Global business news twenty four hours a day. If Bloomberg dot Com the radio plus Globo l act and on your radio. This is a Bloomberg Business Flash from Bloomberg World Handquarters, assigned Charlie Palette. Stocks advance trading there a record after a three days slide. We saw an increase in consumer spending that underscores the strength of the U. S economy. Traders meanwhile assessing the outlook for interest rates.
The tenure up nineteen thirty seconds, the yield there one point five six percent, SMP five hundred, indecks up eleven to eighty, a gain of five tenths of one percent. Nasdaq is up thirteen, a gain of three tenths of one percent down Industrials up one hundred and two points, a gain of six tenths up one percent. The gold price of gold of twenty cents now thirteen eighty ounce, a gain of less than point one percent. And crude oil West Texas Intermediate down one point three percent, down
sixty four cents of barrel to forty seven dollars. I'm Charlie Pelt, and that's a Bloomberg business flash. You're listening to taking stock with Kathleen Hayes and Pim Fox on Bloomberg Radio, Taking stock now of the stock market. We've got a market that is looking for a reason to keep rallying today. A lot of volatility of course around the Fed Reserve and comments it has made taking a look at what companies are going to be doing well in the environment if the Fed does raise race this year,
and then what did it what if it doesn't. Very happy to welcome back to the show. David Kats. He's president and c i O, Chief Investment Officer of Matrix Asset Advisors right here in New York City. David, welcome, Hey, definitely nice to be here. So set back kind of you know, the set the stage for us. Here we are, it's heading towards the end of August, We're going to head into the autumn. How how have this these past uh about eight months of the year kind of set
up the stock market for what's going to happen? Is we had to you know, we're almost going to be well. The market has been a roller coaster this year. You had a historically bad start to the market the first six weeks for the worst six weeks in seventy years. Then you had a great rally, then post breaks that you had a sharp sell off followed by a sharp rebound. So lots of volatility, but quietly the market is up
in the high single digits already. In fact, we if we just look at the past couple of months, it's certainly hasn't been too bad at this point. How big of a threat and how big of an opportunity is a FED or could the FED be requity investors? Well, we think the Fed is going to get a lot of notice. People are becoming obsessed with it. But the reality is the Fed once to raise rates. They need to raise rates. If they're gonna do it, it's gonna be very slowly. So the market at some point is
going to calm down. If the FED raises in September or December but doesn't say that they're going to do a lot more raising next year, the equity markets should be able to digest it on a day daily basis, or the first week. They might sell off, but we do believe they're going to settle down. We say you probably have a little bit bigger risk in the next few months in terms of the election rather than the FED. Well, right now, the market is not focused a heck of
a lot on the election. We think that the oddsmakers are putting a Clinton victory as the more likely outcome. We think if that were to happen, UH, the market would assume it's it's following a lot of the President Obama policies with a slightly better economy bias, So that would be a modest positive for the market. We think if Trump were to win the presidency, which is not being factored in, there's a lot more concern and uncertainty. If you look at the Trump policies in terms of taxes, Uh,
that's actually fairly reasonable and a positive. Uh. In terms of lowering restrictions and laws for companies, also modest positive for business. But the big wild guard is something we're very fearful of and that the economy should be very fearful of is his comments about trade and starting a trade war with China or Mexico in that case. Uh. Some of the better economic forecasters say Trump's policies would put us into a recession, and clearly that would be
real bad for the stock market. Yeah, it doesn't get too much worse than a recession, so that's obviously a threat. Now you're reasonably constructive, it seems on stocks, David uh You say you'd use any weakness to add to stocks, but it wouldn't change the rally, and it's not the time to aggressively add new money to the market. Why, well, So what happens is people always feel better after the market goes up. So you've just had about a ten percent rally in the last six or eight weeks, and
all of a sudden, people are feeling more comfortable. You don't want to buy high. What you want to do is say, Okay, I have a long term time horizon. I like stocks over the next eighteen months, and rather than buying after they've run up, wait for the next self. Something's going to happen, whether it's out of Europe or China, or people fearful about Trump doing better in the polls.
And when you have that three or five percent correction by companies you like but at prices that you like, and you know, that's what is our thinking all year. So we've been buying on the dips and then not chasing the rallies. You say value investing is coming back. It's been lagging growth for nearly a decade. Do you say this could be the the beginning of a new multi year trend. Why and why, well, thank goodness, more value guys.
So it's not been fun for the last few years, but generally the market trades between value and growth and long seven to ten year cycles, growth is vastly outperformed value, as you said, in the last seven eight years. Uh, this year, value is doing better than growth. And right now we think value represents much better opportunity, thank growth,
and better opportunity than it normally has. So as you have the growthier stock slowing down and the market coming back to more economically sensitive and or energy and or financials, we think value was due for a pretty good UH period in the on. Okay, so values back a good UH period of the sun. You are thinking that the dividend oriented investing trend has more upside, but you have to be more discerning, So tell us what you like
in that trade and why. So right now you can get zero in the banks and you can get one and a half percent on its tenure treasury. So people are seeking yield. A lot of the market is paying good dividends, but we be wary of things like utilities that are selling at twenty plus times earnings. The flip side is you can get companies energy companies, financials, healthcare industrials that are paying three and a half to four yields that are growing over time at reasonable the evaluations.
So we think that's a great place to put money. We think you get lower volatility and you still have some pretty good upside. Okay, okay uh. In terms of some of the companies that you're most fond of right now, let's just run through it and in the dividend arena. In terms of industries, who do you like the best? So we like financials the best. Financials have been the biggest lagger this year. We think that the businesses are
actually doing very well. Credit is very good, and if interest rates ever go up, they do even that much better. But vote our investment thesis is they're going to do well either way. Our favorites would be JP Morrigan, MetLife, Wells, Fargo, all wonderful businesses uh and under ten eleven times earnings paying a three and a half to four percent yield. Okay uh. You also are have a couple of consumer
discretionary stocks you like. So consumer discretionary has been uh, pretty volatile this year, the retailers have gotten beaten up, and by and large, we are a little bit wary about a lot of retailers because of the effects on from Amazon. But one that we do like is Target. We think that the company is very well run. They recently lowered guidance or the upper end of guidance for the balance of the year. The stocks hold off. They've y the dividend for forty five years in a row.
They're paying a three and a half percent yields, it's at fourteen times earnings, and we think that there is a place for a Target, and they compete well against the Internet. Um. The the other um you know, uh. One that we like in that space is like a Harley Davidson. We think is a pretty good company there. And we also like McDonald's which pays a rock solid dividend, growing nicely, low volatility. Okay, let's run quickly through a couple more Cisco and CAALCLM in the tech space. So
technology is doing well this year. Some of the old technology companies like the qal Comm and Cisco if something finally started to perk up, but they still sell it reasonable valuations, so we easily think they have another fifteen or twenty percent on the upside, and you're getting a three and a half percent plus yield while you're waiting. Alrighty, so how about what you like in the telegom space. So telecom is like utilities, but you're getting them in
a much better price. So we like both Verizon and A T and T. You're getting a four and a half percent yield and you're buying the stocks of like fourteen times earnings. So we compare that to like a Duke Energy, which is selling its twenty one times earnings. We think the prospects for the telecoms are good, but you're not paying a heck of a lot for that. Okay, Um, you would be sellers, you'd be seller utilities? Why and is there anybody in particular that you'd say, please get
out of this fast? So really, if you've been buying utilities for the yield and you've they've been doing well, so you're happy. We use this as an opportunity to declare victory. If you look at utilities over the last thirty years, they fell between eight times earnings and sixteen times earnings. Today many of them are north of twenty times earnings. Uh, if they were a dynamic growth business, maybe you could rationalize that twenty times earnings. But utilities
are not. They're going to grow their earnings a two or three percent to yield their lowest levels that they've been in years. So we think that they've been marked up because of people are just trying to chase dividends. Uh, don't get caught up in that. Take your profits read deploy into some of the other names that we talked about. So what is the biggest risk? What? What? What should I be watching very closely? If I'm in the market, I'm not going to add stocks aggress so that could
turn that around. What would you say? Oops, So I gotta be a little care cautious in here. Well, the the our biggest concern, as you mentioned a little bit earlier, is what's going on with the US election. Um, you know, we just think that if Trump were to be looking better in the police, he's been pretty erratic in his policy, so it's very difficult to handicaps. You know. While President Obama hasn't been the best in the world for the economy,
it's it's been pretty understandable. Uh. And we think Clinton brings the same to the table with a little bit more pro business bias or pro economy bias, not pro business um. But that's our biggest concern right now. It looks like the break that is going okay, so we're keeping an eye on up, but we think that's okay. All right. Well, David cats a green light on buying some stocks and the dividend play. He likes the financials the death. So we're heading towards the market closed now,
movers and shakers. Our stocks editor Dave Wilson will be joining us at the top of the hour. I'm Kathleen Hayes, and this is Bloomberg