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Chairman and CIO of Cumberland Advisors David Kotok on how low interest rates are helping investors take more risks.
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Hundred trying for its longest weekly winning streak in years.
My next guest says they're still more room to be outside so now is the time to buying he's not tighten up stocks during announced Cumberland advisors chairman -- CIO David -- -- David they have on the show.
-- you think that this is really all about the fat.
It's all about the Fed it's been about the Fed it's gonna continue to be about the Fed the Fed.
He's driving markets it's driving asset prices higher Melissa.
And that include stock prices real estate prices precious metals art.
Everything but cruise ship tickets is -- to.
-- -- -- up -- -- do you say that.
There you know -- things are moving higher we haven't seen anything like this in our lifetime -- need to get laughs.
Well -- -- very interesting construction because when you're up against a zero interest rate or near zero interest rate.
All the models -- used to value things create huge numbers -- opposite is zero is infinity well we know the stock market can't go up forever.
But we could be substantially.
Higher.
Over the next couple of years and the upward bias is strong.
A little better economic news and they get stronger we had a good report out of New York fed today so we get mixed economic picture.
But what we do have there's this constant fed policy -- -- very very low rates it's very very bullish.
So people ask me all the this all the time it doesn't matter that we saw the economy contracted the last quarter of last year that we see unemployment.
Stay stubbornly at this level bad you know the consumer is worried about this tax increase -- just got 77% Abbas at the beginning of the year.
That doesn't matter to stocks because what's driving stocks -- the economy and maybe -- things are positive because it keeps the Fed doing what it's doing.
You said it perfectly.
That's what it's a ballot and and if you lined up the things you just listed what they say is the policy is extended out.
It will take robust economic growth.
To contract the time.
And that fed now has some staff studies which extend that time I've read one.
Which puts the normalizing.
Year on a baseline scenario of 2019.
Well who knows whether it's 201719.
To any.
Whatever we do know the for the next couple of years we -- in this very low interest rate mode huge bearish move for stock.
Yet no I see no danger of robust economic growth there's no sign -- out there.
What do you think is the turning point though I mean it's when the Fed comes -- and changes their action what what gets us there is an unemployment hitting 6% mean what's the trigger.
Well we have.
This thing you know we have the evidence rule which is six and a half percent -- employment and inflation that two and a half for lower.
On the other hand you just had fed chair vice chair Janet Yellen.
Come out and say that's not enough for us to change policy would make -- stay on hold even if we hit those numbers.
So the majority of the FOMC.
Is saying the we're gonna be in this for a long time and until the economic recovery is yeah solid.
And I think we have to believe them.
David real quick before you go so how do you pick your bets in this environment is obviously not every stock is gonna go up -- -- -- -- by the index you -- ATF's do you buy gold -- real estate what's your best -- I.
I like ETFs you know that and and we took a position of the broad based ETFs that are more equal weighted the symbol is our -- As opposed to the cap weighted S&P 500 the one we know SP YRS.
He says if it's a broadening rising market.
You wanna get into equal weighted ETFs you -- -- get the upward movement in the smaller and mid cap stocks.
-- -- contact thanks so much for coming on makes a lot of sense.
Thank you.
