1 00:00:03,240 --> 00:00:06,600 Speaker 1: Global business news twenty four hours a day at Bloomberg 2 00:00:06,640 --> 00:00:09,720 Speaker 1: dot Com, the radio, plus Globo laps and on your radio. 3 00:00:10,039 --> 00:00:14,160 Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Headquarters 4 00:00:14,160 --> 00:00:16,840 Speaker 1: on Katherine Connery. Stocks are little change, heading for their 5 00:00:16,880 --> 00:00:19,720 Speaker 1: best week in nine months and gaining for a fourth 6 00:00:19,720 --> 00:00:22,759 Speaker 1: straight session. There's optimism about the U S economy and 7 00:00:22,800 --> 00:00:25,440 Speaker 1: about signals from central banks that they'll continue to stave 8 00:00:25,480 --> 00:00:28,720 Speaker 1: off fallout from Britain's decision to leave the European Union. 9 00:00:29,080 --> 00:00:31,240 Speaker 1: We check their markets every fifteen minutes throughout the trading 10 00:00:31,280 --> 00:00:33,960 Speaker 1: day on Bloomberg Radio. Down Industrial Average is up twenty 11 00:00:34,000 --> 00:00:36,400 Speaker 1: seven points an eighth of a percent, his rating at 12 00:00:36,440 --> 00:00:39,839 Speaker 1: seventeen thousand, nine hundred fifty six. SMP five founded up 13 00:00:39,880 --> 00:00:42,160 Speaker 1: five points a quarter percent at twenty one o three. 14 00:00:42,479 --> 00:00:44,960 Speaker 1: Then AzaC is up twenty one points at nearly half 15 00:00:44,960 --> 00:00:48,440 Speaker 1: a percent, trading at forty sixty four. West Texas Intermedia 16 00:00:48,479 --> 00:00:50,440 Speaker 1: Crude oil at the eighty three cents of barrel, one 17 00:00:50,479 --> 00:00:53,600 Speaker 1: point seven percent at forty nine sixteen. Spout gold is 18 00:00:53,640 --> 00:00:57,279 Speaker 1: up twenty four dollars twenty cents announced at thirteen eighty ten. 19 00:00:57,320 --> 00:00:59,440 Speaker 1: Year Treasury up seven thirty seconds with the yield of 20 00:00:59,480 --> 00:01:02,200 Speaker 1: one point four four which has sent and updating one 21 00:01:02,240 --> 00:01:05,240 Speaker 1: of our top stories. Local authorities say as many as 22 00:01:05,240 --> 00:01:08,240 Speaker 1: a group of nine gunmen attacked a restaurant popular with 23 00:01:08,319 --> 00:01:12,760 Speaker 1: foreigners in a diplomatomatic zone of the Bangladeshi capital. U 24 00:01:12,840 --> 00:01:15,679 Speaker 1: s State Department spokesman says that all American citizens that 25 00:01:15,720 --> 00:01:18,240 Speaker 1: are under the authority of the Diplomatic Chief of Mission 26 00:01:18,280 --> 00:01:21,000 Speaker 1: Nan Dhaka have been accounted for and we're not involved 27 00:01:21,000 --> 00:01:23,800 Speaker 1: in the incident. The department is still checking on private 28 00:01:23,800 --> 00:01:26,640 Speaker 1: American citizens who may have been in the area. And 29 00:01:26,720 --> 00:01:31,120 Speaker 1: that's a bloomberg business flash. Thank you for investing in Europe, 30 00:01:31,120 --> 00:01:33,480 Speaker 1: and first of all, thanks to Catherine Cartery. Certainly a 31 00:01:33,480 --> 00:01:36,280 Speaker 1: lot of people are asking that question after the big 32 00:01:36,360 --> 00:01:39,080 Speaker 1: Brexit vote. Well, if you are, you're going to want 33 00:01:39,080 --> 00:01:41,959 Speaker 1: to hear this. Catherine Cartery is back with today's et 34 00:01:42,080 --> 00:01:45,440 Speaker 1: F report, one of last year's most popular e t 35 00:01:45,600 --> 00:01:48,280 Speaker 1: F trade has become a disappointment in the first half 36 00:01:48,320 --> 00:01:52,160 Speaker 1: of sixteen. That's the word from Todd Rosenbooth, director of 37 00:01:52,240 --> 00:01:56,160 Speaker 1: et F Research at SMP Global Market Intelligence. Europe has 38 00:01:56,160 --> 00:01:59,240 Speaker 1: been a very poor place to invest in the first 39 00:01:59,240 --> 00:02:02,920 Speaker 1: half of them and sixteen, and it was even before 40 00:02:03,040 --> 00:02:06,680 Speaker 1: the Bridget vote was coming to pass. Rosen Blues takes 41 00:02:06,680 --> 00:02:09,080 Speaker 1: a look at just how disappointing that trade has been 42 00:02:09,080 --> 00:02:13,000 Speaker 1: this year. Most European equity ETFs for down uh, you know, 43 00:02:13,320 --> 00:02:16,680 Speaker 1: mid mid single digits Stephen double digits in the first 44 00:02:16,680 --> 00:02:20,239 Speaker 1: half of the year because of weakness in the local economy, 45 00:02:20,360 --> 00:02:24,359 Speaker 1: because of the strengthening of the euro. Rosenblues says, there 46 00:02:24,360 --> 00:02:27,519 Speaker 1: are also some industry groups that have underperformed the broader market. 47 00:02:27,880 --> 00:02:31,320 Speaker 1: His example, financial shares as interest rates have remained low. 48 00:02:31,720 --> 00:02:35,160 Speaker 1: That financials the like sector spider fund or XLF has 49 00:02:35,160 --> 00:02:37,600 Speaker 1: fallen four point six percent since the start of the year, 50 00:02:37,840 --> 00:02:40,919 Speaker 1: as the SMP five hundred has gained two point seven percent. 51 00:02:41,520 --> 00:02:46,440 Speaker 1: That's your Bloomberg ETF report. I'm Catherine Colderie. You're listening 52 00:02:46,440 --> 00:02:49,440 Speaker 1: to Taking Stock with Kathleen Mays and Pim Fox on 53 00:02:49,520 --> 00:02:54,960 Speaker 1: Bloomberg Ring. A week ago, stocks were plunging in US 54 00:02:55,040 --> 00:02:57,680 Speaker 1: and around the world after UK voted to leave the 55 00:02:57,720 --> 00:03:01,720 Speaker 1: European Union. A week later, the stock market capping off 56 00:03:01,840 --> 00:03:03,960 Speaker 1: four days of gains. No not quite as big as 57 00:03:04,000 --> 00:03:05,880 Speaker 1: earlier in the week. It seems on a much sounder 58 00:03:05,880 --> 00:03:10,239 Speaker 1: footing sp getting back around the level. Where do we 59 00:03:10,280 --> 00:03:12,920 Speaker 1: go from here? Is this just a temporary bounce back 60 00:03:13,040 --> 00:03:15,560 Speaker 1: or have stocks weather to storm and are they ready 61 00:03:15,720 --> 00:03:19,839 Speaker 1: to focus once again on US and global fundamentals and 62 00:03:20,080 --> 00:03:23,360 Speaker 1: maybe make some gains. Well, let's put that question to 63 00:03:23,520 --> 00:03:27,600 Speaker 1: our next guest, David Coudla. He is CEO and chief 64 00:03:27,639 --> 00:03:32,440 Speaker 1: investment strategist at Mainstay Capital Management and he's joining us 65 00:03:32,680 --> 00:03:36,839 Speaker 1: from Michigan. Dave, Welcome back, Kathleen. So the dust has 66 00:03:36,840 --> 00:03:39,120 Speaker 1: settled on Brexit? Is it time to just say, well, 67 00:03:39,120 --> 00:03:41,120 Speaker 1: we'll put that on a on a very back burner 68 00:03:41,160 --> 00:03:43,880 Speaker 1: and look at something else. Now for stocks, you know, 69 00:03:43,920 --> 00:03:46,400 Speaker 1: it may seem that way. Uh. We if you look 70 00:03:46,440 --> 00:03:49,400 Speaker 1: back over the past week, Uh, we had the big, 71 00:03:49,520 --> 00:03:53,240 Speaker 1: big draw down on Friday and Monday, and we've recovered 72 00:03:53,520 --> 00:03:59,120 Speaker 1: about depending on the index. But the real impact of Brexit, 73 00:03:59,200 --> 00:04:03,480 Speaker 1: which we think is much more severe for Europe and 74 00:04:03,880 --> 00:04:07,760 Speaker 1: specifically the UK, has months and years to play out. 75 00:04:07,920 --> 00:04:11,920 Speaker 1: The impact on the US we always expected to be small, 76 00:04:12,560 --> 00:04:15,480 Speaker 1: almost negligible anyway, except how it might affect some of 77 00:04:15,480 --> 00:04:20,640 Speaker 1: our exporters if European economy uh does slow further because 78 00:04:20,720 --> 00:04:24,599 Speaker 1: of it, and UK potentially even going into recession second 79 00:04:24,640 --> 00:04:28,000 Speaker 1: part of this year. Well, apart from the stock side 80 00:04:28,000 --> 00:04:29,360 Speaker 1: of it and how companies are going to do it, 81 00:04:29,400 --> 00:04:31,000 Speaker 1: seems to me we have to also look at the 82 00:04:31,040 --> 00:04:34,560 Speaker 1: bond market because the the impact of Brexit on the 83 00:04:34,600 --> 00:04:37,880 Speaker 1: bond market potentially is somewhat more lasting. We've had the 84 00:04:37,920 --> 00:04:40,719 Speaker 1: drop in the third year bond now to the lowest 85 00:04:40,800 --> 00:04:45,119 Speaker 1: yield ever. We've got, uh, the ECB talking about buying 86 00:04:45,560 --> 00:04:48,240 Speaker 1: more bonds in a sense, even lesser quality bonds. I 87 00:04:48,279 --> 00:04:51,360 Speaker 1: guess you'd say Spanish bonds are railing up. This big 88 00:04:51,440 --> 00:04:54,760 Speaker 1: drop in bond yields around the US and in the world. 89 00:04:55,320 --> 00:04:57,800 Speaker 1: What does that mean for investors? And again, Davi, is 90 00:04:57,800 --> 00:05:00,680 Speaker 1: it something that's going to persist long after the dust 91 00:05:00,720 --> 00:05:03,719 Speaker 1: settles on the fall up from the stock market. Yeah, 92 00:05:03,880 --> 00:05:06,839 Speaker 1: we think that yields are low and are going to 93 00:05:06,920 --> 00:05:10,080 Speaker 1: be low and even lower if we look at what's happening, 94 00:05:10,200 --> 00:05:11,920 Speaker 1: you know, it's not even as much about the FED 95 00:05:11,960 --> 00:05:14,840 Speaker 1: when we get out on the intermediate term and long, uh, 96 00:05:15,000 --> 00:05:18,839 Speaker 1: the long into the curve. We have in Japan their 97 00:05:18,839 --> 00:05:23,120 Speaker 1: massive quantitative easing program, in Europe their massive quantitative easing 98 00:05:23,240 --> 00:05:27,560 Speaker 1: program that will probably become more massive with the e 99 00:05:27,640 --> 00:05:30,320 Speaker 1: C b looking at how do they compensate for the 100 00:05:30,360 --> 00:05:33,920 Speaker 1: adverse impact of Brexit on the UK. So we see 101 00:05:33,960 --> 00:05:37,400 Speaker 1: these yields that went low to zero and even negative 102 00:05:38,160 --> 00:05:42,080 Speaker 1: twelve trillion in sovereign debt with the negative yield globally. 103 00:05:42,720 --> 00:05:45,760 Speaker 1: And so when we look at our tenure, our tenure 104 00:05:46,240 --> 00:05:49,679 Speaker 1: at when it was at one point three four this morning, 105 00:05:49,680 --> 00:05:54,640 Speaker 1: that record low still looks attractive compared to sovereign debt 106 00:05:54,680 --> 00:05:58,000 Speaker 1: around the world. That's that's a lot lower or even negative. 107 00:05:59,600 --> 00:06:04,320 Speaker 1: Now when it comes to the global impact, then is 108 00:06:04,360 --> 00:06:07,560 Speaker 1: it mainly focused in the UK? Would you say, you know, don't, 109 00:06:07,560 --> 00:06:10,800 Speaker 1: don't really bother unless you want to find individual shining stars. OK, 110 00:06:11,000 --> 00:06:13,000 Speaker 1: just avoid the UK for now. But the rest of 111 00:06:13,000 --> 00:06:16,200 Speaker 1: the world looks okay to you. I would I would 112 00:06:16,240 --> 00:06:19,400 Speaker 1: avoid all of Europe for now. I would avoid in 113 00:06:19,440 --> 00:06:22,680 Speaker 1: the UK. There may be mega cap stocks that do 114 00:06:22,800 --> 00:06:25,719 Speaker 1: well because of the currency falling in value so much. 115 00:06:26,600 --> 00:06:31,080 Speaker 1: The multinational conglomerates are exporters from the UK. But overall, uh, 116 00:06:31,120 --> 00:06:33,520 Speaker 1: you know, we we heard Carney come out the Bank 117 00:06:33,520 --> 00:06:37,320 Speaker 1: of England governor and talk about uh really reversing course, 118 00:06:37,560 --> 00:06:40,880 Speaker 1: you know six months ago, ten months ago. Uh, England, 119 00:06:40,920 --> 00:06:42,720 Speaker 1: like the U s we're looking at when they would 120 00:06:42,720 --> 00:06:46,640 Speaker 1: tighten monetary policy, they're now going to reverse course to 121 00:06:46,640 --> 00:06:51,040 Speaker 1: to UH try to abate the negative impacts of Brexit. 122 00:06:51,400 --> 00:06:53,360 Speaker 1: The UK in general is going to be dealing with 123 00:06:53,400 --> 00:06:57,680 Speaker 1: the impact of Brexit. Japan we've we've stayed away from 124 00:06:57,720 --> 00:07:00,960 Speaker 1: for a while. We really think that in general for 125 00:07:01,120 --> 00:07:06,400 Speaker 1: international diversification, for investors, avoid developed markets, Avoid Europe, avoid Japan, 126 00:07:06,880 --> 00:07:09,840 Speaker 1: look to emerging markets. That's where we believe the opportunity 127 00:07:09,920 --> 00:07:13,280 Speaker 1: is now. Auto companies a Big three reported and you 128 00:07:13,320 --> 00:07:15,520 Speaker 1: have a lot of clients, of course who worked in 129 00:07:15,560 --> 00:07:19,480 Speaker 1: the auto industry over the years. Um the question, of course, 130 00:07:19,520 --> 00:07:23,040 Speaker 1: have auto sales peaked after a very strong would you 131 00:07:23,040 --> 00:07:25,040 Speaker 1: invest any in any of the Big three or any 132 00:07:25,040 --> 00:07:27,920 Speaker 1: of the big global auto companies. We're neutral on the 133 00:07:27,960 --> 00:07:32,040 Speaker 1: automakers at this point. We think that in this sales cycle, 134 00:07:32,520 --> 00:07:35,560 Speaker 1: sales will remain strong. We're on track for seventeen million 135 00:07:35,640 --> 00:07:42,680 Speaker 1: vehicles still in in the US plus units, but sales 136 00:07:42,680 --> 00:07:46,960 Speaker 1: of plateaued, and we're neutral on the automakers at this point. 137 00:07:47,640 --> 00:07:51,520 Speaker 1: Ford had a had a good June sales month. GM 138 00:07:51,560 --> 00:07:54,520 Speaker 1: had a great first half, their best first half of 139 00:07:54,640 --> 00:07:58,160 Speaker 1: five percent sales growth, best in a decade. But we're 140 00:07:58,280 --> 00:08:02,240 Speaker 1: at that peak in a cycle sales of plateau, so 141 00:08:02,320 --> 00:08:05,040 Speaker 1: we're neutral on the automakers from here. So Dave, let's 142 00:08:05,080 --> 00:08:07,680 Speaker 1: look at some things that you are positive on, and 143 00:08:07,840 --> 00:08:11,000 Speaker 1: let's start with a Fidelity New Markets income fund. What 144 00:08:11,120 --> 00:08:12,840 Speaker 1: is it and why do you like it? Okay? So 145 00:08:12,880 --> 00:08:16,040 Speaker 1: Fidelity New Markets Income. Uh. This is a Fidelity fund 146 00:08:16,040 --> 00:08:18,800 Speaker 1: that's been managed by John Carlson for more than twenty 147 00:08:18,880 --> 00:08:21,960 Speaker 1: years and he's done a great job with it. Essentially 148 00:08:22,000 --> 00:08:24,960 Speaker 1: invest in the emerging market debt and as we talked 149 00:08:24,960 --> 00:08:28,320 Speaker 1: about with low yields around the world, with the concern 150 00:08:28,360 --> 00:08:31,840 Speaker 1: about the same concerns about the economy in Europe, the 151 00:08:31,840 --> 00:08:35,800 Speaker 1: economy here. So we have those concerns about junk bonds, 152 00:08:35,880 --> 00:08:38,959 Speaker 1: distressed debt, typical high yield debt, we can go to 153 00:08:39,040 --> 00:08:41,880 Speaker 1: emerging markets debt as a place to get that high 154 00:08:41,920 --> 00:08:44,959 Speaker 1: yield New markets income. Fidelity New Markets Income yields about 155 00:08:45,000 --> 00:08:49,520 Speaker 1: six percent. With all this easy money policy driving rates down, 156 00:08:50,000 --> 00:08:52,360 Speaker 1: people seeking yield are going to a fund like this. 157 00:08:52,600 --> 00:08:54,679 Speaker 1: The other thing that's interesting this fund is available in 158 00:08:54,720 --> 00:08:56,400 Speaker 1: a lot of four one K plans. We just talked 159 00:08:56,440 --> 00:08:59,679 Speaker 1: about general motors. Uh, it's our top holding in our 160 00:08:59,720 --> 00:09:04,520 Speaker 1: growth portfolios. Opportunistically, the fund is up twelve percent this year, 161 00:09:04,640 --> 00:09:07,240 Speaker 1: certainly out performing a lot of the equity funds and 162 00:09:07,280 --> 00:09:09,360 Speaker 1: doing it with about two thirds of the level of 163 00:09:09,440 --> 00:09:12,720 Speaker 1: volatility of those funds over time. Now you're getting increasingly 164 00:09:12,800 --> 00:09:14,840 Speaker 1: positive on emerging market equities. I think there's a lot 165 00:09:14,880 --> 00:09:17,120 Speaker 1: of people are wondering if they could jump on that bandwagon, 166 00:09:17,480 --> 00:09:19,160 Speaker 1: if they want to do that. First of all, why 167 00:09:19,200 --> 00:09:22,640 Speaker 1: and what do you recommend buying? Well? With the easy 168 00:09:22,679 --> 00:09:25,760 Speaker 1: money policy, we know that emerging markets, a lot of 169 00:09:25,800 --> 00:09:29,559 Speaker 1: emerging market countries, especially those with current account deficits, live 170 00:09:29,600 --> 00:09:32,640 Speaker 1: and diet for capital flows. UH money will get even 171 00:09:32,679 --> 00:09:35,079 Speaker 1: easier in Europe, it will continue to be so in Japan. 172 00:09:35,840 --> 00:09:38,320 Speaker 1: We now think the FED is on hold probably through 173 00:09:38,320 --> 00:09:40,160 Speaker 1: the end of this year, which is a lot different 174 00:09:40,160 --> 00:09:42,280 Speaker 1: outlook than many people had at the beginning of the year. 175 00:09:42,640 --> 00:09:46,280 Speaker 1: But we're facing the reality of these global worries. So 176 00:09:47,200 --> 00:09:51,560 Speaker 1: that makes that's good for emerging market equities, and we 177 00:09:51,679 --> 00:09:55,600 Speaker 1: expect that emerging market equities to be top performers this year. 178 00:09:56,520 --> 00:10:00,800 Speaker 1: Gold what do you like there? Well? With the again, 179 00:10:00,840 --> 00:10:03,319 Speaker 1: the the uncertainty we have in the markets, and if 180 00:10:03,320 --> 00:10:06,840 Speaker 1: you take last Friday when we had the US market 181 00:10:06,840 --> 00:10:10,080 Speaker 1: depending on the index down three and a half to five, 182 00:10:11,640 --> 00:10:14,840 Speaker 1: Japan down eight percent, Europe down more than eight percent. 183 00:10:14,920 --> 00:10:18,360 Speaker 1: That day gold gold boy in g l D was 184 00:10:18,440 --> 00:10:21,000 Speaker 1: up four and a half percent. And so we get 185 00:10:21,040 --> 00:10:25,440 Speaker 1: that low correlation with stocks and bonds and even a 186 00:10:25,440 --> 00:10:28,280 Speaker 1: negative correlation at time, so we can help diversifier portfolio 187 00:10:28,720 --> 00:10:31,400 Speaker 1: and again with yields so low. You we know gold 188 00:10:31,480 --> 00:10:34,160 Speaker 1: is as a speculative investment. It has no dividend yield, 189 00:10:34,240 --> 00:10:37,640 Speaker 1: it has no pe ratio, but we considered a store 190 00:10:37,679 --> 00:10:40,720 Speaker 1: of value and a diversifier in our portfolio. When bonds 191 00:10:40,760 --> 00:10:44,360 Speaker 1: aren't providing much of a yield, it doesn't feel is bad. 192 00:10:44,400 --> 00:10:46,439 Speaker 1: It doesn't hurt as much to hold gold that has 193 00:10:46,480 --> 00:10:48,679 Speaker 1: no yield, except I have metal in my hand rather 194 00:10:48,720 --> 00:10:51,559 Speaker 1: than a piece of paper. Dove Coola, thanks so much. 195 00:10:51,600 --> 00:10:55,319 Speaker 1: Have a great Fourth of July weekend. To thank you. Kathleen, founder, 196 00:10:55,440 --> 00:11:00,840 Speaker 1: CEO and chief investment Strategies at Mainstay Capital Management in Freud, Michigan, 197 00:11:00,880 --> 00:11:04,760 Speaker 1: with some two billion dollars of assets under management. I'm 198 00:11:04,840 --> 00:11:07,640 Speaker 1: Kathleen Hayes, my co host PIM Fox on vacation this week. 199 00:11:07,679 --> 00:11:10,680 Speaker 1: We'll be greeting him back on Tuesday. This is taking Stock, 200 00:11:11,080 --> 00:11:12,280 Speaker 1: this is Bloomberg.