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What Are the Markets Ignoring?

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    Phil Orlando of Federated investors on the potential warning signs the markets are ignoring.

  • Duration 4:01
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-- William anything more -- all of us now and our next guest says the markets are ignoring.

Some warning signs we have Phil Orlando chief equity market strategist at federated.

Investors would be -- -- Well news market has rallied about seven rate percent -- over the last couple weeks that's reversed the seven RE percent decline that we saw on the market post election.

While we're getting close to a deal and everyone's very excited that we may not go over the -- No -- focused on one of the terms of the deal.

And the terms of the deal may not be as pro growth as the market would like in terms of where to GDP growth in corporate earnings goal post that deal.

At their taxes go up on people who make more than 1000 dollars a year and -- predicted and rate goes up.

-- back on our economy well there's -- -- be -- deleterious impact on economic -- -- mean our GDP forecast for next year.

At one point 6% is below consensus now the consensus is not that much higher maybe it's around 2% or so.

Either set of numbers isn't very good trend line economic role in this country is 3% we ought to be grown at 4% so some of that the negative economic impact from the -- the debt ceiling issues I think -- -- economists are getting some of that into their forecast but aren't we at a point now where we're we're just talking in an economy as large as ours about marginal differences in terms of what they come up with.

-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- Or family making 250 if you live.

-- -- good school district in a high tax state like New York California with a kid in college -- fifty K a year you're not rich make up 2025 deal they cut -- and -- the -- a million then absolutely we fully supported that number I think that that speaker Boehner had a good suggestion now.

The president -- tower with 400.

At least we've got some movement here may -- that number comes in settling in at at 50750.

Not optimal but certainly better than 250 action but.

Will they get to our debts under control our spending under control to the point that you would be willing to.

IE US treasury well essentially loan money did the federal government that's the 64000 dollar question virtually all -- -- a harder question all the.

Focus over the last couple of weeks has been on the revenue side of the equation and I'm -- that we're gonna raise revenue but that -- the big enchilada is on the spending side of the equation particularly entitlement reform and there's there's precious little time or energy that's been spent on exactly how we gonna reform Medicare Medicaid and Social Security.

Right into the details matter as much.

On that side because again and you're gonna -- -- his -- 200 whatever it is a few hundred billion but it doesn't matter what the mix is on the on the spending side as -- -- markets I I think it matters a lot because -- I think the market recognizes that that from from entitlement standpoint we've got an unsustainable trajectory here we're not gonna solve that here -- well we're not who -- and -- market recognizes that -- -- -- still well under 2% well.

And the reason the ten years it at 170 and our view is is flight to safety not based upon.

The fact that we've got sixteen trillion dollars in debt with a debt to GDP ratio of -- percent.

So so the issue is that that everyone recognizes particularly the Congressional Budget Office that we need to sit -- -- Probably post the inauguration I don't think we get this all the next couple days -- -- to safety jobs situation it remains in place doesn't and essentially enabling.

This situation to continue I mean that's one of the reasons that we can continue on this this path as we can borrow money so well and writing and certainly given a summit attended the expansive nature with the Federal Reserve is doing with with -- Zurich and and in QE2 infinity I mean they're trying to keep interest rates -- to be able to support.

The payment of that debt I mean if if rates were back at five or 6% as opposed to one or 2% that would cost us a lot more in terms of interest on the debt -- -- thank you could talk of -- Orlando with us today.

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