WEBVTT - Commonwealth's McMillan on Need for Consumer Spending (Audio) 0:00:02.440 --> 0:00:05.840 Global business news twenty four hours a day at Bloomberg 0:00:05.880 --> 0:00:08.920 dot com, the radio, plus mobile lact and on your radio. 0:00:09.240 --> 0:00:13.640 This is a Bloomberg Business Flash for all Bloomberg World headquarters. 0:00:13.680 --> 0:00:16.240 I'm Charlie Pellett. We have got thirteen minutes to go 0:00:16.280 --> 0:00:19.200 ahead of the close on a Monday, the DAL, the SMP, 0:00:19.360 --> 0:00:22.960 NEZDAC hall rallying by one percent or more. The tenure 0:00:22.960 --> 0:00:26.520 down fourteen thirty seconds. That yield one point seven four percent, 0:00:26.960 --> 0:00:29.800 Gold up three dollars, the ounce to twelve seventy five 0:00:29.920 --> 0:00:32.200 seventy a gain there of two tents of one percent. 0:00:32.680 --> 0:00:36.000 And crude oil forty seven ninety seven a barrel right 0:00:36.000 --> 0:00:39.040 now up three point eight percent on West Texas Intermediate. 0:00:39.400 --> 0:00:42.240 That is a game of the dollars seventy five so again, 0:00:42.280 --> 0:00:45.720 recapping our rally underway for stocks, SMP up twenty a 0:00:45.760 --> 0:00:49.320 gain of one percent down, industrials up eight five also 0:00:49.479 --> 0:00:52.960 up one point one percent. I'm Charlie Pellett, and that's 0:00:53.080 --> 0:00:56.480 a Bloomberg Business Flash. Charlie Pellett, thank you so very much. 0:00:56.560 --> 0:00:58.280 Now it's a sign for the et F Report, brought 0:00:58.320 --> 0:01:01.200 to you by Vanneck Vector's et FS. Expect more from 0:01:01.200 --> 0:01:05.120 your muni's target tax exempt income by maturity and credit quality, 0:01:05.319 --> 0:01:07.520 all with low cost e t f s because van 0:01:07.800 --> 0:01:12.279 dot com slash Muni van eck access the opportunities now 0:01:12.280 --> 0:01:14.000 with the latest on e t F s our own 0:01:14.120 --> 0:01:18.120 Katherine Cowtery, last week was a tough one for retailers 0:01:18.200 --> 0:01:22.080 is disastrous. Reports from Macy's to Nordstrom sent shares tumbling. 0:01:22.440 --> 0:01:25.520 E t S had focused on retail companies had varying results. 0:01:25.760 --> 0:01:29.479 Bloomberg Intelligence analyst Eric Beltuna says it illustrates the importance 0:01:29.480 --> 0:01:32.640 of waiting. His example the spider s and p retail 0:01:32.680 --> 0:01:35.200 e t F taker x RT. Keep in mind this 0:01:35.280 --> 0:01:37.520 is equal weighted, so you're getting a lot of zip 0:01:37.520 --> 0:01:39.840 in here. Small caps cats that destroyed it. X RT 0:01:40.000 --> 0:01:42.679 fell four point six percent last week, and e t 0:01:42.800 --> 0:01:45.640 F with a large allocation to retail shares, declined less 0:01:45.640 --> 0:01:48.040 than other funds in the group. It's the Power Shares 0:01:48.120 --> 0:01:52.400 d W a consumer cyclicals Momentum portfolio ticker p e Z. 0:01:52.920 --> 0:01:57.360 The momentum ETFs basically will look at price movement as 0:01:57.360 --> 0:02:00.480 a screening apparatus, so if the price starts to go 0:02:00.520 --> 0:02:03.520 down relative to other stocks, it kicks it out and 0:02:03.560 --> 0:02:05.960 a lot of times you'll see that technical it's like 0:02:06.040 --> 0:02:08.640 technical analysis. You'll see the price movement go down a 0:02:08.680 --> 0:02:10.720 little before the big one, and so a lot of 0:02:10.720 --> 0:02:13.600 times you can save yourself even though momentum sounds more volatile. 0:02:13.960 --> 0:02:16.440 I've seen it avoid some of the bigger downfalls with 0:02:16.480 --> 0:02:19.760 the big stocks. The easy declined one point one percent. 0:02:20.240 --> 0:02:26.040 That's your Bloomberg ETF report. I'm Catherine Cowdery. You're listening 0:02:26.080 --> 0:02:29.680 to Taking Stock with Bim Fox and Kathleen Hayes on 0:02:29.760 --> 0:02:35.480 Bloomberg Radio. Scheduled for release tomorrow consumer Prices. What will 0:02:35.520 --> 0:02:39.360 that economic report as well as Manufacturing and Industry also 0:02:39.400 --> 0:02:43.000 scheduled for tomorrow. What will that mean for your portfolio? Well, 0:02:43.040 --> 0:02:46.919 Brad McMillan is the Chief Investment Officer Commonwealth Financial Network, 0:02:47.639 --> 0:02:51.720 helping to manage over a hundred billion dollars in assets, 0:02:51.960 --> 0:02:55.320 and he can be followed on Twitter at Brad McMillan 0:02:55.480 --> 0:02:58.680 c f A. He joins us now, Brad, thanks ver 0:02:58.760 --> 0:03:00.799 much for being with us. Let's start off at the 0:03:00.840 --> 0:03:03.800 Consumer Price Report, the CPI that will be out tomorrow. 0:03:04.280 --> 0:03:08.200 Tell us what you expect and what this means for investors. 0:03:09.240 --> 0:03:13.000 We expect to see an increase in UH in inflation 0:03:13.760 --> 0:03:17.600 at the headline level, particularly, but also at the core level, 0:03:17.919 --> 0:03:20.240 we're gonna see maybe a little bit of fireworks because 0:03:20.240 --> 0:03:22.680 you could see the headline number check up, but it's 0:03:22.720 --> 0:03:24.760 not going to mean anything. The important number is the 0:03:24.800 --> 0:03:27.000 core number and actually just be more of the same, 0:03:27.480 --> 0:03:29.480 more of the same, enough for the FED to reserve 0:03:29.520 --> 0:03:31.960 to get excited about inflation. You know, we live in 0:03:32.000 --> 0:03:33.880 an era that's not like it was thirty years ago, 0:03:33.919 --> 0:03:36.119 twenty years ago, ten years ago. FED wants to see 0:03:36.200 --> 0:03:39.000 more inflation so it can help boost wages for a 0:03:39.040 --> 0:03:42.920 little more lift under the economy sales. The f's in 0:03:43.040 --> 0:03:44.800 kind of a rock and a hard place, and you're 0:03:44.800 --> 0:03:48.720 absolutely right and wants to see inflation. The problem is 0:03:48.760 --> 0:03:52.560 even the core, we're just kicking above the level where 0:03:52.640 --> 0:03:55.600 they want to see. So there's enough to justify and 0:03:55.680 --> 0:03:57.640 increase at some point, but not enough to light a 0:03:57.720 --> 0:03:59.880 fire under them yet. I don't think this is going 0:03:59.920 --> 0:04:03.000 to be enough to move them. In June. Brad McMillan, Uh, 0:04:03.240 --> 0:04:05.720 how about the industrial production data? What will that show? 0:04:06.680 --> 0:04:08.720 We're probably going to see a bit of a recovery. 0:04:08.840 --> 0:04:12.080 We're going to see We're going to see utilities continue 0:04:12.120 --> 0:04:15.280 to do well, we're going to see manufacturing hopefully picked up. 0:04:15.680 --> 0:04:18.560 But again it's going to be a recovery. It's not 0:04:18.600 --> 0:04:21.320 going to be a jump ahead. So it will probably 0:04:21.400 --> 0:04:24.960 continue stabilization. But nothing to get excited about, nothing to 0:04:25.040 --> 0:04:27.839 drive fed to move. Okay, so we can talk about 0:04:27.839 --> 0:04:32.440 manufacturing industrial production, and you know the inflation numbers. Housing 0:04:32.440 --> 0:04:36.200 starts are also out tomorrow. The Blueberg survey suggests that 0:04:36.200 --> 0:04:38.800 we will have some move up in new home construction. 0:04:39.240 --> 0:04:42.880 So connect the dots force from some of these industry 0:04:42.960 --> 0:04:46.600 to some of the UH stocks you like, the sectors 0:04:46.680 --> 0:04:49.039 you like, and let's start with home builders since they're 0:04:49.080 --> 0:04:54.400 they're directly involved in home construction. Certainly, you saw the 0:04:54.720 --> 0:04:57.599 you saw the Homeme Builders survey come in today. It 0:04:57.640 --> 0:05:00.080 was stable at a very positive level, but it and 0:05:00.160 --> 0:05:03.880 improved like people expected. And most of that decline actually 0:05:03.880 --> 0:05:07.640 came from the Northeast where sentiment went down. Now, the 0:05:07.680 --> 0:05:10.279 problem is we've got a lot of supply issues here. 0:05:10.279 --> 0:05:12.120 We've got a lack of land, we've got a lack 0:05:12.160 --> 0:05:15.640 of labor to build these things. That's what's holding it 0:05:15.720 --> 0:05:19.000 back and that's going to limit the improvement. But at 0:05:19.000 --> 0:05:21.920 the same time. That's going to make the recovery run 0:05:22.040 --> 0:05:24.600 longer because we're not going to be able to over build, 0:05:25.080 --> 0:05:27.760 and we're getting enough demand to help continue to drive 0:05:27.880 --> 0:05:30.600 consumer spending, which is kicked. All right, you talk about 0:05:30.680 --> 0:05:34.400 driving consumer spending, is that going to help corporate profits? 0:05:34.400 --> 0:05:37.039 Didn't we just get through a really well bad quarter. 0:05:38.200 --> 0:05:40.039 It was a bad quarter, but you have to look 0:05:40.080 --> 0:05:43.479 at everything that happened during the quarter. People were thinking 0:05:43.520 --> 0:05:46.360 the world was going to end well, guess what, it didn't, 0:05:46.680 --> 0:05:50.600 and consumer sentiment, consumer spending was depressed by that. But 0:05:50.760 --> 0:05:54.360 spring is here till on the retail sales report last Friday, 0:05:54.640 --> 0:05:57.400 consumers are starting to spend. It's not that they couldn't spend, 0:05:57.800 --> 0:05:59.920 it's that they chose not to and now they're opening 0:06:00.040 --> 0:06:03.760 the wallets, which is excellent. Hey, is it possible, Brad, 0:06:04.000 --> 0:06:06.599 that over the course of the year we could find 0:06:06.680 --> 0:06:08.880 a bit of a sweep spot for stocks. If you're right, 0:06:09.160 --> 0:06:12.920 you see reasonably positive on the US economy. Consumers will 0:06:13.240 --> 0:06:16.719 spend enough, they'll spend more. But is it also possible 0:06:16.800 --> 0:06:19.839 that they don't spend so much that the fetter reserves 0:06:19.880 --> 0:06:23.360 feels in any hurry to raise interest rates with Is 0:06:23.400 --> 0:06:26.279 that possible. And if that's what occurs, is that good 0:06:26.279 --> 0:06:28.520 for stocks because things have picked up, but the FET 0:06:28.560 --> 0:06:33.039 isn't tightening More on policy, I think the Goldilocks scenario 0:06:33.160 --> 0:06:37.240 is not only possible but becoming increasingly likely. We need 0:06:37.240 --> 0:06:40.040 consumers to start spending that that just there are signs 0:06:40.040 --> 0:06:43.600 that that's exactly what they're doing. We need business to stabilize, 0:06:43.600 --> 0:06:45.880 and we're seeing signs of that in the energy sector 0:06:46.279 --> 0:06:49.080 and in capital investment. But we don't want them going 0:06:49.200 --> 0:06:51.919 nuts right now. The fet is happy with where we 0:06:51.960 --> 0:06:54.880 are where we are, but they're not dying to raise Rachel, 0:06:54.960 --> 0:06:57.280 I could see that continuing for the next quarter or two. 0:06:57.720 --> 0:07:00.880 You mentioned energy, and I'm just wondering where do you 0:07:00.920 --> 0:07:03.200 think that the energy market is headed When we have 0:07:03.920 --> 0:07:08.080 filings for bankruptcy for companies such as Sandridge Energy and 0:07:08.240 --> 0:07:11.760 there's no let up. Well, that's the thing. We've seen 0:07:11.880 --> 0:07:16.240 energy prices come up by about se off the floor. 0:07:16.680 --> 0:07:19.160 What does that mean? That means companies that were just 0:07:19.240 --> 0:07:21.440 trying to make it are now going to get a 0:07:21.480 --> 0:07:23.720 second rease on life. The ones that have been the worst, 0:07:23.720 --> 0:07:25.640 the ones that haven't been able to make it through, 0:07:25.960 --> 0:07:28.760 as you say, are going bankrupt, but that queers the 0:07:29.080 --> 0:07:32.160 clears the deck for the ones that can continue. And actually, 0:07:32.280 --> 0:07:36.680 what's capital? Companies with capital pick up these assets for 0:07:36.760 --> 0:07:39.160 pennies on the dollar, and that's also going to help 0:07:39.160 --> 0:07:42.160 profits going forward. What do you like in technology? What 0:07:42.200 --> 0:07:44.360 are you dislike in technology? It can be you know, 0:07:44.720 --> 0:07:46.800 are you are you interested in social media? Are you 0:07:46.960 --> 0:07:49.760 interested in some of the old line more blue chip 0:07:49.880 --> 0:07:54.600 dividend pairs like Microsoft. It's funny to hear Microsoft described 0:07:54.640 --> 0:07:57.040 as a blue line as a blue chip dividend pair, 0:07:57.120 --> 0:07:59.720 although of course it is, and that is exactly what 0:07:59.760 --> 0:08:02.720 I do white because the real power of technology in 0:08:02.880 --> 0:08:05.920 what's still a fairly difficult business environment is to help 0:08:05.960 --> 0:08:10.160 companies cut costs. I think there's the opportunity social media 0:08:10.240 --> 0:08:14.800 absolutely on a tear, but for sustainable business building, being 0:08:14.840 --> 0:08:17.640 able to help other companies cut costs is exactly where 0:08:17.720 --> 0:08:22.000 companies like Microsoft, for Oracle are making their mark, and 0:08:22.080 --> 0:08:24.600 that's going to continue to be an opportunity going forward. 0:08:25.000 --> 0:08:28.200 But doesn't the idea of cutting your costs fly in 0:08:28.280 --> 0:08:31.480 the face of increasing your revenues. If you're trying to 0:08:31.520 --> 0:08:34.240 cut things to the bone, you're going to improve the 0:08:34.320 --> 0:08:36.920 bottom line. But I thought that the top line, the 0:08:37.000 --> 0:08:39.880 increase in revenue and sales what what is what is 0:08:39.920 --> 0:08:45.040 bedeviling most companies. You're right, the revenue growth is a problem, 0:08:45.080 --> 0:08:48.720 and I would tie that into slow growth overall. But nonetheless, 0:08:48.760 --> 0:08:51.600 why can't you do both? That's the challenge and that's 0:08:51.600 --> 0:08:54.400 actually where I think the opportunity is for companies in 0:08:54.400 --> 0:08:57.559 the market. We've had a difficult business environment. They've had 0:08:57.600 --> 0:08:59.800 to cut costs and they're doing so, but at this 0:09:00.280 --> 0:09:03.040 time they're looking to be more efficient and to grow 0:09:03.080 --> 0:09:06.080 their top wine popline growth has not been easy. But 0:09:06.320 --> 0:09:09.680 as the economy continues to expand and do so more quickly, 0:09:09.840 --> 0:09:12.000 we're going to see companies be able to do both 0:09:12.080 --> 0:09:14.480 and that's going to help on the earning side. So 0:09:14.520 --> 0:09:16.319 what about bonds. We have a bit of a bit 0:09:16.320 --> 0:09:17.800 of a sell off, enough of us all off to 0:09:17.800 --> 0:09:20.000 push the tenure note yield up to one point seven five. 0:09:20.000 --> 0:09:22.920 It have been one point seven four, one point seven three. Interesting, 0:09:23.000 --> 0:09:26.440 fabulous story actually on the terminal today, the mixed view 0:09:26.559 --> 0:09:29.079 on Wall Street of where bond deals are heading. Standard 0:09:29.160 --> 0:09:32.120 Charter is looking for a rally in the tenure treasury 0:09:32.160 --> 0:09:34.920 down to one point six in terms of yield, What 0:09:35.000 --> 0:09:37.160 do you see and is there any play that you 0:09:37.160 --> 0:09:40.960 would recommend in fixed income right now? Right now? I 0:09:41.000 --> 0:09:43.679 think if you're looking at rates, is largely driven by 0:09:43.720 --> 0:09:47.319 international news. You're looking at you're looking at Brexit, You're 0:09:47.320 --> 0:09:50.839 looking at Europe, you're looking at China. That's what's driving 0:09:50.920 --> 0:09:55.120 pricing when US treasuries rather than domestic factors. I don't 0:09:55.120 --> 0:09:57.440 think you see the FED moving at all. You know, 0:09:57.480 --> 0:10:00.360 it's probably not in June, maybe not until STI number, 0:10:00.679 --> 0:10:02.880 So I think that's what's going on. In terms of 0:10:02.920 --> 0:10:05.840 where to go. I think credit still remains attractive. We 0:10:05.840 --> 0:10:09.200 saw a real rally in high yield and so, but 0:10:09.240 --> 0:10:12.000 there still maybe some juice in the apple there. But 0:10:12.240 --> 0:10:15.000 I would still be in credit rather than in sovereign 0:10:15.120 --> 0:10:19.160 simply because there is incremental return in RBO at commonwealth. 0:10:19.679 --> 0:10:22.720 So you don't see a major slowdown. What about a 0:10:22.720 --> 0:10:28.000 major correction in the stock market, That's certainly possible, But 0:10:28.200 --> 0:10:30.320 if you look at what we saw earlier in the year, 0:10:30.400 --> 0:10:34.120 we saw a pullback, A lot of the selling has 0:10:34.160 --> 0:10:36.840 been done. Where is the bad news that would force 0:10:36.880 --> 0:10:39.440 the correction in the near term. I just don't say 0:10:39.440 --> 0:10:43.320 it all right, Brad McMillan, Thank you so very much 0:10:43.320 --> 0:10:47.240 for joining us today. Thank you, Chief Investment Officer for 0:10:47.400 --> 0:10:52.959 Commonwealth Financial Network. He sees, uh, not too much move 0:10:53.040 --> 0:10:55.200 up in inflation, but a consumer that's going to keep 0:10:55.520 --> 0:10:58.400 spending and driving the economy and forward, but not so much. 0:10:58.440 --> 0:11:00.840 The FED will move right away, maybe on September, and 0:11:00.960 --> 0:11:04.800 that's a potential sweet spot for US stock investors. I'm 0:11:04.880 --> 0:11:08.320 Kathleen Hayes. Along with pim Fox coming up Dave Wilson 0:11:08.320 --> 0:11:12.120 are stocks editor, movers and shakers on Bloomberg Radio.