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Speaker 2: President elect Donald Trump has been crystal clear his second
Speaker 2: term will be an assault on climate policy. He just
Speaker 2: released a statement that said that he's thrilled to announce
Speaker 2: Doug Bergham, the Governor of North Dakota, is joining the
Speaker 2: administration as bost Secretary of the Interior and as chairman
Speaker 2: of the newly formed National Energy Council. It'll consist of
Speaker 2: all departments and agencies involved in permitting production, generation, distribution, regulation,
Speaker 2: transportation of all forms of American energy. The statement continues
Speaker 2: on to say that the radical lefts war on American
Speaker 2: energy has hurt our allies by forcing them to buy
Speaker 2: from our adverse series, who in turn use those profits
Speaker 2: to fund wars and terror. Energy dominance will allow us
Speaker 2: to sell energy to our friends. For more on what
Speaker 2: the climate agenda looks like or doesn't look like under
Speaker 2: the President elect, and that new administration that comes in
Speaker 2: on January twentieth. We're joined by Lesli Kaufman. She's Bloomberg
Speaker 2: Green climate change reporter and for Bloomberg Business Week. She
Speaker 2: writes about the President elect aiming a wrecking ball at
Speaker 2: Climate Policey check out her story on the Bloomberg terminal
Speaker 2: and at Bloomberg dot com slash business Week. Leslie joins
Speaker 2: us from New York City. Leslie to bring up that
Speaker 2: statement which he might not have even seen yet because
Speaker 2: it just came out from the former president, but from
Speaker 2: the President elect and former president. He says that America
Speaker 2: is blessed with vast amounts of liquid gold and other
Speaker 2: valuable minerals and resources right before our feet. We're going
Speaker 2: to drill, baby, drill, and expand all forms of energy
Speaker 2: production to grow our economy and create good paying jobs.
Speaker 2: I want to take a step back and sort of
Speaker 2: understand what the energy industry has looked like over the
Speaker 2: last four years so we can better understand what the
Speaker 2: President elect is saying right now.
Speaker 3: Right Well, the United States has not stepped back exactly
Speaker 3: from oil production. We've been the number one oil exporter
Speaker 3: for this oil exporter for six years. That includes both
Speaker 3: the Trump and the Biden administration, So we haven't exactly
Speaker 3: walked away from that, but Biden has been trying to
Speaker 3: nudge the US towards a much greener economy, an economy
Speaker 3: that doesn't rely so much on fossil fuels. He had,
Speaker 3: of course, the Inflation Reduction Act, which put billions of
Speaker 3: dollars towards new forms of energy. And the question now
Speaker 3: is what happens under Trump.
Speaker 4: Let's talk more about that, because one of his pledges
Speaker 4: on day one has specifically been to end offshore When
Speaker 4: when you're thinking about more of those energy side of
Speaker 4: things that you're mentioning, would he actually be able to
Speaker 4: do that as quickly as he claims that he could
Speaker 4: end it when he comes into office.
Speaker 3: Well, this is a more complicated question. There's some pieces
Speaker 3: of that. The first is that the IRA some of
Speaker 3: that money has already gone out, so some of that
Speaker 3: is committed.
Speaker 5: He could.
Speaker 3: Go after the tax credits that promote wind in solar.
Speaker 3: I think he will have a tough time doing that.
Speaker 3: Why because a lot of the beneficiaries of those tax
Speaker 3: credits are in red states and a group of congressmen
Speaker 3: has already written a note to Mike Johnson saying, please
Speaker 3: don't get rid of those tax subsidies. We'd like those.
Speaker 3: He's made a special point about wind. He does hate wind.
Speaker 3: I am sure there are all sorts of things in
Speaker 3: permitting and other things that could make it difficult for
Speaker 3: people who are doing wind generation.
Speaker 2: However, okay, talk a little bit about that, because there
Speaker 2: is there's some real politics involved in this, as you mentioned.
Speaker 2: A lot of the beneficiaries of the Reduction Act, as
Speaker 2: you just said, and you write in the piece as well,
Speaker 2: are in red states and have Republican members of Congress.
Speaker 2: So how do you dismantle something that is actually popular
Speaker 2: even if those politicians didn't approve it. And you have
Speaker 2: some examples of politicians sort of lotting the money that's
Speaker 2: coming to this even after not voting for it.
Speaker 3: Right, they certainly have gone after it and gotten as
Speaker 3: much as they can. This includes everything from solar and
Speaker 3: wind farms, but also battery manufacturers and things like evs
Speaker 3: and ev factories. All of those are things that a
Speaker 3: lot of people will believe will be the economy of
Speaker 3: the future, and they'd like China not to dominate as
Speaker 3: much as it already does. So this has also brought
Speaker 3: a lot of jobs to the US and certainly billions
Speaker 3: in investment. So will he take on the tax credits directly,
Speaker 3: Maybe not, But there are still lots of things he
Speaker 3: can do to adjust the IRA to make it much
Speaker 3: more fossil fuel friendly. For instance, we give all sorts
Speaker 3: of grants for innovation, they could move that away from
Speaker 3: clean energy more towards things that fossil fuel companies like,
Speaker 3: like carbon capture, for example, hydrogen things that come from
Speaker 3: oil and fossil fuel products. This would give money back
Speaker 3: to oil companies or allow them to continue to produce
Speaker 3: fossil fuel emissions and maybe have it carbon captured later.
Speaker 3: So those are some of the things that he can
Speaker 3: do to adjust the law to make it more friendly
Speaker 3: to his contributors and to the oil industry.
Speaker 2: Does the oil industry actually want to be drilling more
Speaker 2: right now in the US given where oil prices are
Speaker 2: and the demand concerns out of China that sent oil
Speaker 2: prices lower this week, right, Well.
Speaker 3: So there's an interesting question. I mean, there were leases
Speaker 3: that went up for sale under Trump that no one took.
Speaker 3: Its oil is very sensitive to things beyond the US market,
Speaker 3: and so it'll be very interesting to see the head
Speaker 3: of Exon is now on the record saying he thinks
Speaker 3: the IRA is a good thing. So of course, like
Speaker 3: I said, there's plenty of goodies in there for fossil
Speaker 3: fuel companies too, so they don't exactly want to see
Speaker 3: that wiped off the boards either.
Speaker 4: Well, speaking of the fossil fuel industry, Donald Trump has
Speaker 4: promised to increase oil and gas production, even though the
Speaker 4: US already set records. To your point that you were
Speaker 4: mentioning earlier at the start of this, and especially if
Speaker 4: you think about those records under the Biden administration, what
Speaker 4: do you think a new Trump administration could do to
Speaker 4: increase it even more than it already has.
Speaker 3: Well, some of the things they're talking about is making
Speaker 3: more public lands available for leasing. They could loosen up
Speaker 3: water standards and things like that, which would make it
Speaker 3: easier to get permitting. And in particular, permitting has been
Speaker 3: a problem for the United States. We just have to
Speaker 3: acknowledge that across all our energies systems. I think a
Speaker 3: lot of people in renewable energy have been so frustrated
Speaker 3: with the permitting process also nuclear. One hope for green
Speaker 3: greenies is that the Trump administration will continue nuclear that
Speaker 3: they will not be hostile to it because that has
Speaker 3: been a bar bipartisan issue. And if they can loosen
Speaker 3: up some of the permitting, that might speed everyone's energy capabilities.
Speaker 3: Of course, you produce the capabilities.
Speaker 4: Right And of course when we bring up energy oil
Speaker 4: and gas as well as gas production, people are going
Speaker 4: to think back obviously to their pocketbooks as well as
Speaker 4: what's happening with gas prices. So when you think about
Speaker 4: all these different kind of proposals, could any of this
Speaker 4: lead to lower energy costs for Americans?
Speaker 3: Sometimes energy costs, you know, it's complicated. Obviously, more coming
Speaker 3: onto the grid is good. The huge and vestments in solar,
Speaker 3: for instance, are paying off. Now solar is now half
Speaker 3: the price of natural gas because we've put a huge
Speaker 3: incentive into building it. So yes, I do think that
Speaker 3: proper incentives can lead to cheaper prices for Americans. But
Speaker 3: it's complicated. It has to do with the demand, it
Speaker 3: has to do with you know, we all saw oil
Speaker 3: prices shoot up. That had to do with COVID and
Speaker 3: the sudden shutting things down and then having to revamp
Speaker 3: things up just as there were demands. As you know,
Speaker 3: there are wars in the Middle East, There's a lot
Speaker 3: of things that are outside the control of the United States.
Speaker 2: Where does this leave renewables in general? Leslie, because these
Speaker 2: projects are already broken ground across the country, indeed, some
Speaker 2: in red states or at least in more conservative districts.
Speaker 2: I've been by some new ones in conservative parts of
Speaker 2: New York State, for example, where they've already broken ground.
Speaker 2: Where does it leave projects that could be in limbo?
Speaker 5: I think that.
Speaker 3: There is great hope that there is enough momentum that
Speaker 3: those will just keep going, that their goal will not
Speaker 3: be to dislodge things that are already occurring, because the
Speaker 3: contracts are signed and the money is moved, and is
Speaker 3: probably not going to be their goal. The question is
Speaker 3: what does it mean for future innovation down the line?
Speaker 3: What does it mean for new projects? There's been a
Speaker 3: huge battle in this nation of natural gas versus renewables.
Speaker 3: This could tip the hand towards natural gas even further.
Speaker 4: What about when it comes to electric vehicles? How much
Speaker 4: would a Trump administration change what's already in mind for
Speaker 4: EV production and ownership When you're thinking about the green
Speaker 4: aspect side of it.
Speaker 3: Right, well, so EV is a whole complicated list of
Speaker 3: things you saw that they've already said that they will
Speaker 3: probably go after the tax credit. This is despite the
Speaker 3: fact that Elon Musk has been a huge supporter. So
Speaker 3: that's seven five hundred dollars. There've been rumors outside of
Speaker 3: Washington that that's going to be in the first tax package.
Speaker 3: They'd like to go after that, So that could certainly
Speaker 3: affect sales in the short run. But then there's a
Speaker 3: lot of questions about highways. Are you going to push
Speaker 3: to have the infrastructure for EVS there? That does not
Speaker 3: seem like that would be a huge priority for the
Speaker 3: Trump administration. So I do think that they will. They
Speaker 3: will slow EVS at least for a while.
Speaker 2: Is there any optimism from folks you talk to about
Speaker 2: Elon Musk? Being close to the president, he understands the
Speaker 2: challenges the climate faces. He's talked a lot about renewable energy.
Speaker 2: He is a fan of renewable energy.
Speaker 3: He is a fan of renewable energy, and Republicans themselves
Speaker 3: used to be a fan of all kinds of energy.
Speaker 3: That was one of their benefits. They used to say,
Speaker 3: I'm not against renewables, I'm just for everything. It's unclear
Speaker 3: that Trump feels that way. I think that there's a
Speaker 3: lot of wait and see, a lot of hope placed
Speaker 3: on certain people, and I think we have to say
Speaker 3: there's just a big question mark about what they'll do.
Speaker 3: We can say, looking back at the last Trump administration
Speaker 3: that it was fairly hostile. That particularly when you looked
Speaker 3: at the kind of regulations they put in place, or
Speaker 3: more importantly, the regulations they knocked out. They were not
Speaker 3: particularly friendly.
Speaker 5: That said.
Speaker 3: He said he'd come in and be very friendly to coal,
Speaker 3: but Cole continued to decline under his administration. I don't
Speaker 3: know if you recall his first months that brought miners
Speaker 3: into interior. He was going to help Cole grow. He
Speaker 3: did not.
Speaker 2: Lesli Kaufman, Bloomberg Green Climate Change reporter. Check out her
Speaker 2: story in a Bloomberg Business Week and if you never
Speaker 2: want to miss a Bloomberg Business Week story, become a
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Speaker 2: now Bloomberg dot com slash subscribe Now.
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Speaker 2: Well, so much happening right now that the c suite
Speaker 2: we know is focused on companies all over the country
Speaker 2: and indeed all over the world. A new administration coming
Speaker 2: in January, figuring out what tariffs and trade will look like,
Speaker 2: trying to parse through those names that have been announced
Speaker 2: as the transition team makes its way to Washington. We
Speaker 2: talked a lot about that last week, perhaps though, about
Speaker 2: ESG and sustainability initiatives for companies, how those look under
Speaker 2: the next administration, especially one that denies climate change even exists.
Speaker 2: Nina Tretman is a Bloomberg News senior editor who writes
Speaker 2: the weekly CFO Briefing newsletter. You can sign up for
Speaker 2: that at Bloomberg dot com slash CFO Briefing. She joins
Speaker 2: us here in the Bloomberg BusinessWeek Studio. We're also joined
Speaker 2: right now by Deanna Strabel, the CEO and formerly CFO
Speaker 2: of Principal Financial Group. She joins us from Iowa. Nina,
Speaker 2: I want to start with you and just get an
Speaker 2: understanding from you about how you're thinking about the CFO
Speaker 2: Briefing newsletter this week ahead of cop Yeah.
Speaker 5: Yeah, thank you.
Speaker 6: Very much for having me. Yeah, one thing that we'll
Speaker 6: look at in the upcoming edition is specifically this how
Speaker 6: do companies navigate this that we have COP twenty nine,
Speaker 6: Who's what's is going on in Azerbaijan. We also have
Speaker 6: the new administration getting ready here in the US, and
Speaker 6: of course the contrast couldn't be starker, and companies are
Speaker 6: in this in the middle ground there sort of trying
Speaker 6: to navigate climate change which increasingly we all feel, and
Speaker 6: the realities of this new administration, and so we are
Speaker 6: speaking to CFOs about this in the new upcoming edition
Speaker 6: of the CFO Briefing. We're talking to them about sort
Speaker 6: of how do they figure out new reporting requirements. There's
Speaker 6: new regulation taking place in the EU, for example, on that.
Speaker 6: We're also talking to them about net zero and why
Speaker 6: those goals are trickier to achieve then you might think.
Speaker 6: And then also we're talking to them about sustainability financing
Speaker 6: and the fact that sort of as debt markets around
Speaker 6: the world have been pretty busy this year, we've also
Speaker 6: seen an increase in that interestingly of the America so
Speaker 6: sort of flagging behind Europe and Asia and Pacific regions there. So, yeah,
Speaker 6: what are we bring in Deana? Thanks for joining us again.
Speaker 6: It was great to talk earlier this week. Could you
Speaker 6: talk a little bit to us about how Principal is
Speaker 6: navigating that challenge that I just described earlier.
Speaker 5: Yeah, thank you so much, and it's great to be
Speaker 5: with you today.
Speaker 7: You know, one of the things is I was just
Speaker 7: announced earlier this week as moving from the CFO position
Speaker 7: to our CEO elect position, with that taking over in
Speaker 7: early twenty twenty five. For those of you that don't know,
Speaker 7: Principle the global financial services company across retirement, asset management,
Speaker 7: and workplace benefits, but specifically you talked about just the
Speaker 7: time that we're in regarding both just the election and
Speaker 7: some of the uncertainty around that, as well as the
Speaker 7: ESG and the sustainability journey. I think the good news
Speaker 7: on both front is, you know, we have navigated for
Speaker 7: one hundred and forty five years over a lot of
Speaker 7: different regimes, a lot of different agendas regarding these topics,
Speaker 7: and ultimately we come back to doing what we think
Speaker 7: is right for our clients and right for our customers
Speaker 7: and employees, and ultimately feel that in doing that, we'll
Speaker 7: navigate these uncertain waters in a very effective way, but
Speaker 7: would love to go deeper if you want to dive
Speaker 7: a little deeper into those items.
Speaker 4: Yeah, definitely do that, Dana, because I know that Principle
Speaker 4: sold its for sustainability bond back in twenty twenty one,
Speaker 4: and you were considering potentially doing so again if any
Speaker 4: sort of good opportunities arise. So talk more about while
Speaker 4: you feel this is the right thing to do, and
Speaker 4: what opportunities you might see again to jump back in.
Speaker 7: Yeah, we did, as you mentioned, issue our first sustainable
Speaker 7: bond a few years ago, and ultimately it is still
Speaker 7: something that we assess whenever we're facing an opportunity where
Speaker 7: we need to refinance a current debt or issue a
Speaker 7: new one. And so again we do have a debt
Speaker 7: that matures in twenty twenty five. We've made no decisions
Speaker 7: whether we will reissue from a sustainability perspective or not,
Speaker 7: but it is one thing that we'll assess, and really
Speaker 7: what comes into it is thinking about obviously economics, but
Speaker 7: also investor demand and ultimately how that fits into the
Speaker 7: landscape of when we are issuing.
Speaker 5: And so more to come on that, but we are.
Speaker 7: Very pleased with our issuance that we have had great
Speaker 7: client interest in that, our investor interest in that, and
Speaker 7: we'll continue to assess that as we move forward.
Speaker 6: One follow up for me. You talked about your clients
Speaker 6: and what's right for your clients. What are you hearing
Speaker 6: from clients sort of thinking about us clients but also
Speaker 6: those in Europe, like, where do they stand on this topic?
Speaker 5: Yeah?
Speaker 7: I think you know, as I mentioned earlier, we are
Speaker 7: an asset manager and we have clients and customers around
Speaker 7: the globe. I think the first thing I would say
Speaker 7: is every climate client is different. You know, there is
Speaker 7: some regional geographic differences. Obviously sustainability in ESG has been
Speaker 7: something much higher on the priority of the European clients
Speaker 7: and investors, But even within an any geography, there are
Speaker 7: clients that ultimately have either a higher or a lower.
Speaker 5: Sensitivity to that.
Speaker 7: And so ultimately we're going to really take seriously our
Speaker 7: fiduciary responsibility to our clients and acting in their best
Speaker 7: interest comes first and foremost. And so if you look
Speaker 7: across our asset management solutions, we have a wide range
Speaker 7: of choice there that can really resonate with that different
Speaker 7: landscape that we see amongst our client base.
Speaker 2: Now is demand right now for that type of asset
Speaker 2: or that type of offering, Deana, because it seems at
Speaker 2: least many Americans that's not necessarily on their radar right now,
Speaker 2: given what we saw at the polls last week. It's
Speaker 2: not like this is twenty twenty one and this is
Speaker 2: top of mind for a lot of people.
Speaker 7: Yeah, I would agree with that, but I don't think
Speaker 7: it's a broad base that there's no one in the
Speaker 7: US that is interested in that. And so again I
Speaker 7: just come back to ultimately, we listen to the clients
Speaker 7: and we're able to meet their needs, whether that's high
Speaker 7: on their priority list or lower. But I do think
Speaker 7: given I do agree with really the backdrop of what
Speaker 7: you said, and ultimately it's a much higher interest when
Speaker 7: we talk to clients outside of the US than I
Speaker 7: would say it is here in the US.
Speaker 4: I want to switch gears quickly because we only have
Speaker 4: a little under two minutes left here. But when you
Speaker 4: take over the helm of CEO of Principal on January seventh,
Speaker 4: you will be the first CEO to lead at the firm.
Speaker 4: What do you think needs to be done to get
Speaker 4: more females at the head of Fortune five hundred companies.
Speaker 5: Yeah, so you are correct.
Speaker 7: I am proud to join the small but growing ranks
Speaker 7: of female CEOs, particularly when you look at the financial
Speaker 7: services sector.
Speaker 5: I think if you look at my path, it's been
Speaker 5: not linear.
Speaker 7: I started. I'm an actuary by background. Then I spent
Speaker 7: twenty years actually running P and L leadership. Then I
Speaker 7: moved in to the chief financial officer role, and then
Speaker 7: ultimately I'll be transitioning into this role in January.
Speaker 5: And I do think it's a journey, right. It is
Speaker 5: continuing to.
Speaker 7: Give women the opportunity to have a seat at the table.
Speaker 5: Principal has long been a supporter of that.
Speaker 7: If you look at our board, if you look at
Speaker 7: our management team, if you look at us thirty years ago,
Speaker 7: we had a lot of gender diversity. And again that
Speaker 7: environment has encouraged others to continue to rise within senior
Speaker 7: manager of the organization. So I think it's giving it
Speaker 7: opportunities females, finding organizations that support that and ultimately seeing
Speaker 7: other people succeed gives others the confidence that they can
Speaker 7: reach those aspirations as well.
Speaker 2: Dan, I canna have to leave it there. Deanna Strabels,
Speaker 2: the incoming CEO, formerly CFO of Principal Financial Group, joining
Speaker 2: us from Iowa. Also here in the studio Nina Traman,
Speaker 2: Bloomberg News Senior editor. She writes the CFO Briefing newsletters.
Speaker 2: Sign up for it at Bloomberg dot com slash CFO Briefing.
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Speaker 5: Now about you let me drive?
Speaker 1: Oh no, no, no, no, honey, please, I'll do the travel.
Speaker 5: Excuse mate, I want to try it.
Speaker 2: It's good question time.
Speaker 1: This is the drive to the Globe dot Tim thing.
Speaker 5: We'll bround Dad.
Speaker 4: On Bloomberg Radio, Jess Meant and Tim Senovik here in
Speaker 4: the Bloomberg Interactive Brokers studio. And what Charlie was just mentioning,
Speaker 4: we do have just under twenty minutes to go before
Speaker 4: the closing bell on this Friday, wrapping up the week
Speaker 4: here with the S and P five hundred on pace
Speaker 4: for actually to notch losses here and closing for the week,
Speaker 4: as well as a NASAQ one hundred, so would be
Speaker 4: the third week of losses in the past month for
Speaker 4: the SNP. Well, the NATSAK one hundred scene just two
Speaker 4: weeks of losses in the past ten And of course, Tim,
Speaker 4: you know it might feel like earning seed is in
Speaker 4: has winded down. Oh God, it ends I know it's true.
Speaker 4: So we still have retailers though, even though ninety percent
Speaker 4: of companies in the S and P five hundred had
Speaker 4: reported so far. So we're gonna have Walmart Low's target,
Speaker 4: We'll have department stores. So real big tell here on
Speaker 4: the consumer, especially on the back of the tail sales
Speaker 4: data that we got earlier this week. But of course
Speaker 4: you cannot forget the world's most valuable company as well
Speaker 4: as the world's biggest ship maker. You may have heard
Speaker 4: of it, Tim and Vidia, but also reporting after the
Speaker 4: closing bell next Wednesday, so stay tuned for that. But
Speaker 4: more of the broader market heading into next week, along
Speaker 4: with the implication of this week's FED commentary on the
Speaker 4: path of rate cuts. Joining us now is Tracy Bell
Speaker 4: CIO at First Horizon Advisors in Alabama, Tracy. Always great
Speaker 4: speaking with you. Of course, we did have Bloomberg's Mike
Speaker 4: McKee interviewing Chicago Fed President Austin Goulesby in the previous hour,
Speaker 4: obviously talking about kind of the conundrum of where the
Speaker 4: neutral rate could potentially be when some officials were thinking
Speaker 4: it was closer to three percent, but was kind of,
Speaker 4: you know, still standing firm on not mentioning too much
Speaker 4: about what could potentially happen with fiscal policy coming out
Speaker 4: of Washington and saying that they're still going to be
Speaker 4: on their mandate for obviously price stability, maximum employment. So
Speaker 4: when it comes to you and managing money for your
Speaker 4: clients going into next year when you do have a
Speaker 4: lot of uncertainty on the policy side, how are you
Speaker 4: feeling going into this and what are you recommending to
Speaker 4: your clients to add exposure to or to sell after
Speaker 4: what's been a really gangbuster not just a year but
Speaker 4: the past two years at the S and P five
Speaker 4: hundred up more than fifty percent.
Speaker 8: Hey, yes, thank you. It's great to join you guys again.
Speaker 8: And I saw that interview with Mike McKee and Austin
Speaker 8: googles Still a little while ago, and yes, he did
Speaker 8: stick to his guns on it, but he did say
Speaker 8: something that was really important. If CPI stays where it
Speaker 8: is today, it would be too high. So you know,
Speaker 8: that's that's the talk this week after having quite a
Speaker 8: run up in the equity markets after the election, that
Speaker 8: having grown up in bonyles after the election, and then
Speaker 8: getting a CPI number that was a little on the
Speaker 8: hot side in that core services side, and then watching
Speaker 8: that three month moving average CPI continue to move a
Speaker 8: little higher from where it was back this summer, and
Speaker 8: you kind of ended up with the perfect storm today
Speaker 8: of a sell off in markets on the equity side. So,
Speaker 8: you know, thinking about where we're talking to for next year,
Speaker 8: We've had a couple of years of really strong equity markets,
Speaker 8: and that equity market return has been especially concentrated within
Speaker 8: large cap growth stocks and technology stocks in particular. So
Speaker 8: a lot of clients today may find themselves in the
Speaker 8: position where their targets are a little out of whack. So, yeah,
Speaker 8: it's argetting in.
Speaker 4: That case, are you trimming say when you have a
Speaker 4: rally in some of these big names. Obviously in Vidia
Speaker 4: didn't have the greatest quarter in the third quarter, but
Speaker 4: still one of the top performing stocks. Even the top
Speaker 4: performing stocks actually at one point coming into this quarter
Speaker 4: was up almost one thousand percent over the last two years.
Speaker 4: So do you end up having to trim a stock
Speaker 4: like that ahead of earnings next week?
Speaker 8: Yeah, you know, trying to time before and after earnings
Speaker 8: that that's really difficult to do. Markets can move around
Speaker 8: those reports, and you really shouldn't try to time too much,
Speaker 8: but you should look at your overall exposure. So if
Speaker 8: you're overexposed to equities at this point, you've got a
Speaker 8: great opportunity to maybe trim that back and go go
Speaker 8: into some fixed income. Some guilds are there now that
Speaker 8: haven't been there in a while, especially after the past
Speaker 8: couple of weeks. And then there's also the opportunity to
Speaker 8: diversify the equity exposure across market cap. So large cap
Speaker 8: stocks are expensive. They are trading it close to twenty
Speaker 8: two times next year's earnings of the IC and P
Speaker 8: five hundred.
Speaker 4: Glad you brought that up, because that's also above the
Speaker 4: ten year average, which sits around eighteen. So at this point,
Speaker 4: when you have a strong rally over the last couple
Speaker 4: of years, you have valuations as well as positioning a
Speaker 4: little bit stretched. What is the setup going into next year,
Speaker 4: even just aside from politics and things like that, because
Speaker 4: I know a lot of portfolio managers, when you don't
Speaker 4: have policies passed yet, you can't really, you know, manage
Speaker 4: portfolios on that. So are stocks sitting a little bit say,
Speaker 4: potentially vulnerable to maybe just a short term correction when
Speaker 4: you have valuations and positioning stretched.
Speaker 8: They can be in valuations or a situation where they're
Speaker 8: more of a condition as opposed to a catalyst. But
Speaker 8: you do have to understand that high valuations do mean
Speaker 8: that there is downside risk in the short term. It
Speaker 8: may be a little bit of a limited upside return
Speaker 8: longer term, but you can diversify away from that, so
Speaker 8: you can diversify out of large caps. Look at your
Speaker 8: exposure to MidCap and small cap next year. In twenty
Speaker 8: twenty five, earnings growth expectations from mid, large and small
Speaker 8: cap companies are much more in line with each other
Speaker 8: as opposed to this year when large cap growth was
Speaker 8: really where the growth was. So next year you can
Speaker 8: get potentially a better valuations small and mid or trading
Speaker 8: closer to sixteen to seventeen times on forward earnings we're
Speaker 8: as large as at twenty two, but next year earnings
Speaker 8: growth across all the large cap, MidCap and small cat
Speaker 8: spectrum is much more in line with each other.
Speaker 2: So what should you do if you have cash right
Speaker 2: now on the sidelines. You've missed this rally in large caps,
Speaker 2: you've reached this, missed this rally in domestics. What should
Speaker 2: you do with the cash?
Speaker 5: You know, one of my.
Speaker 8: Favorite things to say to people is time in the
Speaker 8: market is far more valuable than timing the market. So
Speaker 8: putting together a plan to get yourself invested in a
Speaker 8: way that spreads your timing risk, I think, is a
Speaker 8: great way to approach it. The good old dollar cost
Speaker 8: averaging is tried and true. It's a great method to
Speaker 8: get yourself invested over the long term.
Speaker 2: But what about looking to areas of the market that
Speaker 2: are been unloved over the last few years, Emerging markets
Speaker 2: for example, maybe even European developed markets.
Speaker 8: Yeah, so on evaluation perspective, they certainly are less expensive.
Speaker 8: There's probably some more headwinds there than there are domestically
Speaker 8: at the moment. Jess mentioned the men there to goo
Speaker 8: the unknown political environment, we don't know, but we know
Speaker 8: that there are potentially headwinds there, and growth in those
Speaker 8: markets is not as attractive as in the US, so
Speaker 8: that valuation gap between international and US may be somewhat warranted.
Speaker 8: At this point, you certainly should own these things. Diversification
Speaker 8: is important, but you probably don't have to be in
Speaker 8: as much of a hurry there.
Speaker 4: What about when it comes to small caps, because last
Speaker 4: week there was a point in coming into this week
Speaker 4: where the Rustle two thousand was actually close to being
Speaker 4: back at a record high, which it hadn't touched since
Speaker 4: November of twenty twenty one, And now it looks like
Speaker 4: that drawdown still around five percent though away from that,
Speaker 4: but it's been one of those I mean, there's so
Speaker 4: many zombie companies within this type of index. We're only
Speaker 4: about thirty seconds left. But how do you position? And
Speaker 4: do you position in small caps?
Speaker 8: Loll and mid or two of those areas where active
Speaker 8: management can really add value for you As you get
Speaker 8: up the cap level up to large cap, you know,
Speaker 8: index management less active management tends to make a little
Speaker 8: more sense, but small mid find yourself a good active manager,
Speaker 8: you don't necessarily need to index in those areas.
Speaker 2: All right, I'm gonna have to leave it there. Tracy,
Speaker 2: thanks so much for joining us. Always great when you
Speaker 2: join its. Tracy bell Is CIO over at First Horizon Advisors,
Speaker 2: joining us from Alabama.
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