WEBVTT - The Market has Distinct Trading Pattern : Phil Orlando 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.440 Along with my co host Lisa A. Brahmowitz. Each day 0:00:11.480 --> 0:00:15.000 we bring you the most important, noteworthy, and useful interviews 0:00:15.040 --> 0:00:17.520 for you and your money, whether you're at the grocery 0:00:17.560 --> 0:00:20.560 store or the trading floor. Find the Bloomberg p m 0:00:20.680 --> 0:00:33.519 L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. 0:00:33.520 --> 0:00:37.040 With this earning season coming to a conclusion, what to 0:00:37.159 --> 0:00:41.240 expect next for stocks? Typically stocks rally into and during 0:00:41.320 --> 0:00:44.559 the earning season, depending force on the results of specific companies. 0:00:44.800 --> 0:00:48.000 Here to tell us about earnings and market valuations is 0:00:48.040 --> 0:00:50.800 Matt Forrester. He's the chief investment officer for b n 0:00:50.960 --> 0:00:55.360 Y Melon Lockwood Advisers. He helps to oversee nearly eight 0:00:55.520 --> 0:00:59.240 billion dollars. Is based in King of Prussia, Pennsylvania. Matt, 0:00:59.240 --> 0:01:02.000 thanks very much for in with me. You know, one 0:01:02.000 --> 0:01:04.440 of the one of the things that that always sort 0:01:04.440 --> 0:01:06.680 of is interesting is if you take a look at 0:01:06.680 --> 0:01:09.039 a chart of the SMP five hundred, let's just use 0:01:09.080 --> 0:01:11.480 that as a as a proxy, you can kind of 0:01:11.520 --> 0:01:15.680 tell when earning season takes place without even knowing what 0:01:15.720 --> 0:01:18.480 the dates are, what the calendar is on the bottom 0:01:18.520 --> 0:01:20.720 of the of the chart, because it seems that we 0:01:20.800 --> 0:01:25.080 have this pattern that has almost been ingrained in investor behavior. 0:01:25.360 --> 0:01:30.880 Have you noticed this as well? Absolutely, since since of 0:01:30.920 --> 0:01:33.919 the stock market gains have occurred during this earning season, 0:01:34.000 --> 0:01:37.919 and this one has been absolutely spectacular. Uh, course driven 0:01:37.920 --> 0:01:41.039 by the tax cuts, but we've had a remarkable earning 0:01:41.080 --> 0:01:44.520 season um and we've also seen analysts begin to pick 0:01:44.600 --> 0:01:48.000 up their expectations for future quarters going into the next 0:01:48.400 --> 0:01:51.120 you know, rest of and in the twenty nineteen. So 0:01:51.800 --> 0:01:56.880 we've clearly had some some really remarkable corporate results. Uh. Interestingly, 0:01:57.120 --> 0:02:00.560 the markets have not always in every visual case of 0:02:00.680 --> 0:02:03.160 certain cases where they have looked at these earnings and 0:02:03.200 --> 0:02:06.080 then looked at the guidance and look deeper. So I 0:02:06.120 --> 0:02:08.520 think it's fair to say that a lot of the 0:02:08.600 --> 0:02:12.680 good earnings number have been widely anticipated. But we've continued 0:02:12.680 --> 0:02:14.919 to have gains in markets, and we've sort of powered 0:02:15.000 --> 0:02:18.000 through this other levels of risks that we've seen every 0:02:18.080 --> 0:02:20.760 markets or the last few a few months. All right, 0:02:20.880 --> 0:02:23.440 we'll get to the risks in a second. But this 0:02:23.480 --> 0:02:26.200 notion that we see these gains, as you said, of 0:02:26.240 --> 0:02:28.880 the gains seemed to come in this in this specific 0:02:29.280 --> 0:02:32.520 time period. If you're an investor and you're looking for 0:02:32.560 --> 0:02:35.440 a time to get in, do you wait until the 0:02:35.480 --> 0:02:39.480 earning season is over, see what people are doing in 0:02:39.560 --> 0:02:42.560 terms of maybe taking some short term profits, and then 0:02:42.680 --> 0:02:45.240 go and prospect for the stocks the companies that you 0:02:45.320 --> 0:02:48.920 really want to own. Yeah, it could be. I suspect 0:02:48.960 --> 0:02:51.080 that we're going to have a summer where some of 0:02:51.080 --> 0:02:54.240 the issues that have recently cropped up UH and some 0:02:54.320 --> 0:02:56.639 of the risks are probably gonna give us these periodics 0:02:56.680 --> 0:02:59.919 buying opportunities. So if you're looking to make large new 0:03:00.040 --> 0:03:03.400 allocations to perhaps the equity market, you may want to 0:03:03.440 --> 0:03:07.160 see how that affects the overall macro picture. So clearly 0:03:07.160 --> 0:03:10.320 you've had the Italian news, which you know had some 0:03:10.880 --> 0:03:14.359 stuff just like it's right, but it gives you those 0:03:14.360 --> 0:03:17.600 buying opportunities that are very short lived. I think those 0:03:17.639 --> 0:03:20.680 are very hard for UH, for market players to adjust 0:03:20.720 --> 0:03:22.880 to UM. But if you look at those lists we 0:03:22.960 --> 0:03:27.000 ascaren February on average hourly earnings U, you know, it's 0:03:27.040 --> 0:03:31.320 somewhat crazy for markets to respond to a three tents 0:03:31.400 --> 0:03:35.720 of a of a increase from expected number and average 0:03:35.760 --> 0:03:38.480 hourly earnings, but it got the markets worried about the 0:03:38.520 --> 0:03:42.560 things that we might see in inflation, whether the FED 0:03:42.680 --> 0:03:45.520 was behind a curve, you know, raise questions about whether 0:03:45.600 --> 0:03:49.960 or not monetary policy was have to go even tighter, uh, 0:03:50.000 --> 0:03:52.640 you know, for more quickly than what the markets have expected. 0:03:53.000 --> 0:03:55.240 And when we see those types of fears work their 0:03:55.280 --> 0:03:58.000 way through the markets, UM, that's going to give us 0:03:58.040 --> 0:04:01.040 those periodic trade opportunities to the calendar there, you know, 0:04:01.120 --> 0:04:03.280 from here to the mid terms is going to be 0:04:03.440 --> 0:04:07.600 filled with these trade issues, which we're going to be ongoing. Uh, 0:04:07.600 --> 0:04:09.720 We're going to be continue to dealing with some of 0:04:09.760 --> 0:04:14.320 the European populism and what's what's arisen from the Italian crisis. H. 0:04:14.560 --> 0:04:16.520 On the backdrop of that, that was gonna be a 0:04:16.520 --> 0:04:19.440 lot of really good earnings numbers, you know, coming from 0:04:19.480 --> 0:04:22.760 from American corporation. So we're hoping that that is going 0:04:22.800 --> 0:04:26.760 to power us through these isolated events. Um. But there 0:04:26.760 --> 0:04:29.960 are real structure of reasons why investors should be somewhat 0:04:29.960 --> 0:04:35.239 concerned about Italy, the third largest bondasher on the planet, 0:04:35.800 --> 0:04:39.200 eighth largest economy around the world, twelfth largest by purchasing 0:04:39.200 --> 0:04:42.760 power parity concept. Uh. You know, if there are challenges 0:04:42.800 --> 0:04:45.479 to European populism. H those things are going to have 0:04:45.560 --> 0:04:49.120 an effect on on the Eurozone. Um, we're gonna have 0:04:49.200 --> 0:04:54.960 to power through these trade issues. The structural um connections 0:04:55.000 --> 0:04:58.080 between the U. S and China are really big. This 0:04:58.160 --> 0:05:00.240 is a really big deal. Uh, they are you know, 0:05:00.279 --> 0:05:04.400 we have more connections than any set of geopolitical or 0:05:04.480 --> 0:05:08.560 business rivals and maybe in the twentieth century. So we 0:05:08.640 --> 0:05:11.320 need to work through this. I think the structure probably 0:05:11.360 --> 0:05:14.440 means that we will tread carefully. But in so many 0:05:14.480 --> 0:05:18.240 of these things, markets are dealing with issues that are 0:05:18.320 --> 0:05:22.680 largely opaque. They may not be able to have a visibility. 0:05:22.839 --> 0:05:26.960 We don't know as market players what the Italian government, 0:05:27.040 --> 0:05:29.440 new populistic Italian government really wants to do. I don't 0:05:29.440 --> 0:05:35.080 think the new Italian necessarily. Maybe we've gotta We're limited 0:05:35.080 --> 0:05:36.520 in time, and I want to give you about thirty 0:05:36.600 --> 0:05:39.600 seconds here too. What do you specifically focused on in 0:05:39.680 --> 0:05:42.520 terms of where you're putting money to work right now? 0:05:42.800 --> 0:05:46.240 So I think because of these successes here as the risks, 0:05:46.279 --> 0:05:49.640 you have to think about your portfolio as an overall whole. 0:05:50.240 --> 0:05:52.640 You should have some pieces of your portfolio that may 0:05:52.680 --> 0:05:55.920 act as ballast. Uh. You know to help help keep 0:05:55.960 --> 0:05:59.480 the ship afloat when these periodic risk events continue to 0:05:59.560 --> 0:06:03.080 hit us. And for me that means gold, it means 0:06:03.120 --> 0:06:06.480 some amount of exposure to a long term high grade debt. 0:06:07.000 --> 0:06:08.919 We can't do this in all of our portfolios, but 0:06:08.960 --> 0:06:11.719 where we can, we try to isolate some places where 0:06:11.720 --> 0:06:14.840 we can have some pieces of ballast. Uh US small 0:06:14.920 --> 0:06:17.720 caps may be less exposed to some of the events 0:06:17.760 --> 0:06:20.159 going on overseas. For all those things, those kinds of 0:06:20.160 --> 0:06:21.440 things that we're for him to put into some for 0:06:21.800 --> 0:06:24.360 portfolios today. Thank you very much for being with me. 0:06:24.440 --> 0:06:27.120 You got Matt Forrester, Chief Investment Officer b n Y 0:06:27.200 --> 0:06:30.520 Melon Lockwood Advisers, helping to manage nearly eight billion dollars 0:06:30.560 --> 0:06:33.520 of customer assets. He says, look at gold, high grade 0:06:33.520 --> 0:06:51.880 corporate debt, and small cap stocks. Hello everybody, and welcome. 0:06:51.920 --> 0:06:55.160 I want to bring you in Dr David Kelly, he 0:06:55.360 --> 0:06:57.520 really knows how to CHRISTI wait a minute. You have 0:06:57.600 --> 0:07:00.120 to tell people you were hosting an amazing path at 0:07:00.160 --> 0:07:04.760 all at the b n Y Melon inside and Dr 0:07:04.839 --> 0:07:07.120 David Kelly was on it. And he always does a 0:07:07.120 --> 0:07:11.080 wonderful job at crystallizing and sort of distilling complicated economic 0:07:11.160 --> 0:07:14.520 issues into wonderful metaphors that actually ring home. He is 0:07:14.600 --> 0:07:18.200 chief Global Strategist at Jpmorkan Asset Management. And one thing 0:07:18.200 --> 0:07:21.400 that you said that really struck me was that you 0:07:21.480 --> 0:07:24.480 think that investors are being too barished in the short 0:07:24.600 --> 0:07:28.640 term and too bullish in a long term. Can you explain, Yeah, 0:07:28.800 --> 0:07:31.080 I think, I think in terms of the short term, 0:07:31.560 --> 0:07:34.080 we are seeing a real pickup at economic activity, and 0:07:34.120 --> 0:07:36.920 we've I think economic growth in the second quarter cope 0:07:36.920 --> 0:07:39.280 as much as four percent. Look at the lowest unemployment 0:07:39.360 --> 0:07:42.120 rates since nineteen nine. Earnings this year are going to 0:07:42.160 --> 0:07:44.720 be up about twenty six percent year over year. These 0:07:44.760 --> 0:07:47.560 are these are really wonderful numbers. And when you think 0:07:47.600 --> 0:07:49.960 about the stock market, I would invest in stocks today 0:07:50.040 --> 0:07:52.040 just because of the money companies are earning right now. 0:07:52.440 --> 0:07:54.560 Never mind about the future, because right now they're they're 0:07:54.560 --> 0:07:56.640 generating a no fault of cash that can be paid 0:07:56.640 --> 0:07:58.400 at in dividends that could be used to stock buybacks. 0:07:58.400 --> 0:08:01.400 That's that's all positive. I think. In the long run, though, 0:08:01.440 --> 0:08:03.960 we have to recognize that that. You know, there's a 0:08:03.960 --> 0:08:06.240 lot of talking to these days about three percent growth. 0:08:06.480 --> 0:08:08.280 I think we can do three percent growth for about 0:08:08.280 --> 0:08:11.400 a year. But because we don't have any growth in 0:08:11.440 --> 0:08:14.240 the number of our virtually no growth in the population 0:08:14.240 --> 0:08:18.560 age sixty four, we're really out of available workers. And so, 0:08:18.680 --> 0:08:20.160 you know, I think the employery can come down a 0:08:20.160 --> 0:08:21.800 little bit more, but then it's going to stop and 0:08:21.800 --> 0:08:23.880 growth has got to slow down to about two percent, 0:08:24.400 --> 0:08:25.920 and I think, you know, for the long run, we 0:08:25.920 --> 0:08:27.960 need to recognize that that's where we are. Unless we 0:08:28.120 --> 0:08:31.880 change our policies with regard to immigration and legal immigration 0:08:31.960 --> 0:08:34.720 to increase the number of skilled workers in the United States, 0:08:35.320 --> 0:08:37.520 we will slow down. But there's also a lot of 0:08:37.559 --> 0:08:40.040 opportunity overseas, and so I think that in the short 0:08:40.120 --> 0:08:42.920 run people are being um a little too pessimistic and 0:08:43.000 --> 0:08:46.000 not giving the market credit for the earnings that companies 0:08:46.040 --> 0:08:48.000 are earning right now. But in the long run, I 0:08:48.000 --> 0:08:50.920 think we're we're not recognizing the real structural problems the 0:08:51.000 --> 0:08:53.280 US economy has, not just around this labor supply, I think, 0:08:53.280 --> 0:08:56.079 but also around very big budget deficits which are growing. 0:08:56.800 --> 0:08:58.319 If you want to find out about the health of 0:08:58.360 --> 0:09:01.360 the US consumer, where do you go? I go to Costco. 0:09:01.880 --> 0:09:03.920 It's you know, it's a it's a it's a wonderful 0:09:03.960 --> 0:09:06.959 place here you I mean you see these mobs of people. 0:09:07.040 --> 0:09:08.760 I mean they're piled back into the aisles, and then 0:09:08.800 --> 0:09:10.080 you look at their their cards and they have to 0:09:10.080 --> 0:09:12.760 push these big, oversized carts and then they pile everything 0:09:12.800 --> 0:09:14.480 up to a peak. But what what you really should 0:09:14.480 --> 0:09:16.200 do is look in the carts because people are buying 0:09:16.280 --> 0:09:20.199 enough mustard for a generation. I mean, why hasn't got 0:09:20.200 --> 0:09:21.800 the money? And and so if you want to see 0:09:21.840 --> 0:09:25.440 mindless consumerism come to Costco, Okay what I asked. I 0:09:25.480 --> 0:09:27.679 asked it for a reason because I want to get 0:09:27.720 --> 0:09:29.840 to the point that it is one thing to sit 0:09:29.880 --> 0:09:32.520 in front of a screen and watch a number. It 0:09:32.679 --> 0:09:35.319 is another thing to go out into the real economy, 0:09:35.320 --> 0:09:38.040 in the real world and find out what is new, 0:09:38.080 --> 0:09:40.480 what is innovative, what people are spending their money on, 0:09:40.559 --> 0:09:43.640 what they're not spending their money on. And I'm wondering 0:09:43.679 --> 0:09:47.280 whether this is something that you in a sense advocate 0:09:47.440 --> 0:09:51.840 combined with all of your higher level world absolutely, because 0:09:51.840 --> 0:09:54.560 you look at big numbers and I don't believe in 0:09:54.559 --> 0:09:57.760 in modeling based on anecdotes, but you can use anecdotal 0:09:57.760 --> 0:10:00.400 information to really get what's going on. I mean, you 0:10:00.520 --> 0:10:03.440 try and find a plumber in America today, you can't 0:10:03.480 --> 0:10:04.800 find one. I mean, you just you know, if you've 0:10:04.800 --> 0:10:06.040 got a problem right now, they're not going to come 0:10:06.040 --> 0:10:08.480 out today. Maybe wait, wait a week, maybe wait two weeks. 0:10:08.960 --> 0:10:11.120 But the but the problem is where there's a real 0:10:11.400 --> 0:10:13.320 shortage of skilled workers and you can see that in 0:10:13.360 --> 0:10:15.000 your day to day life if you actually try and 0:10:15.080 --> 0:10:17.640 hire something to do a particular job. Um And equally, 0:10:17.640 --> 0:10:19.000 you know, if if you want to see what's going 0:10:19.000 --> 0:10:21.040 on with consumer spending, as I say, you can, there 0:10:21.040 --> 0:10:22.800 are plenty of areas where you can see just how 0:10:22.840 --> 0:10:25.160 mind to see people spend whatever money is in their pockets, 0:10:25.200 --> 0:10:26.880 you know. But just to push back, if you look 0:10:26.880 --> 0:10:28.079 at it from the other point of view, if you 0:10:28.080 --> 0:10:30.880 want to just look at anecdotal evidence, there's still a 0:10:30.920 --> 0:10:34.120 lot of I don't know, pessimism out there among a 0:10:34.160 --> 0:10:36.080 lot of people. I mean, perhaps it's not captured by 0:10:36.080 --> 0:10:38.240 some of the economic surveys, but you certainly see this 0:10:38.280 --> 0:10:40.920 with the birth rate falling off from millennials, and you 0:10:40.920 --> 0:10:43.360 certainly see this with you know the fact that we 0:10:43.360 --> 0:10:46.679 aren't seeing wages increase more so, how do you reconcile that? Well, 0:10:46.840 --> 0:10:48.679 I think that's true. I mean the gap between rich 0:10:48.720 --> 0:10:51.280 and poor is growing, and I think it will continue 0:10:51.320 --> 0:10:53.880 to grow. Uh And and a lot of people are 0:10:53.880 --> 0:10:56.920 getting left behind. But again we're talking about you know, 0:10:56.960 --> 0:10:59.880 how do you how do you invest? And and you know, 0:11:00.080 --> 0:11:02.000 in the in the first quarter, operating earnings are up 0:11:02.000 --> 0:11:05.040 twenty six percent. In May, wages are up two point 0:11:05.120 --> 0:11:06.880 eight percent. That's not good for workers, but it's great 0:11:06.880 --> 0:11:09.959 for shareholders. So it's I think you have to recognize 0:11:09.960 --> 0:11:11.760 the economy that that we actually have here. We're just 0:11:11.800 --> 0:11:13.880 pretty good for corporations. One of the things that you 0:11:13.880 --> 0:11:15.800 said in the panel that I thought was really interesting 0:11:16.640 --> 0:11:20.200 was about how people in Sweden managed to equalize the 0:11:20.240 --> 0:11:22.600 amount of espresso they drink with the amount of vodka 0:11:22.640 --> 0:11:24.920 they drink in the evenings. Uh. And you're sort of 0:11:24.920 --> 0:11:27.920 making analogy that we've got this incredible tax plan that's 0:11:27.960 --> 0:11:31.720 boosting earnings and a really solid corporate backdrop, but we 0:11:31.760 --> 0:11:33.880 also have all the uncertainty from trade top. Can you 0:11:33.920 --> 0:11:36.280 just explain to well, yeah, I mean that's this is 0:11:36.280 --> 0:11:39.160 this This was mainly a slurn some colleagues of mine 0:11:39.200 --> 0:11:42.160 from Sweeten nothing not the entire Swedish nation. They appreciate it, 0:11:42.240 --> 0:11:44.719 but no, I think I think we have a sort 0:11:44.720 --> 0:11:47.160 of a mixture of Vodican expressing on the economy right now. 0:11:47.640 --> 0:11:50.280 We've got you know, espresso is clearly a stimulative and 0:11:50.280 --> 0:11:52.760 we've got all the stimulus from fiscal stiments, which is 0:11:52.800 --> 0:11:55.520 very unusual this lations cycle. But we've got this big 0:11:55.559 --> 0:11:57.760 tax cut, a lot of money in people's pockets, a 0:11:57.800 --> 0:11:59.960 lot of money in corporate pockets. That's helping the account 0:12:00.000 --> 0:12:01.960 of me grow. And if it was just for that, 0:12:02.120 --> 0:12:05.000 the economy probably be overheating. We'd be really worried about inflation. 0:12:05.360 --> 0:12:07.679 But at the same time, we've got the the the 0:12:08.760 --> 0:12:13.520 sedative or the vodica if you like, of um, tariff worries, 0:12:13.800 --> 0:12:17.839 Washington worries, political divide um, and all of that is 0:12:17.840 --> 0:12:20.400 creating uncertainty. The problem with uncertainty is the business is 0:12:20.800 --> 0:12:22.600 you know, when you've got uncertainty, what what? What do 0:12:22.640 --> 0:12:24.920 people say? Well, let's wait and see. The problems are 0:12:24.960 --> 0:12:27.080 three most dangerous words and economics I wait and see. 0:12:27.080 --> 0:12:28.920 If everybody decides to wait and see, what what, this 0:12:29.160 --> 0:12:31.080 is not good. And so we've actually got this drag 0:12:31.679 --> 0:12:34.720 from uncertainty which who are a particular round trade policy 0:12:34.760 --> 0:12:37.160 which is negating some of the stimulus from the fiscal 0:12:37.400 --> 0:12:40.839 from the fiscal package. Well, you know, caffeine and alcohol. 0:12:40.880 --> 0:12:43.480 There are two things that can lead to addiction, right, 0:12:43.520 --> 0:12:45.319 I mean, you know, if you have a lot of caffeine, 0:12:45.520 --> 0:12:48.880 you need more and you need to keep it consistent, right, 0:12:48.920 --> 0:12:51.200 I mean, that's right, And they both have they both 0:12:51.200 --> 0:12:52.960 have bad long term and that really gets back from 0:12:53.320 --> 0:12:55.080 near term. People should be more bullish long term, they 0:12:55.080 --> 0:12:58.000 should maybe be more bearish because on the fiscal side, 0:12:58.040 --> 0:13:00.280 we're gonna have, you know, starting in Octobe, where we're 0:13:00.280 --> 0:13:02.480 gonna have federal defence of over trillion dollars for as 0:13:02.480 --> 0:13:04.960 far as I can see, that is going to impoverish 0:13:05.080 --> 0:13:08.120 US in the long run. Um And equally with trade, 0:13:08.160 --> 0:13:10.840 you know, you want to trade negotiations to result in 0:13:10.880 --> 0:13:14.320 trade agreements quickly, because uncertainly about trade just means that 0:13:14.559 --> 0:13:16.400 I don't know as a corporation. Should should I build 0:13:16.400 --> 0:13:18.840 a plant in Prioria? Should I build a plant in Poland? 0:13:18.920 --> 0:13:20.720 I don't know? And if I don't know, I'm not 0:13:20.720 --> 0:13:24.120 gonna do either. And so so I think both both 0:13:24.240 --> 0:13:29.280 extra uncertainty from Washington and unwarranted but budget deficits are 0:13:29.480 --> 0:13:32.160 those are both negatives in the long run to investors 0:13:32.240 --> 0:13:36.200 make investing too complicated for themselves, and absolutely they do. 0:13:36.280 --> 0:13:38.160 I think I think I think people need to think about, 0:13:38.240 --> 0:13:40.600 you know, for example, emerging markets. I think emerging markets 0:13:40.640 --> 0:13:42.520 is a great is a people should have in a 0:13:42.600 --> 0:13:44.800 portfolio right now. But people think, oh, it's too complicated. 0:13:44.800 --> 0:13:46.360 I have to know about all these things. No, you don't, 0:13:46.679 --> 0:13:49.400 I mean you don't. You need to have a good 0:13:49.440 --> 0:13:52.080 manager and let them invest in the forest. I'm not 0:13:52.080 --> 0:13:54.600 gonna I'm not going to to testify and behalf any 0:13:54.640 --> 0:13:57.440 individual tree in emerging markets. But the forest will grow, 0:13:57.600 --> 0:13:59.560 Emerging markets will grow fast, and the rest of the 0:13:59.679 --> 0:14:02.040 than to help markets for years to come along. Term 0:14:02.080 --> 0:14:04.800 investor should have position in emerging markets and just feel 0:14:04.800 --> 0:14:07.920 comfortable about that rather than trying to nitpick each individual country. 0:14:08.080 --> 0:14:10.040 He also said that you thought the theme most overvalued 0:14:10.080 --> 0:14:13.200 asset right now is bitcoin. Yeah, but the problem by 0:14:13.280 --> 0:14:15.200 bitcoin is I mean, I know, I know a lot 0:14:15.240 --> 0:14:17.959 of people unfortunately do this, but I want to invest 0:14:18.000 --> 0:14:21.480 in bitcoin. The problem with bitcoin or any cryptocurrency is 0:14:21.480 --> 0:14:23.840 there's no real barrier to entry. Now. I think blockchain 0:14:23.840 --> 0:14:26.200 technology is obviously a good technology. It's obviously gonna be 0:14:26.240 --> 0:14:28.720 useful in a a lot of ways, but right now it's 0:14:28.800 --> 0:14:30.920 you know, Bitcoin is is like the leader, but it's 0:14:30.920 --> 0:14:32.600 got nothing that's going to maintain its lead. It's got 0:14:32.600 --> 0:14:34.680 no barrier to entry. It's like you build a new 0:14:34.880 --> 0:14:38.200 Olympics Olympic stadium and you've got this weekend jog are 0:14:38.280 --> 0:14:40.400 running around, running around the path, and they look really 0:14:40.480 --> 0:14:42.600 good in the stadium. The problem is the varsity teams 0:14:42.600 --> 0:14:44.400 on a bus headed for the stadium, and when they 0:14:44.400 --> 0:14:47.600 get there, you know, the weekend jog is not gonna 0:14:47.600 --> 0:14:51.200 look so good. I think with the problem with something 0:14:51.280 --> 0:14:53.680 a cryptocurrency is it's not a store of value, it's 0:14:53.680 --> 0:14:55.880 not a unit of account, it's not a medium of exchange. 0:14:56.480 --> 0:14:59.160 In the long run, I think blockchain dollars, blockchain the end, 0:14:59.520 --> 0:15:02.320 blockchain euros will be much better. Best. Thank you very 0:15:02.400 --> 0:15:05.560 much for being with us. Dr David Kelly, chief Global Strategist, 0:15:05.560 --> 0:15:08.960 head of a global market insights strategy team at a 0:15:09.080 --> 0:15:27.120 JP Morgan Asset Management. I am very pleased to bring 0:15:27.120 --> 0:15:31.000 in Phil Orlando, chief equity market striate just at Federated 0:15:31.080 --> 0:15:33.840 joining us here in Orlando, Florida. Do you feel a 0:15:33.840 --> 0:15:37.480 particular affinity to Orlando is in Orlando, Yeah, do you 0:15:37.480 --> 0:15:40.520 feel like the city firth to you to answer that question. 0:15:40.600 --> 0:15:43.280 It creates a lot of confusion with T s A 0:15:43.520 --> 0:15:47.040 and hotel check in clerks and all sorts of So 0:15:47.120 --> 0:15:49.520 I want to start with a question, a kind of 0:15:49.600 --> 0:15:52.360 existential question it's been plaguing in the market, which is 0:15:52.360 --> 0:15:56.000 is this as good as it gets? With earnings? First 0:15:56.000 --> 0:15:57.920 of all, I want to say, you did a superb 0:15:58.040 --> 0:16:01.640 job moderating the panel this morning with with Rinehart and 0:16:01.720 --> 0:16:05.680 David Kelly. Uh, really good job. And and this was 0:16:05.720 --> 0:16:09.120 a topic that you touched on, uh with with your 0:16:09.120 --> 0:16:13.680 panelists this morning. Uh you talk about is your question 0:16:13.760 --> 0:16:15.920 is this as good as it gets? I would actually 0:16:15.920 --> 0:16:17.880 take the other side of the argument that I don't 0:16:17.920 --> 0:16:21.280 think the market believes a lot of what they see. 0:16:21.720 --> 0:16:25.000 We think that the stronger economic growth, stronger earnings growth, 0:16:25.040 --> 0:16:27.400 all of that in fact is sustainable, and the market's 0:16:27.440 --> 0:16:31.680 not as as a bulliant as it should be because 0:16:31.720 --> 0:16:34.080 they don't think that any of this is gonna last 0:16:34.120 --> 0:16:37.080 and it's all ephemeral and it's just gonna disappear. Um. 0:16:37.160 --> 0:16:39.120 So I I you know our view. We've got a 0:16:39.120 --> 0:16:42.960 thirty one forecast for the SMP five by the end 0:16:42.960 --> 0:16:44.720 of this year. We think there's gonna be a strong 0:16:44.800 --> 0:16:48.520 fourth quarter rally once we get through the summer period 0:16:48.760 --> 0:16:51.040 where there's gonna be a lot of concern about the 0:16:51.080 --> 0:16:54.880 midterm elections and uh, what's the Fed doing? Are they 0:16:54.920 --> 0:16:58.200 eventually going to overshoot? What's their policy going to be? Uh? 0:16:58.240 --> 0:17:01.320 This pop and first quarter earnings is that sustainable? This 0:17:01.480 --> 0:17:03.320 pop that we think we're going to see in second 0:17:03.400 --> 0:17:06.480 quarter g d P is that sustainable. Everyone's assuming that 0:17:06.480 --> 0:17:08.280 that all of this is just a flash in the pan. 0:17:08.400 --> 0:17:12.440 It ends badly. Um, we think that that that we're 0:17:12.480 --> 0:17:15.200 putting in place a foundation that's gonna get us back 0:17:15.440 --> 0:17:18.360 to trend line or better economic growth. We're looking at 0:17:18.440 --> 0:17:20.720 at corporate earnings growth that hasn't been this good in 0:17:20.760 --> 0:17:23.720 seven or eight years, and and the market needs to 0:17:23.760 --> 0:17:26.520 be more excited about this, and I think eventually they will. 0:17:26.720 --> 0:17:29.359 Today's not that day. So you think we're gonna get 0:17:29.400 --> 0:17:33.960 another six points on the uh? So we're sitting in 0:17:34.000 --> 0:17:38.720 about okay points so so, and we think that the 0:17:38.800 --> 0:17:40.520 back of that is going to be a very strong 0:17:40.560 --> 0:17:43.400 fourth quarter. Ralty that that when you study the history 0:17:43.760 --> 0:17:49.359 that this year calendaren there's a very unusual confluence of 0:17:49.480 --> 0:17:53.080 three seasonal events. The selling man go away thing happens 0:17:53.080 --> 0:17:55.720 every year. We know about that um but this is 0:17:55.760 --> 0:17:58.720 also the second year of the four year presidential election cycle, 0:17:58.800 --> 0:18:01.959 tends to be very volatile of stocks. And we've had 0:18:01.960 --> 0:18:04.480 a leadership transition at the Federal Reserve. Now the Fed's 0:18:04.520 --> 0:18:07.160 been around a hundred years, has only been sixteen chairman. 0:18:07.520 --> 0:18:10.399 But the market has a very distinct trading pattern whenever 0:18:10.480 --> 0:18:14.000 we change horses, and and when when these three things 0:18:14.040 --> 0:18:17.280 come together, they've only come together six times in the 0:18:17.359 --> 0:18:21.119 last eighty five years or so, and and the previous 0:18:21.160 --> 0:18:24.640 five times you've had this sort of barbell shaped year 0:18:24.640 --> 0:18:26.800 where we started the year in good shape, there's a 0:18:26.800 --> 0:18:29.520 lot of volatility and instability in the middle of the year, 0:18:29.640 --> 0:18:32.040 and then we ended the year in really great shape. 0:18:32.200 --> 0:18:35.320 I think we're going through that that instability period right 0:18:35.359 --> 0:18:39.000 now in terms of what's gonna happen with the midterm elections, 0:18:39.040 --> 0:18:41.040 what's gonna happen with the Fed. We've got another f 0:18:41.240 --> 0:18:43.280 MC meeting coming up next week. All right, we think 0:18:43.280 --> 0:18:45.000 there's gonna be a quarter point hike. I think that's 0:18:45.000 --> 0:18:48.040 a fairly consensus view. But the question from then is 0:18:48.280 --> 0:18:51.200 what do the dots look like. What's the FEDS policy 0:18:51.280 --> 0:18:53.840 prescription gonna be over the course of the next eighteen 0:18:53.880 --> 0:18:56.960 months or so? Will they overtight? We don't know the 0:18:57.000 --> 0:18:59.159 answers to that. Well, it's just about a minute to 0:18:59.240 --> 0:19:01.960 go here. I'm wondering what your perspective is, given the 0:19:01.960 --> 0:19:04.880 fact that you expect a strong fourth quarter rally. Does 0:19:04.920 --> 0:19:08.040 the FED matter for that considering the fact that people 0:19:08.080 --> 0:19:10.520 are pricing in or are talking about certainly four rate 0:19:10.560 --> 0:19:13.240 hips is here, Well, it absolutely matters because our forecast 0:19:13.320 --> 0:19:16.440 is only three rate hikes. Uh So, so if we're 0:19:16.480 --> 0:19:18.960 wrong and and the Fed is gonna give us four 0:19:19.200 --> 0:19:23.480 or more, um, you know, there's been a rumor that, uh, 0:19:23.520 --> 0:19:25.240 you know j Powell one of the things he's thinking 0:19:25.240 --> 0:19:29.679 about is is sort of scrapping Janny Yellen's idea of 0:19:29.800 --> 0:19:33.879 only four press conferences, going to eight press conferences. And uh. 0:19:33.960 --> 0:19:37.400 The reason why that's significant is that the market has 0:19:37.400 --> 0:19:40.360 gotten into their head that only a press conference, only 0:19:40.359 --> 0:19:42.960 a pressor only a meeting with the presser's a live meeting, 0:19:43.600 --> 0:19:45.080 and that we're not going to do anything and the 0:19:45.080 --> 0:19:48.760 other meeting. Now that's not necessarily right, but Powell wants 0:19:48.800 --> 0:19:52.000 to strip that thought process away from the market and say, okay, 0:19:52.000 --> 0:19:53.960 every time we meet every six weeks for an f 0:19:54.160 --> 0:19:57.800 MC meeting, we might do something. And and the reason 0:19:57.840 --> 0:20:00.879 that Yelling apparently didn't want to do press there's every 0:20:00.920 --> 0:20:02.919 time is that it's a lot of work to prepare 0:20:02.960 --> 0:20:06.639 for them. We are broadcasting from b n Y Melon 0:20:06.760 --> 0:20:11.080 Inside in Orlando, and joining us, of course, is Phil Orlando, 0:20:11.200 --> 0:20:15.920 chief equity market strategist at Federated UH. Phil, let's talk 0:20:15.960 --> 0:20:18.040 about small and mid cap stocks for just a second. 0:20:18.080 --> 0:20:20.040 I was looking at the Russell two thousands up eight 0:20:20.080 --> 0:20:23.240