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Speaker 1: Global business news twenty four hours a day at Bloomberg

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Speaker 1: dot Com, the radio, plus mobile lap and on your radio.

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Speaker 1: This is a Bloomberg business flash from Bloomberg World Headquarters.

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Speaker 1: I'm Charlie held at jobs Friday, stocks of paired losses

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Speaker 1: as the dollar fell, treasuries and gold gaining after the

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Speaker 1: US employers added the fewest jobs in almost six years

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Speaker 1: in May, bolstering the case for the FED. Believe rates

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Speaker 1: lower for longer. The tenure of thirty seconds that yield

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Speaker 1: one point seven percent, gold surging two point seven percent

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Speaker 1: up thirty two seventy ounce to twelve forty five, Oil

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Speaker 1: down forty cents forty eight seventy seven of barrel on

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Speaker 1: West Texas Intermediate Town, eight tenths of one percent. Equities

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Speaker 1: lower with thirteen minutes to go ahead of the close,

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Speaker 1: SMP down five to two thousand ninety nine and drop

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Speaker 1: there of three tents of one percent and has stackdown

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Speaker 1: twenty ate a drop of six tents of one percent down,

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Speaker 1: industrials down twenty or a drop of point one percent.

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Speaker 1: I'm Charlie Pellatin. That's a bloom Grind business flash. Thank

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Speaker 1: you very much. Charlie Pellett It's time now for the

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Speaker 1: e t F Report. It is brought to you by

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Speaker 1: Muni Vanek access the opportunities. That's go to Catherine Calgary

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Speaker 1: for the e t F Report. The number of so

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Speaker 1: called thematic ets is growing as fund providers try to

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Speaker 1: tap into transit offer growth opportunities. Global x offers nine

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Speaker 1: ranging from lithium to health and wellness to social media.

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Speaker 1: It's newest the global Lex Millennials Thematic e t F

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Speaker 1: ticker m I. L. N. Day Jacobs, director of Research

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Speaker 1: at global X, and the kind of companies that are

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Speaker 1: being included in the e t F. We're really trying

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Speaker 1: to marry two different ideas. So one we're looking at

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Speaker 1: the industries where millennials spend money. These are really basic

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Speaker 1: industries food, education and clothing, housing. And then we're looking

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Speaker 1: at the unique spending characteristics of monules, what makes them

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Speaker 1: different from other generations. So you know their tech ivy generation,

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Speaker 1: as digital natives, they're physically mobile, moving across the country

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Speaker 1: for college or or work. Companies in the E t

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Speaker 1: F range from Amazon to Facebook to Equity Residential and Chipotle.

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Speaker 1: The A t F has an expense ratio of sixty

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Speaker 1: eight basis points and two point three million dollars in

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Speaker 1: total assets. That's your Bloomberg A t F report. I'm

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Speaker 1: Catherine Colderie. This is taking stock with pin Box and

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Speaker 1: Kathleen Hayes on Bloomberg Radio. What's a difference much weaker

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Speaker 1: than forecast jobs report? I can and make bonds and

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Speaker 1: rally mode stocks lower, although not as low as they

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Speaker 1: were early in the day. What does this mean as

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Speaker 1: we move into the second half of this year? Joining

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Speaker 1: us now as Scott Rendy, Senior Global equity Strategist at

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Speaker 1: Wells Fargo Investment Institute. Scott, welcome back to the show. Hi, Kathleen,

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Speaker 1: Thanks so uh you can whether or not you say, oh,

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Speaker 1: this is just a one off week job support or

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Speaker 1: or not, I would say that if you're an equity

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Speaker 1: strategy like you, you still have to contend with an

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Speaker 1: economy that has been mixed at best on a lot

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Speaker 1: of the numbers so far this year. Now you get

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Speaker 1: this ominous sign, do you change your strategy? Do you

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Speaker 1: pair something back, what do you do? I think I

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Speaker 1: do not think you do that, Kathleen. And the reason

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Speaker 1: I say that is because really our overall theme is

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Speaker 1: modest growth and modest inflation. The labor market is slowly

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Speaker 1: moving in the right direction, the economy is slowly moving

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Speaker 1: in the right direction. Is going to look at a

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Speaker 1: lot like twenty fifteen that looked a lot like that

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Speaker 1: looked at like. So I mean, we're moving slowly in

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Speaker 1: the right direction. Uh. Today's non farm payroll number that

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Speaker 1: was a surprise, no doubt about it. UM. But I think, UM,

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Speaker 1: I think the market, the market clearly absorbed this news

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Speaker 1: pretty well. And when I look at that at data,

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Speaker 1: you know, hey, two and a half percent year over

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Speaker 1: year uh, average hourly earnings change, which I believe is

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Speaker 1: the most important number in that report, UM, and has

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Speaker 1: been for the last six or seven months. Um. You know,

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Speaker 1: there's nothing to get excited about. But I don't think

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Speaker 1: it's the end of the world either, And I don't

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Speaker 1: want to say it's a one off, but I don't

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Speaker 1: think this is the start of a trend. All right, Well,

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Speaker 1: I'm glad it's not the start of a trend or

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Speaker 1: at least, it's not going to get you to too worried, Scott.

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Speaker 1: But you keep talking about the things moving in the

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Speaker 1: right direction. How do you know they're moving in the

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Speaker 1: right direction until you've actually reached your destination. Well, Pim,

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Speaker 1: you know, of course, what they're paying us to do

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Speaker 1: is to try to make some projections here and I'll

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Speaker 1: give you an example. Um. You know, average hourly earnings

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Speaker 1: which I'm sorry, initial jobs claims come as comes out

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Speaker 1: every Thursday at eight thirties Eastern time. That is a

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Speaker 1: great leading indicator. And we look forward on that and

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Speaker 1: we make projections on that number, and we're through about

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Speaker 1: January of twenty seventeen. That's about as far out as

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Speaker 1: we can look and feel like we have a lot

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Speaker 1: of accuracy. UM continues to be under three hundred thousand.

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Speaker 1: Any time you see that number under probably even three

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Speaker 1: and two. Uh, that's a darn good number. So you know,

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Speaker 1: it's things like that leading indicators when we project l

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Speaker 1: A I UM. The economic indicators when you when you

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Speaker 1: look at the but that's the economy. I'm talking about

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Speaker 1: the stock market. I mean the reason the stock I mean,

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Speaker 1: you know, you have to think about the economy is

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Speaker 1: what allows companies to prosper or to not prosper. So

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Speaker 1: the foundation of everything we do is trying to figure

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Speaker 1: out what's the economy going to look like going ahead.

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Speaker 1: I think valuations here in the US there's only slightly

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Speaker 1: ahead of the thirty year median um. And you know,

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Speaker 1: let's face that the Federal Reserve is not going to

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Speaker 1: tighten up on us. You know too much here, I

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Speaker 1: don't think, or at least we're not counting on it.

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Speaker 1: So corporate earnings are going to look a lot better

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Speaker 1: in the remaining part of the year. The GDP growth

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Speaker 1: is going to look better. It's all going to look better.

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Speaker 1: In the market knows that. That's why we're sitting up here, Spire.

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Speaker 1: The bond markets begs to differ, do you think, I mean,

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Speaker 1: you've got the tenure down to one point seven, you've

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Speaker 1: got the tier down to point seven seven, big move

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Speaker 1: up and utilities David by con Inison and cepra Well, Kathleen,

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Speaker 1: I hate to admit it, but as an equity guy,

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Speaker 1: bond guys are smarter um but um but and you

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Speaker 1: know one seventy one seventy tenure yield um? Does that

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Speaker 1: make me happy? It definitely doesn't. Does it make me

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Speaker 1: think that the equity guys um are are are you

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Speaker 1: know wrong, and the bond guys might be right and

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Speaker 1: we might see this yield dip even lower. I don't know.

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Speaker 1: I rolled that through my mind all the time. But

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Speaker 1: certainly we're in a modest growth environment. There's no reason

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Speaker 1: to expect that we're going to see much more than

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Speaker 1: you know, two p growth this year, probably next year

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Speaker 1: as well. So you know, we're in a mode here

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Speaker 1: where they're some flight to quality. It's slow growth, um.

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Speaker 1: But you know, you have to say if if you

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Speaker 1: think this tenure yields going below one fifty, I mean

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Speaker 1: that's that's not a good sign um. So I'll leave

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Speaker 1: it at that. But unless you happen to be long bonds, well,

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Speaker 1: unless you have to be long bonds, and of course,

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Speaker 1: you know with with the clients and and you know,

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Speaker 1: retail clients are bread and butter here and we tell

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Speaker 1: them to have diversified portfolios. And this is one of

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Speaker 1: the reasons why we do that well Scotts. We've discussed

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Speaker 1: earlier with George goncab Is from Nomura. Part of the

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Speaker 1: reason bonds are doing so well is because of there's

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Speaker 1: so many negative bond yields around the world. The treasury

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Speaker 1: is the plate pressure markets a place to be. I

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Speaker 1: want to get more specific about stocks because if you're right,

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Speaker 1: if you kind of just better, we don't know what

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Speaker 1: what what are good investments right now? What industries look

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Speaker 1: good to like, go to technology banks sold off today?

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Speaker 1: Is their value there? What do you suggest? Well, financials

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Speaker 1: we can't get too excited about, just because we don't

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Speaker 1: think interest rates are going to be moving enough in

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Speaker 1: the economy is not going to be elerated accelerating enough

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Speaker 1: to get excited about financials. But we we are overweight

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Speaker 1: the consumer discretionary sector in there, things like household appliances,

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Speaker 1: general merchandise stores, Internet, retail. Those industry groups look good.

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Speaker 1: Industrials we like things like industrial conglomerates, conglomerates, construction engineering.

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Speaker 1: We were overweight technology, so that'd be semiconductor equipment, application, software,

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Speaker 1: consult against services. And we also recently added healthcare to

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Speaker 1: our overweight recommendations. And you know that's traditionally a defensive sector.

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Speaker 1: We've been leaning cyclical, but I think when you look

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Speaker 1: at evaluation relative valuation, healthcare has gotten hit here on

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Speaker 1: evaluation purpose, on evaluation basis, or something like Telecom, which

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Speaker 1: we went underweight on had been, you know, really outperforming.

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Speaker 1: So uh, we like healthcare, but it's purely evaluation play.

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Speaker 1: I continue to believe healthcare is going to be a

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Speaker 1: defensive sector. Earnings growth is not going to be anywhere

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Speaker 1: near what it was when we had to surge after

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Speaker 1: the initial A c Affordable Care Act came into play. UM.

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Speaker 1: But you know, those are the four sectors that we like.

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Speaker 1: Three of them are very cyclical, one of them is defensive,

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Speaker 1: and we certainly want to lean cyclical um through the

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Speaker 1: balance of this year. Hey, Scott, let's just suspend this

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Speaker 1: idea for just a second that the economy and the

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Speaker 1: stock market or linked, just for argument's sake. I've been

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Speaker 1: looking at some details having to uh deal with equity funds.

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Speaker 1: Global equity funds recording net outflows about nine billion dollars

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Speaker 1: cumulatively over the past seven weeks. We're talking about a

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Speaker 1: fifty nine billion dollar outflow. If you take the idea

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Speaker 1: that the reason stocks go up is someone else is

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Speaker 1: willing to pay more for the stock that you bought,

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Speaker 1: is there a possibility of people just I'm not interested

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Speaker 1: in putting them money into stocks. Stop. You know, PIM,

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Speaker 1: you and I have talked about this really probably for

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Speaker 1: the last couple of years at least. And you know,

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Speaker 1: retail clients have been sitting on their hands. The volatility

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Speaker 1: earlier this year didn't help. They didn't sell on the

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Speaker 1: way down, they didn't buy on the way back up. Um.

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Speaker 1: Our clients have too much cash, at least it's in

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Speaker 1: our opinion, they're underinvested in stocks. Uh, they're fearful of

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Speaker 1: the market. So UM, you know when I hear the

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Speaker 1: numbers on the outflows, UH, to me, you know, here

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Speaker 1: we are within a couple of percent of the all

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Speaker 1: time record high in the SMP five hundred. After all

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Speaker 1: that outflow, UM, to me, that's a contrarian indicator. And

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Speaker 1: when when retail investors are hesitant, when they're cautious, and

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Speaker 1: you see these outflows, UM, you know, to me, we're

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Speaker 1: not at the top in the market. And that's a

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Speaker 1: that's a good contrarian indicator. So it makes me actually

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Speaker 1: feel better that that target we have. Your end is

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Speaker 1: uh is good. Thank you very much. You're good to

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Speaker 1: have on always. Scott Ran, Senior Global equity strategist, Wells

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Speaker 1: Fargo Investment Institute, giving us his thoughts and details about

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Speaker 1: the stock market. It ain't over yet. We're coming up

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Speaker 1: to the clothes you're listening to Taking stock on bloomberg Rade,