S&P DOWN 8, THE NASDAQ DOWN 22.
YESTERDAY, THE FED GAVE US NEWS
THAT THE ECONOMY IS SLOWING IN A
BIG WAY.
STOCKS CLOSED MOSTLY LOWER AFTER
THE FED LEFT INTEREST RATES
UNCHANGED AND SIGNALED THERE
WILL LIKELY BE NO MORE RATE
HIKES THIS YEAR.
HERE'S WHAT JAY POWELL SAID
YESTERDAY.
>> SO IN TERMS OF WHAT IT WOULD
TAKE, I'D SAY, AGAIN, TODAY WE
DON'T SEE ANY -- WE DON'T SEE
DATA COMING IN THAT SUGGESTS
THAT WE SHOULD MOVE IN EITHER
DIRECTION.
THEY SUGGEST THAT WE SHOULD
REMAIN PATIENT AND LET THE
SITUATION CLARIFY ITSELF OVER
TIME.
WHEN THE TIME COMES, WE'LL ACT
APPROPRIATELY.
MARIA: JOINING US RIGHT NOW IS
WEALTH ADVISORS PRESIDENT AND
FOUNDER, MARK AVALON.
THANKS FOR BEING HERE.
INTERESTING WHAT HE SAID THERE.
HE SAID WE DON'T SEE ANY NEED TO
MOVE IN EITHER DIRECTION.
SO WE'VE BEEN TALKING ABOUT
MOVING HIGHER.
NOW HE'S BRINGING IN EITHER
DIRECTION.
SO DOES THAT INDICATE THAT A FED
CUT COULD BE ON THE HORIZON?
>> THAT'S A SIGNIFICANT CHANGE
FROM THE FED WHICH TELLS US THAT
THEY'RE AWARE OF THE SLOWING
GLOBAL ECONOMY AND THE U.S. IS
CORRELATED TO GLOBAL GROWTH.
WE'RE NOT AN ISOLATED ECONOMIC
ISLAND.
SO EVENTUALLY SOME OF THAT IS
GOING TO TRICKLE OVER TO HERE
AND WE'RE GOING TO SEE MUTED
ECONOMIC GROWTH.
WE'VE ALREADY SEEN THAT WITH
EARNINGS EXPECTATIONS, LOW
SINGLE DIGIT EARNINGS ESTIMATES,
SO IF THE MARKET IS FAIRLY
VALUED RIGHT NOW AT THIS POINT
BY HISTORICAL P.E. MEASURES,
WHAT'S THE CATALYST?
WE DON'T HAVE A GREAT ECONOMIC
CATALYST EITHER FROM THE ECONOMY
OR EARNINGS SO I THINK THE FED
IS GETTING AHEAD OF THAT
FORECAST RIGHT NOW WITH THE
COMMENTS FROM YESTERDAY.
>> TRYING TO LOOK AT THE
ECONOMIC CYCLE VERSUS THE
PRESIDENTIAL ELECTION CYCLE,
OBVIOUSLY THE STATE OF THE
ECONOMY IS PRESIDENT TRUMP'S
BIGGEST TALKING POINT EVER AND
WHAT ARE WE LOOKING AT 1 A 5,
16, 17 MONTHS FROM NOW, WHEN
WE'LL BE IN THE FINAL DAYS OF A
PRESIDENTIAL ELECTION CAMPAIGN.
>> THAT'S A GREAT QUESTION.
THIS YEAR I THINK WE'RE LOOKING
AT A AN UP MARKET, SLIGHTLY UP
FROM HERE ON OUT.
EVERY POST MIDTERM ELECTION
CYCLE SINCE THE 1940s HAS BEEN
POSITIVE THE YEAR AFTER THE MID
TERM.
THIS YEAR I THINK WE'RE SET.
WHAT'S GOING TO HAPPEN IN THE
FOLLOWING YEAR, THAT'S THE BIG
QUESTION MARK.
SOME PEOPLE ARE FORECASTING A
HIGHER CHANCE OF RECESSION IN
2020.
IF THAT STARTS TO HAPPEN AND THE
DEMOCRATS CAN ACTUALLY HAVE A
LEGITIMATE ARGUMENT TELLING
PEOPLE HOW BAD THE ECONOMY IS,
THEN WE COULD SEE PRESIDENT
TRUMP'S NUMBERS DROP.
FOR NOW, 2019, LOOKS VERY STRONG
OR AT LEAST REASONABLY STRONG
FROM HERE ON OUT.
MARIA: DO YOU THINK WE'RE GOING
TO SEE A RECESSION IN 2020?
>> NO, I DON'T.
I THINK WE'LL SEE SLOW, MUTED
GROWTH, MORE WHAT WE HAD DURING
THE PREVIOUS ADMINISTRATION
WHERE WE HAD 1.8, 2.0 ECONOMIC
GROWTH, RELATIVELY MODEST.
WE HAD DELIBERATELY SLOWLY
RISING STOCK MARKET, NOTHING
EXPONENTIAL, MORE INCREMENTAL
GROWTH, NOT EXPO
GROWTH, EOT EXPO
GROWTH, EXP EXPO
GROWTH, EXPONXPO
GROWTH, EXPONENO
GROWTH, EXPONENTIAL GROWTH.
MARIA: WHAT DID YOU MAKE OF THE
FACT THAT STOCKS WENT DOWN AND
SO DID YIELDS?
DAGEN: THAT THE 10 YEAR
TREASURY YIELD FELL TO 2-POINT
TREASURY YIELD FELL 2O 2-POINT
TREASURY YIELD FELL 2.52-POINT
TREASURY YIELD FELL 2.53%POINT
TREASURY YIELD FELL 2.53% AINT
TREASURY YIELD FELL 2.53% ANDT
CHANGE YESTERDAY, THE LOWEST
SINCE JANUARY OF LAST YEAR.
I THOUGHT THAT WAS A BAD SIGN OF
WHERE INVESTORS SEE ECONOMIC
GROWTH.
IT WASN'T JUST NO RATE HIKES
THIS YEAR.
THE DOT PLOTS ARE SAYING ONLY
ONE RATE HIKE IN 2020.
THE BALANCE SHEET REDUCTION WILL
CEASE, IT WILL START IN MAY
WHERE THEY REDUCE THE AMOUNT OF
THE REDUCTION AND THEN IT WILL
STOP IN SEPTEMBER AND THEN THE
PORTFOLIO COMPOSITION IS PRETTY
INTERESTING, THAT THEY'RE GOING
TO -- THEY HAVE $1.6 TRILLION IN
MORTGAGE BACKED SECURITIES AND
THEY'RE GOING TO DO THIS --
THEY'RE GOING TO BASICALLY MOVE,
REDUCE THAT TO A MAXIMUM OF ONLY
$20 BILLION A MONTH.
WHICH IS CONVERTING THOSE
$1.6 BILLION OF MORTGAGE BACKED
SECURITIES INTO TREASURIES.
SO THAT MIGHT -- DOES THE
HOUSING MARKET REALLY NEED THAT
BALLAST ANYMORE?
PROBABLY NOT.
BUT I THINK THAT YOU'RE GOING TO
HAVE TO WATCH THE ENTIRE
TREASURY CURVE A AND EVEN
MORTGAGE SECURITIES AS THE
BALANCE SHEET ROLLOFF COMES TO
AN END IN SEPTEMBER.
MARIA: LOOK WHAT'S HAPPENING TO
THIS MARKET THIS MORNING.
NOW WE'RE AT THE LOWS OF THE
MORNING.
WE'RE LOOKING AT A DECLINE OF
165 POINTS.
CHINA IS ALSO IMPORTANT, MARK,
THE CHINA TRADE STORY.
THE PRESIDENT TALKED ABOUT
NEGOTIATIONS YESTERDAY AS THIS
DISPUTE IS NOW IN ITS NINTH
MONTH.
WATCH.
>> YOU HAVE TO MAKE SURE THAT IF
WE DO THE DEAL WITH CHINA, THAT
CHINA LIVES BY THE DEAL.
BECAUSE THEY'VE HAD A LOT OF
PROBLEMS, BUT WE'RE GETTING
ALONG WITH CHINA VERY WELL.
PRESIDENT XI IS A FRIEND OF
MINE.
THE DEAL IS COMING ALONG NICELY.
WE HAVE OUR TOP REPRESENTATIVES
GOING THERE THIS WEEKEND TO
FURTHER THE DEAL.
BUT NO, WE HAVE -- WE'RE TAKING
IN BILLIONS AND BILLIONS OF
DOLLARS RIGHT NOW IN TARIFF
MONEY AND FOR A PERIOD OF TIME
THAT WILL STAY.
MARIA: I'M QUESTIONING IF WE
ACTUALLY COULD GET A DEAL WITH
THE BIG STUFF LIKE THE I.P.
THEFT, LIKE THE FORCED TRANSFER
OF TECHNOLOGY.
ISN'T THAT A CULTURE IN CHINA?
DO YOU THINK A DEAL IS GOING TO
HAPPEN AND HOW IMPORTANT IS IT
FOR THE MARKETS.
>> THEY DON'T RECOGNIZE THERE'S
A PROBLEM SO I DON'T SEE A
GIGANTIC DEAL COMING.
THE MARKET HAS MORE DOWNSIDE
RISK RIGHT NOW WITH CHINA THAN
UPSIDE.
REMEMBER, EARLIER THIS YEAR
JANUARY, FEBRUARY, THE BIG PART
OF THIS RUNUP WAS OPTIMISM ON
CHINA TRADE.
WE HAD THE FED BACKING OFF IN
DECEMBER, SO WHAT WE'VE SEEN
THIS YEAR IS LARGELY CHINA
TRADE.
IF WE DON'T GET A TERRIFIC DEAL
THAT'S GOOD FOR BOTH SIDES, I
THINK THE MARKET SELLS OFF A
LITTLE BECAUSE THAT COULD PUT
PRESSURE OVERSEAS AND HERE.
MARIA: SOUNDS LIKE YOU WANT TO
PULL BACK FROM STOCKS.
>> I WANT TO BE VERY CAUTIOUS.
ISM NOT GOING TO MAKE A CALL TO
GET OUT RIGHT NOW.
I THINK WE'RE GOING TO HAVE
INCREMENTAL, NOT EXPONENTIAL