UNEMPLOYMENT IS LOW AND CONSUMER SPENDING IS UP AND THERE 3 IS NO
TRADE DEAL WITH CHINA.
WE SAT DOWN WITH THE.
HAVE AND PORTFOLIO MANAGER TO TAKE A LOOK AT THE NUMBERS AND
OFFER ANALYSIS AND CONTEXT RECORDING THE ROAD AHEAD.
AND THEY ARE A SPONSOR OF WGBY'S MURRAH GALLO EVENT.
>> THERE ARE CERTAINLY STORM CLOUDS THAT ARE GATHERING THAT
HAVE US CONCERNED.
I THINK THERE'S NUMBER OF THINGS THAT WE CAN TALK ABOUT THAT
POTENTIALLY COULD PUSH US IN A RECESSION, SO AS INVESTORS, IT
IS SOMETHING WE'RE CONSTANTLY MONITORING AND THINKING ABOUT
AND, YOU KNOW, ASKING OURSELVES, DO WE NEED TO MAKE CHANGES TO
PORTFOLIOS IN RESPONSE OF THAT IN ANTICIPATING THIS IN SOME
WAY.
>> IT CERTAINLY IS A POLITICAL ISSUIX OF COURSE.
THE WHITE HOUSE SAYS NO, NO, THE ECONOMY IS STRONG, DEMOCRATS AND
OF COURSE WE'RE TALKING ABOUT AN ELECTION COMING UP, SAYING NO,
WE'RE ABSOLUTELY HEADING IN THAT AREA.
IT BECOME AS VERY BIG POLITICAL THING AND THAT MAKES PEOPLE
NERVOUS AND I'M SURE SOME OF YOUR CLIENTS ARE IN THAT
POSITION.
>> IT SEEMS EVERYTHING THESE DAYS ARE IN THE POLITICAL ARENA
SO DEPENDING WHICH CAMP YOU'RE ON, YOU WILL HAVE A DIFFERENT
PERSPECTIVE OF WHERE THE ECONOMY IS HEADING.
AS INVESTOR WES WE TRY TO FELL TER OUT THE DATA AND FILTER OUT
THE NOISE AS A DISTRACTION.
THE MAIN DRIVE NOW IS THE TRADE WAR BETWEEN THE U.S. AND CHINA.
THE U.S. IS THE LARGEST ECONOMY IN THE WORLD, CHINA IS NUMBER
TWO.
WHEN TWO BIG ECONOMIES ARE HAVING A TRADE DISPUTE, THIS
DOES IMPACT THE GLOBAL ECONOMY.
WE'RE SEEING EVIDENCE OF STRAIN IN THE GLOBAL ECONOMY IN AREAS
THAT ARE MORE EXPOSED TO TRADE AND GLOBALLY, IF WE WIDEN OUR
LENS OUTSIDE OF THE UNITED STATES COUNTRY THAT IS ARE MORE
EXPOSED TO TRADE ARE REALLY STARTING TO SHOW SOME SIGNS OF
STRESS.
A COUPLE GOOD EXAMPLES WOULD BE GERMANY AND SOUTH KOREA.
THOSE ARE TWO QUESTIONS THAT ARE TRADE DRIVEN, HE EXPORT DRIVEN
AND THEY'RE FEELING THE WAR DIRECTLY.
THE UNITED STATES IS IN A UNIQUE POSITION IS THE ECONOMY VERY
LARGE AND TRADE IS VERY POUND TO OUR ECONOMY BUT IT IS LESS
IMPORTANT TO US THAN OTHER COUNTRIES SO IN SOME WAYS, WE'VE
BEEN ABLE TO MITIGATE THE IMPACTS OF THE TRADE WAR BECAUSE
WE'RE NOT AS RELIABILITY AS OTHER COUNTRIES ARE ON TRADE.
WHERE WE'RE SEEING IT RIGHT NOW DOMESTICALLY IS IN THE
MANUFACTURING SPACE.
GLOBALLY, THE MANUFACTURING WORLD CONTRACTING BECAUSE
MANUFACTURING IS TIED TO TRADE.
MANUFACTURING, THIS IS NOT THE U.S. ECONOMY OF A HUNDRED YEARS
AGO, MANUFACTURING IS NOT A REAL LARGE PART OF THE ECONOMY ANY
MORE, IT IS 12 OR 13% OF OUR ECONOMY IS BASED ON
MANUFACTURING.
SO WITH MANUFACTURING SLOWING DOWN AND CONTRACTING IN SOME
WAYS THAT DOESN'T NECESSARILY HAVE THE SPILLOVER EFFECT OF THE
BROADER ECONOMY THAT IT WOULD HAVE, SAY CERTAINLY 100 YEARS
AGO OR 50-YEARS AGO OR EVEN 20 YEARS AGO IN SOME RESPECTS.
>> WHAT IS THE IMPACT IF THERE IS NOT A DEAL REACHED BY
DECEMBER?
>> IT IS A DARK CLOUD OVER HANGING MARKETS RIGHT NOW.
IT ESSENTIALLY CREATED A LOT OF UNCERTAINTY AND SO JUST PUT
YOURSELF IN THE ROLE OF, YOU KNOW, CFO OF MAJOR COMPANY, YOU
DON'T REALLY KNOW WHEN THIS IS GOING TO BE RESOLVED.
SO THAT MIGHT DELAY, YOU KNOW, NEW INVESTMENT IN GNAW NEW PR
NEW EQUIPMENT, SO THESE TYPE OF THINGS, THE CLOUD OF UNCERTAINTY
IS IS IMPACTING MARKETS, AS WELL.
GETTING A RESOLUTION IN THE TRADE SITUATION WOULD ALLEVIATE
THAT CONCERN AND HOPEFULLY, YOU KNOW, SOME OF THE IMPACT WE'RE
SEEING IN MANUFACTURING AND TRADE WOULD REBOUND AND THE
ECONOMY WOULD OVER ALL REBOUND WITH IT BUT I WOULDN'T
ANTICIPATE A DEAL BEING DONE IN THE TRADE WAR TESTIMONY SEEMS
FROM WHAT I'M READING AND TALKING WITH OTHER PROFESSIONALT
SEEMS LIKE IT IS LIKELY WITH US FOR SOME TIME.
THERE CONTINUES TO BE HE ESCAN WITH THE U.S. RAISING TARIFFSES.
YOU CONSIDER IT A TAX IN SOME WAYS, IT ESSENTIALLY RAISES
COSTS AND SOMEBODY HAS TO PAY THOSE INCREASED COSTS SO WHETHER
IT IS THE COMPANIES IMPORTS THE GOODS OR IF THEY ARE ABLE TO
PASS THAT ON TO THE CONSUMER, RAISING CONSUMER PRICES.
>> UP UNTIL NOW HAVE CONSUMERS REALLY FELT IT?
CONSUMER SPENDING IS UP, ON THE FLIP SIDE, AND IF THIS CONTINUES
INTO 2020, AS A HOT OF PEOPLE HAVE SAID, WHEN WILL CONSUMERS
START TO SAY ENOUGH IS ENOUGH.
>> NOT TO FOCUS TOO MUCH ON THE CLOUDS OUT THERE BECAUSE THERE
IS A LOT OF GOOD THINGS GOING ON.
THE UNEMPLOYMENT RATE IS 3.67%.
YOU HAVE TO GO BACK TO THE LATE 60S TO SEE A COMPARABLE
UNEMPLOYMENT RATE.
THIS IS BRINGING PEOPLE BACK INTO THE LABOR FORCE SO MAYBE
PEOPLE DROPPED OUT OF THE LABOR POOL BECAUSE THEY WERE
FRUSTRATED THEY COULDN'T FIND A JOB ARE STARTING TO GET BACK
INTO THE LABOR FORCE, SO THESE ARE ALL GOOD THINGS.
>> IN THE MIDST OF ALL, THIS THE FEDS CUT THE RATES NOT AS MUCH
AS THE WHITE HOUSE WANTED.
WHAT DO YOU ADVISE OR HOW DO YOU ADVISE YOUR CUSTOMERS AS FAR AS
INVESTING, I MEAN DO THEY STAY THE COURSE?
BECAUSE THIS IS POLITICS AND THIS IS A CYCLE.
>> YEAH, SO A FEW THINGS THERE.
WHEN INTEREST RATES MOVE DOWN WISH THEY HAVE, THERE'S SOME
GOOD WITH IT AND THERE'S SOME BAD WITH IT.
I GUESS I'LL START WITH THE BAD IN THAT IT, YOU KNOW, IT DOES
LOWER SAVING ACCOUNT RATES, CD RATES, SO THERE IS LESS SAFE
INCOME AVAILABLE THAT WAS GENERATED A YEAR AGO OR SO.
ON THE FLIP SIDE, IT DEFINITELY HAS POSITIVE EFFECTS IN THAT IT
LOWERS INTEREST BURDEN SO MORTGAGE RATES HAVE REALLY COME
DOWN QUITE A BIT OVER THE LAST, KNOW, ABOUT A YEAR AGO, WE WERE
APPROACHING ALMOST 5% ON 30-YEAR FIXED MORTGAGES.
TODAY WE'RE ABOUT 3.7, 3.75 ON AVERAGE.
THAT'S A PRETTY BIG DROP OVER 1% DROP IN LESS THAN A YEAR AND TO
KIND OF NAUGHT IN BROADER PERSPECTIVE IN TERMS OF WHAT
THAT MEANS FOR DOLLARS, IF YOU WERE BUYING A $200,000 HOUSE,
PUTTING 20% DOWN THAT 1% DROP IN MORTGAGE RATES WE'VE HAD EVEN
LARGER BUT 1% DROP THAT LEAVES WITH YOU WITH A LITTLE MORE THAN
$1,100 EXTRA IN YOUR POCKET EACH YEAR VERDICTDUCTION IN RATES
DEFINITELY HAS IN MORTGAGE RATES HAS A NICE IMPACT IN TERMS OF
HOUSING, PEOPLE HAVING MORE MONEY TO SAVE IT, INVEST IT OR
CONSUME PRODUCTS.
AND WE SHOULD SEE A BOOST IN HOUSING IN RESPONSE TO THAT IN
TERMS OF INVESTING IN PORTFOLIOS, WITH THIS TYPE OF
ENVIRONMENT, THE BIGGEST THING TO KEEP IN MIND IS THAT IT IS, I
WOULD SAY, EXTREMELY DIFFICULT IF NOT IMPOSSIBLE TO DO TWO
THINGS.
YOU HAVE I HAVE A GOT TO GET TWO THINGS RIGHT.
ONE APPRECIATE DISTRICT THE RESECTION IS COMING, PREDICT THE
TEAMING OF IT. AND TWO PREDICT THE MARKET
REACTION TO THAT.
I MANY, YOU KNOW, YOU COULD KNOW WHAT IS GOING TO HAPPEN AND NOT
KNOW HOW THE MARKET IS FOG REACT TO IT.
>> RIGHT.
>> SOMETIMES MARKETS CAN SURPRISE YOU.
I THINK A GOOD EXAMPLE TO KIND OF REMIND US OF THAT IS THE
ELECTION OF PRESIDENT TRUMP IN 2016, AS I'M SURE WE ALL RECALL,
IT WAS NEARLY CONSIST VIEW BY BOTH THE PRESS AND MARKETS THAT
IT WAS GOING TO BE A PRESIDENT HILLARY CLINTON, AND GENERALLY
SPEAKING, IT WAS A BIG SURPRISE ELECTION NIGHT, PRESIDENT TRUMP
WON, AND GENERALLY SPEAKING, MARKETS DON'T LIKE TO BE
SURPRISED LIKE THAT.
AND IF YOU REMEMBER THAT NIGHT, THEY ACTUALLY, THE FUTURES WERE
INDICATING THE MARKET WAS GOING TO REALLY PLUMMET, BUT ACTUALLY,
WE CLOSED UP THE FOLLOWING DAY AND THEN WE WERE OFF AND RUNNING
FOR A LITTLE WHILE, WHICH WAS A BIG SURPRISE.
IT IS JUST A LESSON THERE THAT PREDICTING THE FUTURE IS A VERY
DIFFICULT THING TO, DO AND I WOULD SAY IN SOME RESPECTS IT IS
PROBABLY IMPOSSIBLE SO IT REALLY DOES PAY TO STICK TO A SOUND
FINANCIAL PLAN, HAVE A LONG-TERM GOAL IN MIND WHATEVER YOU'RE
INVESTING FOR AND REALLY DO YOUR BEST TO STICK WITH IT I WOULD
ALSO SAY, YOU DON'T WANT TO OVERREACT TO NEAR TERM NOISE,
THINGS ARE GOING TO COME UP THAT ARE GOING TO BE UNSETTLING,
MARKETS ARE GOING TO GYRATE.
OVERREACTING, TYPICALLY, DOES NOT WORK OUT FOR PEOPLE OVER THE
LONG RUN SO IT REALLY DOES PAY TO KEEP IN MIND WHAT YOUR
LONG-TERM FOALS AND TRY TO REMIND YOURSELF OF THAT, YOU
KNOW, DURING TOUGH PERIODS.
>> AND STAY THE COURSE.
>> AND STAY THE COURSE AS BEST YOU CAN.
THAT'S NOT TO SAYING YOU SHOULDN'T LOOK AT YOUR
INVESTMENTS AND LOOK AT YOUR OVER ALL RISKS LEVEL OF YOUR
INVESTMENTS.
YOU SHOULD CHECK IN ON YOUR INVESTMENTS AND NOT EVERY DAY,
BUT AT LEAST ONCE A YEAR IT IS A GOOD IDEA TO TAKE A LOOK AT YOUR
INVESTMENTS AND SEE WHAT YOUR GOALS ARE, MAKE SURE THAT
EVERYTHING IS IN SINK SINK IN TERMS OF HOW YOU'RE INVESTED
WHAT YOUR GOALS ARE.
HE WOULD REMIND PEOPLE, THE SYSTEM CAN BE VOLATILE.
THE AVERAGE PERSON THROUGHOUT SHOULD NOT PROBABLY ALL BE
INVESTED IN THE SYSTEM BECAUSE THINGS HAPPEN IN LIFE.
IT COMES DOWN THE TIME LINE, AS WELL.
IF YOU KNOW YOU NEED FUNDS, YOU HAVE A FUND FOR A WEDDING OR
HOUSE DOWN PAYMENT OR WHATEVER THE CASE MAY BE, WITHIN THE NEXT
FEW YEARS, THAT POT OF MONEY SHOULD PROBABLY NOT BE INVESTED
IN THE SYSTEM BECAUSE AS WE KNOW, THINGS CAN HAPPEN AND THEY
CAN TAKE SOME TIME TO FILTER OUT.