Welcome to barrons round table getting behind the headlines and prepare you for the week ahead. Im jack otter. Coming up, most investors would rather paloer taxes and Franklin Tempton cio explains where to get tax free gains and well dive into the next big trends for the coming years and years t intelligence and how you can invest and some earning more based on companys esg performance. Is this another ploy to raise salaries. We begin with three things investors ought to think about right now. Wasnt just big tech this week. The entire market did well. Plus, the may jobs report shows while the economy added more jobs than expected, Unemployment Rate shot up. More big retailers are getting caught up in the culture wars with ad campaigns tied to pride month and interesting investing opportunity here. And an ftc crackdown on mna means Arbitrage Funds may be great investments. I have my guests with me tonight. Ben, weve been talking every week about how its only tech stocks driving the market higher, but we saw everything go up practically this week. Each of the major indexes up more than 2 . Yeah, the market is having a party and everyone is invited. So tech shown as it has been this whole time, apple has almost hit a record high ahead of the developer conference and may show off vr goggles and saw the dow go up 2 this week and that was on the strength of industrials and s p up 1. 8 and this is great. Even better than that, small caps, which have been awful this year were up close to 3 . Its really everything that is going up finally, and thats the great thing to build a rally on. Jack partly because its a gold i did locks jobs report . Thats a big part of it. The Unemployment Rate ticked up and wages didnt go up very much and put that all together and get a number that wasnt too strong and Strong Enough that we dont have to worry about recession and not so strong that the fed goes ahead and hikes next week. Jack ben, over the course of the week we saw a dramatic increase at rate hike pause. Thats right. Everyone for sure there was a rate hike in june but on thursday after a couple fed speakers talked and it flipped and 75 chance of a pause and even with the jobs number that came out, the stronger number, that didnt come down much and came down to about 68 chance that its going to be a pause. Looking ahead, it really does seem like the market expecting the fed to stop and wait come the june meeting, june 15th. Big sirely for equity novices toker. Re investors and going up for stocks and few companies that got criticized for pride marketing. Yeah, a lot going on in the Retail Sector and look at Something Like li lulu lemon anw double digit stock growth and nordstrom did very well and macys warning for lower Sales Guidance ended up ending out the week well. The thing to look at is whats going on in other aspects of the retail space. Lot of head winds obviously coming from some of the headline issues around Companies Like bud and target getting embroiled in some of the marketing issues around pride and things like that. Probably not too much risk for the companies. Look at fundamentals and more than just the headlines so there could be entry points there. In fact, i think, andrew, you said target is a decent investment right now . Yeah, it looks good and things will probably blow over and trading big to walmart and a 3 dividend yield. Jack carlton, one thing is twist and slack from apollo on the show and he put out a chart that said cradling seizure disorderses spiked draconian delinquencies spiked dramatically. Yeah and against all age groups as well and drawing comparisons to the great financial crisis in 2008. Looking at consumer health, its a spotty picture because you have whether you call luxury sectors of the economy or higher end. Those lulus and nordstroms doing pretty well and a company like a Dollar General warning about weaknesses in their customer base. Be and with that wonderful placesser if thats unique to lower Income Customer or more a problem with Dollar General not managing inventory and labor as well. Were watching whats going on with the economy. Andrew, an obscure economy a low digit performer and a steady eddie and a big opportunity right now. Yeah, Biden Administration is launching a war on mergers and ftc, federal trade commission under its chair dena lena kahn and the purchase of verizon therapeutics and thats widening out spreads and creating more opportunities for investors right now. Jack briefly explain how the Merger Arbitrage thing work . If you want to invest and Warren Buffett doing this for decades, buy the companies that target the acquisition and typically will trade a discount to the value of a deal and basically hold on to the target stock till the deal closes and make that tread. Its often very tight and gotten wider as investors are pricing in more risk as the government goes after more deals. Jack your point is that the deals are actually probably more likely to go through than not. Well, the deals may do better than wall street maybe thinking right now. I think some of the legal theories that ftc is putting forward and theyre dubout and can get dubious and get double digit rushes for an area thats not providing concerns. Jack a few seconds left and part of the thing going on is politically is an effort to put a chill on the market for the big mna dials. Yeah, have merger activity slow down and they feel even if the their efforts dont work in terms of individual deals and chill merger activity and be deterrent to more deals. Jacker thanks, andrew. Strongs job data out for may. What does it mean for the economy . Well get reaction from Franklin Tempton next. What are folks 60 and older up to these days . Getting inspired volunteering playing pickleba. shelves. Shelves that know what taste buds want. Shelves smart enough to see, sense, react, restock. So caramel swirl is always there for the taking. [typing] you were made to act spontaneously. We were made to help plan accordingly. When will we return todays of easy money and could chinese currency dethrown the dollar . Known dethrone the dollar. Im joined by sonal desih. Thank you for joining the show. What was your biggest take away from the jobs report on friday . Look, the labor market is wrong. From a market perspective, i ate saying this hate saying this but most markets would actually have preferred a slightly weaker number. The labor narcotic is strong and American Market is strong and American Consumer is strong and the market is an Excellent Way to gauge how long the strength of the recovery and were still recovering and well continue. I take away that it puts the fed in a very difficult position on balance i dont think theyll raise, but it makes even more clearer that theyre on a pause and not at a stock. This is not the end of the hiking cycle if they dont raise next week. Jack thats an interesting question and of course theres a lot of discussion, when do they hike . What did they cut, et cetera. Youre looking at the forest and not the trees and youve pointed out this easy money weve gotten used to over the past decade may not be here for much longer or we may not see it for awhile i should say. Can you explain that . Yeah, we in the markets are so focused on the next great hike. Ive lost count of how many times people ask me, what is the peak. Its not the peak thats interesting. Its the valley. The point is at some point the u. S. Will face a slow down, a recession. At some point the fed will cut. I happen to think thats not happening this year. But the more interesting thing is where does the fed cut to. Theres many, many people that think itll go back to precovid, and i think that were really going back to pregfc. The aberration if you will was not covid. It was the aberration was not the postglobal financial crisis period where Interest Rates were really, really low or rather beyond the opposite. That was the obstructing cerumen ration. The fact that we had aberration. The fact that we had rates as low as they were for the last 15 years. If i look at where the fed thinks the normal rate or neutral rate for Interest Rate is 2. 5, to 5 . Thats not right. If i look at what academics serious studies look at, for decades going back to the 50s and centuries, the neutral rate of interest is around 2. 25. Add in inflation, neutral fed funds should actually be over 4 . It shouldnt be as low as what the fed is currently programming. Jack yeah, people dont realize that literally the past ten years were some of the lowest rates in 3,000 years according to bank of america study. Okay, what does this mean for portfolios and how should investors set up for this . What investors need to do is recognize that we are not looking we should stop looking for equitylike returns for fixed income. Fixed income, i hate saying in, its supposed to be a boring asset trust and youre supposed to get not equitylike returns and equitylike volatility. Thats not been the case this year and going further forward, i would hope it does once again begin to be the case. That you look at returns where, yes, i think rates are going to go higher including in 10 year treasuries and then we dont see that jumped in because if you blink youll miss it getting into duration. You go through an extended period of time where rates grind lower as the economy weakens. How do you position for a period like this . Well, you look at interesting places. I like investment rates still. I dont like getting over my skis on ricks. Yes, we like high yield but very actively, specifically picked. We like mu ni bonds and think its a good area to be and especially in the fiscal environment were in, bethink municipals are valuable. Jack youre an esteemed member of the barron round table and high yield no, Municipal Bond fund was one of your picks. Unfortunately we have to leave it there. I do want to say you have interesting thoughts on how the chinese will in fact not replace the dollar as the reserve currency. Well have you back onto talk about that. Sonal, great to see you again and thank you for coming on the show. Artificial intelligence is reshaping the tech landscape but not easy to invest in ai. Well tell you how to play it next. Fisher Investments its easy to think that all Money Managers are pretty much the same, but at Fisher Investments were clearly different. other money manager different how . You sell High Commission investment products, right . Fisher Investments nope. Fisher avoids them. other money manager well, you must earn commissions on trades. Fisher Investments never at fisher. other money manager ok, then you probably sneak in some hidden and layered fees. Fisher Investments no. We structure our fees so we do better when our clients do better. That might be why most of our clients come from other Money Managers. At Fisher Investments, were clearly different. When you automate sales tax with avalara, you dont have to worry about things like changing tax rates, exemption certificates or filing returns. AvalarAhhh Ahhh Ahhh ahhh jack Artificial Intelligence suddenly dominating headlines over the past few months and investors who own the right stocks are benefiting big time. Where does it go from here . Its part of a barrons special quarterly section, the guide to wealth. Ben, we tack al whole bunch of friends in the story but start with one thats getting all the oxygen and 39 years after the term nay torr hit screen screend were talk about ai. Ai has gone from a pipe dream to a reality. We saw with chatgpt and theres a consumer opportunity here and we can sell stuff through this and real game changer is when nvidia came out with the earnings and the numbers were fantast and i can better than the earnings was the guidance, which was 50 higher than they had previously said and that was because people are ordering chips to be able to do ai, which takes a lot of memory to co. So all of a sudden everything that had anything to do with ai is rallying. You have chip makers are doing it, data base companies, c3ai has the ticker. Ai was flyin flying and thats e it just got everybody super excited because this is real now. Jack one quick thing with nvidia, seems to be priced for perfection. Investors that own it, should they take profits at this point . I dont think you take profits at this point. Stocks hit a million in profit value and pulls back. Its the one company that seems to be make ago lot of money off this right now. Its a stock to hold. Theres analysts out there telling people to hit the brakes on this, itll take time to go from big hyper scalers that are buying for their Cloud Businesses and whatnot. For nvidia, the future is now. Jack think amazon is a slightly more smart law because its cheaper . Its not cheaper but it hasnt gained as much and theres concern that its a Cloud Business and a good chance that ai help withs the Cloud Business and will drive more business to them and should help in the long run. Jack got it, carlton, another trend we call out in the story is india. As we know its now the largest population in the world. Its a very fast growing economy. I looked it up right before the show. Ten years ago if you invested in the u. S. Market, you more than, i think you more than tripled your money over the past ten years. You invest in france, you more than double your money with the french index of stocks. India not quite. Turn 10 grand into 18 gap. 18 grand. Why is now suddenly the time . Yeah, wall street gets overly excited about things and wall street loves acronyms and looking at bricks, brazil, india, china. They did not pan out and to your point looking at worship gods largest population and thats 1 Worlds Largest population, 1. 4 billion and about 40 of them are under the age of 25 so its a country thats not going to have sewage social Services Cost for aging population. That bodes well for it and india has been in a years long effort to have a National Identity program for it is population. Years ago youd look at india and a third of the population didnt have a birth certificate and 60 didnt have Bank Accounts and now people are starting to Access Financial services and infrastructures and transportation improve and broad band Internet Access improve, and in a more affordable way so this is going to be a growing economy. Im not saying that this is going to knot knock it out of the moon or anything like that because wall street gets too excited but you dont want to ignore this population. Jack interest that you think banks is a opportunity in india. Absolutely. With the National Identity program, theres more people that have been blocked from accessing Financial Services suddenly being able to. You want to look at Something Like the hdfc bank for maybe a single Stock Investment or if you just want greater expose uroto the region, do the etf, inda. Jack one more for you, andrew, the energy transition. Not always easy to play though. Evs can get very expensive, how are you looking at it . Might take a more conservative approach and buy electric utility stock stocks aa big buildout of wind and solar Power Generation in the next decade and transmission lines and play through electric utility stocks and Companies Like du power, American Electric power, 4 dividend yields and the utility etf and have dividend and Earnings Growth in the mid Single Digits in the current decade. Jack biotech changing the world and all sorts of wonderful things happening and really stricky for investors. One company is the therapeutics developing a jean therapy and a cure gene therapy for a muscular dystrophy that is a killer and affects boys and is a real game changer. Jack youve been covering that for year years and kudos to you. Carelton, the water issue around lake mead. Yeah, and the agricultural and semiconductors use a lot of water and invest in an etf dealing with issues of Water Conservation and purification and water investment etf. Jack we covered a lot of stuff. Thankers for that. You have even more investment ideas and those are coming up. Andrew says ceos are raking in the big bucks based on esg performance. Well explain when w a third kid. What if she likes playing golf . Its expensive. Were outlawing golf. Wait. Can i still play . Since we work with emower, we dont have to worry about planning for a third kid. You can still play golf. Sometimes. Take control of your financial future to empower whats next. Jack andrew, ceos and good buddies on the boardover directors found another way to boost pay. The woke agenda continues to infect Corporate America with esg pollty it is and theyre paid well and looking to boost pay by paying them based on certain goals like the head of chipotle got paid for using more sustainable produce and diversity goals and head of starbucks got paid for getting rid of Plastic Straws in the stores and were see ago lot of that going on right now. Ceos pad their pay with the help of directors. Jack good for the environment and a lot say he should have got a pay cut. Time for actionable ideas. Carleton, starting with you. Im with you on the paper straws and looking at defensive sectors of the economy and normally intensive downturn and Consumer Staples and utilities. If you lock at how the market has performed this year, they were all laggerred and also facing inflation and yields arent that enticing and new way to play defense is actually tech believe it or not. When you look at stocks performing so far and definitely a ton of outperformance and not about the high Growth Stocks necessarily. Its about looking at tech companies, particularly in the Enterprise Software space and predictable revenues, businesses are still going to have to pay for cybersecurity and software and things like that. It actually could be a good spot to hide out and for that look at Something Like the invescoqqq trust. Jack ja margins just as hot and going with the high valuations. Again, whats your pick . All tech Cisco Systems and not seen as ai play and its only up 5 this year and less than s p 500 but may be a larger ai opportunity there, particularly building out the infrastructure thats going to be needed for that. And the stock has been rallying just a little bit. Its dirt cheap and about 12. 5 times earnings, which is well below the s p 500. It looks pretty interesting here. Jack cisco is the darling in 1999 and still 30 below where it was at its peak in 2000s. If youve held your stock, still havent gotten your money back. Jack ben, karleton, andrew, great ideas and read more at barrons. Com and on Twitter Twitter barronsonline. See you next week on barrons round table. Rachel National Cheese day. Maria good sunday morning, everyone
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