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Katherine Ross: Invesco's chief global market strategist, Kristina Hooper joins me to discuss market catalysts, oil and earning season. Let's start with earning season, Kristina. We've gotten earnings from Netflix, from Goldman Sachs, from Pepsico, Microsoft and others. Are we seeing the earnings recession that many on Wall Street predicted or is there another story here?

Kristina Hooper:  Well there is another story which is that companies have lowered expectations. I mean they really done that almost across the board in terms of sectors and what that has done has caused people to anticipate that we will see an earnings recession because they've re lowered their forecast so much. But the reality is many of them are coming, many of them are coming in and beating those estimates and so we're likely to see earnings season wind up being flat to maybe slightly higher. So I don't anticipate an earnings recession this quarter.

Katherine Ross: Now looking at earnings reports by line by line, what's the one thing that you need to see in each earnings report to feel good about the season?

Kristina Hooper: Well, there's not one thing that I need to see. I'm one thing that I am seeing which is good is that revenue growth is positive. Um, that's certainly important. The top line is critical. And so we've seen again, in sectors in, for most companies we've actually seen revenue growth that has been decent. Uh, but that means that costs are increasing, right? If we're not seeing the kind of profit growth that's keeping up with revenue growth. So we want to understand what is creating the headwinds for companies. Is it something as simple as FX, which is what we've heard on a number of earnings calls? Or is it something more significant that can be controlled? For example, wage growth, labor costs, and what do companies do about that? So, my expectation is that based on what we hear from companies going forward, we're going to look for areas where they might actually try to cut costs going forward.

Kristina Hooper: I don't know if it's going to be wage growth, but maybe they'll have to cut jobs at some point, to defend their profit margins. It's a huge question to ask and I think there are a lot of of, it's a very nuance situation.

Katherine Ross: Looking at market catalysts in general, aside from earnings season, what should investors be watching?

Kristina Hooper: So there's two things that investors really should be watching, the two key factors that are impacting markets beyond earnings. And that of course is number one, the Fed. And number two, the trade situation. The Fed has upside risk written all over it. Certainly we've seen, the Feds turned to a more dovish stance, move stocks higher. And then of course the trade wars, certainly something that if it were to be resolved would be a positive. But if it continues and in fact deteriorates would be a real negative for stocks.

Katherine Ross: Speaking of the trade war, when do you expect that we will get a deal?

Kristina Hooper: The fifth of never. My expectation is that we're not going to see a trade deal. I just can't find a compelling reason for China to make the major concessions that the United States wants. So, my expectation is that we're likely to see trade talks occur in fits and starts, but nothing material will occur. China doesn't have an incentive to do that. And so, there are going to be times where we're going to get negative news flow on trade and that's likely to depress stocks. And there are times where we might see glimmers of hope there, but I don't expect a trade deal and I in general expect the trade situation to deteriorate.

Kristina Hooper: So no trade deal on the table. What about more tariffs? Are they on the table?

Kristina Hooper: Absolutely. The president said as much in a cabinet meeting last week. It's a weapon he clearly likes to use. And what really concerns me, and I think we're hearing this from corporate leaders as well, is that use of a tariff, that threat that was made in June to use terrorists to further immigration policy, that mixing of tariffs with furthering policy goals beyond trade frightens companies because it adds to economic policy uncertainty. And unfortunately, economic policy uncertainty tends to tamp down business investment.

Katherine Ross: Now, Kristina, obviously investors, especially oil investors right now are closely watching Iran as tensions escalate there. What's one piece of advice that you have for oil investors?

Kristina Hooper:  Well, we need to recognize that oil interestingly, the price of oil tends to move based on two factors, or at least this is what we've seen in recent years. And the first of course is supply.

Kristina Hooper: And so news about production control agreements for example, have an impact on the price of oil. Of course the other is geopolitical risk. And we're seeing a very significant helping of geopolitical risk right now that's likely to continue and certainly influence of the price of oil, to the upside.

Katherine Ross: Now, Jim Cramer and I talk a lot about homework and I think that that's something that every investor needs to be looking at, right? So looking at earning season, do you have any advice for investors who want to get their homework done ahead of time?

Kristina Hooper: Well, I think the most important thing that most valuable thing investors can do is to listen in on the earnings calls. Certainly you can glean a lot from balance sheets from reviewing the financial statements, but the reality is so much is said on these calls. That's valuable, especially in terms of what to look for in the future and what the headwinds are that companies are anticipating.

Katherine Ross:  Now you said, I just want to circle back, you said about the trade deal. You don't expect fifth of never, you say, for investors who are worried about never getting a trade deal and how that might impact their portfolio, do you have any advice for them?

Kristina Hooper: Well, I would just say to expect more volatility. The reality is that because the Fed has turned more dovish, there is still a bias towards risk assets. So you want to be well-diversified, but certainly have that exposure to risk assets. Don't be afraid of them because of the trade situation, but just recognize that there's going to be a lot more volatility and that includes volatility to the downside at times because of the trade situation.

Katherine Ross: Kristina, it's always a pleasure to have you. Thank you so much.

Kristina Hooper: Thanks for having me.

What are you watching in the markets?

We're in the middle of earnings season, and many on Wall Street were worried that this earnings season would show proof of an earnings recession. 

However, so far, so good. 

Kristina Hooper, Chief Global Market Strategist at Invesco, discussed why she isn't worried about an earnings recession. 

"Well, there is another story which is that companies have lowered expectations. I mean they've really done that almost across the board in terms of sectors and what that has done has caused people to anticipate that we will see an earnings recession because they've lowered their forecast so much. But the reality is many of them are coming in and beating those estimates and so we're likely to see earnings season wind up being flat to maybe slightly higher. So I don't anticipate an earnings recession this quarter," she said. 

Hooper also weighed in on the trade war and when she expects to see a trade deal. 

"The 5th of Never," said Hooper. "My expectation is that we're not going to see a trade deal. I just can't find a compelling reason for China to make the major concessions that the United States wants. So, my expectation is that we're likely to see trade talks occur in fits and starts, but nothing material will occur. China doesn't have an incentive to do that."

Watch to see what Hooper has to say about earnings, oil, tariffs and trade.