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BlackRock chief investment strategist Russ Koesterich on how fiscal cliff worries are pushing the markets lower
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-- and you seeing stocks play off.
The progress or lack thereof on the fiscal cliff if you look at this chart from yesterday.
Afternoon after a little upward movement in the stock market you see that debt.
Then senator Harry Reid came -- expressed disappointment and a lack of progress being with these automatic.
Tax increases and spending cuts and he saw the reverse happen again today say that won't pop.
Just a short while ago stocks get a bit of a -- after house speaker John Boehner sounded optimistic.
On getting the deal together what is -- -- to think of -- all he's chief investment strategist at BlackRock.
Let it doesn't seem that bad it didn't market you'd -- bounced back a little bit could you -- see increased volatility and I mean much wilder swings potential way.
As we get closer to this day.
-- I think the risk is we're gonna have a lot of days like today where the market bounces around in this purgatory.
Where were basically moving on every utterance out of Washington the truth is when -- get some positive comments when he -- -- negative comments.
Any -- there's any real clarity.
About when a compromise is gonna happen.
What it's gonna look like the markets are likely to be hostage.
To what's going on in Washington DC.
Are you actively telling investors to make changes to their portfolios.
The composition.
Of those portfolios based on what.
Could happen in a -- that it's in the mites.
At the end of the year.
But I think there are some.
Asset classes that are likely to be more resilient now some -- it makes sense even if you don't go over the fiscal cliff but for example one -- -- been talking to clients about.
Our municipal bonds up fixed income in general looks expensive but segments that fixed income market -- look attractive on a relative basis including municipal bonds.
Now in addition to that this is an asset class that's obviously likely to do well if marginal tax rates rise in 2013.
So that's needs an example place that -- wanna be any way would make even more sense if we do go over the fiscal Clinton.
-- with the Muni bonds though they have had an incredible run in recent years and just the category averages here if you look at.
Longer term Muni bonds California even New Jersey you've had double digit returns it -- as a -- -- just here today so far.
They aren't getting a little ahead of themselves at this point.
What -- couple things given my certainly their places we'd want to avoid or at least not overweight generally like broad national base Muni funds.
But in general again if it's a relative game so.
Yes Munis to look expensive on absolute basis but again you're gonna have clients you have investors with a portion of their allocation and fixed income.
Compared to other alternatives particularly the treasury market -- actually incredibly cheap you're getting a significant yield premium.
In municipals even before you take into account the tax advantage so.
And right now unfortunately we're in a relative game in this is one of the places that on a relative basis at least does look at track.
That we sell dividend stocks here.
With the possibility that a dividend tax rates go up significantly.
For wealthier Americans.
This is an excellent question -- we're getting from a lot of clients I think the -- on the segment of the dividend space so -- portions that it particularly US utilities.
-- it -- look at very expensive you know these are stocks have been bid up.
Big deal plays have defensive characteristics.
He's done very well the last two -- three years they've got -- pricey.
But in general no I don't think that -- -- in space.
Is it any more risk than the broader stock market because remember if we go for the fiscal cliff people have a lot -- about besides their dividend tax.
We're looking at potentially economic recession.
And -- many of those dividend companies have defensive characteristics in other words they do better in a slow economy.
Which may give them a bid even if you take into account the fact that the tax rate is likely to go up.
Well sad Brussels great to see you thank you so much have a great holiday idea and if we don't -- -- before -- rusk gastric.
BlackRock -- it.
