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Will the Economy Sway the Vote in November?

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    David Abuaf on how expected market volatility will affect the presidential election.

  • Duration 6:31
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-- out to Chicago rain down David a blew up CIO at hefty well -- -- I sir thanks for coming on again.

How they -- and having him but the comments great let's be here again all right so the fiscal cliff that were all talking about.

It's gonna hit us probably January 1 full face.

A tax hike perhaps send more spending cuts and everybody's nervous about this.

Investors and business owners.

Are in -- -- -- today.

That's.

Been so that.

What we do say that that's actually a problem however we can't have much like -- Other congresses before them they've all -- bicyclists before and they've all managed to deal with that pretty successfully.

So we think especially given that we are in a pretty big election year.

We think that there will be changes that there will be a solution but we think enforcing its gonna come last minute as is -- is the case -- a lot of politicians.

You say here you say the markets will determine the election outcome not nice person accident president Emma yeah -- get elected.

No so what we're trying to say was hit the markets are going to determine presidential.

Elections is.

For the course of the next couple months the next couple quarters.

Leading up that November election we think it's gonna be.

Very important to keep an eye on what's happening with.

Consumer prices with consumer confidence but wholesale prices and also with mortgages are are consumers going back -- -- flooding the market.

Are they putting what's called a risk on trade.

Risk on trade means that they're putting more money into equities and they're taking money out of the -- market.

So we think if that continues especially the couldn't.

News that we -- from Wells Fargo today and other -- -- -- -- -- -- -- earlier.

But if we focus action Wells Fargo we saw -- -- -- -- 17%.

Increase in profits and a lot of that was due to an increase in their mortgage department.

-- additions that they also reduce their loan loss provisions so we could actually see consumers come back since the market start buying start spending.

With it's a much higher likelihood we believe that a final stag.

However if the global economic news continues to persist.

And no strong fundamental data comes out we think that Romney stands a better chance we don't really think it yes.

Let's talk about that global economic situation.

Of her let's not have a lawyer for a second -- about China because there -- GDP came in seven point 6% sounds great we're jealous here in the US but that's bad for China.

We make of the slowdown.

-- the reason it's bad for China is because it used to be 8% back just a couple quarters ago would have ceased to be double digit growth.

So really -- when it comes to take a look at China and Chinese economic growth.

There was a lot of concern in the market and that section when the reasons were up today.

There's a lot of concern in the market that the growth would actually have fallen much below the 77 and a half percent growth that.

The expectations game on Wall Street you know becoming an -- -- indications are better.

Then typically stocks -- rise but that that this -- as China's slowing down and that is it concern for the US and for the world that I matter.

That is if you're right that's actually concerned but what we need to focus on is on the pace of that slowdown a quote what everyone has admitted is that the pace -- the slow.

Is that the -- half the -- China it's not possible to have.

Double digit growth lead to 8% growth -- percent growth and have that sustainable yet that's important to -- It -- so what's important to see is that this be the growth.

Goes down slowly to about three to 4% growth that's -- the world can pick up their GDP -- putting money right now.

Right now worry we're still putting money in a little bit more of the defensive names specifically consumer Staples were putting -- in utilities and health -- And what we're tracking the reason we're trying to -- it is.

How we define it declines as the difference between return of investment.

Vs return on investment so typically return on investment people go out to five spots to think the price the stock -- a -- However you're still invest in the stock market.

-- time like this where uncertainty is is very large.

What we wanna talk about with clients is return on investment make sure that the hundred dollars that we use to buy at various stock.

That we still have similar purchasing power in a couple months should the stock market move so.

Well listen Howard it's enough that sounds really -- told -- David because.

You know the stock market was flat last year and it's looking like you might be flat again this year so essentially.

Yeah it seems like -- -- deal with a lot of people that the best strategy is not to lose money so years.

It kind of seems like -- -- money and get the same amount out.

You know that's one way to think about the way that we actually think about it is we're not.

Is that we are taking them that no matter what you do whether you buy a CD from a bank or whether you buy stock.

At the end of day it's -- -- if the bank that he by the CD from the that crumbles you're not gonna get your CD back.

If -- company that you -- stock from if they'd go bankrupt you're not gonna get back your equity.

So we're we're tried to say is.

It over the course of the next quarter quarter and a half as there is a lot of uncertainty we want to make sure that we are putting your money.

And were investing -- so we're actually.

Giving risk onto your money but we want to make sure that it's the safest amount of risk.

That we can take so we're not saying we're gonna put -- under -- cash.

On in fact were actually saying is we want to invest you.

Fairly fully but we want to make sure that where we put your money is going to be safe so even if the stock market goes so does the does go down.

You'll actually return pretty high coupons and dividends in the stocks and bonds -- would side.

To buying a purple and -- way you -- from tech financials and materials.

Yes so one of the reasons we say stay away from -- is that tech has just been you know it's traditionally a growth company our growth sector.

And with all the bad news going on globally outside of this morning.

We're a little bit concerned that global growth isn't growing as fast as the rest the market expects but one -- things that we're actually trying to do is -- take money.

Off the table when it comes the telecoms telecoms sector AT&T Verizon sprint they've all actually been outperforming the market by about.

818% I think it is evident that you right.

They do -- -- to yet but there is actually a little bit of concern when it comes to how much.

At.

How much actual -- capacity there is so good but yes so we're -- saying stick with the -- copies for now wait for real hard news to come out.

And then hopefully start putting money to -- to work.

After the election.

David a blew up CIO -- -- Enjoy your weekend in Chicago you you tip -- have a.

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