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Adviser Investments CIO James Lowell on why bonds are at the beginning of a bear market while stocks are at the start of a bull market.
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Despite today's decline -- next guest says we're in the early stages of a bull market for stocks but not so much with the bond market it is -- -- it doesn't face the same fate.
Joining us now -- insights -- investment CIO Jim lull before we talk about bonds and like I your content your comments -- Do you think they -- on the cusp of a long term bull market for equities but the way -- you're playing it is a lot more cautious.
You're instituting pair trade so what are you buying and what he appearing at west.
Right so our basic philosophy is we don't -- the guesswork we look for bulwark said in a market like there's an environment like this.
They don't wanna be focus on battleship balance sheets no matter where you look so.
The Dow diamonds at Fidelity mega cap stock vanguard dividend growth all -- sort of -- battlefield balance sheet diversified actively managed funds.
That said we compare them with junk bonds in particular right now -- -- -- -- at three pigs have very defensively oriented.
Junk bond fund but there's probably room in the next year inside this here get a little more aggressive inside -- jump bonds space.
Ginnie just talked about junk bonds I know bonds that as an asset class are keeping you up at night so as here at lying awake alert and awake at night.
How do you separate the junk.
And -- -- when not meeting junk bonds here read how do you separate what you actually want to play and then in the realm of bonds vs not.
Well we -- certainly wrong about it the interest rate risk content in the longer end of the treasury spectrum last year.
We're probably gonna be wrong again about it at some point during this year that said.
Interest rate risk remains a had -- concerned especially on them plain Vanilla.
Safety valve kinds of bonds bonds that investors have been plowing billions and billions of dollars into.
On the other end of the spectrum we know that corporate America much like Americans themselves.
On a much better job -- our governments have shoring up their bottom lines.
And so we're looking for areas that can sustain growth cash and the coffers.
Meaningful business models -- necessary products.
-- I mean I gotta tell you a lot of people on -- Smart people.
Become -- become very bullish and I'm wondering what's the case fundamentally for a for the optimism -- long term.
When I looked at the need good liking -- we hear these numbers but -- you look really good even today -- factor in numbers you take out access ex aircraft and that is good last week.
You take away a few things in that it's good why are you so optimistic.
Well cautiously optimistic Charles for reasons that the tangled web it still just revealed continued to to make anyone sort of cautious.
But the reality on the ground is that fundamental evidence continues to present.
Recovery.
Being the most probable outcome not just here in the US we've been an expansion -- -- months.
But even inside of the -- you see that in the bond market inside the Euro -- where the bid.
On intermediate and longer term bonds from Italy Spain Portugal are all basically running out of you know.
Bumping up against the limit of auctions because there are significant buyers as the near term risk the next twelve to eighteen months.
Where the eurozone has proved -- -- -- -- to be settled the Middle East has to be solved these are things that definitely keep me up at night we'll probably do so throughout this hour.
You know -- is so funny -- because all the all the manufacturing data out of Europe overnight only Germany.
Beat the S -- having thing anyone could be proud of could we as a country that could America decouple from Europe and still achieve what you believe what you got to looking for what the market.
Absolutely and I think even.
Europe can decouple from the eurozone if Greece could just be allowed to take a temporary sabbatical.
And basically return to the drop when devaluing significantly -- the domestic goods are better than imported goods.
They be able to lose their tax revenue in a heartbeat so -- other countries inside the Arizona it's time for the eurozone to basically wake up and understand.
But the concept was great.
But the execution has been an abject failure I don't think that leads to a sustainable market meltdown however I think -- certainly.
Could see -- ten to 20% down draft in the markets.
But I -- be erased and as many months is it takes to manifest itself.
Because fundamental evidence remains a bid for recovery not against it.
GM I -- sticking on the topic of your pair trade strategy I -- that day everyone out there including yourself that is paying attention to rising gas prices but you say that the there's a way to protect yourself or at least playing that.
Tell our viewers how exactly you're doing that.
Well one way is -- -- -- diversified emerging market ETF.
Or emerging market bond fund both areas we like we hold -- and -- pair trade.
But certainly they're trying to offset prices of the bomb.
The only way I can think of to do -- is -- look at.
NE -- flies symbol UGA -- -- and gasoline I don't think what we're seeing in terms of pricing pressure.
Is a result of supply it's really a result of the lack of refineries here in the US.
Able to basically translate enough crude into gas that we -- -- and -- scale that would drive down prices so the only economic offsetting this to invest against it.
I I love that strategy Jim -- I advisor investment staying awake at night.
Thinking about bonds so that we don't have to you thanks like instantly business from -- -- I think the.
