1 00:00:02,320 --> 00:00:05,640 Speaker 1: Global business news twenty four hours a day. If Bloomberg 2 00:00:05,720 --> 00:00:08,840 Speaker 1: dot Com the radio plus mobile lap and on your radio, 3 00:00:09,080 --> 00:00:13,240 Speaker 1: this is a Bloomberg Business flag from Bloomberg World Headquarters. 4 00:00:13,360 --> 00:00:16,439 Speaker 1: I'm Charlie Pellot. Stocks are retreating from records as a 5 00:00:16,520 --> 00:00:20,480 Speaker 1: tumble in the price of crude sinks energy shares West 6 00:00:20,520 --> 00:00:23,759 Speaker 1: Texas Intermediate Crude down two point six percent following a 7 00:00:23,880 --> 00:00:27,000 Speaker 1: dollar fourteen of arrel forty three oh five Right now 8 00:00:27,120 --> 00:00:30,520 Speaker 1: on w t I. The tenure down to thirty seconds, 9 00:00:30,640 --> 00:00:33,880 Speaker 1: yield one point five seven percent. Gold down seven ninety 10 00:00:33,920 --> 00:00:36,920 Speaker 1: the ounce to thirteen fifteen, a drop there of six 11 00:00:36,960 --> 00:00:40,600 Speaker 1: tenths of one percent. SMP five hundred index down seven 12 00:00:40,880 --> 00:00:43,559 Speaker 1: to sixty seven to drop there of four tenths of 13 00:00:43,600 --> 00:00:47,400 Speaker 1: one percent down. Industrials down eighty five to eighteen thousand, 14 00:00:47,520 --> 00:00:49,839 Speaker 1: four hundred eighty five, a drop of five tenths of 15 00:00:49,920 --> 00:00:55,080 Speaker 1: one percent. I'm Charlie Palot, and that's a Bloomberg Business flash. 16 00:00:55,200 --> 00:00:58,200 Speaker 1: You're listening to Taking Stop with Kathleen Hayes and Pim 17 00:00:58,280 --> 00:01:03,639 Speaker 1: Fox on Bloomberg Radio. Blow interest rates stocks well, they 18 00:01:03,640 --> 00:01:06,520 Speaker 1: are up about six percent year to day, measured by 19 00:01:06,560 --> 00:01:10,200 Speaker 1: the SMP five hundred just last week stock crisis closing 20 00:01:10,880 --> 00:01:13,480 Speaker 1: at a high for the second week in a row. 21 00:01:14,440 --> 00:01:17,800 Speaker 1: We have lots of uncertainty always in the stock market 22 00:01:17,880 --> 00:01:20,760 Speaker 1: and for your investments. Tom Wilson is the senior investment 23 00:01:20,800 --> 00:01:24,240 Speaker 1: manager and managing director of Wealth Advisory at Brinker Capital, 24 00:01:24,560 --> 00:01:28,840 Speaker 1: helping to manage eighteen billion dollars of customer assets. He 25 00:01:28,959 --> 00:01:32,720 Speaker 1: joins us from Philadelphia. Tom, great to have you with us, 26 00:01:32,760 --> 00:01:35,080 Speaker 1: And I don't know are you gonna be attending the 27 00:01:35,319 --> 00:01:39,720 Speaker 1: uh the Democratic National Convention at all? Hey Ben, thanks 28 00:01:39,720 --> 00:01:42,360 Speaker 1: for having me and at the moment that's not my plans. 29 00:01:42,360 --> 00:01:46,040 Speaker 1: Probably certainly the watching on the television. All right. Well, 30 00:01:46,040 --> 00:01:48,400 Speaker 1: the reason I brought up the convention, and of course 31 00:01:48,640 --> 00:01:53,360 Speaker 1: it begins tonight in is in Philadelphia, is what effect 32 00:01:53,400 --> 00:01:56,360 Speaker 1: do you believe that the election cycle is having on 33 00:01:56,520 --> 00:02:00,800 Speaker 1: investment strategy? Sure? Well, when you go back and look 34 00:02:00,880 --> 00:02:04,560 Speaker 1: at years where there's an open election which means the 35 00:02:04,680 --> 00:02:08,639 Speaker 1: current president could no longer run, you find that in 36 00:02:09,120 --> 00:02:12,680 Speaker 1: this year the stock market returns tend to go sideways 37 00:02:13,000 --> 00:02:16,839 Speaker 1: as opposed to years where the current incumbinent can run 38 00:02:17,000 --> 00:02:19,560 Speaker 1: for president. And we think the reason behind that is 39 00:02:19,600 --> 00:02:22,200 Speaker 1: simply the market doesn't like uncertainty, so when you have 40 00:02:22,240 --> 00:02:25,240 Speaker 1: an open election, it increases the uncertainty as far as 41 00:02:25,240 --> 00:02:28,600 Speaker 1: which party is going to take power, and because of that, 42 00:02:28,720 --> 00:02:30,560 Speaker 1: the market it's more of an unknown and acts as 43 00:02:30,600 --> 00:02:32,639 Speaker 1: a bit of a bit of a headwind. Well as 44 00:02:32,680 --> 00:02:37,720 Speaker 1: someone who manages money for institutional and high net worth clients. 45 00:02:38,600 --> 00:02:45,079 Speaker 1: Over the years, have you observed any correlation, any real 46 00:02:45,240 --> 00:02:48,720 Speaker 1: direct connecting the knots between you know, who's in the 47 00:02:48,760 --> 00:02:52,600 Speaker 1: White House and whether or not it really influences the 48 00:02:52,680 --> 00:02:55,120 Speaker 1: economy and therefore the stock market that much. You know, 49 00:02:55,160 --> 00:02:59,480 Speaker 1: Bill Clinton said it's the economy stupid years ago. Uh. 50 00:02:59,560 --> 00:03:02,600 Speaker 1: You know, Donald Trump is advertising himself as a businessman 51 00:03:02,639 --> 00:03:04,880 Speaker 1: who can get things done, as somebody who has to 52 00:03:04,919 --> 00:03:07,519 Speaker 1: manage money. What do you look for in a candidate? Yeah, 53 00:03:07,680 --> 00:03:10,760 Speaker 1: thank you, Kathleen Well On the first part of your question, 54 00:03:10,760 --> 00:03:13,480 Speaker 1: as far as what does the market tend to like, 55 00:03:14,240 --> 00:03:18,840 Speaker 1: Oddly enough, the market tends alike when there is a 56 00:03:18,880 --> 00:03:21,360 Speaker 1: different party in charge of the White House compared to 57 00:03:22,240 --> 00:03:25,200 Speaker 1: the party that's in charge of Congress. So set another way, 58 00:03:25,320 --> 00:03:29,200 Speaker 1: the market tends to like gridlock. Surprisingly enough, Uh, we 59 00:03:29,280 --> 00:03:31,760 Speaker 1: believe the thought process there is that when there's gridlock, 60 00:03:31,800 --> 00:03:35,000 Speaker 1: it will be more of a uh status quo. And 61 00:03:35,040 --> 00:03:39,480 Speaker 1: therefore businesses know what the rules will will be and 62 00:03:39,960 --> 00:03:43,840 Speaker 1: as a result, businesses can plan accordingly, make capital outlays, 63 00:03:44,200 --> 00:03:46,800 Speaker 1: and be able to spend the funds that they have, 64 00:03:47,280 --> 00:03:49,600 Speaker 1: and it helps to take away a bit of that uncertainty, 65 00:03:49,600 --> 00:03:53,200 Speaker 1: as opposed to when one party is in charge of 66 00:03:53,240 --> 00:03:56,840 Speaker 1: both the executive branch and a few charge of the 67 00:03:56,840 --> 00:04:00,200 Speaker 1: White House as well as charge of Congress, then you 68 00:04:00,280 --> 00:04:03,680 Speaker 1: just don't know all the rules that may change. That 69 00:04:03,800 --> 00:04:07,360 Speaker 1: creates more of more of an uncertainty there, Tom Wilson, 70 00:04:07,680 --> 00:04:10,680 Speaker 1: what is the single or maybe there are others, but 71 00:04:10,760 --> 00:04:14,200 Speaker 1: just give us one mistake or one fail that you 72 00:04:14,320 --> 00:04:16,600 Speaker 1: had in the last twelve months. You're one call that 73 00:04:16,680 --> 00:04:21,960 Speaker 1: did not work out well? If there was one thing too, 74 00:04:22,200 --> 00:04:24,560 Speaker 1: and there's obviously in the investment business, it's a it's 75 00:04:24,560 --> 00:04:27,360 Speaker 1: a humbling business. So from time to time you're you're 76 00:04:27,400 --> 00:04:32,600 Speaker 1: gonna uh you know, make uh mistakes as you as 77 00:04:32,600 --> 00:04:35,640 Speaker 1: you put it. But probably the one item is we 78 00:04:35,640 --> 00:04:40,240 Speaker 1: we underestimated how low interest rates would would go. Um 79 00:04:40,360 --> 00:04:42,880 Speaker 1: why we felt that interest rates the fear of rates 80 00:04:42,960 --> 00:04:46,320 Speaker 1: moving up rapidly was not a risk. I think many 81 00:04:46,360 --> 00:04:49,680 Speaker 1: investors did not anticipate rates continue to go down from 82 00:04:49,680 --> 00:04:52,360 Speaker 1: the levels that they were just twelve months ago. So 83 00:04:52,400 --> 00:04:55,640 Speaker 1: what does that mean for you now when you've seen 84 00:04:55,720 --> 00:04:58,960 Speaker 1: just how they could pick up and rally again, pushing 85 00:04:58,960 --> 00:05:03,400 Speaker 1: those yields UH two lows and even in some case 86 00:05:03,520 --> 00:05:06,200 Speaker 1: record lows again when you look outside the United States, 87 00:05:06,200 --> 00:05:09,360 Speaker 1: I mean, it just seems I know there's a way 88 00:05:09,400 --> 00:05:11,400 Speaker 1: to invest in fixed income. I know it helps balance 89 00:05:11,400 --> 00:05:14,240 Speaker 1: the portfolio, but in some in some sense you say, man, 90 00:05:14,240 --> 00:05:17,360 Speaker 1: oh man, why would you even look at bonds? Now? Sure, well, 91 00:05:17,480 --> 00:05:19,640 Speaker 1: part of that is because of the balancing of the portfolio. 92 00:05:19,680 --> 00:05:22,760 Speaker 1: I mean, we we do take a multi asset class 93 00:05:22,760 --> 00:05:25,599 Speaker 1: approach here at Brinker and where we think that fixed 94 00:05:25,640 --> 00:05:28,760 Speaker 1: income is an important element of one's portfolio and it 95 00:05:28,839 --> 00:05:31,599 Speaker 1: does help the hedge against uncertainty. So even if you 96 00:05:31,640 --> 00:05:35,000 Speaker 1: get the interest rate direction call wrong, when there's a 97 00:05:35,000 --> 00:05:37,840 Speaker 1: geopolitical event that takes place in the market, it's sort 98 00:05:37,839 --> 00:05:40,839 Speaker 1: of shocks things such as Brexit back at the end 99 00:05:40,880 --> 00:05:45,840 Speaker 1: of June. Having a piece of your portfolio allocated to conservative, 100 00:05:46,160 --> 00:05:49,279 Speaker 1: high quality fixed income UH will tend to do well 101 00:05:49,320 --> 00:05:53,960 Speaker 1: in those periods of uncertainty. Now we also think, though, 102 00:05:54,000 --> 00:05:57,800 Speaker 1: is that because interest rates are so low um it 103 00:05:57,920 --> 00:06:01,680 Speaker 1: does create a kind of a negative headwind for the 104 00:06:01,720 --> 00:06:05,000 Speaker 1: fixed income asset class. So we also like the idea 105 00:06:05,040 --> 00:06:09,120 Speaker 1: of allocating towards absolute return vehicles, and absolute return vehicles 106 00:06:09,120 --> 00:06:11,200 Speaker 1: tend to try to get a a steady way to 107 00:06:11,240 --> 00:06:16,240 Speaker 1: return regardless of the overall economic environment, so they tend 108 00:06:16,240 --> 00:06:20,120 Speaker 1: to be a lot less interest rate sensitive. What's your 109 00:06:20,160 --> 00:06:25,000 Speaker 1: call on energy companies, Well, what we've see energy has 110 00:06:25,040 --> 00:06:29,560 Speaker 1: been very very interesting, uh in the today, particularly of 111 00:06:29,800 --> 00:06:31,880 Speaker 1: a day where oil is down and the market's gone 112 00:06:31,920 --> 00:06:34,800 Speaker 1: down along with it as well. What we saw in 113 00:06:34,880 --> 00:06:37,919 Speaker 1: the in the first quarter is that the direction of 114 00:06:38,040 --> 00:06:42,080 Speaker 1: oil and the stock market was highly correlated. So oil 115 00:06:42,080 --> 00:06:44,279 Speaker 1: continued to go down and down during the first quarter, 116 00:06:44,560 --> 00:06:46,799 Speaker 1: you saw the markets go down along with it as well. 117 00:06:47,120 --> 00:06:50,400 Speaker 1: In the second quarter, as oil prices began to rise, 118 00:06:50,520 --> 00:06:53,400 Speaker 1: you saw the market move up as well. And as 119 00:06:53,440 --> 00:06:55,560 Speaker 1: the quarter progressed, you actually began to see that the 120 00:06:55,560 --> 00:06:58,239 Speaker 1: price of oil and the price of the markets became 121 00:06:58,279 --> 00:07:01,600 Speaker 1: independent once again of one another. So when oil is 122 00:07:01,680 --> 00:07:05,320 Speaker 1: really really low, it tends to be a negative harbagure 123 00:07:05,839 --> 00:07:09,359 Speaker 1: of weak global growth. As oil begins to rise and 124 00:07:09,360 --> 00:07:12,800 Speaker 1: get out of that real low low territory. When I 125 00:07:12,840 --> 00:07:17,560 Speaker 1: say that I meant dollars a barrel. UM oil can 126 00:07:17,560 --> 00:07:20,920 Speaker 1: trade independently of the of the market. As we think 127 00:07:20,920 --> 00:07:25,240 Speaker 1: about energy companies, we're getting to that anniversary of really 128 00:07:25,280 --> 00:07:27,240 Speaker 1: low oil rates, and as we look at the year 129 00:07:27,400 --> 00:07:31,480 Speaker 1: year comparable oil prices are higher. The market is definitely 130 00:07:31,520 --> 00:07:35,520 Speaker 1: anticipating better things from an earnings perspective coming out of 131 00:07:35,520 --> 00:07:38,480 Speaker 1: the energy sector, which in turn should help the whole 132 00:07:38,760 --> 00:07:41,280 Speaker 1: UH SMP five hundred as far as earnings growth as 133 00:07:41,280 --> 00:07:43,320 Speaker 1: we move into the third and the fourth quarter of 134 00:07:43,320 --> 00:07:45,800 Speaker 1: this year. And what do you make of the story 135 00:07:45,840 --> 00:07:50,640 Speaker 1: today by Bloomberg's own Mark Shank, beware oil bowls. Just 136 00:07:50,680 --> 00:07:53,080 Speaker 1: as US oil production seems low enough to drain supplies, 137 00:07:53,120 --> 00:07:56,240 Speaker 1: demand is about to fall off a cliff consumption gasing 138 00:07:56,320 --> 00:07:59,520 Speaker 1: consumption that is usually ebbs in August and September. And 139 00:07:59,560 --> 00:08:00,840 Speaker 1: he said that a lot of people worried that the 140 00:08:00,840 --> 00:08:03,720 Speaker 1: price is gonna start falling again. Yeah. Well, and certainly 141 00:08:03,720 --> 00:08:06,440 Speaker 1: if oil demand falls off the cliff, yes, we're gonna 142 00:08:06,480 --> 00:08:08,640 Speaker 1: have a certain problem with the price of oil, and 143 00:08:08,680 --> 00:08:11,040 Speaker 1: it will, it will then it will definitely go down. 144 00:08:11,600 --> 00:08:14,160 Speaker 1: UM oil in general, though, of course, is a UH 145 00:08:14,320 --> 00:08:17,440 Speaker 1: you know, a global UH industry, so we need to 146 00:08:17,480 --> 00:08:21,000 Speaker 1: really look at the global demand as well. And UH 147 00:08:21,080 --> 00:08:26,320 Speaker 1: not that long ago the International Energy Agency Administration excuse me, 148 00:08:26,440 --> 00:08:31,440 Speaker 1: actually increase their UH forward looking assumptions for global demand 149 00:08:32,120 --> 00:08:35,560 Speaker 1: up from about eight hundred million barrels UH for the 150 00:08:35,640 --> 00:08:38,800 Speaker 1: year too close to one point three point point four billion. 151 00:08:39,280 --> 00:08:44,080 Speaker 1: So what we're seeing globally is on on balance, a 152 00:08:44,080 --> 00:08:46,200 Speaker 1: little bit an increase in demand for oil. At the 153 00:08:46,240 --> 00:08:50,240 Speaker 1: same time, globally, we've seen rig comes rig counts come 154 00:08:50,280 --> 00:08:52,360 Speaker 1: down as well, so we think that we're moving a 155 00:08:52,360 --> 00:08:54,760 Speaker 1: little bit closer to a point of equilibrium. We're not 156 00:08:54,800 --> 00:08:57,160 Speaker 1: there yet, but we wouldn't be over the surprise in 157 00:08:57,200 --> 00:08:59,520 Speaker 1: the next six or twelve months if oil is able 158 00:08:59,520 --> 00:09:02,560 Speaker 1: to settle it more to equilibrium type of price. Do 159 00:09:02,679 --> 00:09:06,559 Speaker 1: you foresee any increase in consumer spending? Do you think 160 00:09:06,600 --> 00:09:12,120 Speaker 1: that consumer discretionary stocks will do well? Damn? Consumer discretionary 161 00:09:12,160 --> 00:09:17,040 Speaker 1: spending should be increasing as we continue to progress throughout 162 00:09:17,040 --> 00:09:19,559 Speaker 1: the year. And there's a couple of data points that 163 00:09:19,640 --> 00:09:23,520 Speaker 1: we would point to that would back this up. Um 164 00:09:23,679 --> 00:09:25,840 Speaker 1: One is that you do have wages on the rise, 165 00:09:26,080 --> 00:09:28,000 Speaker 1: and it's been shown that as wages will go up, 166 00:09:28,520 --> 00:09:31,640 Speaker 1: consumer spending pence to go up as well. Uh. Two 167 00:09:31,720 --> 00:09:35,840 Speaker 1: is at home prices have not only been uh strong, 168 00:09:35,920 --> 00:09:39,080 Speaker 1: but they've been increasing in price. Uh. Most recently you 169 00:09:39,160 --> 00:09:43,480 Speaker 1: had the case Schiller twenty city home price index up 170 00:09:43,520 --> 00:09:47,560 Speaker 1: five pot year of a year. So with interest rates 171 00:09:47,559 --> 00:09:49,960 Speaker 1: being as low as they are right now, we would 172 00:09:49,960 --> 00:09:54,000 Speaker 1: expect home prices continue to rise. The reason why that's important, 173 00:09:54,040 --> 00:09:58,240 Speaker 1: The reason why that's significant is for the average consumer, 174 00:09:59,080 --> 00:10:01,920 Speaker 1: their largest I said, isn't their stock portfolil, but rather 175 00:10:01,960 --> 00:10:04,360 Speaker 1: it's their house. So as the home price goes up, 176 00:10:04,600 --> 00:10:07,480 Speaker 1: they feel more confident and that tends to lead to uh, 177 00:10:07,679 --> 00:10:10,959 Speaker 1: the more spending. Of course, we have that SMPK Suler 178 00:10:11,040 --> 00:10:14,520 Speaker 1: Home Press Index out tomorrow. TOMA. One more question. The 179 00:10:14,520 --> 00:10:17,360 Speaker 1: Federal Reserved two day meeting probably don't do anything on rates, 180 00:10:17,360 --> 00:10:19,240 Speaker 1: but they send us a signal on the economy. How 181 00:10:19,240 --> 00:10:22,280 Speaker 1: does that influence your outlook right now? Yeah, what you'll 182 00:10:22,280 --> 00:10:25,240 Speaker 1: probably see is them singling that the economy looks good, 183 00:10:25,440 --> 00:10:29,320 Speaker 1: but they're still concerned about international markets and US. They'll 184 00:10:29,400 --> 00:10:32,520 Speaker 1: they'll stand pat and an old likelihood, uh, though they 185 00:10:32,600 --> 00:10:36,200 Speaker 1: might raise the specter of a potential rate increase, if 186 00:10:36,200 --> 00:10:40,160 Speaker 1: not September, but potentially more of a December event. So 187 00:10:40,200 --> 00:10:42,760 Speaker 1: if we saw something other than what I just described, 188 00:10:43,280 --> 00:10:46,559 Speaker 1: that might make us make a change in our capital 189 00:10:46,559 --> 00:10:50,080 Speaker 1: market forecast. But for now, uh why just articulated is 190 00:10:50,080 --> 00:10:53,400 Speaker 1: what we're respecting from the Federal Reserve. Tom Brinker, thank 191 00:10:53,480 --> 00:10:56,000 Speaker 1: you so very much for joining us. The senior investment 192 00:10:56,040 --> 00:11:01,160 Speaker 1: manager and managing director of Wealth Advisory at Brinker Capital 193 00:11:01,240 --> 00:11:05,959 Speaker 1: with eighteen billion dollars of assets under management in Philadelphia. 194 00:11:06,000 --> 00:11:08,880 Speaker 1: And yes, he is watching the convention closely trying to 195 00:11:08,880 --> 00:11:12,480 Speaker 1: figure out what it means for investors. This is Bloomberg