WEBVTT - Stocks Drop on Trade Concerns; Fed Cuts Rates 0:00:02.640 --> 0:00:05.360 Welcome to the Bloomberg Penel Podcast. I'm Paul swing you 0:00:05.360 --> 0:00:07.680 along with my co host Lisa brahma Witz. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:21.520 at Bloomberg dot com. Well, yesterday we had what is 0:00:21.560 --> 0:00:25.400 now being coined a hawkish interest rate cut by the 0:00:25.440 --> 0:00:28.680 Fed and table. We got some mixed economic news consumer 0:00:28.720 --> 0:00:31.840 perhaps a little bit weaker than expect that. The question 0:00:31.840 --> 0:00:34.360 is what is this mean for fixed income markets going forward? 0:00:34.720 --> 0:00:36.959 To adjust that? We welcome Tony Rodriguez, head of fixed 0:00:37.000 --> 0:00:39.040 income strategy at muvine. He joins us here in our 0:00:39.040 --> 0:00:41.560 Bloomberg Interactive Broker studio. So, Tony, thanks so much for 0:00:41.640 --> 0:00:45.680 joining us. Let's start with what we got yesterday from 0:00:45.720 --> 0:00:48.120 the Fed and from Chairman Pal. What was your key takeaway? 0:00:48.640 --> 0:00:50.600 Let mean, my key takeaway was that I thought that 0:00:50.680 --> 0:00:53.960 the key was that they did not communicate a very 0:00:54.040 --> 0:00:56.960 hawkish ease, and I think they kind of were able 0:00:57.000 --> 0:00:58.639 to thread that need a little bit. I know, it's 0:00:58.640 --> 0:01:01.080 being referred to as a as a hawk is she's 0:01:01.080 --> 0:01:04.000 But they did talk in the press conference very much 0:01:04.040 --> 0:01:07.280 about how the three things that they consider to be 0:01:07.280 --> 0:01:11.520 the rationale for lowering rates were, you know, global growth, 0:01:11.800 --> 0:01:14.679 trade uncertainty, and that inflation is gonna be is not 0:01:14.760 --> 0:01:17.280 at their target, and they re emphasize that they are 0:01:17.319 --> 0:01:20.960 not going to raise rates until inflation really exceeds their target. 0:01:21.160 --> 0:01:24.959 They talk about a symmetric target. So I think that 0:01:25.040 --> 0:01:26.800 kind of gave the market the idea to look, they're 0:01:26.840 --> 0:01:28.399 not going to raise rates. The bar for that is 0:01:28.480 --> 0:01:33.160 enormously high, and the risks remain really unaddressed in terms 0:01:33.160 --> 0:01:36.320 of weaker global growth and in terms of trade uncertainty. 0:01:36.600 --> 0:01:39.039 So I think it's more than likely that you we 0:01:39.280 --> 0:01:41.920 believe you'll see them actually come back to the market 0:01:42.280 --> 0:01:44.680 to cut rates again in the first half of next year. 0:01:44.760 --> 0:01:48.400 Because of those two concerns on trade and on global growth. 0:01:48.520 --> 0:01:53.160 Everyone seems to agree that the risk to not cut 0:01:53.280 --> 0:01:57.440 enough is much bigger than cutting two quickly. That seems 0:01:57.480 --> 0:01:59.640 to be what everyone is saying is that basically, if 0:01:59.640 --> 0:02:03.280 you air on the side of easing, uh, that's just fine. 0:02:03.640 --> 0:02:06.480 My concern is that no one's talking about moral hazard 0:02:06.480 --> 0:02:09.680 anymore in any way, shape or form. Are we seeing 0:02:10.080 --> 0:02:13.680 anything in credit markets that indicates that perhaps companies are 0:02:13.680 --> 0:02:16.239 taking advantage of this easy money era that has gone 0:02:16.280 --> 0:02:19.080 on for a very long time and we'll continue for 0:02:19.120 --> 0:02:21.760 a very long time. Yeah, some of the credit markets, 0:02:21.760 --> 0:02:25.079 I would say, what you're seeing is certainly elevated levels 0:02:25.080 --> 0:02:27.080 of debt, debt to cash flow, any kind of metric 0:02:27.120 --> 0:02:29.359 you look at has risen, but they are not at 0:02:29.960 --> 0:02:34.720 troubling levels. Okay, So companies have, I think, just fundamentally 0:02:34.760 --> 0:02:38.240 begun to target a different capital structure. Whereas years ago 0:02:38.280 --> 0:02:40.720 people would have said double A or single as where 0:02:40.760 --> 0:02:42.840 I want my balance sheet to be, and you in 0:02:42.880 --> 0:02:45.919 fact even had an occasional triple A corporate credit out there. 0:02:46.240 --> 0:02:49.519 I think pretty much financial kind of theory today is 0:02:49.720 --> 0:02:51.919 triple busy optimal place for me to be. We don't 0:02:51.919 --> 0:02:54.360 care about being double A at all. Single A may 0:02:54.440 --> 0:02:58.160 in fact even be unnecessary because the cost of capital 0:02:58.560 --> 0:03:01.560 is so low and an absolute level, no company complains 0:03:01.600 --> 0:03:04.840 to us about capital being too expensive or unavailable, which 0:03:04.960 --> 0:03:06.679 this is the reason why you're seeing the triple B 0:03:06.880 --> 0:03:10.480 rated segment of the investment market grow so much faster 0:03:10.560 --> 0:03:12.760 with record pace of issue and so far this year 0:03:12.800 --> 0:03:15.560 and nearly three trillion dollars of US and outstanding right 0:03:15.639 --> 0:03:18.720 and interestingly, what you are seeing is on some companies 0:03:18.840 --> 0:03:21.480 who have been kind of the poster children for being 0:03:21.480 --> 0:03:24.239 at risk of dropping into high yield the fallen angel risks, 0:03:24.280 --> 0:03:26.520 so g would be the one that really pops up 0:03:26.520 --> 0:03:30.720 on people's screens. Those companies have shown a real commitment 0:03:30.760 --> 0:03:34.480 to at least try and in many cases successfully maintain 0:03:34.560 --> 0:03:37.720 that triple B rating. So whether it's through asset sales UH, 0:03:37.840 --> 0:03:41.320 cutting down their share buy back, reducing their dividend. So 0:03:41.600 --> 0:03:45.840 there is still a focus amongst CFOs and corporate boards 0:03:46.120 --> 0:03:48.280 to try to maintain an investment grade rating and the 0:03:48.320 --> 0:03:51.960 triple B space. So we you know, we think that yes, 0:03:52.080 --> 0:03:55.440 it changes the character of the investment grade credit market 0:03:55.520 --> 0:03:59.160 quite a bit. Ultimately, when we get to a downturn, 0:03:59.240 --> 0:04:02.320 which you know, the spite the longest growth pier we've 0:04:02.320 --> 0:04:05.240 ever had here, we will get to one UH, then 0:04:05.320 --> 0:04:09.680 you may see a greater dislocation as a result of this, 0:04:09.840 --> 0:04:12.440 you know, large amount of triple B because we will 0:04:12.480 --> 0:04:15.040 have more fallen angels. There may not be the appetite 0:04:15.080 --> 0:04:17.760 then to absorb it. So the only shock absorber will 0:04:17.800 --> 0:04:20.000 be price. So you'll see spreads why now more than 0:04:20.000 --> 0:04:23.520 maybe we've seen in other previous recessionary periods. So tony, 0:04:23.560 --> 0:04:25.280 given kind of what we know about the FED, we've 0:04:25.279 --> 0:04:27.839 got some more color yesterday. Given where we are in 0:04:27.880 --> 0:04:30.839 this economic cycle, as you mentioned, the very long economic 0:04:30.880 --> 0:04:33.360 growth cycle. What do you at NUVINE doing with your 0:04:33.720 --> 0:04:36.640 portfolios right how what kind of adjustments are you making sure? 0:04:36.720 --> 0:04:38.520 So the thing that we've been doing over the course 0:04:38.520 --> 0:04:40.680 that i'd say the last call it even six to 0:04:40.839 --> 0:04:45.039 nine months, has been uh positioning for the end of 0:04:45.040 --> 0:04:47.000 the cycle at some point. We don't think it's imminent. 0:04:47.000 --> 0:04:49.440 We're not calling for a recession in twenty but we 0:04:49.480 --> 0:04:52.159 do think we're late cycle. And what that means in 0:04:52.240 --> 0:04:56.479 terms of defensive positioning is three things. Really upgrading in 0:04:56.600 --> 0:05:00.159 quality within whatever segment of fixing commure an emerging marketshigh 0:05:00.200 --> 0:05:04.120 yield and message your credit upgrading quality, Upgrading in liquidity 0:05:04.200 --> 0:05:07.120 so that you aren't able to maybe move your portfolio 0:05:07.160 --> 0:05:09.960 to an area where there is a dislocation when that happens, 0:05:10.360 --> 0:05:14.400 and increasing diversification. We don't think there is a you know, 0:05:14.520 --> 0:05:19.039 single pound the table, cheap asset out there in the 0:05:19.080 --> 0:05:22.000 fixed income space, but we also not seeing recession. You 0:05:22.040 --> 0:05:25.280 want to be exposed broadly to the greater income that's available, 0:05:25.360 --> 0:05:28.160 versus sitting in a very defensive you know, in the 0:05:28.200 --> 0:05:31.440 bunker positioning of you know, cash and treasuries. Well, it's 0:05:31.480 --> 0:05:33.280 quite a it's quite a needle to thread. And I 0:05:33.320 --> 0:05:36.719 do wonder how concerned you are about the fact that 0:05:36.760 --> 0:05:39.839 your peers are doing something similar and they're they're moving 0:05:39.960 --> 0:05:42.240 up in credit quality. We hear that a lot. And 0:05:42.320 --> 0:05:44.560 what you're seeing in the market is that the up 0:05:44.640 --> 0:05:49.240 and credit quality uh debt is actually uh giving you 0:05:49.360 --> 0:05:52.360 very little relative to history and relative to other aspects. 0:05:52.360 --> 0:05:54.520 So are you worried that it's sort of overpriced at 0:05:54.520 --> 0:05:57.880 this point given that that appetite, Right, Yeah, you always 0:05:57.920 --> 0:06:00.120 do worry about a consensus trade, right that every is 0:06:00.120 --> 0:06:01.720 on the same side of the boat. The one thing 0:06:01.720 --> 0:06:04.000 I would say is that while we're upgrading quality, we 0:06:04.040 --> 0:06:07.119 have not abandoned completely, for example, the high yield market, 0:06:07.160 --> 0:06:09.040 which would be in terms of the higher risk segments 0:06:09.040 --> 0:06:12.120 of market, high yield, emerging markets, triple be debt. We're 0:06:12.120 --> 0:06:14.800 not abandoning those areas at all. We still think in fact, 0:06:14.839 --> 0:06:17.120 there's value to be found. It's just that we're not 0:06:17.240 --> 0:06:20.120 digging into the triple C segment very much, although there's 0:06:20.160 --> 0:06:23.680 occasional opportunities there. I think the biggest thing that you 0:06:23.720 --> 0:06:26.080 need to make sure you have as an investor is 0:06:26.120 --> 0:06:29.320 an ability in this type of market to do the 0:06:29.360 --> 0:06:33.279 fundamental credit work to distinguish between the triple bees that 0:06:33.279 --> 0:06:35.480 are an opportunity and those that will be a very 0:06:35.520 --> 0:06:39.159 likely fallen angel or the single bees that could be declining. 0:06:39.200 --> 0:06:43.080 So the premium on strong credit research I think is 0:06:43.200 --> 0:06:46.520 higher now as you enter this late cycle with some 0:06:46.600 --> 0:06:49.600 of these imbalances along the credit quality scale then it 0:06:49.600 --> 0:06:51.599 would have been in previous cycles. All right, let me 0:06:51.600 --> 0:06:53.359 ask you this a weird question just right off of 0:06:53.360 --> 0:06:57.080 what you just said, credit analysis, credit research. The credit 0:06:57.080 --> 0:06:59.920 research departments don't exist on the cell side anymore. I mean, 0:07:00.000 --> 0:07:03.200 and I was there that we people doing credit research 0:07:03.279 --> 0:07:06.920 that doesn't exist anymore. What do you guys do about that? Well, 0:07:07.400 --> 0:07:09.280 primarily you do have to rely on your own internal 0:07:09.279 --> 0:07:12.280 credit research, And I would argue that you know, over time, 0:07:12.360 --> 0:07:15.360 really the credit research from the cell side, you know, 0:07:15.440 --> 0:07:19.040 while some was very high quality and truly just um, 0:07:19.080 --> 0:07:21.880 you know, effective, at determining relative value. A lot of 0:07:21.880 --> 0:07:25.080 it was maybe just supporting say the syndicate desk in 0:07:25.120 --> 0:07:28.920 the new issue market and the trading positions. Um so, 0:07:28.920 --> 0:07:32.320 so I think that the credit departments internally at the 0:07:32.320 --> 0:07:34.760 asset management firms have grown over time. We have over 0:07:34.880 --> 0:07:37.680 fifty or one of the largest in the business in 0:07:37.680 --> 0:07:41.040 that space, because the value you can get from identifying, 0:07:41.440 --> 0:07:45.280 you know, real opportunities is enormous. Right now when you 0:07:45.280 --> 0:07:49.560 think of how compressed yields our globally compressed spreads, the 0:07:49.600 --> 0:07:52.080 opportunity really isn't doing that bottom up work, whether it's 0:07:52.120 --> 0:07:55.160 on a sovereign in emerging space or on a credit tony. 0:07:55.280 --> 0:07:59.000 How much do political developments in the United States factor in, 0:07:59.200 --> 0:08:02.680 if at all, to your investing thesis. They definitely do, 0:08:02.800 --> 0:08:06.560 because just broader uncertainty is certainly something that raises the 0:08:06.640 --> 0:08:09.000 level of volatility and the potential risk in the market. 0:08:09.120 --> 0:08:11.920 And the political uncertainty not only in the US, but 0:08:11.960 --> 0:08:14.240 we can think globally with what's been taking place, whether 0:08:14.240 --> 0:08:16.720 it's around Brexit or other areas of the world, the 0:08:16.720 --> 0:08:19.840 political uncertainty size so we are paying more attention to 0:08:19.880 --> 0:08:23.080 that than we'd probably like to. And UH and therefore 0:08:23.120 --> 0:08:26.560 tapping into different sources for finding as much good political 0:08:26.600 --> 0:08:30.840 insight as you can, because it is dramatically impacting potential policy, 0:08:30.880 --> 0:08:34.880 whether it's on specific industries or broad issues like trade policy, 0:08:34.960 --> 0:08:38.480 tax policy, regulatory policy, it's pretty critical. So what do 0:08:38.480 --> 0:08:41.160 you think would happen if President Trump gets impeached? What's 0:08:41.160 --> 0:08:43.960 the market response? You know, I think it's considered to 0:08:44.000 --> 0:08:47.080 be uh in terms of in the House, you know, 0:08:47.160 --> 0:08:49.760 such an obvious that that's going to happen that right now, 0:08:49.800 --> 0:08:52.000 the market is certainly convinced that nothing would happen in 0:08:52.040 --> 0:08:54.240 the Senate. So I think it really creates maybe just 0:08:54.280 --> 0:08:55.719 some short term noise, but I don't think it will 0:08:55.800 --> 0:08:58.280 change anything really fundamentally. How do you guys factor in 0:08:58.320 --> 0:09:01.280 the all the geopolitical issue is that the market has 0:09:01.320 --> 0:09:02.560 to deal with every day and least and I have 0:09:02.600 --> 0:09:06.880 to report on every day, whether it's China trade every 0:09:07.000 --> 0:09:11.480 day every day. Let me rephrase that, Brexit comes to 0:09:11.559 --> 0:09:14.160 mind and so on and so forth. M How does 0:09:14.160 --> 0:09:16.720 that factor into kind of what you guys do day 0:09:16.760 --> 0:09:18.720 to day? Sure, well, you have to factor in higher 0:09:18.800 --> 0:09:21.640 risk premiums for that, for example, because it's not only 0:09:21.679 --> 0:09:24.800 the political you know, call it noise or issues, they 0:09:24.840 --> 0:09:27.360 actually create fundamental issues. So Hong Kong, as you just 0:09:27.400 --> 0:09:30.720 saw right recession, you know, negative three plus per saying 0:09:30.760 --> 0:09:34.199 growth quarter over quarter, So that political noise does in 0:09:34.320 --> 0:09:38.960 fact drive true fundamental economic and earnings. UM, you know results. 0:09:39.160 --> 0:09:41.400 Tony Rodriguez, thank you so much for being here with 0:09:41.480 --> 0:09:43.480 us all the way from Minneapolis. How to fix the 0:09:43.480 --> 0:10:02.120 come strategy at nu Ven have a wonderful Halloween. We're 0:10:02.240 --> 0:10:04.040 very pleased to say we have with us. Christina Hooper 0:10:04.080 --> 0:10:07.680 Invesco Chief Global Market Strategists Susina, how often do you 0:10:07.720 --> 0:10:10.920 feel like chief political strategist at this point? Well, it 0:10:10.960 --> 0:10:13.920 often happens, but it's usually in the context of speaking 0:10:13.920 --> 0:10:17.000 with clients who are worried about it and really need help, 0:10:17.480 --> 0:10:20.840 um making sense of the noise. What's really important in 0:10:20.880 --> 0:10:22.560 what is? So? What do you tell them? Well, what 0:10:22.640 --> 0:10:24.680 I tell them is we have to look at those 0:10:24.679 --> 0:10:28.840 events that actually have an impact on economic policy. So, 0:10:28.880 --> 0:10:31.640 for example, what I think is the big news today 0:10:31.960 --> 0:10:34.360 is of course China coming out and saying that it's 0:10:34.440 --> 0:10:38.800 unlikely UH to see anything beyond phase one of the 0:10:38.840 --> 0:10:41.840 trade deal come to fruition. That to me is what's 0:10:42.040 --> 0:10:46.840 the real news today and that which truly impacts economic policy. 0:10:46.960 --> 0:10:50.120 So what do you think, just staying with the China news, um, 0:10:50.160 --> 0:10:51.920 what do you think the market is kind of discounting? 0:10:51.960 --> 0:10:54.280 Is it just a Phase one type of light deal 0:10:54.880 --> 0:10:58.160 or does anybody really believe that will get anything me meaningful? 0:10:58.800 --> 0:11:02.360 I think the market has been incredibly optimistic. Anytime there's 0:11:02.360 --> 0:11:05.960 been positive news flow around the US China trade situation, 0:11:06.360 --> 0:11:10.599 it's always assumed the best, and so I think actually 0:11:10.640 --> 0:11:13.160 more than just Phase one has been priced in, and 0:11:13.200 --> 0:11:15.760 that's why we're seeing a stock sell stock market sell 0:11:15.800 --> 0:11:18.000 off today. How surprising is this though? I mean, we 0:11:18.080 --> 0:11:20.199 knew that the Phase one was sort of this peripheral 0:11:20.200 --> 0:11:23.600 deal or not I should say, superficial deal that would 0:11:23.600 --> 0:11:26.360 get the parties to Phase two in a sort of 0:11:26.360 --> 0:11:30.040 save the phase kind of way. All around, what's new? 0:11:31.240 --> 0:11:34.280 There isn't? This is groundhog Day over and over again. 0:11:34.760 --> 0:11:38.480 Thank you, You're like you're living the same story. But 0:11:38.679 --> 0:11:45.120 markets continue to get overly excited and positive about any news. Um, 0:11:45.160 --> 0:11:49.320 It's it's wishful thinking, and unfortunately the market continues to 0:11:49.360 --> 0:11:51.320 get let down. All right, let's focus a little bit 0:11:51.320 --> 0:11:55.320 more on fundamentals, um, switch gears. What was your takeaway 0:11:55.360 --> 0:11:58.480 from the FOMC meeting yesterday and Chairman Pal's comments, is 0:11:58.480 --> 0:12:01.000 that did it change your view of kind of how 0:12:01.040 --> 0:12:03.800 you guys want to be positioned? It didn't, but it 0:12:03.920 --> 0:12:06.760 certainly gave a lot more clarity than we often get 0:12:06.840 --> 0:12:10.520 from chair Powell. I think there was a little trepidation 0:12:10.720 --> 0:12:13.360 that they would remove the language that that they did 0:12:13.400 --> 0:12:16.160 remove um, but he was able to come back in 0:12:16.160 --> 0:12:20.839 that press conference and make investors fear more more confident 0:12:20.920 --> 0:12:24.160 about the market because it appears as though the FETE 0:12:24.240 --> 0:12:25.920 is going to be sitting on its hands for a 0:12:25.920 --> 0:12:30.160 while before it ever considers raising rights. I coined a 0:12:30.160 --> 0:12:33.520 new phrase this morning, Alice in Wonderland market hawkish cut 0:12:33.679 --> 0:12:37.600 negative rates. These contradiction in terms, I'm wondering how you're 0:12:37.640 --> 0:12:41.200 sort of deciding how to position next and light of 0:12:41.240 --> 0:12:43.760 the earnings that we're getting, the things that are not uh, 0:12:43.800 --> 0:12:49.000 you know, sort of wishy washy, complex, complicated contradictory phrases. 0:12:49.720 --> 0:12:53.160 Are you seeing this latest three Q earning season as 0:12:53.200 --> 0:12:56.720 a positive sign for the U S economy? Well, it 0:12:56.880 --> 0:13:00.920 is potti positive, but modestly positive. And I say that 0:13:01.000 --> 0:13:05.679 because companies have become very good at managing expectations and 0:13:06.000 --> 0:13:09.479 meeting or exceeding them. So this was certainly a positive 0:13:09.520 --> 0:13:12.760 earning season, but we have to recognize that probably the 0:13:13.200 --> 0:13:16.960 more positive theme as we head into is that the 0:13:17.000 --> 0:13:20.800 FED is relatively accommodative. We just don't have enough visibility 0:13:20.840 --> 0:13:22.640 on what earnings is going to be like for all 0:13:22.679 --> 0:13:26.680 of but we do have more visibility I think after today, 0:13:26.760 --> 0:13:29.440 after yesterday's press conference, in terms of what the FED 0:13:29.480 --> 0:13:32.959 may do. So unless we see a significant spike in inflation, 0:13:33.320 --> 0:13:36.880 we're likely to see continued low rates. So in this 0:13:37.000 --> 0:13:43.480 environment again continued local rates UH, late cycle UH slowing growth, 0:13:43.480 --> 0:13:46.800 still growth in US economy, but slowing. Are there sectors 0:13:46.840 --> 0:13:50.480 that you feel more comfortable with right now versus some others? Well, 0:13:50.480 --> 0:13:53.360 it's all a question of timing. Because UM for the 0:13:53.440 --> 0:13:57.480 last few weeks and possibly a bit longer, um value 0:13:57.520 --> 0:13:59.959 has looked attractive. The cyclical names have looked at track 0:14:00.000 --> 0:14:02.480 active because we saw steepening of the yield curve. UM 0:14:02.520 --> 0:14:05.360 that seems to be changing today. I do think the 0:14:05.480 --> 0:14:08.520 longer term, if we look out for the next six 0:14:08.600 --> 0:14:11.600 to twelve months, is likely to be again growth out 0:14:11.640 --> 0:14:15.200 performing value, and so that would drive me to tech UM, 0:14:15.240 --> 0:14:18.160 not the cyclical tech names, but the more secular growth 0:14:18.320 --> 0:14:22.720 names as an area that continue to perform well. So UH, 0:14:22.960 --> 0:14:27.280 software for example, UM, cloud computing. Uh, those areas where 0:14:27.280 --> 0:14:31.600 we're seeing very nice levels of growth. It's some good 0:14:31.680 --> 0:14:33.720 numbers out just on the tech front last night Apple 0:14:33.760 --> 0:14:37.200 on Facebook. So does that give you I'm not sure 0:14:37.360 --> 0:14:39.880 what your exposure is there, but at least it appears 0:14:39.880 --> 0:14:43.800 that the consumer facing technology continues to be quite strong. 0:14:44.440 --> 0:14:48.320 It does. It does. Technology continues to be the go 0:14:48.440 --> 0:14:52.280 to place for corporate spending as well. UM. In environment 0:14:52.320 --> 0:14:54.400 where you have a tight labor market, we're likely to 0:14:54.440 --> 0:14:59.360 see companies spend more on innovation, spend more on technology 0:14:59.480 --> 0:15:02.920 that in a productivity. So while we're seeing a decline 0:15:02.920 --> 0:15:06.360 in business investment overall, I think we'll see more dollars 0:15:06.400 --> 0:15:10.040 allocated to technology going forward. And we are seeing today 0:15:10.320 --> 0:15:14.640 Apple shares as well as Facebook shares rising after beating expectations. 0:15:14.680 --> 0:15:17.720 Apple shares up two percent at Facebook up three and 0:15:17.760 --> 0:15:20.520 a quarter percent. We're speaking with Christina Hooper, Investco, Chief 0:15:20.640 --> 0:15:23.720 Global market Strategist. I don't know if you knew this, 0:15:23.760 --> 0:15:28.440 but it is philosophical Thursday and earlier today on this 0:15:28.440 --> 0:15:31.120 program right here. You heard it first. Um, you know, 0:15:31.160 --> 0:15:33.440 we did get Twitter announcing that they were going to 0:15:33.680 --> 0:15:37.600 strip out of political ads this morning shares spell perhaps 0:15:37.600 --> 0:15:40.440 in response to that, perhaps into response and something else. Meanwhile, 0:15:40.480 --> 0:15:44.880 Facebook coming out adding subscribers not taking a similar measure 0:15:45.120 --> 0:15:48.600 shares popping. What does that tell you about investors and 0:15:48.640 --> 0:15:51.200 how much they care about some of the sort of 0:15:51.240 --> 0:15:54.200 social implications that is that are talked a lot about 0:15:54.200 --> 0:15:57.680 in Washington, d C. But aren't necessarily do anything. You 0:15:57.760 --> 0:15:59.480 hit the nail on the head. They've been talked about 0:15:59.520 --> 0:16:02.920 for a while, and so until we actually see the 0:16:03.080 --> 0:16:08.400 issues coming at us UM and very very close proximity, 0:16:08.440 --> 0:16:10.640 investors aren't going to worry about it. We've had that 0:16:10.760 --> 0:16:14.400 overhang of greater regulation hanging over tech for a long 0:16:14.440 --> 0:16:16.680 time now, totally. But it makes me wonder all these 0:16:16.720 --> 0:16:19.200 people saying that E s G filters are so important 0:16:19.240 --> 0:16:20.880 to them, and they're looking at all of these like 0:16:21.000 --> 0:16:24.640 so at the social consequences. Uh, they're not making much 0:16:24.760 --> 0:16:28.040 traction here because it doesn't seem to matter. Am I wrong? Uh? 0:16:28.480 --> 0:16:31.520 You're right, But we're looking at a snapshot in time, 0:16:31.520 --> 0:16:33.480 and I think E s G will be one of 0:16:33.520 --> 0:16:37.760 those factors that over time rewards those companies that it 0:16:37.840 --> 0:16:41.960 believes are UM more in keeping with with the values 0:16:42.040 --> 0:16:44.560 of E s G. But over the shorter term, I 0:16:44.600 --> 0:16:48.400 think what we're going we're likely to see is reaction 0:16:48.600 --> 0:16:53.200 to the democratic primaries that this could be UM. This 0:16:53.280 --> 0:16:57.120 could be where you actually start to see some nervousness 0:16:57.200 --> 0:17:01.080 filter into tech prices UM for those companies that are 0:17:01.160 --> 0:17:06.640 are perhaps on the front lines of potential regulation UM, 0:17:06.680 --> 0:17:10.280 depending upon which candidates do best in in certain primaries. 0:17:10.520 --> 0:17:13.840 Just real quickly, any sectors that you're just or any 0:17:13.880 --> 0:17:17.320 asset classes you're just staying away from right here, well, 0:17:17.359 --> 0:17:19.359 I think we need to be very well diversified. So 0:17:19.400 --> 0:17:21.840 there's no asset class that I can say we should 0:17:21.840 --> 0:17:24.399 have no exposure too. But I would say that this 0:17:24.480 --> 0:17:27.920 is an important time to be emphasizing dividends. So all 0:17:28.000 --> 0:17:31.960 else being equal, UM in a given sector, migrate to 0:17:32.040 --> 0:17:36.040 those with that are fundamentally solid but have a dividends. 0:17:36.600 --> 0:17:40.080 Christina Hubert, thank you, Thank you, always wonderful having you. 0:17:40.400 --> 0:17:43.720 Thank you. Christina our investcor TEF global market strategist. Joining 0:17:43.760 --> 0:17:47.240 us here in our investue, in our interactive broker studios. 0:18:03.400 --> 0:18:06.080 Let's bring in Mark stoke O. He's CEO and portfolio 0:18:06.119 --> 0:18:08.560 manager of Adams Funds. Mark, thanks so much for joining 0:18:08.600 --> 0:18:10.520 us here in a Bloomberg in our Actor broker studio. 0:18:10.960 --> 0:18:14.520 You know this, today's impeachment is just another piece of 0:18:14.600 --> 0:18:18.359 quote unquote noise, uh, that investors have to deal with. 0:18:18.400 --> 0:18:21.680 It's trade, it's Brexit. How do you suggest investors should 0:18:21.720 --> 0:18:24.359 kind of factor in our factor out the noise in 0:18:24.359 --> 0:18:27.440 their investment process. Well, it's it's a really good question 0:18:27.480 --> 0:18:29.520 and it's something that we are pretty passionate about because 0:18:29.600 --> 0:18:31.919 one of the concerns that we have is most of 0:18:31.960 --> 0:18:36.160 the time when um, there are uneasy things happening, investors 0:18:36.200 --> 0:18:39.879 get nervous, they get scared, and their first reaction, because 0:18:40.000 --> 0:18:42.080 it's easy, is to trade, and they'll trade out of 0:18:42.119 --> 0:18:45.280 their positions. And you know, there's a there's a statistic 0:18:45.320 --> 0:18:49.119 that is is actually troublesome and most individual investors that 0:18:49.240 --> 0:18:52.000 invest in the SPY, just a regular smp FI funderd 0:18:52.080 --> 0:18:54.320 t F, do not get the sp F t F 0:18:54.359 --> 0:18:58.200 return because they trade. And you know, I think it's 0:18:58.359 --> 0:19:01.719 it's trying to be more one intellectually honest about how 0:19:01.760 --> 0:19:03.840 much risk you should be taking given where you are 0:19:03.840 --> 0:19:06.320 in your life and what you're just saving for. Number two, 0:19:06.520 --> 0:19:09.240 decide what asset classes you want to be invested in 0:19:09.760 --> 0:19:12.399 and leave it alone. There's a lot of noise, and 0:19:12.400 --> 0:19:14.320 a lot of this noise tends not to really matter 0:19:14.400 --> 0:19:15.840 at the end of the day. It will matter today, 0:19:15.920 --> 0:19:18.879 might tomorrow, might for a week. But the idea that 0:19:18.960 --> 0:19:22.920 it's it scares you into trading is exactly the wrong thing. 0:19:23.320 --> 0:19:27.480 You know, over time, bowl markets last twice as long 0:19:27.520 --> 0:19:30.399 as bear markets. The markets go up over time. And 0:19:30.440 --> 0:19:32.719 if you're again, if you're intellectually honest about how much 0:19:32.800 --> 0:19:35.320 risk you want to take and you invest leave it alone. 0:19:35.600 --> 0:19:38.400 Doesn't mean you can't adjust if something changes in your life, 0:19:38.520 --> 0:19:40.960 but you really do need to stay invested in order 0:19:41.000 --> 0:19:44.680 to really get the power of compounding uh that long 0:19:44.760 --> 0:19:47.520 term investing offers. So I have active managers. Why not 0:19:47.640 --> 0:19:51.399 just as you know, a person creating a retirement fund 0:19:51.560 --> 0:19:53.920 just put their money in spy and leave it there 0:19:54.000 --> 0:19:56.040 until they're older and they rejigger it and make it safer. 0:19:56.600 --> 0:20:01.080 They could. The problem is you you take away any 0:20:01.119 --> 0:20:03.879 opportunity to outperform that. And I think that one of 0:20:03.920 --> 0:20:05.800 the things is an active manager. If you're not choosing 0:20:05.800 --> 0:20:09.720 active manager. But but yes, exactly. But then the question is, 0:20:09.920 --> 0:20:12.119 as an active manager, how do you know when to 0:20:12.280 --> 0:20:15.800 trade given the noise? What what what's the sort of 0:20:15.840 --> 0:20:21.400 threshold of change? Um, you need to try to tune 0:20:21.400 --> 0:20:24.800 out the noise and concentrate as best you can on data. 0:20:25.240 --> 0:20:27.879 If you concentrate on data, that will lead you to 0:20:27.960 --> 0:20:29.600 place that that will lead you to decisions that we 0:20:29.640 --> 0:20:32.639 think are better decisions as opposed to I can't believe 0:20:32.760 --> 0:20:35.600 that X y Z happened. Maybe we should get more defensive, 0:20:35.920 --> 0:20:39.840 Well maybe not. Maybe that's not the right answer, um, 0:20:40.040 --> 0:20:42.080 And you know, defensive stocks might be and maybe in 0:20:42.160 --> 0:20:44.880 vogue might not be. But I think it's it's it's 0:20:45.000 --> 0:20:48.040 the concept of trying to tune it out and have 0:20:48.160 --> 0:20:51.000 a longer term perspective. And again, as I said earlier, 0:20:51.280 --> 0:20:53.200 part of the problem here is it's easy to trade. 0:20:53.440 --> 0:20:55.879 All of these companies have made it incredibly easy to trade, 0:20:56.280 --> 0:20:59.919 and um, which is fine, and it's cheaper, which is great. Um, 0:21:00.080 --> 0:21:02.919 but most people should be in it for a longer 0:21:03.040 --> 0:21:05.480 term and and just try their best to to tune 0:21:05.480 --> 0:21:08.439 out the noise. And again, as I said, if if 0:21:08.480 --> 0:21:12.359 you're trading, you are not getting the benefit of compounding, 0:21:12.359 --> 0:21:16.920 which over the time is an incredibly powerful concept. What 0:21:17.040 --> 0:21:19.880 any ATMOS funds? How are you positioned right now? We're 0:21:19.920 --> 0:21:23.080 ten plus years into this economic cycle. Um. You know 0:21:23.119 --> 0:21:24.879 that's getting people to think about, g do I need 0:21:24.920 --> 0:21:28.320 to be out reallocating my assets here for what the 0:21:28.359 --> 0:21:31.000 next five years is likely to be probably lower growth 0:21:31.000 --> 0:21:34.240 in the last five How are you positioned? Uh? We 0:21:34.240 --> 0:21:37.920 we are positioned looking for stocks that we believe can 0:21:37.920 --> 0:21:39.800 out perform the SMP have haven't heard. So in some 0:21:39.880 --> 0:21:42.600 respects we're a little different because our bogie is to 0:21:42.640 --> 0:21:44.240 try to out perform the SMP. I found it. We've 0:21:44.280 --> 0:21:46.840