Reuters Insider - Avoid REITs and emerging markets, says Fi Plan's Greg Powell

Union

05/02/2019 23:36

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Source: Reuters Insider

Description: The president of Fi Plan Partners tells Reuters' Fred Katayama he
sees REITs as overvalued. He also fears the U.S. dollar may strengthen and
hurt emerging markets.
Short Link: https://reut.rs/2MUHnf6

Video Transcript:

The S&P 500 could make it five wins in a row if it closes higher today. Our
next guest says avoid REITs. Let's find out why and also get his take on the
markets. We're joined by Greg Powell. He is President of Fi Plan Partners, and
he joins us via Skype from Birmingham, Alabama. Welcome back, Greg. Why are
stocks rallying ahead of the President's State of the Union address?

Well from the standpoint, there's a lot of anticipation about tonight with the
State of the Union. Some people are thinking that infrastructure stocks could
do well. Another win that they're watching out for is biotechs,
pharmaceuticals. Both the Democrats and the President had talked about it.
Those prices may me too high on drugs and so there may be debate going
forward. For some time now, we've anticipated that the Democrats and the
Republicans, along with President Trump, could work together on
infrastructure. But I think there are other categories too that people could
look at. They could have some good growth here as we continue on into 2019.

Alright. We'll keep an eye on the State of the Union. What do you see is the
state of the markets?

State of the markets – I think we've got several good factors going on
here. I think that if the US and China trade talks continue and they turn out
better than expected, we're even on a positive note. This market then would
react very positively to that. I also think inflation – we're going to
see low inflation. I think the Fed is starting to come to that same
conclusion. And if they don't continue to raise interest rates, that would be
a positive. Plus also technology continues to keep prices in check in certain
areas. And so that's another thing about inflation. And then also other
factors taking place in terms of tax cuts. We've had a doubling at the state
introduction, people going to start to realize that. Also increase in the
child deduction there, there's going to be more money in the economy. Parents
are going to get more money in regards to their children. And we all know if
you have children, you're probably going to spend that money. And then the
other factor is—

So you're positive on the state of the markets. You also believe in avoiding
REITs. They really did well last year especially in light of—given that
interest rates are climbing. So now that the Fed has assumed a dovish posture,
why should you avoid REITs now?

Well, just from the standpoint that that did have a really nice upside here, I
think there are other sectors of the market that you could look at, case in
point. The energy sector, which was down in anticipation of a slowing economy
and that China would have a hard landing, I think there's positives there I
think from the standpoint. There are other areas such as global consumer
staples. I think we've got a good opportunity there as we see more income in
the economy with the consumer wanting to expand. Or also from the standpoint
of if Europe and Japan and China have their own stimulus programs, that could
be a positive. And then another sector that got beaten up as interest rates
increase, so I hear what you're saying on REITs, but there's also the
financial sector. If rates don't continue to climb, the financial sector would
continue in terms of the loans being made out there, people borrowing money,
business expanding, we could see positives there. In terms of REITs, I think
they've had a good run and you may want to evaluate other areas.

Alright. Lastly, you don't like emerging markets. That's contrary to many
strategists nowadays who are saying, "Hey it's time to go back into the
emerging markets. They've already fallen a lot. They've started to come back
at the end of last year and that the Dollar would be rather stable, so why
don't you go in on a cheap sector?" Why do you say avoid it?

Well just from the standpoint, I think we still got a lot of growth here in
the United States. I think in terms of the Dollar, I do think the Dollar could
continue to strengthen which would have an impact on emerging markets. We as
Americans, as we look at our country and all the issues that are taking place,
sometimes those around the globe put more faith in us than we do ourselves.
And so I really think that the US market has gotten much more upside. Granted
the emerging markets at this point, there's value there, I just think at this
point though there's still time to wait before you start to move with money
into that area.

But with the Fed appearing dovish, why do you think the Dollar will
strengthen?

Well just from the standpoint of and so much was quoted in Dollars and let's
go back to my energy point as well, is that all prices start to move up and
some other things taking place here. I just think that the greenback, the US
Dollar is the currency of choice throughout the world as these other economies
are having problems.

Alright. We'll leave it there. Thanks a lot, Greg, for your thoughts.

Fred, it's always great to be on your show.

Good to have you with us. Our thanks to Greg Powell, Fi Plan Partners, of
Birmingham Alabama. I'm Fred Katayama, and this is Reuters