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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Ley.

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Speaker 1: We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course on the Bloomberg Really

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Speaker 1: Placed to say that. Joining us here in the studio

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Speaker 1: in New York City is Brian Levitt, invest global market strategist.

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Speaker 1: Good mornitude. You'll take on that how well this market

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Speaker 1: is holding up in the face of some bad news

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Speaker 1: here and that through much of this week. Well, it's

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Speaker 1: a better tone for the market. I mean, think about

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Speaker 1: how negative investors were in the summer. You had seen

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Speaker 1: interest rates go down significantly, we inverted the yield curve,

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Speaker 1: and what you really need was policy to respond. So

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Speaker 1: the Federal Reserve has responded and will continue to respond.

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Speaker 1: We've seen some modest improvements in tone in the US

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Speaker 1: China trade such ovation. So I view this as the

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Speaker 1: market had gotten very negative. The tone is getting somewhat

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Speaker 1: more positive, and now the market is is really looking

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Speaker 1: for the next catalyst to press higher. All the earnings

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Speaker 1: through this week, for every Amazon, there is a Microsoft

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Speaker 1: for every Texas Instruments. There is an insalet. It's been

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Speaker 1: pretty mixed scratually through the week so far. Bron, it's

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Speaker 1: that your tight tip. Yeah, it's a very mixed picture

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Speaker 1: and and earnings growth is not going to be significant.

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Speaker 1: It's very consistent with a global economy that had slowed

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Speaker 1: pretty meaningfully amid all of the policy uncertainty. So this

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Speaker 1: is the third growth scare we've had in this elongated cycle.

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Speaker 1: The first time the European Central Bank stepped in, the

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Speaker 1: second time in the Federal Reserve backed off. And now

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Speaker 1: markets are looking for clarity on trade, which will start

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Speaker 1: to improve business sentiment and start to improve capital expenditures,

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Speaker 1: start to improve the manufacturing sector. So the market is

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Speaker 1: dealing with a a flat earnings growth environment and we

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Speaker 1: wait for the next catalyst to improve business comp it

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Speaker 1: ends and start to improve economic activity globally. And Brian,

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Speaker 1: at what point do you think we need to worry

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Speaker 1: or be concerned about valuation. We've had a nice run

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Speaker 1: up in the market this year roughly, yet earnings have

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Speaker 1: been kind of flatish. Where are we evaluation? Yes, So

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Speaker 1: the market, Um, if you look at the broad SMP five,

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Speaker 1: you're trading somewhere around nineteen nineteen and a half times earnings.

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Speaker 1: So that is expensive compared to the long term average,

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Speaker 1: but I think it makes more sense for investors to

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Speaker 1: think about it within the confines of the current interest

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Speaker 1: rate and inflation environment. And so, you know, if you're

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Speaker 1: if you say a nineteen times price earnings multiple on stocks,

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Speaker 1: I'd rather think of it of an earnings yield, an

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Speaker 1: earnings yield of you know, call it one hundred and

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Speaker 1: sixty earnings divided by three thousand on the SMPS, around

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Speaker 1: four and a half percent, compared to a one point

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Speaker 1: each treasury yield. So yes, stocks are a little bit

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Speaker 1: expensive to their own history, but are still cheap compared

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Speaker 1: to bonds um at a time when investors really haven't

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Speaker 1: gotten euphoric about equities. So yeah, do we have significant

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Speaker 1: multiple spansion here? Perhaps not. I suspect what drives markets

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Speaker 1: higher is a better policy mix that starts to improve

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Speaker 1: economic activity and ultimately drives earnings higher. In so, given

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Speaker 1: that we're ten plus years into this economic cycle where

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Speaker 1: valuations are not cheap historically, but we have the the

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Speaker 1: low interest rate environment, are there certain sectors that you

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Speaker 1: like right here? Because we've heard people talk about I

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Speaker 1: need to be safe. I need to be you know,

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Speaker 1: kind of get into the less risky sectors. But those

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Speaker 1: aren't cheap, and I think about reets in YouTube and

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Speaker 1: things like that. What sectors do you think about at

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Speaker 1: this point of the sector. Well, I think it's too

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Speaker 1: late to get defensive. I mean the time to be

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Speaker 1: defensive was when the tenure Treasury right was going from

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Speaker 1: three and a quarter to one fifty. And that was

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Speaker 1: the market telling you we were in the throes of

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Speaker 1: a policy mistake both from the FED and the administration

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Speaker 1: on trade. You know, this back up in rates and

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Speaker 1: a little bit of an improving tone that favors the

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Speaker 1: more cyclical parts of the market. I don't think we're

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Speaker 1: going into this environment where the u S gets to

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Speaker 1: this new higher sustained level of growth and starts to

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Speaker 1: unlock the deeper value in the markets. I would favor

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Speaker 1: in the near term the more cyclical parts of the

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Speaker 1: market as growth improves as you get out into Honestly,

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Speaker 1: I think we're just gonna get back into this slow

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Speaker 1: growth world where investors are going to get back to

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Speaker 1: paying these fancy multiples on true growth companies and discretionary names.

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Speaker 1: And technology names. Market leadership tends to not change meaningfully

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Speaker 1: later in the cycle. So we're in a period right now.

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Speaker 1: We're more value, more cyclical. But I think we get

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Speaker 1: back to growth in a slow growth world type of environment,

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Speaker 1: slow growth trend, growth that's sufficient for a sustainable break

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Speaker 1: at three. Oh yeah, absolutely, um, you know this. We

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Speaker 1: we we have been in this nice environment of two

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Speaker 1: percent growth for a long period of time that didn't

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Speaker 1: really please workers, didn't really please the voters, but it's

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Speaker 1: been fantastic for the equity markets. And the reason it's

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Speaker 1: fantastic for the equity markets because it's strong enough to

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Speaker 1: support corporate earnings but not so strong as to bring

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Speaker 1: forward inflation and FED tightening, and so in that type

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Speaker 1: of environment, you just don't want to upset the apple cart.

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Speaker 1: What we've been dealing with since with stimulus and then

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Speaker 1: FED rate hikes and then the trade war is upsetting

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Speaker 1: this nice two growth, two percent inflation, no fed tightening

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Speaker 1: environment that's been very good for equities and should continue

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Speaker 1: to be good for equity. Let's wrap this conversation up

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Speaker 1: the debate of the week for me, have we seen

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Speaker 1: off the worst of it? Have we seen off the

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Speaker 1: worst of it. Sometimes the information content and how a

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Speaker 1: market response to information is just as important as the

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Speaker 1: data itself. And through this week, the p m ice

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Speaker 1: haven't picked up in Europe. Business confidence in Germany a

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Speaker 1: glimmer of hope, but it's not really that convincing yet.

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Speaker 1: The stoxics hundred new height. What's the signal that, Brian, Yes,

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Speaker 1: so the market is sniffing out a better policy mix

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Speaker 1: leading to better economic activity. And so I believe we

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Speaker 1: have seen the worst of him. And look, Jonathan, we

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Speaker 1: we got to one and a half on the ten

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Speaker 1: year rate. We got to an inverted yield curve. That

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Speaker 1: was the bond market telling us, well, is what happened

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Speaker 1: with the dollar and strength the currency market telling us

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Speaker 1: we're in the throw is of a policy mistake that's

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Speaker 1: leading to a severe economic slowdown. As you start to

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Speaker 1: change that narrative, fed steps in administration starts talking about

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Speaker 1: skinny deals. We kicked the can down the road further.

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Speaker 1: On Brexit and this idea of a of a hard

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Speaker 1: Brexit or no deal brexit, U brexit first just to

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Speaker 1: clean now carry on, Brian, play the word of the day, um,

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Speaker 1: and you know all of that starts to improve the

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Speaker 1: tone in the market and market um so, I suspect

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Speaker 1: you will see the purchasing manager in the season, the

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Speaker 1: leading indicators of economic activity start to pick up again,

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Speaker 1: just like they did when the European Central Bank responded

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Speaker 1: in twelve and just like they did when the FED

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Speaker 1: backed off. In the debate we're having right now is

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Speaker 1: so polarizing. I imagine there are people screaming, screaming, sang

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Speaker 1: I agree with Brian. There will be other people saying

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Speaker 1: I completely disagree. Let's put you on the spot. You

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Speaker 1: think we've seen the loan for the ten year for

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Speaker 1: this year? Oh yeah, I think we've seen the low

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Speaker 1: for the tenure. Um. I don't think that we're going

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Speaker 1: to see the tenure rate go meaningfully higher. This is

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Speaker 1: a cyclical move up in tenure, but the tenure will

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Speaker 1: likely reflect where where real economic activity is. In the

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Speaker 1: United States, call it, call it closer to two percent,

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Speaker 1: but you know three was treasuries that had been oversold,

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Speaker 1: one and a half was treasuries that were overbought. And

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Speaker 1: two percent right along the lines of where potential growth

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Speaker 1: is in this country, is a is a more reasonable

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Speaker 1: rate for the tenure. Great to see you. Great to

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Speaker 1: see you as well. Brian Levitt, Investar Global Markets, trying

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Speaker 1: to just here is your two second Brexit warning. Now

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Speaker 1: we're going to discuss Brexit. Here's the latest for you.

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Speaker 1: The Prime Minister has been forced legally to us for

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Speaker 1: an extension. The EU has not said when that extension

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Speaker 1: will go to because the Prime Minister is now asking

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Speaker 1: for an election. Jeremy Corbin is so fast saying no.

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Speaker 1: James Apy has the unfortunate luck of joining us on

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Speaker 1: this program to talk about it. Aberdeen Standard Investments senior

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Speaker 1: investment manager to join the Sound of London. Good morning

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Speaker 1: to James. More than John, How you doing what is

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Speaker 1: going on in the United Kingdom? You could have eased

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Speaker 1: me and gently with a question about something a little

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Speaker 1: less ridiculous, but thank you for starting me with the

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Speaker 1: the impossible task. I don't know, like I gave up

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Speaker 1: doing what I normally do as an investor looking at

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Speaker 1: the world probabilistically gaming this out. How do I know

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Speaker 1: who's incentivized to do what? What does the world look

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Speaker 1: like in all of these scenarios, etcetera, etcetera. It hasn't worked.

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Speaker 1: I you know, the normal motivations for political individuals and

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Speaker 1: parties don't seem to be driving their decisions. And I

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Speaker 1: think most confusingly, and most recently of all, the opposition strategy,

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Speaker 1: which was opposed everything because you want an election, has

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Speaker 1: now been well, you don't want an election either, so

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Speaker 1: what do you want? And that means it's very difficult

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Speaker 1: because of the Fixed Parliament's Actor. This is what's god

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Speaker 1: us into this mess. Really, the unintended consequences of that

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Speaker 1: legislation unlesson until the Labor Party's policy is a bit

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Speaker 1: clearer and easy to understand. We're trapped in this situation

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Speaker 1: where the EU won't move until they know what we're doing,

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Speaker 1: and we can't move until the EU is confirmed. So

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Speaker 1: it's a tough one. I think essentially we're talking about

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Speaker 1: a general election, if that's mid December or not. I

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Speaker 1: guess we'll find out more in the coming days for

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Speaker 1: our listeners who might not be familiar with the Fixed

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Speaker 1: Term Parliament Act, Essentially, to get a snap election in

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Speaker 1: the United Kingdom, it's not enough the government calls for it.

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Speaker 1: You need two thirds of MPs to actually vote for it.

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Speaker 1: So for the Prime Minister to get what he wants,

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Speaker 1: he needs the leader of the Opposition Jeremy Corbyn and

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Speaker 1: some Labor MPs to come with him. James, I was

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Speaker 1: looking at the letter from the Prime Minister to the

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Speaker 1: Leader of the Opposition on page two. In the first paragraph,

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Speaker 1: the EU may offer only a short extension, say the

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Speaker 1: fifteenth November. This would obviously be my preference, but I

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Speaker 1: was illegally prevented by Parliament and the courts from suggesting this. James,

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Speaker 1: I think it's pretty clear he's suggesting. Get I just

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Speaker 1: wonder what the EU will come back with, because this

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Speaker 1: is actually pretty critical for the next moves in markets

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Speaker 1: and the next moves politically. What extension the EU actually

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Speaker 1: gives the UK And so far, James, we've had no answer,

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Speaker 1: no exactly. So the e used position is obviously that

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Speaker 1: an extension is almost a foregone conclusion. But increasingly they recognize,

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Speaker 1: and I think we all recognize that purgatory is suiting

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Speaker 1: no one. So they're not they don't want to be

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Speaker 1: involved in UK politics, but neither do they want to

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Speaker 1: be involved in just continually kicking the can down the

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Speaker 1: road without any sign of resolution. So they want from

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Speaker 1: us a plan. Why are we having this extension and therefore,

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Speaker 1: what's an appropriate length of time. The problem is that

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Speaker 1: Jeremy Corbyn, the leader of the Opposition, is saying I

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Speaker 1: will not vote for an election, I will not vote

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Speaker 1: for this deal. I will basically not vote for anything

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Speaker 1: until no Deal is quote unquote taken off the table,

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Speaker 1: which is an impossibility because even if you could legislate

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Speaker 1: to take it off the tables as they have, that

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Speaker 1: legislation can always be undone when a government has a majority.

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Speaker 1: So again we're sort of trapped in this situation. I

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Speaker 1: think President mcquan is is an important figure to watch here.

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Speaker 1: He's the de facto leader I think of the European Union,

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Speaker 1: and I think he's working well with Prime Minister Johnson,

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Speaker 1: and I think they're trying to pressure together the UK

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Speaker 1: Parliament to get its act together. When push comes to shove,

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Speaker 1: I still think it's probably more likely that that we

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Speaker 1: end up with an extension to the end of January

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Speaker 1: than one to the middle of November. I say that

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Speaker 1: with low confidence, with low comb James, I'll lay after brexit.

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Speaker 1: Hook here, let's focus on the markets a little bit.

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Speaker 1: I'm inclined with indices at or near all time highs.

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Speaker 1: I've got earnings tep it at best. I've got growth

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Speaker 1: slow and globally, you know, I'm hard pressed not to

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Speaker 1: just take all my chips off the table and go home.

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Speaker 1: What are your thoughts? Yeah, I mean that's essentially not

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Speaker 1: necessarily all of your chips off the table. I think

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Speaker 1: there are still places that you can find value in markets,

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Speaker 1: but those of that that value exists in defensive asset classes,

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Speaker 1: not in pro cyclical risky asset classes. I completely agree.

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Speaker 1: I'd actually have a more negative categorization of the earning picture.

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Speaker 1: I think the earnings that are being reported are not great,

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Speaker 1: and the earnings that are being reported, you know, diverging

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Speaker 1: hugely from the underlying profitability of films across the US

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Speaker 1: economy in particular. So to me, equities up here are

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Speaker 1: incredibly expensive considering where we are in the economic cycle,

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Speaker 1: and I don't see any evidence that the main macro

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Speaker 1: themes which have driven this economic decline are going away

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Speaker 1: or a changing course. So I think we're on a

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Speaker 1: path towards recession. That's not imminent, but that's the path

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Speaker 1: that we're on, and therefore I still want to own

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Speaker 1: treasury duration and I do not want to own risk.

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Speaker 1: The efforts James Athey, thank you and I'm sorry that

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Speaker 1: we started with Brexit, but unfortunately that's where we are

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Speaker 1: in the UK no man's land, with the zombie Parliament

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Speaker 1: and hoping for a solution. Cave all this morning one

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Speaker 1: pound one two and down a quarter of one percent.

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Speaker 1: That was James Ane from Aberdeen Standard Investment, Senior investment manager.

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Speaker 1: J want to us out of London. The politics of

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Speaker 1: d C just over the last week's a few weeks

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Speaker 1: relatively speaking, fading into the background on Wall Street just

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Speaker 1: a little bit, just a little bit, but it's interesting.

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Speaker 1: It's not just earnings, and it's not just the FED

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Speaker 1: that investors have to deal with as they think about

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Speaker 1: the markets. It's also geopolitics. We've got trade with China

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Speaker 1: and we've also got some military situations in the Middle East.

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Speaker 1: To get a sense of what's going on there. We

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Speaker 1: welcome Brett Bruin, director of the Global Situation Room, also

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Speaker 1: former Global Engagement Director in the Obama White House, joining

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Speaker 1: us on the phone from our DC bureau. But thanks

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Speaker 1: so much for joining us. Give us a sense of

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Speaker 1: kind of how you view the US situation in Syria,

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Speaker 1: given that the US pulled out and all that's happened. Well,

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Speaker 1: I think unfortunately, the US has shown increasing um issues

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Speaker 1: with its allies. We are not any longer a reliable partner,

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Speaker 1: and that was clearly on display with terms decision to

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Speaker 1: both pull out of Syria to back away from the Kurds.

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Speaker 1: And unfortunately this has pretty far reaching consequences, not just

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Speaker 1: for Syria, not just for the Middle East, but our countries.

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Speaker 1: Groups are going to be reluctant to get into these

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Speaker 1: kinds of engagements with the US, knowing that our track record,

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Speaker 1: particularly our recent track record, is pretty spotty. So, Brett,

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Speaker 1: it's interesting President Trump, you know, made the clear argument

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Speaker 1: that it's just time to bring our troops home. We

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Speaker 1: can't be the policeman for the world. That is obviously,

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Speaker 1: uh in contrast to post World War two policy for

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Speaker 1: the US. What do you think in reality it means

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Speaker 1: for some of the other hotspots of the world. I'm

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Speaker 1: thinking Korea on top of mind. Well, I think what

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Speaker 1: we're seeing. And it's interesting you mentioned Korea because Trump's

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Speaker 1: just vision to pull out of the Iran nuclear deal

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Speaker 1: makes a nuclear deal with North Korea that much more

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Speaker 1: difficult because he's shown how the US from administration to

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Speaker 1: administration isn't necessarily going to honor the word of the

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Speaker 1: last president. So the calculation for someone like Kim Jong

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Speaker 1: nunn he is let me just see how much I

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Speaker 1: can extract from this guy and not really make significant compromises.

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Speaker 1: So the art of the deal when it comes to

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Speaker 1: President Trump is um pretty superficial. So Pratt, let me

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Speaker 1: tread carefully on two of these issues, North Korea in

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Speaker 1: the Middle East, and I want to lean on your expertise.

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Speaker 1: Many people criticize the current president of the United States

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Speaker 1: for his approach in places like Syria, in places like

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Speaker 1: North Korea, but the previous approach didn't seem to be

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Speaker 1: that too effective either. Can you walk me through what

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Speaker 1: you think the ultimate the optimal approach actually is. Well,

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Speaker 1: and let me contrast to you, because there is this

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Speaker 1: narrative out there. Well, Obama was reluctant to get into Syria.

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Speaker 1: Obama pulled our troops out of Iraq. I was actually

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Speaker 1: on a forward operating base outside of to create two

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Speaker 1: thousand and eight two thousand nine. When we did that,

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Speaker 1: the difference was there was a plan, there was a process,

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Speaker 1: it was orderly. In the Trump foreign policy world, these

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Speaker 1: decisions changed from hour to hour, and that is what

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Speaker 1: makes it so chaotic and and quite frankly, that creates

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Speaker 1: this collateral damage. It ricochets around the region and the world,

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Speaker 1: you know, creating unintended consequences. So, Brett, if I were

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Speaker 1: to pull a number of folks in the foreign policy

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Speaker 1: establishment in Washington, professionals that have been there before the

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Speaker 1: Trump administration are likely to be there after the Trump administration,

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Speaker 1: how do they view kind of what our policy should

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Speaker 1: be as it relates to engagement or disengagement. Well, there's

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Speaker 1: a lot of concerns here in Washington. I've started calling

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Speaker 1: it a post American error where the United States is

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Speaker 1: no longer serving as the guaranteer of security stability around

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Speaker 1: the world. Our credibility um was really taking a hit

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Speaker 1: under this administration. The challenge I think for the foreign

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Speaker 1: policy establishment is how do you rebuild, whether it is

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Speaker 1: under this administration or a future administration. And I think

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Speaker 1: it's going to become by showing that we can hold

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Speaker 1: ourselves to certain standards and others to those standards, and

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Speaker 1: we will become more reliable. Policy can continuity and a

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Speaker 1: doct democracy, Brett, You'll Apprecia is incredibly difficult, and I

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Speaker 1: just look at the situation right now and think, well,

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Speaker 1: isn't this what people voted for In the last election.

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Speaker 1: The president was pretty clear about how he would handle

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Speaker 1: foreign relations, that he wouldn't want to get involved in

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Speaker 1: places like the Middle East. In fact, he wanted to

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Speaker 1: pull back. Should we be surprised, Well, I think there

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Speaker 1: uh is a difference between political rhetoric and national security

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Speaker 1: implementation and toward you know, Trump has always had his

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Speaker 1: isolationists tendencies. He's always talked about America first, but there

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Speaker 1: is a way of doing it. It's not as destructive.

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Speaker 1: And if we just look at his record over the

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Speaker 1: last two and a half years, there's not much that

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Speaker 1: he has built on the world stage. He's bulldozed a

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Speaker 1: whole lot. But we also need to have trade deals,

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Speaker 1: we need to have um these institutions in place. And

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Speaker 1: I haven't seen it anything that the Trump is actually

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Speaker 1: been able to accomplish for all of his you know,

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Speaker 1: bombast and Brett, give us a sense of what you

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Speaker 1: think Russia is doing here? Does Russia you the American

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Speaker 1: pullback off of the global stage to whatever extent we

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Speaker 1: are only back what extent is Russia viewing it as

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Speaker 1: a real opportunity to reassert itself on the global stage. Oh,

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Speaker 1: it's a huge win. And let's just take what recently

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Speaker 1: transpired in Syria. Russia has moved in asserted themselves over

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Speaker 1: the territory um in the northeast of Syria. These um

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Speaker 1: Putin who was meeting in soci with Urdwan. They sort

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Speaker 1: of divided up the spoils. And ironically, Russia has become

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Speaker 1: a more reliable ally for countries in the region than

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Speaker 1: the United States. Bashar al assan um and and other

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Speaker 1: leaders in the region are now looking to Moscow and

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Speaker 1: saying we can get a better deal. We can get

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Speaker 1: a more reliable deal from Putin than we can from

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Speaker 1: a Trump or or any American leader. That wasn't the

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Speaker 1: same true under Obama, you say, under any other American leader, Brett,

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Speaker 1: and I wonder if the same was true under Obama

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Speaker 1: as well. Why is that different this time around? Sound Well, Look,

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Speaker 1: I think the Obama foreign policy certainly had the shortcomings,

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Speaker 1: and I witnessed many of them firsthand. I mean, when

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Speaker 1: we looked at the rise of Isis and we were

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Speaker 1: reluctant to engage, and even when Obama came out in

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Speaker 1: a primetime addressed and he was still quite cautious. There

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Speaker 1: is undoubtedly errors that were committed under the last administration,

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Speaker 1: and we're talking on a whole different spell when it

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Speaker 1: comes to this administration. We've got to leave it there.

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Speaker 1: We'll continue the conversation another day. Brett Ruin there, director

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Speaker 1: of the Global Situation Room and form a Global Engagement

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Speaker 1: Director in the Obama White House. There is a question,

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Speaker 1: what do you do at this point? You have a

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Speaker 1: bunch of cash, you're heading into the end of the

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Speaker 1: year of people have been fairly conservative. Do you just

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Speaker 1: buy the dip? Vanila right, Richardson joining us now she

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Speaker 1: is Edward Jones investment strategist. Uh and Nila, it seems

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Speaker 1: to be that that is what you're recommending by any dip.

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Speaker 1: Is that correct? Yes? And in a word, so, we

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Speaker 1: know that the growth pattern in the economy is slowing.

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Speaker 1: We see weakness and manufacturing, but we still see some

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Speaker 1: bright lights when it comes to the consumer. The consumer

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Speaker 1: has been resilient, so that's that pillar of the economy

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Speaker 1: we think remains. We're also going to see a downturn

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Speaker 1: in terms of earnings growth, but not earning so we

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Speaker 1: think that earnings will slow, especially at this quarter, and

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Speaker 1: then pick up in the fourth quarter and into next year.

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Speaker 1: So what does that mean for the investor. It means

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Speaker 1: that we expect more volatility, but we expect the bull

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Speaker 1: market to continue. So this is the time to put

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Speaker 1: that cash that's been sitting on the sideline to work

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Speaker 1: to buy quality of the investment at more attractive valuations. Well, Neil,

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Speaker 1: let's talk about valuation a little bit. We've had the

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Speaker 1: s and p up, you know, rough this year, but

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Speaker 1: essentially no meaningful earnings growth. So I need to be

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Speaker 1: concerned about valuation. That this market is rich, We don't.

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Speaker 1: We think that the market is reasonably priced. It's not

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Speaker 1: cheap like it was in December when we had that

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Speaker 1: big stell up, and that was a good time if

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Speaker 1: you put money into the market, then you saw a

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Speaker 1: very very strong first quarter. So it's not cheap, but

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Speaker 1: it is reasonably priced. And so that's why with that

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Speaker 1: combination of expecting more volatility as we get all these

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Speaker 1: headlines from trade and geopolitics, these are times to be

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Speaker 1: opportunistic and you're buying and look for those times and

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Speaker 1: when the market might be uh going through a bit

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Speaker 1: of a dip to really put that cash in. What

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Speaker 1: would make you change your mind? What would make me

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Speaker 1: changeable my mind and be more embarrassed. I would start

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Speaker 1: being more bearish. When I look to the consumer, I

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Speaker 1: go back away from the market. It's interesting how much

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Speaker 1: of our market outlook this year is based on the

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Speaker 1: macro economy and not very real Idios Cristi desocratic risk

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Speaker 1: in the corporate sector. It's really about interest rates, the

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Speaker 1: consumer growth and global growth. If consumer confidence started doing,

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Speaker 1: if I saw a slowdown and hiring, if I saw

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Speaker 1: a slowdown and wage growth, then I start to get

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Speaker 1: concerned about the ability of this economy to keep expanding

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Speaker 1: and it being supportive of equity returns over time. That

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Speaker 1: would confirm me. Right now, we're not seeing that. We're

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Speaker 1: seeing a deceleration but still growth, and so for that

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Speaker 1: reason we think that equities are are set to climb

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Speaker 1: this year and next. So, Nila, I'm wondering about certain

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Speaker 1: sectors that maybe I should be looking at if I'm

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Speaker 1: thinking about getting into the equity markets. You know, here

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Speaker 1: a lot of folks saying, you know, we're ten plus

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Speaker 1: years into the cycle's time to get defensive. But the

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Speaker 1: defensive sectors are rich biastorical level. Should I be thinking

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Speaker 1: defensive or should I be thinking about maybe even some

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Speaker 1: more cyclical type sectors. So we are slightly more defensive

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00:24:10,520 --> 00:24:14,040
Speaker 1: than we were earlier. This year, we took some UH

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00:24:14,200 --> 00:24:17,000
Speaker 1: money out of energy because we don't think that is

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00:24:17,040 --> 00:24:20,359
Speaker 1: an opportunity anymore. We've been waiting for those valuations to

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00:24:20,400 --> 00:24:22,720
Speaker 1: pay off in the energy sector. But if you pair

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00:24:23,320 --> 00:24:27,119
Speaker 1: what's going on there with a slow down and global growth,

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00:24:27,160 --> 00:24:29,480
Speaker 1: we don't think that's a good place to be. We're

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00:24:29,480 --> 00:24:34,240
Speaker 1: still favorable tech U. There are multiple avenues for continued

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00:24:34,280 --> 00:24:37,640
Speaker 1: business growth. Now you're going to see UH some volatility

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00:24:37,680 --> 00:24:40,679
Speaker 1: in that sector, especially tied to regulation. We saw that

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00:24:40,800 --> 00:24:44,280
Speaker 1: with Amazon UH not as smooth in terms of earnings

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00:24:44,680 --> 00:24:47,639
Speaker 1: when they reported, But tech we think is still strong.

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00:24:47,840 --> 00:24:51,640
Speaker 1: We are favorable healthcare as well, UH because of long

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00:24:51,760 --> 00:24:54,280
Speaker 1: term demographics. So if you take a long term view,

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00:24:54,560 --> 00:24:57,800
Speaker 1: there are opportunities in this market to really put that

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00:24:57,880 --> 00:25:00,840
Speaker 1: cash to work. Again that's a recurrent same, but you

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00:25:00,920 --> 00:25:03,480
Speaker 1: have to be more strategic now than you have an

447
00:25:03,560 --> 00:25:06,560
Speaker 1: earlier in the cycle. Cash to work is is an

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00:25:06,600 --> 00:25:09,280
Speaker 1: important point here, and and I guess that the other

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00:25:09,320 --> 00:25:12,400
Speaker 1: point is what kind of returns should people be expecting

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00:25:12,600 --> 00:25:17,560
Speaker 1: over the next twelve months from US equities. This is

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00:25:17,560 --> 00:25:22,160
Speaker 1: a time to really have a realistic perspective. We are

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00:25:22,160 --> 00:25:24,840
Speaker 1: not going to see year over year earnings growth like

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00:25:24,920 --> 00:25:28,120
Speaker 1: we did in twenty seventeen eighteen. We are in a

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00:25:28,160 --> 00:25:32,080
Speaker 1: period of very low interest rate environment. We're seeing a

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00:25:32,160 --> 00:25:35,720
Speaker 1: slow down and growth both in the United States and globally,

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00:25:35,720 --> 00:25:39,920
Speaker 1: so we expect earnings returns to mimic that slow down

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00:25:39,960 --> 00:25:43,920
Speaker 1: that we're seeing in the macro fundamental flower returns than

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00:25:44,000 --> 00:25:48,000
Speaker 1: we've seen in previous parts of this cycle. La Richardson,

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Speaker 1: thanks so much for joining us. Niela's at Edward Jones

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Speaker 1: Investment Strategist, joining us on the phone. Thanks for listening

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00:25:54,680 --> 00:25:59,200
Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews

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00:25:59,240 --> 00:26:04,480
Speaker 1: on Apple, pod Cast, SoundCloud, or whichever podcast platform you prefer.

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00:26:05,040 --> 00:26:08,359
Speaker 1: I'm on Twitter at Tom Keane before the podcast. You

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Speaker 1: can always catch us worldwide. I'm Bloomberg Radio.