Global business news twenty four hours a day at Bloomberg dot com, the Radio plus mobile app, and on your radio. This is a Bloomberg Business Flash M. Bloomberg World Headquarters. I'm Charlie Pellot. The down in SMPR lower NAZDAK is trading higher, the ten year down thirteen thirty seconds, the yield there one point six two percent, the SMP down three points now at sixty nine, a drop of one tenth of one percent. Down Industrials down forty four a drop of two tenths of one percent, and Nasdaq is
up by one tenth of one percent. Gold down sixty cents to thirteen twenty the ounce and drop there of less than point one percent. Crude Oil West Texas Intermediate up one cent, little changed at forty four barrel. I'm Charlie Peloton. That's a Bloomberg Business flash. Is taking stock with Kathleene Hayesan pim Fox line from the Jackson Hall Economic Symposium on Bloomberg Radio bubbles, negative interest rates? What
are people to do well? First things? Probably to ask Heather Loomis tie market strategies for black Rocks Family Office, Foundations and Endowments Group, and she joins us from our San Francisco studio, Hometool nine sixties. She can be followed on Twitter at h Loomis. Heather Loomis, thank you very much for being with us. Tell us a little bit about the challenges that institutional investors such as family offices, foundations, endowments.
They're looking long term they have to deal with low interest rates or they get have interest rates for perhaps a much longer period of time. What are their specific challenges right, No, you highlight something very real, and Chair Yellin's remarks today underscored this that we are in a very low interest rate environment, which despite the fact that we may see a couple of rate hikes over the course of a year to two years, this will persist.
And so these types of institutions are in need of income which they have been deprived of in traditional sources of the bond market as yields have fallen. So aren't up today's to find pockets within both bonds, equities and alternatives which could satisfy their needs for that income while not orienting them too far into the risk spectrum or creating any concentrations within their portfolios. So Heather, who is
actually here in Jackson Hole today. She just couldn't stay away for a chance to snag a conversation with the FED official or two as they're going in and out of these meetings. She's a fedder like so many of us here at Bloomberg Radio and Tevy, so the the successful Bob. We do have a two year no yield
rising a bit again the hyacinths June. If you look at w I RP World indest Rate projections on your Bloomberg, you can see that the odds of the hike by the end of the year are now to something like I think it doesn't That's a much stronger the bet than we saw from the bond market just even a couple of weeks ago. You're absolutely right. We were looking at numbers which were you know, in the in the high forties, even like even about fifty three after after
yelling speech today, and have since drifted up. You know, from our perspective, we think a probability of September is still fairly low, called eighteen to. We think the probability of December is much higher, you know, a little bit over fifty. The fundamentals are there to make a hike. There's credibility on on the line as well. Um. But you know, we're seeing some improvements in the labor market percolating wage growth. You're also seeing an incredible market resilience
to things which could create faultility like Brexit. Faultilities extremely low right now. How the crowding in all assets that offer yield almost of any kind, that doesn't sound like a rest for success when they ring the bell, because they won't ring the bell, correct, right. I think you have to be aware of crowding in certain positions, and so we've seen that across the board. That's you know, that is one thing to consider in the short term
because that could create some price volatility over the long term. Though, if you think about things which offer yield in public markets, there may be a very long term demand for these type of assets as we see demographics, as we see people age, as we see demands from from pensions, from insurance companies remain high. Those will offset some of that
short term volatility from crowding. UM. Having said that, I think you do need to look for places within the market which can offer differentiated source of yield which aren't so crowded for a lot of people. Um. They have found that in the alternative space where you don't see so such an significant magnitude of entering into that space pushing down yields, pushing up valuations. So avoid crowding. And
that's one rule of thumb. How about looking globally right now and again in a world of negative rates negative bond yields. A lot of debate today over the negative rates are something us should adopt in some really interesting ideas about how to do that. But for right now,
what do you see when you look globally? Right so, when we look globally, especially as it relates to questions on where to find income today, where to find relative value today, the emerging markets are um a place where we see some value as a result of the fact that you have seen outflows for a number of years which have been reversed, but not in large part. Only a small amount of the outflows has has been reversed over the course of the past um called year to
date period. You're looking at fundamentals which are improving from a political standpoint, from a reform standpoint, and you're looking at carry something which we don't find in markets today, the ability to earn something like five six percent in markets, there will be a demand for that. There will be, of course more volatility. You'll have to accept local currency risk um, but a lot of that risk can be abated by the downward move we've already seen and has
already been behind us. We're speaking with Heather loomas time market Strategies for Black Rocks Family Office, Foundations and Endowments Group. Heather, do even sophisticated investors recognize that there may be greater value in holding cash because it is so liquid, Because if there is any kind of upset or chaos in the market, even those with fixed income, they may find
the exits crowded. It's a very very interesting point you bring up, especially because we have been sitting with billionaire family offices, endowments and foundations for the better part of this week leading up to this conference, and the conversation has been around exactly that they're making independent decisions to raise cash and portfolios because they feel more comfortable with that. Now.
If you look back to call you nighteen and think about the worst performing asset class um of every one of those over time, it has been cash. And I don't think that this time period is any exception with cash rates actually lower than the rate of inflation, the state of rate of inflation. I think that we could think about some different ways to express call it a negative you on markets, or a view that maybe markets are going to go down and they need to hold
some dry powder. Think about perhaps owning the vix. You know, going long ball is not expensive right now, it's a
good hedge. Gold also plays diversifying role. And then you could also think about investing in some of these longer term, uh, longer term alternatives which pay off an income stream which is quite stable, tied to investment grade credits, and maybe if you need a line of credit against that for your cash, for your liquidity, you could kind of have your cake and need it too in a certain way by having something that's income producing but then also having
the ability to to access cash if you need it. So what about emerging markets for example, again a little bit of the shadow of that hanging over them, and broadly or specifically an emerging market where do you see
some some opportunity. So we're looking at emerging markets where we're seeing signs of political reform, where you can at least look at a market and say I'm going to be able to access to this market better tomorrow than I have been yesterday because of reform kind of around politics, around corruption, making the markets a safer place to invest. Some some of the areas which we're seeing pockets of value and could be Brazil, could be UM, could be
places like India, UM, countries like Indonesia. And importantly, I think one of the things which we need to see remain stable for that view to play out is that we need to see the dollar remain relatively stable, which we do expect to happen even into the face of one to two rate hikes. We think that there's some stability which we could access there in the dollar and the I just want to pick up on something you said having to do with the VIX, the volatility index.
Do you think that stock investors are too complacent? To me? The VIX is under fourteen. There is an incredible sense of complacency in the market right now and UM and I think that that's why there was a lot of importance placed around cheer, yell and speech today, Uh, simply because the market seem to be waiting for something, and yet you see the volatility continue to hit new lows. UM. I think that that, in part, back to your comments before,
makes people a little bit nervous. It actually adds that these cash positions that they're buffering, saying this is a little bit of an eerie calm in the markets right now. There are things which are looming from valuations UM to geopolitical issues UM that people feel comfortable with. Yet markets
keep marching forward. And for that reason, that's why we like to build in some stability some places in the market, especially where we see an altar where they're not correlated to bonds or stocks UM, because that will buffer clients investments against potential future volatility. So if you had to bet on the FED, would you be going against the grain a little bit heather and say maybe that'll move it all this year? Or you do you think it's
more baked than the cake. I my expectation. I think you know what the FED has conditioned us, and today was no exception, is that they have to be data dependant. There's no preset course. But based upon what we have already seen in terms of US and even global economic data, we think that December could be a possibility here, probably greater than all. Right, the market agrees with you, head of the list side you thank you so much for joining us here. To Dan Jackson Hall, so great to
be here. Thank you. She's usually in San Francisco at black Rocks Family Office for foundations and endowments. On Kathleen Hayes along with Pim Fox. This is Wilberg. Yeah,