BlackRock Global View On Fixed Income/Stocks As We Begin Q4; Deutsche Bank’s Woes; What To Watch This Week

BlackRock Global View On Fixed Income/Stocks As We Begin Q4; Deutsche Bank’s Woes; What To Watch This Week


     Richard Turnhill, BlackRock’s Managing Director ($4.9T under management) was interviewed on CNBC’s Squawk Box this morning on the investment firm’s outlook for fixed income and stocks as we begin quarter four of 2016.  Mr. Turnhill first discussed

Outlook For Q4 Asset Class —  Fixed Income

Neutral              U.S. Treasuries

Overweight      U.S. Credit

Overweight      European Credit

Positive            Corporate Bonds (Europe, U.S., U.K.)

Neutral             Municipal Bonds

BlackRock View On Stocks/Q4 2016

Neutral                  U.S. Stocks

Underweight        European Stocks

Neutral                  Japan

Overweight           Emerging Markets (EM)

     Just my personal view; but, I am overweight U.S. stocks, especially technology — cloud, social media, data storage, data mining, drones, and bio-tech.

Update On Deutsche Bank, European Banks

     U.S. stock futures are flat to slightly down this morning.  Reports of a deal between the U.S. Justice Department and Deutsche Bank on Friday proved premature.  CNBC is reporting that German politicians are accusing the U.S. of waging an “economic war,’ against the bank.  Raoul Pal, the Global Macro Investor publisher was interviewed on CNBC this morning and he told the network that the fine for Deutsche Bank is likely to come in higher than what a lot of investors thought on Friday and that something in the $6B – $8B range is the more likely settlement figure.  But, Mr. Pal said that the fine isn’t the real concern hanging over one of Europe’s largest lenders.  Mr. Pal warned that “the bank has an enormous derivative book, many of which are netted off — which means shorts and longs cancel each other out.  But, the size of the bank’s derivative portfolio makes it more difficult for the bank to unwind positions in any short period of time.  Meanwhile, he warns, there is a bigger problem with negative interest rates across the continent and rising libor rates which is causing a paucity of lending — which of course is needed for economic growth.

     Mr. Pal was dour on European banks in general.  He adds that the issue of bailing out Deutsche Bank would put Germany’s Angela Merkel in a real tight spot — dammed if she does, and dammed if she doesn’t.  He foresees a recession coming to many parts of Europe and believes that it will be some financial issue other than Deutsche Bank that will cause more uncertainty and a negative outlook for economic growth across the pond — including the United Kingdom.

     So, the issue of Deutsche Bank, that upset the market late week last week only to move sharply higher on rumors of a settlement with the DoJ — continues this morning.

Other Potential Market-Moving Events This Week

     Friday’s September Non-Farm Payrolls on the number of net new jobs created in the U.S. last month; but, we’ll also get September ISM numbers a little later this morning.  All for now.  V/R, RCP


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