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Surevest Capital CEO Rob Luna and Janney Capital fixed-income managing director Guy Lebas give their outlook for the markets.
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All right nine days to go until a President Obama is calling -- job killing one point two trillion dollars and across the board government spending cuts.
To take a fact but some say that these cuts could actually be a good thing in the long -- for -- economy and the markets.
Who's right here and vehicle Abbas chief strategist for fixed income that -- is with -- Robert -- service capital CEO.
With us as well and they're both here and Robert start with you you know used -- -- -- coming pullback in stocks.
You look at part by 5%.
Hold back.
Buying opportunity shore.
But why that substantial the pulled up 5% to big number.
Yeah it's a relatively big number -- but if you look at where we're at year to date the market's gotten a little bit ahead of itself.
And markets if you look technically never tend to stayed too far too long above their fifty day moving average.
So where I come up -- that 5% number is basically just having the market's pullback.
To its fifty day moving average and long term I think that'll be a healthy correction and as you mentioned a buying opportunity for people to to get back into stock.
You know G I know that your concerns as well -- for you it's that -- -- what in the finger congress does point with sick restoration.
On its way it worked you know nine days ago as I just mentioned you're saying that congress.
It's gonna be crack is gonna crash it's gonna be a painful rat the we're all gonna -- well and what is there.
A potential here is for a fairly serious economic problems.
And the issue when it comes the markets is really that we've had these experiences a few times and we play these games that I like called fiscal chicken.
Back first in the summer of 2011 back just a few months ago.
And each of these times we had an outcome that was relatively favorable in the scheme of things the markets are now predicting at this time around.
But with any game of chicken there's just this risk that something goes wrong negotiations don't work in a serious problem and predictable.
Yeah I think you're and I agree with you -- on that and you know also Robert I mean if you look at what happened in the fourth quarter GDP we had.
-- -- negative surprise there and I think that's the big concern now that was very much tied to.
That's -- CB but the fiscal cliff fiasco out of Washington and I'm curious if the economy is gonna take another major hit.
Because of sequestration -- you've got news articles on the Internet right now saying you know parks are shutting down -- not going to be available.
You know the world is ending because -- sequestration that that scares the consumer cracked.
Yeah I think it definitely scares the consumer and all -- all -- mean if this goes through there's probably going to be about a 1% hit to GDP.
But you know let's keep in mind that march 1 comes around the economy doesn't turn into a pumpkin over night.
These are cuts are gonna roll out over a seven month period I think what I do think it's gonna happen first bought me if you look big gold gold's telling you that it's gonna happen.
But that being said I think you know 23 weeks into this when you know government workers start getting their notice of layoffs.
And it creates enough political fodder for everyone to get out there front of the media and in state their point.
That's when you start to see some -- to compromise come into play and I definitely think something is gonna get done and these are professionals like kicking the can down the road.
So again you know -- 5% corrections what we're expecting but its long term a buying opportunity.
No that big -- -- wanna talk about the treasury market would you view because you're also calling.
For two for interest rates to begin to ten higher steadily.
Over the rest of the year that's gonna affect things like the housing recovery that's gonna affect credit cards is gonna affect everything you're saying 2.2 percent at least for the ten year.
You're talking about that dramatic increase in the scheme of things and frankly right now there's a fairly large -- premium built in -- ten to fifteen basis points.
On the risk that fiscal issues are resolved very successfully.
So I think once we see whatever does -- -- -- congress that risk premium we did begin to bleed away.
We see maybe a little bit more focus and the Fed in the latter half of the year rather in the fiscal two.
You know and no I -- Robert that you like equities and another one of the things we need to unite talked about -- the forest frontier markets that are emerging market.
Consumer outside of the US a fiscal disaster or if you will how I played that how to play this frontier names.
Yes it's a good point you know you don't have to as an investor be stuck here to that domestic economy it's growing at 1%.
When you have emerging and frontier markets growing -- over 67%.
I mean a case in point there is a couple ways to play it look at PepsiCo.
This is -- company that's been kind of chugging along not really get growth but they're finally the investment that they've been making in the emerging markets are starting to pay off.
They just reported fourth quarter numbers 90%.
Sales growth pretty much all coming from the emerging markets.
Certainly looking for a way to play it domestically that's one way to play it.
But we really like the front tier story and so a lot of people investing in the bricks the emerging market countries for the past few years.
There really even hasn't been a mandate for the big institutional investors to invest in emerging markets until a couple years ago.
But right now look at where the big money's going they're starting to look at places like front -- markets.
Places like Vietnam.
Indonesia.
Also places like Argentina right now.
These are countries that are really have not gotten a lot of attention now there when adding the inter portfolio really makes a lot of sense right now and -- could play -- -- single country Tia.
G last word on that you don't have to be stuck in this country when he says.
You don't have to be stuck in this country but for our world because fixed income is more in reliance of corporate governance structures.
And the infrastructure required for healthy market we look at more the developed countries.
Continue to like Australia and a pretty strong commodities play all right L that's that's dozens and thought I will thank you very much T and of course Robert thanks about -- -- about from the chef thinks skies.
