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Speaker 2: All right, let's go to geopolitics for a moment. Dan
Speaker 2: Williams is standing by his reporter based in Jerusalem. Israel
Speaker 2: is holding talks in Washington, and that's as the country
Speaker 2: is weighing how to respond to an Iranian missile tech
Speaker 2: about a week ago. And this comes as a year
Speaker 2: anniversary of what happened in Israel and Gaza. Okay, so Dan,
Speaker 2: what are where are we in terms of the actual talks.
Speaker 2: We kind of know where the military fighting is. What
Speaker 2: about the talks?
Speaker 3: Well, Israel's Defense min So you have Gallant will this
Speaker 3: evening set off for Washington for talks with his US counterpart,
Speaker 3: Lloyd Austin. And also we hear other members of the
Speaker 3: Biden administration. This is an especially brought period in this
Speaker 3: alliance because while the Biden administration very supportive of Israel's
Speaker 3: war effort in terms of supplying weaponry, moral support diplomatic support.
Speaker 3: The sides have been locking horns at times about specific moods,
Speaker 3: including this move into Lebanon on the ground over the
Speaker 3: last week by the Israelis, including how Israel might carry
Speaker 3: out its threat and retaliation for Iran's one hundred and
Speaker 3: eighty ballistic missiles that were fired also just a few
Speaker 3: days ago. So they're expected to discuss that, try to
Speaker 3: work out something they might agree on that the Americans
Speaker 3: would not see as needlessly rattling the region, perhaps setting
Speaker 3: off an energy shop and a major shipping crisis and
Speaker 3: terrorism crisis, just as the United States is in the
Speaker 3: last weeks of the selection campaign ahead of the vote
Speaker 3: in November.
Speaker 4: Should we be surprised, Dan, that Israel has not yet
Speaker 4: responded against Iran for that missile attack. I kind of
Speaker 4: thought we would have seen something by now.
Speaker 3: That has been said. On the other hand, this is
Speaker 3: a pretty weighty period attacking Iran. Again, It's worth remembering
Speaker 3: that the Iranian ballistic missile salver of last week was
Speaker 3: the second such attack by Iran. It conducted one in
Speaker 3: mid April, to which Israel responded with a very low signature.
Speaker 3: In fact that these raleised to my knowledge, never acknowledged it.
Speaker 3: They somehow managed to get some kind of strike vehicle
Speaker 3: into Iran to hit a radar at a key air base,
Speaker 3: but at the time they kept it very low key.
Speaker 3: So the question is would they do it again now
Speaker 3: or would it have to be something pretty spectacular in
Speaker 3: order to register as a deterrent. Now within Israel there
Speaker 3: as open discussion of whether Israel should go all the
Speaker 3: way and strike Iran's nuclear facilities. This is something that's
Speaker 3: been threatened for years, never carried out, or the oil
Speaker 3: facilities or goo for something more limited military politics and
Speaker 3: all that. This is really not something anyone would enter
Speaker 3: into rashly. I think these Reelis will be very careful
Speaker 3: to keep the Americans on side, and that is the
Speaker 3: reason for this trip. And with the pace of this war,
Speaker 3: I imagine even if the attack is carried out today,
Speaker 3: next week, in a month, it will still be seen
Speaker 3: as half of the course when it comes for this
Speaker 3: current standoff or I should say face off between Israel
Speaker 3: and i Ram.
Speaker 2: All right, Dan, we really appreciate it. Thank you very much.
Speaker 2: Dan Williams, reporter for Bloomberg News based in Jerusalem, joining
Speaker 2: us there on the latest An Israel response to that
Speaker 2: Iranian missile attack.
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Speaker 2: Let's stay on that China story for a moment, and
Speaker 2: Bloomberg News and the current joins us now on China. So,
Speaker 2: and you lived in China for many, many years, you
Speaker 2: are obviously has an economics background. What we heard out
Speaker 2: of China today felt a little same old, same old.
Speaker 2: These are the things that we normally seem to think
Speaker 2: about when it comes to China stimulus. Is that a
Speaker 2: fair assessment?
Speaker 5: Yeah, good morning. I think they had raised expectations because
Speaker 5: the officials from the National Development Reformer Commission said they
Speaker 5: were going to hold a press conference on the first
Speaker 5: Tuesday back after the week long holiday. And given that
Speaker 5: last week and the week before we had news about
Speaker 5: pending China stimulus and expectations of warwide, this might be
Speaker 5: the next leg. Here comes the government to explain things
Speaker 5: further and announced new measures. But what happened was they
Speaker 5: didn't announce any new measures. They spoke about bringing forward
Speaker 5: and spending maybe tune out billion worth of spending, some
Speaker 5: support for businesses and for some support for the less
Speaker 5: privileged and poor in society, but not much by way
Speaker 5: of detail. And I think that lack of detail on
Speaker 5: the spending side is what this point in markets and
Speaker 5: up ended trading.
Speaker 6: The way he sought.
Speaker 5: But to be clear, though, what they did say was
Speaker 5: that they reaffirmed the commitment to meeting their five percent
Speaker 5: growth target. That might sound like nothing to people living
Speaker 5: from overseas, but it does mean the government's going to
Speaker 5: hit that political sense of target, you know, at all costs,
Speaker 5: and that means that at the very least they will
Speaker 5: continue to support the economy. And remember, the five percent
Speaker 5: growth target for China is obviously slower than double edgit
Speaker 5: a decade ago, but it's five percent on a much
Speaker 5: bigger base than it was a decade ago as well,
Speaker 5: so it's not nothing.
Speaker 4: And in reality, I guess from a political standpoint, maybe
Speaker 4: from economic standpoint. In reality, what can President Jijiping do
Speaker 4: in terms of fiscal stimulus, Well.
Speaker 5: They have room and certainly room to borrow and spend
Speaker 5: at the central government level. And now when you get
Speaker 5: into the local governments and the provinces, and that's where
Speaker 5: a lot of the property stress is located. That's where
Speaker 5: the business model of selling landolf to developers raise finances
Speaker 5: that seems to be broken at the moment. So that's
Speaker 5: where your debt pile is. But the central government has
Speaker 5: a lot of it of physical space. Use the jargon,
Speaker 5: they could intervene. They could start shoring up projects or
Speaker 5: recapitalizing the banks, which you have not of that in
Speaker 5: recent weeks, or make sure that they get those property
Speaker 5: construction sites finished. So there's a lot they could do.
Speaker 5: There's a feeling though that they're still being cautious because
Speaker 5: of the legacy of debt and leverage that was left
Speaker 5: by previous rounds of China Stimmus and not just the
Speaker 5: Flantic crisis, but also over the.
Speaker 6: Last decade or so.
Speaker 5: They didn't want to go on that road again. And
Speaker 5: also there's a view that maybe they're holding their powder
Speaker 5: somewhat dry. They want to get past the US elections
Speaker 5: see what comes out of that, because that could also.
Speaker 6: Be material for China.
Speaker 2: So to that point, the market reaction was quite swift.
Speaker 2: So the way you're talking about is like, look, they're
Speaker 2: a little long term strategic. They don't want to make
Speaker 2: any mistakes. They want to kind of see how the
Speaker 2: election pans out. Golden Dragon indexes down, commodities are getting
Speaker 2: hit really hard. Paul was pointing out Ali Baba's down
Speaker 2: and by about eight percent. That's a proxy for the
Speaker 2: China consumer. Is that market reaction legit? Like? Does it
Speaker 2: measure up with what we actually heard in your experience
Speaker 2: and understanding Chinese economic policy?
Speaker 5: Well, typically the top policymakers in China, you know, markets
Speaker 5: are not necessarily their number one concern. That's a rough
Speaker 5: rule of thumb. But I think what happened over the
Speaker 5: past couple of weeks was China's economy had reached such
Speaker 5: a kind of a funk that when the officials came
Speaker 5: out with the measures that they did, which is bringing
Speaker 5: them boring costs, talking about putting money back into the banks,
Speaker 5: the measures they announced for the Chinese break heighten explications
Speaker 5: that more money might be under way real physical spending.
Speaker 5: And that's when the market's went to open a tear.
Speaker 5: And now we've reached a point where a wait a minute,
Speaker 5: what exactly are they saying here. They're obviously putting support
Speaker 5: into the economy. They obviously want to hit that five
Speaker 5: percent growth target. That's a political target. But are they
Speaker 5: going to actually go out and borrow and spend more money,
Speaker 5: like real new money. We're not there yet. They may
Speaker 5: yet do that. The anthem might yet be coming, but
Speaker 5: that's not the signal for now. I think that's where
Speaker 5: both the disappointment and they can fusion has come into
Speaker 5: the market side of things. Is clearly not planning to
Speaker 5: rep things up the way they have in previous downturns.
Speaker 5: They're going to take their time working the way out
Speaker 5: of this.
Speaker 7: And I mean, just real quickly.
Speaker 4: For me, it's the long term issues with their population aging.
Speaker 4: I mean, some of those issues are just long standing.
Speaker 4: I don't know how you get around those things.
Speaker 5: Yeah, no, absolutely right. I mean I should have mentioned
Speaker 5: the structural issues. You've got the demographics, you've got the
Speaker 5: long term death story, You've got the system of political control,
Speaker 5: which some people will argue will ultimately keep a cap
Speaker 5: on Chinese economic potential. That's the point of debate, but
Speaker 5: it's one of the structural challenges that people talk about,
Speaker 5: all of which is weighing on China's growth. There's a
Speaker 5: view out there that over the past four decades, the
Speaker 5: low hanging fruit was picked. China had a manufacturing export model.
Speaker 5: It was gangbusters. It all went well, throw in a
Speaker 5: property boom to finish it off. But now we're the
Speaker 5: point where, of course, making those gains so much harder,
Speaker 5: aging workforce, a lot of debt, and giopolitical tensions means
Speaker 5: the China story is going to be much more more
Speaker 5: complicated in years ahead.
Speaker 7: Hi, very good, end the current.
Speaker 4: Thank you so much for joining us endocurrent Bloomberg Global
Speaker 4: Economy reporter, giving us the latest on China.
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Speaker 4: Alex Steele Paul Sweeney, we are live broadcasting live in
Speaker 4: Orlando with the World Center.
Speaker 7: Merit.
Speaker 2: This place is huge, huge, I mean, how many steps
Speaker 2: did you clock yesterday?
Speaker 7: Fifteen thousand?
Speaker 8: What?
Speaker 4: Yeah, it's crazy and that's you know, but I'm all
Speaker 4: over the theme parks. We're common Well's national conference for
Speaker 4: financial advisors. I got like twenty twenty three hundred folks here.
Speaker 4: A lot of smart folks come in here trying to
Speaker 4: talk about the business and helping their clients with their
Speaker 4: financial advice. Brad McMillan joins us here today. He's a
Speaker 4: managing principal Wealth and Investment Management and the CIO at
Speaker 4: Commonwealth Financial Network. Brett Aside from the coming hurricane, what
Speaker 4: are your registered investment advisors asking you at this conference
Speaker 4: this year? I mean it, I know it's S and
Speaker 4: P's up twenty percent. I'm making money on my bonds,
Speaker 4: making money on my cash. It's probably a good time
Speaker 4: to be a financial advisor.
Speaker 7: But what are they asking you going forward?
Speaker 9: Well, the real question is always what happens next? Paul,
Speaker 9: And you know, we've heard a lot of news. I mean,
Speaker 9: the hurricane coming in is a great kind of metaphor
Speaker 9: for impending doom. You know, we've got wars.
Speaker 2: We get blue sky, so there's something that there, but
Speaker 2: a little bit.
Speaker 9: Of a mixed message, you get that, right, But you know,
Speaker 9: so there's a lot of stuff that can go wrong.
Speaker 9: The FED cut by fifty basis points. What do they
Speaker 9: know that we don't so the question is everything looks okay,
Speaker 9: but is it really you know, is there a hurricane
Speaker 9: out there despite the blue skies we see? And I
Speaker 9: think the answer to that is, actually, things are okay.
Speaker 9: There's still a lot that can go wrong and we
Speaker 9: need to keep an eye on it. But my talk
Speaker 9: this conference was actually going to be it's gonna be okay.
Speaker 6: But I think that's the real takeaway.
Speaker 2: And to be fair, you're gonna speak tomorrow, but you
Speaker 2: guys had to cancel the morning because of the hurricane.
Speaker 2: So if if your talk is yeah, it's stormy, but
Speaker 2: we're gonna be okay, how how is that reflected in
Speaker 2: a portfolio allocation?
Speaker 9: Well, I think you can actually see it in what's
Speaker 9: happening in the market today. I mean, one of the
Speaker 9: things out there were was we're gonna have a recession.
Speaker 9: We've got to get defensive, We've got to go with
Speaker 9: value rather than growth. And that's not actually what we're
Speaker 9: seeing in the market today. We're seeing the Nasdaq out performing,
Speaker 9: and we're seeing the now which is relatively defensive, underperforming.
Speaker 6: Now one day, of course, does not make a market.
Speaker 9: But the real message of the jobs report, as I
Speaker 9: read it, was that the economy is going to keep going.
Speaker 9: We're gonna see earnings keep growing and growth. You know,
Speaker 9: you don't have to get defensive. There are still opportunities
Speaker 9: on the growth side going forward.
Speaker 7: A lot of folks when that we saw the short
Speaker 7: term rates go higher.
Speaker 4: I mean, you're able to get I don't know, if
Speaker 4: you're a Marcus customer, Goldmen Sex, you're going to get
Speaker 4: five percent on a money market or something four point
Speaker 4: two five, four.
Speaker 7: Point two five.
Speaker 4: Now, how do you get your RAS or what's the
Speaker 4: message for your RAS about is it okay to be
Speaker 4: in cash or now you need to be in this market.
Speaker 9: I think at this point, given where you're getting paid
Speaker 9: in the money markets, you know, and in the bond
Speaker 9: market depending, it's okay to sit out. You know, there
Speaker 9: are opportunities out there, but you look at valuations, there
Speaker 9: are also risks. I mean, this is not a cloud
Speaker 9: free sky, you know, go back to the weather metaphor, so,
Speaker 9: you know, I look at this and I'm saying, if
Speaker 9: I'm an older client or if I'm somebody who's really
Speaker 9: risk adverse, I'm happy to sit at four or five
Speaker 9: percent and just take it easy. You know, for the
Speaker 9: first time, in a long time bonds are actually be
Speaker 9: worth being in for their return. Not great, but it's safe, right,
Speaker 9: that's important to.
Speaker 2: Be fair, Paul, I am thinking about Munie's just so
Speaker 2: you know, little diversification. That money sitting in Marcus is
Speaker 2: you know, being very risk averse. I'm still thinking about it.
Speaker 2: So where does that leave And you were mentioned sort
Speaker 2: of the sickle goal versus value, except to growth versus value,
Speaker 2: I should say, where does that leave you in thinking
Speaker 2: about mid cap and small caps? Because if things are
Speaker 2: okay ish, but there are worries but we're okay, that's
Speaker 2: a really weird spot for the small caps.
Speaker 6: It is a really weird spot.
Speaker 9: And I think when you look at that, you have
Speaker 9: to start thinking about sector exposure rather than you know,
Speaker 9: company size.
Speaker 6: You know.
Speaker 9: And there's a lot of discussion out there about oh,
Speaker 9: we've got MidCap, we've got small cap, you know.
Speaker 6: I think you need to look at it.
Speaker 9: Okay, is at a financial well they've been doing pretty well,
Speaker 9: you know, and small cap or MidCap that matters, but
Speaker 9: perhaps less than the fact that it's the financial sector
Speaker 9: or the industrial sector or whatever the sector exposure is.
Speaker 9: So I don't think it's a time for cap level discussion.
Speaker 9: I think it's time for sector exposure discussion.
Speaker 7: What are some of the sectors that screen well for
Speaker 7: you guys.
Speaker 9: Well, when you look at it, I think anything that's
Speaker 9: exposed to growth. You look at technology, you know, one
Speaker 9: of the things we're seeing is companies are trying to
Speaker 9: manage their costs. I mean, one of the messages of
Speaker 9: the jobs report was that no, we're not going to
Speaker 9: be able to hire lots of people cheaply. So any
Speaker 9: kind of technology that lets companies leverage capital expenditures rather
Speaker 9: than hiring, I think that's going to go. And that
Speaker 9: speaks directly to a lot of the megacap stocks. It's
Speaker 9: probably a tailwind for the AI bubble. Excuse me, shouldn't
Speaker 9: have said bubble, but you know, it's a tailwind for
Speaker 9: the AI industry. You know, it's a tailwind for companies
Speaker 9: that really enable companies to do more with less, you know.
Speaker 9: At the same time, I think when you look at that,
Speaker 9: that's also probably a tailwind for real estate because you've
Speaker 9: got to put all these workers somewhere. And that indicates,
Speaker 9: along with for example, Amazon going back to five days
Speaker 9: a week, we may be through the worst of it
Speaker 9: for the commercial real estate market that maybe early I
Speaker 9: don't know, but you can see signs.
Speaker 2: Well, we've been talking to a lot of commercial real
Speaker 2: estate people and they've been saying something similar like, there's
Speaker 2: still going to be that ten percent portion. That's not great,
Speaker 2: but on the other hand, it's going to be okay.
Speaker 2: So to your point about storms. So when you take
Speaker 2: a look at that theme, though, there is a narrative
Speaker 2: out there that once we get past the election, you
Speaker 2: could see a lot of capex come into the market
Speaker 2: because one might think that there would be more clarity
Speaker 2: on state corporate taxes than tariffs. Do you see that
Speaker 2: as a headwind tailwind for the economy or hope instead
Speaker 2: of reality.
Speaker 6: I think it's more hope.
Speaker 9: But the thing I would say about that is we're
Speaker 9: already seeing massive investment. I mean, again, one of the
Speaker 9: things that's driving it is the demographics.
Speaker 6: We don't have enough workers.
Speaker 9: Yeah, the market is software, so you're being forced to
Speaker 9: do capital investment. Regardless of who wins the election, you're
Speaker 9: going to have a situation where we're going to be
Speaker 9: continued to deglobalise. We're going to continue to restrict immigration,
Speaker 9: and that's going to require more capital investment. We are
Speaker 9: now in a position where we're generating most of the
Speaker 9: natural guess, which means an enormous amount of the chemicals
Speaker 9: industry is coming to the United States, and that requires
Speaker 9: massive capital investment.
Speaker 6: This is going to happen regardless of Washington.
Speaker 4: So how do you discuss the political landscape the election
Speaker 4: coming up this year? Because it's coming up in a
Speaker 4: matter of days. It seems like I'm sure you're getting
Speaker 4: some questions some comments from your financial advisors here.
Speaker 9: One of the things that goes with my job is
Speaker 9: getting questions from people on both sides. And every single
Speaker 9: election cycle, I have people on both sides saying if
Speaker 9: the other side wins, it's going to be a disaster.
Speaker 9: And I've heard that for the past, you know, twenty years.
Speaker 9: I've been doing this, and it's always been wrong. One
Speaker 9: of the things that you have to remember as an
Speaker 9: investor is the US economy is largely decoupled from Washington.
Speaker 9: Any effects it has, it has at the margin.
Speaker 2: But isn't that the irony though it's not because a
Speaker 2: fiscal spend, so like a lot of the hiring is
Speaker 2: in government workers, like the money that's being pumped in
Speaker 2: is through government programs, et cetera. So in a weird way,
Speaker 2: it's not.
Speaker 9: But you're wrong, because how am I wrong? That is
Speaker 9: a relatively small part of the economy, and that.
Speaker 6: Is the workers.
Speaker 2: Yeah, small part of the economy, and all the money.
Speaker 9: Small part, yes, And you look at all of the
Speaker 9: spend out there, And the question is even if you
Speaker 9: even if you're correct, is that going to change up
Speaker 9: or down significantly depending on the administration.
Speaker 6: It's not. You know, they're not going to No.
Speaker 2: It's going to keep growing that like, and deficits are
Speaker 2: going to grow.
Speaker 6: That is that a tailwind or a headwind for some economy?
Speaker 6: It's a tailwind, okay, as we've seen.
Speaker 9: I mean one of the interesting things, and I'll go
Speaker 9: back to history a little bit, is you go back
Speaker 9: to the seaquester and how that was supposed to cut
Speaker 9: spending and stop the growth of the deficit. You know what,
Speaker 9: it worked. So we've seen that before when federal spending cuts,
Speaker 9: that slows growth down. But if you say the federal
Speaker 9: spending is going to increase, that is a tailwind for
Speaker 9: growth going forward.
Speaker 7: So what do we do here?
Speaker 4: If I'm the federal Reserve, I feel pretty comfortable that
Speaker 4: just that fifty basis points and then you can kind
Speaker 4: of do their twenty fives as they like.
Speaker 7: I'm comfortable with that. Are you comfortable with that?
Speaker 9: I think fifty basis points was a mistake. I was
Speaker 9: really surprised they did that, and the reason I was prizes.
Speaker 6: You've got two mandates.
Speaker 9: Okay, you've got employment, which, as we've seen, slowed down
Speaker 9: a little bit, but it's still at boom levels historically
Speaker 9: and is coming back up. And then you've got inflation,
Speaker 9: which is not where they want it to be. It's
Speaker 9: moving there. But then you look at the components. Housing
Speaker 9: is not going to We've been saying how I've been
Speaker 9: saying housing is gonna Inflation is going to get down
Speaker 9: for the past three years.
Speaker 6: Guess what it hasn't.
Speaker 9: And then you're gonna have inflationary things like you know,
Speaker 9: reduced immigration. You look at wage growth that's still up.
Speaker 9: So I think the Fed is going to end up
Speaker 9: having to reverse sometime in the next year or two.
Speaker 2: You mean stop cutting or hiking hiking. Wow, Okay, that
Speaker 2: would be huge. That would be a huge change for
Speaker 2: a portfolio allocation for the whole thing.
Speaker 9: Yeah, I think they I think they mistake. I think
Speaker 9: they made a mistake with the fifty basis points, you know.
Speaker 9: But that said, when you look at it, why are
Speaker 9: they gonna have to hike? It's going to be because
Speaker 9: growth continues, and that's actually gonna be good for corporate earnings.
Speaker 6: And when you.
Speaker 9: Look at stock prices, there are in nominal terms, they're
Speaker 9: not in real t so actually get you get more
Speaker 9: of a headline return even as inflation continues to go up.
Speaker 7: All right, very good, appreciate it.
Speaker 4: Hopefully you guys have a good show for the remainder
Speaker 4: of the day here today before people look, I think
Speaker 4: making an early exit.
Speaker 7: BREDC.
Speaker 4: Millan, managing Principal Wealth and Investment Management and CIO at
Speaker 4: Commonwealth of Financial Networks. We're here at their conference in Orlando, Florida.
Speaker 4: They have over two thousand of their financial folks down
Speaker 4: here talking about the markets.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 2: Sir Alex the alongside Paul Sweeney. This is Bloomberg Intelligence
Speaker 2: Radio and we are broadcasting to you live from Orlando
Speaker 2: at the World Center Mariot at Commonwealth's National Conference for
Speaker 2: Financial Advisors. They're about two thousand and five over the
Speaker 2: last couple of days getting expert guidance on how to
Speaker 2: manage their clients and their businesses. And the theme of
Speaker 2: the conference this year is the Future is Now, and
Speaker 2: this is the tenth year the Bloomberg Radio has been
Speaker 2: privileged to broadcast from the conference. Well, joining us now
Speaker 2: here is a Rob Kain, investor, director of Alternative Investments
Speaker 2: over at Commonwealth Financial Network. Now he joined back in
Speaker 2: July of twenty thirteen as an alternative investment analyst, So
Speaker 2: this is great. So we just had a great conversation
Speaker 2: about the broader market and how to allocate, et cetera.
Speaker 2: Where do alternative investments come in. What's the right percentage?
Speaker 8: You've got to look at alternatives through a holistic approach,
Speaker 8: in my view, and I always say, if you want
Speaker 8: to start with a nice allocation, but ten percent to
Speaker 8: really move that portfolio. But I think you can make
Speaker 8: a good argument that twenty maybe even twenty five percent
Speaker 8: for those higher net worth clients make a lot of
Speaker 8: sense once you start.
Speaker 6: Getting that endowment type model.
Speaker 8: Unless you're able to source and you have that breadth
Speaker 8: and skill to get those types of investments, largely, you're
Speaker 8: going to be paying up for beta exposure. So that's
Speaker 8: why we would say thirty percent is probably at the
Speaker 8: high end you want to be.
Speaker 7: Where do I go?
Speaker 4: You know, growing up, it was for me it was
Speaker 4: just you know, private equity, some hedge funds. Now private
Speaker 4: credit is a big source of capital sieing crypto. Yeah, exactly,
Speaker 4: So how do you how do you guys, I guess,
Speaker 4: ease your clients into, ease your advisors into that space.
Speaker 8: You know, I think private credit is almost the path
Speaker 8: of least resistance because everyone understands that fixed income concept there.
Speaker 8: And the story makes a lot of sense because we've
Speaker 8: seen traditional lenders pull back here the banks giving what's
Speaker 8: going on here, and these non traditional lenders are just
Speaker 8: fueling the economy with this. At the end of the day,
Speaker 8: it's debt. We need to ensure that they're able to
Speaker 8: pay it back. And yes, we can command a premium
Speaker 8: for those types of returns, but we need to ensure
Speaker 8: that's going to come through, and that's looking at good
Speaker 8: quality managed to do that.
Speaker 2: So when you're talking to clients, is it fifty forty ten,
Speaker 2: is it sixty thirty ten?
Speaker 6: It all depends what the client's looking for.
Speaker 8: So those more aggressive type investors, you're going to want
Speaker 8: to pull from the equity bucket and look for returning
Speaker 8: hands strategies such as private equity. On the fixed income side,
Speaker 8: I think it makes a lot of sense to use
Speaker 8: a private credit by peering from your loans or your
Speaker 8: credit exposure in general, that will give you a nice balance.
Speaker 8: I would say that's where you want to start and
Speaker 8: almost look at the drivers of returns underneath, try to
Speaker 8: match those where your traditional batas and exposures are and
Speaker 8: then put those alls in there.
Speaker 4: What types of products do you guys at common Wealth
Speaker 4: have for your ris So we.
Speaker 8: Have private equity, have private credit, we have hedge funds.
Speaker 8: Right now, private equity is a big seller for us.
Speaker 8: A lot of folks that gravitating towards that story. We've
Speaker 8: also seen the decline and the public market opportunity, so
Speaker 8: it's a larger opportunity sept for people to get into.
Speaker 8: We're seeing folks like that, and particularly in the secondaries,
Speaker 8: private equity secondaries, where there more clear insight into the
Speaker 8: portfolio and that companies know what they need to get
Speaker 8: to that next level.
Speaker 6: Our advisor is really jumping out.
Speaker 2: To the story that's interesting, and that's like a way
Speaker 2: for private equity to offload. So it's like definitely an
Speaker 2: burgeoning market. How do you think about the risks? One
Speaker 2: might say that retail being invested in, say, private credit
Speaker 2: has not been tested. Private creds been around for a
Speaker 2: long time. It's been through cycles, but not with this
Speaker 2: kind of money and investor base. How do you think
Speaker 2: about the risks?
Speaker 6: Well, I start with you think about private credit.
Speaker 8: There's absolutely ton of risk and the biggest risk is
Speaker 8: default can I get my income back? But a lot
Speaker 8: of private credit managers are actually lending to private equity managers,
Speaker 8: so they're able to navigate these companies through those complex
Speaker 8: times by injecting equity in. There also the covenant protection
Speaker 8: and private credit that's much stronger than you see in
Speaker 8: the syndicated market, and that makes it really healthy and
Speaker 8: the recovery rates a lot better.
Speaker 6: In the long term.
Speaker 7: All right, So how has it changed really?
Speaker 4: I mean we've been here for ten years, coming to
Speaker 4: your conference ten years ago versus today.
Speaker 7: How's the discussion.
Speaker 4: How's your role in terms of communicating with your ris here?
Speaker 4: I mean, I'm guessing they want to talk to you
Speaker 4: more often than ten ten years.
Speaker 6: It's funny.
Speaker 8: We joked that we were in the corner for a
Speaker 8: long time no one wanted to talk alternatives, and then
Speaker 8: being mainstream, we're having those conversations every day. Our advisors
Speaker 8: have really embraced it. We've seen those allocations increase significantly
Speaker 8: over the past few years, and then we had to
Speaker 8: meet that demand with products, so Commonwealth we took a
Speaker 8: lot of time to increase our offering set for our advisors.
Speaker 6: And give them everything that they need now. So we're
Speaker 6: very competitive in that space.
Speaker 2: What do you think is the biggest misunderstanding when it
Speaker 2: comes to alternatives.
Speaker 6: A lot of folks think alternatives.
Speaker 8: They think they see on the news these returns of
Speaker 8: one thousand plus percent. I said, that's not your alternatives.
Speaker 8: The alternatives have a role in the portfolio, usually that
Speaker 8: uncorrelated or lack of correlation. They're not all returning answers
Speaker 8: and having that discussion, particularly when you're talking to clients
Speaker 8: as well. You could have had that discussion and frame.
Speaker 2: That correctly, so meaning that investors come to and they're like,
Speaker 2: all right, let's use my portfolio by big time exactly exactly.
Speaker 4: We haven't seen are real or maybe ask another way,
Speaker 4: have we seen our Are you concerned about seeing a
Speaker 4: big correction in private equity, in private credit in headgshrends?
Speaker 7: We haven't really seen that, have we?
Speaker 6: We haven't.
Speaker 8: You know, private credit is one area I'm staring at
Speaker 8: and seeing what's going on there. We have seen non
Speaker 8: accruise and defaults start picking up a little bit. The
Speaker 8: interest rate cut will help that out. But if we
Speaker 8: start thinking about those lower middle market type of companies,
Speaker 8: they are highly indebted. The longer interest rates stay, the
Speaker 8: more they're going to struggle. And that's the concern that
Speaker 8: I'm watching the upper market. These type of companies usually
Speaker 8: are more resilient, not tied to the economy like the
Speaker 8: lower middle market, So I'm not as worried about that,
Speaker 8: but lower middle marketing.
Speaker 2: What other questions are you getting right now, either from
Speaker 2: investors or from other arias well.
Speaker 6: It's funny a lot of people say where do you go?
Speaker 8: And one hand, I can make a strong argument where
Speaker 8: the economy is going, and it's we're going to go
Speaker 8: and look at the equity markets. We're going to perform
Speaker 8: very well. On the other hand, you can see a
Speaker 8: tiring economy. So a lot of people say, what do
Speaker 8: you do in this? So we're having discussions about absolute
Speaker 8: return hedge funds really not making any direction bets here,
Speaker 8: just taking idiosyncratic ideas. Let's leverage those up a little
Speaker 8: bit and get those returns. And that's what we're having
Speaker 8: with those folks having those discussions. Longer term, we are
Speaker 8: having that private equity discussion, and we're talking about the
Speaker 8: public markets declining, the opportunity set where can you go
Speaker 8: and private equity makes a.
Speaker 6: Lot of sense.
Speaker 7: Crypto is that in the conversation you didn't mention it.
Speaker 2: That's actually interesting.
Speaker 8: It's very it's very episodic, and when it comes a
Speaker 8: lot of people will jump on there. But when they
Speaker 8: start seeing those swings, a lot of people think they
Speaker 8: have that stomach for that volatility, but at the end
Speaker 8: of the day, they truly don't.
Speaker 6: So we've seen that, Wayne net What about.
Speaker 2: Gold and yeah, start there and then yeah, I know
Speaker 2: we do like gold.
Speaker 8: We're not gold Bug, so to speak. We think there
Speaker 8: makes a lot of sense there. And the one thing
Speaker 8: I always look at, if you look at the international buyers,
Speaker 8: they're going to jump in, so there's a supply to
Speaker 8: man factor in there. Obviously you have the interest rates
Speaker 8: I tied in there. Gold has been on a great tear.
Speaker 8: We do think it makes a lot of sense in
Speaker 8: the polio still and we have to look there's a
Speaker 8: lot of volatility risks out there, so I think Gold
Speaker 8: should say the portfolio.
Speaker 6: For the long term.
Speaker 7: All right, Rob, thank you so much for joining us.
Speaker 7: Really appreciate it. Rob Kane.
Speaker 4: He's the director Alternative Investments at Commonwealth Financial Network.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 7: Alex Steel, Paul Sweeney.
Speaker 4: We are broadcasting live in Orlando at the World Center
Speaker 4: Mariot at Commonwealth's National Conference for Financial Advisors. Joining us
Speaker 4: here this morning is Peter Aslink, Senior Vice President, head
Speaker 4: of advisory solutions for Commonwealth Financial Network. Peter, talk to
Speaker 4: us first of all, thanks for joining us here and
Speaker 4: in various processes going to their meetings before they bug
Speaker 4: out for the hurricane.
Speaker 7: Talk to us about the.
Speaker 4: Portfolio management platform you guys pro for your RIS.
Speaker 10: Sure, absolutely so. We have two main platforms at Commonwealth.
Speaker 10: One is an advisor discretion or DIY platform where they
Speaker 10: are responsible for all trading oversight, full discretion into portfolios, management,
Speaker 10: choosing securities, et cetera. The complement to that is called
Speaker 10: PPS Select where it's a home office discretionary portfolio where
Speaker 10: advisors can outsource all management responsibilities to us.
Speaker 2: Oh okay, so would you be in place of like
Speaker 2: AI then, because like isn't that what AA is supposed
Speaker 2: to do?
Speaker 10: It is, and what we're doing has developed new solutions. Really,
Speaker 10: what we're trying to do is redefine the way advisors
Speaker 10: that think and work with their client relationships. Where if
Speaker 10: you look at the investment management industry over the last
Speaker 10: twenty years, by and large, it's mostly become commoditized, right
Speaker 10: where if you look at the assets in the universe,
Speaker 10: approximately seventy five percent of model based assets follow ten
Speaker 10: providers and in large part a lot of those providers
Speaker 10: are their own proprietary strategies. So we've taken a bit
Speaker 10: of a different approach with our strategy, where it's a
Speaker 10: multi manager approach. We have over one hundred different models,
Speaker 10: and most recently we're announcing some new enhanced features, beginning
Speaker 10: with personalized indexing, which is more commonly referred as direct indexing,
Speaker 10: and as you know direct indexing, the features that come
Speaker 10: with that, it's greater personalization, customization. Tax efficiency really takes
Speaker 10: it from an environment where advisors have moved into largely
Speaker 10: adopting one to five portfolios where they assign clients into
Speaker 10: one of those allocations, to now expanding to an infinite
Speaker 10: number of possibilities and allocations through utilizing personalized indexing alongside
Speaker 10: using it as the core alongside other elements of the
Speaker 10: portfolio with mutual funds and ETFs.
Speaker 4: So, I mean, that's some of the talk we hear
Speaker 4: at these conferences is that you want your ri as
Speaker 4: your advice be spending more time with the clients, less
Speaker 4: time with plumbing and all that kind of stuff. So
Speaker 4: how does do they do most to I guess, outsource
Speaker 4: the management of those of that capital their clients.
Speaker 7: That's great question.
Speaker 10: So two thirds of our advisors outsource and utilize the
Speaker 10: PPS Select platform. We've run a number of different analyzes,
Speaker 10: and the advisors who predominantly use an outsourced solution at
Speaker 10: Commonwealth on average grow faster and they receive better performance.
Speaker 10: And that actually coincides with a lot of the literature
Speaker 10: that you see across the industry where you know, it's
Speaker 10: not rocket science if you're spending more time in front
Speaker 10: of clients, engaging with them, servicing them, really driving the
Speaker 10: advisor alpha piece which comes through financial management or financial
Speaker 10: planning as opposed to focusing your time and energy on
Speaker 10: picking stocks and mutual funds on a daily basis. You know,
Speaker 10: it's pretty evident that you're going to grow faster and
Speaker 10: receive better performance. It's kind of like a general contractor, right,
Speaker 10: they don't want to if you're building a house, You're
Speaker 10: not going to focus on every single element. You often
Speaker 10: outsource and sub least two different subcontractors.
Speaker 2: So then how are you guys using AI.
Speaker 10: AI comes in different forms. As it stands today, it's
Speaker 10: mostly on the technology side, and it hasn't really other
Speaker 10: than direct indexing hasn't really made a major splash and
Speaker 10: what we're doing from a management perspective. But if you
Speaker 10: extend that, I mean we are looking at things and
Speaker 10: going to be rolling out next year tax transition of portfolios,
Speaker 10: so seamless tax transition, or an advisor could pick one
Speaker 10: of our models, establish a capital gain budget and then
Speaker 10: it'll seamlessly tax transition over to the model.
Speaker 2: And that would be AI and technology that.
Speaker 7: Would do that, yes, exactly.
Speaker 10: In addition to that, there's tax overlay, which is the
Speaker 10: constant monitoring of portfolios to seek out loss opportunities that
Speaker 10: can be used to offset gains in the portfolio.
Speaker 2: So imagine tax loss harvesting.
Speaker 10: Constant tax loss harvesting. So think of an environment next
Speaker 10: year where advisor sits down with their client and says,
Speaker 10: I was able to generate forty thousand dollars in losses
Speaker 10: to offset of forty thousand dollars gain in twenty twenty
Speaker 10: four in an up market.
Speaker 6: Right.
Speaker 10: So these are some of the capabilities that we're going
Speaker 10: to be launching next year that really takes things to
Speaker 10: the next level from a money management perspective.
Speaker 4: One of the real interesting growth stories, and I think
Speaker 4: just global financial services over the last decade has been
Speaker 4: the growth of ETFs. How do your advisors use ETFs
Speaker 4: and is it at the expense of maybe traditional mutual funds.
Speaker 10: Absolutely, I mean it's a trend that I think the
Speaker 10: ETF assets in the marketplace have recently surpassed mutual fund
Speaker 10: assets and that they do serve a place. But honestly,
Speaker 10: I think directing indexing is going to overtake ETFs where
Speaker 10: it's one of the fastest growing spaces. There's additional benefits
Speaker 10: beyond because you can tax lost harvest in an up
Speaker 10: market and as well as a down market. For instance,
Speaker 10: the S and P five hundred. In any given year,
Speaker 10: thirty five percent of the holdings in the index are down.
Speaker 10: You can't harvest those losses in a mutual funder ETF.
Speaker 10: You can do so when you own them individually through
Speaker 10: a direct index and a separately managed account. So I
Speaker 10: really see direct indexing as being the future for investment management.
Speaker 7: Just for me, define direct index Oh, thank you sure, sir.
Speaker 7: A great question.
Speaker 10: So direct indexing is owning through a separately managed account
Speaker 10: the individual securities of an index like the S and
Speaker 10: P five hundred. Right, So, with a mutual funder ETF
Speaker 10: it's a pooled vehicle of securities. Direct indexing, it's a
Speaker 10: sampling of securities from that index, oftentimes the top one
Speaker 10: hundred to one hundred and fifty names that you own outright.
Speaker 10: So at any given time, some of those names are
Speaker 10: going to be at a loss predominantly hopefully majority of
Speaker 10: them are going to be at a gain, but you
Speaker 10: can harvest the losses to offset gains over time, and
Speaker 10: it's all done through advanced technology.
Speaker 2: Amazing. When you talk to advisors, what are the things
Speaker 2: do they want you to help them with?
Speaker 10: I mean, it really is across the spectrum, everything from
Speaker 10: what time of fee exposure or fee arrangements should I
Speaker 10: have with my clients, to what type of outsourcing capabilities
Speaker 10: are on the platform. But what we've seen recently is
Speaker 10: advisors really looking up into higher net worth and ultra
Speaker 10: higher networth clients. They demand and are asking for allocations
Speaker 10: and securities that go well beyond just traditional mutual funds
Speaker 10: ETFs and a smattering of bonds and equities. So we're
Speaker 10: seeing all to play a bigger role in that space.
Speaker 10: Direct indexing, as I mentioned, just more sophistication beyond the
Speaker 10: robot commoditized exposure that you see a lot of advisors
Speaker 10: using historically, what's.
Speaker 4: The best way have you seen in your career? Kamath
Speaker 4: for an advisor to grow his or her business.
Speaker 10: The most successful advisors that I've seen have really gone
Speaker 10: through a segmentation exercise where they segment it out into
Speaker 10: ABC and D clients. Generally, the clients are in the
Speaker 10: A and B bracket are bringing in the majority of
Speaker 10: the revenues, and they look towards the C and D
Speaker 10: clients as a good outsourced option. So spending your time
Speaker 10: and energy aspects of your business while outsourcing perhaps some
Speaker 10: of those clients that aren't generating as much revenue for
Speaker 10: your practice.
Speaker 2: When you say these CND clients outsourcing, what does that.
Speaker 10: Mean Generally smaller accounts.
Speaker 2: So they outsourced to where either.
Speaker 10: An internal discretionary platform that we offer or one of
Speaker 10: the other TAMP providers turn key asset manager platforms that
Speaker 10: we have available through our network.
Speaker 4: How do new advisors grow their business? I mean, is
Speaker 4: there a strategy for successfully growing your business from the
Speaker 4: ground though it's.
Speaker 10: Very difficult these days to go the cold calling method,
Speaker 10: as you quite know. So what we've seen is a
Speaker 10: lot of advisors and we have a network that we've
Speaker 10: created for anybody interested in getting into the business, will
Speaker 10: actually pair them up with existing offices. As you've probably
Speaker 10: seen today at or this weekend at our conference, we
Speaker 10: have a number of universities that have also been represented.
Speaker 10: So we're continuing to expand our network, both across graduates
Speaker 10: as well as undergrad areas to continue to expand that network.
Speaker 2: What's the interest level for young kids.
Speaker 7: We're seeing it.
Speaker 10: I would say in the past few years it's picked
Speaker 10: up pretty significantly. It seems like from most grads it's
Speaker 10: either financial services or tech right, So I'd say there
Speaker 10: was a bit of a lull after the two thousand
Speaker 10: and eight financial crisis, but in recent years we've seen
Speaker 10: a significant uptake and interest. Absolutely.
Speaker 4: And what's the activity I know it's always I've been
Speaker 4: in the business since mid eighties. It's always been a
Speaker 4: decision for advisors at wirehouses like a Merrill Lynch or
Speaker 4: something whether to go on the independent route. How has
Speaker 4: that changed during.
Speaker 6: Your career, Yeah, it's.
Speaker 7: Again in recent years.
Speaker 10: I do a lot of the prospect visits where it's
Speaker 10: newer advisors coming in and just trying to understand our
Speaker 10: business model. More and more, we're seeing advisors coming from
Speaker 10: the wirehouse channel. Whereas you go back ten to fifteen
Speaker 10: years and it was mostly transitions from the IBD space.
Speaker 10: But advisors are in the wire space are looking just
Speaker 10: for more independence. They don't want to be told what
Speaker 10: products to sell, right, They want the entire spectrum, the
Speaker 10: entire universe of the options. They want to do what's
Speaker 10: best for their clients, not necessarily what's in the best
Speaker 10: interests of their partner firm. So that's what the independent
Speaker 10: channel really offers them as full capabilities.
Speaker 2: All right, Peter, thanks lot, really interesting. Thank you so much.
Speaker 2: Peterlaesla excuse me SPP, head of Advisory Solutions, a Commonwealth
Speaker 2: financial network kind of working us through a portfolio management
Speaker 2: platform for Commonwealth advisors there. Thank you so very much.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 1: Alexa playing Bloomberg eleven.
Speaker 2: I'm Alexi alongside Paul Sweeney. This is Bloomberg Intelligence Radio.
Speaker 2: We're broadcasting to you from cloudy, albeit a little rainy
Speaker 2: and windy Orlando, Florida. We are at the Commonwealth's National
Speaker 2: Conference for Financial Advisors. The theme is the Future is Now,
Speaker 2: where Commonwealth brings lots of advisors together and they talk
Speaker 2: and give ideas and they help them guide them through
Speaker 2: the market, guide them through this volatility and this uncertain time. Well,
Speaker 2: joining us now for his take is Chris Pasiano, Senior
Speaker 2: portfolio manager at Commonwealth Financial Network. So when you talk
Speaker 2: to other advisors and you guys, are you know, hanging
Speaker 2: out doing what advisors do, and you talk about the
Speaker 2: volatility and you talk about all the uncertainty out there,
Speaker 2: is there a consensus about where markets are going?
Speaker 1: Oh?
Speaker 11: I don't think there's a consensus at this point. But
Speaker 11: the advice that we give a Commonwealth remains the same
Speaker 11: no matter what the consensus is, and that's keep calm
Speaker 11: and carry on. There's there's always opportunities the market, no
Speaker 11: matter what's going on, and sometimes volatility presents those best
Speaker 11: opportunities that you can add value to clients' portfolios. So
Speaker 11: I think in general, the consensus right now in the
Speaker 11: marketplace is that the FED will successfully and guide the
Speaker 11: economy to a soft landing and inflation's moving in the
Speaker 11: right direction, and people view that as a supportive background
Speaker 11: for the markets.
Speaker 7: How important are earnings for your market? Call Chriscus.
Speaker 4: We're gonna have JP Morgan is gonna be kicking off
Speaker 4: this Friday, another round of earning season. We'll get another
Speaker 4: lookout Corporate America is doing. How do you frame out
Speaker 4: earnings for your clients.
Speaker 11: Yes, so we're encouraged by earnings at this point, but
Speaker 11: it is an important element of the future direction of
Speaker 11: the market. We look at our acid class decisions, and
Speaker 11: any investment decisions have two pieces to valuation and in fundamentals,
Speaker 11: you need both of those to have good long term investments.
Speaker 11: So we've been encouraged by earnings growth. Look at twenty
Speaker 11: twenty not surprisingly because the global economy was shut down,
Speaker 11: earnings dropped. We had one good year of solid earnings growth.
Speaker 11: These the economy reopened, and then in twenty twenty two.
Speaker 11: In twenty twenty three, Corporate America struggled with inflationary pressures,
Speaker 11: cost increases, and earnings flat lined. The rally we saw
Speaker 11: over the last couple of years has then been due
Speaker 11: to valuations expanding But if you look now, as you mentioned,
Speaker 11: we're about start earnings period for the third quarter at
Speaker 11: the end of the week right now, consensus estimates are
Speaker 11: for ten percent growth this year, and even better from
Speaker 11: an earnings perspective for next year, fifteen percent consensus earnings growth.
Speaker 2: And is that going to be in mags seven or
Speaker 2: is that going to be in the other four hundred
Speaker 2: ninety three six.
Speaker 11: This is the best part I think for the market
Speaker 11: going forward, is that for the time being, all that
Speaker 11: earnings growth has been in the magnificent seven. So if
Speaker 11: you come back to what I said, valuations fundamentals, that's
Speaker 11: why those stocks have acted so well. But what we're
Speaker 11: going to see next year is the beginning of the
Speaker 11: divergence within earnings growth start to close. So you're going
Speaker 11: to start to see better earnings growth from the rest
Speaker 11: of the market, and we believe that that will lead
Speaker 11: to better.
Speaker 6: Breadth in the market.
Speaker 11: So you'll see not only the other four ninety three
Speaker 11: start to work, but small cap mid cap they should
Speaker 11: begin to participate as that earnings gap narrows.
Speaker 4: How do you guys feel about just real simply stocks
Speaker 4: versus bonds here because I can now get a decent
Speaker 4: year to my two year government treasury, I can if
Speaker 4: I want to take a little credit risk, I can
Speaker 4: do a little bit more.
Speaker 11: Bonds are relevant. That's how we fail about the equity
Speaker 11: bond mix. But we don't try to time the market
Speaker 11: at Commonwealth. We think it's really hard, if not impossible.
Speaker 11: So we believe that you should have allocations to whatever
Speaker 11: the appropriate equity target is for your client and fixed income.
Speaker 11: But as you point out, bonds are pretty attractive now
Speaker 11: because you can get yields across the curve. And one
Speaker 11: of the things that we have spent times talking to
Speaker 11: advisors about is to make sure that you take advance
Speaker 11: to increase your duration and move out on the curve
Speaker 11: where you can still get relatively attractive rates as your
Speaker 11: money market and CD rates come down. But if you
Speaker 11: look historically, anytime the Fed has cut rates, high quality
Speaker 11: fixed income, longer duration has outperformed cash going forward.
Speaker 2: We've asked this question to a bunch of guests over
Speaker 2: the last two days in terms of alternative asset allocation,
Speaker 2: and is it sixty forty zero, is it fifty forty ten,
Speaker 2: is it sixty thirty ten. I'm doing all that fast math.
Speaker 7: It was pretty good, right, yeah, thank you?
Speaker 2: The how do you look at it?
Speaker 11: So we deliver solutions to our advisors to use for
Speaker 11: their individual client situations and deliver the appropriate allocation for them.
Speaker 11: So we offer over one hundred different model suites at Commonwealth,
Speaker 11: and we have models with alternatives in our model suites
Speaker 11: that are used by our advisors. We view that as
Speaker 11: keep fixed income as your core and use alternatives.
Speaker 6: So whatever was forty forty.
Speaker 11: Twenty would be the way we look at it, and
Speaker 11: have alternatives that tend to have equity like exposures, so
Speaker 11: you can participate but de risk the portfolio's going forward.
Speaker 4: What are you hearing this week in Orlando from your
Speaker 4: rias that maybe you.
Speaker 7: Haven't heard in the past.
Speaker 11: I think the big question really is fixed income. Understandably,
Speaker 11: what happened in twenty twenty two still leaves a lot
Speaker 11: of scarves, and people don't necessarily want to go back
Speaker 11: into fixed income if they've lost their ability to provide
Speaker 11: ballast when the equity markets provide volatility. Right, and I
Speaker 11: look at it, the scenario that we had in twenty
Speaker 11: twenty two is the perfect storm. Rates went up, they
Speaker 11: went up fast, and they surprise people but we believe
Speaker 11: that going forward that historical relationship between equity and fixed
Speaker 11: income will continue. And if we get into a period
Speaker 11: for equity volatility, you'll see more like twenty twenty where
Speaker 11: bonds went up what the equity market. So we're having
Speaker 11: those conversations with advisors of getting people comfortable back.
Speaker 6: In the bond space.
Speaker 2: Oh, what's their biggest misconception? You think about that thesis?
Speaker 7: Oh?
Speaker 11: I think people look and it's human nature.
Speaker 6: Right.
Speaker 11: We all look at short term interest rates and see
Speaker 11: four seventy five and we see four on the tenure.
Speaker 2: Yeah.
Speaker 11: Right, but you've got to think of the total return
Speaker 11: that is available to you across your portfolio.
Speaker 6: Right.
Speaker 11: So we believe in balance and diversification to navigate uncertainty
Speaker 11: in portfolios. So instead of trying to time it and
Speaker 11: make that shift, gradually make that shift and have the
Speaker 11: balance and diversification.
Speaker 2: All right, Thanks so much, Chris. We really appreciated Chris,
Speaker 2: Senior portfolio manager of Commonwealth Financial Network. We appreciate that.
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