A Check On Commodities, Markets, The Economy

at Bloomberg dot com slash podcast. So, Matt, I've got the one year chart for gold up on my Bloomberg termo here and about a year ago a u x AU currency x au absolutely uh, kind of started the year around nineteen fifty announced and here we are down just below eighteen hundred dollars announced, so you know a little bit, you know, not really showing its performance there and kind of wondering kind of what the sentiment is out there for gold. Let's bring in Everett Milman, Precious

Metal Specialists for Gainesville Coins based in Gainesville, Florida. So Gainesville, Florida is University of Florida, that's right in Florida state is in Gallas, Tallahassee. Okay, I got it, um, Everett, they switch for joining us here. What is the sentiment for gold out there right now? I think we have to admit that the sentiment in the gold market has been fairly poor of late UM, and we've seen gold function more as a fear and sentiment trade rather than

a truly reliable inflation hedge. As the prices are down quite a bit ear date, and in that sense, we can look at the gold price as a pretty good gauge of of risk appetite UM. Gold has been sensitive to recent economic data, so we saw a big rally on the mists and last month's non farm payrolls, and yet UM earlier this morning, with the surprise of the upside and the Empire State manufacturing survey, we saw gold

pull back. So I think it's fair to say that the gold market really has ignored some of the major macro drivers like US China relations and the levels of global debt that normally have an impact on price. Those are really faded into the background during the third quarter, and so long as risk appetite remains healthy, inequity markets UM. I don't think big funds and retail investors will want to incur the opportunity cost of holding a nonproductive asset

like gold. If economies are on the world do indeed recover relatively smoothly, and that makes sense, you know. Otherwise, Ever, if you look at UM rates this low, coupled with trillions and trillions and trillions of dollars of spending, a FED balance sheet doubling, and in the course of eighteen months, you would think that gold just flies on that, right, you would, You would um. Certainly the case of low interest rates for longer is a positive narrative for gold um.

But it does seem that the broader markets have a conviction that the FED will be successful and threading the needle and nailing the goldilocks timing between UH tapering and raising rates not too soon or not too late eights UM and expecting the Federal Reserve to do so amid the unprecedented economic shock of a global pandemic. That does seem to be expecting a lot. But as we've seen with gold not taking off and setting new highs, that

does seem to be. The expectation is that the FED will navigate a soft landing of the situation and rates will normalize, bond purchases will be tapered smoothly, and that will make it out of this without a scratch. But gold is always there, as that fear gage. As I mentioned that if all of that doesn't go according to plan, UM holding some gold does function as an insurance policy.

So every I'm also looking at, you know, other precious metals like platinum and palladium, and they're down kind of you know, thirteen fourteen, fifteen, sixteen percent year to date. Is that is that simply a reflection of they're not making as many cars because of all the various chip

shortages and whatnot. Yes, UM, we finally have seen prices for used cars and rental cars cool off, and there are some encouraging signs that micro chip manufacturers maybe on the cusp of catching up with demand UM, but the production stalls with the semiconductor shortage. That really was one of the main reasons that we saw palladium and platinum prices searched so high. UM. Now, with a potential surplus in palladium later this year, UM, we are seeing that

swift pullback. UM. Palladium is looking to break a streak of six consecutive trading days in the red UM, but it's about thirty off its peak. UM really is all dependent on automobile demand and the fact that that is perhaps waning UM is weighing very heavily on those two metals. Well, you know, I was just at the Munich Auto Show, Everett, and it seemed to me when I was there as if the CEOs various CEOs were jockeying for position when it came to locking own supply of the materials necessary

for e vs for building electric vehicles. What what do you think which commodities have the best are the most room to run in terms of EV production. So it is true that electric vehicles would perhaps uh put some damper on demand for platinum and palladium in catalytic converters. So really the commodities are metals that stand to benefit the most from that trend towards e vs would be copper and silver. UM. The average electric vehicle uses even

more copper than our combustion engine or normal UM automobiles. UM, and silver plays an especially important role in that UM. It's the long term uses for silver in industry UM, particularly in the green economy, are rather bullish. UM. I think the one thing standing in the way with that really are trade relations between the U S and China and whether those medals will be able to get to

market UM. To see ev production expand. But but silver really is well positioned to benefit from that if we do indeed see a pretty rapid rise in adoption of electric vehicles. Alright, just sconds Everett. What's the best metal? Long here? From your perspective over the next six twelve months, I still think silver is the best of the bunch. We have seen lag gold and perhaps UM the gold market has absorbed most of its gains that we're going

to see one. I think silver still has more room to run and figures very prominently in that UM future of green energy usage. Everett. Always great to get your take. Thanks so much for joining us on the program, Everett Millman, um there he comes to us to talk about precious metals as well as sometimes crypto. We didn't hit crypto today, but from Gainesville Coins. Always great to get his inside. This is Bloomberg. Let's bring in Christina Hooper. She is

chief global market strategist at Investco. They have more than one point for trillion dollars in assets under management, and she joins us out of Atlanta. Christine, I'd love to get your take first off on the US economy after we got that um more subdued inflation data yesterday. UM, how does it look to you in terms of growth and prices? Well, the more subdued inflation data really wasn't that impactful in a positive sense because we had gotten a p p I number UM that suggested we have

more inflation to come. We're seeing factory gate numbers China factory gate numbers that are high. So UM, the big increase in inflation is not over. But I still have to stress that I believe it is temporary. It's just not as temporary as some would like to have it UM. So all in all, the US economy is and I believe good shape UM. And I don't think that what we're seeing in terms of of UM good initial jobless claims UM is going to stop UM is going to

have any kind of impact on the set. I don't think the weak jobs report is going to have an impact on the set. I think they're going to stick with their timeline and announce the tapering the start of tapering UM next next week, and hopefully commence it soon after that. All right, So Christina, given that backdrop here, UM, you know, Matt and I were just chatting with with a guest who was suggesting that who was actually buying

cyclical stocks here in in recent weeks. How do you think about kind of the equity markets here given your economic outlook, you know, kind of cyclical stocks, maybe some small cap stocks versus uh, some of the you know, tried and true growth names. That is the sixty four tho dollar question. What I think we will see is out performance by cyclicles in the next several months, but it's going to be narrow out performance because UM, we

certainly have seen a very strong growthsburg UM. We're likely to see more strength in the economy this fall UM, but at a certain point that growth is going to moderate again, and so I would suspect that in advance of that UM markets will start to UM favor defensive secular growth UM. So, so in the shorter term, I think value encyclicals win not every day, UM, but but most days. I think there will be narrow out performance.

And then at a certain point UM we're likely to see a shift UM with with UM more inclusive performance or in fact, at a certain point, defensive and secular growth outperforming. What do you looking for in terms of you know, the monetary side has been so important to investing until recently, not that it isn't anymore. But the fiscal side now is so key. And yet I hear so many investors saying, you know, their strategy doesn't depend on an infrastructure package or lack thereof. Well, I think

we have to draw a distinction. I believe fiscal policy matters so much from main street for the economy, but in terms of markets, monetary policy, in my view, matters more so. The fact that we have an extremely accommodative set that even when tapering starts, the SAID will still be adding to its balance sheet is very positive for stocks. Yes, of course fiscal policy plays a role, but I think

monetary policy plays an outsized role. UM. Now, of course, if we have all kinds of fiscal stimulus UM taken away, that can provide some hiccups. Just like UM, the lack of an infrastructure package might cause concern among investors, but I think it is not UM. It's it's misplaced because UM infrastructure spending would occur over time anyway. UM tends to be something that that happens over year over year

over year. It's not like giving a one time stimulus payment or multiple stimulus payments that go into people's bank accounts. So I think infrastructure spending is important for other reasons. I think of it as government capex, UM, but it shouldn't have I don't think we should think of it as primarily fiscal stimulus that would have an immediate impact

like other forms of of fiscal spending would. Christina, what are you and the portfolio managers at Investo looking at really over the next several months and quarters in terms of kind of where these markets are going to go? Is is it simply the pandemic, the virus or there other things? Well, Um, there are a few different factors

at play. I would say, um that that first and foremost, UM, I think you know, the outlook is positive for the economy and markets, but there are some tail risks that we have to be aware of, even if they're low probability, because they could have a significant impact. UM. The first, of course is the resurgence of the pandemic. But when I say that, I mean a COVID nineteen variant that is not protected against by existing vaccines, and we haven't seen that yet. UM, But that to me would be

a worth case scenario. I don't think it would plunge us into a deep recession like it did in the spring of because we've learned how to adapt, but it would be a real, real problem. UM. And then, of course, the other tail risk scenario is the FED policy error. I'm getting too aggressive because they're concerned about inflation. I don't see either one happening. UM. I think the Fed is is UM has taking a very measured and thoughtful approach. Christina,

thank you so much again for joining us. We really appreciate you taking the time. Christina Hooper, chief market strategists globally for Investco, love getting her thoughts on the economy and on these financial markets. All right, let's talk about this market here. We've had some folks talking about maybe rotating into more cyclical names, perhaps, you know, sensing perhaps a reopening trade that's certainly worked well at times since

this pandemic began. What's happening, Yeah, exactly. Let's uh check in with Chance Fanuka and he's chief investment officer at Oxbow Advisors based in I guess he's in Austin, Texas today. We're mad. I think they have a small college or university there or something. I'm not sure. Maybe play a little football. So Chance, thanks so much for joining us. Here talk to us about cyclical stocks and and maybe how they feature in what you guys are doing today

at Oxbow Advisors. Sure, thanks, Paul and Matt. So what we've noticed is if you're looking to add defensives or growth stocks into your portfolio this year, the time to do that was really in the first quarter. You saw some good valuations back in March especially, but some of those defensive stocks have really taken off in the last six months. For instance, American Tower and Costco both appreciated

by fifty scent. Yeah, they're there. So what we've noticed is even though the markets making record highs here in recent months, last month, the average stock in the SMPRED was down si from its fifty two week highs, and a lot of that was coming from cyclical and value sectors. As interest rates came down and the delta variants started to spread around the world, and we thought that would be a good time to start moving a little bit

more of our portfolio towards cyclicals. And the three names that we came up with that we added to our client's equity portfolios last month where Salesforce Booking Holdings in Berkshire, Hathaway and so these aren't necessarily the kind of cyclicals I would think of. At least two of them are really techy, right salesforce I would considered techy. Booking is one that I would think as more of a pure

consumer discretionary. If you've been following the online travel agencies Booking, Expedia, and Airbnb, along with the hotels, they've all been moving together through this pandemic. As you talked about the re reopening happening, and I think as there were concerns about the delta variant picking up in recent months, you saw those companies shares sell off and this is the one that we think is the highest quality right now, and felt it was a good time to add to the portfolio.

So Chance and what are the When you think about bookings, Holdings obviously a big play on consumer travel. How much do they depend upon business travel because that seems like something that from what we're hearing, is going to be slower, much slower to come back here. I don't think it's as big of a concern for them as the global hotels that may feature more business travelers in their network.

I think if you think about Booking, they actually are more exposed to Europe than their peers, and they have a lot of independent hotels in Europe that rely on Booking dot Com in order to get guests coming in on a daily basis. So I think that was part of the sell off was as the delta variants spread,

especially in Europe. There are some concern in the short term, but for us, when we take a five year outlook, we would expect revenue for Booking to return to its twenty nineteen levels next year and then continue to ramp up to record high is going into When you think about sales Force, I mean, what what drives that investment? Are you? Are you seeing a lot of corporate um

you know, capex increases. I think for us, the way we think about the software of the service companies is just really wanting to play along with that secular growth trend. The underlying uh markets that Salesforce operates in. Our growing tend to twenty a year, which is a nice starting point. And then you've got one of the few remaining large

tech companies is still run by its founder. If you think about the really large tech businesses, there's only about three left along with Facebook and Nvidia, that are really really still run by a founder or co founder, and so you have some of with that kind of visionary mindset, uh in a strong history of making smart acquisitions. We like partnering up with someone like that, especially in an

industry that's still growing at a double digit rate. Chance, when I think about Berkshire, I'm just not sure it's anything more than kind of a g d P play. I'm just not sure what the catalyst is out there for this name, barring you know, a monstrous acquisition. Um, how do you think about that in terms of catalysts. Sure, I think we viewed a little bit differently in terms

of how it fits into our client's portfolio. So for us, we always a look into some counterbalances UH in the portfolio that are going to act more defensively if we get a bear market. But what we've noticed is we'd

rather own something like Berkshire Hathaway. They can provide that sort of GDP growth plus share buybacks which have picked up in the last two years, compared to owning something like Johnson and Johnson and nest Lee that maybe a stalwart in a defensive environment, but really are not going to participate in an economic reopening like we might have over the next couple of years. Are you expecting real

fiscal stimulus? Are you expecting the infrastructure, build the passes that does that play doesn't matter not so much to us. I don't think we're ever trying to get ahead of any sort of political dynamics in the shorter term. If they happen to benefit the companies that we do own,

that's terrific. But we're looking more to try and own anything for five even ten years, and so usually we're looking for companies that are going to benefit from more structural growth trends and are less reliant on political outcomes, working to their to their favor. All right, Chance, thanks so much for joining us. Oh, it's great to get

your insight. Chance for nuke In there is a chief investment officer at Oxbow Advisors talking about moving into three cyclical stocks that they have um bought in August, Salesforce, dot Com, Booking Holdings in Berkshire, Hathaway, really really interesting moves. As we saw this, the rotation kind of peter out, and now we're hearing from others including Marco Marko Kolanovitch. As I said from JP Morgan that it's time for

the re reopening trade, get back into those cyclicals. All right, So as we think about these equity markets here, we know folks are thinking about re reopening of the economy, if you will, and do I take on some more cyclical risk or do I stick with the tried and true growth stories that give me both top line and bottom line and growth. Let's bring in Adam Kuhn's portfolio manager and trade were Winthrop Capital. They are based in Indianapolis, Indiana.

Talk about the heartland there outstanding. So Adam, thanks so much for joining us here. What camp do you come down in here? There's a lot of folks that have done really well with kind of that reopening trade. Where where are you guys thinking right now? Yeah? For something's having me? Yeah. Really, what we're looking at is from a top down approach is where is the economy heading?

And we're seeing a lot of signs of the slowdown And um, you're gonna start to hear this word throwing around quite a bit, but it absolutely looks like we're seeing signs of stagflation where inflation is remaining high, yet growth is beginning to slow and in some pockets dramatically.

And because of that, we are pulling back on the you know, reflation COVID affected industry trade and moving back towards the more tried and true names like Apple, Microsoft, and Alphabet that you know, just have great cash flow, a great business model that can sustain through you know, a lot of volatility and economic headplines. The second time

I've heard someone talk about stagflation this week. Um, even though we got a more subdued inflation number and the last UH data release, are you the growth slowdown is what is? What is? What? It looks scary to me? Are you concerned that the growth slowdown we're seeing in the third quarter is going to continue on? Yeah? So, you know, while we did get a slow down in inflation, if you look at UH average hourly earnings, they're still

above four percent. So if you're paying employees more and you're still seeing a lot of jobs that are unfilled total job openings, is that a record high? Um? So, I think you're gonna see employees continue to be paid quite a bit. So you're gonna see savings rates continue to be high, and effectively, if they can spend the money, they will, and that's going to keep inflation higher in the short term. Um. But the problem is that that

where can they spend their money? And we're seeing supply chain issues continue uh to pick up, and frankly, there's just not a lot that consumers can spend the money on um outside of just the traditional things that they buy.

So heading into the holiday season, it might not be a story of what can consumers buy and it's what what is it actually a bailable So I think what we're going to see is this kind of dislocation of what consumers are have the ability to buy from a from a financial standpoint, and what they can physically go and find in the store or online. And so I think that's gonna be a reduction to growth and I think that's why we're going to see the fourth quarter

be quite a bit slower than what we're expecting. All Right, So if you're focusing on some of the higher growth, you know, perhaps to the technology sector, talk to us about valuation here because that's always a challenge for people in that space. But what is your view of valuation as you take a look at some of these uh, fast growing tech names. Yeah, so we're careful not to throw around, uh you know, this time is different anything

like that. Evaluation since then the day absolutely matters, but low interest rates do help the case for higher multiples. So we generally think that a lot of these technology stocks that I just mentioned earlier are fairly valued. We would not call them over valued in in any way. When you get the growth potential in the way that they're able to monetize just different businesses, we think that these valuations do make sense, So that's why we're still

investing in them. But what we're doing is when we're looking for value is we've begun to add to Chinese technology companies, So companies like Buy Do, ten Cent, Ali Baba. You know, they've been in the headlines recently, and obviously these are stocks that have been beaten down quite a bit, and for good reason with increased regulation out of China. But we think right here in this spot that that

the valuations for those companies actually look attractive. So using those alongside the traditional US counterparts we think makes sense going forward. What UM industry groups do you like or where do you see the most value out there that that maybe is underpriced. So I'll reiterate Chinese technology absolutely the place where we think that that stocks are underpriced outside of that not a lot. We think that the

market generally speaking is fairly valued to overvalued. When you look at financials and energy, we would argue those are are grossly overvalued giving the prospects for for growth going forward. UM, So it's more of a play of moving towards defense when there's not a lot of investment opportunities, and that's what we're doing across our portfolios is broadly speaking, moving up in quality, moving more defensive, just kind of weather this growth storm. All right, great to get your take.

Thanks so much, Um for joining us talking. They're about what's going on in these markets from the perspective of a trader. Adam Coon's there from Winthrop Capital Management. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews with Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seven twenty three and on false Sweeney

I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio.