tv Nightly Business Report PBS February 19, 2018 5:00pm-5:31pm PST
this is night lly by report with tyler mathisen and sue herera. >> good evening and twl k this specition of "nightly business report." i'm tyler mathisen. z >> welcome. we are about a month and a half into the new year and what a year it has been. volatility has returned like few expected. >> and tonight, we'll look at what that means for you and your money and offer some investing ideas for a market that seems to have a mind of its own. >> that's right. at's where we begin with the stock market. never before have we seen the dow jones industrial average fall nearly s 1600 poi a single session, at least until this year. the stomach turning moves lower and dramatic moves higher are happening at warp speed and as minic chu reports, it will go
down in the history books. >> after months ilend, voly is back and came back with a vengeance over the past few weeks. it's been so long since investors have had to deal with the fall iing stock market that many may have fort gotten what it's like. the middle of 2016 saw the s&p pull back by16% as concern ant the chinese economy and global growth took a bite out of markets. even around the commotion about the decision to leave the european union didn't have this big of an effect. that so-called brexit ve only shaved around 6% from the s&p. another interesting way to look at the lack of volatility is how long we've hovered near a record high level for stocks. according to lpl financial market strategist ryan dietrich, the s&p 500 trad within 5% of record high levels for over 400 trading days in a throw. 's the longest streak on record. many experts think that the
recent volatilesy isn't over. sf such a long stretch of inactivity, it may take more than just a week or two to get dvck on track. in the meantime,ers are busy counseling clients and answering questions about how to react to the up and down market. it's given investors a reason to idealuate, reenp forforcing the should depend on how they plan on using the money. the longer term horizon you have, the less worried you should have. gettingou're retired, close or need to money for college or dow paymon a house s, it may not be appropriate to have a lot in stocks. whatever your circumstances, if e resent market melee has you worried, you may need to talk to a financial adviser to see if you're positioned correctly. >> yoin us now to talk about
what we have been seeing and what could lie ahead is michael purvi gypurvis chief global stra good to have you with us. one of the things we can all agree on is that this market is not 2017's market anymore. and that there are two things that investors haven't had to think b about in years that they're now finding themselves having to think about. rising inflation or the prospect of i and rising interest rates. >> that's absolutely right. we're starting to see volatility, something we haven't seen in ag l period of time. dominic was mentioning when you have volatility, the vix going up for example, although you would see bond yields going on. what's happened oaf ovee the last cou weeks is that they're not going down. that's raising unsettling questions for investors. >> what about the volatility? it was so violent on those couple of trading days. dong you have a feehat is over?
was it linked to any particular instrument? what's your take on that? >> well, been a huge industry that's developed over the last few years of efftively selling volatility. and that's an investment o trade that works great until it doesn't. what happened over the last two is really, it's what you'd call on wall street, the short squeeze. and the just happened to be these volatility instruments. it create ed a lot of sort market violence that we don't normally see. and there will be aftershocks from that. but i think thinquestion for stors who have the 12 or 24 month time horizon is really anything that different than it was back in early january. besides these reverberations from the volatility squeezs >> with thatbackdrop, do you think the stock market is going to churn higher albeit potential ly with more volatiliha. >> i thinks right. the fundamentals are really
good. it's kind of interesting to that over the last two weeks, the outlook for expected earningscrinsed almost 2%. what i'm expecting, we're going to have a few weeks of choppy trading. ultimately, i think what you're going to start seeing is t u.s. equity market rally forward. but going forward as interestte go higher, that will mean more volatility. i think both volatrkity and the will reach higher later through this year. >> so if you have a longer term time horizon and you want to commit some cash to this mar st, where do y opportunity? >> well, i'd say right now, the best thing to do i sit back and wait for some of these aftershocks to playout. you don't need to rush in tomorrow there. but i think anod, solid cos that have been working over the last couple of years, the tech sector, for eonmple,
will bnue to do quite well. regardless of where interest rates happen to beg. go i also think the financial efctor is another good area where it will b from a higher interest rate environment and the volatility that we've just beenil discussing help their tradinging businessess well. >> michael, thank you well, some say the stock market is taking its cues from the bond market. treasury yields are starting to rise and that's causing stocks to adjust. but where do ieserest rat head from here? steve liesman takes a look. >> one of the reasonses for height ped volatility in stocks is more heuncertainty about outlook for interest rates. there's a lot for equity inestors to fig out just where interest rates and the federal reserve will go from ear. on the suppl, si the fed is reducing the balance sheet. ramping up li$600 b a year and increasing the supply of treasuries on the market. government borrowing is set to ri t. back up a trillion dollars a year o finance the deficits
amon other things from the t and the right rate will rise to reflect better growth u numbers in the economy. at some point,su a higher tr will need to com the long rate feeds back on the fed. they'll set a short-term rate at the rate to continue economic grow, but if growth is better, that could view that short rate higher than it is now. so far, bill dudley says the market turil hasn't hurt the economy, at least not yet. >> having a bump like this really has virtually no consequence in my view of the economic outlook. my outlook hasn't changed because the stock market is a little lower than it was few days ago. it's still up sharply from a year thago. said, if the stock market to go down precipitousl and stay down, that would feed into the economic outlook and that would affect my view of monetary policy.
>> robert kaplan added market corrections can be healthy m we'll hear more from the federal reserve on february 28th when the new chairman sits for testimony before congress. the first time he'll take questions at the helm. i'm steve liesman. >> well, when the fed does raise rates, interest rates on deposit accounts also tend to rise. slowly. the fed's latest rate hike is yet to result in more money in aiverer's pockets, so p w the fedex pechted to rates, maybe four time this is year, when will being a saver pay off? here to discuss is kimbee y palmer at rsonal financial websi website, nerd wall let. good to have you. >> thanks for having me. >> when rates go up, ithotice quickl the rates on my credit cards go up. my rates on my home equity line go up. th prime rate goes up. that's all the rates that batting averabanks
charge to borrows, but not on savings accounts. is is how banks make money, isn't snit. right.'s the traditional banks have been slow to raise rates. but at the same time, whave seenore movement with online bankshore offering more competitive rates. so we've seen those rates on saiings account go up to n e 1.5%. ht you're right, the traditional bane been slow to increase those rates. >> if they did, wouldn't it beove them to do so because you keep your money in that bank longer. >> that's right. it's appealing when a bank raises rates and encourages people to put more in their oavings account. consumers want t make sure they're earning as much they can on their savings. >> you mentioned something very interesting and i want to probe it a bit. id i believe that the online banks pay hire savings rates. ut i want to buy a cd or $10,000 in a savings account, is that where i should look first? and how do do it?
>> absolutely. there are of course a lot of factors at playut one of the smartest moves for consumers to make is is to spend tim looking online, comparing the different ratesanksffer because you'll often find the online banks are offering more competitive rates. you can do it at nerd wallet, of course. >> i had to give you. that's called a, you know, roger fed eaerer could have d that. go ahead. nerd wallet is a good place to do that. >> it is. you can easily compare rates. it's so importanturo make you're earning as much you can for your savings. >> i've talked to some who say i'm uncomfortable with an online bank. what do you look for when looking at an onlineo bank potentially put 10, 20, $30,000 in? >> such a good question because security is ambolutely the one concern. you always want to check first of all that it's fdic thinsured
make sure you understand how to access your money. are they on an atm network? can y take out men when you want to. will you be able to keep fees to a minimum. >> so are more and more people using these online banks or are they still inclinedo just go with the familiar name that's either the corner local bank or one of the big lttate banks? >> we actually are seeing a lot of growth in interest in online ngnks and there's a gro comfort level with online banks. so that's a trend we're seeing over time. as people seek to get higher returns on their money. >> thank you so much. >> thank you. >> kimberlyalmer with nerd wallet. still ahead, trying to figure out what you should h your money in a volatile raising interest rate environment? we have two guests and a lot of ideas.
the topics we've been discussing a lot have been bgh interest rates and rising volatility. with that many mind, let's talk about what stocks could benefit from those two things. here with us to discus three picks that could do wele in more volaarket is chris, president of aviaite c management and bill sneed, who will focus on three stocks risingd to benefit of rates. he's the ceo of smeed capital management. nice to have you with us, gentlemen.
bill, i'm going the start withet the fact that banks aren'tal passingg those rates, but you found a couple of stocks that will nefit. t's start with your first one. amg amgen. why do you think it will be the beneficiary? >> whe g the economys stronger and interest rates rise, ultimately, you'll get a nings ction of price e ratios companies that produce their own capital become much more valuable than companies that demand capital. so if you have loads of cash on your balance sheet, generate high free cash flow, life should be pretty good and that pretty much describes amgen. who and then lastly, it also ry trades at a very low price to earnings ratio, which also is very positive you know, more environmen >> so chris, in this scene, your motivation is to pick stocks
thatig benefit from increased volatility. your three choices are very interesting in light of what's been going on in washington. they are lockheed, rathion and northrup. that feels like a play to me on defense spending in the u.s. and arnd the world. why are they also good in a volatile marke >> absolutely. the old sports analogy, the best offense is a defense, really applies here. and you could certainly play defense, punut intended, owning these companies. just take a look at the volatility burst we've had. these companies were down maybe 2 or 3% at most when the market was falling off 10, 11% from its high and year to date, they're up 8 to 11% and they're really participating as the economy grows. never underestimate the power of the government to either make a buness run or to maybe hold it back a little bit and with the $700 billion budget pass to
defense spending and the rest, they will actually really benefit each quart earnings for i think the next eight the to ten quarters. i think you have it, really a situation where you can kind of own these companies, understand that when you have a tough time, that they won't hurkn you. >> you, bill, let me go back to you on bank of america, your second pick. obviously, they would benefit ra from the risin environment in terms of loans and things like that, but why else do you like it? >> well, first of all, 86 million people between about 23 and 41 and they are forming households now at very large numbers. for example, 65% of the views on zillow are millennials, so as their economic activity picks up, the amount of little transacti transaction charges they're doing at the bank goes upy
significannd you've state ed in your prior segment that over the course of tt eight to ten years, bank of america found out everybody that will have money on deposit with them that doesn't care about what their return is. any money that's still sitting in savings and checking accounts now is obviously not rate sensitive people and your prior guest has a wonderful idea for those motivated to shop, but most people are lethargic and want their money at one or two places. especially the older you get. and they passes away have money in 20 different financial institutions, you've got a real headache on your hands. >>absolutely. so certain ly theneruth. chris,f the other thip things that i notice about the stocks you mentioned. again, lockheed, rathion and northrup, thesere dividend payers. >> and they consistently raise their dividendsairly aggressively. they're not high yielders, but
it would be like owning the five-year u.s. treasury. you're getting at least that. a little more in loc i think that continues as they pass cash and cash flow back to the investor. >> and bill, you g to tell me about walgreens boots alliance. now we know that particula area of the market has seen a lot of consolidion. there are deals going on. i would assume it's a little bit of a play on that as well. >> let me jump on the nice pile that our oer guests ovideded. bank of america will probably see some of the most amaze iing dividend growth. it's just about ther had because have been restricted by the sea car federal reserve requirements on how much they can pay in dividends and historically, they paid aheut 50% of profits out. their average estimate is 210 for this year, which means in normal year, they'd be paying 1.05 and that's more than double what they're paying now.
walgreens has been you know, they are a dividend aristocedt. they've ravery year since the beginning of time practically and they're gushi free cash flow and if in fact they're able t buy the other 70%, that's just going add a big nother bunch of copious free cash ow. their increases will be substantial and bank ofemerica is m play on a stronger economy then walgreens andotmgen are companies that i don't think it really makes a whole lot of difference economy does. we're going to be excited on them regardless. >> gentlemen, thank you so much. >> and coming up, why spring has sprung early for real estate. >>
the ground hog predicted that would be six more weeks of winter, but the housing market doesn't agree. fall lgg ply has sbiers out early. diana olc has more. >> this half million dollar denver home was listed on a thursday. >> yeah, i likeanhis one a lot. this is 587. >> just came on the first. >> and it already had 37 showings before the saturday open house. >> there's just simply not enough homes to go around for
people looking to buy them. >> the home was under contract by monday. the supply of homes for sale now is at a record low. not just in denver, but nationwide. demand is suring and that has shoppers out early. hope tog get a jump on the spring market. >> kind of the offseason now, ti but i'm experiencing a accident amount of competition. i thought i was at a higher price point where it would be a little ease yes for m t get a place, but i've put down two offers so far and both times been bean out byash offer. >> it'stories like that that have eric andalexa out early as well. >> we haven't put in any offers or niranything, but we understa it's a really tough market sfwlchlt so we're sort of doing everything we can to be prepared to make a good fer. competitive market. con tin jtingencies and that so thing. >> not only are are pol buyers facing low supply, but also high prices and rising mortgage rates. a not so perfect storm that has
the usually busy spring market starting in winter. >> i strongly believ that's going to cause more buy side demand as people try to get into a home before rates get into a home where they can no longer afford a home they would like. >> higher rates could throw col water onoverheating home pricy . >> and theve the whole thing. >> that's true. >> but demand is so strong, that higher rates are unlikely to cool the competition. ham diana oleic in washington. >> so trends might we see during this spring selling season? here to discuss her outlook is skyler olsen. senior economist at zillow. i'm tyler. welcome. good toee you. skyler and tyler. >> thank you. >> soverybody keeps talking about how low inventory is. thhae just aren't many houses for sale in many markets. why is that? why aren't people putting their houses up for sale? >> you know, actually, over
time, the number of new lew listed homes going out on the market are relatively stable. it's increasing right now. newly listed homes.l it wontinue until may for the home shopping season. this is when the listings start to pick up. the rub is that demand so hot that those homes are coming off the market as soon as they get on it. so hom listed at the beginning of the monthot are necessarily available at tend of the month so, if we look at daily inventory, how many homes are available on any given day, that's 10% lower than it was st year and last year, we would have been having a similar conversation. >>hat impact do you think higher mortgage rates is going to have on that de>>nd? you know, i think, you can think the effect might be there. but they're likely to be sll and one of is is something we may expect, i'm going to move quickly now. the thing is that demand is
already so strong relative to the supplywe out there tha might not notice. in terms of really seeing a significant cooling, there are a lot of pent up home buyers that have expected to buy hahomes, tt been looking to buy homes, that have been and losing out on those and frapgly, there are a lot of other barriers toooving i the market and become iing a homeowner such as saving for that down paymt that in the mortgage rate, which has historically even at higher, as high as it's been sin 2014, it's historically still low. >> you call this all 's market and likely to be so as far as the eye can see. if'm a buyer, a bidder, in one of these seller's markets, wt are the two pieces, three pieces of advice you would give me to give me st chance to get the home i want? >> yeah, i think first off, you know, really consider theha reality you're going to lose your first bid. you d't cross, a national average that the typical home
buyer has t submit at least two bids to win that home. in a hot market lik seattle for example, xpect to lose four five before you win that option. when that happens, you know, you cannot stop aggressively save ing for a down payment. because if you lose that bid, home values are not going to stop. they'reunoing to move a you. right? and it takes aggressive saving, continue saving just to keep wup that down payment share like say 20%. or 10% that you otherwise would have expected. next, really identify what your min speckis is the min yum requirements you have in where you're looking because you'll have to get flex bable. >> on that note, thank you so much. >> thank you so much, too. >> befor we go, sharon has some reminders on what to do and not to do in periods of extreme market volatility.
>> well, y roller coaster ride that many neverte exp the recent swings in the stock market have been b especially for furt investors, w, they may have gotten spooked. here are some tips op how to ride out the market. first of all, don't panic. just remember your goals. there's a reason you started investing. you set a goal. it could to save for college or fund your retirement. whatever you plan. ke a few deep breaths. and stick to your u plan. the money is there for the long haul and then it's probabl b better to n the market. there over time, it's going to grow. next thing is don't hit the sell button. until you've reassessed your risk. if you're losing sleepve the market turmoil, your investment mix may beoo aggressive. after last year's gains, your portfolio may need tweaking. if you needash for a large purchase in two or ththe years, k that stock disclosure and finally, doen't go it alone.
talk with an add virz. it may give yogua much needed check. and it's their job, especially in times like these, to calm you down and if you need it, to help you rework your investment strategy. guys. >> sharon, thank you. and thank you for watching this special e dig of "nightly business report." i'm sue herera. >> have a great evening, everybody, and we will see you tomorrow.
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