Also in this playlist...
This transcript is automatically generated
Earnings season is getting under way today vehicles we know with high hopes would also concerns about what the markets will do when the Fed.
-- we talked about this sort of begins to taper so well should investors be positioned for the second half of the year.
That's -- returning to -- that these Barclays managing director and head of US equity portfolio strategy is so.
It'll last hour we had I think one traders say -- we're only going to be 3% higher it was McDonald's reported it as well.
Year over year for S&P earnings.
In total what's wrong with that I -- at least we're moving in the right direction.
Well we may be moving in the right direction I suppose you could make an argument that earnings growth bottomed out in the third quarter of last year but.
It to you get nominal GDP to pick up you're not gonna have top line revenue growth so.
Some 40% of earnings growth this year has come from share buybacks that's fine but for the median company.
They're not going up as a percentage of cash flow cash -- not gone up because revenue growth has gone up so it's really not a model we error earnings growth can accelerate.
So explain to people what I'm -- economic zeppelin would accompany an out to share buybacks there's sometimes a push by big shareholders to do so because it very short charge juices the stock sometimes they never even follow through with that.
And finally it's like financial engineering it's not that they sold more widgets -- Cut correct and it looks fine it drives earnings growth higher in the short run -- in the long run if you add debt to do it.
In some ways you're just mortgaging.
Against the future growth of the company rather than investing capital or labor or so.
It's -- It is financial engineering and away -- so look I think the bottom line here is.
Dead economy may very well be get positioned for an acceleration in the back half -- certainly we've seen.
Our view all year has been that as public policy and certainly.
I didn't have a 201011.
Or twelve style -- Business confidence would improve business investment would improve which she -- the labor data we're seeing at the capital spending that that sets the stage for stronger earnings growth.
In the meantime know when the Fed starts to normalize policy like they did in 8394.
Or 04 yeah it triggers a correction.
It just does it starts -- the interest sensitive parts of the market and then rotates into the cyclical parts of the market.
And it's highly unlikely that it's run its course until you see the financial sector go down.
Until we get to the point when the Fed actually is tapering purchases and you believe that will happen when and the markets know it's coming do you still anticipate that correction all -- absolutely we've just gone through stage one a bit if you go back to 4014.
We had a first -- lower than we actually rallied on the first strong payroll report much like we did on Friday -- followed -- a little bit on Monday just like we did today.
And that was the peak of the market sold off again over the next month fairly sharply.
So where you and Barkley is piling it on knowing that what we know that eventually tapering will happen knowing what the numbers might very well be for earnings.
Where do you like the right so our idea all along was to be in the parts of the stock market that were in the sweet spot of fed policy.
Until we hit this inflection -- -- that was the high dividend paying stocks well we called stocks and bond like characteristics.
As we go through this process we want to rotate it is cyclical stocks so coming out of this process.
We want to be long industrials and energy and technology.
But you can't.
Be too quick to pull the trigger on those because as I said in the second stage of the correction that's what's going to go down so we do think you'll get -- better entry point.
Humphrey Hawkins testimony in two weeks is the Allentown announcement at the end of the month at all those things as you move in August and closer to that September tapering.
-- -- -- it's gonna happen and sure looks like it does he get a better window to -- the cyclical stocks as a -- -- in mind Barry what do you avoid what are you getting out.
Well when we've certainly got out of this stocks Obama characteristics that really had no fundamental story attached to all other than dividend -- so we -- utilities for example.
Health care is still pretty cheap.
There's been about.
Product pipeline in the pharmaceutical companies so that you might be okay.
But utilities Telecom the reads you know.
MLPs all those things that people are buying only for dividend yield those of the parts that are gonna struggle here -- Fifty I believe in your coming out with 51 front.
Yeah I think your last Lincoln said that the -- -- -- for the year I would agree with what you agree with that because that's well below where we are now you're making me nervous well typically.
We had seven and 9% corrections and then the market was stuck in range for several quarters after that.
Now I may have wind up having a variant.
Much more aggressive positive target for fourteen because the years after these.
Kelsey Norman was a nice things have -- to be very -- you're getting the other side where you're not dependent upon the Fed 1995 for example was it.
Blow out if the stock market all right Barry -- thank you so much for being thank you very share -- wisdom we appreciate it -- thanks when we.
Filter by section