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Fifth Third Asset Management Portfolio Manager Mark Demos and Vanguard CIO Gus Sauter on the outlook for the markets and which sectors may boost inves...
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President now on today's markets and how you can play that would mark the most of the portfolio -- -- manager at fifth third asset management and Gus Sauter.
He is chief investment officer.
At vanguard in charge of all the money in the world -- -- does start with you yesterday we have mark -- -- you know mark -- -- mr.
doom and gloom.
He said there is -- one -- percent chance of global not just European but global.
A recession we are right in it right now let me just play a clip from that interview and get your response go -- play the clip.
I think we can easily drop below a thousand on the S&P.
A 1008.
That the SNB has outperformed just about every other market in the world.
Does your reaction on mark Robert.
Well I have.
Who limited conference in not in that prediction actually.
We think that the US economy will soften so -- on the numbers -- seeing coming in softer not surprises but we think there will be strengthening in the second half of the error or fourth quarter.
So wouldn't they -- yes it's a very slow moving economy.
We don't necessarily believe that the US slips into a recession unless a few wild cards come into play.
So I wouldn't really know how to handicap the odds of going down under a thousand -- the S&P.
We really don't try to make short term projections we really kind of look out five or ten years and in there were comfortable with the stock market well.
Well that's that's what's so important about your your view is that you are and -- for the longer term -- so I guess the question then becomes.
With your belief that the numbers turned softer short term and then we we still continue to kind of stumble along before we improve.
Is there a way to reallocate a portfolio what I don't everybody's portfolios different -- older people with a shorter time horizon younger folks who have longer term opportunities but.
Do you reallocate in any meaningful way at this point.
You know we would actually avoid doing -- because things news is we've observed over the last couple of years things are turning on a -- million -- just think back to last October and it was very scary period of time of course the markets -- significantly from that point in time.
And suppose you had.
Made adjustments in who would've been just that the wrong time so what we have observed is that investors that are most successful of the ones that really just stick with their long term.
Strategic asset allocation and don't get caught up in the -- in the moment.
Well mark Finnessey you don't get caught up in the moment -- always focus on particular companies and look at their long range worth you are you still believe in health care stocks now I'm just wondering that -- this.
This Supreme Court vote coming up.
If -- whether or not that is going to affect.
Health care stocks particularly insurers one where the other.
Yes that's -- that's one event that we're looking at you know that and that will particularly impact a lot of companies that that provide health care services.
The insurance company of the hospitals.
I certainly.
Yeah I think if you look at it if you look at health -- there are still.
You know stocks that are that are buys out their stocks and healing in in Biotech.
That we think will continue to to provide good performance and none -- there's.
Tell us that mortgage how to make the -- the mark tell us it's in different -- -- how you make a bet if you assume for example that the Supreme Court is gonna overturn.
The individual mandate to me that means that insurers wouldn't have as many customers and you would sell the insurance companies in my right on that are wrong.
That's right that's right that's right then OK let me get to -- -- -- it's okay.
Yeah I mean that's that's difficult thing to handicap -- -- we haven't so so much.
Focus on a lot of service companies were.
We're more -- more focused on a lot of product companies with -- health care.
Gusts somewhere do you see growth you look in so many different areas and here as of vanguard.
Big -- giving you guys are always looking at many different opportunities.
What looks good -- right now.
-- you mean growth in needn't money news and business seeming growth Nissan sectors that might bounce off -- the economy is doing.
-- -- -- -- we actually.
We think that they're going to be two drivers to the economy.
Over the next year or two and really one is the consumer.
And it's the consumer and and really capital investment by corporations.
Both have been.
That the true drivers we've experienced over the last couple of years we do nothing government and we do not think that net exports -- going to be big drivers so.
You kinda look at the consumer new look at corporations and we.
That's where we think that.
The united drivers will come from again not not significant drivers not what we've seen.
In prior recoveries that that that's when growth is on the mark specific -- you brought to a two picks along with -- pre show and.
Ecolab tell us about these companies.
Yeah -- goes a company that's that's that's in the health care area they provide.
I store branded.
You know -- a -- cold medicine pharmaceuticals so if you go and any.
Walgreens CVS Wal-Mart all the store brands are made by -- ago.
They've been gaining share as customers have been you know much more.
Comfortable buying store branded products.
So we think that you they've got a good and you know great outlook as well a lot more products are coming.
-- -- -- -- And on the shelves that they can -- so there's you know there's there's continued catalyst for that company.
I and then eagle that was -- -- company that we like you know fairly steady and market sanitizing cleaning.
Also couple catalysts here with the earnings you know and an an acquisition.
And then -- a lot of restructuring that they've done in Europe which we think we'll driver.
It's alright and finally -- have got to bring up what's happening in the bond market it's an unbelievable flight to quality to the point where people.
Are actually paying the US government one and a half percent or so.
Just hold it for 102030 years is that is that a bad move.
Well we are concerned that people -- -- someone throwing caution to the wind at some point in time rates are going to reverse.
Investors have stretched out the yield curve were concerned about that they're taking risks that may not be you know aligned with their own needs and you know -- stretching for yield.
On that does concern us we do think that -- returns the bond market will be quite muted over the next decade if if yields are we one and a half percent in that the ten year right now that's about what you're going to get -- over the next decade about one and a half percent.
So -- -- were little bit concerned people seem to throw caution to win in the in the fixed income market Gus Sauter Marc Davis thank you guys are breached.
