There is some regulatory risk in that they get so broad that regulators see it as anti competitive behavior. Regulators would mangle a high growth company like this. Right now the growth is good even if stretched. It is all working, but there is nothing new to the story. Technically it checks all the technical and fundamental boxes.
Spanish Bank. Synchronized global growth benefits it. It drives productivity growth. So financials should do well. There is still rate correction to go on there. The yield curve is steepening there. It has a history of being aggressive with credit and M&A philosophy so he would be careful there. On the whole it checks a lot of boxes.
Utilities have been fantastic. You get that bond proxy. Rates have been okay. Among that group, water has been great. He likes the water and utility themes. He would have preferred an ETF rather than one stock in the space. The catch here is valuation. It is an 8-9% grower at a 20+ times earnings. H does not see a huge risk unless rates go through the roof.
Market. Every month this year the S&P has been up. Since 1987, we have not had a calendar year with 12 consecutive positive months on the S&P. It seems like it is a little more on the radar these days. You have synchronized global growth creating greater global output. This tightens the labour market. It attracts capital investment. He thinks we are getting increasing productivity that could surprise to the upside. However, we know we are closer to the end of the party than the beginning. We have to be careful about it. He thinks inflation is coming. If rate hikes are coming, he likes the slow and steady policy. Every end to a cycle has its own flavour. This one has rates going up. There could be more increases in futures in 2018. The market is pricing in two increases. It could end with compressing valuations as well as decreasing bond prices and decreasing liquidity.