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-- -- -- So -- today is better than expected auto sales and factory orders -- another sign that finally the economy really is doing -- up.
Well my next guest thinks many of the risks for 2013 of played -- he's overweight equities for the second half of this year and Jeremy.
UBS chief US equity strategist for the wealth management research Jeremy thank you for being with us.
So I mean when we take a look at the macro view do you feel like this economy really is getting on solid ground now.
Yeah I do -- contract and -- I think that the second half of this year we're gonna see a modest acceleration of growth.
Relative to the first half of the year some of the fiscal.
Travel starts to wane in the second half of the year we're seeing people growth.
Accelerate modestly from the from what we saw in the second half of 2012.
And I think that does business conferencing consumer confidence continues to improve housing continues to get better you're gonna get that second leg of capital investment from business spending which has really been the missing link in the an economic growth.
-- -- -- The fact we hear that every day all we have a big jobs number out on -- -- -- that is disappointing.
Does that give a boost to the market because.
It means the Fed may have to delay there -- tapering of the bond purchasing.
I think good question but I don't think that disappointing growth can be a sustainable market driver ultimately growth is going to be needed and required to drive earnings and ultimately the market follows the path.
The trajectory of earnings.
So the reason that we're optimistic on equities isn't because we have the Fed and accommodative policy at our at our backs.
It's because we do think that the economic growth.
It's gonna support reasonably strong earnings growth even in the first quarter where we have fiscal -- higher tax rates earnings for four and a half percent year on year.
That the quarter or this quarter is likely to be the trough in earnings growth and we're looking for better earnings growth on the back of a little bit better economic momentum in the second half yeah yeah.
That bad earnings growth is getting very downplay this there's not full costs to be back -- We we have the same conversation yesterday as it just these companies that is sandbagging the market so that they can surprise when they actually -- release those results.
Well earnings growth expectations for the second quarter -- running at about 3%.
If you rewind back to the first quarter with a similar two or 3% expectation going into the corner and then earnings beat and they ended up being closer to 5%.
I think we're really looking out a situation where the second quarter earnings -- gonna look a lot like the first quarter.
Reasonably low expectations.
You end up with mid single digit earnings growth in -- period in the first half of the year when GDP was just growing at around 2%.
That the prospects for earnings to re accelerate in the second half is what investors are going to be focused on and I think those prospects looked pretty constructive.
So assuming that volatility will be with us at least in the short -- as we get through this period where do you put your money where you telling your clients is the best place -- their investment right now.
-- within the equity markets I think that the cyclical sectors for when that'll benefit the most from a pick -- an economic growth.
Momentum -- are likely to outperform in the second half of the year.
You also have defensive sectors of the market that are trading at pretty expensive valuations.
We've seen some of those expensive valuations come in a bit -- interest rates have started to rise taking the shine out of some of those higher yielding defensive areas like utilities and Telecom.
But both of those sectors to look expensive to me -- for much prefer areas like technology industrials.
You know pockets in consumer discretionary.
Like media and consumer durables are gonna benefit from an -- -- -- sustainable housing market recovering.
-- look like the most attractive opportunities both from the cyclical perspective and also from a valuation perspective.
Glean information is always thank you so much Jeremy is there -- of UBS wealth management we appreciate you joining us for a.
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