Speaker 1: Global business news twenty four hours a day. If Bloomberg
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Speaker 1: This is a Broomberg Business Flash from Bloomberg World Handquarters.
Speaker 1: I'm Charlie Pellett. Stock still remain law, but the SMP
Speaker 1: five hundred index has trinned. It's lost right now. It
Speaker 1: is down point one percent, have been down five tenths
Speaker 1: of one percent. The SMP falling two points down. Industrials
Speaker 1: down eighty five, a drop of five tenths of one percent,
Speaker 1: NASA stank is up nine, a gain of two tenths
Speaker 1: of one percent. Ten, you're up three thirty seconds with
Speaker 1: the old of one point eight four percent, Gold of
Speaker 1: a dollar fort heats twelve fifteen twenty on advanced there
Speaker 1: of point one percent, and crude oil down eight tenths
Speaker 1: of one percent, down forty cents now forty ninety two
Speaker 1: for a barrel of West Texas in the media crude.
Speaker 1: I'm Charlie Pellett. That's a Bloomberg Business Flash. Thank you
Speaker 1: very much, Charlie Pellett at his time Now for the
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Speaker 1: Catherine Cowdery for the e t F report. Some e
Speaker 1: t F investors may be wishing they'd paid attention to
Speaker 1: that old saying sell in May and go away. Bloomberg
Speaker 1: Intelligence analyst Eric Beltun has focused on a few e
Speaker 1: t F that have pulled back this month. The market
Speaker 1: vector Steel e t F. You probably didn't even think
Speaker 1: there was a steel et attracts companies that make steel.
Speaker 1: It got sold off in May, but this is profit taking.
Speaker 1: It was up this year up until then, so a
Speaker 1: lot of people literally are selling in May. Valcuna says
Speaker 1: investors are selling to lock in some profits. His other
Speaker 1: examples include the I Shares MSCI Turkey e t F,
Speaker 1: which again scent this year up until May and has
Speaker 1: dropped ten percent this month. He also cites the van
Speaker 1: x Vectors gold Miners e t F, which was up
Speaker 1: sent until May one and has dropped eleven per cent
Speaker 1: since then. That's your Bloomberg ETF report. I'm Katherine Calderie.
Speaker 1: You're listening to Taking Stock with Pim Box and Kathleen
Speaker 1: Hayes on Bloomberg Radio. Where is the stock market going
Speaker 1: next as it waits for the big jobs report on Friday?
Speaker 1: Is that waits for the feds next policy meeting in
Speaker 1: the middle of June. A lot of global forces buttressing
Speaker 1: stocks right now. Scott Clemmens joins us here in our
Speaker 1: New York studio. He's Chief Investment Strategies for private wealth
Speaker 1: Management at Brown Brothers Caraman here in New York City.
Speaker 1: Welcome Scott, Thank you, Kathleen. Happy summer it's here, isn't it?
Speaker 1: Big time? Big time? Well, you know, uh, this summer
Speaker 1: may be heating up the weather on the East Coast.
Speaker 1: But corporate earnings, you know, if you look at them broadly,
Speaker 1: have not Certainly some companies performing well. This is one
Speaker 1: of the big factors you're looking at as you look
Speaker 1: in the second half of the year for the US
Speaker 1: stock market. That's right. I think one of my job
Speaker 1: descriptions is that I get paid to worry, and perhaps
Speaker 1: the top of the worry list is the lack of
Speaker 1: corporate earnings. To extend the metaphor, earnings are the fuel
Speaker 1: and the tank, and the fuel tank is running sort
Speaker 1: of thin. We've had six consecutive quarters now of a
Speaker 1: year over year decline in corporate earnings for the S
Speaker 1: and P. And that's that's that's worrisome. It's easy to
Speaker 1: blame a certain amount of that on the energy sector.
Speaker 1: It's also obvious to blame the energy sector, but it's
Speaker 1: not entirely energy. It's a pretty widespread malaise and profitability
Speaker 1: in corporate America. Having said that, let's look at some
Speaker 1: individual sectors, perhaps either housing or automobiles. Is we're going
Speaker 1: to get those new figures. Yeah, those are the Those
Speaker 1: are the two big drivers of the personal consumption personal
Speaker 1: income type numbers we've gotten, and they're two strong points
Speaker 1: of the economy. Uh. And that's important because if you
Speaker 1: think about it, housing is the primary driver of wealth
Speaker 1: for most Americans. It's it's not a financial portfolio, despite
Speaker 1: most of your listener base, it's really the roof over
Speaker 1: people's heads. It's the primary store of wealth. And then
Speaker 1: the job markets the primary source of income. So as
Speaker 1: long as those two things are in decent shape, the
Speaker 1: driver of personal income and personal consumption is in pretty
Speaker 1: good shape. One of the things that I'm looking for
Speaker 1: over the balance of this year is whether or not
Speaker 1: we get an acceleration in wage growth. And we may
Speaker 1: be beginning to see that average hourly learnings up two
Speaker 1: and a half percent year over a year. That's not
Speaker 1: a great big number, but it does represent a little
Speaker 1: bit of an acceleration. That's important because that not only
Speaker 1: drives the economy, but ultimately it trickles down into corporate
Speaker 1: earnings as well. And of course we'll get that piece
Speaker 1: of news on Friday in the in the jobs report.
Speaker 1: Corporate earnings, the fact that even absent energy, they haven't
Speaker 1: been that great. As the Fed to Reserve contemplates raising
Speaker 1: the rate June July, waiting until September, we don't know
Speaker 1: should they be looking at that. The consumer, even if
Speaker 1: we get stronger wage growth, consumer is not roaring. It
Speaker 1: just kind of plotting along to that. I'd be more
Speaker 1: concerned about corporate earnings and corporate profits, you know. I
Speaker 1: think if that's concerned about a lot of things, not
Speaker 1: enough to hold them back from raising rates in either
Speaker 1: June or July would be my bed. And it's sort
Speaker 1: of a coin flipp as too, which the two it is.
Speaker 1: I believe the FED is looking for reasons to raise
Speaker 1: interest rates, because if they were simply dealt the hand
Speaker 1: that they've got, which is an unemployment rate of five percent,
Speaker 1: a reasonably good economy, it's not running away that it's
Speaker 1: it's not strong, but compared to the rest of the world,
Speaker 1: it's okay. And they asked themselves, is that consistent with
Speaker 1: interest rates measured in basis points instead of percentage points? Yeah,
Speaker 1: I think the Fed would very much like to raise
Speaker 1: interest rates. They're not being held back by politics, that's
Speaker 1: being an election year. Uh, They're not being prompted by inflation.
Speaker 1: They're no real inflationary concerns. But I think they'd rather
Speaker 1: move them sooner rather than later, simply that they can
Speaker 1: reastore a little bit of a normality to interest rates,
Speaker 1: knowing full well that at some point they're going to
Speaker 1: want to cut interest rates again. They can't say that
Speaker 1: that would lead to concern and maybe even panic in
Speaker 1: the marketplace, But they right now don't have the ability
Speaker 1: to lower interest rates in response to an economic downturn.
Speaker 1: That tools not in the toolbox. They very much like
Speaker 1: to put it back. Scott, what about investing in stocks?
Speaker 1: Most of our client moneys and stocks. And it's simply
Speaker 1: because the risk return trade off and fixed income, at
Speaker 1: least traditional fixed income is simply not that appealing. So
Speaker 1: we are finding within the market and and and to
Speaker 1: go back to an earlier question, you ask those parts
Speaker 1: of the market that that are reliant on consumers spending,
Speaker 1: you find that mostly in the consumer discretionary even the
Speaker 1: consumer nondiscretionary. Healthcare would be another our investors paying too
Speaker 1: much though for these particular types of stuff. Because I
Speaker 1: keep thinking at if you tell me that corporate earnings
Speaker 1: are terrible, that a generalization to understanding, but in certain
Speaker 1: sectors they're terrible. You want to buy something when they're
Speaker 1: terrible because you want to make sure that someone else
Speaker 1: buys it from you when they think it's great, exactly right,
Speaker 1: exactly right, buy low and sell high. I seem to
Speaker 1: call that being one of the investment UH guys to success.
Speaker 1: It can help you keep solving. It's still it's still
Speaker 1: very much the case. So it's a question of value
Speaker 1: versus price. And although the overall market is reasonably fully
Speaker 1: priced about twenty one times trailing earnings, that's not a forecast,
Speaker 1: that's trailing earnings operating earnings. There are certainly UH sectors
Speaker 1: and companies within the market that aren't trading at that
Speaker 1: it's a very narrowly led market. Even though as we
Speaker 1: sit here today, the SNP five hundred is within let's say,
Speaker 1: a couple of percent of a new all time high,
Speaker 1: most of the stocks in the market are not, So
Speaker 1: there are opportunities. I just ran this data today. There's
Speaker 1: something along the lines of a hundred and fifty stocks
Speaker 1: within the SNP five hundred, So a hundred of the
Speaker 1: names in the index are or more below they're fifty
Speaker 1: two week high. So there are opportunities within the market,
Speaker 1: although the overall index level wouldn't lead you necessarily that conclusion.
Speaker 1: So give us some industries. I know you can't share
Speaker 1: your individual company names that you're investing your clients many in,
Speaker 1: but let's start with something that you know, technology and
Speaker 1: within within technology, what part of technology you do or
Speaker 1: don't like, because it's a pretty broad field. That's a
Speaker 1: broad field, it's a very broad field. We draw a
Speaker 1: distinction within technology between service providers and product providers, and
Speaker 1: we love to own companies that sell essential products and
Speaker 1: services that have repeat customers. That ends to be more
Speaker 1: of a service type business model than a product type
Speaker 1: business model, and particularly when that services relying on demand
Speaker 1: from the consumer, and we're pretty optimistic about the strength
Speaker 1: of personal consumption. We're finding opportunities in those areas. Mascott,
Speaker 1: I understand you help manage it. Brown Brothers haremon about
Speaker 1: twenty seven billion dollars of customer assets. What are some
Speaker 1: of the questions that you are being asked by these customers? Well,
Speaker 1: and some of them are the obvious questions. When is
Speaker 1: the FED going to raise interest rates and by how much?
Speaker 1: And that's really born out of a desire to earn
Speaker 1: a reasonable rate of return out of traditional fixed income
Speaker 1: conservative investors. And I think I would characterize most of
Speaker 1: our clients as conservative investors with a lower case love
Speaker 1: the idea of earning a reasonable rate of return on
Speaker 1: stable patient capital. And that's what's a reasonable rate of return,
Speaker 1: something measured in percentage points, not basis points. Um. I
Speaker 1: was talking to a colleague uh last week about money
Speaker 1: market yields, and we looked at a graph and and
Speaker 1: and realized, much to our shock, that money markets back
Speaker 1: in two thousand and seven not ancient history. You can
Speaker 1: earn five five and a quarter percent on money markets.
Speaker 1: And when you say that today you sound like granddad
Speaker 1: talking about nickel coax down at the corner store. But
Speaker 1: that that's an extraordinary example of how far we've come
Speaker 1: to get five and a quarter percent today. And fixed
Speaker 1: income you have to own non investment grade debt junk bonds.
Speaker 1: So a little less than ten years you've gone from
Speaker 1: money markets to junk to earn the same amount of return.
Speaker 1: That's a pretty telling statement about how challenging it is
Speaker 1: for investors today. Coogog overseas equity market. You started your
Speaker 1: career as a portfolio manager looking at European stocks, at
Speaker 1: Asian equities, So do you see buying opportunities in those
Speaker 1: areas of the world selectively? And and and Kathleen, more
Speaker 1: often than not in the shares of multinational companies that buy,
Speaker 1: if you will, historical accident happen to be located in
Speaker 1: a certain part of the world. But but really, who
Speaker 1: do not respect any geographic borders when it comes to
Speaker 1: pursuing clients and pursuing business growth? And and I believe
Speaker 1: as an investor we should look through the geographic borders
Speaker 1: as well and looking for opportunities. So there are fewer
Speaker 1: and far between, and where we find them, it's more
Speaker 1: in the multinational sector. Do you have any thoughts on
Speaker 1: the US dollar right now? You know, I've got colleagues
Speaker 1: who pay opportation and that mark chancel, you know, mar
Speaker 1: in terms of what it means for corporate profits, because
Speaker 1: I keep hearing this thing, well, you know the reason
Speaker 1: that they're having trouble selling things overseas is, you know,
Speaker 1: the dollars too expensive. I I generally, I think that's
Speaker 1: more of an excuse than a reason. When you actually
Speaker 1: open the hood and look below the hood of what
Speaker 1: companies do. They're either operationally hedged or they're financially hedged.
Speaker 1: So it's it's a handy reason for I'm gonna be
Speaker 1: cynical now for a CFO to explain away a quarters miss,
Speaker 1: but I think it's more excuse than it is a
Speaker 1: reason more often than not. Thank you very much, much appreciated.
Speaker 1: Scott Clements is the chief investment strategist Private wealth Management
Speaker 1: for Brown Brothers Harriman, helping to manage nearly twenty seven
Speaker 1: billion dollars of customer assets. You're listening to take king Stock,
Speaker 1: I'm pim Fox my co host Kathleen Hayes, and we're
Speaker 1: gonna take you through to the close of trading right
Speaker 1: now on taking stock on Bloomberg Radio. H