Speaker 1: Global business news twenty four hours a day at Bloomberg
Speaker 1: dot Com, the radio, plus Globo laps and on your radio.
Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Headquarters
Speaker 1: on Katherine Connery. Stocks are little change, heading for their
Speaker 1: best week in nine months and gaining for a fourth
Speaker 1: straight session. There's optimism about the U S economy and
Speaker 1: about signals from central banks that they'll continue to stave
Speaker 1: off fallout from Britain's decision to leave the European Union.
Speaker 1: We check their markets every fifteen minutes throughout the trading
Speaker 1: day on Bloomberg Radio. Down Industrial Average is up twenty
Speaker 1: seven points an eighth of a percent, his rating at
Speaker 1: seventeen thousand, nine hundred fifty six. SMP five founded up
Speaker 1: five points a quarter percent at twenty one o three.
Speaker 1: Then AzaC is up twenty one points at nearly half
Speaker 1: a percent, trading at forty sixty four. West Texas Intermedia
Speaker 1: Crude oil at the eighty three cents of barrel, one
Speaker 1: point seven percent at forty nine sixteen. Spout gold is
Speaker 1: up twenty four dollars twenty cents announced at thirteen eighty ten.
Speaker 1: Year Treasury up seven thirty seconds with the yield of
Speaker 1: one point four four which has sent and updating one
Speaker 1: of our top stories. Local authorities say as many as
Speaker 1: a group of nine gunmen attacked a restaurant popular with
Speaker 1: foreigners in a diplomatomatic zone of the Bangladeshi capital. U
Speaker 1: s State Department spokesman says that all American citizens that
Speaker 1: are under the authority of the Diplomatic Chief of Mission
Speaker 1: Nan Dhaka have been accounted for and we're not involved
Speaker 1: in the incident. The department is still checking on private
Speaker 1: American citizens who may have been in the area. And
Speaker 1: that's a bloomberg business flash. Thank you for investing in Europe,
Speaker 1: and first of all, thanks to Catherine Cartery. Certainly a
Speaker 1: lot of people are asking that question after the big
Speaker 1: Brexit vote. Well, if you are, you're going to want
Speaker 1: to hear this. Catherine Cartery is back with today's et
Speaker 1: F report, one of last year's most popular e t
Speaker 1: F trade has become a disappointment in the first half
Speaker 1: of sixteen. That's the word from Todd Rosenbooth, director of
Speaker 1: et F Research at SMP Global Market Intelligence. Europe has
Speaker 1: been a very poor place to invest in the first
Speaker 1: half of them and sixteen, and it was even before
Speaker 1: the Bridget vote was coming to pass. Rosen Blues takes
Speaker 1: a look at just how disappointing that trade has been
Speaker 1: this year. Most European equity ETFs for down uh, you know,
Speaker 1: mid mid single digits Stephen double digits in the first
Speaker 1: half of the year because of weakness in the local economy,
Speaker 1: because of the strengthening of the euro. Rosenblues says, there
Speaker 1: are also some industry groups that have underperformed the broader market.
Speaker 1: His example, financial shares as interest rates have remained low.
Speaker 1: That financials the like sector spider fund or XLF has
Speaker 1: fallen four point six percent since the start of the year,
Speaker 1: as the SMP five hundred has gained two point seven percent.
Speaker 1: That's your Bloomberg ETF report. I'm Catherine Colderie. You're listening
Speaker 1: to Taking Stock with Kathleen Mays and Pim Fox on
Speaker 1: Bloomberg Ring. A week ago, stocks were plunging in US
Speaker 1: and around the world after UK voted to leave the
Speaker 1: European Union. A week later, the stock market capping off
Speaker 1: four days of gains. No not quite as big as
Speaker 1: earlier in the week. It seems on a much sounder
Speaker 1: footing sp getting back around the level. Where do we
Speaker 1: go from here? Is this just a temporary bounce back
Speaker 1: or have stocks weather to storm and are they ready
Speaker 1: to focus once again on US and global fundamentals and
Speaker 1: maybe make some gains. Well, let's put that question to
Speaker 1: our next guest, David Coudla. He is CEO and chief
Speaker 1: investment strategist at Mainstay Capital Management and he's joining us
Speaker 1: from Michigan. Dave, Welcome back, Kathleen. So the dust has
Speaker 1: settled on Brexit? Is it time to just say, well,
Speaker 1: we'll put that on a on a very back burner
Speaker 1: and look at something else. Now for stocks, you know,
Speaker 1: it may seem that way. Uh. We if you look
Speaker 1: back over the past week, Uh, we had the big,
Speaker 1: big draw down on Friday and Monday, and we've recovered
Speaker 1: about depending on the index. But the real impact of Brexit,
Speaker 1: which we think is much more severe for Europe and
Speaker 1: specifically the UK, has months and years to play out.
Speaker 1: The impact on the US we always expected to be small,
Speaker 1: almost negligible anyway, except how it might affect some of
Speaker 1: our exporters if European economy uh does slow further because
Speaker 1: of it, and UK potentially even going into recession second
Speaker 1: part of this year. Well, apart from the stock side
Speaker 1: of it and how companies are going to do it,
Speaker 1: seems to me we have to also look at the
Speaker 1: bond market because the the impact of Brexit on the
Speaker 1: bond market potentially is somewhat more lasting. We've had the
Speaker 1: drop in the third year bond now to the lowest
Speaker 1: yield ever. We've got, uh, the ECB talking about buying
Speaker 1: more bonds in a sense, even lesser quality bonds. I
Speaker 1: guess you'd say Spanish bonds are railing up. This big
Speaker 1: drop in bond yields around the US and in the world.
Speaker 1: What does that mean for investors? And again, Davi, is
Speaker 1: it something that's going to persist long after the dust
Speaker 1: settles on the fall up from the stock market. Yeah,
Speaker 1: we think that yields are low and are going to
Speaker 1: be low and even lower if we look at what's happening,
Speaker 1: you know, it's not even as much about the FED
Speaker 1: when we get out on the intermediate term and long, uh,
Speaker 1: the long into the curve. We have in Japan their
Speaker 1: massive quantitative easing program, in Europe their massive quantitative easing
Speaker 1: program that will probably become more massive with the e
Speaker 1: C b looking at how do they compensate for the
Speaker 1: adverse impact of Brexit on the UK. So we see
Speaker 1: these yields that went low to zero and even negative
Speaker 1: twelve trillion in sovereign debt with the negative yield globally.
Speaker 1: And so when we look at our tenure, our tenure
Speaker 1: at when it was at one point three four this morning,
Speaker 1: that record low still looks attractive compared to sovereign debt
Speaker 1: around the world. That's that's a lot lower or even negative.
Speaker 1: Now when it comes to the global impact, then is
Speaker 1: it mainly focused in the UK? Would you say, you know, don't,
Speaker 1: don't really bother unless you want to find individual shining stars. OK,
Speaker 1: just avoid the UK for now. But the rest of
Speaker 1: the world looks okay to you. I would I would
Speaker 1: avoid all of Europe for now. I would avoid in
Speaker 1: the UK. There may be mega cap stocks that do
Speaker 1: well because of the currency falling in value so much.
Speaker 1: The multinational conglomerates are exporters from the UK. But overall, uh,
Speaker 1: you know, we we heard Carney come out the Bank
Speaker 1: of England governor and talk about uh really reversing course,
Speaker 1: you know six months ago, ten months ago. Uh, England,
Speaker 1: like the U s we're looking at when they would
Speaker 1: tighten monetary policy, they're now going to reverse course to
Speaker 1: to UH try to abate the negative impacts of Brexit.
Speaker 1: The UK in general is going to be dealing with
Speaker 1: the impact of Brexit. Japan we've we've stayed away from
Speaker 1: for a while. We really think that in general for
Speaker 1: international diversification, for investors, avoid developed markets, Avoid Europe, avoid Japan,
Speaker 1: look to emerging markets. That's where we believe the opportunity
Speaker 1: is now. Auto companies a Big three reported and you
Speaker 1: have a lot of clients, of course who worked in
Speaker 1: the auto industry over the years. Um the question, of course,
Speaker 1: have auto sales peaked after a very strong would you
Speaker 1: invest any in any of the Big three or any
Speaker 1: of the big global auto companies. We're neutral on the
Speaker 1: automakers at this point. We think that in this sales cycle,
Speaker 1: sales will remain strong. We're on track for seventeen million
Speaker 1: vehicles still in in the US plus units, but sales
Speaker 1: of plateaued, and we're neutral on the automakers at this point.
Speaker 1: Ford had a had a good June sales month. GM
Speaker 1: had a great first half, their best first half of
Speaker 1: five percent sales growth, best in a decade. But we're
Speaker 1: at that peak in a cycle sales of plateau, so
Speaker 1: we're neutral on the automakers from here. So Dave, let's
Speaker 1: look at some things that you are positive on, and
Speaker 1: let's start with a Fidelity New Markets income fund. What
Speaker 1: is it and why do you like it? Okay? So
Speaker 1: Fidelity New Markets Income. Uh. This is a Fidelity fund
Speaker 1: that's been managed by John Carlson for more than twenty
Speaker 1: years and he's done a great job with it. Essentially
Speaker 1: invest in the emerging market debt and as we talked
Speaker 1: about with low yields around the world, with the concern
Speaker 1: about the same concerns about the economy in Europe, the
Speaker 1: economy here. So we have those concerns about junk bonds,
Speaker 1: distressed debt, typical high yield debt, we can go to
Speaker 1: emerging markets debt as a place to get that high
Speaker 1: yield New markets income. Fidelity New Markets Income yields about
Speaker 1: six percent. With all this easy money policy driving rates down,
Speaker 1: people seeking yield are going to a fund like this.
Speaker 1: The other thing that's interesting this fund is available in
Speaker 1: a lot of four one K plans. We just talked
Speaker 1: about general motors. Uh, it's our top holding in our
Speaker 1: growth portfolios. Opportunistically, the fund is up twelve percent this year,
Speaker 1: certainly out performing a lot of the equity funds and
Speaker 1: doing it with about two thirds of the level of
Speaker 1: volatility of those funds over time. Now you're getting increasingly
Speaker 1: positive on emerging market equities. I think there's a lot
Speaker 1: of people are wondering if they could jump on that bandwagon,
Speaker 1: if they want to do that. First of all, why
Speaker 1: and what do you recommend buying? Well? With the easy
Speaker 1: money policy, we know that emerging markets, a lot of
Speaker 1: emerging market countries, especially those with current account deficits, live
Speaker 1: and diet for capital flows. UH money will get even
Speaker 1: easier in Europe, it will continue to be so in Japan.
Speaker 1: We now think the FED is on hold probably through
Speaker 1: the end of this year, which is a lot different
Speaker 1: outlook than many people had at the beginning of the year.
Speaker 1: But we're facing the reality of these global worries. So
Speaker 1: that makes that's good for emerging market equities, and we
Speaker 1: expect that emerging market equities to be top performers this year.
Speaker 1: Gold what do you like there? Well? With the again,
Speaker 1: the the uncertainty we have in the markets, and if
Speaker 1: you take last Friday when we had the US market
Speaker 1: depending on the index down three and a half to five,
Speaker 1: Japan down eight percent, Europe down more than eight percent.
Speaker 1: That day gold gold boy in g l D was
Speaker 1: up four and a half percent. And so we get
Speaker 1: that low correlation with stocks and bonds and even a
Speaker 1: negative correlation at time, so we can help diversifier portfolio
Speaker 1: and again with yields so low. You we know gold
Speaker 1: is as a speculative investment. It has no dividend yield,
Speaker 1: it has no pe ratio, but we considered a store
Speaker 1: of value and a diversifier in our portfolio. When bonds
Speaker 1: aren't providing much of a yield, it doesn't feel is bad.
Speaker 1: It doesn't hurt as much to hold gold that has
Speaker 1: no yield, except I have metal in my hand rather
Speaker 1: than a piece of paper. Dove Coola, thanks so much.
Speaker 1: Have a great Fourth of July weekend. To thank you. Kathleen, founder,
Speaker 1: CEO and chief investment Strategies at Mainstay Capital Management in Freud, Michigan,
Speaker 1: with some two billion dollars of assets under management. I'm
Speaker 1: Kathleen Hayes, my co host PIM Fox on vacation this week.
Speaker 1: We'll be greeting him back on Tuesday. This is taking Stock,
Speaker 1: this is Bloomberg.