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Wells Fargo Advantage Funds Chief Equity Strategist John Manley and Nomura Managing Director George Goncalves on the outlook for the markets and shift...
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So no one can deny that today's jobs report shows some some significant some strong momentum by generating 236000.
Jobs in February with the unemployment rate following.
To its lowest level since December of 2008 this report.
Defied the naysayers.
It happened -- -- the sequester.
Despite that sort of you know sword of damocles over everybody's head it happened despite the snow storm that rocked the northeast a few weeks back and even.
In light of a payroll tax hike or at least the elimination of the payroll tax cut.
Bonds sold off on the news as we mentioned while stocks kept rolling let's break it all that with George Gonzalvez Nomar US interest rates strategy had a job family.
Wells Fargo advantage funds chief investment strategist gentlemen -- that that the question really is as the great rotation really happening now people fell very hard into treasuries they jump they -- they stumbled.
You know they just were trotted stampede -- reach other to get in there over the past year but now it's all equities -- is there -- rotation going on yes.
I may see you imagine the opposite happened -- the marketing gone down at between your kid dribbling away.
That would save me there was money on the inside trying to get out this acts like a market where there's money on the outside trying to get in that it -- the station yet George what do you think.
And actually the numbers if you look at there's still inflows into the bond -- so I have a hard time people.
Calling -- degree rotation loses the great sprinkles really what's happening.
You know that the Fed is pumping money everywhere into the -- market into the equity markets and MI is going everywhere salute to say that people are actually physically getting out of bond funds move into equity funds.
I find that a little bit too cute.
Well look on the screen and John you know you've made this point that stocks are yielding more than treasuries -- -- right 500 dividend yield you don't see this topic is not just what via shortly after the start of 2011.
It started to happen the yellow line -- the S&P 500 dividend.
And here we are it yields two point 16.
And then you see what's happening -- thing that you tenure -- this is just obvious to me that you want to be in stocks at this.
I think we've along when that he it is obvious and it's it's true and personal was called acute a long time so I appreciate it.
But secondly I think that you I'm not talk about fund flows on -- developed markets -- The market stock market double without fund flows going in the right direction.
There's still money on the outside it doesn't necessarily have to come through funds although we'd like -- to but I think you do have a situation where.
People if they're going to try and retire -- institutions they're gonna try and -- what they have to do they're gonna be forced into equities over the next several years and better to be there -- before they have to get there.
All right well I'll play the market came off its earlier highs pretty quickly this morning and that its climb back up again but George that made me wonder where people starting to think.
Is the -- going to tighten sooner rather than later meaning hike interest rates because the economy does look better.
Do you expect that this year or early next year.
We're still thinking that the president taper off towards the end of the year and really stayed behind the curve again.
We have to be very careful hot right rising rates -- could stunt the growth in the economy.
Hurt the housing market really her mortgage is something that -- John -- -- -- stunts that if they tighten or at least they start to telegraph that they will tighten eventually I think it does and I think that's why -- going to be slow to do -- I think they're going to be sort of make sure the economy strong enough to take the -- that it will get and they start to.
Not -- but who -- less I think they do they go from being strongly aggressively positive monetary pressure to just being positive to.
Just there lessons somewhere to have a lot in history I'm thinking Argentina.
A decade or so ago right I mean did you think tighten rates and it actually.
Was fine it improves the situation there.
-- US is different economies and we have our own issues to deal with a look at the comparison to an emerging market -- not yet but I do believe a I'm -- I do believe that we can sustain these low levels and rates that all we're seeing.
-- in the equity markets it's a definite trending market in the bond markets a chopper -- fest we get chopped up and down two weeks ago we are rallying doubts the lows in yields.
We tac came right back this week so.
It's too it's too early to say that business are big bond market sell off we rather have played a range and the Fed does mean is there to support you.
What John what do you like right now what looks like it can at least continue on this upward trend -- I think health -- still reasonably attractive it's not as cheap as it used to be that you know we're all paying more taxes for other people's health -- that's gonna go to somebody -- one.
Like technology US corporations got this -- while using technology I think they keep on using technology.
And I like energy I think it may be too soon for the commodities effect -- May never happen.
But my way of sort recycling and -- -- by the big energy companies which I think are extremely attractive in terms of their fundamentals -- are you worried about housing.
-- I worry a little bit about housing but you know and I -- worried about customers the -- -- two or three years we've had five years of sub par construction you've -- five years household formation.
Markets are beginning to clear up just let that happen I don't think -- would like up there there's there's a back -- there's a long line of people waiting to -- the states at this point that so there's there's some opportunity George what do you like his is.
In your opinion any point on the yield curve an opportunity.
So look.
We -- that we've been characterizing for quite some time is that for long term investors having enough cash to kind of roll up.
If we do get a higher rate environment in the future that -- -- approach where keep some short term.
Instruments and you have your long term allocation to credit and and high yield because that -- of the areas in the fixed income markets that.
Still pay enough yields.
But I think you know over time you know we will see rates for Verizon and and -- drop at the same time until the Fed actually says its dog and in the short term trading environment -- maybe if we -- -- ten year -- back -- two point -- we -- actually -- -- -- -- here.
Bottom I just sort of feel like if you on the stock and you got the dividend to miss an opportunity than the -- you feel -- you you -- a little bit something more -- know here at the government's gonna pay you back but both sides very valid job -- of Wells Fargo.
Chief equity strategist at George Gonzalvez no more -- US interest rates strategy had to have a great weekend gentlemen thank you Q2.
