Can Stocks Continue to Rally Amid Global Tensions?

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July 18 (Bloomberg) -- JPMorgan's Anne Lester, Princeton's Alan Krueger and Pimco's Richard Clarida discuss where the best opportunities in stocks are and the state of the European economy with Trish Regan, Alix Steel and Matt Miller on "Street Smart." (Source: Bloomberg)

Investor.

As you look across the entire space out there, we were just talking about all of these concerns in europe, where do you see the best opportunity?

We still like risk assets.

When we see environments like we saw over the last day, with the pullback, it really reminds us to stay focused on the long-term.

When we look at things that inspire volatility in the market, the question we always ask is is it causing any change in our forecast?

Is it going to change the climate for companies?

Our answer is no.

So you are long on equity.

What you think of europe?

Europe is a place we were very bullish last year.

We have been finding developments there a little less encouraging.

Despite the support of the central bank we do think that it may not be quite as bullish as we thought so we are pulling back a little there.

We still like the market in general, just maybe not as much as we did.

Will have to happen geopolitically for events to have a more damaging affect longer-term like we have seen in the past?

We have some other resident experts here to talk about that, but when we look at things that would actually cause gdp to start slipping in a material way, it's an inflation shot, it's something that's going to cause the oil price to go up, it's another shock that could lead to recession.

We don't see any signs of that on the horizon.

What about deflation in europe?

Anybody worried about that?

When your headline inflation is below one and you have the unemployment, deflation is always a risk.

Drago and the ecb are correct to be running about running a very aggressive policy.

Isn't aggressive enough when you look at what we have done?

They can will do more if they need to.

Their goal is to percent inflation and they are falling way short of that.

When you look at what they have done, they managed to talk the markets into believing they have done something without actually having to do it, with that being a little more skillful.

They have taught the markets into it, but they haven't actually done it.

Are the markets at risk because we haven't been as aggressive?

If you see the u.s. continuing to get two percent-three percent growth, you see that not feed back the global economy in europe in particular, that is a warning sign.

Do you like the communication strategy from drago?

It's the most successful policy intervention in my lifetime and i am more than 50. it totally changed market dynamics in a multi-trillion dollar market and he hasn't spent one penny.

He said i have a plan a my file.

He hasn't had to use it.

Ireland and spain can borrow money more cheaply than the u.s.. it's a total turnaround based upon a speech.

As you -- are you as worried about unemployment in europe as you are about the u.s.? ic and more worried about unemployment in europe.

We are long-term unemployment problem, but it is nowhere near as bad as the long-term unemployment problem in europe.

The u.s. and in use to heal.

We are starting the sixth year of a recovery.

Recoveries don't die of old age by themselves.

It tends to take external shock.

I do worry about contagion from abroad, but i think the u.s. will continue to expand and that makes me optimistic about the u.s.. would contagion broad be economic shock from europe or what we have seen in russia and ukraine?

Accor come from anywhere.

It could be a tsunami that wipes out a supply chain.

We always have to be on guard and i think it is important that we do what we can to strengthen our economy.

I think it is a shame that we have not invested more in infrastructure and things that would boost the economy.

When i look at the landscape, i think the u.s. is continuing to recover from the crisis we had.

We have made a lot of progress.

We have built up the housing sector even though higher interest rates have affected it.

Is there any chance we do some of that investment now?

President obama at the end of his term seems to be more willing to use his executive powers.

Right now he is meeting with latin american leaders to talk about immigration.

Infrastructure in this country badly, that lee needs to be fixed.

Is there any chance we get some of that investment?

I work for the president for four years.

I can tell you he is the most persistent person i ever met fighting for the american people.

But not the most political.

There is a limit to what he can do with his own executive authority.

That's what he's trying to do on immigration and other fronts.

But he can't spend money without congress authorizing it and congress i think has fallen down on the job when it comes to invest in infrastructure.

I wonder why because that is the one kind of investment i think is agreed upon on both sides of the ios the role of government.

Right?

I mean, even libertarian, tea party people know you have to build roads and fix airports.

I think of a lot of americans just inherently don't trust the government to get it right.

They fear that when you put money in the government's hands it doesn't get distributed the way it should.

I have a story for you.

Upon lake winnipesaukee in new hampshire, there is a fancy little community that decided they had a dirt road that they wanted paved.

They said let's get some of this and for structure spending.

This community was able to get the federal government to pay for their brand-new fancy driveway around their community and it was all part of the infrastructure spending.

Well, they managed to press the right button simple the right strings.

They didn't really need a new driveway, and by the way, they could've paid for themselves.

That is a small anecdote, but i think it speaks to the concern that some people have that it's challenging for the money to always get to the right places, and that is the fear.

And that is why don't think everybody agrees on infrastructure.

I think a lot of people also agree with that on both sides of the aisle, that government doesn't spend money efficiently or on the right projects.

But we only got a pittance of the money promised for shovel ready projects.

Why do we get more of that?

Let's transition to next week.

What are you guys watching for?

And, i will start with you.

This text has been automatically generated. It may not be 100% accurate.

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