Bob Doll: July Hike Not Off Table If Conditions Are Met (Audio)

index toward back to back gains. Right now, we've got the SMP up seven and two thousand ninety, a gain of four tenths of one percent. Nes stack up eleven, a gain of two tens of one percent, towing US creoles up forty three points, a gain of two tens of one percent. The tenure down four thirty seconds that held one point seven oh percent, Gold down twenty ninety ounce to twelve sixty eight, a drop of one point

nine percent, and crude is down one percent. West Texas Intermediate Town fifty two cents of barrel forty eight eighty five. Right now, I'm Charlie Pellett, and that's a Bloomberg Business Flash. Charlie Pellett, thanks you so very much. Time now for the e t F report, brought to you by a sector spider e t S. Why by a single stock when you can invest in the entire sector visits sector spd rs dot com or called one six six sector e t F. Now we turned to Bloomer's Catherine Cowdery.

It could become the biggest e t F smart beta craze. So far, every year we see some kind of a you know, a craze some some area of et F market beyond Vanguard and Schwab catches fire. This year it's low volatility. Bloomberg Intelligence analyst Eric Beltuna says thirteen billion dollars is float into e t s designed to minimize volatility. He adds that's double wet currency hedgtfs attracted in their

first six months. Beltuna takes a closer look at the biggest the I shares edge m SCI Minimum Volatility USA E t F taker U S m V US m V typically has volatility about less than the S and P. So people do like the lower downside and that's what's attracted investors the low vultility over the past like four or five years. But this year This mad rush is

a classic case of performance chasing. U s m V has gained seven point seven per cent since the start of the year, while the S and P five thundered is up two Valtoona says money has also been flowing into low volatility e t s that focus on foreign countries and on small and MidCap companies. That's your Bloomberg ETF report. I'm Catherine Calderie. You're listening to taking Stock

with pim Box and kapoleen As on Bloomberg Radio. If we are able to avoid Brexit, and if the June jobs report comes in strong, is it possible that we could see a rate hike next month? So says our next guest, Bob Doll. He is chief equity strategist for Nouvene Asset Management and he joins US now from Chicago. Bob,

thank you very much for being with us. UM explain your reasoning here that if we avoid a Brexit vote on the twenty three, and if the jobs report is strong, or at least strong enough, we could see a rate height in July. Certainly, pim we heard from Jenny Yellen this morning and she's indicated, Look, they want to raise rates, but the conditions have to be right. Brexit is one of them. If Brexit, Brexit happens, I think there's no way they'll go in July. If Brexit doesn't, that's feel

the first check mark. And then we have to reverse the horrible employment report we saw at the beginning of this month for the month of May, and then that gives us the opportunity to consider raising right. So if they don't go in July, I think they'll go in September. But July is not off the table, if and only if those two things happen. Okay, blah blah. Botchers are saying, you take a lot to get enough evidence by the next meeting that, in fact, the economy really has turned

around or shrug it off. Johnyelleny, she she agreed in a way with you because she said, look, this could be temporary. Don't forget you got might be a one month wonder. At the same time, though, uh, the the four rate high view the Fed at the beginning of the year has turned into two, maybe only one. The Feds seems to be saying now Janet Yellen, that the world doesn't look the way they thought it would at

the end of the year. It's this weaker economy and it may not be bad for equities, but it doesn't seem to be uh the kind of thing that's going to push the Fed quickly to the next hike. I agree, Kathleyne. Look, I I don't think July is a done deal. If those two things happen, it just puts it back on the table. The Fed and and and and Janet Yellen

said this. They do want to quote normalize rates, which means they want to bring them up, but they're they have said it's depending on lots of things, and all those cautionary comments and not hear all those. And I agree it's going to be slower than we originally expected because growth, especially globally, is a bit slower, and the whiff of deflation that shows up from time to time leading to a very low or negative interest rates in other parts of the world are among the reasons why

the FIT is taking the good old time. Well, Bob in that good old time investors or at least people that are looking to invest their money need to make some decisions what should they do with it? Well, my view is we are going to get some better earnings, not great, but good enough in the second half of the year, we lap the horrible headwinds from lower oil and the rising dollar, and the horrible earnings recession that

we've been through. Minus five percent in the first quarter, probably minus percent or two in the quarter that will be reported soon. I either second quarter, paving the way for some possible up earnings in the second half. Up earnings are a necessary ingredient in my view to have a shot at a somewhat better market. And I'm not looking for big returns. I just think stocks in the US will have mediocre but in a low inflation world,

that's fine given the environment. Well, this is uh, this is I think that what's kind of underlying or behind the feds slow down this year. This there really is a pretty dramatic shift in their view that I think they're realizing that it just it is mediocre growth. And if earnings aren't rising, that's not a great sign either.

But let's be a little more specific, because if I do want to put money in stocks, and I'd rather have mediocre returns than almost nothing on you know, the safest bonds, where do I start looking, Bob, where should we putting money? Healthcare, energy, tech, what let me mention some some factors that matter, some themes. I think you still want to own companies to get a lot of their business here in the US, beware of the multinationals.

Growth here is slow, but it's slower elsewhere. Number two, I think you want to focus on companies that are able to increase their throughput more unit growth. And number three, free cash flow and a slow growth world. Free cash flow is king companies that are able to generate that can to have more degrees of free them. You find

these three characteristics and lots of different places. Tech has more of them than most um, but you find some in healthcare, occasional, consumer discretionary name um and like uh. You know, at some point, if the economy continues to get a little better and the FED starts normalizing rates again, this insatiable search for yield leading to these big outperformance of utilities at all will slow down. We're not there yet,

but I think that will come. I wonder if you could tell us what indicators you're looking at, perhaps even on a specific level. I know we're going to be getting FedEx results after the market closed today. That's an issue about volume versus profits or indeed can they turn increased volume into increased profits. And I look at the transport average. We're talking about a year today change of

just up under two Pretty pathetic, isn't it. I'm looking at the p M I is the purchasing manager in the ease and the I s M the institute of supply management. These are indicators for parts of the economy that tend to be a bit more cyclical, the parts of the economy that have been depressed. The consumers doing okay, spending some money. It's manufacturing and foreign trade that has been troublesome along with capital spending. And we just need a little better news out of those areas. And uh,

you know, it's just a hope. It's not a given at this point. Not a hope and not a given. Uh. When you look at overseas markets SPOB, is there any place do you have to get into more risky emerging markets? Is there any place where I can get better than mediocre single digit returns? Well, it depends on your time rise in Kathleen, if you've got a longer time rise, if anybody has it anymore. I'm of the view that the emerging markets are in a bottoming process. I wouldn't

chase them. They're they're up nicely year to data, as you know. But I've not given up on the fact that in the emerging markets, you've got hype a lot of population people moving from the lower class of the consumption class, and that's where some of the world growth is going to come over the next five to ten years. Bob, I always like to find out what is the most unloved investment that you hear about. You know, the free cash flow story is still not believed. You know, last

year was the perfect example. Give me a than stock, but don't give me a cheap cyclic gold that has good free cash flow. And while those stocks had a bit of a run that is free cash flow kind of from February to April as the market moved up, I still think they're unloved by most people. Unloved. Uh, give us one of I know you can't maybe talk about individual companies, but your favorite place right now and something where maybe I could outperform this very modest outlook

for equity returns this year. Yeah. Also, I'll give names that fit most of the bills that we talked about before. McKesson is a reasonably can servative stock in health care if you want to be more speculative, and a name that's been down is Gilead. Uh. In technology, um, you know, Big Bad Apple and Cisco to me are a couple of names that fit the bill. Airlines have had a

hard time. They don't look good technically, but if the prasums of the revenue per seat mile begin to improve, which I think they will over the next quarter, or to Delta or or Southwest or our names I've put on the list as well. And uh gosh, anything in fixed income an yeah, So within fixed income, believing that rates are going to creep higher led by the Fed,

I think that's an eventual head wind. And maybe we saw the low in the one fifties for the ten year treasury in terms of yield, so I'd be careful about duration. But we still think um munis where tax conditions permit are interesting, and we still prefer credit to sovereigns. Bob Doll. We always prefer having you on our show. Thank you, Chief Equities to Aratagies for Nuvine asset management.

I'm Kathleen Hayes Long with pim Box. The market closes upon US movers and Shakers coming up on taking stock on Bloomberg Radio h