AriseTV Xchange (Nov. 12, 2015)

AriseTV interviews Michael W. Conway of the Conway Wealth Group to discuss the next moves of the Federal Reserve.


Andrew: Michael Conway is the CEO of Conway Wealth Group at Summit Financial Resources and joins us here back on Arise Xchange to talk about the numbers and what else to expect from the Fed. We’ll start with the selloff on Wall Street today. A lot has been talked about oil prices and energy prices. At what point is this signaling a real risk to the economy?

Michael Conway: We have to look at what these numbers tell us. We see oil prices have fallen dramatically. They’ve dropped from over $100 a barrel. We see copper at six-year lows, iron ore, electricity usage. It really points to a little bit of a global slowdown. That’s something we have to keep an eye out for.

Andrew: How much of that is China and how much of that is Europe?

Michael Conway: I think a big piece of it is China, and that has affected emerging markets a big deal. China’s economy is not quite … It’s not growing at what it used to be. It was 10%, and it’s down to 6. We think it might be a smidge lower than that. That’s had, we think, the biggest impact.

Andrew: Okay, so now you’re looking at interest rates, and everything from the Fed is telegraphing an interest rate hike in December. Almost if they don’t raise interest rate hikes in December, then you can never believe anything Janet Yellen says again. On the same front, the EU may actually cut interest rates again.

Michael Conway: Yeah.

Andrew: Why?

Michael Conway: Go back to the Fed. This is like you’re talking to your kid; you tell him, “I’m going to ground you. If you don’t do what I tell you, I’m going to ground you.” You say it over and over and over again, but if you don’t follow through … The Fed is caught in a little bit of a negative feedback loop. They want to get out of this desperately. I think there’s the possibility that they raise, over a 50% chance, maybe even a 60% chance. Our economy here is growing at about a 2% GDP, a 2% run rate. Europe’s is growing sub 1%. We have two different things going on between what’s happening here and what’s happening in Europe.

Andrew: The worry from the Fed, though, is that they raise interest rates even so slightly in December and some say they might have to retreat in the first quarter of next year. Is there a risk of that?

Michael Conway: Andrew, think of what we’re talking about. We’re talking about 25 basis points.

Andrew: It’s so nominal, but it’s more psychological.

Michael Conway: It is psychological, but it is only 25 basis points. It would be bad if they raised rates and had to retreat and then do quantitative easing or possibly even go to negative interest rates, so we certainly hope that doesn’t happen.

Andrew: When you look at what’s going on in Europe, why does Europe continue to stay in the quagmire it is with the economy? The UK doing okay. The rest of the eurozone, though, really troubled. Is it Germany that’s slowing down?

Michael Conway: Germany is slowing down a bit, but if we can compare and contrast what’s happening here versus what’s happening in Europe, they’re hoping to get to almost a 2% inflation, and there’s basically no inflation at all. Their GDP is less than 1%, and they’re hoping for 2% GDP. We are slightly better. Our inflation rate is about 1.8%, and our GDP, as I said before, is about 2. Those are the tales of two cities of-

Andrew: Okay. Finally, when you look-

Michael Conway: … what’s happening.

Andrew: … at the markets for the rest of the year, any big surprises out of equities?

Michael Conway: There hasn’t been a divergence between the Fed raising rates and Europe doing something different all the way back to 1994. We have absolutely no idea-

Andrew: Almost uncharted territory.

Michael Conway: Absolutely unchartered territory, so how it all plays out remains to be seen.

Andrew: Michael Conway, we’ll have you back on as it does. Thank you.

Michael Conway: Thank you very much. Nice to see you.

Andrew: Coming up on Arise Xchange, how coffee cups have stirred up the heat on social media for two companies. Stay with us.