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Jeff Carbone Advises Investors For Porfolio Breakup (Audio) · Bloomberg Intelligence

• 0:00
  Speaker 1: We're gonna take a look now at the stock market
• 0:01
  Speaker 1: the bond market. Him. I just want to point out
• 0:03
  Speaker 1: a little bit more of the detail on the big
• 0:06
  Speaker 1: auction we had. The Treasury doesn't usually sell three year
• 0:09
  Speaker 1: notes and ten year notes on the same day, and
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  Speaker 1: they're quarterly refunding. But in fact, today billion dollars or
• 0:14
  Speaker 1: three year notes, twenty billion of ten your debt and
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  Speaker 1: UH it left yields in part land on the tenure
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  Speaker 1: anyway at the highest since June, weaker than usual demand,
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  Speaker 1: the bid to cover ratios UH coming down a good bit.
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  Speaker 1: I guess it's not too surprising given that there's a
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  Speaker 1: lot of uncertainty about where the FED goes next, but
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  Speaker 1: certainly it's something investors are watching very closely. In fact,
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  Speaker 1: let's bring one in now, Jeff Carbone, co founder and
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  Speaker 1: managing partner of Cornerstone Financial Partners, to tell us his
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  Speaker 1: view on the FED and what it's going to mean
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  Speaker 1: for stocks. Jeff, welcome to the show. Oh, thank you.
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  Speaker 1: So did Leo Branard Fed governor when she spoke and
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  Speaker 1: urged prudence in the course of hiking rates. In other words,
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  Speaker 1: she seems to be argue, maybe for a little later
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  Speaker 1: rather than sooner? Did it change your view on the
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  Speaker 1: stock market, which seemed to like it. Our Bloomberg terminal
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  Speaker 1: shows another nice leg up in the SMP five hundred
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  Speaker 1: this afternoon after she spoke. Absolutely, I think to raise
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  Speaker 1: or not to craize that is the question, isn't it.
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  Speaker 1: So that's what we're that is what we're looking at.
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  Speaker 1: And uh, certainly you take the last today with the
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  Speaker 1: Fed Governor Brainerd talking, Today's the last day and we'll
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  Speaker 1: go on radio silence til the FED meeting next week.
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  Speaker 1: So it was interesting to her speaking today because part
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  Speaker 1: of the sell off on Friday was led to just
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  Speaker 1: her knowing that she was going to talk, and the
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  Speaker 1: concern of what she have more of a hawker is
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  Speaker 1: stance and um a rate hike in September, which has
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  Speaker 1: seemed to be on the table up until today when
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  Speaker 1: the Fed when the probability factor just fell to about
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  Speaker 1: so certainly looks less likely that September rate hike would happen.
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  Speaker 1: My thoughts have always been didn't would not make sense
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  Speaker 1: leading up to the election to raise it, to raise
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  Speaker 1: rates prior to the election, but still high probability, and
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  Speaker 1: I do think we will get a rate hike in December.
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  Speaker 1: So what we've been doing with for our clients and
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  Speaker 1: our portfolios has just taken a more cautious stance. We
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  Speaker 1: we had the FED meeting, the theme of the election, certainly,
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  Speaker 1: the uncertainty and volatility of the September October markets is
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  Speaker 1: always out there. So has not been a bad time
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  Speaker 1: to be a little bit more UM defensive in the portfolios,
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  Speaker 1: and we have. We've got a little bit more cash
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  Speaker 1: and we typically would. But what that means is we're
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  Speaker 1: looking for a time and when can we put the
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  Speaker 1: dry powder back to work, and we'll look we're looking
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  Speaker 1: for probably a five to eight percent pullback and we'll
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  Speaker 1: we'll put the money back to work in sectors that
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  Speaker 1: are less interest rate sensitive, so we'll look to UM.
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  Speaker 1: We look for some financials. We like technology, consumer discretionary,
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  Speaker 1: and energy as some of our favorite sectors that we
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  Speaker 1: like right now. Jeff, While all investors are not created equal,
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  Speaker 1: I wonder if you give us an idea or a
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  Speaker 1: hint about how much cash you would expect intelligent portfolios
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  Speaker 1: to have right now for that dry powder that you
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  Speaker 1: just described. Yeah, we were recommending anywhere and just like
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  Speaker 1: you said, not all portfolios nor investors are created equal.
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  Speaker 1: So we we've looked from anywhere from a twelve as
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  Speaker 1: high as a cash position. Right now, um, we have
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  Speaker 1: taking taken off the table some of the um value
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  Speaker 1: of the sectors that had were overvalued, like some consumer
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  Speaker 1: staples as well as utilities that we fit we've kind
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  Speaker 1: of thought and feel are definitely overvalued and will be
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  Speaker 1: more interest rate sensitive when the Fed does raise rates. However,
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  Speaker 1: we're seeing them rebound a bit today. So where Friday was,
• 4:00
  Speaker 1: it didn't matter what you had. Friday was a didn't
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  Speaker 1: whether it was gold, whether it was bond stock, it
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  Speaker 1: was just energy, it didn't matter. Uh it was everything
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  Speaker 1: was down. Today we're seeing a little bit of reversal
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  Speaker 1: of that, and the market seems to be holding, which
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  Speaker 1: I'm glad to see that we were expecting volatility but
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  Speaker 1: didn't expect it as quickly as it happened. Right now. Well,
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  Speaker 1: you know, Jeffy, it just seems to me that there's
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  Speaker 1: there's a couple of ways you can look at this,
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  Speaker 1: and I think it's very tough. If you're a money manager, right,
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  Speaker 1: investment strategist, whatever, that you could say, look, if the
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  Speaker 1: FED starts raising rates even it's a little bit, it's
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  Speaker 1: a it's a vote of confidence in the economy. And
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  Speaker 1: so it's a positive background for stocks. And sure socks
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  Speaker 1: are going to have a day or two where they
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  Speaker 1: sell off, but you know, just get over it and
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  Speaker 1: and have a positive view for stocks. Or what's the fear.
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  Speaker 1: What's the fear that they're going to raise rates four
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  Speaker 1: times next year? That doesn't seem likely and so is
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  Speaker 1: it possible this is a win win for the stock market. Well,
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  Speaker 1: and I think that's the concern is that, Okay, why
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  Speaker 1: would you why would the Fed need to raise rates
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  Speaker 1: outside of and you know we've been on uh you know,
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  Speaker 1: non normal low rates environment for you know, the seven
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  Speaker 1: eight year periods. So they would typically look to raise
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  Speaker 1: rates to control invasion or uh take care of a
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  Speaker 1: heightened inflation environment, which we're not in, or to control
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  Speaker 1: and slow down and overheated economy, which again we're not in.
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  Speaker 1: So the concern would be if they raise rates too quickly.
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  Speaker 1: And what we're already in a slow growth uh you
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  Speaker 1: know from GDP from even though we're even we've had
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  Speaker 1: improved job numbers, we still have weakness within wage growth.
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  Speaker 1: We still have weakness in manufacturing. So it's the concern
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  Speaker 1: of it they raised too quickly, will they stall and
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  Speaker 1: put into recession a slow, slow economy. Uh So that's
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  Speaker 1: I think what we're seeing as a fear. Well if
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  Speaker 1: they if they continue to stay on the pace that
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  Speaker 1: they they that Janet Yellen has spoken that she'll based
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  Speaker 1: on UM data dependency, they'll continue to look at a
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  Speaker 1: slow rise at rates. UM. You know, they did go
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  Speaker 1: from where they're going to raise rates four times in sixteen,
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  Speaker 1: well we haven't even gotten We saw one in fifteen,
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  Speaker 1: we haven't seen any this year we can maybe see
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  Speaker 1: and then they dropped it down to two. We've got
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  Speaker 1: we're probably going to see one in December. We're looking
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  Speaker 1: at two rate hikes possibly next year. But even from
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  Speaker 1: Governor Brainerd today, it's definitely more of a dovish stance
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  Speaker 1: that they will need to be at a slower pace
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  Speaker 1: than maybe they've initially and we've got a little dissension
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  Speaker 1: it seems between some said governors. So that's going to
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  Speaker 1: be an interesting UM. The area to watch is do
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  Speaker 1: we have consistency with our fed governors to raise rates
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  Speaker 1: at a slow and steady pace. Another thing to watch
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  Speaker 1: of course, is the upcoming election in November, and it's
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  Speaker 1: not just an election for president and is also an
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  Speaker 1: election for Congress. And I'm wanting your take on what
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  Speaker 1: you see happening and how that affects people's investment strategy. Sure, well,
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  Speaker 1: we know the markets don't like uncertainty, and with this election,
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  Speaker 1: we're we're seeing a lot of uncertainty when you look
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  Speaker 1: at you know, the polls, and the polls are getting
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  Speaker 1: closer for both Canada will for the Republican candidate is
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  Speaker 1: getting some getting some momentum. But you when you look
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  Speaker 1: at the favorability polls, neither his his every favorable candidate.
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  Speaker 1: So when we look at that, no, if you end
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  Speaker 1: on November nine, there's gonna be a lot of disappointed uh,
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  Speaker 1: citizens of the United States, so which could have a
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  Speaker 1: negative undertone to the market. So whether you're you're a
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  Speaker 1: Republican or a Democrat, that's not the The hope is
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  Speaker 1: that you go out and vote. However, there's gonna be
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  Speaker 1: a lot of disappointed UM voters that their candidate did
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  Speaker 1: not win. So from an economy standpoint, on the stock market,
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  Speaker 1: you know, that's yet to be seen. But my thoughts
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  Speaker 1: are it's going to be more of a negative UM,
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  Speaker 1: based upon what's what we're seeing right now. Quick final question, Uh,
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  Speaker 1: at the end of next year, where is the stock
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  Speaker 1: market going to be? I still think we're going to
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  Speaker 1: be in a positive I think we're going to see Uh,
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  Speaker 1: we haven't. We haven't had this overheated economy UM. But
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  Speaker 1: I think when you look at the housing data, you
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  Speaker 1: look at UM, the job numbers, you look at you
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  Speaker 1: even though GDP has been slow, and we are seeing
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  Speaker 1: you improved revenue and earnings UM. And that's the two
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  Speaker 1: key drivers. Are earnings are the expectation of earnings is
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  Speaker 1: what drives the stock market. I do think they will
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  Speaker 1: be positive. We've got to leave it there. Thanks very much.
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  Speaker 1: Jeff Carbone He is the co founder and managing partner
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  Speaker 1: of Cornerstone Financial Partners. You're listening to taking stock. We
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  Speaker 1: take you through to the close on Wall Street next