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BlackRock iShares ETF Global Chief Investment Strategist Russ Koesterich on how investors can protect their portfolios from volatility in the markets ...
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Domestic market volatility though because just as soon as these numbers go up that -- down investors' fears over Spain.
And much of Europe of course and now renewed fears over whether China's really slowing -- What are you the investor to do well turn to this guy -- cost -- just a BlackRock iShares ETF global chief investment strategist joining us.
In a Fox Business exclusive on the perfect data happy -- and I'm from grabbing.
A couple of things that I wanted to ask you about right of way of that is first the news of the day and what we expect to be news of the weekend.
Is there a way to position yourself to what could be a slowdown in China and more concern about Spanish banks affecting the entire eurozone region.
We'll be on the Spanish banks that -- this is going to be critical not just for Europe -- really for the global economy.
Right now most of the global economy -- out of Europe is muddling along it's not great growth.
But it's adequate the big risk is do you have a European banking crisis so.
It's going to be critical that the European institutions.
Address this the sooner the better.
It shipped to China it actually cautiously optimistic Chinese growth is slowing there's no doubt about that.
-- -- most of the data including some of the recent numbers we've had from the manufacturing sector.
They still tell you that Chinese growth in Q2 in Q3 is more likely to be around 8%.
Then this up 7% which would constitute a hard -- I think we're gonna be okay at least in the near term as applies to China.
OK so -- again back to the original question though is is an investor what is an investor to do.
Knowing that these headlines are swirling and in a way if -- cautiously optimistic about China -- that makes me feel happier but.
Investors are very concerned that lets just say Greece has a disorderly exit from the Euro zone.
We have somebody on yesterday you sit and watch out your your portfolio -- take a 60% hit I don't necessarily believe that -- -- -- the markets are expecting a -- do you.
-- now is a short answer -- look it if Greece would have a disorderly exit from the Europe over the next few weeks this is gonna hurt the markets Spanish banks -- the bigger risk.
That said I do think a lot of bad news is discounted it not that stocks can't go lower.
But to answer your question directly what what I do all right now -- going to be doing is I'd be looking at mega cap.
High dividend paying stocks first of all from the short term these stocks tend to be more defensive if we do get bad news out of Europe -- hold up better than the broader market.
But the longer term argument if you're a long term investor -- you look in the next ten years.
I'd much rather own global mega caps it ten or eleven times earnings with a three -- 4% yield kind.
Hit a ten year treasury with a one and a half percent -- All right so you're saying global mega caps now let's dig even deeper and look at where you know your favorite sectors to find these global mega caps and and the -- you don't like right now.
Sure so I think there are some opportunities more specific opportunities.
One of which should be energy in this is a sector that some poorly -- date date its underperform but it's gotten very very cheap.
You can buy large cap energy stocks out around ten times earnings I think over the long term while crude has taken a dip over the last two months.
The long term direction of crude is higher.
And you can access these companies -- ETFs like the IXC.
Which gives you access to global energy companies what I have -- -- right now two sectors in particular.
US consumer discretionary.
You sort of struggling consumer I think the earnings estimates of these companies are way too high.
And US utilities.
I would say this is the sector that is most vulnerable.
If we don't see an extension.
Of the dividend at the preferential treatment for dividend taxes.
But rest you know including today utilities have been hitting some consistent highs recently.
Still doesn't change your mind.
No it doesn't and what's happening is not that surprised you had utilities underperform the first 34 months of the year.
-- utilities to become the ultimate risk golf -- if people word about Greece if there weren't about Europe they they bid up utilities.
The problem is they've got an expensive we now have this sector which traditionally traded about a 30% discount.
-- trading on par with the market despite the fact is a very regulated sector and with a relatively low return on equity.
Okay now.
If you like energy at this is what I'm confused about you like energy part oil prices have come down.
That would put more money in people's pockets to buy things like retail.
Products you don't like the retailers.
I don't think you know you're rightly is certainly energy coming down at the margins a good thing it's gonna help cushion the consumer.
But the the bigger issues consumers have too much debt and not enough earnings growth and I think evaluations and -- retail stocks assumed too much good news.
Quick word on -- how do you feel about it.
You know gold is interesting -- we've continued to advocate that -- clients maintain strategic position in gold.
First of all it does tend to be diversified and small amounts in the portfolio.
The other key thing is that typically the big driver for gold returns has been the level of real interest rates and -- in an environment where the Fed the ECB.
Most of the world's large central banks are determined to keep real rates -- All sequel that is a tail -- for gold.
It's unbelievable isn't it to see these gigantic lives like yesterday and then last Friday -- thank you so much for joining us.
Thank you has rest costs church who likes global Telecom and energy doesn't like utilities and retail put it all up on the FaceBook page she's -- from the closing.
