Michael Carlin

Hi this is Michael Carlin President of Henry and Horne Wealth Management with your second quarter 2019 Capital Markets Outlook. We are joined today by Joe Taiber of Taiber Kosmala & Associates. Thank you again for coming in and visiting with us. We really appreciate it.

 

Joe Taiber

Pleasure to be here. Thanks for having us.

 

Michael Carlin

You know we love having you on Skype, but you know what we really need to do since you know I have never seen you without a suit on. This is big. You can’t see it but it’s amazing. I see Joe without a suit. This is like seeing Santa Claus in his house just in regular pajamas. This is amazing. Although you’re wearing a button-down shirt you were great.

 

Joe Taiber

And the thing is I’m sitting down at a table I’m actually wearing boxers. .(Laughing)

 

Michael Carlin

And that concludes the market.podcast. (laughing). So before we get started Joe I wanted to provide everyone with a quick overview about why we do this in and for those of you that know me you know that I started at Merrill Lynch and I spent a lot of time at Morgan Stanley in it those firms they pride themselves on creating this research and in it was back in those days in the mid 90s it was. Research had real value. People thought that research meant that you were going to make more money because it was truly exclusive. Fast forward in that research has lost a lot of its exclusivity. You can get J.P. Morgan research or Wells or again Merrill Lynch research and not to downplay any of the great work that the analysts do because they certainly do try. There’s a big difference between our capital markets outlook and in the research that you’re picking up and reading about what the market and economy are going to do from a lot of those institutions. Those institutions have an incentive to get you to keep your money invested don’t sell. Keep your money in stocks. Don’t worry about it. Surprising. That still to this day that there’s still so much optimism usually at the start of a year. And then as the year goes on the things that you know the reality started to sink in about what the market the economy are going to do. The capital market it tells that we do, its data driven. We are intent on figuring out. How to position clients in your portfolios. We have nothing to sell.

 

Joe Taiber

Absolutely. Sell side and you being a recovering sell side investment professional. There’s the sell side for those of you who aren’t familiar. That’s generally referred to as the side of the capital markets industry that is selling equities, or they are selling fixed income securities they’re the market are they’re in the business of selling securities to investors. On the buy side which is more the side of the capital markets that purchases those securities. Right. So, the buy side would be if Henry and Horne has put your money with a mutual fund manager or a separate account manager those managers are seeking to buy securities by fixed income or equity securities and so the research that they produce is a different spin. It’s a buy side research angle and then the third side of the prism which is why we’re in the room is the independent side and that’s where I think Henry and Horne places I think a lot more emphasis in terms of where they look to for guidance and the independent research is truly just that it’s research that’s conducted not because it’s selling something not because it’s pointed at purchasing or buying something. It’s research for research sake. So, research for sale advice for sale and that’s where we come in with our vendors and work with like all the folks at Henry and Horne to provide that angle.

 

Michael Carlin

We just want to be right. That’s it. We want to be right we want to be independent. With that we have to start for this for this capital market outlook with the Fed. We had an amazing first quarter we’re going to get into some of the results, but it was truly incredible how much the market grew how much the stock market rebounded from where we were in December and where we closed the end of the year last year. I highlighted the six point two percent decline in the S&P 500. When the Fed made the statement on December 19th to December 24th that little pocket of time it seems to me that that caused Powell to change course. If you remember, go back to September of 2018 Powell was predicting three more interest rate increases in 2019 and now as of the March meeting that we just had the Fed said they expect no further interest rate increases its huge impact on the market.

 

Joe Taiber

No question. We went from we went from double checking one and a half hikes in 2019 back in December to now two and a half cuts for 2019 which is which is an absolutely stunning pivot on the part of the Fed. As Michael said we came off the back of the worst quarter that we’ve seen in over seven years. The S&P 500 up in the fourth quarter 2018 and responded with the best quarter that we’ve seen in nearly 10 years really since Q3 of 2019. A pretty remarkable sort of mirror image overwhelmingly would agree Michael with your assessment that the Fed was at the apex of that and they’re in it or they’re finding religion in late December with regard to Fed policy was the catalyst.

 

Michael Carlin

Yeah and I’m looking at the market the S&P 500 and you see the in the second quarter third quarter 2018 were where the market peaked out and then we’re just had exhaustion from the Fed being tone deaf or blind to what the what the market or the economy needed in the eyes of the stock market. In this the huge in massive decline experience between that end of that third quarter you know getting down to December I think December 26 was the bottom in this massive surge that we had that ended in the first quarter and a nice start even to the beginning of this quarter. And if you’re looking we haven’t crossed the highs that we experienced in September. So, the way that I interpret that is I interpret that as that’s a latent negative in that you know we want to be making new highs in the fact that we’re not is something to be paying close attention to.

 

Joe Taiber

Yeah for sure. We’re not far below I think at the close of close of business last week I think we’re sitting on the S&P 500 about 3 percent below the September high. So, we clawed back overwhelmingly the majority of that fourth quarter drawdown but as you said I mean what the Fed the Fed narrative in October to November into December October was their comments on the Fed funds rate where it was essentially they felt that they were far below neutral Fed funds rate at the time back in October. November the narrative changed too yeah, we’re just below neutral on into December where they made the death know by saying that the balance sheet unwinds on cruise control and that really roiled markets into that first quarter into the fourth quarter and sort of got that capitulation.

 

Michael Carlin

It was a heck of a heck of a bear market. I mean the market did drop 20 percent, so we look kind of historically to say well is when you have this bear market rally. It’s interesting I think the bear market when the market drops 20 percent or more which we technically did have on an intraday basis and if you’re looking historically going back to 1929 there’s been a number of times where the markets dropped 20 percent. We’ve had this kind of a rally and this one that we experience in 2018. Is is from a rally perspective. A heck of a lot higher and greater than you would then you would see normally and the durations a heck of a lot shorter. And I wonder if this has a lot to do with the technology feedback loop or you know electronic trading. If this is just a new sign of the times because if it is then then then then the days where you know as an advisor I feel like I had some time to make a decision that Windows really seeming to shrink if you look at how how quick. Some of these market moves are.

 

Joe Taiber

Yeah, I think there’s a lot of things. The decline of the S&P 500 in the fourth quarter didn’t meet their market. technically speaking. I think technically again you have to close at a 20 percent so an intraday by all means but the pace of it was remarkable. So, it’s a three-month period from September 20th to basically December 24th looking at major declines in the S&P 500 going all the way back to World War 2. The average duration of a major decline in the S&P 500 call it 20 percent or greater is about 14 months and that’s almost three. If you look at the dispersion of those on the end the average decline depths or loss of a drawdown is 30.7%. So, it’s actually a little bit deeper and significantly much and much longer.

 

Michael Carlin

This kind of folds me into the next part of this and that is one of the things that seemes to me most obvious is that people are looking for the market end. One of the key reasons the easiest reasons the simplest reasons that people point is they will do it’s gone on long enough. If you look at there is a chart that we have and by the way you can always e-mail us at that info at hh-wm com we’ll get you a copy of the slides that Joe and I are looking at. And if you look at the end of the expansions chart is growth done? For me it lays it out very clearly. If you look at the longest economic expansions in U.S. history. We’re right there with the longest continuous economic expansion in U.S. history in terms of duration months. If you look at what’s projected for growth moving forward between now and 2020 this would be even longer than we’ve ever seen by a pretty good margin. The two things that I notice is that, 1 the length of the economic recovery real GDP expansion has been huge. 2 at the same time.the amount of growth that we’ve experienced in this recovery has been far and away of all the ones historically that I’m looking at in the chart the least amount of growth cumulative. Is what kind of things do you see when you look at this chart.

 

Joe Taiber

I mean that’s no question about it. I’ll call it tepid growth the tepid growth of this expansion is evident based on this chart. It’s something that’s been written about and studied frankly for the past decade where we’ve struggled with two or two percent growth. Coming off of the GFC the global financial crisis 2008 2009 and the debt laden global economy. If you look back at you know debt super cycles like that historically they do typically translate into subdued growth or anemic growth for an extended period after that debt bubble bursts. So, you’ve got you know kind of a work off for the first five to seven years. And then there are all sorts of other things you look at globally where you look at demographics as a great example. I mean the declining backdrop of the demographic growth push here in the United States and Japan and Europe those probably are factoring in to tepid growth as well. I like to quote Michael that you put up there on the top. Yeah right up this chart. Economic expansions don’t die of old age they get murdered from Ben Bernanke and that’s something that is 100 percent the case and really what he meant what he meant by that is he’s pointing the finger at himself. Typically, it is actually the Fed and a Fed policy mistake that ends expansions where on the cross cusp. This year we’re on the cusp of the longest expansion on record. I think that technically hit in July of this year or so. It’s one of those things that we’re analyzing markets and economies stock markets bond markets. One thing we really like to focus on this is not to get too hung up on economics but rather look at who’s the perpetrator right. I mean who’s the perpetrator of the downside. You don’t look at the victim which might be a declining ISM first and foremost you look at the perp and that perp generally is going to be you know the Fed in most cases.

 

Michael Carlin

Yeah and nine consecutive interest rate increases is a good weapon of choice. So, one of the things I wanted to spend a minute on not too long is I want to talk about monetary policy influence with respect to growth and what we’ve become accustomed to is you know a first quarter where you’re looking at S&P 500 quarterly performance and even going back to 1928 it’s historically been one of the weaker quarters. That we’ve had to deal with and it isn’t a surprise that we’re seeing GDP numbers may come in a little bit lighter. Then typically a little bit better in the second quarter. I’m wondering aloud whether or not we’re going to see some type of government intervention some type of additional stimulative force to help continue to push this economic cycle forward. I wonder to me the most obvious would be some type of an infrastructure in a railroads, bridges, airports that kind of thing to help give us another engine of growth where there’s just not a whole lot of expectation and excitement in anticipation over big publicly traded company earnings for 2019. So, I wonder without some kind of stimulative effect I mean where are where are we going to be lost without one.

 

Joe Taiber

So fiscal policy. monetary policy monetary policy being driven obviously by the Fed fiscal policy and infrastructure spending and budget spending. So I just caught this I don’t have the data in front of me but I did think it was really interesting and it was it was a look from again one of the independent research groups that we subscribe to they do a really deep fiscal policy analysis and looking back from the period of 2012 through 2016 the federal government was actually a detractor to grow meaning there was a decline reigning in government spending in that time period. Some of you might recall your finance classes it’s C I G N F.

 

Michael Carlin

You’re given formulas out. This is oh my gosh.

 

Joe Taiber

Super spending investments. Governments spend. Yes. Net exports that equals GDP. It’s those factors really simply so. So that fiscal policy component that government’s spending component was a detract from GDP for from 2008 to 2012 through 2016 or 13 through 16. To the tune of about 40 basis points off GDP it’s about a half a percent per year. That flip that switch did flip in 2017 and 2018. Both. There was more. There was. There was an increase in government spending as well as a decrease obviously in taxes. So, the fiscal policy has been a stimulative, but very benign one so the push in 17 and 18 was a 17 basis point or .17 percent add to GDP. Right. As opposed to a 40 basis point to track it does it go higher from there. As Michael suggested there’s a push frankly from a political perspective probably from both sides of the aisle to fix roads and bridges and get that infrastructure spending done. Beyond that it’s anybody’s guess. I do think that fiscal policy likely is going to continue to be supportive as opposed to a detractor like it was for a period dating back to the economy.

 

Michael Carlin

At the time the economy was in a better position to handle some of those negative detractors too. But we’ll have to see. The next few charts kind of rolled up into one that I wanted to point out is that we know we’ve got fund flows and decline so if you look at the largest 20 ETFs and see whether or not people are putting money in or pulling money out the top 20 tell a nice story about what in retail and institutional investors are doing with their money and if you’re looking at the you know the equity side the stock side of this equation it’s pretty notable that you see you can even go back to 2017 if you try a little bit of a longer term trend of in this gradual reduction of money being added put into the market in those 20 largest ETF. We saw a little bit of a rebound starting in March of this year. That to me is very telling because we’re can we see follow through where we’re going to get interest back in the market we’re going to talk about IPO which I think is a part of the formula to get interest back into the market. But I’m watching that because I am watching the consumer because at the same time as I’m seeing fund flows for 2018 being pretty neutral and in 20 in the latter part of 2018 into 2019. Lot of fun flows coming out of the market yet at the same time consumer confidence continues to hang in there. We’ve got a confident consumer with spending. Wages look good. There’s a lot that goes into consumer confidence more than just more than just wages and spending. But at the same time we’ve got the fund flows in decline. You would like to see a confident consumer with a lot of fun flows you know money going into the market but would there’s just a bit of a disconnect. What do you think. What do you think we’re missing and how do we tie these two things together?

 

Joe Taiber

I guess people are confident to vote on a survey as opposed to voting with their dollars. Well it certainly looks like I totally agree. I mean retail fund flows and just how we work that indicator into the matrix here is it’s actually a contrarian indicator, so we see anemic flows in the retail market. That’s generally a good thing because you kind of want to move the opposite direction. December case and point maybe Michael we may have touched on this last call but that massive panic selling across ETF and mutual fund complex is back in the fourth quarter which you did not want to do. And Ed Henry and Horn’s clients did quite the opposite. They we’re actually buying at the end of December moving into both ETF funds equity markets, but retail fund flows as being a contrarian indicator neutral right now looking very anemic institutional money is what I think we’re going to touch on. I think it’s a little bit different, but it is definitely a notable trend here.

 

Michael Carlin

You do want to typically work opposite of what everyone is speaking about particularly when it comes to retail investing. But yet at the same time the Bank of America survey where they looked at institutional behavior. That was rotated into the most and this is as of February of 19 pretty fresh data is cash. Cash being number one equities generically being the largest area of investing that was people the institutions pulling money out of. Yes, there were some exceptions health care and in discretionary to the better performing areas of the market historically particularly lately. They got their fair share of money in. When you’re looking at institutions that are adding to cash in a time like February I’d like to think that smart money knows better. I don’t know if we’re feeling that are they missing the boat.

 

Joe Taiber

I think the behavioral difference between institutional investors and retail investors in simplistic terms is this a pension fund an endowment or a foundation. That time frame of the time horizon that they’re investing for truly is perpetually meaning they’re investing. Is the market going to be in 2018 versus 2059 is how they invest so they tend not to get too moved around by short term market movements. I think the one thing that’s a really interesting last year with respect to institutional money was the shift from this is going to sound wrong because it doesn’t sound right. If you read the papers but the shift from passive to active actually in 2018 was the first time in over six years that there’s a money movement from passive to active so 13 percent was a 30 percent increase in active equity assets and passive equity assets across the US to catch flat point eight percent was the first time that’s happened in quite some time. I think that might speak to I think there’s often that tension if you want to Michael but fund flow isn’t always active.

 

Michael Carlin

Well you’re right we could spend a lot of time on it but we’ve got to talk about the inverted yield curve. It finally happened. I want to set the table a little bit for those that don’t know an inverted yield curve. It means the short part of the yield curve the three-month treasury is actually higher than the 10-year treasury for you know 4 4 on the U.S. treasury market. There’s a reason why that’s critical is that you know some will say oh my gosh inverted yield curve. I know that’s bad but why there’s kind of a predictive story that goes with an inverted yield curve because if you think about it no one would buy a 10-year U.S. Treasury a 10-year obligation lock their money a for 10 years. When they could buy a U.S. Treasury with a three-month maturity and they could be getting more they could be getting a higher yield. The reason why you would do it is if you’re expecting you would still buy the tenure if you’re expecting the short part of the yield curve to decline in the short part of the yield curve declines when there’s an expectation that the Fed’s going to cut rates which they tend to do when the economy is struggling so you have this moment where you say a little bit further down the road. Well that’s interesting because I guess we’re thinking about the Fed cutting interest rates which you alluded to and we want to touch more on it you know because there’s more of a story than the banks struggled to make profits when we have an inverted yield curve. We get that and when the yield curve finally inverted this most recent quarter for many it set the clock which we’ll talk about when and if this is and continues to be a signal for a future recession.

 

Joe Taiber

Very much got a lot of ink. Michael in terms of the inverted yield curve a couple of quick talking points on that. There’s no question that looking back post-World War 2 every single recession was preceded by an inverted yield curve. However not every inversion was followed by a recession. So, it does happen without it. There you can get a false signal this curve it did invert but did not invert very deeply. That’s the other things you have to look at the deficit how long it stays inverted. That’s one of the things that right now doesn’t have us overly concerned in fact last week it did come back into positive territory. Right. You know at the end of the week. So in the depth that there was a Fed paper it actually dates back to 1990 and 97 that really did some deep analysis of inversions the depth specifically of the emerging and the likelihood or probability of the recession hit the ceiling and the depth of this curve inversion which was less than 20 basis points translated into about a 10 to 15 percent chance of recession following in the next twelve months. Had it continued to go deeper I think our concern would have been quite a bit more, but I think that it was inverted for a very short amount of time in a very shallow inversion. So, it’s not something that we got overly concerned with at least in our models.

 

Michael Carlin

And we didn’t have a false alarm in 2006 07. Then it eventually did it did invert yet again and that time period which made things a little more challenging. The depth being one thing and there’s a lot of information out there htat can give us an indication. It is an early predictor in when you have this inverted yield curve it is a it is a predictor and again hopefully this is a shallow one and this is a false signal but. Month from inversion to recession is usually 14 months. Now it’s all over the board can be a little longer a little later. But. Even if that signal were legitimate in history being our guide that would mean some time mid next year on average would be the time where you would expect to see recession numbers start to flow through.

 

Joe Taiber

Fourteen months I think is the general lead time I guess. Yes. Inversion of the three-month 10 year a lot media outlets will write about the two-year 10-year curve but it’s really as Michael highlighted here it’s really the three months right here that most economists look to. So, the depths and the duration. Generally speaking you’re going to want more than 10 days consecutively. I think we feel a little bit shorter you know on that front is part of the reason we’re not super concerned. The other thing that I will mention is right around the same time as the emersion actually just before the immersion you had global bond yields particularly in Europe given the economic backdrop in Europe yet global bond yields really plummet.

 

Michael Carlin

Oh, you’re going to go there now.

 

Joe Taiber

Negative yields negative yields and Germany in particular right just as Michael laid out the example of why would you buy a 10 year bond at 2.5 percent you could buy a three month bond at two point six percent you wouldn’t. Same reason German investors and European investors across the board were faced with negative real yields in Europe. So why buy a negative 10 basis point real yield German bond as opposed to a positive real return. You know U.S. treasury securities so there’s competing I guess there’s competing return propositions I guess for non U.S. investors that we think you know played pretty factored pretty largely into what happened on the long end of the curve.

 

Michael Carlin

Yeah and that’s the thing that when you add it up over 10 trillion dollars of negative yield worldwide. Negative 10 trillion of negative yield it’s everything from Switzerland Japan Germany Denmark Sweden Austria France like you look down the list and it is amazing that you could buy a one year Bulgarian government bond at negative 10 basis points or you could buy a U.S. Treasury at 255. What would you rather do so you got to figure that a lot of capital is finding its way to our shores and that in and you know maybe the interest rate inversion due to the fact that there’s there’s a good gosh a real global disconnect going on right now the inversion maybe it was a little bit less reliable given the fact that we have some pretty extreme circumstances going on overseas. As I mentioned a little bit the Fed does seem to have backed away from further rate hikes in fact when I looked at the data it was a 60 percent chance of seeing rates drop within the fiscal to 2019 year. There’s still you know about 40 percent of institutions where we’re looking for rates to remain stable to one more increase. This is changing dramatically and I still think that through it all the Fed’s policy still continues to remain accommodative.

 

Joe Taiber

No question. I mean from a Fed Funds perspective it became don’t forget that became more accommodative also in terms of the balance sheet. Well when we use the term balance sheet unwind you know all of the quantitative easing that began back in 2010. The Fed balance sheet growing from four or five hundred billion up to four point six trillion dollars at them in the process since early 2017 in the process of unwinding that four point six trillion dollar balance sheet or putting those bonds back out into the market that’s a liquidity extractor. Without question there. They’ve been doing really for the last twelve months they’ve been doing about 50 billion dollars a month 30 billion of U.S. Treasuries and 20 billion of U.S. mortgage backed securities. With the meeting in January I’m sorry in March they announced that too is going to end prematurely or prior to what they had previously announced. So that is going to be winding up by September of this year. So that liquidity extract. You know also is going to be coming to an end. So that combined with their forward rate guidance definitely accommodative. No question.

 

Michael Carlin

Can we talk about earnings for second? Can we talk about corporate earnings? So, it seems to me that when I’m looking at first quarter projections for publicly traded companies. In the number of companies that are issuing negative guidance for positive we’ve got five companies issuing negative guidance for everyone. That is issuing positive guidance and as a result it looks like right now quarterly earnings are expected to be negative. For the first time since really 2016 and if you remember the year ended up well it took a little bit of time. The year ended up well. So, you know I took that. Information into consideration and also looked at historically. You know there is directly there’s kind of always a weird cycle that occurs with expectations for corporate earnings. I’m just trying to see is there a historical connection. Should we read too a lot into this negative guidance. Yet you know get real conservative. What do you think?

 

Joe Taiber

I think while the negative guidance. I don’t know that we should read too much into it other than just knowing that that’s part of the game. So, the game being corporate management will guide Wall Street down so that they will beat to the tune of on average about 60 or 65 percent of companies beat their earnings forecast. Wall Street earnings forecasts every quarter that’s on average. So, the downward guidance is a wash rinse repeat exercise pretty much every quarter. As Michael said the extent to which earnings were guided down last this for this Q1 2019 was substantial. So, they were cut by about seven point six percent was the number that the last number that I’d seen. The average downward guidance is more like two and a half to three and a half percent. So close to X or over frankly over 2x the downward guidance a lot of things at play here a Q1 SP. I guess I think the SP number that the last one I saw was a negative four point two percent earnings growth which I think is a little further south even than what I think we might have here. That’s a number that’s concerning for sure. The thing you need to have in mind is what are you jumping over that’s a year over year number. So, you’re jumping over Q1 of 2018 That’s the first quarter that benefited from very dramatic tax cuts corporate tax cuts. You’re hurdle rate is elevated based on mass. I think you’re going to see a lot more this quarter comparison of pre-tax earnings versus pre-tax earnings on a year over year basis. That give us a better read for really what’s happening fundamentally.

 

Michael Carlin

Well if you’re really talking about negative earnings we’ve got to talk about the IPO market because if you want to talk about companies that aren’t making money there all the companies that we’re familiar with. You know for a long time you know being the sell side since I guess this is the theme of this is going to be me used to being a sell side guy I used to do all the secondaries and IPO and everything so I could build the syndicate index so I could get more of the good stuff when it came. This is the good stuff. Uber, Air B&B, Lift you know Pinterest which is you know next week you name it. This this is a renaissance of sorts where you have all of these privately held companies that for a long time were raising money outside of the stock market. It almost seemed resistant to putting their company under the scrutiny of of the stock market and quarterly earnings. On one hand I saw the research and my jaw dropped in that is the percentage of companies that are coming out that don’t make money. It’s 81 percent. And I haven’t if you haven’t seen in the data hasn’t seen a number like that until it matches the 81 percent of public cup of companies coming public that that weren’t the top of the dot.com bubble burst. Now granted a huge difference in that there were a lot of companies that went public in 2000 that’s not the case today a lot fewer. These companies are huge. The valuations are massive you know I have to wonder if a few things will happen. 1 will this reinvigorate consumer excitement in the market because they’re buying brands that they really use and understand. Two these are brands that represent in a lot of ways the changing landscape of the economy. In that you know ride share home share. pinterest a different kind of social media amongst others where were these really are a part of the future way that a lot of business is done and advertise and people are moved and transported. So, you know will this transformative group of companies that are coming in at huge valuations will leave enough money to be made for retail and institutional investors for this experiment to work or is this a sign of the times like it is in the year 2000. I know not to be a disaster. I saw you couldn’t see his reaction. It’s not it’s not to be a disaster. But. I’m just saying it’s interesting to me it’s interesting what do you think Joe?

 

Joe Taiber

I will tell you said to me time will tell. I always think back to the rash of IPO here recently is definitely on the radar something obviously we don’t look at what our stock pickers per say but I will say I mean managers that we retain on behalf of clients are scrutinizing these IPOs very closely and I always think back to you know obviously the dot com bubble which you know Michael and I invested through Facebook the Facebook IPO stands out as one that was really created by the market with a lot of skepticism. That’s worked out pretty well. It’s really difficult different business models you have to be priced very differently but there’s definitely been a rash and it’s been a notable one for sure.

 

Michael Carlin

My hope is that it did this is another leg of investor excitement in that there’s a lot that shaping up for this market to be and feel a lot like the market of 1998 there was something different things going on with Asian currency and things like that, but you did have a Fed cut. You did have the IPO market. You did have investor enthusiasm. Maybe we see some improvement there. I wish we had time to do the real estate piece, but we will have to cover that later. Should you want to talk about real estate send us an email at info at hh-wm.com. Happy to take you through it. Let’s go to the conclusion. The strategic has put together a nice piece on and they boil down to what we need to do. Keep the U.S. Mexico border open. Get that U.S. China trade deal done, do not do the EU auto tariffs. Gotta see some solution with the Brexit. There is a you know we’ve got the run up to the Japan value added tax increase we’ve got a U.S. debt ceiling consideration again coming up and we’ve got to work to replace the sequester budget cuts. We’ve got a lot of things to keep things going and we’ve already accomplished quite a bit. We reopen the U.S. government. The Fed did pause. China has done their domestic stimulus which is great. OPEC has stabilized oil prices which is good, and we got the guidance on the Fed balance sheet. So, we’ve done a number of things there’s a few things that need to get done that don’t feel unattainable. Which I hate to be optimistic but makes me feel like maybe the remainder of 2019 looks pretty decent.

 

Joe Taiber

We concur.I think a lot of those things I mean as you listed those off a lot of those things are more political I guess. I think I’d agree it’s attainable. The one thing I’ll say and remind everybody on the call is that you know when you look at what’s happened so far, the S&P 500 is up 15 percent. When you look at the equity market versus you know junk bonds and things of that sort the equity market feels like it’s just near term here. It can’t go up like that forever. So it’s also a pause a breather. The 65-day rate of change in the S&P 500 right now is in the ninety nine percentile of observations of the right tail. So, some short-term volatility we would expect wholeheartedly. It’s not necessarily a trading event but because the Fed seems to be out of the way and as Michael said a lot of these more political catalysts out there seemed manageable, I’d agree we were definitely constructive in a through 2019 for sure.

 

Michael Carlin

Yeah there’s plenty to worry about we just don’t have to worry about it right now. We can we both worry about that later. So, hey Jamie says we’re at the 40 minute mark. We’re done. Listen Joe you were fantastic as always. I really appreciate your time in you when you’re nice and close to the microphone it’s like it’s hardly echoey it’s terrific. He’s got too many windows in your office it’s too fancy we’re going to tell you. Thanks again Joe. This has been our second quarter 2019 capital markets outlook. Thank you so much for tuning in. Thanks again Joe. Take care and have a great day.

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