus a FED increase UH 0:05:45.080 --> 0:05:47.320 in the near future. And she's talking specifically, like, look 0:05:47.320 --> 0:05:50.160 at some of the auto industry numbers, UH, look at 0:05:50.160 --> 0:05:55.679 some of the housing numbers that we're seeing, UH concerns there, Um, 0:05:56.080 --> 0:05:59.479 how does that factor in potentially? Sure? Well, first off, 0:05:59.480 --> 0:06:01.240 you know, we don't think there's much of a chance 0:06:01.279 --> 0:06:03.320 or rate hike, but I get it. You can make arguments. 0:06:03.320 --> 0:06:05.120 You know what we just did this week, Actually we 0:06:05.160 --> 0:06:08.359 looked at all of the corporate earnings UM notes that 0:06:08.400 --> 0:06:11.800 came out, and we we saw Carol a lot of positives. 0:06:11.839 --> 0:06:14.480 You know, there was very little discussion of Trump. There 0:06:14.520 --> 0:06:16.800 was a lot of very little discussion of a recession. 0:06:17.080 --> 0:06:19.719 You know, the US dollar isn't so important, so really 0:06:19.760 --> 0:06:21.919 these companies are looking at more fundamentals. We saw a 0:06:21.920 --> 0:06:24.200 lot more positive notes when it came to earnings and 0:06:24.240 --> 0:06:27.159 than negatives. So again those are all pluses. But you're right, 0:06:27.200 --> 0:06:29.599 you know, the autos and some other areas are you know, 0:06:29.640 --> 0:06:31.800 you could say cracks in the surface. But when we 0:06:31.839 --> 0:06:34.960 see consumer confidence of breaking out against two new highs 0:06:35.440 --> 0:06:37.200 um you know, the earnings continue to be strong, and 0:06:37.200 --> 0:06:40.000 look where the earnings came from. Technology and financials. You know, 0:06:40.040 --> 0:06:41.919 those have kind of brought us to the dance. And 0:06:42.040 --> 0:06:43.960 we still think, you know, those are the two largest 0:06:44.000 --> 0:06:46.440 components the FMP five. As long as the earnings he 0:06:46.560 --> 0:06:50.440 coming from the right areas, we'd still be positive here, 0:06:50.480 --> 0:06:52.359 you know, on markets, and we think there's still a 0:06:52.360 --> 0:06:54.440 good chance of one more rate hike, not at a 0:06:54.560 --> 0:06:57.160 rate hike probably in December. Is still even though I 0:06:57.160 --> 0:07:00.000 think futures are with thirty five percent chance approximately, we've 0:07:00.000 --> 0:07:01.279 gets probably a little bit higher than that and in 0:07:01.320 --> 0:07:03.279 fact likely over the rate hike in December, which I 0:07:03.360 --> 0:07:06.200 was Ryan Dietrich, Senior Markets Judges at LPL Financial on 0:07:06.240 --> 0:07:08.640 the phone from Charlotte, North Carolina. Your own research that 0:07:08.720 --> 0:07:10.680 reminds us that we're getting ready to enter the worst 0:07:10.720 --> 0:07:15.200 two months of the year. Uh. Again, that alone doesn't 0:07:15.240 --> 0:07:17.600 necessarily say we're going to see it this time around again, 0:07:17.680 --> 0:07:20.160 but but we are typically running into the quarter where 0:07:20.200 --> 0:07:23.440 we start to see potentially some selling within the market. 0:07:23.720 --> 0:07:28.520 Uh could we should we see some kind of a pullback? Carroll? 0:07:28.600 --> 0:07:30.160 We do think so, you know, like we said, I mean, 0:07:30.520 --> 0:07:33.679 August historically has been a troublesome month, and the probably 0:07:33.680 --> 0:07:36.080 got one more day in August and probably gonna be down. 0:07:36.120 --> 0:07:37.960 I mean, think about it like this. The SP five 0:07:38.400 --> 0:07:40.960 has been positive on a total return basis. So again 0:07:41.000 --> 0:07:45.080 that includes dividends nine consecutive months, longest Streek since when. 0:07:45.120 --> 0:07:48.640 Of course, all these records are playing in so we've 0:07:48.640 --> 0:07:52.240 got a really nice run. Um. You know, historically you've 0:07:52.240 --> 0:07:54.480 got the troublesome September, and let's be honest, So why 0:07:54.520 --> 0:07:56.600 it's September troublesome? You know, we can get into some 0:07:56.680 --> 0:07:58.880 of those things. What's happened in this September. Well, you've 0:07:58.920 --> 0:08:00.920 got the FED, you've got the ECB, you've got the 0:08:00.960 --> 0:08:02.680 B O J and if you even get into all 0:08:02.720 --> 0:08:05.960 the Washington drama with the budget, budget issues and debt 0:08:06.000 --> 0:08:09.200 ceiling issues. So September a month that's usually voluable, We've 0:08:09.200 --> 0:08:11.000 got a lot of events. We think they can definitely 0:08:11.040 --> 0:08:14.120 make it just that very voulable. What other industries do 0:08:14.200 --> 0:08:16.280 you look at specifically, Like if you take a look 0:08:16.280 --> 0:08:18.880 at the down transports versus let's say the S and 0:08:18.920 --> 0:08:22.000 P five hundred, or if I look at a chart 0:08:22.720 --> 0:08:25.360 of the Dow, the down the SMP certainly mirror one 0:08:25.400 --> 0:08:28.000 another because we've kind of upward momentum. But you look 0:08:28.000 --> 0:08:30.800 at something like transports, that's a whole other charts. We've 0:08:30.800 --> 0:08:34.480 seen a significant pullback from the doubt transport since about 0:08:34.520 --> 0:08:36.640 mid July. I think if you pull up the Russell 0:08:36.800 --> 0:08:40.840 as well, you'll see a similar chart to that Transports. 0:08:40.920 --> 0:08:43.760 You've seen that group pull back as well. Doesn't that 0:08:43.840 --> 0:08:46.000 worry a little bit about the underpinnings of the market 0:08:46.040 --> 0:08:48.679 as well? Sure, Caroline, it absolutely does. I mean, you know, 0:08:48.760 --> 0:08:50.920 let's be honest, those are quote unquote the Trump trades, 0:08:50.960 --> 0:08:52.679 whether you believe it or not, that's what they've kind 0:08:52.679 --> 0:08:55.200 of been lumped as and and no questions small caps 0:08:56.480 --> 0:08:57.920 well yeah, yeah, I mean if you look with small 0:08:57.960 --> 0:09:00.520 caps did initially after the election last year, Clearly they 0:09:00.600 --> 0:09:02.240 did well. And why did they do well with the 0:09:02.280 --> 0:09:04.720 hope of tax reform which clearly has been pushed back, 0:09:04.800 --> 0:09:08.160 And that's obviously we think why small caps have underperformed 0:09:08.200 --> 0:09:11.679 this Year's gonna keep punning back the tax reform. All Right, 0:09:11.679 --> 0:09:14.520 we gotta run, Hey, Ryan, Thanks. Ryan Ditrick, senior market 0:09:14.559 --> 0:09:18.679 strategist at LPL Financial, on the phone from Charlotte, North Carolina. 0:09:18.920 --> 0:09:20.800 We've got just about three and a half minute minutes 0:09:21.000 --> 0:09:23.280 left in today's trading session. We're gonna walk you through 0:09:23.320 --> 0:09:25.040 those numbers and also some of the names on the 0:09:25.120 --> 0:09:27.520 move in a Wednesday trade. This is Bloomberg Radio.