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Fed Stimulus Bad for Markets?

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    Mark Luschini of Janney Montgomery Scott gives his outlook for the markets.

  • Duration 4:11
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I looks pretty good year for stocks so far but our next guest says that the Fed's latest round of economic stimulus -- to close the markets to stall in the fourth quarter.

-- -- -- investment strategist for -- Montgomery Scott joins us now.

So -- so little counterintuitive right because we hear that we have this fed that's just gonna pump money into the market guidance not -- mean you're saying it's not actually even gonna work.

Well I'm not sure that it is -- mean obviously the market has responded positively to quantitative easing one and two but at this point.

Surveys taken of CFOs relative to what if anything they would do different with regard to business investment are hiring plans.

Most -- responded to the answer being no whether interest rates were one or even 2% below where they are today.

So the fact the matter is I don't think it's necessarily a liquidity your interest rate issue as much as it is a demand issue.

In airports I think that's more tied to uncertainty relative -- the elections in the fiscal clip.

Then what can be brought in the -- -- help through the Federal Reserve's monetary policy.

And because you know not Ben Bernanke talking a lot about the number of people out of work and how frustrating it is.

To continue to pump money into -- not growing the economy.

But companies are under operating under very strict cost controls how do you break that cycle so they're not going to be hiring.

And so we're just stuck in neutral what's it gonna take to really get some traction.

Well actually at the moment that is in fact the case and I think it's going to take the rekindling an animal spirits which is to say that.

They indeed businesses have more confidence in what they see in the name a couple of things as to what's.

If you prick who will opt for putting them from having more confidence than they do today.

And at the top of the list is tax reform and governmental intervention.

Third -- final sales in other -- lack of visibility because of obviously domestic sluggishness problems in Europe and so on.

But I think obviously some path toward fiscal.

And tax reform after that it the first of the year -- I don't when it expects the anything preemptively before the end of the year but.

Something toward -- I think might be able to ignite some confidence that businesses that are sitting on.

Trillions of dollars in cash might -- and business investment and higher.

Read -- again that's it it's -- tale of two cities right in the economy vs the stock market did you the stock market that's on fire.

Equities are outpacing.

Bonds.

But by miles to -- a market that's -- a 130 points today so you still have to be in it I think he can't be sitting on the sidelines even though you're nervous about the economy.

Where should people be putting their money.

Tracy I would agree I think you have to remain -- ties but I think the way you do that is through large high quality franchises.

We've been pre disposed to having more or biased towards US -- equities for the longest part of the last couple of years.

Actually now we begin to -- -- leaning into other international markets that have even cheaper valuations than the US.

And if we get some kind of triage of their.

Circumstances could improve and therefore -- even greater upside namely in Europe and even Chinese equities which are exceedingly inexpensive.

In on the prospects as some kind of fiscal initiatives that might be underweight currently in along with under the new regime.

Those also look interest thing but we aren't necessarily saying unilaterally don't -- US equities but rather.

Lean towards high quality but you can -- -- other markets that look exceedingly attractive as well.

Until that -- -- -- Tracy's point not so in other words enjoy the -- but stay close to the exit they can make -- quick escape.

If this much vaulted contraction comes along.

Do you see the market contracting when and by how much.

Well you know I think at this moment you know we're at 1450.

We've closed in on 15100 a little while ago.

I think we need to see economic validation to support substantively higher equity prices from today's levels continue to see multiple expansion without the benefit of corporate profits increasing.

Or with the continued risk that we have what we without them receding.

Suggest that we're gonna succumb the gravitational pull at some point so.

I do expect to see a more vault full fourth quarter.

But at the -- -- I think you need as we were seeing earlier remain -- ties just do so with a lot of ballast.

-- -- thank you for sharing your insights.

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