this is"nightly business report" with sue herera and bill griffith. >> good evening, everyone. and welcome to this special edition of nightly business report. ight we're going to look ahead to the second half of the year to try to figure outis wha n store for investors in those months ahead. >> well, the market sos far t year has been full of fireworks. from a rally in ojanuary, a sell off in february to a number of twists and turnsincethen. the big question is, what happens next. dominick chu takes a look. >> the first six months of 2018 didn't play out at all like the first six months of 2017. the broader market staged a relatively calm and steady rally all of last year, the same cannot be said this time around.

sthat isn'tring some experts when 2 comes to the second half of this year. >> under the surface, small cap leip is doing well. we think in the second half of this year can continue to be upward. >> there will be a number key drivers to watchs weead toward year end. one of the most critical remains the health of corporate america and its ability to produce profits. >> it's going to be mostly earnings, it's going to impact where stocks go. >> given all the uncertainty around president trump's trade policies and the medium to longer effects of the economy -- if the economy can't manage to maintain momentum, even pick up some steam, some parts of the m market do better than others. >> when the gdp gains 3% or more, so y have a good economy. value tends to do much better

thgrowth. in our opinion, a stronger economy like we expect the second half of this year, it could finally bor time value to outperform growth the second half of 2018. some sectors may appear less attractive than others do. vo>> we'veed retail, and i think energy is tough, because you're so dependentn the commodity price. retail in general has been a toughce p to be. i get worried about all the impacts amazon is going do on all the businesses. >> those are a handful of topics in the coming months. a >> to that the upcoming elebss in congress this fall, d you get the recipe for more market volatility to finish the year. >> of course the tech sector has been beloved by investors leading the market higher bothr this y and last. and as josh lipton reports now, some key e onts are the agenda for the second half this year. >> tech is among the best performing sectors so far this

year,hat should investors expect in the second half. here are three predictions. one tech taipo's s strong. we had a sid first half of the year for tech ipo's, drop box, spot phi, and dock sign to name just a few. that trend continues in the second half, with a pipeline of prospects. survey monkey confidentially filed for an ipo about investors say to watch software firms. investors have been eager to buy tech companies, especially ones selling cloud bases services. two, apple successfully navigates trade tensions. ltim cook w introduce new iphones in the fall, which need to sell well in china. investors might worry that apple could now get caught in the crossfire. as the trade battle heats up u between the. and chine that. here's what some are predicting. apple's china business will not be seriously impacted.

beijing doesn't t want hurt the iphone maker with more than 1 million chinese workwang in some on apple products. amazon picks indianapolis as its new headquarters. the companys deciding what second l host its corporate headquarters and has visited all 20fi lists. indianapolis could be a serious contender. centrally located between interstate highways. it's g a strong university system and a state economy that's stable and business friendly. one possible hurdle, a relative shortage of the kinds of skilled workers azon wan right now. with this new headquarters, indy could attract them from chicago, and the rest of the midwest. for nightly businessre rt, i'm josh lipton, san francisco. >> how should investors prepare thselves for the rest of 2018. joining us for aiotrategy se is jim paulson. good to see you, jim. thanks for joining us. >> good to see you, sue.

>> we have seen twists and turns and volatilityal in the first of the year, do you expect that to continue? what does the market complexion look like to you? >> i kind of do. i think the primary problem all year from my perspective has been the bond yields have been too low, and stock valuations hihave been too . and we're doing a job on that, you know, we raised yields now, they lot better than they were when we came into the year. the valuation of stocks have come down while earnings have gone up. we have me of thato do yet, and in the second half, i think we're going to struggleith maybe a little slower economic growth which cou challenge wall street earnings estimates a bit, but the problem is, it might not slow enough to really stop the fed from continuing to raise interest rates orwa stop and consumer price inflation from continuing to rise. we may have a stayflation about

i'm not looking for a bear market. i don't think that's the case, more volatility or maybe eve lowerows this year could be a oistinct possibility. >> let me get youut a finer point on that. the fed wants to raise rates, maybe even three more, imes this yeu see 3 1/2% by the end of this year, will that be good or bad forou stocks in view. >> well, i think the rest of this year if that happens, ll, i think it will kind of keep a lid on the up sideck for the s market. against that, you have to remember, earnings mig go up to 20% annual rate the rest of this year, they can probably with stand higher rates over that period of time. i do think, my guess s, sometime tyear, either at year end when stocks are a little cheaper, because earnings go up andhe stock market doesn't do anything, or we have a bit of a panic yet this year. i think 245 might be a really great buying opportunities

for -- to enter pretty good re yrns nextr and in 2019. >> let's talk more about that, you've given us strategies for investors. first you say overweight the inflation sectors like energy and things like th, correct? >> right. avthink, sue, we a 3.8% unemployment rate, if we grow at all, we're goi to continue to aggravate inflation pressures if you also weaken the u.s. dollar in the second half, which i think could happen. i think tha will push up not just oil but other commodity prices. and i think you're going to want to own some of these that really benefit from that, the energy's already doing well, i think material stocks a industrials ould enter the fray if that happen >> jim paulson, thank you so much. >> to the housing n market, where prices are rising as you know, and inventory is falling. d that has been frustrating potential buyers all across the

country. that many frustration may linger. >> today's housing mket is pricy and competitive, it's likely to stay that way for the rest of the year, tngs may be easing up on a couple fronts. first, mortgage rates r sharply at the start of this year, but seem to have settled whtely, albeit at that higher level. e rates are unlikely to fall. and could inch up a little bit more, exper are not expecting as big a leap as in the first salf of this year. home pri are still hot, rising faster than incomes but the geem to be easing up ever so slightly. as buyers hit an affordability . wall and the sale increases a little bit. supply will be key in the second half. home builders will continue to ramp up production. although not as quickly as needed. and mostly in the move up, not entry level category. costs are alrea high for, buildersand a potential trade war would only make that worse. with those higher costs passed on to consumers. demand for housing will only

increase as a stronger economy gives more and more renters buying power. for nightly business report, i'm diana i olick, washington. >> so far in 2018 the airline and autors sec have underperformed the market as a whole. there are concerns that will continue as the industry's fight head winds in the months ahea phil lebeau has more. >> reporter: the future of autos ported and imported to the united states and how much they'll be taxed will be a focus for auto investors this summer and fall. others could follow if president trump pushes through higherff ta will tariffs drive up prices and hurt sales and speaking of sales. the biggest question for investors will be whether tesla can sustain a higherelivery rate for the model 3. will elan musk have to raise more capital for his thcompany. e big issue, jet fuel prices

up 50% in the last year. could they go higher? that would push up costs. and prompt some carriers to cut flights in certain markets. nally, will demand remain strong? >> the robust economy and high consumer confidence have a lookingumber of people to fly this summer. will that continue this fall's th big question facing airlines and their investors in the second half of this year. phil lebeau, nightly business report, chicago. as you plan your summer vacation, there's an emerging battle between illegal short arm rentals the law. morgan brennen spent months investigating this cnbc exclusive, and that's next.

an emerging turf battle is underway betwe cities and upstart tech companies like air bnb that have beenapitalizing on the wild west landscape of the share econom it's valued at $31 billion, currently worth most of publicly traded hotel rivals. gigantic growth means big growing pains at the same time. >> air bnb unwelcomed guests is our investigation into that class between illegal short term rentals andtr rted regulations. they've worked with cities o craftthe world

reasonable regulations. but not in miami beach, where the fight has no end in site. morgan brennen has that story. >> it's 9:00 on a saturday night, and we're ridingg al with miami beach code compliance. on the look out for illegal short term rentals. >> what are you looking for >> hopefully we can establish contact if it's o determine what is a violation. >> code compliance officer have seen it yl. large nois late night parties in residential neighborhoods. commercial shoots with a home investigated for short termnt complaints. and unwitting tourists who say they unknowingly booked air bnb's in prohibited areas. >> aap cred on body camera videos, recorded over the past two years.

some are so blatant, these house rules show what to do if someone they're told to lie by saying they're a friend. and certainly don mention that you rent this place. >> you're not allowed to rent this place for less than six months and one day. >> this party needs to clear up. >> miami beach, one of the country's most popular resort destinations is also a popular city for short term rental. also one of the most aggressive in the coury for going after illegal rentals, with stiff fines. only cer oin sectionsthe city like south beach permit rentals less than six months and one day. large ptions of the residential sections of the city are not permitted. >> you would say, when you hear that story. >> the issue is clear cut. >> that may work in some places, they don't work here. at the end othe day, it's not the mom-and-pops we're seeing here, we're seeing

commercialized predatory companies that are trying to commercialize our communities. >> predatory seems like strong word. what do you mean by that? >> it iss predatory, i not about a mom-and-pop or a grandmother wanting to bring in a college kid to make him chicken soup at night. it's people taking vy nice properties, buying them and turning them into essentially a flop house. >> a former prosecutor and florida state lawmaker, says air bnb and other home sharing platforms must abide by thelaw. >> have you spoken to air bnb or some of the other companies that operate here? >> i'd like to send a message.i' like them to be corporately responsible. i'd like them to do the right thing. >> why do you think they haven't done that? >> these a not charities. these home sharing platforms they want toake money. >> from south florida to uthern california, short term rentals have turned some neighborhoods into next door nightmares. different cities encounter different problems.

across the country, in los angeles we found large homes that routinely advertised on air bnb for mega parties. prompting noise complaints.at loud party in mill bray, california. in the san francisco bay area, shots rang out. >> guests seen on sveillance cameras running down the street. air bnb has zero tolerance for this type of behavior, andan permanently the guest. these incidents don't represent the umoverwhelming nr of satisfied hosts and guests in an 81,000 cities and 191 countries. and it's succewifully worked lawmakers around the world. >> backn the streets of miami beach, it's not long before we roll up on a group of vacationers. >> the building has tell tale signs of an illegal rental. two of the units advertised on air bnb have lock boxes and

keypads. >> do you live there? >> we do ow long have you been living there? >> we just rented the air bnb. >> they booke the air bnb through a host named rachel. are you surprised to hearit 's not legal here? >> i am. >> it gets even more interesting, when this officer calls rachel. >> i was jusspeaking with the occupants here, and they told me they rented your unit. the cy has an ordinance that prohibits short term rentals. >> they're actually my guests or my friends. >> they told me -- >> they're staying iny apartment. >> so are they staying here for free? is that what you're telling me? >> yes. >> i can get them on the dpok to t to you right now. they just told me they50 paid for the weekend and it was rented via air bnb. >> oh, no, ,no.

that shodn't -- no. let me check with them again. >> hello, sir, i think you guys have a free apartment. rachel told me you guys are friends and you didn't have to pay to stay here. >> rachel says she's associated vacao. which is well known to city officials. they rent properties and leases them via air bnb and other rental platforms to short term tenants.ey th were each issued a violation notice which carries a $20,000 fine. the owno didn't wantalk to us. the cities fines range from $20,000 to $100,000 for the fifth offense. the total fines amount to $700,000. at four properties in miami beach. the city is on track to conduct

more than 1,000 investigations his short term rentals year, up from more than 800 in 2017. total fines so far this year, $2.4 million. but only about 183,000 has been collected. at another illegal air bnb advertised by the same host identified by the city is rachel perea, the officer walks in ha find out wt's going on. >> this building is located in a zone where it'srohibited to rent out apartments for less than six months and one day. >> oh, wowth is e the college students tell us their group of six rented the apament for fi days. the apartment is clearly set up for short term ests. >> is this the other bedroom? >> this is a two bedroom apartment. it supposedlyei sleeps ght. >> this unit and a second one in ere building have racked up four violations, both leased by vacao. the owner said he didn't know

ything about them being used for this purpose. the company said it's given the ts a full refund. >> these properties on air b. >> we wanted to get some answers from the air bnb host. >> i'm sorry about that? i'm really sorry. i can't takl this c right now. >> the coo and co-founder isabel bernie, says her company has since gotten out of the leases where these short term rentals are not allowed. and has not paid the $700,000 in fines. >> our lawyers are resolving that, they feel like it's unconstitutional the way they're finding. there's many different groups fighting the city, and it hasn't been resolved. they're not collecting the nines that they'reissuing. >> are you going to wait and run out the clock and seef laws complaining in miami beach? >> right now, we're just not accepting any homeowners in miami beach.e >> get about 30 to 50 requests a day to lease property

on our website. o your investors know that you have these outstanding fines in miami beach? >> they're fully aware of everything going on.k we stuck our nt for a lot of owners and that we are tackling a really difficult problem, in general with our property and with basically accepting single family homes. >> are you saying you will continue to break the law in some of these properties -- >> i'm not w saying that want to fight and we're going to enter properties now knowing that the law has changed a we're not allowed. >> she confirmed that rachel is ill one of vacao's hosts. >> the renters were friends they weren't paying anything, which was false. so she lied t code compliance. are you aware of that? >> no, but how do you know it was false? because i do letriends and family use our places? >> here is the violatiohis is the customer receipt. >> yeah, i mean she was probably

put on the spot and she was probab scared and i didn't -- i wasn't aware. >> respondg to our investigation air bnb says it has removed listings associated with vacao from the site. in an interview at air bnb's san francisco headquarters, the head of global policy strongly defendan the cos track record. >> i've yet to see a program being run byny mayor, any elected official in this time of economic inequality for a typical middle class family. all without the expenditure of a single taxpayer dollar. that isir what a bnb is about its core. >> should air bnb be responsible for what is in that market an nlegal activity the platform. >> i think what is a common sense solutio for miami beach, happy to do this, if they really want to sit down and have ati constr conversation. if you could take that 35% of the city,hat's a residential

area, make that an exclusionary zone. allow the activity to be able to take place in 65% of the city that's zoned for this type of activi . >> in themeantime, you have illegal listings on yoursite. >> i think if you look at the underlying law in the city, in miami beac right? the miami beach allows for this activity to takeplace. $20,000 fines on someone making their home available aes few t a year to help makends meet? >> he says air bnb has more than 400 partnerships with places around the world. including the proposed restrictions in los angeles. >> if you had to grade air bn what grade would you give the company in terms of complying with regulations, broadly. >> i appreciate the professor asking the question, what i would say is with those citieo who want engage in a conversation, we deserve a ally hygrade.

>> what about the cities who don't. dothat's like asking me, how i do a test, when the person grading the test is going to give theorrect answers and incorrect result. if you have a teacher whs ying to rig the process, it's impossible to be able to answer the question, about how you c it. >> in markets like miami beach where you have illegal listings on air bn why not block throws? >> we've worked with cities all over the country. we p in something called a pass through registration system. cities can determine whether something is in the permissible air or not.a >> hain takes aim at the hotel industry. air bnb's competition, which he says has been shown to be close when i aligned with regulators. >> miami beach hasn't beenin rested in doing that. because miami beach up to this point in time has just not had a serious desire to really want to engage on this, t because at end of the day, as the information that has come out revealed, they're effectively working -- with the hotel

industry, which is incdibly powerful, and a h el industry that doesn't want to see every day people to be able to use their h mes toe extra money. >> instead of supporting common sense regulations, air bnb has opted to deploy a massive destruction combine of dirty tactics, deceptive messaging and personal attacks against anyone who raises a concern. david walksmith who has researched air bnb around the world says, miami beach is not atypical. >> miami beach has been a little more aressive than some other cities, i would think of it as the front of the big wave. you can't throw a rock inhi country right now without hitting a city that's more aggressively. miami beach is at the forefront of that, but they're atfr the ont of the trend that's happening across the world. >> the research primarily done nerough the university, is 2018

report, commiss by the hotel industry that found 45% of all air bnb reservations in new york city last year were air bnb calls the report deeply flawed and inaccurate. >> bottom line, this is a company that's not goi away, how does did play nice with others. >> right w, what air bnb needs to do is to come up with a strategy for being just a little more proactive with the way they'rilling to enforce regulations. lots of cities are passing laws, but they have a hard time enforcing those laws. i think the current business model is not compatible with the kind of recognition that short term rentals are not in the broadly public in in cities. >> clearly, even wit an aggressiveme enfor team, the illegal rentals remain hard to enforce. look at what we found when weth returned t same apartment that had been cited two weeks prior. a groupf college students on

spring break who told usy t had no idea they were staying in an illegal air bn for nightly business report, i'm morgan brennen. whether is air bnb or booking.com or home away, owned by eeed ya. all of these companies have had classes withat regs in many cities. whether it's boston, los angeles or new york. rethey say there issues. that said, we found in our reporting tt the company brought up the most frequently is air bnb. >>t that will do for us, thank you so much for watching this special elist of nightly business report. i'm sue herera. >> have a great evening, happy fourth of july, we'll see you tomorrow.

>> this is "bbc world news america." >> funding of this presentation is made possible by the freeman foundation, kovler foundation, pursuing solutions for america's neglected needs, and purepoint financial. >> how do we shape our tomorrow? it starts with a vision. we see its ideal form in our mind, and then we begin to chisel. we strip away everything that stands in the way to reveal news poibilities. at purepoint financial, we have designed our modern approach to