BNY's Loh: Need To Get Used to Lower Yield Environment (Audio)

Coming up with Marvin Lowe, global market strategist for b n Y Melon. Right now, let's go to Charlie Pellett and the Bloomberg news room for a Bloomberg Business Flash, and I thank you, Pim Fox from Bloomberg World Headquarters. I'm Charlie Pellett. Stocks are advancing on this Wednesday, the DAL, the SMP NEZDAC all climbing right now, the SMP five hundred index up ten points, a gain there of five

tenths of one percent. An Heeuser Busch InBev has won government anti trust approval for its takeover of s A. B. Miller after the maker of Budweiser agreed to give up ownership of the Miller brand and open the door to greater competition from craft beers. Stocks are advancing. We're seeing records as quarterly numbers out of Microsoft and Morgan Stanley

spur optimism that corporate earnings can support further gains. Morgan Stanley posted profit that beat analysts estimates, as the firm report of a surprise gain in bond trading revenue and compensation costs that were lower than expected. David Campbell Bacon Campbell covers Banks for Bloomberg News Look year over year revenue at Morgan Stanley declined for the third out of the last four quarters. So the industry still has a

revenue problem, there's no question about that. And obviously with the trading results, we always talk about how sustainable they are from one quarter to the next. Uh, this doesn't really give us any more insight into this. And right now we do have shares of Morgan Stanley trading higher by one point four percent. United Condental Holdings flying higher as well today, at the highest value in almost three months.

After CEO Oscar Munio said he is reviewing all aspects of the airline's operations in an effort to boost profitability. Gold Is lawer by one point one percent, down fourteen fifty ounce. The thirteen seventeen crude oil West Texas Intermediate Crude up five tenths of one percent. Crude oil now up by twenty cents forty four eight five a barrel again recapping the SMP five index up ten to seventy four, a gain of point five percent to thirty two on

Wall Street. Now, the other story is making news. Thank you, Charlie from the Bloomberg News room. I'm Rami in a cent cio. It's day three of the Republican National Convention. ABC News spoke with Eric Trump, who says it's been an incredible journey to watch his father become the numbinee for president. When he becomes passionate about something, he sets

his mind to it and he does it. And you see that as you sit in this arena, I mean, this incredible arena, with this incredible passion, and I'm proud of him. I mean, I'm just proud of the man. He's done such an unbelievable job. Eric Trump will speak tonight at the convention along with Donald Trump's running mate Mike Pence and Texas Senator Ted Cruz. The people of Baton Rouge, Louisiana are remembering their three slain police officers.

Residents turned out at makeshift memorials, churches and rallies, with some faith and community leaders gathering to discuss ways to improve police relations with black residents. The officers were fatally shot by a former marine on Sunday morning. Three others were wounded. The parents of the University of California student killed the niece France or speaking out, Conrad Leslie says at first he and his wife thought Nicholas survived the attack.

As soon as we landed in Paris, we found our phones, thinking that we're going to get into good news, but instead we had a voicemail and it said we had some new fingers on and unfortunately, uh, they said it was bad news. Officials say five people remain in custody for possible links to the attack, and the search is underway for four suspects were fired shots at NYPD officers last night. Police say the four drove past the officers and shot them as they were walking in Brooklyn, and

then fled the scene. Global News twenty four hours a day, powered by more than journalists and analysts in more than one under twenty countries. I'm Ramie in Essensio. This is Bloomberg, Charlie, and we thank you and again recapping stocks are advancing, the SMP five indecks climbing to a record up ten points now seventy three. That is a gain of five tenths of one percent. I'm Charlie Pellet and that's a Bloomberg business flash. This is taking stock the Fed in

focus on Bloomberg Radio, the Fed in focus. The Federal Reserve? Is it on hold for rate hikes because of the political season? Let's find out more from Arevin Low, Global market strategist b n Y Melon and joining us now, Marvin, thank you very much for being with us. Well, thank you very much for having me again, Pim Marvin. Do you think that the Federal Reserve is going to do nothing because we are in the thick of the election cycle? You know what, I personally do think that they are

on hold. I think in addition to the election cycle, we still have the potential fallout from Brexit, which, while you know everyone's being pretty sanguine about it, UM still has a lot of questions that need to be answered. So what would those questions be that would satisfy you? Well, um, you know, the process itself is so unique, um that we really don't have a lot of history to kind of base it on. Um. I guess I would lean towards the IMF report, the report that the IMF put

out earlier this week which lowered global growth. So that's certainly a big question, and whether or not there's additional knock on effects with regard to either tightening credit conditions throughout Europe or um embolding potential other populous movements which you know certainly have a basis not only UH in

the UK, but around Europe and possibly even here. Well, I'm going to play to your title as the global market strategies for just a minute, because you mentioned the International Monetary Fund, and they came out with report that suggests that Italy's economy will remain stagnant for the next get this, twenty years. It is the euro Zone's third largest economy. Will what happens in Italy affect the United States?

You know, what happens in Italy certainly affects the Eurozone, and what happens in the Eurozone we've seen from either a reach perspective or a UM risk taking appetitles in the financial markets certainly has an impact here. Also, central banks have been successful in calming nerves in the past, and I think that's um the point in the cycle that we're at now. But without really addressing those problems yesterday. They will affect um, the US, they will affect the FED.

Thought we are a citizen of the world. In that case, will we catch some of that helicopter money if Mario drag starts dropping it from the skies? Well, um, at this point, you know, helicopter money discussion really is more focused on Japan. I don't think the ECB has taken a a very strong stance in going that way. But the trend of lower yields amongst the other central banks will have their impact on the U S yield curve.

And while we've seen yield rise over the last couple of weeks, you know, they still are significantly lower since Brexit, and expectations are that um, you know, the Bank of England, UH, the e c B and the Bank of Japan are possibly moving towards the next stage of monetary accommodation. If they do move to this next stage of monetary accommodation.

What does that do to U S interest rates? UM. You know, it's it's an interesting time right now because at the same time that I'm having this conversation with you, there's certainly a lot of discussion about whether or not the FED is going to try to hype rates again this year. You know, we've seen the odds of a rate hike UM increase significantly over the past few weeks and never been some pretty high profile stories in the press about the FED ready to move again. UM. Kind

of trying to put all of that together. While the FED UM, you know, certainly wants to increase rates to UM put additional bullets within within their arsenal, our yield curve is certainly influenced by a lot of these other yield curves. So the last time I was on your program, I really thought that we were in a period where should expect kind of this range bound or lower yield type environment. UM. Even though we have backed up, we still remain relatively low by historical standards, if not at

all time low still around the world. And I'll stand by that thingment. I think that we need to deal and and get used to this lower yield environment. Well, I'll just give you the details. Right, the ten uere right now trades at one point five seven. It is down seven thirty seconds today. Also, the thirty year bond is selling off down seconds, a decline of a little bit more than half a percent, trading at two point to nine. All Right, As a global market strategist, what

do you recommend people do with their money? Well, again, um, you know, it really is a function of tempering expectations. And we kind of had a little bit of this discussion, um the last time I was there. You know, really understanding that risk is part of the equation, That of volatility is probably something that we need to get used to. And finding the part of the market that makes sense

for your risk tolerance. Generating the type of returns that you had from the fixed income market is going to be challenging. Uh. It certainly requires one to look at um non sovereign um types of fixed income investments if you're looking for that type of that type of return. You know, we've seen really strong returns within the high

yield world. Uh, the investment grades space within the US and it's you know, for USD investors that kind of makes UM the currency aspect a little bit easier, continues to offer spread to to that treasury market, and it continues to post positive returns in there. So it's that type of thinking that I believe UM investors need to to do rather than just simply looking at the government

bond market. So do people have to get used to relative returns as opposed to absolute returns to a certain extent, to a certain extent, to a certain extent, and you know that certainly comes into your retirement planning process and everything else that goes along with it. UM. When you do have these sovereign yields anchored at these either very low and or negative levels around the world, a relative return is something that UM you have to take into consideration.

Thank you very much for spending time with us and giving us your thoughts. Marvin Lowe is global market strategist for b N Y Melan and they can be followed on Twitter at b N Y Melan. You're listening to taking Stockheim, pim Fox, and this is Bloomberg. The fed in Focus is brought to you by Willoughby's since eighteen ninety eight, New York City's boutique camera store for precision craft at Hazelblat and Like A Cameras, plus a full

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