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Doug Cotay with ING Investment Management on bigger threats to the global markets than the fiscal cliff.
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-- budget talks in Washington -- dominating the headlines are investors overlooking a bigger global threaten -- the fiscal cliff when joining us now dot could take chief market strategist with ING investment management -- Are we spending too much time worrying about the fiscal -- from what worries you on the global scale.
Well I think -- fundamentally you shouldn't focus too much on politicians anyway.
And what we're looking at is.
Paying attention to the fundamentals of corporate earnings what really matters to companies and what we've seen is this is the first quarter and twelve consecutive quarters.
That year over year earnings growth is negative.
That means that something's happening.
-- and the global economy.
Either in emerging markets -- Europe or Japan and what we're seeing is.
That's a signal for economic slowdown and that matters to the markets so -- act what we're advocating is right out this Christmas rally.
But going into the new year we're -- back then equities a little bit -- another overdo it we're gonna go defensive because we see a lot of headwinds going forward.
Police say that but we just got the latest housing index again was pretty positive.
Highest level in six and a half years so perhaps was seeing a little more traction in housing.
Goldman Sachs -- it's outlook on China -- 2013.
What worries you in split in particular.
Well it's not good economy.
Challenging fundamentals.
And if you look at it over time you really wanna -- the fundamentals because.
Once you get one negative earnings signal.
It's -- -- is this tunnel like cockroach theory EC one you -- see -- at the so what we've seen it's already yeah already in fourth quarter.
The earnings expectations being ratcheted down dramatically.
So we -- -- again.
Back to back negative quarters in earnings so even though housing is turning around.
Even though China looks like it started to do okay.
Good economy.
But bad.
Pop market for the -- challenging market for the fundamentals and that's.
What why you really need to be positioned just to trim back in equities the move into bonds you think bonds that really is a defensive move is a net.
Well -- -- he would broadly speaking is you have a high yield.
Definitely has exposure to risk assets -- global bonds which we like a lot you have corporate bonds and you have governments unless same goes short duration.
I like the duration.
And and you're getting paid for credit -- so.
Even if there is a rallying equity markets high yields is gonna pick that up.
So it's I'm just saying that -- now going to million a year there's enough challenges out there.
Not only the fiscal -- have.
But you have other health care bill you have by frank Dodd regulation right hand and it I don't I don't know how that all plays out but it doesn't look.
Market friendly and it's certainly not pro growth economic policies.
It's interesting -- we're seeing a lot of money coming out of these mutual funds and going into ETFC TF investment op like 26% this year alone.
Do you think that trend will continue as we head into the new year.
Well I think certainly we like active management but I think ETF trend is here is definitely very biggest part of the market and -- -- fact even portfolio managers can use ETF.
To hedge or get exposure.
Not pulled their ready to select box so it's really I think it's a very important asset class.
But all the long term broadly.
Across equity and bonds you active management and superior.
Very quickly what area -- you say avoid at all costs.
-- at at all costs I can be broadly globally diversified but -- I would -- I'm concerned about financials the financial sector there -- sold what the Fed is saying.
That they can't do any more acquisitions that that is -- when they can distribute capital when they can pay dividends.
And I think that's too much government to parents into one sector.
The sector has been moving -- in recent days all right Doug -- -- -- ING investment management thank you so much appreciate -- Welcome.
