1 00:00:02,320 --> 00:00:05,680 Speaker 1: Global business news twenty four hours a day. If Bloomberg 2 00:00:05,760 --> 00:00:08,840 Speaker 1: dot com, the radio plus mobile act and on your radio. 3 00:00:09,119 --> 00:00:14,280 Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Headquarters. 4 00:00:14,360 --> 00:00:17,320 Speaker 1: I'm Charlie Pallat of the DAL. The SMP nastac all 5 00:00:17,400 --> 00:00:21,160 Speaker 1: trading higher right now. That are reserve meeting minutes, quelling 6 00:00:21,239 --> 00:00:24,759 Speaker 1: speculation that borrowing costs could rise as soon as next month. 7 00:00:24,800 --> 00:00:28,160 Speaker 1: We've got the SMP five hundred index higher by four 8 00:00:28,200 --> 00:00:30,960 Speaker 1: points right now eighty two, a gain of two tenths 9 00:00:31,000 --> 00:00:33,840 Speaker 1: of one percent. Those minutes, by the way, showed officials 10 00:00:33,840 --> 00:00:37,839 Speaker 1: were divided in July over the urgency to raise interest 11 00:00:37,920 --> 00:00:40,720 Speaker 1: rates again. The Dow up twenty six points, up one 12 00:00:40,800 --> 00:00:43,480 Speaker 1: tenth of one percent, NASTACK up a point a little 13 00:00:43,560 --> 00:00:46,920 Speaker 1: change there, up by less than point one percent. The 14 00:00:46,960 --> 00:00:49,800 Speaker 1: Tenure up five thirty seconds, had yield one point five 15 00:00:49,880 --> 00:00:52,839 Speaker 1: five percent. Gold down four ninety the ounce the thirteen 16 00:00:52,920 --> 00:00:55,960 Speaker 1: forty seven, a drop there of four tenths of one percent. 17 00:00:56,360 --> 00:00:59,600 Speaker 1: Crude Oil West Texas Intermediate up thirty one cents forty 18 00:00:59,640 --> 00:01:01,920 Speaker 1: six eighty nine of barrel. Again they are of seventh 19 00:01:01,920 --> 00:01:05,080 Speaker 1: cents of one percent. I'm Charlie Pellet and dance a 20 00:01:05,120 --> 00:01:08,200 Speaker 1: Bloomberg business flash. Thank you Charlie Pellett. It's time now 21 00:01:08,240 --> 00:01:09,880 Speaker 1: for the E t F Report. It is brought to 22 00:01:09,920 --> 00:01:13,120 Speaker 1: you by E t F Exchange sixteen b n Y 23 00:01:13,200 --> 00:01:17,600 Speaker 1: Melon's Annual E t F Symposium September twenty one in 24 00:01:17,680 --> 00:01:21,760 Speaker 1: Dana Point, California. This essential conference is complementary for I 25 00:01:22,000 --> 00:01:25,200 Speaker 1: R R I A S, but space is limited. Register 26 00:01:25,319 --> 00:01:28,880 Speaker 1: now at b n y melon dot com slash e 27 00:01:29,160 --> 00:01:31,960 Speaker 1: t F. Let's go to Katherine Cowdery for the Exchange 28 00:01:31,959 --> 00:01:35,800 Speaker 1: Traded Fund Report. Money is pouring into e t s 29 00:01:35,880 --> 00:01:38,880 Speaker 1: this month billion dollars in the US in the first 30 00:01:38,920 --> 00:01:42,840 Speaker 1: half of August. Bloomberg Intelligence analyst Eric Baltuna says it 31 00:01:42,880 --> 00:01:46,119 Speaker 1: continues a breakneck call of sixty eight billion dollars since 32 00:01:46,160 --> 00:01:49,200 Speaker 1: the end of June. Is this goldilocks environment, right, You've 33 00:01:49,200 --> 00:01:52,320 Speaker 1: got breaksit behind you, and you've got decent economic news 34 00:01:52,400 --> 00:01:55,280 Speaker 1: but not too good and so there's really just no 35 00:01:55,400 --> 00:01:57,080 Speaker 1: fear of the Fed. And plus I don't think there's 36 00:01:57,080 --> 00:01:59,480 Speaker 1: anybody thinking they're going to raise before the election. Bell 37 00:01:59,560 --> 00:02:02,440 Speaker 1: Junas as a flows are showing that investors are indulging 38 00:02:02,480 --> 00:02:05,680 Speaker 1: their risk on appetite as more than ten different small 39 00:02:05,720 --> 00:02:08,480 Speaker 1: cap e t f s have taken in money. In August, 40 00:02:08,480 --> 00:02:10,480 Speaker 1: they're going all the way. Small cap ets took in 41 00:02:10,520 --> 00:02:13,000 Speaker 1: two point five billion, and about a dozen of them 42 00:02:13,000 --> 00:02:15,760 Speaker 1: saw flows. So this tells me they're really all in 43 00:02:15,880 --> 00:02:18,240 Speaker 1: right now. E t s that focus on industrial companies 44 00:02:18,280 --> 00:02:20,600 Speaker 1: are leading all sectors and flows. So far this month, 45 00:02:20,880 --> 00:02:24,359 Speaker 1: they've taken in eight one million dollars. One of the reasons, 46 00:02:24,639 --> 00:02:28,720 Speaker 1: Beltuna says performance the industrial select sector Spidery t F 47 00:02:28,840 --> 00:02:32,760 Speaker 1: is up five percent since July. That's your Bloomberg ETF report. 48 00:02:32,919 --> 00:02:39,480 Speaker 1: I'm Katherine Cowdery. This is taking Stock with Kathleen Hayes 49 00:02:39,520 --> 00:02:44,880 Speaker 1: and Grim Fox on Bloomberg Radio. Well, stocks are fluctuating, 50 00:02:45,160 --> 00:02:48,119 Speaker 1: still trying to figure out what to watch. The FED 51 00:02:48,240 --> 00:02:51,320 Speaker 1: minutes did show a FED somewhat divided. As I've been 52 00:02:51,919 --> 00:02:53,680 Speaker 1: talking to people on the show today along with my 53 00:02:53,720 --> 00:02:57,320 Speaker 1: co host Pim Fox and looking at research notes, I'm 54 00:02:57,360 --> 00:03:00,480 Speaker 1: seeing that some people are saying they appear slightly more hawkish. 55 00:03:00,919 --> 00:03:03,639 Speaker 1: Some people are saying they're more held back by inflation. 56 00:03:04,000 --> 00:03:06,000 Speaker 1: Question is, though, what does this mean for the stock market? 57 00:03:06,000 --> 00:03:08,200 Speaker 1: And as we watched so many of the retailers following 58 00:03:08,200 --> 00:03:10,920 Speaker 1: short are we seeing signs that some weakness in the 59 00:03:10,919 --> 00:03:15,359 Speaker 1: macro economy is spilling over into the business economy. We're 60 00:03:15,440 --> 00:03:17,560 Speaker 1: very happy to be joined now by Peter Kenny, senior 61 00:03:17,560 --> 00:03:22,600 Speaker 1: market strategist at Global Markets Advisory Group. Uh, Peter, welcome, 62 00:03:23,160 --> 00:03:26,720 Speaker 1: Thank you, Kathleen. So uh just here quickly. From the 63 00:03:26,800 --> 00:03:29,200 Speaker 1: stock market view, from the investing view, we got these 64 00:03:29,240 --> 00:03:31,000 Speaker 1: f onm C minutes. They didn't know how weak the 65 00:03:31,000 --> 00:03:34,120 Speaker 1: GDP was with the second jobs report. Do you just 66 00:03:34,160 --> 00:03:36,320 Speaker 1: put them on the back burner and say next or 67 00:03:36,360 --> 00:03:39,640 Speaker 1: does this? Is there something you take away for the 68 00:03:39,640 --> 00:03:43,440 Speaker 1: stock market well? As far as the markets concerned, what 69 00:03:43,480 --> 00:03:45,960 Speaker 1: we're seeing from the Fed and from the interest rate 70 00:03:46,000 --> 00:03:50,400 Speaker 1: conversation or landscape is that we're likely to see much 71 00:03:50,440 --> 00:03:53,800 Speaker 1: of the same unchanged outlook. In other words, we're seeing 72 00:03:54,040 --> 00:03:57,160 Speaker 1: very mixed economic performance and a very divided f o 73 00:03:57,320 --> 00:04:02,760 Speaker 1: MC that provides for an unchanged view moving forward, and 74 00:04:02,840 --> 00:04:07,680 Speaker 1: that has provided for some significant risk on allocation of 75 00:04:07,760 --> 00:04:12,080 Speaker 1: resources into equities. And that's a concern because we're seeing 76 00:04:12,120 --> 00:04:17,839 Speaker 1: pe ratios well above historical averages. The Dow Industrials, transports, 77 00:04:17,839 --> 00:04:20,320 Speaker 1: and utilities have all seen a meaningful uptick in the 78 00:04:20,440 --> 00:04:22,880 Speaker 1: in the price ratings ratio over the last twelve months 79 00:04:23,760 --> 00:04:26,080 Speaker 1: and are are well into an area where we have 80 00:04:26,200 --> 00:04:29,280 Speaker 1: historically seen a pullback. We're also seeing the same sort 81 00:04:29,320 --> 00:04:31,919 Speaker 1: of themes in the Russell two thousand, nastac one s 82 00:04:31,960 --> 00:04:35,200 Speaker 1: and P five hundred. So as far as I'm concerned, 83 00:04:35,200 --> 00:04:38,800 Speaker 1: this risk on appetite, which has driven valuations higher than 84 00:04:38,800 --> 00:04:43,200 Speaker 1: they've historically been, is some cause for concern, But we're 85 00:04:43,240 --> 00:04:45,760 Speaker 1: not seeing anything on the part of the FED which 86 00:04:45,800 --> 00:04:49,919 Speaker 1: is indicating that we should expect an economic slowdown. The 87 00:04:50,040 --> 00:04:52,839 Speaker 1: issue for the FED is interest rates, and interest rates 88 00:04:53,080 --> 00:04:56,800 Speaker 1: is not something that they can really engage in in 89 00:04:56,880 --> 00:04:59,760 Speaker 1: September in terms of a race, it's not going to happen, 90 00:05:00,200 --> 00:05:01,920 Speaker 1: And if it's not in September, it's not going to 91 00:05:02,000 --> 00:05:05,520 Speaker 1: be before the elections, which means does it happen in December. 92 00:05:05,520 --> 00:05:08,880 Speaker 1: That's far enough off in terms of the calendar for 93 00:05:08,920 --> 00:05:12,680 Speaker 1: investors to not really have to focus on it. Peter, 94 00:05:12,839 --> 00:05:15,800 Speaker 1: where's the money coming from that pushes stocks hire? Is 95 00:05:15,839 --> 00:05:19,520 Speaker 1: that the retail investor? Or? Is it institutions? I think 96 00:05:19,520 --> 00:05:24,479 Speaker 1: it's institution and PIM I think it's institutional institutions. Globally, 97 00:05:25,400 --> 00:05:29,760 Speaker 1: the US equity market is seeing a really significant influx 98 00:05:29,800 --> 00:05:33,479 Speaker 1: of capital from around the world for very very clear reasons, 99 00:05:34,320 --> 00:05:38,159 Speaker 1: whether it is the dividend field on US corporate issues, 100 00:05:38,480 --> 00:05:43,000 Speaker 1: or whether it's the likelihood or the perspective prospects of 101 00:05:43,000 --> 00:05:47,120 Speaker 1: an increase in prices of equities. This is the most 102 00:05:47,400 --> 00:05:50,240 Speaker 1: relatively attractive place to be putting your money to work, 103 00:05:50,440 --> 00:05:53,839 Speaker 1: globally speaking. And you know, just look at negative rates 104 00:05:53,839 --> 00:05:58,040 Speaker 1: in Japan, in EU are largely in some pockets of 105 00:05:58,080 --> 00:06:01,520 Speaker 1: the EU, and you're seeing that this the U S 106 00:06:01,600 --> 00:06:06,360 Speaker 1: equity market is the is the landscape that global investors 107 00:06:06,440 --> 00:06:08,560 Speaker 1: are more than willing to put their money to work 108 00:06:08,600 --> 00:06:12,640 Speaker 1: at because of the relative attractiveness and ren yields. So 109 00:06:13,040 --> 00:06:17,200 Speaker 1: if that's the case, then we are Do you say, 110 00:06:18,120 --> 00:06:21,919 Speaker 1: which of these three? Do you say stocks continue to rise, 111 00:06:22,200 --> 00:06:27,080 Speaker 1: UM as A B spasses it? Do you say, oh, well, 112 00:06:27,240 --> 00:06:29,760 Speaker 1: back and forth, back and forth. You know, global investors 113 00:06:29,800 --> 00:06:31,520 Speaker 1: want invest here. On the other hand, you know the 114 00:06:31,520 --> 00:06:33,640 Speaker 1: earnings have been that great or is there a third 115 00:06:33,640 --> 00:06:37,279 Speaker 1: possibility that stocks drive down? I mean, is the is 116 00:06:37,279 --> 00:06:40,440 Speaker 1: this global demand for anything that looks better than anything 117 00:06:40,480 --> 00:06:42,400 Speaker 1: else going to be a much of a driver for 118 00:06:42,520 --> 00:06:47,480 Speaker 1: this a year? Yeah, certainly, in the last of those 119 00:06:47,480 --> 00:06:51,400 Speaker 1: three options, I think is the most likely, and this 120 00:06:51,480 --> 00:06:55,600 Speaker 1: is why UM equity markets have historically not been able 121 00:06:55,640 --> 00:07:00,800 Speaker 1: to whole evaluations UH as measured by P north of 122 00:07:00,880 --> 00:07:05,520 Speaker 1: twenty for extended periods of time. And I think that 123 00:07:05,560 --> 00:07:09,400 Speaker 1: we've seen over the last two weeks a real slowdown 124 00:07:09,560 --> 00:07:13,280 Speaker 1: in activity in terms of volume and turnover, and we've 125 00:07:13,320 --> 00:07:17,000 Speaker 1: seen a real moderation in terms of price gains. The 126 00:07:17,040 --> 00:07:21,080 Speaker 1: post Brexit rally has run its run its course. We're 127 00:07:21,080 --> 00:07:24,000 Speaker 1: now in a post Brexit rally mentality in terms of 128 00:07:24,000 --> 00:07:28,880 Speaker 1: the broader street, and we're seeing that there's no compelling 129 00:07:28,960 --> 00:07:32,400 Speaker 1: reason at these valuations to put much capital at risk, 130 00:07:32,960 --> 00:07:36,560 Speaker 1: in spite of the fact that the global environment does 131 00:07:36,680 --> 00:07:40,600 Speaker 1: continue to sort of fuel the allocation events of cash 132 00:07:40,680 --> 00:07:44,000 Speaker 1: into US equities and US corporate debt UM. I do 133 00:07:44,160 --> 00:07:48,080 Speaker 1: think that we've kind of reached an equilibrium. The goldilocks 134 00:07:48,120 --> 00:07:51,680 Speaker 1: scenario that many have spoken about is going to add 135 00:07:51,760 --> 00:07:57,920 Speaker 1: best provide for very modest, very incremental returns from here 136 00:07:58,480 --> 00:08:01,160 Speaker 1: until we we hit some to sort of a real 137 00:08:01,200 --> 00:08:04,040 Speaker 1: pivot point in terms of volatility, which will of course 138 00:08:04,120 --> 00:08:10,320 Speaker 1: drive prices two more historically based valuations. Peter, You've got 139 00:08:10,320 --> 00:08:12,559 Speaker 1: to simplify it for me because I just keep thinking 140 00:08:12,560 --> 00:08:14,520 Speaker 1: that one of the reasons that stocks go up is 141 00:08:14,560 --> 00:08:17,600 Speaker 1: that somebody buys them. And I was looking at US companies. 142 00:08:17,640 --> 00:08:20,760 Speaker 1: They've reduced their stock buy backs to the lowest level 143 00:08:20,960 --> 00:08:23,880 Speaker 1: in four years. This is a report from the stock 144 00:08:24,000 --> 00:08:28,200 Speaker 1: research firm trim Tabs. If you have US companies not 145 00:08:28,320 --> 00:08:31,240 Speaker 1: buying back their stock, combine that with what you've just 146 00:08:31,320 --> 00:08:36,160 Speaker 1: described as this perhaps overvalued stock market because of the 147 00:08:36,240 --> 00:08:40,120 Speaker 1: pe levels. What happens when we get maybe a five 148 00:08:40,200 --> 00:08:44,880 Speaker 1: to correction. Let's assume that that takes place, how many 149 00:08:44,920 --> 00:08:48,160 Speaker 1: people go under and what happens next. I do think 150 00:08:48,200 --> 00:08:50,679 Speaker 1: that that takes place. I would not at all be 151 00:08:50,800 --> 00:08:53,520 Speaker 1: surprised to see a five percent pull back between now 152 00:08:53,520 --> 00:08:57,360 Speaker 1: and the elections, possibly more. And I do think it's 153 00:08:57,360 --> 00:09:00,360 Speaker 1: going to be predicated upon a lack of corporate by backs, 154 00:09:00,520 --> 00:09:03,520 Speaker 1: which has been a huge driver of price appreciation and 155 00:09:03,600 --> 00:09:07,960 Speaker 1: equity markets, and coupled with extended evaluations. In that case, 156 00:09:09,000 --> 00:09:10,680 Speaker 1: we're going to have to wait to see that. Where 157 00:09:10,679 --> 00:09:13,120 Speaker 1: the dust clear is because a lot of this volatility 158 00:09:13,160 --> 00:09:16,640 Speaker 1: that we have coming up on us, certainly before the election, 159 00:09:16,720 --> 00:09:18,520 Speaker 1: is going to be as a result of the elections, 160 00:09:19,280 --> 00:09:22,160 Speaker 1: and based on the outcome of those elections, we're gonna 161 00:09:22,200 --> 00:09:24,800 Speaker 1: we're gonna have a much more clarity as to what 162 00:09:25,920 --> 00:09:28,600 Speaker 1: the interest rate scenario looks like going forward and what 163 00:09:28,679 --> 00:09:32,040 Speaker 1: the corporate guidance looked looks like going forward. My sense 164 00:09:32,160 --> 00:09:34,800 Speaker 1: is that we do get that bull back. My senses 165 00:09:34,880 --> 00:09:37,760 Speaker 1: that it represents an opportunity because I think over the 166 00:09:37,840 --> 00:09:41,360 Speaker 1: next twelve months, the S and P five is likely 167 00:09:41,400 --> 00:09:44,160 Speaker 1: to gain somewhere between six and a half and seven percent. 168 00:09:44,960 --> 00:09:48,120 Speaker 1: That's so that would take us up to gosh, how 169 00:09:48,120 --> 00:09:51,000 Speaker 1: far do the math quickly for me, Peter, the math 170 00:09:51,080 --> 00:09:59,640 Speaker 1: would get us to uh twenty, that's not bad today. Yeah, 171 00:09:59,640 --> 00:10:02,319 Speaker 1: I mean you certainly beat the return you'd get holding 172 00:10:02,920 --> 00:10:05,760 Speaker 1: a lot of different kinds of bonds, that's for certain. 173 00:10:05,800 --> 00:10:08,920 Speaker 1: And so in the longer term twelve months, I'm I'm 174 00:10:08,960 --> 00:10:13,360 Speaker 1: actually quite confident, okay, okay, So give me a longer 175 00:10:13,480 --> 00:10:15,480 Speaker 1: term play. What are some names or that you would 176 00:10:15,600 --> 00:10:18,520 Speaker 1: that you would buy now or hold onto now because 177 00:10:18,600 --> 00:10:21,160 Speaker 1: look out over the election divide and you can you 178 00:10:21,200 --> 00:10:23,679 Speaker 1: know you'll hold onto it make some money. Okay, So 179 00:10:24,480 --> 00:10:28,160 Speaker 1: I would when you starting to reverse mining's miners, uh, 180 00:10:28,240 --> 00:10:30,560 Speaker 1: they've had a huge run. I look for them to moderate, 181 00:10:30,600 --> 00:10:34,920 Speaker 1: truckers and parts, huge run moderate, food meets and products 182 00:10:35,120 --> 00:10:38,360 Speaker 1: huge run moderate. So the stocks that I think will 183 00:10:38,400 --> 00:10:41,520 Speaker 1: likely outperform in the next twelve months are at the industrials, 184 00:10:42,320 --> 00:10:48,840 Speaker 1: medical stocks, pharma, and housing. UM. I think that you're 185 00:10:48,880 --> 00:10:52,680 Speaker 1: going to continue to see all rotation into those names, 186 00:10:52,720 --> 00:10:54,680 Speaker 1: and I think that they will lead the market higher. 187 00:10:55,080 --> 00:10:58,040 Speaker 1: Thanks very much, Peter Kenny. He is a senior market 188 00:10:58,080 --> 00:11:02,720 Speaker 1: strategists Global Marks Advisory Group. Is also an independent market 189 00:11:02,760 --> 00:11:06,400 Speaker 1: strategist at Kenny and Co. We're gonna take you through 190 00:11:06,440 --> 00:11:09,600 Speaker 1: to the clothes on Wall Street. This is taking Stock. 191 00:11:10,040 --> 00:11:13,240 Speaker 1: I'm Pim Fox my coast. Kathleen Hayes, this is Bloomberg.