Oppenheimer Funds' Alec Young talks with Bobbi Rebell about how earnings are impacting the equities markets, and where he believes the best values are right now for investors.
Allstate tracking global equities higher today here read more at Alec he's investment strategist put up and I are friends great to have you. Good to be here right let's start him. Well I think I'm you know the the biggest thing this market has going forward is low expectations you know we look at the on the AI I the American Association of Individual Investors. They do with sentiment survey every week. Are you bullish neutral to bearish and neutral tends to run about 30%. The last decade right now it's closer to fifty. You know a lot of people on on the sidelines on the fence cautious they're relieved that the markets have recovered from earlier in the year but they don't really believe that making content so. People are fairly defensively position and so when we get earnings that are coming in you know sure. They're not create their down a little bit vs last year but they're coming in well ahead of expectations. You tend to have money kind of rushing back in the marketed I come out it was nervous. And they see that maybe the coast is clear things aren't as bad as they thought and and it's that's sort of bearish capitulation that cautious when he is forced back into stocks. I think that has a lot to do with what we're seeing. And it's interesting image earnings because as you as you say the bar was very low. But what we're hearing from companies about what's happening now and in the second half of the year it's interesting. Yeah yeah. I think this widely. Chronicled earnings recession worries have been negative the last three quarters on a year over year basis. That's finally set and in the second half I think will look both probably look at another small loss in Q2. But by the third quarter. Earnings growth should be positive that should accelerate into the fourth quarter and it when he seventeen got a few things driving that number one the strong dollar is going to be headwind for multinationals. The dollars coming a little bit that's soft and that's bullish for earnings are commodities obviously have rebounded a lot that's good for earnings. We've also seen US manufacturing. Tick up along with the merging market growth. So both of those things are good for cyclical. Companies so we think it's a combination of a whole bunch of things for the full year earnings aren't going to be great there's still going to be roughly flat. But certainly the second half is gonna be strongly positive a lot better than the weakness India in the first. For investors to position themselves except it isn't holding back to work later here. No we don't think this should be holding back money our view overall risk assets global equities credit. You know I yield loans to riskier assets is fairly constructed through the end of the year. We think that the Fed is the biggest factor and we think they're gonna state of actually gonna continue to underwhelmed. In terms of about what investors are expecting terms of interest rate increases some actually positive. I'm as aesthetic make a lot of earnings headwinds are are fading we think cautious sentiment is also bullish we like that that aspect as well. On and in terms of the sectors I think he wanted to be. You know it pretty well diversified it looks right what right now there's more opportunity in on cyclical areas. As opposed to some of the high dividend paying. You know defensive errors which seemed to be a little bit crowded the telecoms utilities. We would look a little bit more in areas that can benefit if in fact. The second half to what does turn out to be a little less volatile a little bit better take a look at it cyclical stocks things like industrials are technology. Thank you so thank you I think here. Oppenheimer Funds Alec young and Bobbi Rebell this is Reuters.