Commonwealth's McMillan on Need for Consumer Spending (Audio)

down fourteen thirty seconds. That yield one point seven four percent, Gold up three dollars, the ounce to twelve seventy five seventy a gain there of two tents of one percent. And crude oil forty seven ninety seven a barrel right now up three point eight percent on West Texas Intermediate. That is a game of the dollars seventy five so again, recapping our rally underway for stocks, SMP up twenty a gain of one percent down, industrials up eight five also

up one point one percent. I'm Charlie Pellett, and that's a Bloomberg Business Flash. Charlie Pellett, thank you so very much. Now it's a sign for the et F Report, brought to you by Vanneck Vector's et FS. Expect more from your muni's target tax exempt income by maturity and credit quality, all with low cost e t f s because van dot com slash Muni van eck access the opportunities now with the latest on e t F s our own Katherine Cowtery, last week was a tough one for retailers

is disastrous. Reports from Macy's to Nordstrom sent shares tumbling. E t S had focused on retail companies had varying results. Bloomberg Intelligence analyst Eric Beltuna says it illustrates the importance of waiting. His example the spider s and p retail e t F taker x RT. Keep in mind this is equal weighted, so you're getting a lot of zip in here. Small caps cats that destroyed it. X RT fell four point six percent last week, and e t F with a large allocation to retail shares, declined less

than other funds in the group. It's the Power Shares d W a consumer cyclicals Momentum portfolio ticker p e Z. The momentum ETFs basically will look at price movement as a screening apparatus, so if the price starts to go down relative to other stocks, it kicks it out and a lot of times you'll see that technical it's like technical analysis. You'll see the price movement go down a little before the big one, and so a lot of times you can save yourself even though momentum sounds more volatile.

I've seen it avoid some of the bigger downfalls with the big stocks. The easy declined one point one percent. That's your Bloomberg ETF report. I'm Catherine Cowdery. You're listening to Taking Stock with Bim Fox and Kathleen Hayes on Bloomberg Radio. Scheduled for release tomorrow consumer Prices. What will that economic report as well as Manufacturing and Industry also

scheduled for tomorrow. What will that mean for your portfolio? Well, Brad McMillan is the Chief Investment Officer Commonwealth Financial Network, helping to manage over a hundred billion dollars in assets, and he can be followed on Twitter at Brad McMillan c f A. He joins us now, Brad, thanks ver much for being with us. Let's start off at the Consumer Price Report, the CPI that will be out tomorrow. Tell us what you expect and what this means for investors.

We expect to see an increase in UH in inflation at the headline level, particularly, but also at the core level, we're gonna see maybe a little bit of fireworks because you could see the headline number check up, but it's not going to mean anything. The important number is the core number and actually just be more of the same, more of the same, enough for the FED to reserve to get excited about inflation. You know, we live in an era that's not like it was thirty years ago,

twenty years ago, ten years ago. FED wants to see more inflation so it can help boost wages for a little more lift under the economy sales. The f's in kind of a rock and a hard place, and you're absolutely right and wants to see inflation. The problem is even the core, we're just kicking above the level where they want to see. So there's enough to justify and increase at some point, but not enough to light a fire under them yet. I don't think this is going

to be enough to move them. In June. Brad McMillan, Uh, how about the industrial production data? What will that show? We're probably going to see a bit of a recovery. We're going to see We're going to see utilities continue to do well, we're going to see manufacturing hopefully picked up. But again it's going to be a recovery. It's not going to be a jump ahead. So it will probably continue stabilization. But nothing to get excited about, nothing to drive fed to move. Okay, so we can talk about

manufacturing industrial production, and you know the inflation numbers. Housing starts are also out tomorrow. The Blueberg survey suggests that we will have some move up in new home construction. So connect the dots force from some of these industry to some of the UH stocks you like, the sectors you like, and let's start with home builders since they're they're directly involved in home construction. Certainly, you saw the

you saw the Homeme Builders survey come in today. It was stable at a very positive level, but it and improved like people expected. And most of that decline actually came from the Northeast where sentiment went down. Now, the problem is we've got a lot of supply issues here. We've got a lack of land, we've got a lack of labor to build these things. That's what's holding it back and that's going to limit the improvement. But at

the same time. That's going to make the recovery run longer because we're not going to be able to over build, and we're getting enough demand to help continue to drive consumer spending, which is kicked. All right, you talk about driving consumer spending, is that going to help corporate profits? Didn't we just get through a really well bad quarter. It was a bad quarter, but you have to look

at everything that happened during the quarter. People were thinking the world was going to end well, guess what, it didn't, and consumer sentiment, consumer spending was depressed by that. But spring is here till on the retail sales report last Friday, consumers are starting to spend. It's not that they couldn't spend, it's that they chose not to and now they're opening the wallets, which is excellent. Hey, is it possible, Brad, that over the course of the year we could find

a bit of a sweep spot for stocks. If you're right, you see reasonably positive on the US economy. Consumers will spend enough, they'll spend more. But is it also possible that they don't spend so much that the fetter reserves feels in any hurry to raise interest rates with Is that possible. And if that's what occurs, is that good for stocks because things have picked up, but the FET isn't tightening More on policy, I think the Goldilocks scenario

is not only possible but becoming increasingly likely. We need consumers to start spending that that just there are signs that that's exactly what they're doing. We need business to stabilize, and we're seeing signs of that in the energy sector and in capital investment. But we don't want them going nuts right now. The fet is happy with where we are where we are, but they're not dying to raise Rachel, I could see that continuing for the next quarter or two.

You mentioned energy, and I'm just wondering where do you think that the energy market is headed When we have filings for bankruptcy for companies such as Sandridge Energy and there's no let up. Well, that's the thing. We've seen energy prices come up by about se off the floor. What does that mean? That means companies that were just trying to make it are now going to get a

second rease on life. The ones that have been the worst, the ones that haven't been able to make it through, as you say, are going bankrupt, but that queers the clears the deck for the ones that can continue. And actually, what's capital? Companies with capital pick up these assets for pennies on the dollar, and that's also going to help profits going forward. What do you like in technology? What are you dislike in technology? It can be you know,

are you are you interested in social media? Are you interested in some of the old line more blue chip dividend pairs like Microsoft. It's funny to hear Microsoft described as a blue line as a blue chip dividend pair, although of course it is, and that is exactly what I do white because the real power of technology in what's still a fairly difficult business environment is to help

companies cut costs. I think there's the opportunity social media absolutely on a tear, but for sustainable business building, being able to help other companies cut costs is exactly where companies like Microsoft, for Oracle are making their mark, and that's going to continue to be an opportunity going forward. But doesn't the idea of cutting your costs fly in the face of increasing your revenues. If you're trying to cut things to the bone, you're going to improve the

bottom line. But I thought that the top line, the increase in revenue and sales what what is what is bedeviling most companies. You're right, the revenue growth is a problem, and I would tie that into slow growth overall. But nonetheless, why can't you do both? That's the challenge and that's actually where I think the opportunity is for companies in

the market. We've had a difficult business environment. They've had to cut costs and they're doing so, but at this time they're looking to be more efficient and to grow their top wine popline growth has not been easy. But as the economy continues to expand and do so more quickly, we're going to see companies be able to do both and that's going to help on the earning side. So

what about bonds. We have a bit of a bit of a sell off, enough of us all off to push the tenure note yield up to one point seven five. It have been one point seven four, one point seven three. Interesting, fabulous story actually on the terminal today, the mixed view on Wall Street of where bond deals are heading. Standard Charter is looking for a rally in the tenure treasury down to one point six in terms of yield, What do you see and is there any play that you

would recommend in fixed income right now? Right now? I think if you're looking at rates, is largely driven by international news. You're looking at you're looking at Brexit, You're looking at Europe, you're looking at China. That's what's driving pricing when US treasuries rather than domestic factors. I don't think you see the FED moving at all. You know, it's probably not in June, maybe not until STI number, So I think that's what's going on. In terms of

where to go. I think credit still remains attractive. We saw a real rally in high yield and so, but there still maybe some juice in the apple there. But I would still be in credit rather than in sovereign simply because there is incremental return in RBO at commonwealth. So you don't see a major slowdown. What about a major correction in the stock market, That's certainly possible, But if you look at what we saw earlier in the year, we saw a pullback, A lot of the selling has

been done. Where is the bad news that would force the correction in the near term. I just don't say it all right, Brad McMillan, Thank you so very much for joining us today. Thank you, Chief Investment Officer for Commonwealth Financial Network. He sees, uh, not too much move up in inflation, but a consumer that's going to keep spending and driving the economy and forward, but not so much. The FED will move right away, maybe on September, and

that's a potential sweet spot for US stock investors. I'm Kathleen Hayes. Along with pim Fox coming up Dave Wilson are stocks editor, movers and shakers on Bloomberg Radio.