Global business news twenty four hours a day at Bloomberg dot com, the Radio plus Mobile Act and on your radio. This is a Bloomberg Business flag from Bloomberg World Handquarters. I'm Charlie Pellot. We've got thirteen minutes to go ahead of the clothes on a Tuesday. Stalks rising the most in more than two months, a surgeon home sales, fueling speculation the economy can withstand higher interest rates amid rising bets that that are reserve will tighten policy this summer.
Right now, the S and P five hundred index up twenty nine points to two thousand seventy six, a gain of one point four percent. Nas stack up ninety five and advance there of two percent down. Industrials up two d twenty four points, a gain of one point three percent. Gold down twenty three twenty bence to twelve thirty, a drop of one point nine percent. Crewed up one and a half percent. Hired by seventy three cents a barrel to forty eight dollars eighty one cents. I'm Charlie pellet
us a bloom Bred business flash. Charlie Pellett, thanks so much time off for the E t F report brought to you by van Eck Vector's e t F s. Expect more from your muni's target tax exempt income by maturity and credit quality, all with low cost e t F s. Visit van k dot com slash Muni vanek access the opportunities for e t F report our own Katherine Katherine Cowdery. Another boutique et F firm is being
purchased by a large active fund manager. This time it's Lattice Strategies, as San Francisco based firm known for its factor focused and smart data e t s. It's being acquired by Hartford Funds. The m a activity e t F S is basically reading reaching fever pitch um. We've seen three acquisitions this year and eight in the past two years. Bloomberg Intelligence analyst Eric val Tunis explains what Hartford Funds hopes to gain with the acquisition. They're not
buying them for the products. Okay, they don't really care about. Lattice is two and fifty million dollars in in e t F assets. There's no big deal compared to Hartford seventy six billion. Okay. What they're buying is talent, brains, and experience because Lottice has a couple of guys who wear black Rock and Barclays. I'm talking like twenty year veterans. Terms of the deal were not released. It's expected to close in the third quarter of this year. That's your
Bloomberg at fy Fort. I'm Catherine Cowdery. You're listening to Taking Stock with Bim Box and Kathleen Hayes on Bloomberg Radio. An investment in the SMP five hundred so far this year has offered a gain of one and a half percent. Currently, the SMP five hundred offers a yield of a little bit more than two percent. Can we expect similar returns for the remainder of Well, that's why we have Mike Ryan.
He is the chief investment strategist for UBS Wealth Management America's Mike, thank you very much for being with us. So do we just have to adjust our expectations. I think we do. I don't. I'm not sure it's going to play out exactly it has in the in the first and a half months of this year. I remember this was an extraordinary period where you had an extraordinary draw down in markets, suffered you know, pretty big losses. Through mid February only to see this pretty impressive bounce back.
So it's been a period of extraordinary volatility within equity markets. I think going forward what we're likely to see as the following I do think the markets are in the process right now of becoming more comfortable with the pathway the FED has set pre monetary policy. In other words, I do think we're going to see rate increases over the course of this year, but remember from they're gonna be a very gradual, very deliberate, very measured type of
rate hike. So against the backup, we're starting to see more and more evidence that the economy is improving. I think that's going to create a favorable backdrop for risk assets, and therefore it's going to favor certainly equity markets. But again, I do think that the point you raised about the gains being more measured in terms of the equity markets, I think we're gonna be focused on trying to generate gains in the mid to high single digits rather than
any gains in the double digits. It defend is moving slowly and gradually. Mike, Is this also not so bad for bonds, at least not when you get out to the longer end of the curve because they're not going to do that many boosts at the short end. Number one and number two, the Feds getting tighter to hold down inflation or with that, I mean they actually want inflation to rise, but doesn't openly hold down inflation. Doesn't it mean that the long end isn't such a bad
place to be. I think you're right, Kathleen. I think what the what the bond market wants to see is that the FED is going to be in the process of slowly normalizing rates, but that they're not going to do it in in a pre ordained man In other words, they're not simply go out and rotally raise rates by you know, a quarter of a percentage point every quarter or the Hunter basis points, which is sort of the
signaling they gave us earlier. There. Instead, I think the bond market appreciates the fact that the Fed is reflecting upon what we see in terms of the macroac now in developments. They're certainly sensitive to the financial market reactions to policy decisions, and therefore they're going to plot what
I consider to be again a pragmatic course. So like it's that backdrop, it tells me then that the bondom market repricing is not going to be as extreme as we saw before the temper the Taper tantrum, when the markets overreacted to expectations about set rate hikes. So I do think it's an environment where rate increases will be more muted. And I also think you're right that the extent this is viewed as being a necessary step in making sure that we don't have any problems down the
road with inflation. I think that does provide a more favorable backdrop for the back end of the curve as well. All right, Mike, So let's say that you get a telephone call or an email from one of the investment strategists or analysts who are dealing directly with clients, and they say, you know, the clients keep calling and they cannot live on two percent. What is your recommendation if
the time horizon is three to five years. I think it's gonna be a tough conversation because I think we have to understand that if we're going to try and generate returns or levels of income materially higher than that, we're gonna be willing to take on incremental risk. So that means either I'm going to take investment choices that have lower credit quality, move much much further out in mature respectrum that I have been accustomed to, or perhaps
look at look for income in non traditional sources. Now we've certainly seen some folks have gravitated to reads and m LPs as a way of replacing you know, loft income, but we also have to understand their attendant risks with that. They're not fixed income securities. They don't have the safety and security of a guaranteed return of principle UM. So obviously there's a new a new set of risk to come with that. So what I would say is we
have to strike the right balance. Strike the balance and trying to generate a level of income that's going to be acceptable for the clients given the level of risk that they're willing to assume. So for me, that includes not only getting it from traditional sources as we just talked about in terms of six income markets, but also looking at the non traditional places as we said MLPs and reads, but also let's look at it in a place where we haven't been searching for income for quite
some time, and that's the equity market. Remember that the ability to throw a dividend over time is perhaps one of the best ways of replacing lost income. It's interesting though, that we were PAYM and I were speaking with Frank Laslo yesterday UH from B and Y Melon. We were out in Tucson, Arizona at a conference, and Frank made the same point about a low inflation, low return environment.
A lot of investors are going to be looking at these we can call them alts, liquid alts, alternatives, etcetera. But the kinds of investments that they may take longer to bear fruit, but they may seem more less volatile and a little more promising than stocks at this point. Well, I look, I think there's a place for them in the portfolio. I certainly think that we have to look at a a broader, a broader set of investment opportunities if we want to capture the income and the returns
that clients are looking for today. But I'd be careful not to look at UH certain asset classes as as precluding others. For example, I still think that equities needs to be a core holding within a fix, within an
diversified portfolio. And by the way, I do think that we have to think differently about equities going forward, where we sort of during the eighties and nineties and even two thousand's we sort of looked at equities purely as a source of capital gains and we were going to get all of the yield of the income needs from
fixed income. I think that has a change, Kathleen. I think we have to look more holistically at our entire portfolio and trying to figure out how we're going to get as much income out of the portfolio from all the sources of return across the holding base. Well, one of the sources of returns, at least in the past, have been variety of hedge fund strategies. Do you see that that will continue and will customers continue to pay two and twenty for performance that if it doesn't outpace
the SMP certainly isn't delivering as they say alpha. Well, look, I I it's it's hard to me to come with them the know what what clients are willing to pay. I do know that that increasingly what you're seeing is is competition. UH is certainly something that all managers are being faced with. Clients are demanding better returns, they're certainly demanding accountability for outcomes. So I suspect there's gonna be fee pressure regardless of the type of investment vehicle people choose.
So whether it's two and twenty or any other structure, I think people are certainly going to demand performance um for the fees that they're paying. That said, I do think that hedge funds and alternatives still have a place within the portfolio. UM. I think we we tend to, you know, you know, periodically we sort of um fall out of love or or we sort of um have our our our interest in certain types of asset classes,
kind of Wax and Wayne. I do think though that there are a number of really strong managers in the space. There's something some really really prudence strategy that are being employed, and therefore I think it's still is a place that investors need to be looking at in terms of opportunities. Uh, let's just spend you down on the FED. You've been watching the FED along with me for many years, Mike Ryan. Uh so, what what's your best if you're if you're a trader on a desk and you have to put
some money on this, what would you bet? June, July, September. I think it's most likely by July whether it's the June and July meeting is a little harder call to me. I think there's two things that work here. First of all, what would be in favor of holding off in June is simply that we're going to get the UK referendum
on EU membership um just shortly after the meeting. And while the SET officials have said that, you know, certainly that's not going to be a primary determinant of a policy decision, I think the FED once clarity on anything that's going to have a potential impact on global growth dynamics, so that could be one of the things that tips
of scale. The other hand, one of the problems about the July meeting is sort of an off cycle meeting, meaning it doesn't have the press conference attached to it, so it doesn't allow the FED to have a kind of communication they've tried to have around policy changes. So I still think though, if between the two, I think they actually opt to go in July and forego the press conference, because I think that's better timing their standpoint.
My Brian, thank you so much for joining us. The chief investment strategists at UBS Wealth Management America's I'm Kathleen Hayes along with Pim Fox, We're gonna take a look at the movers and shakers at the clothes, Coming up now on Bloomberg Radio.