CHARLES: NEW DATA OUT THIS
MORNING SHOWING NUMBER OF
AMERICANS FILING FOR
UNEMPLOYMENT DROPPED TO A
49-YEAR LOW.
THAT IS THE BIGGEST BEAT THIS
YEAR.
WITH ALL THE RECESSION TALK, IS
IT OVERINFLATED, WHAT I CALL
PROFESSIONAL PESSIMISM?
WE HAVE THREE OF THE BEST
PROFESSIONALS.
LINDSEY BELL, CHIEF ECONOMIST
BRIAN WESBURY IS WITH US AS
WELL, CHIEF INVESTMENT
STRATEGIST FOR JANUARY MY
MONTGOMERY JOT, MARK LUSCHINI
JOINING US WELL.
YOU ARE CAUTIOUSLY OPTIMISTIC,
BUT EMPHASIS ON THE CAUTIOUS
PART?
>> YES, EXACTLY.
I MY BIGGEST CONCERN IS THE
TRADE ISSUE.
90 DAYS BEFORE THE CONCLUSION OF
NEGOTIATIONS BETWEEN THE U.S.
AND CHINA.
LOOK WE'RE OPTIMISTIC, WE THINK
BOTH PRESIDENTS WANT TO COME TO
AN AGREEMENT IN AN ORDERLY
FASHION BUT IN THE MEANTIME
BUSINESSES HAVE ALL THIS
UNCERTAINTY AND THIS ENVIRONMENT
THEY HAVE TO OPERATE IN WHICH
WILL PREVENT THEM FROM SPENDING
ON CAPITAL INVESTMENTS AND
HIRING.
YOU'VE SEEN THAT IN THE NUMBERS.
THAT IS WHERE MY CONCERN LIES.
CHARLES: BRIAN, I CALL YOU
MR. SUNSHINE.
HELP ME OUT HERE.
>> THEY DO CALL ME MR. SUNSHINE.
I DON'T SEE THIS EVIDENCE OF
CORPORATIONS SLOWING DOWN.
IN FACT, YOU KNOW WHAT IS
INTERESTING, GLOBAL TRADE, WHEN
YOU ADD UP EXPORTS AND IMPORTS
HAS NEVER BEEN HIGHER THAN IT IS
TODAY.
AND WHENEVER WE HAVE A
CORRECTION IN THE MARKET,
CHARLES, I THINK WE ALL KNOW
THIS, EVERYBODY LOOKS FOR A
REASON, AND IT SEEMS LIKE, AT
LEAST IN THE LAST NINE OR 10
YEARS, EVERYONE OF THOSE REASONS
ALWAYS ENDS UP WITH THE END OF
THE WORLD, ANOTHER RECESSION,
ANOTHER 2008.
I DON'T SEE ANYTHING LIKE THAT
ON THE HORIZON.
THE FED IS NOT CLOSE TO BEING
TIGHT.
CORPORATIONS ARE MAKING RECORD
LEVELS OF PROFITS.
THEY HAVE RECORD ASSETS.
REAL INVESTMENT.
IS, I THINK HOW YOU NEED TO LOOK
AT IT.
IT IS AT AN ALL-TIME RECORD
HIGH.
SO PROFITS WILL CONTINUE TO
GROW.
THIS ECONOMY, I DON'T THINK
FACES RECESSION IN THE NEXT TWO
YEARS FOR SURE.
I DON'T KNOW ABOUT 2021.
CHARLES: RIGHT.
>> BUT CAN'T SEE OUT THAT FAR
ANYWAY OR AT LEAST THE NEXT TWO
YEARS.
CHARLES: MARK, A NEW SURVEY OUT
THIS WEEK, HALF OF THE CFOs
WERE SURVEYED SEE RECESSION NEXT
YEAR.
82% SEE RECESSION IN 2020.
NOW I KNOW CFOs ARE PAID TO
WORRY LIKE THAT, WHEREAS THE
CEOs GENERALLY, THE CHIEF
EXCITEMENT OFFICER.
WHERE DO YOU SEE US GOING?
>> CHARLES, PROBABLY NOT ALL
THAT DISSIMILAR TO THE OTHER
GUESTS.
I DON'T THINK IT WOULD BE A 2019
PHENOMENON THAT WOULD REQUIRE A
MASSIVE DECELERATION OF THE
GROWTH WE HAVE.
THERE IS TREMENDOUS MOMENTUM ON
THE GROWTH WE'RE PERSONSING ISM
READS ON MANUFACTURING AND
SERVICES CORRESPONDS TO NOMINAL
GROWTH GDP GROWTH RATE OF AROUND
6%.
WE KNOW WE'RE OPERATING WELL
ABOVE TREND PACE OF GROWTH.
OUR VIEW IS LIKELY WE'LL SEE A
SLOWDOWN OF 2019, OVER 2018,
EVEN THEN LIKELY OPERATING ABOVE
TREND LEVEL SO ALL THE KIND OF
SUBSTANCE WE THINK LIKELY WILL
CONTINUE TO PUSH THIS ECONOMY
FORWARD IN A POSITIVE FASHION,
WE BELIEVE FROM EMPLOYMENT TO
WAGE GROWTH, CONFIDENCE LEVELS
REMAINS LARGELY INTACT.
THEREFORE VIEW THIS SECOND HALF
2020, PHENOMENON.
MAYBE 2021 AS BRIAN SAID,
FUZZIER FATHER OUT YOU GO BUT
BOTTOM LINE NOT 2019.
CHARLES: BOTTOM LINE IT WILL
HAPPEN, BUT WE'RE MORE CONCERNED
ABOUT THE NEARER TERM.
>> RIGHT.
CHARLES: IT IS INTERESTING,
BECAUSE THE ECONOMIC DATA
EVERYONE POINTING OUT, VERY
ROBUST.
YOU GET DATA, LINDSEY FROM THE
MARKETS.
THERE IS SORT OF A TOYING WITH
INVERTED YIELD CURVE, THE ACTION
IN THE MARKET ITSELF,
FINANCIALS, A HUGE RED FLAG.
FINANCIALS ARE THIS WEEK, THIS
VULNERABLE WHAT DOES IT SAY FOR
THE ECONOMY?
COULD SAY THE SAME THING ABOUT
INDUSTRIALS AND MATERIALS?
SO THERE ARE DIFFERENT SIGNALS
OUT THERE BEYOND THE ROBUST DATA
WE GET ON THE ECONOMY THAT
SUGGEST OTHERWISE?
>> FINANCIALS USUALLY NEED THEM
TO LEAD THE WAY, KEEP THE MARKET
GOING HIGHER, AS WELL AS THE
TECH SECTOR BUT THE FINANCIALS
ARE A CONCERN.
THE BIGGEST CONCERN REALLY IS
THE YIELD CURVE.
RATES WERE GOING UP.
THAT WAS SO EXCITING, YOU KNOW A
YEAR AGO OR TWO YEARS AGO, THAT
WAS SUPPOSED TO DRIVE THESE
BANKS HIGHER.
WE'RE FINALLY IN AN ENVIRONMENT
WHERE THE FED HIKED FOUR TIMES
THIS YEAR, OR IS GOING TO HIKE
FOUR TIMES THIS YEAR WITH NEXT
WEEK'S HIKE, AND THAT, YOU WOULD
HAVE THOUGHT WOULD BE GOOD FOR
THE BANKS BUT AS THE YIELD CURVE
COMPRESSES HIGHER RATES MEET
LOWER RATES, HARDER FOR BANKS TO
MAKE MONEY.
IF THEY CAN'T MAKE MONEY, LOANS
ARE NOT FLYING OFF THE SHELVES,
IT'S A PROBLEM FOR THE BANKS.
CHARLES: WHAT IS YOUR BIGGEST
WORRY, BRIAN?
>> FIRST OF ALL GO BACK TO THE
BANKS OR BOND MARKET FOR A
SECOND.
EVERYBODY ACTS LIKE THE BOND
MARKET IS ALL-KNOWING ENTITY.
IT IS NEVER WRONG AND STOCK
MARKET IS ALWAYS WRONG BUT THE
BOND MARKET HAS MADE HUGE
MISTAKES IN THE PAST IF YOU GO
BACK TO 1971, THE 10-YEAR YIELD
WAS 5.3%.
THE NEXT 10 YEARS INFLATION WAS
8.9 IT WAS A HUGE LOSER TO BUY
BONDS IN 1971.
I THINK THESE BOND YIELDS, THE
ONE BUBBLE I SEE IN THE
MARKETPLACE.
AND, WHEN WE DO TALK ABOUT
BANKS, THEY'RE MAKING RECORD
LEVELS OF EARNINGS.
THEY HAVE NEVER EVERYBODIED MORE
MONEY.
THEY'RE FLOWING RIVERS OF CASH.
ON FORWARD EARNINGS WAYS BASIS,
S&P 500 IS TRADING 14.9 ON
FORWARD EARNINGS.
CHARLES: WHICH IS SIGNIFICANTLY
BELOW THE FIVE-YEAR AVERAGE,
RIGHT?
WE NEVER HAD A CRASH.
>> IT'S A CORRECTION.
CHARLES: WE NEVER HAD A MARKET
CRASH AT 14 PE FOR SURE.
>> SURE.
CHARLES: GET MARK FOR HIS FINAL
THOUGHTS.
SO, MARK, WHAT GETS US OUT OF
THIS MALAISE THEN?
WHEN DO WE GET A SORT OF CALM
AMONG THE PROFESSIONAL WORRIERS?
>> WE HAVE TO SEE A COUPLE
THINGS.
OBVIOUSLY THE NEXT MEETING FOR
THE FEDERAL RESERVE WILL BE
DELICATE ONE, NOT SO MUCH
RAISING INTEREST RATES WHICH
SEEM LIKELY WHAT IS THE DOT PLOT
FORECAST FOR THE ATTENTION TO
FURTHER INTEREST RATE INCREASES
OVER BALANCE OF 2019.
THE OTHER OF COURSE IS TRADE.
ANY RESOLUTION AROUND WOULD GO A
LONG WAY REDUCING UNCERTAINTY
FOR THAT.
OTHER UNCERTAINTY IS GLOBAL
GROWTH.
SEEING ANY ARRESTING OF
DECELERATION IN THE GLOBAL PMI
READS FALLING NOW SINCE THEY
PEAKED LAST DECEMBER WHICH
SUGGESTS TO ME, PERHAPS WE COULD
SEE RESUMPTION OF NON-U.S.
ECONOMIC ACTIVITY OCCURRING IN A
POSITIVE FASHION WHICH WOULD
TAKE SOME OF THE RELIEF OFF OF
THE INVESTORS THAT ARE WORRIED
THAT WE'RE GOING TO BASICALLY
IMPORT IT HERE IN THE UNITED
STATES.
SUCCUMB TO THE SAME RECESSIONARY
CONDITIONS A COUNTRIES OUTSIDE
THE UNITED STATES ARE
EXPERIENCING.
CHARLES: LIKE OUR MOAT AS WE'RE
GETTING SMALLER AND SMALLER.
WE'RE GETTING WRAP.
LINDSEY, LAST WORD TO YOU.
YOU WANTED TO SAY SOMETHING.
>> NO, I AGREE WITH THE LAST
GUEST.
THOSE ARE ALL THE THINGS THAT
NEED TO BE RESOLVED.
CHARLES: ALL RIGHT.
WE HAVE A CHECKLIST.
HEY, THREE OF THE BEST MINDS ON