WEBVTT - Markets Anticipate Fed Decision 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.800 --> 0:00:14.880 This is the Bloomberg Surveillance Podcast. I'm Paul Sweeney along 0:00:14.880 --> 0:00:17.240 with Tom keen Join us each day for insight from 0:00:17.239 --> 0:00:20.760 the best in economics, geopolitics, finance, and investment. You can 0:00:20.800 --> 0:00:24.439 also watch the show live on YouTube. Visit the Bloomberg 0:00:24.480 --> 0:00:27.760 Podcast channel on YouTube to see the show weekday mornings 0:00:27.760 --> 0:00:30.400 from seven to ten Eastern Remark Global Headquarters at New 0:00:30.480 --> 0:00:33.720 York City. Subscribe to the podcast on Apple, Spotify, or 0:00:33.720 --> 0:00:36.800 anywhere else you listen, and as always on Bloomberg Radio, 0:00:36.840 --> 0:00:39.840 the Bloomberg Terminal, and the Bloomberg Business App. Jennifer Ryan, 0:00:40.000 --> 0:00:42.800 sitting in for Tom Keeney, is on holiday this week. 0:00:42.840 --> 0:00:46.600 We know not where. Search someplace exotic. I'm here in 0:00:46.640 --> 0:00:49.320 a Bloomberg Interactive Broker studio or also streaming live on 0:00:49.360 --> 0:00:52.760 YouTube's ahead over to YouTube dot com and search Bloomberg 0:00:52.960 --> 0:00:56.280 podcast here. A lot happening on economic calend, A lot 0:00:56.320 --> 0:01:01.200 happening on the Central Bank calendar this week. All us 0:01:01.200 --> 0:01:02.520 are gonna be on the Fed there. We're gonna hear 0:01:02.520 --> 0:01:06.120 from fitchairman j Pal on Wednesday. We'll send Michael McKee 0:01:06.120 --> 0:01:09.920 down there on the accella train and we'll send he'll 0:01:10.080 --> 0:01:11.800 have all the re reporting for us on Wednesday. Let's 0:01:11.840 --> 0:01:14.600 check out with Lori Calvasen ahead of US Equity Strategy 0:01:14.760 --> 0:01:17.960 RBC Capital Markets, Lourie, Is it all about the FED? 0:01:18.040 --> 0:01:18.280 Here? 0:01:18.400 --> 0:01:20.679 I mean, do it earnings matter? Are we just kind 0:01:20.680 --> 0:01:22.959 of waiting on the FED to see if it's two cuts, 0:01:23.000 --> 0:01:25.800 three cuts? Maybe a hike in there somewhere? I don't know, 0:01:26.240 --> 0:01:28.520 how are you guys approaching the kind of the overview 0:01:28.520 --> 0:01:29.120 of this market. 0:01:30.480 --> 0:01:33.000 It's a great question, and thanks as always for having me, 0:01:33.080 --> 0:01:35.039 by the way, But you know, I joke that as 0:01:35.080 --> 0:01:37.640 an equity strategist, we've all sort of had to become 0:01:37.720 --> 0:01:41.600 rape strategists these last few years. And thankfully I get 0:01:41.600 --> 0:01:43.480 along with my rate struggles very well. He does a 0:01:43.520 --> 0:01:46.720 great job. But look, I do think that to some extent, 0:01:46.880 --> 0:01:48.960 I wouldn't say maybe all about the FED, but I 0:01:48.960 --> 0:01:51.440 would say maybe mostly about the FED. So maybe, you know, 0:01:51.480 --> 0:01:54.280 like eighty ninety percent or so. And you know, I 0:01:54.280 --> 0:01:57.480 would say in my conversations the last few weeks at least, 0:01:57.520 --> 0:01:59.200 I feel like we've got a lot of the angst 0:01:59.280 --> 0:02:01.960 out of the way. So it's been the economy is hot, 0:02:02.000 --> 0:02:04.200 How can the Fed possibly cut Oh my gosh, there 0:02:04.200 --> 0:02:05.840 aren't going to be any March cuts, And we've been 0:02:05.880 --> 0:02:07.440 kind of pushing back saying, well, we never thought they 0:02:07.480 --> 0:02:09.079 were going to be March cuts to begin with. We've 0:02:09.400 --> 0:02:12.880 always been looking at June. Our guys have dialed down 0:02:12.919 --> 0:02:15.320 their expectations for cuts in the back half of the years, 0:02:15.639 --> 0:02:18.080 so we have you know, pivoted a little bit, but 0:02:18.120 --> 0:02:20.120 probably not as much as other folks. I would say. 0:02:20.240 --> 0:02:23.480 You know, we're watching as always the commentary this week 0:02:23.520 --> 0:02:26.200 as an equity person, I care what Powell says on inflation, 0:02:26.360 --> 0:02:29.480 the labor market, and kind of the overall characterization of 0:02:29.520 --> 0:02:32.040 the economy. But you know, it always does kind of 0:02:32.040 --> 0:02:34.280 come down to the dots. So we'll see what happens. 0:02:34.560 --> 0:02:36.880 So how are you recommending people play this? Do you 0:02:37.000 --> 0:02:40.000 like large caps or small caps? Are you big on tech? 0:02:40.280 --> 0:02:42.040 Souring on tech a bit? Tell us a little bit 0:02:42.080 --> 0:02:42.959 about what your pick seling. 0:02:43.080 --> 0:02:46.320 Yes, so you know, we are kind of if we 0:02:46.320 --> 0:02:48.639 don't make a ton of sector changes all that frequently. 0:02:48.680 --> 0:02:51.240 Our last batch was back in January. That is very 0:02:51.360 --> 0:02:53.400 characteristic of us to kind of move slowly and not 0:02:53.440 --> 0:02:55.760 that often on the sector views. But we did downgrade tech, 0:02:56.560 --> 0:02:58.959 and part of what we thought was just that tech 0:02:59.000 --> 0:03:01.520 if you looked at the medians doock valuation six months, 0:03:01.600 --> 0:03:03.600 you know, kind of middle of twenty twenty three, still 0:03:03.600 --> 0:03:05.720 looked pretty reasonably valued. And by the time we got 0:03:05.720 --> 0:03:07.720 to the beginning of twenty twenty four, your medium tech 0:03:07.720 --> 0:03:10.440 stock was pretty darn expensive. So it wasn't just you know, 0:03:10.520 --> 0:03:13.239 sort of the big megacap growth names that we had 0:03:13.240 --> 0:03:17.080 sticker shock on valuation for. We've also thought, you know 0:03:17.120 --> 0:03:19.320 that frankly, we were never sort of headed toward an 0:03:19.320 --> 0:03:21.960 eminent recession the way a lot of folks were. So 0:03:22.040 --> 0:03:24.040 we've been in the rotation camp, and we said at 0:03:24.040 --> 0:03:26.040 the beginning of this year it's probably going to take 0:03:26.040 --> 0:03:27.880 a while for the rotation to happen. The thing that 0:03:27.919 --> 0:03:30.959 really needed to happen was that economic expectations needed to 0:03:30.960 --> 0:03:34.280 get reinvigorated. That's the why of this whole you know, 0:03:34.400 --> 0:03:36.760 Fed kerfuffle right now, right if the FED holds off 0:03:36.800 --> 0:03:39.200 on cutting or minimizes the cuts, it's because the economy 0:03:39.240 --> 0:03:41.280 is great. It's kind of twisted a lot of people's 0:03:41.280 --> 0:03:43.520 heads into a pretzel. But we've really been trying to 0:03:43.520 --> 0:03:46.880 position our sector views for that move kind of into 0:03:46.880 --> 0:03:48.240 cyclicality down the road. 0:03:48.760 --> 0:03:51.119 Haylor, I know, is a head of strategy. A big 0:03:51.120 --> 0:03:53.720 part of your role is to travel really around the 0:03:53.760 --> 0:03:57.320 world and meeting with RBC's big institutional investor clients. As 0:03:57.360 --> 0:04:00.720 you've been doing that this year, what's the settim been 0:04:00.840 --> 0:04:02.320 out there and how has a change? 0:04:02.320 --> 0:04:07.080 Maybe it's a great question. You know, our sentiment indicators 0:04:07.160 --> 0:04:09.280 tell you there's a lot of froth out there. Specifically, 0:04:09.320 --> 0:04:11.720 if you look at CFTC where we've been around, you know, 0:04:11.760 --> 0:04:15.120 early twenty twenty pre COVID highs, early twenty eighteen highs. 0:04:15.320 --> 0:04:18.120 I would say things don't quite feel that frothy in 0:04:18.160 --> 0:04:21.920 the conversations. They feel more like the AAII indicator, which 0:04:21.960 --> 0:04:24.480 is about one standard deviation about the long term average, 0:04:24.480 --> 0:04:26.680 so that's at a problem point, but not at two 0:04:26.800 --> 0:04:29.960 standard deviations, which is when things have typically felt very 0:04:30.000 --> 0:04:32.279 you know, kind of silly over the course of time. 0:04:32.320 --> 0:04:36.240 So things don't feel silly. It feels like a begrudging bullishness, 0:04:36.279 --> 0:04:38.240 like like people have sort of been pulled into this 0:04:38.400 --> 0:04:41.440 fighting tooth and nail and they've sort of accepted, you know, 0:04:41.480 --> 0:04:43.400 that the economy is on a decent track, but they're 0:04:43.400 --> 0:04:46.400 not all that happy about it, and they're frustrated by 0:04:46.400 --> 0:04:48.320 the dominance of the big names, but they're you know, 0:04:48.360 --> 0:04:50.560 sort of confused about when that leadership is actually going 0:04:50.600 --> 0:04:52.480 to shift. So I would say it's kind of frustrated 0:04:52.520 --> 0:04:54.720 bulls out there would be my characterization. 0:04:54.960 --> 0:04:59.160 Frustrated bulls. Another question of what you're getting asked is 0:04:59.160 --> 0:05:01.680 is anyone's starting to ask you questions about how to 0:05:01.720 --> 0:05:03.279 position for the US selection? 0:05:03.600 --> 0:05:08.480 Good, Yeah, it's a great question. It depends on where 0:05:08.480 --> 0:05:14.160 they live, is the honest answer. So European investors, Canadian investors. Obviously, 0:05:14.160 --> 0:05:15.640 I work at a Canadian bank, so I spend a 0:05:15.640 --> 0:05:18.120 lot of time with the Canadian investors. We have a 0:05:18.160 --> 0:05:20.240 franchise down in Australia as well, so I spent a 0:05:20.279 --> 0:05:23.800 decent amount of time talking to those folks. That has been, 0:05:24.000 --> 0:05:25.800 you know, kind of one of the top questions in 0:05:25.800 --> 0:05:28.560 my meetings since last summer, and really heated up in 0:05:28.600 --> 0:05:31.480 the fall, in December and January as well. In the US. 0:05:31.520 --> 0:05:33.880 It's really the interest has been sparked by the primaries 0:05:33.880 --> 0:05:36.960 and caucuses and it's you know, we've used this phrase 0:05:37.000 --> 0:05:39.480 in the past, staring at the sun, you know, ended 0:05:39.520 --> 0:05:41.880 up last year, people are like, I'll look, but let's 0:05:41.880 --> 0:05:43.479 talk about it really quick, and then let's look away. 0:05:43.520 --> 0:05:44.800 It's too painful. There's nothing to do. 0:05:44.880 --> 0:05:45.120 Yet. 0:05:45.520 --> 0:05:48.760 Now they're opening their eyes, letting their gaze, you know, 0:05:48.839 --> 0:05:51.360 sort of stay there a little bit longer. It's still 0:05:51.360 --> 0:05:53.440 pretty painful though, so people are happy to get out 0:05:53.480 --> 0:05:55.680 of the conversation. I don't think people are doing a 0:05:55.680 --> 0:05:59.159 lot yet, but they're dusting off the historical playbook. You know, 0:05:59.200 --> 0:06:01.560 one stat we have we liked the financial sector, and 0:06:01.600 --> 0:06:03.760 everyone likes the stat that seven of the last eight 0:06:03.800 --> 0:06:07.400 presidential election years you've seen the financial sector outperform the. 0:06:07.400 --> 0:06:07.640 S and P. 0:06:07.760 --> 0:06:09.719 The only time it didn't in the GFC. So that's 0:06:09.760 --> 0:06:11.880 sort of a good, you know, data point for people. 0:06:12.720 --> 0:06:15.040 I joke and say, there's safety in numbers. Right, It's 0:06:15.080 --> 0:06:17.320 such a difficult topic to talk about if you live 0:06:17.320 --> 0:06:19.960 in the US, but I say, you know, professionally, there's 0:06:19.960 --> 0:06:22.000 safety in numbers. So let's just talk about the numbers 0:06:22.040 --> 0:06:22.880 and what those represent. 0:06:23.400 --> 0:06:25.920 All right? How about that you just mentioned the financials there? 0:06:27.040 --> 0:06:29.960 Why do you guys like the financials here? Given we 0:06:30.080 --> 0:06:32.520 may see the FED start to cut rates this year, 0:06:33.800 --> 0:06:34.400 So look. 0:06:34.240 --> 0:06:36.200 I think if the fed cuts a little bit. The 0:06:36.279 --> 0:06:39.839 economic you know, the economic backdrop stays you know, decently strong, 0:06:40.360 --> 0:06:43.240 and you know, inflation is somewhat contained. You know, it's 0:06:43.240 --> 0:06:45.240 still heading in the right direction. That feels kind of 0:06:45.240 --> 0:06:48.440 like the sweet spot for the banks to me, you know, 0:06:48.520 --> 0:06:50.640 I think if we you know, and we really did 0:06:50.640 --> 0:06:52.760 do the financials as the plumbing of the economy, it's 0:06:52.839 --> 0:06:54.880 kind of become a boring sector. That wasn't you know, 0:06:54.920 --> 0:06:57.039 the case back in the you know, kind of two thousands, 0:06:57.040 --> 0:07:00.800 pre twenty ten, you know, back in you know, life cycles. 0:07:00.839 --> 0:07:02.400 But it is kind of a boring sector at this 0:07:02.440 --> 0:07:04.800 point in time. And if you think the economy is 0:07:04.839 --> 0:07:06.760 on the mend, it tends to do very well when 0:07:06.760 --> 0:07:09.159 consumer confidence is recovering, and that does seem to be 0:07:09.200 --> 0:07:11.080 the case since twenty twenty two. We're in this slow, 0:07:11.160 --> 0:07:14.760 kind of staggered halting up trends. But also it's just cheap, 0:07:15.120 --> 0:07:17.520 I will tell you. Gerard Cassidy and our bank's team, 0:07:17.600 --> 0:07:20.080 John Arshrom covers the regional banks. They have generally been 0:07:20.120 --> 0:07:23.360 more constructive than our analysts and other sectors, and Gerard 0:07:23.400 --> 0:07:25.680 in particular has really kept a cool head through a 0:07:25.680 --> 0:07:28.160 lot of the episodes that have happened over the last 0:07:28.240 --> 0:07:30.880 year and a half. And then frankly, you know, if 0:07:30.920 --> 0:07:33.040 you look at banks earnings revisions, they're midway through and 0:07:33.080 --> 0:07:36.400 earning's revision recovery. So we like that component. And then 0:07:36.400 --> 0:07:38.440 if you just go back to the rotation trade, you 0:07:38.520 --> 0:07:40.760 have to think about it in market cap terms. If 0:07:40.760 --> 0:07:42.560 we take a lot of the money out of big tech, 0:07:42.640 --> 0:07:44.440 or even a decent amount and roll it into other 0:07:44.480 --> 0:07:47.520 parts of the market, I really think that the financials 0:07:47.600 --> 0:07:50.880 ultimately have to participate. If value outperforms, financials tend to 0:07:51.000 --> 0:07:52.640 as well, and that's really just a function of their 0:07:52.680 --> 0:07:54.400 big market cap in that part of the market. 0:07:55.000 --> 0:07:57.000 Can you shift gears a little bit and talk to 0:07:57.040 --> 0:08:00.840 us about what your views are on energy? Doing enormously 0:08:00.880 --> 0:08:04.080 well so far this year, but we've got a potential 0:08:04.080 --> 0:08:07.120 for a slowing economy, potential for lower rates. What's the 0:08:07.160 --> 0:08:09.120 best way to think about energy going forward? 0:08:10.200 --> 0:08:12.360 So I would say on the economy, if you look 0:08:12.400 --> 0:08:14.800 at the data and we pull this off Bloomberg, just 0:08:14.840 --> 0:08:16.720 on the ECFC function. So I'll give you guys a 0:08:16.760 --> 0:08:18.520 little bit of a plug. But if you monitor how 0:08:18.560 --> 0:08:22.760 GDP forecasts are moving back last summer twenty twenty four 0:08:22.760 --> 0:08:25.320 real GDP on the year was expected to be point 0:08:25.360 --> 0:08:28.920 six percent, so just barely in positive territory the beginning 0:08:29.000 --> 0:08:30.640 of this year and it moved to above one. I 0:08:30.680 --> 0:08:33.320 forget exactly where it was as recently as mid February. 0:08:33.360 --> 0:08:35.440 It was one six and at the end of February 0:08:35.440 --> 0:08:37.320 it hit two point one percent, and that's still where 0:08:37.320 --> 0:08:40.319 I believe it is today. And so we've really been 0:08:40.360 --> 0:08:44.200 seeing the economic story improve. Multiple quarters for twenty twenty 0:08:44.200 --> 0:08:46.400 four are now seeing improvement. So I don't buy the 0:08:46.480 --> 0:08:49.840 idea that we're heading into a stagnant, you know, economic backdrop. 0:08:50.160 --> 0:08:52.600 I think that we're breaking out of the malaise that's 0:08:52.720 --> 0:08:55.199 characterized the last few years where people have said it's 0:08:55.200 --> 0:08:57.120 going to be sluggish forever. It's like, oh no, no, no. 0:08:57.280 --> 0:08:59.800 So that benefits energy, but frankly, you know, it's also 0:08:59.840 --> 0:09:02.400 an inflation hedge and it's cheap, and then you've got 0:09:02.480 --> 0:09:04.360 you at political risks, so we like a lot about 0:09:04.360 --> 0:09:04.880 it right now. 0:09:04.960 --> 0:09:06.599 All right, Lurie, thank you so much as always for 0:09:06.679 --> 0:09:08.920 joining us. Lori cavacin ahead of US equity strategy at 0:09:09.000 --> 0:09:22.760 RBC Capital Markets. Let's check in with David Katz, President 0:09:22.760 --> 0:09:26.760 and chief investment officer Matrix Asset Advisors. Hey, David, thanks 0:09:26.760 --> 0:09:28.640 so much for joining us here. I mean, we got 0:09:28.640 --> 0:09:32.199 a busy week here, a lot of central banks reporting, 0:09:32.760 --> 0:09:34.680 you know, with some of their comments and statements, and 0:09:34.720 --> 0:09:36.080 we're going to get some views from a lot of 0:09:36.120 --> 0:09:38.560 central banks here. When you step back and you think 0:09:38.600 --> 0:09:41.880 about our central Bank, our Federal Reserve, what do you 0:09:41.880 --> 0:09:43.880 think we're going to see? And you think the markets 0:09:43.920 --> 0:09:46.960 are accurately discounting what we might see. 0:09:48.240 --> 0:09:50.160 You think the markets are coming to terms that the 0:09:50.200 --> 0:09:52.520 Fed is going to be less aggressive in lower and 0:09:52.600 --> 0:09:54.960 rates this year and probably starts a little bit later. 0:09:55.360 --> 0:09:57.640 We're not expecting any great news out of the Fed 0:09:57.679 --> 0:10:01.320 this week or any incrementally new news. We think they're 0:10:01.360 --> 0:10:04.200 going to talk about wanting to see better inflation numbers, 0:10:04.240 --> 0:10:07.480 but the idea that they will be lowering rates will happen. 0:10:07.480 --> 0:10:09.040 They're just not going to give a timeframe. So we 0:10:09.040 --> 0:10:10.800 don't think anything news is going to come out of 0:10:10.800 --> 0:10:13.360 the Fed. We think, of anything, it creates a little 0:10:13.360 --> 0:10:15.320 bit of a headwind for the market this week, but 0:10:15.440 --> 0:10:17.360 today the market seems to be ignoring that. 0:10:18.280 --> 0:10:20.440 But looking further ahead, I mean, we've got a whole 0:10:20.440 --> 0:10:23.240 bunch of other central bank decisions coming up this week. 0:10:23.760 --> 0:10:25.240 Do you feel like the vibe is going to be 0:10:25.320 --> 0:10:28.080 overall more hawkish than people are expecting or is it 0:10:28.120 --> 0:10:31.280 going to be like some signs of dubbishness coming through. 0:10:32.840 --> 0:10:35.240 We think there is going to be a balance of 0:10:35.320 --> 0:10:38.000 both of those. We think the critical thing for investors 0:10:38.080 --> 0:10:40.800 is not to get obsessed with the exceptionally near term. 0:10:41.320 --> 0:10:44.319 Understand that the FED and the other central banks are 0:10:44.400 --> 0:10:46.839 likely going to be more dubvish as the year progresses, 0:10:47.080 --> 0:10:49.720 and if you're investing today, the markets are going to 0:10:50.120 --> 0:10:52.959 discount that sooner rather than later. So we'd be looking 0:10:53.000 --> 0:10:55.960 to put your portfolio to work with the idea that 0:10:56.000 --> 0:10:58.440 the FED is going to be lowering the rates. We're 0:10:58.559 --> 0:11:01.880 generally optimistic about stocks this year. We do expect a 0:11:01.880 --> 0:11:04.920 lot more volatility than we've seen. You had a great 0:11:04.960 --> 0:11:07.320 fourth quarter and a very good first quarter, so there's 0:11:07.320 --> 0:11:09.599 going to be some volatility. There's going to be some pullbacks, 0:11:09.840 --> 0:11:12.240 but we think ultimately stocks end the year higher than 0:11:12.280 --> 0:11:15.240 they are now, probably in the low double digits. 0:11:15.679 --> 0:11:17.480 All right, David, giving that background, what are some of 0:11:17.520 --> 0:11:21.199 the sectors you like here? Assuming you know I haven't 0:11:21.240 --> 0:11:24.480 been long the Magnificent seven, like Tom Keene has, what 0:11:24.520 --> 0:11:25.360 do you like sector wise? 0:11:26.240 --> 0:11:28.600 So basically, we think there's going to be a rotation 0:11:28.760 --> 0:11:30.360 this year with some of the things that did not 0:11:30.400 --> 0:11:32.480 do as well last year starting to do better. We 0:11:32.640 --> 0:11:34.679 think that the things that did great last year are 0:11:34.679 --> 0:11:37.559 going to slow down. You're already starting to see technology 0:11:37.600 --> 0:11:40.160 slow down some. We think that's going to continue, so 0:11:40.240 --> 0:11:44.160 we wouldn't chase last year's winners. Healthcare and financials started 0:11:44.160 --> 0:11:46.840 this year off very good after a very poor. 0:11:47.040 --> 0:11:48.080 Twenty twenty three. 0:11:48.240 --> 0:11:50.000 We think that's going to continue, so we think there 0:11:50.000 --> 0:11:52.839 are lots of opportunities in that area to make money. 0:11:52.559 --> 0:11:53.640 On a go forward basis. 0:11:54.000 --> 0:11:57.480 Utilities had a very poor twenty twenty three and even 0:11:57.559 --> 0:11:59.880 a worse start to twenty twenty four, so we think 0:12:00.480 --> 0:12:02.480 if you have a six to twelve month time horizon, 0:12:02.520 --> 0:12:04.880 there are lots of it stocks in the utility sector, 0:12:05.080 --> 0:12:07.320 then we think are going to be good investments, especially 0:12:07.360 --> 0:12:09.520 if the economy slows down a little bit later in 0:12:09.520 --> 0:12:12.079 the year and the Fed starts the lower rates, We 0:12:12.080 --> 0:12:13.840 think utility is going to be a very good place 0:12:13.880 --> 0:12:16.160 to be, so nice place to make money with much 0:12:16.200 --> 0:12:17.000 lower risks. 0:12:17.200 --> 0:12:19.040 Looking at the return so far. You're to date in 0:12:19.080 --> 0:12:21.280 different sectors of the SP five hundred. The one at 0:12:21.280 --> 0:12:24.280 the very bottom is real estate. What's your view there? 0:12:25.720 --> 0:12:28.439 So we don't have a great conviction on real estate. 0:12:28.480 --> 0:12:30.800 We think that if rates start to go lower, as 0:12:30.800 --> 0:12:32.400 we expect, it probably gives. 0:12:32.120 --> 0:12:33.760 Them a little bit of a tailwind. 0:12:34.240 --> 0:12:36.800 But there's so many moving parts right now with real estate, 0:12:36.800 --> 0:12:39.280 we just think they're better places to make money. So 0:12:39.360 --> 0:12:41.240 that's a sector we don't have a great conviction on. 0:12:41.280 --> 0:12:44.120 We've been negative on it for the last eighteen months. 0:12:44.280 --> 0:12:47.360 I'd say we're probably neutral at this point, David. 0:12:47.360 --> 0:12:48.800 One of the names on your list that jumps out 0:12:48.840 --> 0:12:53.240 of me is one we all know. Cisco. CSCO is 0:12:53.280 --> 0:12:56.080 the ticker symbol there, two hundred billion dollar market cap, 0:12:56.080 --> 0:12:58.880 but the stocks just kind of flat here. You're to 0:12:58.960 --> 0:13:01.600 date flat over the ear twelve months. It is certainly 0:13:02.240 --> 0:13:05.520 not you know, received any AI pop. What's your call 0:13:05.559 --> 0:13:06.040 on Cisco? 0:13:07.240 --> 0:13:09.760 Well, we do think it is a second derivative AI 0:13:09.880 --> 0:13:14.439 play as work communications take place, as computers and PCs 0:13:15.200 --> 0:13:18.880 are using more mainframes in the cloud to do AI, 0:13:19.320 --> 0:13:21.960 we think Cisco's going to have to lay out more cables. 0:13:22.400 --> 0:13:25.120 You had a problem last year because there was a 0:13:25.120 --> 0:13:27.600 lot of overordering because people weren't able to get as 0:13:27.640 --> 0:13:30.320 much as they wanted. When Cisco is able to fulfill 0:13:30.440 --> 0:13:33.239 all of their orders, a lot of those orders got canceled, 0:13:33.480 --> 0:13:36.240 so that's made a two or three quarter slow down 0:13:36.280 --> 0:13:38.000 in their revenues. We think it's going to pick up 0:13:38.000 --> 0:13:40.080 this year. We think the worst is behind them. Box 0:13:40.160 --> 0:13:42.400 to twelve thirteen times earning and pays it like a 0:13:42.440 --> 0:13:44.400 three and a half percent yield, So we think for 0:13:44.480 --> 0:13:47.280 investors that have a twelve to eighteen month time horizon, 0:13:47.600 --> 0:13:49.840 they're going to start to catch up. We're not expecting 0:13:49.880 --> 0:13:53.560 anything spectacular, but we easily think the stockcast fifteen to 0:13:53.640 --> 0:13:56.120 twenty percent upside with very low risks. 0:13:56.440 --> 0:14:00.000 Another name on your list which intrigues me quite a lot. Starbucks. 0:14:00.200 --> 0:14:02.640 The stock's not been doing particularly well over the last 0:14:02.640 --> 0:14:06.080 twelve months, but what's the play there? 0:14:06.120 --> 0:14:08.880 So the great thing about Starbucks is they make an 0:14:08.920 --> 0:14:13.360 addictive product that generally is pretty safe for people and 0:14:13.360 --> 0:14:16.559 in fact, in some cases healthy for people. They've got 0:14:16.600 --> 0:14:19.440 a great footprint around the globe. The stock has done 0:14:19.520 --> 0:14:22.640 poorly in the last six months out of concerns that 0:14:22.760 --> 0:14:26.040 China is slowing down. China is slowing down, but China 0:14:26.160 --> 0:14:29.120 is going to start some stimulative packages in the next 0:14:29.120 --> 0:14:31.800 three to six months. And you're getting Starbucks at a 0:14:31.840 --> 0:14:34.400 great price that pays a good yield. We like the 0:14:34.440 --> 0:14:37.400 new CEO of the company. We think the company is 0:14:37.520 --> 0:14:41.320 very well positioned for the future. Gen Z likes their products. 0:14:41.320 --> 0:14:44.480 They like the ice and coffees, so we think that 0:14:44.560 --> 0:14:47.280 they are going to be a sports to be reckoned 0:14:47.320 --> 0:14:48.880 with for the long term, and you're getting it at 0:14:48.880 --> 0:14:49.680 a very good price. 0:14:50.560 --> 0:14:53.520 David, here's a name. Like. We had the regional banking 0:14:53.560 --> 0:14:56.200 crisis starting a little bit more than a year ago, 0:14:56.560 --> 0:14:59.280 and I've always said, boy, I'd love to have I'd 0:14:59.320 --> 0:15:00.800 love to be able to kind of go into my 0:15:00.880 --> 0:15:02.520 PMF I'm at a hedge fund and say, hey, give 0:15:02.520 --> 0:15:05.760 me another couple hundred million bucks. I'm going along regional banks. 0:15:05.840 --> 0:15:09.920 I think this is the bottom. I'm not sure we're 0:15:09.960 --> 0:15:13.560 there yet, but P and C Bank is on your list, 0:15:13.600 --> 0:15:15.280 and this is I'm not really a region, it's kind 0:15:15.280 --> 0:15:18.000 of like a super regional, I guess, but it's I 0:15:18.000 --> 0:15:20.080 think kind of grouped with some of those regional banks. 0:15:20.840 --> 0:15:22.600 Is it safe to go into some of these names. 0:15:22.600 --> 0:15:23.320 Do you think. 0:15:25.000 --> 0:15:28.760 It's safe to go into the best quality super regional? 0:15:29.200 --> 0:15:32.280 So the banking group has had a stealth rally since 0:15:32.320 --> 0:15:35.200 May of last year. They've done really well after the 0:15:35.240 --> 0:15:38.680 pain of last March April. But we really would want 0:15:38.680 --> 0:15:41.960 to focus on the best quality companies, best credit quality, 0:15:42.520 --> 0:15:47.880 good commercial real estate portfolios, and conservative financing. PNC meets 0:15:47.920 --> 0:15:51.320 that ticket US Bank or same thing Bank of New York. 0:15:51.840 --> 0:15:55.640 We would not delve into the lower quality companies just 0:15:55.680 --> 0:15:58.480 because we don't know the risk there, and you only 0:15:58.520 --> 0:16:01.240 find out the risk for the big problems after the fact. 0:16:02.200 --> 0:16:03.760 Some of the ones that I mentioned. 0:16:03.480 --> 0:16:06.840 Really good quality, very good valuations, very nice sealds. We 0:16:06.880 --> 0:16:09.680 think if the Fed starts lowering rates and we don't 0:16:09.680 --> 0:16:13.440 have a recession, which we're not forecasting, these companies should 0:16:13.440 --> 0:16:15.320 do quite well real quick. 0:16:15.320 --> 0:16:17.200 We don't have a lot of time left. Apple, We've 0:16:17.200 --> 0:16:19.680 been talking about it a lot this morning. What's your 0:16:19.760 --> 0:16:21.800 view there, especially with the news that about the potential 0:16:21.840 --> 0:16:22.680 tie up with Google. 0:16:24.520 --> 0:16:27.160 So we own Apple. We went into this year when 0:16:27.200 --> 0:16:29.160 it was the one ninety to one ninety five level 0:16:29.200 --> 0:16:31.880 a little bit less enthusiastic. At the one to seventy level. 0:16:31.960 --> 0:16:34.280 We think it's a very good re entry point for 0:16:34.400 --> 0:16:39.720 new moneies. We think today's announcement or speculation is a positive. 0:16:40.000 --> 0:16:42.760 Apple is going to have AI on their new phones. 0:16:42.800 --> 0:16:45.880 Whether it's you know, with with Google or with someone else, 0:16:46.080 --> 0:16:48.000 there will be a new product cycle. We think the 0:16:48.040 --> 0:16:50.640 market has gotten overly negative over the last few weeks, 0:16:50.760 --> 0:16:53.600 so it's a pretty good entry point. It's it's about 0:16:53.600 --> 0:16:55.960 fairly valued, but we think we'll go higher. 0:16:56.000 --> 0:16:58.280 All right, David, thanks so much for joining us again. 0:16:58.440 --> 0:17:01.960 David Cassie's a president and chief investment officer for Matrix 0:17:02.080 --> 0:17:09.040 Asset Advisors. Let's step back and take a big, big 0:17:09.200 --> 0:17:11.840 holistic look at these markets. So we can do that 0:17:11.840 --> 0:17:14.600 with our next guest, Dana Diyoria. She is co CIO 0:17:14.800 --> 0:17:18.200 of invest Net. Dana, thanks so much for joining us here. 0:17:18.400 --> 0:17:21.560 You know, I'd love to just start with asset allocation here. 0:17:21.560 --> 0:17:24.280 We kind of grew up with a sixty forty equity 0:17:24.359 --> 0:17:27.400 fixed income portfolio. Now a lot of folks are saying, hey, 0:17:27.400 --> 0:17:30.160 you need to have a meaningful presence in alternative investments, 0:17:30.440 --> 0:17:33.760 so let's step back in asset allocation. How do you 0:17:33.800 --> 0:17:35.280 guys think about it right here? 0:17:37.560 --> 0:17:41.240 Well, we definitely an investment you know, accommodate both right 0:17:41.600 --> 0:17:43.679 at a high level, I would say to balance, the 0:17:43.680 --> 0:17:47.639 sixty forty still dominates, you know, no surprise there, you know. 0:17:47.680 --> 0:17:50.360 And it's interesting because I'm sure you hear a lot 0:17:50.400 --> 0:17:52.160 of this, of course, because in the last few years 0:17:52.160 --> 0:17:54.840 we've just had, you know, several times where it just 0:17:54.880 --> 0:17:58.520 didn't seem like equities and fixed income we're hedging each other. 0:17:58.960 --> 0:18:02.240 I you know, the performance of fixed income, I think 0:18:02.320 --> 0:18:04.440 is the real issue that people are having and why 0:18:04.480 --> 0:18:07.360 you're hearing kind of more of a push for alternatives. 0:18:07.920 --> 0:18:10.879 You know, everybody expects equities to drop there. They're not 0:18:10.960 --> 0:18:14.000 as sanguine about seeing their fixed income losing, especially when 0:18:14.040 --> 0:18:17.000 it gets to double digits. But you know, so there's 0:18:17.040 --> 0:18:21.200 a I would say, a steady increase in interest and alternative. 0:18:21.240 --> 0:18:23.320 And I also think a lot of the big alternative 0:18:23.359 --> 0:18:25.840 players are looking to come down market to you know, 0:18:25.880 --> 0:18:29.160