Why Stocks Will Trade Sideways in 2015: Ellis

Your next video will start in

Recommended Videos

  • Info

  • Comments


Aug. 12 (Bloomberg) -- Stifel Nicolaus' Chad Morganlander and Green Square Capital's Lincoln Ellis discuss the outlook for U.S. stocks. They speak with Trish Regan and Julie Hyman on "Street Smart." (Source: Bloomberg)

Stifel nicolaus.

You think things are going to get better for this market and things should be buying some of these dips.

What happens when the fed pulls away, chad?

You can see a modest irruption -- disruption.

You could see a strengthening of the u.s. dollar.

You may get a modest correction, but the reality is what happens over the next three to five years or even the next 12 to 18 months with the overall equity markets.

That will be tied to economic growth as well as earnings.

We believe earnings will be stronger going into 2015 and the gdp trend will not be a 2% of but perhaps 3%. far from the4% or 5% we've seen over the past few years.

Some have made the point that in some ways you do not want to see 5% growth because the fed will be more active in terms of raising rates sooner.

This is kind of a good environment.

I was adam parker from morgan stanley who said this was a good environment.

Do you like that analogy?

It's the goldilocks analogy.

You have a wage gaining, inflation.

You are worrying about wages getting out of control in pushing the fed to move faster in companies that are in quite good shape coming out of the backside of the recession with enormous amounts of cash -- although we have seen some of the larger and in day deals -- m&a deals pull back.

This will set us up for a 2015 where you will be not too hot, not to hold, trading sideways and maybe plateauing with housing and some of the key pieces of economic metrics.

We have a lot of retail metrics coming forward, an area that julie is well acquainted with.

A slew of earnings coming out this week hearing from the likes of macy's, kohl's, jcpenney, nordstrom.

How will it overall be looking?

We should see some improvement.

We have the weather affect in the first quarter but most are looking for a pickup.

We might see the margins are a little squeezed because there has been something of an inventory buildup.

Now they are discounting to get the stuff out and now we are use to discounts.

Consumers are demanding discounts to get into the stores and retailers are used to them as a way to drive traffic so you have to wonder how solid consumer spending really is at this point.

As we have back-to-school, will we see people shopping for their kids?

Consumption patterns will be somewhat bumpy until you start to see credit from consumption, consumer credit particularly in the mortgage side expand in wage growth increase from the 2% we are experiencing now.

You will have lackluster consumption patterns and that feed into the names of target as well as walmart.

In regards to spot prices, they have been washed out.

They are left for dead.

Any kind of uplift would bode well for the big-box retailers.

The city is upgrading a bunch of them as we head into this back to school season.

The thinking is that people will actually step up and spend some money.

We do have king digital earnings crossing.

This has been a momentum stock.

The maker of candy crush.

It was very memorable.

Since then, not so memorable in terms of how the stock cost performed.

It looks like what is causing the 18% drop in the stock is the fact that the company says bookings are declining sequentially quarter over quarter and is also cutting their outlook for the full year ropes rate.

And looks like all of that is disappointing to investors even though they declared a special dividend of $150 million, not enough to them the tide here in terms of the declines we are seeing.

I looks like the stock is down and i'm not remembering exactly when the ipo was but it has been trading lower.

Continuing to fall.

Lots of people on the train still playing candy crush but absolutely, in terms of consumption, we are consuming low cost items.

Target, kohl's, even the donald's are very much a relative value trade.

It's possibly quite beneficial for the second half of the year but also playing into the economic environment we have both been describing, very defensive, people waiting, looking for discounts, continuing the pattern we have seen since the recession.

What i would add about candy crush or any momentum gimmick stock, particularly gaming, it's a hard business to have growth.

You have to invest a lot of money and hope to god it plays out in the long run.

That's a key issue happening.

There is a transition.

Do they need to be diversifying more?

With apple, you have product risk.

You need to make sure they will come out with something to equal the ipad or iphone going forward.

It's the same risk with entertainment companies producing films or tv shows.

You need content.

The difference between cheney and apple is the balance sheet cash.

-- the difference between k ing and apple.

This is where people are putting their money to work as they have

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


BTV Channel Finder


ZIP is required for U.S. locations

Bloomberg Television in   change