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Speaker 1: This is Bloomberg Surveibans. We think we're heading into an

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Speaker 1: eighties and nineties type environment where it's a Warren Buffet

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Speaker 1: slash Peter Lynch type world where you're by good companies

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Speaker 1: in a stick with them. We live in a world

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Speaker 1: which is more and more weightless. Intangibles are such an

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Speaker 1: important part of the economy. I think it's pretty clear

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Speaker 1: that if you only look at the economic data and

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Speaker 1: not at the market, the FED would be raging rates

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Speaker 1: to hand March Bloomberg Surveillance your link to the world

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Speaker 1: of economics, finance, and investment on Bloomberg Radio. Good morning,

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Speaker 1: Michael McKay along with Tom Keane. It's seven a. I'm

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Speaker 1: on Wall Street on Jobs Day Eve. The mood generally

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Speaker 1: positive this morning January twenty if that was the low

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Speaker 1: price for oil at the close West Texas. Since then

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Speaker 1: oil has stabilized, and that does seem to have turned

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Speaker 1: the mood. The Bloomberg Commodities Index I was looking at

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Speaker 1: this this morning up five. You don't realize it. Commodity

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Speaker 1: indecks up five since it's low on January this morning,

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Speaker 1: Food mixed with West Texas up six cents to thirty

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Speaker 1: seventy two. Brent down five cents to thirty eight, but

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Speaker 1: basically has stabilized in the mid thirties, and to the

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Speaker 1: extent there's a correlation. Stocks are higher, Europe was higher

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Speaker 1: most of the morning. Now that the stock six hundred

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Speaker 1: is unchanged on the day. Futures in the US are unchanged,

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Speaker 1: and really that is the case. I mean SMP, Dowland, NAZDACK,

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Speaker 1: E many futures, there's no change in them from yesterday.

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Speaker 1: We did have a big rally the last couple of days,

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Speaker 1: so we will see what the mood is once the

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Speaker 1: markets opened this morning in the US. Helping the mood

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Speaker 1: besides oil decent to better economic data in the US lately,

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Speaker 1: including the better than forecast a d P numbers yesterday.

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Speaker 1: So bond yields are higher this morning. The tenure on

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Speaker 1: the five year one point three six and eighty five

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Speaker 1: basis point for the two year note yield. Despite the

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Speaker 1: relative optimism, however, in the markets, gold continues to rise

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Speaker 1: seventy cents. It is just under it's recent high. What

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Speaker 1: is behind sort of the the dichotomy and views here.

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Speaker 1: Scott Wren, Senior equity strategist at Wells Fargo in St. Louis,

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Speaker 1: America's heartland. The price action Scott we're seeing recently kind

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Speaker 1: of puts me in mind of Ronald Reagan's heartland. America's

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Speaker 1: heartland was midtown Manhattan, right, Yeah, Well not Tom, believe

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Speaker 1: it or not, it's it is for Tom. He doesn't

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Speaker 1: go west to the bar at the Carlisle. UM anyway,

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Speaker 1: Ronald Reagan said, you know, trust but verify about the

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Speaker 1: Soviet Union. And that's kind of what I'm looking at

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Speaker 1: this morning. Investors feel better about things, but they're not

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Speaker 1: yet ready to go all in unrisk. Well they're they're

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Speaker 1: really they're not, Mike, and and I was a little surprised.

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Speaker 1: I have to tell you that the market held on

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Speaker 1: and gained a touch yesterday after after the big day

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Speaker 1: of the day before. But but I think that that

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Speaker 1: I don't want to say that we're building confidence, but certainly, UM,

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Speaker 1: people are a little bit more confident than they were

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Speaker 1: maybe a few weeks ago. Is that because they see

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Speaker 1: things better or because what happened a few weeks ago

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Speaker 1: was an overreaction. Well, I think it was an overreaction,

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Speaker 1: and I think they are seeing things better and the

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Speaker 1: world is not coming to an end. And and while

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Speaker 1: growth as modest, inflation is still modest, there's a lot

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Speaker 1: of questions. There's a lot of questions still to be

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Speaker 1: answered about the economy. I feel pretty confident and certainly

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Speaker 1: our work tells us that this this, this economy is

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Speaker 1: going to move ahead gradually. Um. The fundamentals this year

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Speaker 1: in really, to be honest with you, from our view,

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Speaker 1: are really not much different than they were for the

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Speaker 1: last five years. So it's kind of a status quo

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Speaker 1: kind of thing to me. Tom, Well, there a surprise there.

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Speaker 1: John Tucker should be sending out a headline. Scott Wren says,

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Speaker 1: world is not coming to an end. Well, no, I

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Speaker 1: think would great. What's great here, Scott and and avving

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Speaker 1: you on is uh you see so many people capturing

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Speaker 1: really the pulse of what's on the mood of the

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Speaker 1: American UH investor without in mind Bloomberg Surveillance. This morning

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Speaker 1: brought to you by Investco. Factor based strategies can help

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Speaker 1: investors focus on a high quality, low volatility, and more.

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Speaker 1: Learn more at investco dot com Slash High Conviction. That's

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Speaker 1: investco dot com slash high Conviction. Street perspective from Scott

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Speaker 1: Wren with Wells Fargo. Are we getting any users used more? Use?

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Speaker 1: My English is killing me? It was it was the

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Speaker 1: wind and the plain coming north from Washington yesterday, Scott Wren?

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Speaker 1: Are we getting used to a single digit world? To me?

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Speaker 1: So much of investors struggle as a yearned for eight, nine,

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Speaker 1: even ten percent returns. They're not there, are they? They're

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Speaker 1: not there, Tom, And I don't think they're going to

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Speaker 1: be there in this cycle. And I think we're going to.

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Speaker 1: You know, we'll see what happens in the next cycle,

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Speaker 1: which obviously somewhere out there on the horizon is another recession.

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Speaker 1: But I think the single digit world is here, at

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Speaker 1: least through this cycle. I don't see growth really accelerating

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Speaker 1: to the point where stocks are going to have fantastic

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Speaker 1: run up evaluations or or anything like that. I think

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Speaker 1: monetary policy has worked to hold us in here, to

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Speaker 1: allow the economy to move forward slowly, But I don't

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Speaker 1: see it really accelerating, and I just don't see evaluations.

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Speaker 1: And here's the critical Scott in question, which is what

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Speaker 1: is dividend growth modeled at if it's a single digit

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Speaker 1: nominal GDP coupon clipping expectation I mean, all of a sudden,

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Speaker 1: do I have to put up with four and five

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Speaker 1: percent dividend growth? Well, I think that you're going to

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Speaker 1: be in a very low dividend growth world, even though

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Speaker 1: companies do have a lot of cash. When you're in

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Speaker 1: a revenue world we are right now, when you're in

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Speaker 1: an earnings world where much of the earnings push is

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Speaker 1: cost cutting, holding the line on expenses, all those sorts

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Speaker 1: of things. Um, you know, I just don't think that

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Speaker 1: you can expect much in terms of dividend growth. I

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Speaker 1: think right now overall, you know, you look at about

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Speaker 1: two for the S and P, and I think we're

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Speaker 1: going to be right around there for for quite a while.

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Speaker 1: We seeing a pig in a python here. With the

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Speaker 1: with that kind of forecast is that we get through

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Speaker 1: it maybe six months or so, the first second quarter

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Speaker 1: in terms of earnings, and then things start to pick up.

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Speaker 1: That's the economic forecast. Does the does the equity forecast

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Speaker 1: match that? Well? I think right now, if you look

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Speaker 1: out over the course of the balance of this year,

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Speaker 1: I think the market, unlike what's been the case case

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Speaker 1: really uh this year so far is I think we're

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Speaker 1: going to hit a point where it's more of a

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Speaker 1: grinding kind of a market. It wouldn't surprise me at

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Speaker 1: all if we traded a little bit lower here, just

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Speaker 1: just in back and forth action. I think we're going

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Speaker 1: to be higher than this, at the top end of

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Speaker 1: our target range. For wouldn't surprise me if we traded

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Speaker 1: a little bit above that. But but overall, I don't

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Speaker 1: think we're going to make a heck of a lot

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Speaker 1: of progress to the upside. And I think we're going

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Speaker 1: to hit some points this year where the market is

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Speaker 1: just a real grind. Well, uh, what do you do? Then? Um,

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Speaker 1: give us some advice. But I still think i'd tell you, Mike,

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Speaker 1: you know, the sectors that performed well on the way down,

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Speaker 1: all the defenses, that's not where we want to be.

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Speaker 1: And you know, we've all talked enough to know that,

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Speaker 1: you know, we think this, this recovery is going to

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Speaker 1: continue here and abroad. We want to be in the industrials,

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Speaker 1: we want to be in technology, we want to be

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Speaker 1: in the consumer address discretionary sector. And those are three

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Speaker 1: of the sectors that have performed well on the bounce up.

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Speaker 1: So if you don't think the economy is going to collapse,

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Speaker 1: if you think we're going to move ahead gradually. You

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Speaker 1: want to be in these sectors that that are sensitive

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Speaker 1: to that. You want to be in these sectors that

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Speaker 1: are going to benefit from a continuation of the recovery,

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Speaker 1: even though it's slow. Yeah, I look at the continual

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Speaker 1: recovery and what it comes down to is as massagy

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Speaker 1: and the income statement. Folks will do a lot of

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Speaker 1: herbal life here with that shoging on UH this morning.

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Speaker 1: But if I've got okay, revenue growth not great, is

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Speaker 1: there enough room on the blue chip balance sheet to

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Speaker 1: help me get even do growth operating income growth and

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Speaker 1: possibly gap adjusted hearings growth. Well, I think that I

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Speaker 1: think that you know, this this is going to be

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Speaker 1: just a continuing UH struggle. I think you are going

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Speaker 1: to see a little bit better revenue growth. I think

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Speaker 1: you're going to just you know, this year you might

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Speaker 1: see you know, two or three percent earnings growth. So

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Speaker 1: I just don't think you're going to see those numbers

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Speaker 1: really expanding much here in I would argue that valuations

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Speaker 1: are if you look at them on a pe basis,

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Speaker 1: you know, they're around sixteen times at least versus our numbers.

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Speaker 1: So you're going to see that number that pego up

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Speaker 1: a little bit, but not much, and certainly not when

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Speaker 1: you compare to our inflation and interest rates are based

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Speaker 1: on much of the last eighty years of market history. Now,

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Speaker 1: how much confidence do you have in your forecast? That's

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Speaker 1: the hard thing, because everybody suggests that you know, there's

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Speaker 1: something different going on out there. We definitely have conviction

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Speaker 1: in this economic forecast. I think that we are um

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Speaker 1: confident in our in our index forecast, which is, you know,

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Speaker 1: let's say, if it's not an aggressive number, I do

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Speaker 1: think we can trade above the top end of that.

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Speaker 1: But I would say from our perspective when we look

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Speaker 1: at our strategy group, in our Equity Street group, we

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Speaker 1: have we definitely have confidence on where this economy is going.

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Speaker 1: And that's more the same slow, slow method. Scott Ran

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Speaker 1: with us with Wells Fargo will continue this discussion and

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Speaker 1: particularly want to drill down to that idea of where

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Speaker 1: to be where not to be as being just as important,

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Speaker 1: and of course the opinion on sector uh in and

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Speaker 1: of course the financials we have to touch on as well.

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Speaker 1: We do that with a yield curve at a hundred

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Speaker 1: basis points. We had a flatter yield curve and with

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Speaker 1: a general risk on field the last number of days

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Speaker 1: fractionally steeper yield curve. But get into a hundred that's

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Speaker 1: a benchmark. The difference in yield between the ten year

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Speaker 1: and the two year one percentage point with the decimal

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Speaker 1: overde dude, and you get a hundred basis points on

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Speaker 1: the two tents spread. The yield one point eight six percent.

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Speaker 1: Future is flat, uh dow. Future is positive to right now.

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Speaker 1: Time now to check in with Michael bar Let's get

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Speaker 1: the latest world in national headlines. Michael, Mike, Tom, thank

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Speaker 1: you very much. Former Massachusetts government Romney is tell Republican

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Speaker 1: voters that Donald Trump is a phony who must be

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Speaker 1: defeated to avoid profoundly negative consequences for the party and

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Speaker 1: the country. Romney, who was the Republican presidential nominee in twelve,

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Speaker 1: will deliver a speech today at the University of Utah

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Speaker 1: and prepared remarks. He says Trump's campaign promises are as

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Speaker 1: worthless as a degree from Trump University. Ben Carson is

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Speaker 1: out for the night's Republican presidential debate in Detroit. Carson

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Speaker 1: issued a statement yesterday saying he does not see a

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Speaker 1: political path forward one night after a strong showing. On

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Speaker 1: Super Tuesday, Democratic presidential candidate Hillary Clinton hosted a star

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Speaker 1: studied fundraiser at New York City's Radio City Music Hall. Elton, John,

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Speaker 1: Katy Perry, and Andrew Day all performed Global News twenty

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Speaker 1: four hours a day, powered by Ours, twenty four hundred

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Speaker 1: journalists and more than one fifty news bureaus from around

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Speaker 1: the world. I'm Michael Barr, Mike, Tom, Michael, thanks so

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Speaker 1: much again. One thirteen at nineties seven. That is a

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Speaker 1: weaker yeat this morning. Michael McKeene and Tom Keene vote

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Speaker 1: in New York. Bloomberg Surveillance. Bloomberg Surveillance brought to by

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Speaker 1: s c n b V Bank for businesses on the move.

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Speaker 1: Are you looking for the right banking partner? Go to

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Speaker 1: SCNB dot com to learn more. Now open in Long

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