tv Nightly Business Report PBS March 25, 2016 7:00pm-7:31pm PDT
this is "nightly business report" with tyler mathisen and sue herera. good evening and welcome to a special edition of "nightly business report." believe it or not, the first quarter of the year is just about in the books and this time around the first quarter was unlike any one we've really ever seen. >> absolutely. investors were whip-sawed and had nerves frayed by big plunges and sharp snapbacks. with one quarter just about in the rear-view mirror we're going to look ahead to what we might expect as the second quarter rolling in and how your money might be impacted. >> we'll begin tonight with stocks. 2016 started in the worst way possible with the market plunging. sparking fears of a recession and dredging up feelings eerily
similar to those of the financial crisis less than a decade ago. then a funny thing happened on the way down, stocks reversed and all started to seem right with the world. what's next? >> reporter: so after what started off as one of the worst starts to a year for the stock market in history, we're right back to around flat for 2016, give or take a few points. bulls and bears are feeling pretty good about their respective cases. after dropping 11%, the trend of bounce-backs has continued for the large cap s&p 500 index. however, the parts of the market that are leading the way higher leave a lot to be desired. the biggest gains have come from high dividend-paying sectors like telecom stocks and utilities. the sectors that investors flock to when they're worried about the economy. some are optimistic about the market assuming some big negative factors change course. >> remember the biggest negative last year, there were two.
declining oil and the rise in the dollar. both those things at least for now have reversed themselves. if we can get some of that we'll have modest earnings improvement for the full year and that is what is necessary for stocks to do okay. >> reporter: that's not it. after all the stock market story is a global one and the bigger picture or macro concerns will be front and center for the rest of the year as well. >> i think there's going to be two big factors that will influence the rest of this year's trade. one is the health of the global economy. in particular is china able to soft land and is europe able to continue to grow at 1.5%? the second element has to do with central banks. particularly central banks in europe, in japan, in china, still able and willing to repress financial volatility, not because they love markets but because that's the only way they can promote economic growth. >> the market has given investors a chance to
re-evaluate things. 2016 losses are now gone, at least when it comes to some of the major indices. now the question is what will they do after hitting that reset button? for "nightly business report," i'm dominic chew. doug gordon joins us to tell us what he's expecting from the financial markets next quarter. and what it might mean for your money. he is senior portfolio manager at russell investments. nice to have you here, doug, welcome. are you -- >> great to join you, thank you. >> are you still looking overall for 2016 for low single-digit returns globally? >> that's right, i think that we're looking forward after the volatile start to the year that we'll still see something in that low to single, medicine angle digit returns from the equity part of the portfolio going forward. there's still a lot of really open questions, both tied to diverging monetary policy as we see not only what happens but how effective monetary policy responses prove to be.
we have to get out of the woods a bit with respect to the impact of that slower, bumpy start in earnings as well. >> let's look at two issues that certainly are going to be in the news for the rest of this year. one is the threat of terror. particularly how it might affect the european economies. and the other is the u.s. presidential race. how do you see those two things affecting share prices? >> yeah, interesting question. one that we normally don't have to think about. kind of these outside factors that influence markets very materially, potentially. obviously the threat with ret to what we've seen thus far in europe as well as around the world. it's a concern that's going to go forward. there certainly will be elevated responses. but again, we have to see how effective those are. it's one of those prove the negatives. when we don't know what the terror event could have been and it was thwarted, we don't see the impact so we can't measure it. when bad things happen like we unfortunately and tragically saw in brussels this week, that
obviously brings to light what the potential impact can be. domestically in the united states the presidential election puts another wrinkle into capital markets and markets going forward in 2016. i think one thing we do know amid a lot that we don't on that election is if we do assume the two potential candidates and a potential trump v. clinton election is both of them will probably have a bit of trouble getting policy through congress that will likely, at least on the house side, stay in line with the republicans. and that might give a little bit more runway in terms of time for response to any regulatory or policy changes. >> the other thing that your team is watching is fed tightening. and now the overarching theme on the street is that they will not raise rates as often as originally said they would. but even if they do raise rates once or maybe twice through the rest of the year, they're still going counter to their central bank counterparts around the globe.
>> yeah, that's exactly right, that divergent monetary policy is going to be interesting, both with respect to what the dollar does relative to other developed currencies and with respect to how the market responded. what we need to watch domestically will be that bright spot we've had in the u.s. economy thus far, the labor market. we still see relatively robust payroll gains somewhere in the range of averaging 160,000 for a 12-month perspective. earnings as i mentioned before we'll have to look and see if that stumble in the first part of the year ripples. we've had good numbers on eps side but expectations have pulled back, it will than earnings growth number that . also it's efficacy of these policy. ecb put very accommodating policies forward, we need to see the uptake of the targeted lrp program and how that ripples into credit and lending growth in the eurozone. >> very quick answer, in the equity market dozen you like
america, europe, asia, japan, which? very quick. >> yeah, outside the u.s. developed markets look a little better from a fully hedged perspective, in part because we have that uncertainty that sue mentioned around monetary policy in the united states and that pace. >> all right, doug. thank you so much. good to see you again. doug gordon with russell investments. it was the same issue for oil as for stocks in the first quarter. the first part we lovered in the 20s. then things changed. jackie deangelis has more on the reversal in oil. >> reporter: a bumpy quarter for crude oil prices. we saw crude go down to that $26 level for the second time before it rebounded back to $40. the dip attributable to the global supply glut. the bounceback due to rumors in the market that a production freeze could help stabilize the market. and hopes that the summer driving season will start to boost demand. but even if global producers meet in qatar on april 17th, can a consensus be reached? and would an agreement to freeze
production at current levels be enough to support oil prices? >> i would think these -- there's a freeze now, that should be enough. now granted that means that the demand must increase here. which is something i am expecting in this driving season that's coming up. >> freeze or no freeze the fear at the moment is that producers will feel comfortable pumping more in a higher-priced environment only to drive the market down again. and if history is an indicator, last year prices fell in june when stockpiles were little diminished. summer driving demand wasn't enough to ball license supply and demand overall. consumers are feeling the recent spike at the pump. aaa says the national average is hovering around $2 a gallon, up more than a quarter from a month ago. >> gas prices could rise a bit over this driving season. but i don't think it's going to be anything that's going to discourage motorists from using more gas, driving a little more. this is still a big improvement over the last couple of years as far as their costs. so i would say this is a
positive gas season and it will be extra consumption from previous years. >> investors and analysts are remaining cautious. they say the run-up in crude oil prices more than 20% in the last month alone leaves little room to run. >> jackie joins us now to talk a little bit more about what we might expect from here. i don't know 40 is the new 20 or 20 is the new 60 or black is the new red, i don't know. there's a meeting in mid-april as you mentioned in the piece. who's going to be there? what are they aiming to accomplish? >> that's an excellent question. and this is a producer meeting, not just of opec members, it's global producers. very hard to coordinate an effort for this and actually get a date on the table. but the problem is not everybody is coming to the table. so how do you implement a freeze when all of the parties aren't necessarily coming to discuss? you have certain opec members like libya that aren't coming. i haven't heard anything about the u.s. coming to the table to talk about production cuts. russia is one of the non-opec producers that may be there.
obviously they're more interested in implementing a freeze at this point. but unless you get all the parties together, and even if you do, consensus is so hard to reach. >> that begs the question, can we see oil back at $50 or $60 a barrel by the end of the year, as some strategists have gone on a limb and are expecting? >> yes, some of the investment banks, some of the analysts out there, they are holding firm to those forecasts. they think 50 or 60 is possible. then i have others on the other side of the table that are saying, no, actually from here, this is a little bit maybe of a head fake run-up, we probably are going back into the 20s again and there's a possibility of that before things get better. i think you've got to settle in for a bumpy ride this year. i think 50 to 60, very optimistic. >> gasoline has been going up just a little bit where i buy it in suburban new jersey. what are we looking for over the next few months and then into the fall? >> you know, it's difficult to say with gasoline exactly as well. i can tell you this, the national average according to aaa hovering just around $2 as
we're heading into the summer driving season. you are going to see a little bump from here as demand starts to hit the road, as we get into the warmer months. that demand usually peaks in july, around july 4th. seasonally in the bad years the average around then has been about $3, if not sometimes a little bit over that. i do not think you're going to see that this year. as jeff said in the piece, it's definitely going to be a little bit easier on your wallet. but it's not going to be as great as it's been. >> jackie deangelis, thanks very much. the federal reserve did not raise interest rates in its two meetings during the first quarter but there is belief that it's april or june, those meetings could be in place. steven friedman, senior investment strategist with bnp paraba, good to have you with us. i think a lot of people thought that based on the meetings in march that, well, there were probably only going to be two hikes, june, december, after the election. now there is some talk that
maybe april is on the table. what tune? >> it's a very good question. there has been a lot of fed presence come out in recent days making the point april is a live meeting. in theory i agree but i think the issue is the fed has signaled they're considered about global risks. it's hard to imagine in six weeks they'll have that much more confidence they'll proceed with raising rates. >> we've seen the terrorism incident recently, does that play into the fed being worried about the global situation? because we have seen economic growth after terrorist incidents decline. >> that's a possibility. i think it's just one of the risks that they consider. i think largely what they've been focusing on is the fact that a lot of the indicators point to a slowing in global growth momentum. we've seen it in surveys and business activity. we see it in the hard data. they're just concerned that that will eventually have an impact on the u.s. and there is some concern in the u.s. data as well that's pointing to slowing growth
ahead. >> it is relatively rare that you have a divergence of central banks with many central banks cutting and seemingly ours on the verge of raising interest rates. is that a concern to you or not? >> well, i think it is a challenge in that veer very aware of it. i think that's why we're seeing them signal a likely shallower path for interest rates. they're quite quarter if they were to forge ahead with a steady diet of rate increases as they have projected in december that would likely lead to a much stronger dollar which would only make it more difficult for them to meet their growth and inflation objectives. >> speaking of inflation, there's not much inflation out there. i mean, how did they finesse, if you will, the target that they've put out there that they hope to achieve on inflation? that we're not even anywhere close to. >> i think this points to why they feel they can go very, very slowly. we're actually seeing their messaging on inflation change a little bit. what we've seen the last month or two is greater emphasis in
their communications on the fact that they're willing to tolerate inflation above 2%. i think earlier there was a perception in markets that the 2% objective was more of a ceiling. they're trying to push back on that and attempt to put some support underneath inflation expectations. >> talk to me for a moment about two things that seem to concern some commentators. one is the size of the balance sheets that both the u.s. and now increasingly the ecb have. and whether that poses a long-term risk of some or any sort to economic growth. and the second one is whether the central banks are running out of tools to influence economies. >> two very good questions. i think they both feed into this narrative that central banks are essentially out of bullets. on the balance sheet side it's not something i'm particularly concerned about. one could argue that eventually the size of the balance sheet, it could lead to losses for central banks. that is more of a political issue.
central banks can operate with negative capital, they have in the past. it can be an issue if it becomes an issue for politicians and impede central bank dependants. there might be some limit to quantitative easing, that's the main concern i would have for balance sheet growth. on the issue of central banks running short on tools did this has been a very strong narrative in markets the last month or two. i think it's been one of the reasons why we saw that deterioration in january and february. it's not a narrative that i've put a lot of faith in. i think for central banks they might appreciate that their tools may have some declining benefits. but if those are the tools they have i would expect them to respond to that with even more forceful policy. >> steven friedman, thank you very much. as we draw closer to this summer's political conventions, the race for the white house is intensifying. and the primaries that take place in the second quarter will go a long way in determining the candidates for both parties. john harwood joins us from washington tonight. john, welcome. as always, are both nomination
races basically over? or are they still in play? >> not quite. the democratic race is more over than the republican race. hillary clinton's got a substantial lead over bernie sanders. very difficult under democratic rules for sanders to catch up. he's got to start winning not knowledge big states but win them by big margins. that's very difficult to do. no sign he's going to be able to do that. on the republican side, donald trump has got a lead. but it's still unclear how certain it is that he can get the 1237 delegates he needs to be nominated on the first ballot. stop trump forces are rallying around ted cruz. john kasich's been fading a bit although he hopes when the race moves back east to have prospect to pick up victories. ted cruz is looking to wisconsin as a place to slow down donald trump. but donald trump remains in the driver's seat. somebody's got to knock him off. it hasn't happened in the recent contests. >> both parties are becoming used to the idea of a donald trump candidacy in the general election. how do they assess his prospects
to win, especially against hillary clinto >> well, a couple of things about that. first of all, most of the polling now suggests that hillary clinton has an advantage over trump in the general election. he's been a very divisive candidate. he has repelled nonwhite voters. that's an important part of the democratic coalition. if you had to make a judgment you'd say hillary clinton is a strong favorite. but even within the clinton campaign there's wariness about trump, a feeling that he's more of a wild card than they've expected. he's broken all the rules so far. if he can increase the republican share of the white vote by a small but significant margin, without having any other effects in other parts of the electorate, he could win the race by flipping some states that president obama won in 2012. it's an uphill fight for him but not impossible. >> fascinating stuff. john, thank you so much. john harwood in washington. next, what's in store for the upcoming spring travel season? and a check on how the spring selling season is unfolding for
houses. spring officially arrived less than a week ago but the spring selling season for housing has been under way for a while now. diane olick joins us with a look at how things have been shaping up. we got mixed signals from housing. existing home sales fell sharply. newly built home sales are rising. what's going on here? >> well, it really has to do with supply. there's a very tight supply of existing homes for sale which is pushing prices higher and actually slowing down the sales
because there aren't that many homes for sale. new homes, there's a lot more supply. again, you're paying a price premium for new home sales. new home sales are still running below historical averages. they're just doing a little bit better. the question going forward is, will the big builders benefit over the fact that there are so few existing homes for sale? >> let's talk about the price rise that you just mentioned. they are rising but is that straining affordability, both for first-time buyers and for people who would like to trade up? >> absolutely on both counts. it's straining affordability for the first-time buyer who is still being sidelined, just 30% of buyers in february were first-timers. that number share should be around 40%. we're also seeing people afraid to move up. afraid they're not going to be able to afford that home so they're not listing their home. for sellers, it's not a limit. it's not that the sky is the limit. they're going to have to look at what the comps are and be smart about how they're selling. >> so that's one tip if i'm
going to sell my house and list it this month. what are some other things that the sellers should consider? >> well, one thing, list your house on thursday. i'm not kidding. >> really? >> people say that on thursday, yeah, you're going to see most of the potential buyers trawling the internet, looking for homes that just came on, they're going to be mapping out their open house touring for the weekend. so thursday is the perfect day to list your home. don't list over the weekend because people won't see it. >> fascinating. staging is a big thing now. >> yes. staging is a big thing right now. you absolutely want to stage your home. and more and more professionals are doing it. and interestingly, a lot of real estate agents are starting to pay for the staging themselves. saying that it is worth it in the price that they're going to get for that home. even if you think your house is absolutely gorgeous and perfect, you want to stage it. don't just clean it up. make sure the rooms look clean, fresh, and impersonal. someone lives there but not necessarily you live there.
because the buyer wants to be able to picture themselves there. again, that last one is the sky is not the limit. buyers are not stupid. they know what the homes are worth. >> that's right. i wish somebody would come stage my house. >> buyers ultimately set the price, not the seller. >> that's exactly right. >> thanks, diana olick. this easter weekend marks the unofficial start of the spring travel season. while security will be top of mind following this week's attacks in belgium, people are still making plans for getaways. the traditional destinations will get the usual throngs of visitors. but this year, some places off the beaten path are getting attention. phil lebeau has a look. >> reporter: as winter winds down, spring break is heating up. especially in the caribbean where those looking to get away are finding their way to less popular spots. >> a lot of people now are looking for alternatives that may be a little more laid back, relaxing. places like playa del carmen, riviera maya, where they may not
pay as much and have a little different feel. >> reporter: orbits says airfares this the spring are down roughly 15% compared to a year ago, partially because of the drop in fuel costs and because more airlines are adding routes to the caribbean and that's pushing fares lower. that's the good news. the bad news? hotel rates are edging higher. largely because of greater demand. >> they'll see a slight increase overall of about 4% in come edition prices. but there are markets where there's actually substantial savings. >> reporter: europe remains a popular trip for a couple of reasons. first airfares have been falling. second, the euro remains weak, which means americans are getting more bang for their buck at hotels, restaurants, and shops. >> we're seeing that the strength of the dollar abroad is really attracting people to upgrade their spring break destinations to go places that are further away and then have typically have been more expensive like paris, dublin,
panama city, where we've seen an increase over the last five years of 476% in hotel bookings. >> reporter: for those driving somewhere for a long weekend or spring break, good news as well. while gas prices have moved higher the last month, they're still lower than where they were a year ago. and most experts believe gas prices will stay at around $2 a gallon as we head into the summer. phil lebeau, "nightly business report," chicago. coming up, what to do to protect your hard-earned money in the years leading up to your retirement. market volatility, like what
we've seen this quarter, can wear on the nerves of the most seasoned investors. but what about those closing in on the end of their working careers? the decade or so before calling it quits? sharon epperson has some tips for those heading into that retirement danger zone. >> reporter: 63-year-old michelle jeggy has gone planning for retirement, putting money into stocks for decades. >> i've been a big investor. that's the way to grow. it's a rocky road but that's the way to grow. >> reporter: now jeggy, who runs her own insurance business in suburban new jersey, is in the danger zone. those last five to ten years before retirement can make or break your financial future. especially if you leave your hard-earned money exposed to too much risk. >> i've always invested at least 30% of my money, if not more. >> reporter: an unexpected financial crisis can wreak havoc on investments. think about 2008. when the average u.s. worker
lost about 24% of the balance in their 401(k) account. even in better times market volatility always unpredictable, could seriously damage your nest egg. jeggy is working closely with financial adviser jeff boyer to make changes to keep her money safe. >> putting a retirement plan in place means making sure clients are going to have a successful financial plan in good, average, and poor markets. so essentially if you've got a financial plan that's going to work in all those environments, we've sort of taken the market out of the equation. >> reporter: leading up to retirement, boyer and other financial advisers agree it is important for investors to diversify assets. minimize the tax impact. and maximize social security benefits. >> the dollars at stake between delaying social security to age 70 and accepting it early at 62 can add up to hundreds of thousands of dollars in additional benefits. >> reporter: working longer may also help jeggy avoid getting
trapped by the danger zone. >> if i still love what i'm doing and i'm able to do it, i can see myself working to 70. >> reporter: jeggy plans to continue working, saving, and investing to secure her financial future. for "nightly business report," i'm sharon epperso >> and that is "nightly business report" for tonight. i'm sue herera. thanks for watching. >> i'm tyler mathisen. happy easter, everybody. have a great weekend. we'll see you monday
gwen: from brussels to havana to the 2016 campaign trail. power, history, and political feuding pretty much sums up the week tonight on "washington week." >> a feeling of war. >> we all know that we're not safe anywhere. t can happen anywhere at any moment. gwen: more blood shed. more terror. more worry about whether isis can be stopped. >> the momentum is in our favor but by no means would i say woor' about to break the back of isil or that the fight is over. gwen: the brussels attacks jolt the world's attention back to a growing threat. airforce one touches down in