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Speaker 1: Bloomberg Audio Studios, Podcasts, radio.

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Speaker 2: News Right Now with liz Anne Saunders, Chief Investment Strategies

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Speaker 2: that Charles Schwab. It's an over our conversation one b

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Speaker 2: rid Holts Berry Rid Holts Masters in Business with Liz

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Speaker 2: Anne Saunders and all I got to say, folks, if

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Speaker 2: you want to know where you need to be in

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Speaker 2: the market.

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Speaker 3: Just trust me get incredible.

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Speaker 2: Perspective that only Barry red Holts can bring to it.

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Speaker 2: With Miss Saunders and Liz aenne Berry had one question

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Speaker 2: which I just thought.

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Speaker 3: Was it was just brilliant tears on it. Oh my god,

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Speaker 3: this is a question I would never ask. So I'm

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Speaker 3: stealing from Rid Holts Liz enne and it's simple. You've

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Speaker 3: been at Schwab forever. You and I saw what Schwab invented.

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Speaker 3: He's older, he's moving on. But the answer is Schwab continues.

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Speaker 2: With core values. What are those core values that have

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Speaker 2: kept you at Schwab all these years.

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Speaker 4: Well, we have it, as I guess, for lack of

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Speaker 4: a better word, our tagline, but it's what we live

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Speaker 4: breathe every day, which is through client size and having

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Speaker 4: almost nine trillion dollars essentially all individual investors. What is

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Speaker 4: important to them is quite different from what is important,

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Speaker 4: say to an institutional community. So we always think of

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Speaker 4: everything we do from the perspective of the individual investor.

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Speaker 2: Did the individual investors show exuberance right now.

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Speaker 4: A little bit yes, I'd say. The sentiment data more broadly,

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Speaker 4: is I guess, on the Frauthier end of the spectrum.

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Speaker 4: Certainly attitudinal measures of sentiment, maybe a little bit less

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Speaker 4: so behavioral measures of sentiment. I think it's important to

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Speaker 4: understand which indicators fall in which bucket, and the almost

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Speaker 4: necessity for it to be a contrarian indicator to see

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Speaker 4: it in both categories, which were not quite seeing it

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Speaker 4: in both of those, But it's on the Frauthier end

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Speaker 4: of the spectrum. The most important thing I would say, though,

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Speaker 4: is sentiment. Not that anything's a good market timing indicator.

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Speaker 4: Sentiment is a terrible market timing indicator. We can get

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Speaker 4: frauthy sentiment and it can stay there for years, as

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Speaker 4: we all learned in the late nineteen nineties, So it's

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Speaker 4: more of a backdrop.

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Speaker 1: Lizzy and we had a bunch of central banks speaking

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Speaker 1: and issuing announcements last week, and let's start with the

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Speaker 1: Federal Reserve probably came out a little bit less hawkish,

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Speaker 1: I guess is a right way to frame it than

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Speaker 1: maybe investors were discount of going into it. What did

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Speaker 1: you take away?

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Speaker 4: So it was definitely on the more dubbish end of

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Speaker 4: the spectrum, particularly as it relates to the dots and

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Speaker 4: the expectation heading into the meeting that we might see

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Speaker 4: one of the three rate cuts come out of expectations

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Speaker 4: per the dots. But I think what's more important is

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Speaker 4: Powell continuing to push back on the notion that the

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Speaker 4: dots represent some sort of policy path. They don't. They

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Speaker 4: never have, and certainly in an environment where the FED

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Speaker 4: is data dependent and not on any kind of preset course.

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Speaker 4: If the data changes, I think their perspective and things

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Speaker 4: like probabilities in terms of the FED fund's future market

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Speaker 4: could change. So at that moment in time, it was

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Speaker 4: slightly more dubbish. But the combination of their dual mandates

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Speaker 4: I think has to continue to behave or in the

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Speaker 4: case of inflation, actually roll back over and start moving

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Speaker 4: down again for rate cuts to start as soon as

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Speaker 4: the June FOMAC meeting.

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Speaker 1: So given that backdrop lit le Zane, you have you

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Speaker 1: guys altered kind of your allocation here? Stocks, bonds, maybe alternatives?

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Speaker 1: What's the schwab call these days? Maybe how has it

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Speaker 1: changed over the last several months.

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Speaker 4: So we don't play the short term sort of tactical

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Speaker 4: asset allocation game by saying, you know, above or below

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Speaker 4: or percentages, because again, almost nine trillion dollars of client assets.

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Speaker 4: What might be right for you know, some twenty five

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Speaker 4: year old aggressive investor that inherited ten million dollars from

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Speaker 4: their grandparents and doesn't need the money, versus say, a

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Speaker 4: you know, seventy five year old who is retired and

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Speaker 4: needs to earn income on an estegg that they can't

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Speaker 4: afford to lose any component of. So two different, entirely,

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Speaker 4: two different messages there. What we have continued to do, though,

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Speaker 4: is focus on factors, even a little bit more than sectors,

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Speaker 4: and we still think you want to stay up in quality.

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Speaker 4: A momentum has been a dominant factor. But what's interesting

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Speaker 4: is that's more of a concept than a factor. Momentum

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Speaker 4: says thank you. It just says these docs that have

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Speaker 4: been working, continue to work. What you can do though,

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Speaker 4: because a lot of comparisons are being made to the

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Speaker 4: late nineties. Uh oh, momentum as a factor is doing

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Speaker 4: well right now. That's the same thing happened in the nineties.

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Speaker 4: But the actual fundamental factor that was most highly correlated

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Speaker 4: to momentum in the late nineties was negative earnings. The

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Speaker 4: factor right now most positively correlated to momentum is are

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Speaker 4: factors like I return on equity, strong free cash, and

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Speaker 4: a negative correlation right now is negative earning. So momentum

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Speaker 4: is just a concept. You then have to look at

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Speaker 4: what are the fundamentals of the types of stocks that

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Speaker 4: continue to do well. And I think that's an important differentiation.

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Speaker 4: But in essence, it's high quality other factors that are

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Speaker 4: dominating in terms of momentum, and that is what we

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Speaker 4: say you want to stick with right now, stay up

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Speaker 4: in quality. This is not the time to go down

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Speaker 4: the quality spectrum.

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Speaker 2: What you just heard there, folks, as far as I'm concerned,

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Speaker 2: is gospel. I don't even know where to go with this,

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Speaker 2: this momentum stuff, Lezanne. I'm aging listening to the certitude

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Speaker 2: of young turks telling me momentum is a Steve Ross

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Speaker 2: factor concept. You say quality matters. Are we going to

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Speaker 2: get earnings to deliver Q one, Q two, Q three

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Speaker 2: to develop that free cash flow of quality.

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Speaker 4: I think earnings estimates on a forward looking basis maybe

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Speaker 4: have some legitimacy, but probably only out a quarter or two.

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Speaker 4: What we've seen in this sort of pandemic era not

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Speaker 4: as extreme as the case a couple of years ago,

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Speaker 4: when you had a record percentage of companies that just

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Speaker 4: withdrew guidance altogether. So estimates just became a total, you know,

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Speaker 4: dart throw because companies were saying, we have no idea,

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Speaker 4: we're not going to try to guide. I think a

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Speaker 4: lot of companies are using the environment as an excuse

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Speaker 4: not to go back to the kind of precise quarter

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Speaker 4: league guidance. What that's left analysts to do is go

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Speaker 4: into earning season, where lately they've been setting the bar

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Speaker 4: too low, listening to what companies are saying, maybe make

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Speaker 4: adjustments out a quarter or two, but then sort of leave,

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Speaker 4: you know, three quarters, four quarters the following calendar year

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Speaker 4: aside until they get more concrete information. So I think

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Speaker 4: there's probably some validity to first half estimates. I'm not

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Speaker 4: sure how much is based in reality on later out estimates.

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Speaker 2: This is brilliant Lizzie too short a visit, Thank you

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Speaker 2: so much, Lizzie and Sanders a childs schwab there actors,

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Speaker 2: and maybe an overwrought comment on momentum