UBS strategist Julian Emanuel expects tech stocks and the broader market to end the year higher and says this is a dip you should buy into. Following is a transcript of the video.
Henry Blodget: Is the eight-plus-year bull market coming to an end and more pertinently is the little correction in tech stocks the harbinger of a much bigger drawdown? We’re joined by Julian Emmanuel from UBS strategist. Julian, first of all, congratulations on calling the mini tech crash. Very well done. Let’s start with the market as a whole. What are we in for the next six months?
Julian Emanuel: Well, you know there is a concern that we’re eight and a half years into this bull market. But what we found, you look at 30 years of market history, bull markets don’t end unless there’s a recession coming. And as hard as we might look, we don’t see a recession in ’17 and we don’t see one in ’18. So by that token, we think the market could be weak led by tech over the next several weeks perhaps into the fall but ultimately, it’s a dip that needs to be bought.
Blodget: So we’ll come back to tech. No concerns about the yield curve, which everyone is talking about, is flattening? Some people say this is a harbinger of recession?
Emanuel: There’s definitely concern there. Again when you look back at history and history is a good guide particularly we’re in these unknown waters, where the fed is coming off zero interest rates, but what we’ve seen is that the yield curve tends to flatten to zero before there was a recession. And our view is that the fed is, as much as they want to hike and intend on hiking, are definitely cognisant of the messages that the yield curve is sending out and so they will manage that as well as we get into the fall.
Blodget: So you see no problems ’17 and into ’18? But you do refer in your reports to late cycle for the markets. So what does that mean? When should we be worried?
Emanuel: Well, so late cycle means that actually the Fed themselves, as I have so often in the past, tend to sound the bell for the start of the end of the bull market. But that cycle can take as much as three or four years so when they first raise rates in December of ’15, we started on the clock. However, if you think about this recovery, it’s been low and slow and actually is as much as the bull market has run, the games of actually been low and slow over the course of eight years, so we see that stretching out in time if not an amplitude as well.