Speaker 1: Global business news twenty four hours a day, Cat Bloomberg
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Speaker 1: radio please. He's a Bloomberg business plan for am Bloomberg
Speaker 1: World hand Quarters. I'm Charlie Pellot. The DAL, the SMP,
Speaker 1: NEZ dank all slumping. We have got thirteen minutes to
Speaker 1: go ahead of the close. US equities on cautious footing
Speaker 1: b SMP down two points now at seventy two and
Speaker 1: dropped there of one tenth of one percent. The Downtown
Speaker 1: fifty one down two tenths of one percent, as stank
Speaker 1: is down twenty three, down four tenths of one percent.
Speaker 1: The ten year of five thirty seconds, the yield two
Speaker 1: point two four percent, Gold up nineteen thirty the ounce
Speaker 1: have an assets advancing gold now at twelve seventy eight.
Speaker 1: The ounce up one and a half percent. West Texas
Speaker 1: Intermediate crude oil up thirty eight cents of barrel forty
Speaker 1: nine fifty five on w t I. That is a
Speaker 1: gain of eight tenths of one percent. I'm Charlie Pellett.
Speaker 1: That's a Bloomberg business flash. Thank you very much, Charlie Pellett.
Speaker 1: Well Bloomber Markets has brought to you on the ever
Speaker 1: word bloom Markets is brought to you by black Rock.
Speaker 1: Worried about market volatility and minimum volatility strategies may be
Speaker 1: able to help. To learn more of please visit black
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Speaker 1: Hurricanes can hit ocean front property and they can also
Speaker 1: strike junk e t F. Listen, They're called drunk bonds
Speaker 1: for a reason. And I think you know inside the industry,
Speaker 1: there's some professionals who are worried about the high yield
Speaker 1: debt e t s having a problem when there's a
Speaker 1: real sell off, because how could the e t F
Speaker 1: be so liquid when the underlying isn't his liquid. Bloomberg
Speaker 1: intelligen CTF analyst Eric boltun Is calls it a valid concern.
Speaker 1: If you take h YG the black Rock high Yield
Speaker 1: dead ETF only of the bonds in their trade every day,
Speaker 1: and only six trade on any given day. That is
Speaker 1: totally different than the equitiside of the market or treasuries,
Speaker 1: So it is a legitimate fear. H y G has
Speaker 1: been up about five percent over the past five years,
Speaker 1: but beltun Is warns that the e t F is
Speaker 1: especially sensitive to interest rates and credit concerns. When a
Speaker 1: hurricane hits, it's gonna hurt. I mean, if you look
Speaker 1: at h y G it's had about a dozen days
Speaker 1: below three percent drops. So that to me is the
Speaker 1: bigger takeaway. Don't buy this thing. I equated to beach
Speaker 1: property in a Florida a lot of benefits, but you
Speaker 1: better expect an occasional hurricane. I'm Jenna Dagenhardt and that's
Speaker 1: your Bloomberg et F report. This is Bloomberg Markets with GARYL.
Speaker 1: Masser and Corey Johnson on Bloomberg Radio. There's an air
Speaker 1: rab blow vent of hagginess and there did the fresh
Speaker 1: Prince is new definition of some of that. Yes, that's
Speaker 1: George Gersh from the summertime. That would be fresh Prince.
Speaker 1: I believe, of course, same thing all right, anyway, summertime
Speaker 1: and it is summertimes. And Michael Sheldon's right now, chief
Speaker 1: investment officer of Arty On Financial Group, looking at summertime
Speaker 1: and selling May and go away Maybe wasn't the best advice.
Speaker 1: And this time summertime when it comes to dequity Marcus Michael, well,
Speaker 1: right now I think we're as we look ahead, we
Speaker 1: haven't had a. We haven't had a five percent or
Speaker 1: a ten percent pullback in some time, and on average,
Speaker 1: the markets experience a five percent pullback about every seven
Speaker 1: months or so, in a uh ten percent pullback or
Speaker 1: more about every twenty four months or so. So we're
Speaker 1: maybe a little bit overdue. But I think the bigger
Speaker 1: picture really for us is that we don't see a
Speaker 1: recession ahead. Corporate profits are rising at a healthy pace.
Speaker 1: I'm sorry, go ahead, sure, corporate profits look good. You're
Speaker 1: optimistic on that. Yeah, corporate profits are rising in the
Speaker 1: double digit rate. U We've now had about of the
Speaker 1: company's reports second quarter results and EPs are once again
Speaker 1: rising at a double digit rate, which are higher than
Speaker 1: estimates going into the quarter. Revenues are up about five
Speaker 1: and margins actually surprised on the upside by about thirty
Speaker 1: eight basis points. Are so I think some of the
Speaker 1: other things to point to, our credit spreads remain very healthy.
Speaker 1: Defense raising rates, yes, and that could be a longer
Speaker 1: term issue, especially as they wind down their balance sheet,
Speaker 1: but right now they're taking a gradual approach. And one
Speaker 1: of the factor we keep an eye on is the
Speaker 1: Conference Boards Leading Economic Index, the l e I comes
Speaker 1: out every month, and it basically forecasts the direction of
Speaker 1: the economy over the next two to three quarters and
Speaker 1: right now that increase for ten months in a row.
Speaker 1: So right now, we remain optimistic, we remain constructive, but
Speaker 1: we're aware of the fact that some kind of pullback
Speaker 1: or market correction maybe in the cards before too long.
Speaker 1: But it's it's hard to time a correction. You have
Speaker 1: to get the right time to get out of the
Speaker 1: market and the right time to get in. But so
Speaker 1: overall we're constructive, but aware of the market maybe in
Speaker 1: for a little bit of a bump or two. So
Speaker 1: what do you do, I mean, other things you don't
Speaker 1: want to own? Given that, I mean, I'm really surprised
Speaker 1: to see, for example, the strength of Netflix today after
Speaker 1: an important business partner, Disney, and not his plans to
Speaker 1: not only not be a business partner in some very
Speaker 1: important ways anymore, but also uh, you know, compete with
Speaker 1: them very directly. Well, we can't, unfortunately, we can't talk
Speaker 1: about individual companies. But but in terms of I'm gonna
Speaker 1: make it easy for let's let me put it easy forward. Say,
Speaker 1: if we look at Netflix, if we look at Tesla,
Speaker 1: if we look at some of those momentum stocks that
Speaker 1: have carried a lot of this market. What's happening there
Speaker 1: that they're still carrying this market? Do you still want
Speaker 1: to be in those stocks if you're saying that is
Speaker 1: the possibility to sell off, Well, it's interesting. I wrote
Speaker 1: a blog about the fact that there there's been a
Speaker 1: lot of press about the fang type stocks and a
Speaker 1: small narrow group of growth stocks have been leading to markets.
Speaker 1: And if you look back over the past five or
Speaker 1: twenty years or so, the number of stocks or the
Speaker 1: senators stocks that are creating the majority of games this
Speaker 1: year is actually not that different than what you've seen
Speaker 1: over the past twenty years or so. Yes, some of
Speaker 1: these growth stocks are getting a lot of a lot
Speaker 1: of the press and a lot of the market buzz,
Speaker 1: but but overall there you know, until just about a
Speaker 1: couple of weeks ago when we started to see a
Speaker 1: little bit of weakness in the small caps and the
Speaker 1: transport stocks, the altar, the advanced decline line for the
Speaker 1: S and P five hundred, which looks at all the
Speaker 1: stocks rising on an ongoing basis, was at all time highs.
Speaker 1: So we we have been seeing fairly broad participation. But
Speaker 1: the leadership has been in those bank stocks, and I
Speaker 1: think the reason for that it's it's really interesting to
Speaker 1: look at is growth. Last year value outperformed growth, but
Speaker 1: this year growth is one once again at performing value.
Speaker 1: And the reason for that is so far this economic cycle,
Speaker 1: GDP growth has only been about two and when investors
Speaker 1: are unsure about the level of economic growth, they're going
Speaker 1: to sort of migrate towards these growth stocks, which can
Speaker 1: produce not revenue growth of two or three percent, but
Speaker 1: ten or over time. So when the GDP is crawling,
Speaker 1: growth stocks hotter growth stocks, growth stock typically performed better
Speaker 1: because they're able to put up no matter what the
Speaker 1: despite the economic environment, they are able to put up
Speaker 1: more robot, more robust revenue and earning super share growth
Speaker 1: because of the growth profile that they demonstrate. So the
Speaker 1: correlator might be that the caterpillars of the world and
Speaker 1: the consumer staples and stuff aren't in a in a
Speaker 1: in a modeling GDP world aren't going to get see
Speaker 1: a lot of growth because they will also model along.
Speaker 1: But that the intrinsic story of a tech company changing
Speaker 1: something might or a growth company might actually grow regardless
Speaker 1: the economy. Well, every sector is a little bit different
Speaker 1: in the case of consumer staples, for example, or utilities,
Speaker 1: which are two sectors that were not overly inclined towards
Speaker 1: Both of those have above average valuation levels right now,
Speaker 1: and they're also not putting up very strong revenue growth,
Speaker 1: So both of those are sectors were sort of staying
Speaker 1: away from. And in terms of the growth versus value,
Speaker 1: that's a that's a big story on the minds of investors.
Speaker 1: Growth is continuing to do well this year, and for
Speaker 1: value to really start to do better, we need to
Speaker 1: see a sustained pickup in economic growth, and we need
Speaker 1: to see stronger margins. We need to see more robust
Speaker 1: economic data on a sustained basis, and part of that
Speaker 1: could happen if some of the Trump plans come to fruition.
Speaker 1: But at this point, the market's going up despite the
Speaker 1: economic plans from Trump really not coming coming through, so
Speaker 1: that growth that could help the value will probably more
Speaker 1: more of a two thousand eighteen event if it happens.
Speaker 1: I mean, it's pretty remarkable to see what has happened
Speaker 1: with the value trade, because, like you mentioned, there was
Speaker 1: lots of optimistic there after Trump was elected, and that
Speaker 1: seems to have faded. But I also want to ask
Speaker 1: you about something that you've done with your portfolio that
Speaker 1: it sounds is not in the norm for your actions,
Speaker 1: and that would be adding low cost ets. Certain if
Speaker 1: you could quickly walk us through what that decision was
Speaker 1: to add ets to your portfolio and seconds. Thanks sure.
Speaker 1: Um what our d M financial We believe it's important
Speaker 1: to focus. We think there's a place for both active
Speaker 1: and passive management. The majority of active managers have not
Speaker 1: outperformed the benchmarks, but we do a lot of homework
Speaker 1: on that. We kicked the tires and we've been able
Speaker 1: to find active managers that outperform. At the same time,
Speaker 1: we've also found some passive managers to complement those in
Speaker 1: areas of the market. We that we think when you
Speaker 1: put together an entire portfolio that that works just as well.
Speaker 1: So we believe there's a place where passive and act
Speaker 1: invest and active investments within a portfolio. Well. Certainly interesting
Speaker 1: times and lots of options out there. It's sort of
Speaker 1: amazing all the different types of things that one computer
Speaker 1: to portfolio. These guys, um, uh, interesting that you guys
Speaker 1: are looking across all platforms. Michael Shelton Georges right now
Speaker 1: joining us. Thank you very much appreciate the Chef Investment
Speaker 1: Officer from r DM Financial Group. You're listen to Bloomberg Markets.
Speaker 1: I'm Bloomba ready with Corey Johnson and Danny Burger. This
Speaker 1: is Bloomberg