Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Ley.
Speaker 1: We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
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Speaker 1: Placed to say that. Joining us here in the studio
Speaker 1: in New York City is Brian Levitt, invest global market strategist.
Speaker 1: Good mornitude. You'll take on that how well this market
Speaker 1: is holding up in the face of some bad news
Speaker 1: here and that through much of this week. Well, it's
Speaker 1: a better tone for the market. I mean, think about
Speaker 1: how negative investors were in the summer. You had seen
Speaker 1: interest rates go down significantly, we inverted the yield curve,
Speaker 1: and what you really need was policy to respond. So
Speaker 1: the Federal Reserve has responded and will continue to respond.
Speaker 1: We've seen some modest improvements in tone in the US
Speaker 1: China trade such ovation. So I view this as the
Speaker 1: market had gotten very negative. The tone is getting somewhat
Speaker 1: more positive, and now the market is is really looking
Speaker 1: for the next catalyst to press higher. All the earnings
Speaker 1: through this week, for every Amazon, there is a Microsoft
Speaker 1: for every Texas Instruments. There is an insalet. It's been
Speaker 1: pretty mixed scratually through the week so far. Bron, it's
Speaker 1: that your tight tip. Yeah, it's a very mixed picture
Speaker 1: and and earnings growth is not going to be significant.
Speaker 1: It's very consistent with a global economy that had slowed
Speaker 1: pretty meaningfully amid all of the policy uncertainty. So this
Speaker 1: is the third growth scare we've had in this elongated cycle.
Speaker 1: The first time the European Central Bank stepped in, the
Speaker 1: second time in the Federal Reserve backed off. And now
Speaker 1: markets are looking for clarity on trade, which will start
Speaker 1: to improve business sentiment and start to improve capital expenditures,
Speaker 1: start to improve the manufacturing sector. So the market is
Speaker 1: dealing with a a flat earnings growth environment and we
Speaker 1: wait for the next catalyst to improve business comp it
Speaker 1: ends and start to improve economic activity globally. And Brian,
Speaker 1: at what point do you think we need to worry
Speaker 1: or be concerned about valuation. We've had a nice run
Speaker 1: up in the market this year roughly, yet earnings have
Speaker 1: been kind of flatish. Where are we evaluation? Yes, So
Speaker 1: the market, Um, if you look at the broad SMP five,
Speaker 1: you're trading somewhere around nineteen nineteen and a half times earnings.
Speaker 1: So that is expensive compared to the long term average,
Speaker 1: but I think it makes more sense for investors to
Speaker 1: think about it within the confines of the current interest
Speaker 1: rate and inflation environment. And so, you know, if you're
Speaker 1: if you say a nineteen times price earnings multiple on stocks,
Speaker 1: I'd rather think of it of an earnings yield, an
Speaker 1: earnings yield of you know, call it one hundred and
Speaker 1: sixty earnings divided by three thousand on the SMPS, around
Speaker 1: four and a half percent, compared to a one point
Speaker 1: each treasury yield. So yes, stocks are a little bit
Speaker 1: expensive to their own history, but are still cheap compared
Speaker 1: to bonds um at a time when investors really haven't
Speaker 1: gotten euphoric about equities. So yeah, do we have significant
Speaker 1: multiple spansion here? Perhaps not. I suspect what drives markets
Speaker 1: higher is a better policy mix that starts to improve
Speaker 1: economic activity and ultimately drives earnings higher. In so, given
Speaker 1: that we're ten plus years into this economic cycle where
Speaker 1: valuations are not cheap historically, but we have the the
Speaker 1: low interest rate environment, are there certain sectors that you
Speaker 1: like right here? Because we've heard people talk about I
Speaker 1: need to be safe. I need to be you know,
Speaker 1: kind of get into the less risky sectors. But those
Speaker 1: aren't cheap, and I think about reets in YouTube and
Speaker 1: things like that. What sectors do you think about at
Speaker 1: this point of the sector. Well, I think it's too
Speaker 1: late to get defensive. I mean the time to be
Speaker 1: defensive was when the tenure Treasury right was going from
Speaker 1: three and a quarter to one fifty. And that was
Speaker 1: the market telling you we were in the throes of
Speaker 1: a policy mistake both from the FED and the administration
Speaker 1: on trade. You know, this back up in rates and
Speaker 1: a little bit of an improving tone that favors the
Speaker 1: more cyclical parts of the market. I don't think we're
Speaker 1: going into this environment where the u S gets to
Speaker 1: this new higher sustained level of growth and starts to
Speaker 1: unlock the deeper value in the markets. I would favor
Speaker 1: in the near term the more cyclical parts of the
Speaker 1: market as growth improves as you get out into Honestly,
Speaker 1: I think we're just gonna get back into this slow
Speaker 1: growth world where investors are going to get back to
Speaker 1: paying these fancy multiples on true growth companies and discretionary names.
Speaker 1: And technology names. Market leadership tends to not change meaningfully
Speaker 1: later in the cycle. So we're in a period right now.
Speaker 1: We're more value, more cyclical. But I think we get
Speaker 1: back to growth in a slow growth world type of environment,
Speaker 1: slow growth trend, growth that's sufficient for a sustainable break
Speaker 1: at three. Oh yeah, absolutely, um, you know this. We
Speaker 1: we we have been in this nice environment of two
Speaker 1: percent growth for a long period of time that didn't
Speaker 1: really please workers, didn't really please the voters, but it's
Speaker 1: been fantastic for the equity markets. And the reason it's
Speaker 1: fantastic for the equity markets because it's strong enough to
Speaker 1: support corporate earnings but not so strong as to bring
Speaker 1: forward inflation and FED tightening, and so in that type
Speaker 1: of environment, you just don't want to upset the apple cart.
Speaker 1: What we've been dealing with since with stimulus and then
Speaker 1: FED rate hikes and then the trade war is upsetting
Speaker 1: this nice two growth, two percent inflation, no fed tightening
Speaker 1: environment that's been very good for equities and should continue
Speaker 1: to be good for equity. Let's wrap this conversation up
Speaker 1: the debate of the week for me, have we seen
Speaker 1: off the worst of it? Have we seen off the
Speaker 1: worst of it. Sometimes the information content and how a
Speaker 1: market response to information is just as important as the
Speaker 1: data itself. And through this week, the p m ice
Speaker 1: haven't picked up in Europe. Business confidence in Germany a
Speaker 1: glimmer of hope, but it's not really that convincing yet.
Speaker 1: The stoxics hundred new height. What's the signal that, Brian, Yes,
Speaker 1: so the market is sniffing out a better policy mix
Speaker 1: leading to better economic activity. And so I believe we
Speaker 1: have seen the worst of him. And look, Jonathan, we
Speaker 1: we got to one and a half on the ten
Speaker 1: year rate. We got to an inverted yield curve. That
Speaker 1: was the bond market telling us, well, is what happened
Speaker 1: with the dollar and strength the currency market telling us
Speaker 1: we're in the throw is of a policy mistake that's
Speaker 1: leading to a severe economic slowdown. As you start to
Speaker 1: change that narrative, fed steps in administration starts talking about
Speaker 1: skinny deals. We kicked the can down the road further.
Speaker 1: On Brexit and this idea of a of a hard
Speaker 1: Brexit or no deal brexit, U brexit first just to
Speaker 1: clean now carry on, Brian, play the word of the day, um,
Speaker 1: and you know all of that starts to improve the
Speaker 1: tone in the market and market um so, I suspect
Speaker 1: you will see the purchasing manager in the season, the
Speaker 1: leading indicators of economic activity start to pick up again,
Speaker 1: just like they did when the European Central Bank responded
Speaker 1: in twelve and just like they did when the FED
Speaker 1: backed off. In the debate we're having right now is
Speaker 1: so polarizing. I imagine there are people screaming, screaming, sang
Speaker 1: I agree with Brian. There will be other people saying
Speaker 1: I completely disagree. Let's put you on the spot. You
Speaker 1: think we've seen the loan for the ten year for
Speaker 1: this year? Oh yeah, I think we've seen the low
Speaker 1: for the tenure. Um. I don't think that we're going
Speaker 1: to see the tenure rate go meaningfully higher. This is
Speaker 1: a cyclical move up in tenure, but the tenure will
Speaker 1: likely reflect where where real economic activity is. In the
Speaker 1: United States, call it, call it closer to two percent,
Speaker 1: but you know three was treasuries that had been oversold,
Speaker 1: one and a half was treasuries that were overbought. And
Speaker 1: two percent right along the lines of where potential growth
Speaker 1: is in this country, is a is a more reasonable
Speaker 1: rate for the tenure. Great to see you. Great to
Speaker 1: see you as well. Brian Levitt, Investar Global Markets, trying
Speaker 1: to just here is your two second Brexit warning. Now
Speaker 1: we're going to discuss Brexit. Here's the latest for you.
Speaker 1: The Prime Minister has been forced legally to us for
Speaker 1: an extension. The EU has not said when that extension
Speaker 1: will go to because the Prime Minister is now asking
Speaker 1: for an election. Jeremy Corbin is so fast saying no.
Speaker 1: James Apy has the unfortunate luck of joining us on
Speaker 1: this program to talk about it. Aberdeen Standard Investments senior
Speaker 1: investment manager to join the Sound of London. Good morning
Speaker 1: to James. More than John, How you doing what is
Speaker 1: going on in the United Kingdom? You could have eased
Speaker 1: me and gently with a question about something a little
Speaker 1: less ridiculous, but thank you for starting me with the
Speaker 1: the impossible task. I don't know, like I gave up
Speaker 1: doing what I normally do as an investor looking at
Speaker 1: the world probabilistically gaming this out. How do I know
Speaker 1: who's incentivized to do what? What does the world look
Speaker 1: like in all of these scenarios, etcetera, etcetera. It hasn't worked.
Speaker 1: I you know, the normal motivations for political individuals and
Speaker 1: parties don't seem to be driving their decisions. And I
Speaker 1: think most confusingly, and most recently of all, the opposition strategy,
Speaker 1: which was opposed everything because you want an election, has
Speaker 1: now been well, you don't want an election either, so
Speaker 1: what do you want? And that means it's very difficult
Speaker 1: because of the Fixed Parliament's Actor. This is what's god
Speaker 1: us into this mess. Really, the unintended consequences of that
Speaker 1: legislation unlesson until the Labor Party's policy is a bit
Speaker 1: clearer and easy to understand. We're trapped in this situation
Speaker 1: where the EU won't move until they know what we're doing,
Speaker 1: and we can't move until the EU is confirmed. So
Speaker 1: it's a tough one. I think essentially we're talking about
Speaker 1: a general election, if that's mid December or not. I
Speaker 1: guess we'll find out more in the coming days for
Speaker 1: our listeners who might not be familiar with the Fixed
Speaker 1: Term Parliament Act, Essentially, to get a snap election in
Speaker 1: the United Kingdom, it's not enough the government calls for it.
Speaker 1: You need two thirds of MPs to actually vote for it.
Speaker 1: So for the Prime Minister to get what he wants,
Speaker 1: he needs the leader of the Opposition Jeremy Corbyn and
Speaker 1: some Labor MPs to come with him. James, I was
Speaker 1: looking at the letter from the Prime Minister to the
Speaker 1: Leader of the Opposition on page two. In the first paragraph,
Speaker 1: the EU may offer only a short extension, say the
Speaker 1: fifteenth November. This would obviously be my preference, but I
Speaker 1: was illegally prevented by Parliament and the courts from suggesting this. James,
Speaker 1: I think it's pretty clear he's suggesting. Get I just
Speaker 1: wonder what the EU will come back with, because this
Speaker 1: is actually pretty critical for the next moves in markets
Speaker 1: and the next moves politically. What extension the EU actually
Speaker 1: gives the UK And so far, James, we've had no answer,
Speaker 1: no exactly. So the e used position is obviously that
Speaker 1: an extension is almost a foregone conclusion. But increasingly they recognize,
Speaker 1: and I think we all recognize that purgatory is suiting
Speaker 1: no one. So they're not they don't want to be
Speaker 1: involved in UK politics, but neither do they want to
Speaker 1: be involved in just continually kicking the can down the
Speaker 1: road without any sign of resolution. So they want from
Speaker 1: us a plan. Why are we having this extension and therefore,
Speaker 1: what's an appropriate length of time. The problem is that
Speaker 1: Jeremy Corbyn, the leader of the Opposition, is saying I
Speaker 1: will not vote for an election, I will not vote
Speaker 1: for this deal. I will basically not vote for anything
Speaker 1: until no Deal is quote unquote taken off the table,
Speaker 1: which is an impossibility because even if you could legislate
Speaker 1: to take it off the tables as they have, that
Speaker 1: legislation can always be undone when a government has a majority.
Speaker 1: So again we're sort of trapped in this situation. I
Speaker 1: think President mcquan is is an important figure to watch here.
Speaker 1: He's the de facto leader I think of the European Union,
Speaker 1: and I think he's working well with Prime Minister Johnson,
Speaker 1: and I think they're trying to pressure together the UK
Speaker 1: Parliament to get its act together. When push comes to shove,
Speaker 1: I still think it's probably more likely that that we
Speaker 1: end up with an extension to the end of January
Speaker 1: than one to the middle of November. I say that
Speaker 1: with low confidence, with low comb James, I'll lay after brexit.
Speaker 1: Hook here, let's focus on the markets a little bit.
Speaker 1: I'm inclined with indices at or near all time highs.
Speaker 1: I've got earnings tep it at best. I've got growth
Speaker 1: slow and globally, you know, I'm hard pressed not to
Speaker 1: just take all my chips off the table and go home.
Speaker 1: What are your thoughts? Yeah, I mean that's essentially not
Speaker 1: necessarily all of your chips off the table. I think
Speaker 1: there are still places that you can find value in markets,
Speaker 1: but those of that that value exists in defensive asset classes,
Speaker 1: not in pro cyclical risky asset classes. I completely agree.
Speaker 1: I'd actually have a more negative categorization of the earning picture.
Speaker 1: I think the earnings that are being reported are not great,
Speaker 1: and the earnings that are being reported, you know, diverging
Speaker 1: hugely from the underlying profitability of films across the US
Speaker 1: economy in particular. So to me, equities up here are
Speaker 1: incredibly expensive considering where we are in the economic cycle,
Speaker 1: and I don't see any evidence that the main macro
Speaker 1: themes which have driven this economic decline are going away
Speaker 1: or a changing course. So I think we're on a
Speaker 1: path towards recession. That's not imminent, but that's the path
Speaker 1: that we're on, and therefore I still want to own
Speaker 1: treasury duration and I do not want to own risk.
Speaker 1: The efforts James Athey, thank you and I'm sorry that
Speaker 1: we started with Brexit, but unfortunately that's where we are
Speaker 1: in the UK no man's land, with the zombie Parliament
Speaker 1: and hoping for a solution. Cave all this morning one
Speaker 1: pound one two and down a quarter of one percent.
Speaker 1: That was James Ane from Aberdeen Standard Investment, Senior investment manager.
Speaker 1: J want to us out of London. The politics of
Speaker 1: d C just over the last week's a few weeks
Speaker 1: relatively speaking, fading into the background on Wall Street just
Speaker 1: a little bit, just a little bit, but it's interesting.
Speaker 1: It's not just earnings, and it's not just the FED
Speaker 1: that investors have to deal with as they think about
Speaker 1: the markets. It's also geopolitics. We've got trade with China
Speaker 1: and we've also got some military situations in the Middle East.
Speaker 1: To get a sense of what's going on there. We
Speaker 1: welcome Brett Bruin, director of the Global Situation Room, also
Speaker 1: former Global Engagement Director in the Obama White House, joining
Speaker 1: us on the phone from our DC bureau. But thanks
Speaker 1: so much for joining us. Give us a sense of
Speaker 1: kind of how you view the US situation in Syria,
Speaker 1: given that the US pulled out and all that's happened. Well,
Speaker 1: I think unfortunately, the US has shown increasing um issues
Speaker 1: with its allies. We are not any longer a reliable partner,
Speaker 1: and that was clearly on display with terms decision to
Speaker 1: both pull out of Syria to back away from the Kurds.
Speaker 1: And unfortunately this has pretty far reaching consequences, not just
Speaker 1: for Syria, not just for the Middle East, but our countries.
Speaker 1: Groups are going to be reluctant to get into these
Speaker 1: kinds of engagements with the US, knowing that our track record,
Speaker 1: particularly our recent track record, is pretty spotty. So, Brett,
Speaker 1: it's interesting President Trump, you know, made the clear argument
Speaker 1: that it's just time to bring our troops home. We
Speaker 1: can't be the policeman for the world. That is obviously,
Speaker 1: uh in contrast to post World War two policy for
Speaker 1: the US. What do you think in reality it means
Speaker 1: for some of the other hotspots of the world. I'm
Speaker 1: thinking Korea on top of mind. Well, I think what
Speaker 1: we're seeing. And it's interesting you mentioned Korea because Trump's
Speaker 1: just vision to pull out of the Iran nuclear deal
Speaker 1: makes a nuclear deal with North Korea that much more
Speaker 1: difficult because he's shown how the US from administration to
Speaker 1: administration isn't necessarily going to honor the word of the
Speaker 1: last president. So the calculation for someone like Kim Jong
Speaker 1: nunn he is let me just see how much I
Speaker 1: can extract from this guy and not really make significant compromises.
Speaker 1: So the art of the deal when it comes to
Speaker 1: President Trump is um pretty superficial. So Pratt, let me
Speaker 1: tread carefully on two of these issues, North Korea in
Speaker 1: the Middle East, and I want to lean on your expertise.
Speaker 1: Many people criticize the current president of the United States
Speaker 1: for his approach in places like Syria, in places like
Speaker 1: North Korea, but the previous approach didn't seem to be
Speaker 1: that too effective either. Can you walk me through what
Speaker 1: you think the ultimate the optimal approach actually is. Well,
Speaker 1: and let me contrast to you, because there is this
Speaker 1: narrative out there. Well, Obama was reluctant to get into Syria.
Speaker 1: Obama pulled our troops out of Iraq. I was actually
Speaker 1: on a forward operating base outside of to create two
Speaker 1: thousand and eight two thousand nine. When we did that,
Speaker 1: the difference was there was a plan, there was a process,
Speaker 1: it was orderly. In the Trump foreign policy world, these
Speaker 1: decisions changed from hour to hour, and that is what
Speaker 1: makes it so chaotic and and quite frankly, that creates
Speaker 1: this collateral damage. It ricochets around the region and the world,
Speaker 1: you know, creating unintended consequences. So, Brett, if I were
Speaker 1: to pull a number of folks in the foreign policy
Speaker 1: establishment in Washington, professionals that have been there before the
Speaker 1: Trump administration are likely to be there after the Trump administration,
Speaker 1: how do they view kind of what our policy should
Speaker 1: be as it relates to engagement or disengagement. Well, there's
Speaker 1: a lot of concerns here in Washington. I've started calling
Speaker 1: it a post American error where the United States is
Speaker 1: no longer serving as the guaranteer of security stability around
Speaker 1: the world. Our credibility um was really taking a hit
Speaker 1: under this administration. The challenge I think for the foreign
Speaker 1: policy establishment is how do you rebuild, whether it is
Speaker 1: under this administration or a future administration. And I think
Speaker 1: it's going to become by showing that we can hold
Speaker 1: ourselves to certain standards and others to those standards, and
Speaker 1: we will become more reliable. Policy can continuity and a
Speaker 1: doct democracy, Brett, You'll Apprecia is incredibly difficult, and I
Speaker 1: just look at the situation right now and think, well,
Speaker 1: isn't this what people voted for In the last election.
Speaker 1: The president was pretty clear about how he would handle
Speaker 1: foreign relations, that he wouldn't want to get involved in
Speaker 1: places like the Middle East. In fact, he wanted to
Speaker 1: pull back. Should we be surprised, Well, I think there
Speaker 1: uh is a difference between political rhetoric and national security
Speaker 1: implementation and toward you know, Trump has always had his
Speaker 1: isolationists tendencies. He's always talked about America first, but there
Speaker 1: is a way of doing it. It's not as destructive.
Speaker 1: And if we just look at his record over the
Speaker 1: last two and a half years, there's not much that
Speaker 1: he has built on the world stage. He's bulldozed a
Speaker 1: whole lot. But we also need to have trade deals,
Speaker 1: we need to have um these institutions in place. And
Speaker 1: I haven't seen it anything that the Trump is actually
Speaker 1: been able to accomplish for all of his you know,
Speaker 1: bombast and Brett, give us a sense of what you
Speaker 1: think Russia is doing here? Does Russia you the American
Speaker 1: pullback off of the global stage to whatever extent we
Speaker 1: are only back what extent is Russia viewing it as
Speaker 1: a real opportunity to reassert itself on the global stage. Oh,
Speaker 1: it's a huge win. And let's just take what recently
Speaker 1: transpired in Syria. Russia has moved in asserted themselves over
Speaker 1: the territory um in the northeast of Syria. These um
Speaker 1: Putin who was meeting in soci with Urdwan. They sort
Speaker 1: of divided up the spoils. And ironically, Russia has become
Speaker 1: a more reliable ally for countries in the region than
Speaker 1: the United States. Bashar al assan um and and other
Speaker 1: leaders in the region are now looking to Moscow and
Speaker 1: saying we can get a better deal. We can get
Speaker 1: a more reliable deal from Putin than we can from
Speaker 1: a Trump or or any American leader. That wasn't the
Speaker 1: same true under Obama, you say, under any other American leader, Brett,
Speaker 1: and I wonder if the same was true under Obama
Speaker 1: as well. Why is that different this time around? Sound Well, Look,
Speaker 1: I think the Obama foreign policy certainly had the shortcomings,
Speaker 1: and I witnessed many of them firsthand. I mean, when
Speaker 1: we looked at the rise of Isis and we were
Speaker 1: reluctant to engage, and even when Obama came out in
Speaker 1: a primetime addressed and he was still quite cautious. There
Speaker 1: is undoubtedly errors that were committed under the last administration,
Speaker 1: and we're talking on a whole different spell when it
Speaker 1: comes to this administration. We've got to leave it there.
Speaker 1: We'll continue the conversation another day. Brett Ruin there, director
Speaker 1: of the Global Situation Room and form a Global Engagement
Speaker 1: Director in the Obama White House. There is a question,
Speaker 1: what do you do at this point? You have a
Speaker 1: bunch of cash, you're heading into the end of the
Speaker 1: year of people have been fairly conservative. Do you just
Speaker 1: buy the dip? Vanila right, Richardson joining us now she
Speaker 1: is Edward Jones investment strategist. Uh and Nila, it seems
Speaker 1: to be that that is what you're recommending by any dip.
Speaker 1: Is that correct? Yes? And in a word, so, we
Speaker 1: know that the growth pattern in the economy is slowing.
Speaker 1: We see weakness and manufacturing, but we still see some
Speaker 1: bright lights when it comes to the consumer. The consumer
Speaker 1: has been resilient, so that's that pillar of the economy
Speaker 1: we think remains. We're also going to see a downturn
Speaker 1: in terms of earnings growth, but not earning so we
Speaker 1: think that earnings will slow, especially at this quarter, and
Speaker 1: then pick up in the fourth quarter and into next year.
Speaker 1: So what does that mean for the investor. It means
Speaker 1: that we expect more volatility, but we expect the bull
Speaker 1: market to continue. So this is the time to put
Speaker 1: that cash that's been sitting on the sideline to work
Speaker 1: to buy quality of the investment at more attractive valuations. Well, Neil,
Speaker 1: let's talk about valuation a little bit. We've had the
Speaker 1: s and p up, you know, rough this year, but
Speaker 1: essentially no meaningful earnings growth. So I need to be
Speaker 1: concerned about valuation. That this market is rich, We don't.
Speaker 1: We think that the market is reasonably priced. It's not
Speaker 1: cheap like it was in December when we had that
Speaker 1: big stell up, and that was a good time if
Speaker 1: you put money into the market, then you saw a
Speaker 1: very very strong first quarter. So it's not cheap, but
Speaker 1: it is reasonably priced. And so that's why with that
Speaker 1: combination of expecting more volatility as we get all these
Speaker 1: headlines from trade and geopolitics, these are times to be
Speaker 1: opportunistic and you're buying and look for those times and
Speaker 1: when the market might be uh going through a bit
Speaker 1: of a dip to really put that cash in. What
Speaker 1: would make you change your mind? What would make me
Speaker 1: changeable my mind and be more embarrassed. I would start
Speaker 1: being more bearish. When I look to the consumer, I
Speaker 1: go back away from the market. It's interesting how much
Speaker 1: of our market outlook this year is based on the
Speaker 1: macro economy and not very real Idios Cristi desocratic risk
Speaker 1: in the corporate sector. It's really about interest rates, the
Speaker 1: consumer growth and global growth. If consumer confidence started doing,
Speaker 1: if I saw a slowdown and hiring, if I saw
Speaker 1: a slowdown and wage growth, then I start to get
Speaker 1: concerned about the ability of this economy to keep expanding
Speaker 1: and it being supportive of equity returns over time. That
Speaker 1: would confirm me. Right now, we're not seeing that. We're
Speaker 1: seeing a deceleration but still growth, and so for that
Speaker 1: reason we think that equities are are set to climb
Speaker 1: this year and next. So, Nila, I'm wondering about certain
Speaker 1: sectors that maybe I should be looking at if I'm
Speaker 1: thinking about getting into the equity markets. You know, here
Speaker 1: a lot of folks saying, you know, we're ten plus
Speaker 1: years into the cycle's time to get defensive. But the
Speaker 1: defensive sectors are rich biastorical level. Should I be thinking
Speaker 1: defensive or should I be thinking about maybe even some
Speaker 1: more cyclical type sectors. So we are slightly more defensive
Speaker 1: than we were earlier. This year, we took some UH
Speaker 1: money out of energy because we don't think that is
Speaker 1: an opportunity anymore. We've been waiting for those valuations to
Speaker 1: pay off in the energy sector. But if you pair
Speaker 1: what's going on there with a slow down and global growth,
Speaker 1: we don't think that's a good place to be. We're
Speaker 1: still favorable tech U. There are multiple avenues for continued
Speaker 1: business growth. Now you're going to see UH some volatility
Speaker 1: in that sector, especially tied to regulation. We saw that
Speaker 1: with Amazon UH not as smooth in terms of earnings
Speaker 1: when they reported, But tech we think is still strong.
Speaker 1: We are favorable healthcare as well, UH because of long
Speaker 1: term demographics. So if you take a long term view,
Speaker 1: there are opportunities in this market to really put that
Speaker 1: cash to work. Again that's a recurrent same, but you
Speaker 1: have to be more strategic now than you have an
Speaker 1: earlier in the cycle. Cash to work is is an
Speaker 1: important point here, and and I guess that the other
Speaker 1: point is what kind of returns should people be expecting
Speaker 1: over the next twelve months from US equities. This is
Speaker 1: a time to really have a realistic perspective. We are
Speaker 1: not going to see year over year earnings growth like
Speaker 1: we did in twenty seventeen eighteen. We are in a
Speaker 1: period of very low interest rate environment. We're seeing a
Speaker 1: slow down and growth both in the United States and globally,
Speaker 1: so we expect earnings returns to mimic that slow down
Speaker 1: that we're seeing in the macro fundamental flower returns than
Speaker 1: we've seen in previous parts of this cycle. La Richardson,
Speaker 1: thanks so much for joining us. Niela's at Edward Jones
Speaker 1: Investment Strategist, joining us on the phone. Thanks for listening
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