Paul Karen discussed on Bloomberg Surveillance


Forty eight cents to sixty dollars seventy one cents a barrel call my school that'll change at eighteen at fourteen eighty three ninety announce the euro one point one zero eight six against the dollar the yen but nine point three seven lease on Paul Karen thank you so much we really appreciate that here we are December twentieth certainly it time to look back one year it's been equity markets up twenty seven twenty eight percent on the S. and P. it got investment grade bonds up close to fifteen percent the question now is as we look towards twenty twenty what kind of encore can the markets give us our good friend Margie Patel joins us she's Wells Fargo a senior portfolio manager he joins us on the phone market thanks so much for joining us again and we owe a great a great year for a lot of the financial markets out there how are you framing twenty twenty as you look ahead I think twenty twenty is going to be a continuation of the great trends we saw this year and in fact I think there's a chance we may see the economy because G. P. this morning two point one actually begin to accelerate so we could actually see the equity market do even better than say mid high single digits which I'm expecting and twenty twenty Margie how concerned are you that that is the solid consensus that people expect the economy to keep improving it not go too crazy to the point of igniting inflation and having a bond sell off but everything will just continue to do well all be it perhaps not as not as well as this year well I think a lot of people are nervous because after you've had basically a decade of the market dancing people are naturally nervous but to me the big changes the fed is fundamentally change how they operate we can count on them not slamming on the brakes when they have previously and as long as the fundamentals are solid which they are I think the market should expand the only knock on next year is I do think that the absolute returns will be more modest than yes here another word low single digit for equities mid single digit for fixed income only OR into potter fixed income rather than what turned out to be a truly spectacular year for the bond market was because Margie Patel Wells Fargo senior portfolio manager also awaiting some comments a press conference for the post launch news conference from NASA and we coming from the Kennedy Space Center will bring some of those comments to those in in moments but market let's think about twenty twenty you know it's a look back to twenty nineteen it seems like we had a couple of periods where people were rotating in from the growth to more maybe conservative defensive sectors and cycling back into growth as we think about twenty twenty how out there on the risk spectrum do you think we should be in terms of you know growth versus maybe more value I think we still have to stick with growth because gross will be slowing down and so those companies that can produce some kind of take double digit earnings growth will be more and more valuable so I'm not looking to find the undervalued areas certainly it's frustrating when every good company you look at that you don't know this probably up forty percent year to date so naturally people want to look more at the bottom of the barrel but I think it's better to stick with sock a gross at this point are you will be the worst performing asset class in twenty twenty I think commodities are going to continue to be disappointing on balance because where you don't have inflation where you don't have explosive growth from China that period stuff I think commodities will be rather disappointing emerging markets I think you know one area that people are suggesting is emerging markets has been a chronic under performer and maybe get some type of trade deal even if it's a phase one deal that might be the catalyst for merging markets broadly defined when you think well virtually all emerging markets are commodity based so I don't see that there's really any drivers they are to accelerate that in particular because a commodity based at that very dependent on China China's growth is clearly slowing down so I'm at because even lesson lukewarm on emerging markets say spent the last ten years doc doubling tripling their death internally they have to make fundamental changes in their economy now you have commodity price and demand flatter going down so that's not an attractive picture for me Margie this year at the sixty forty portfolio is amazing it crashed it on every level there was von really there was a stock rally sixty forty would absolutely have been at the right way to go why would not not be the case next year but it sounds like we're setting up for more of the same albeit less high well I would say when you just look at the bottom math is how much price appreciation can you have won a lot of bonds are running into their call price at the specially problems in high yield the absolute coupons are very low two three four percent in other words right on top of equity dividend and and I think that even if the stocks are only up no se eight ten twelve percent they'll still be better than any part of the bond market can produce just because of low coupon and the lack of price appreciation when you talk about high yield debt I know you've been cautious in the past about it I'm wondering do you think that given the call price and where we are does this seem like an area that's right for for correction or do you think that just cap cap attention upside I think the big criticism of high yield two things actually one is he just are going to be able to make double digit returns next year just because of the local pawn and so many bonds already trading after call prices total returns three four five six percent of the maximum that you could make their is secondly there's actually rather scarcity of good quality high yield bond prevented that's going to be the big challenge next year is what to buy this acceptable quality a lot of the lower cheered even some of the good names but socks off into the low market they finance and private equity and so the the demand is very very high and I think next year the supply of these names will be very limited so that'll be the challenge for investors mark tell leveraged loan market is it too much risk here the risk reward is not there how do you think about that market again levered loans have pulled off a lot of the bottom tier supply in the woods because of the high yield market they bought the lever glow market because I got much better terms even lower coupon rate and so if there's a risk of the fixed income market and I think that the very very modest I'm looking for not looking for a big explosion I think the lover loan market might be disappointing because of some of those lower tier names that turnout have too much leverage don't have a great business model thank you so much for being with us and happy holidays to you marquee Patel is Wells Fargo asset management senior portfolio manager joining us by phone interesting to see how the consensus really is solidifying heading into twenty twenty this that the response is going to do pretty well not as well as they did this year some concern about how much bonds can rally given how tight spreads are certainly on the credit side as well as the treasury side this sort of I don't know if the tension here is not seeing a big spike in yields while also seeing all of this positive stuff on the other side I'm just a that's rooms I'm so I'm trying to square that the exactly I think it's some of the expectation is the assumption is that the fed is on the sidelines it the assumption is kind of two percent GDP growth global GDP growth and their deception is that trade is going to be of relatively benign issue as we as we go through the year that's kind of pretty solid and so that kind of I guess the worry is what's gonna upset that yeah and and again I'm I'm looking right now at the yield curve the two ten gap and it's the steepest since November I'm just trying to understand you know it was there was a time when people thought the bond market was sending a signal to equities right and it is a signal now sort of disconnected and and bond yields are gonna remain really suppress but if if the feds holding the front and lower I just have to wonder could that be the big surprise what if we get pollution what if we get inflation we just have not seen that and the fed has not seen that and that's one of the reasons I think they're kind of sitting where they are but it'll be very team to see the fed we believe is on the silence and that's the key thing right now let's get the news we have our own Michael by Michael Lisa phone thank you very much bowing to starliner capsulas all scores in orbit after blasting off on its first test flight today's.

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