alix: we are moments away from the closing bell. welcome to the bloomberg market day. [closing bell ringing] alix: we are looking at stocks finishing higher for a second straight day. i'm counting down here 1358 days since we've seen a 10% correction and yet again, we have the nasdaq and russell 2000 closing at another record high.

you did have the s&p up even more throughout session, but it kind of stalled out. you have fed governor powell saying a rate hike in 2015 is still possible. that pushed up the dollar and pushed up sectors like financials. joe weisenthal is here to help me break it all down. i wish i could be more pumped about it. joe: everyone has been expecting higher volatility, but those vix touched its lowest level of the year. alix: one notable mover was the homebuilders. it had a bigger rally throughout the day but it couldn't hold on. it finally finished flat but that was a big move for a sector that is typically very rate sensitive when the fed hikes. joe: we got new home sales which hit a 10-year high -- sorry, seven-year high. the fascinating thing is even

though it had a seven-year high, it is very low, so there's quite a bit of room to run. alix: the other macro data we got was the capital goods for may. the headline number looked a little yucky, but if you dig deeper, it's all about stabilization. we saw core equipment improving like machinery and metals and i read a note from barclays saying perhaps the peak dollar drag is over. joe: that number has a history of being messy. this is a month before the paris air show, so some sales get depressed. you can put too much stock on one number. alix: i was looking at airline stocks, finishing relatively flat but had a pop earlier in the session. we talk a lot about the transportation sector -- dow jones transportation not holding up as well, but it has been continuing to climb and airlines are part of that. joe: everything people said was

going wrong in the market seems to be going fine again. that is the big take away. alix: globally, we have to break down the manufacturing data. joe: i love flash pmi day. we get lots of manufacturing data from around the world. we get regions and an interesting story -- the u.s. and europe still strong. china's number was still contraction. it was a bit better than expected, so that is your nice snapshot of the world's manufacturing region. alix: joining us to break it down as cliff and chad -- you are looking little tan. we like that vacation. we were talking about the pmi

and it was germany and france leading the way. germany had been a little murky. give me your global snapshot. chad: euro stocks is back somewhat, so you have the pmi number that is more elevated. i do believe this will be short lived. when you look at the eurozone and the debt dynamics within the euro zone, we are calling for a roughly 1% type of growth trajectory for 2015. we are not as bulled up over the eurozone project. we think it will strengthen once the eurozone goes through this transitory time and we will see growth of about 3% in the united states for 2016. alix: isn't it though weaker euro good?

chad: yes. that's why you have a strong pmi number today. we believe going forward, you have to have real economic activity as the credit dynamics are going to be listless. joe: do you think if europe can get the grease issue solved it can see some nice growth and for a while? guest: it has a great actor rob with a tailwind behind it, so that should help. as you showed, the pmi number was very good. considering what they have been through a year or two ago, it looks good. chad: when we talk about this trajectory of growth in the eurozone, we were not looking at a four handle on gdp or a three handle on gdp. the reason is you have an aging population, you have productivity that is not great and we are believers that the long-term equity market returns

are around 4.5% over the next 5-7 years. alix: initially, it was pretty perplexing. everybody getting better about what's going on with greece and the euro falls against the dollar. and in european stocks staging a big rally on the back of it. i saw many notes out trying to explain why we saw this. cliff: that's a normal reaction but greece is a much bigger part of the decision-making today. greece is really driving the news and there hasn't been a decision on it today. it's more of the same. there hasn't been a final decision made as to what's going to happen, so that is what is driving the news in the markets. chad: cliff is correct. the markets are keeping a careful eye on greece but there is another undertone to this.

you are starting to see credit dynamics, for example, home prices and home sales starting to gradually improve and that means the debt deleveraging cycle is starting to subside and is a tremendous backup which could push the united states when it comes to growth. that could get you to the three handle. joe: one of the reasons people are selling the euro as they think the u.s. is getting ready to raise rates, but the eurozone is a long way and there will not be an ecb version of the taper. i take it was your prediction, you don't think there's any risk of an early end to easement? chad: the ecb has to deflate their currency. you are seeing it within the economic numbers. that is the way they can gin up their inflation expectations and try to break the japan-like cycle.

the credit dynamics there are when it comes to the real true economy, they are somewhat better but not great. in the united states, we are starting to see spending and mortgage debt and business investment pick up again. you could definitely see a second-half recovery in the united states. nonetheless, better than the 2.3% we see. joe: there was a fascinating note this morning from citigroup looking at this question of financial market liberalization in china and what that would mean for the various sectors. there's a great chart here -- what happens -- their argument is the market has run a lot but we could be at the early inning of a massive expensive of the bond market. they show this chart looking at national bond markets after

financial liberalization. you see germany, japan and korea massively exploded and therefore is this china's future? would you expect to see a massive growth in the chinese bond market and what else would you expect to see? cliff: it is really up to companies that want to issue at reasonable prices and have good uses for the proceeds from that money. there are limits for investors buying into china. alix: presumably that would be listed. investors could get more access to bonds and you have a local debt swap market so there would be more issuance. chad: let's talk about china for a second. their overall economy, roughly 10 trillion -- what percentage of that is actual government spending? i believe it is 50% if you believe the world bank, and i think i'm being conservative. when you look at equity markets, they have had a beautiful run.

their valuations are roughly 18 times, similar to ours in the united states. and you have a growth trajectory because of that great rebalancing that is decelerating rapidly. if you believe the numbers, which it is all science fiction over there. they will eventually liberalize their bond market, but the may have to liberalize currency flows, which they are not going to do in a wide way. i think if this point, you want to stay away from the chinese market. alix: but there's a good chance we will see the currency be legitimized in the world markets as a back currency. that would spur more demand for r&b denominated assets. you don't like it? cliff: i would be more comfortable with the accounting and laws working in that area before we invest a lot of our clients' money in that region.

alix: i want to end on blackberry. we saw its spike up 9% premarket and it they'll, ending the day lower here. when was the last time you guys bought a blackberry? i think the first one i had was nine years ago and i dumped it. cliff: i still believe in blackberry. alix: there it is. cliff: i have my iphone. it still does its job. alix: when did you buy your last like very? chad: 2010, maybe 2007? joe: i never had one. i went straight from the flip phone to the iphone. alix: therein lies part of the issue -- they are still trying to sell the hardware, but it's not enough to make it up. thank you for joining me. coming up on the bloomberg market day, we will speak to the cio of the second biggest u.s. public pension system and where calstrs is investing its nearly $200 billion in assets.

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alix: welcome back to the bloomberg market day. i'm alix steel. a win for activist investors -- darden restaurants spinning off its real estate, about 430 properties in total. and the final battle is a proxy war with star board value. one avid supporter is the nation's second-largest public pension fund, calstrs. since 2012, they've tripled the size of their activist holdings to roughly $5 billion. joining us now is the man himself, the cio. good to have you here. you used to own a small share of darden shares.

do you still own them today? chris: yes. we have owned darden since it has been public and we will own it for the next 30 years. they kept the number of red sticks in the basket the same, that was another part of our key proxy war. alix: was it really? chris: no. alix: what did you make when you heard this news? chris: we think it is important. they are a great chain. they sold off red lobster when shareholders were going to ask to vote on that. that was a critical move. when ceos are selling assets, we think that's the most important decision and we want them to be engaged and pay attention to shareholder value. we will keep owning them and starboard will move on to other companies, but we think the share value will rise over time.

alix: talk about your relationship with activist investors. you had a lot of fights over the last few years. you have dupont, you have carl icahn with forest labs, it's different from other big pension funds. how come? chris: we have been an active investor in terms of owning companies, maybe i should say and active ownership capital in terms of being high profile and getting in the news, that has changed for us. by teaming up with different managers and the word i heard was hedge funds, these managers do not hedge in a naked short. they might hedge industry exposure, but we are long managers. alix: even though activists get a bad rap for short-term. chris: there are activist managers that are short-term,

but there's degradation of quality or scale. there are white hats and black hats and we think it is that clear to us. there are people willing to short a company and we want people who will be long the company and try to improve it and make it better. take dupont. nelson lost in the proxy vote, but the company is making smarter decision and cutting their corporate waste at the top to be more efficient. alix: take a step back with me and look at the s&p. we are around record levels. growth still isn't that great. what do you see the next six to 12 months bringing out? chris: it is an interesting challenge. if you look at the last six months, it's very choppy. we have set record highs during that time, but this is a market that is getting very long in the tooth.

if you back up and look at the market over the last three years, it has been a raging bull market. we think this is a pause to refresh. we think there is some upside, but we will have to see how the market reacts to it. it's not a recession. if the fed tightens, that's because they are data dependent and that means there will be good news. alix: it seems like there are the momentum names really leading. chris: there is no value. we are hitting record highs, so nothing is cheap. we are fully invested but we are finding it very hard to find value. everything is expensive. p/e ratios are at reasonable levels, but they are at the higher end of the band. as long as we continue to see merger monday, that's a good thing. the key is corporate earnings.

we will get the next wave of corporate earnings in july and if you looked at last quarter, they were not all good news. there was some weakness in this market. i think it's going to be a choppy summer with a bias toward slight increases in value. alix: we do see a lot of volatility and liquidity concerns in the market. how do you break it down? chris: we are very low. there's a lot of talk about the classic 60/40 portfolio. talking to a lot of bloomberg people here with their 401(k) plans, it's all like you need a lot more options. in your typical portfolio, you want to diversify. we only have 15% of our portfolio in fixed income. even then, we are worried about the duration. i would not hold a long duration fixed income portfolio. the key is to rebalance and use this time to rebalance your

asset allocations. alix: thank you so much for joining us. we will have to get some bread sticks now. the chief investment officer of calstrs. we will be back in just a minute. ♪

alix: welcome back to the bloomberg market day. i'm alix steel. we want to get back to the top stories of the afternoon. state lawmakers in south carolina has set the stage on a debate on whether to remove the confederate flag from the statehouse grounds. the senate joined the house today to extend the current session which was set aside to have budget votes. this comes as hundreds gathered in the sweltering heat outside the south carolina statehouse demanding the flags removal. virginia's governor called for the confederate flag to be banished from state license

plates. retailers, including walmart, ebay and amazon, say they will no longer sell confederate flag products, saying the image has become a symbol of divisiveness and racism. it was a victory for president obama and his trade agenda. the senate voted to begin full debate on the fast-track negotiation authority. the vote avoids a filibuster. previous presidents have enjoyed fast-track authority. and it took six weeks for verizon to complete its $4.4 billion acquisition of aol. and now the aol chief executive says verizon will turbocharge the aol content business. meanwhile, arianna huffington has signed a contract to remain editor-in-chief at the huffington post. this ends the uncertainty surrounding her future after the website was acquired by verizon. those are your top stories.

the greek prime minister is facing the first signs of dissent within his own party. this comes over his latest plan to end a five-month standoff with creditors. the former greek prime minister spoke to bloomberg earlier about his experience and what to expect. >> when i took over and i had to ask for bailout, there was widespread opposition from the other parties in the opposition. i had to move things alone. today, there is a huge spectrum from right to left which the stewards of this adjustment program, when this government decides if they do finally agree on an adjustment program, we will have seen the whole of the

political spectrum having dealt with this crisis in a similar manner. i think there will be a widespread consensus beyond the confines of the government's party. the prime minister himself will have to put his full weight behind the agreement, but i think he can do that. pimm: what can you tell us about the fallout from political leaders like angela merkel in germany? >> angela merkel has followed a policy of very reluctant acquiescence to a bailout. i think germany has to follow policy that is much wider. growth policy in europe, we have had quite a few years of recession.

the idea that austerity after recession will simply be enough has been a drag on the economy. we need investment in public infrastructure and energy, communications and transportation throughout europe to unify the single market investment in high quality investment in research and development. this is where europe is competitive and where we need to go. we need to further integrate into the strong banking union and fiscal coordination, things like eurobonds. that would be very important and not putting the burden only on the periphery. germany has a high surplus account and more spending would be better. alix: i was the former greek prime minister with our own pimm fox. thanks so much for watching the bloomberg market day. have a wonderful afternoon and enjoy this 100 degree weather. see you tomorrow. ♪

announcer: from our studios in new york city, this is "charlie rose." we begin this evening with the tragedy in charleston. nine people, including the reverend, were killed at a church on wednesday. hundreds gathered in charleston on sunday to commemorate the victims. south carolina prosecutors charged dylann roof with the crime. he is said to be motivated by racial hatred. several pictures emerged of him posing with the confederate flag. governor haley