WEBVTT - Investing In Technology, ESG, And The Markets 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day, we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.560 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.640 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.520 at Bloomberg dot com slash podcast. Well, during this pandemic, 0:00:22.720 --> 0:00:24.760 I think I'm probably like a lot of people where 0:00:25.480 --> 0:00:27.920 I'm using technology even more. It's not just Zoom. I'm 0:00:27.960 --> 0:00:31.520 thinking about just kind of my personal banking for example. 0:00:31.560 --> 0:00:35.239 I'm much more uh engage with the digital offerings from 0:00:35.240 --> 0:00:38.080 my financial institution, and I can't even imagine why I 0:00:38.080 --> 0:00:40.720 would ever need to go into a branch again. But uh, 0:00:40.920 --> 0:00:42.880 and I think a lot of folks, you know, again, 0:00:42.920 --> 0:00:45.839 embracing technology across a lot of different fronts. Let's check 0:00:45.880 --> 0:00:49.200 in with Nisha Hate, chief Digital Officer for Charles Schwab. 0:00:49.240 --> 0:00:52.479 They have a new report out Investing in Technology Study, 0:00:52.760 --> 0:00:54.720 and it's kind of looking at how the pandemic has 0:00:54.800 --> 0:00:57.920 changed tech trends. Nisha, thanks so much for joining us here. 0:00:57.920 --> 0:01:00.800 What are some of the key takeaways um your charge 0:01:00.840 --> 0:01:04.760 Schwab report Yeah, well thanks thanks for having me. Um 0:01:04.800 --> 0:01:07.240 and uh, Paul. What you shared is probably the experience 0:01:07.280 --> 0:01:10.360 that many have had, which is we saw, um, you know, 0:01:10.440 --> 0:01:12.800 in our survey, we saw a lot of investors talking 0:01:12.840 --> 0:01:16.479 about how they've used technology and more in different ways 0:01:16.520 --> 0:01:19.880 than they ever had prior to the pandemic. UM. But 0:01:19.920 --> 0:01:22.480 what one of the interesting things is that they continue 0:01:22.520 --> 0:01:24.480 to say that they're going to use technology at an 0:01:24.480 --> 0:01:28.600 accelerated pace. And when we asked them, however, what it 0:01:28.880 --> 0:01:31.959 what it is that drives trust and technology, often they 0:01:31.959 --> 0:01:34.000 come back to the way that we used to work, 0:01:34.080 --> 0:01:36.520 which is they want to be able to have access 0:01:36.560 --> 0:01:39.920 to humans. Um, whether it's on a phone line or 0:01:39.959 --> 0:01:43.199 even actually, as you mentioned, walking into a branch. So 0:01:43.360 --> 0:01:45.800 you know, there's this desire to use more technology but 0:01:45.880 --> 0:01:49.000 at the same time wanting to build trust through human connection. 0:01:49.640 --> 0:01:54.720 Are there demographic or generational differences in that desire for 0:01:54.800 --> 0:02:00.320 human versus technology contact? You know, there are some, um, 0:02:00.360 --> 0:02:03.680 although you know, not as much as we might think so. UM. So, 0:02:03.760 --> 0:02:06.680 for example, one of the questions we asked was, you know, 0:02:06.840 --> 0:02:09.200 do you think it's possible to have a relationship with 0:02:09.240 --> 0:02:12.480 a financial company through technology only? And if you asked 0:02:12.480 --> 0:02:16.000 the overall population, just over half would tell you that 0:02:16.000 --> 0:02:18.720 that it is possible to have a personal relationship with 0:02:18.760 --> 0:02:22.520 a financial services institution with technology only. But if you 0:02:22.600 --> 0:02:26.240 ask what we call Generation I, so Generation Investor, which 0:02:26.280 --> 0:02:29.440 is UM folks who came into investing for the first 0:02:29.440 --> 0:02:34.200 time in one they would tell you almost three quarters 0:02:34.240 --> 0:02:36.160 of them would tell you that it is possible to 0:02:36.200 --> 0:02:40.000 have a personal relationship through technology only. Now that Generation 0:02:40.120 --> 0:02:42.520 I does sue a little bit younger, but really it's 0:02:42.560 --> 0:02:46.960 more about newer investors coming into the industry. So we've seen, 0:02:47.320 --> 0:02:49.880 uh nitche really since the beginning of this pandemic a 0:02:50.080 --> 0:02:54.880 spike in retail trading in the stock market, whether it's 0:02:54.919 --> 0:02:57.200 some of the meme stocks that got so much attention 0:02:57.240 --> 0:02:58.799 earlier on or just in general, and not a lot 0:02:58.800 --> 0:03:01.760 of folks, including I believe Charles Shrob, you know, low 0:03:01.800 --> 0:03:05.679 costs or no cost trading, give us a sense of 0:03:05.760 --> 0:03:08.840 kind of what you're seeing in the retail side of 0:03:08.919 --> 0:03:13.280 the business. Yeah, I mean the engagement digital engagement, and 0:03:13.280 --> 0:03:15.040 that's you know, a lot of our trading comes through 0:03:15.040 --> 0:03:17.799 our digital channels. Of course, is just tremendous. I mean 0:03:17.800 --> 0:03:21.040 we saw over a billion and a half mobile and 0:03:21.080 --> 0:03:24.480 weblog ins last year four times the trading on the 0:03:24.480 --> 0:03:28.440 mobile apps than we've ever seen before. So incredible engagement, 0:03:29.000 --> 0:03:32.200 especially earlier this year in one when you know, when 0:03:32.320 --> 0:03:34.920 markets were very active and we saw a lot of engage, 0:03:35.040 --> 0:03:38.320 engagement and that continues, although it has you know, stepped 0:03:38.360 --> 0:03:42.000 back just a bit. Well on that point, obviously, there 0:03:42.160 --> 0:03:44.720 was this narrative last year, I mean even in the 0:03:44.760 --> 0:03:48.200 pandemic and earlier this year where it was all about 0:03:48.240 --> 0:03:50.560 all the liquidity was out there, you had ample stimulus 0:03:50.600 --> 0:03:52.680 coming on the monetary side, and then on the fiscal 0:03:52.720 --> 0:03:55.920 side you had stimulus checks burning a hole in people's pockets. 0:03:55.960 --> 0:03:59.520 Now that those impulses are kind of fading, how was 0:03:59.600 --> 0:04:04.400 retail investor behavior changing? Well, what's interesting, you know, And 0:04:04.440 --> 0:04:06.440 one of the things we asked about in the survey was, 0:04:06.520 --> 0:04:08.520 you know, why are you investing and what is it 0:04:08.560 --> 0:04:10.640 that you're trying to accomplish? And while you know, I 0:04:10.640 --> 0:04:12.720 think we talked a lot about the investors who are 0:04:12.920 --> 0:04:15.040 you know, trading the meme stocks and kind of really 0:04:15.080 --> 0:04:18.040 active in the market. Um, a lot of these investors 0:04:18.040 --> 0:04:20.440 this generation, I would tell us that they're actually trying 0:04:20.480 --> 0:04:23.200 to figure out how to get to better financial outcomes. 0:04:23.240 --> 0:04:26.320 You know, they actually had this this disruption, the pandemic 0:04:26.320 --> 0:04:28.919 disrupted their lives and they've had that moment of reflection 0:04:29.000 --> 0:04:31.200 and and trying to figure out what to do next 0:04:31.240 --> 0:04:33.599 with their financial lives so that they have a security net. 0:04:33.920 --> 0:04:36.400 So we've we've seen you know, an increase in, for example, 0:04:36.760 --> 0:04:39.760 engagement in digital financial planning. So you know, in just 0:04:39.839 --> 0:04:42.160 in the second quarter, we had twenty thousand folks do 0:04:42.320 --> 0:04:45.600 digital financial plans through our Schwab dot com channel. And 0:04:45.640 --> 0:04:49.000 so it's this you know, it's not just about trading UM, 0:04:49.000 --> 0:04:51.680 but it's actually now about getting educated about how to 0:04:51.800 --> 0:04:54.839 actually build out your financial portfolio UM and get to 0:04:54.880 --> 0:04:57.280 the outcomes that you're looking for. We should give us 0:04:57.279 --> 0:04:59.560 a sense of kind of what a typical charge Schwab 0:04:59.600 --> 0:05:02.520 customer looks like today versus maybe several years ago. It 0:05:02.560 --> 0:05:06.400 just feels like with all the technological changes and advancements 0:05:06.400 --> 0:05:09.359 and ease of interaction, maybe skewing a little bit younger 0:05:09.360 --> 0:05:12.560 than maybe we've seen in the past. UM, we are 0:05:12.600 --> 0:05:14.640 a little bit a little bit younger than we were 0:05:14.680 --> 0:05:17.080 a few years ago. UM. Over you know, I think 0:05:17.080 --> 0:05:22.159 over of our investors are under the age of forty 0:05:22.200 --> 0:05:24.920 one at this point. So when when they're coming in 0:05:25.000 --> 0:05:28.479 every year, so are new to firm investors UM and UH. 0:05:28.520 --> 0:05:31.280 And they do tend to leverage digital channels much more 0:05:31.360 --> 0:05:35.279 than you know, our traditional investors. So definitely more engaged digitally. 0:05:35.320 --> 0:05:37.320 But as I mentioned at the beginning, I think what's 0:05:37.360 --> 0:05:39.880 most interesting is even so you know Generation I, as 0:05:39.920 --> 0:05:42.880 I mentioned, even when you ask them about you know, 0:05:42.920 --> 0:05:45.360 what what happens during the market downturn, what do you 0:05:45.400 --> 0:05:47.880 want when? What kind of support do you want? You know, 0:05:47.920 --> 0:05:50.840 one of the staffs we have of them wanted to 0:05:51.279 --> 0:05:54.200 talk to a person to discuss their finances when there 0:05:54.240 --> 0:05:56.760 was a market downturn. So even though we talk about 0:05:56.800 --> 0:05:59.520 them as being different, sometimes I wonder if they're really 0:06:00.000 --> 0:06:02.400 that different because they still want that human connection to 0:06:02.400 --> 0:06:05.240 build the trust and confidence in their strategy. Yeah, really 0:06:05.240 --> 0:06:07.599 fascinating stuff, but good to see some of the younger 0:06:07.640 --> 0:06:13.560 folks getting invested. Nisha Hati, chief Digital Officer for Charles Schwab. 0:06:13.640 --> 0:06:16.279 They have a new report out Investing in Technology study 0:06:16.320 --> 0:06:20.000 how the pandemic has kind of changed UM, maybe how 0:06:20.120 --> 0:06:23.800 some people view their investing habits and the emergence of 0:06:23.839 --> 0:06:28.080 technology to help them interact with their financial services providers. 0:06:28.120 --> 0:06:33.440 So interesting stuff coming out of Charles Schwab. E s 0:06:33.480 --> 0:06:35.240 G investing is not for the faint of heart. Just 0:06:35.320 --> 0:06:37.359 listen to a couple of these headlines. Just in the 0:06:37.400 --> 0:06:41.479 last couple of days, Oil fouled California beaches, rekindled demands 0:06:41.520 --> 0:06:46.360 for offshore ban, Tesla racism trial juror says company failed 0:06:46.520 --> 0:06:52.520 to protect workers. Facebook's Zuckerberg denies putting profit over user safety. 0:06:53.200 --> 0:06:55.920 And I'm supposed to apply E s G investing characteristics 0:06:56.160 --> 0:06:59.360 UM in my portfolio. That's gotta be tough. James Kat's 0:06:59.480 --> 0:07:03.680 founder and CEO of Humankind Investments. He does just that. James, 0:07:03.760 --> 0:07:05.840 I love to get your thoughts about when you see 0:07:05.880 --> 0:07:10.120 headlines like that as an investor, UM, how do you 0:07:10.200 --> 0:07:16.200 think about investing in companies through a E s G lens? Sure? Well, 0:07:16.200 --> 0:07:17.720 first of all, thanks so much for having me, And 0:07:17.800 --> 0:07:19.600 just to answer your question, I think if there's a 0:07:19.640 --> 0:07:22.480 takeaway from the stories that we're seeing about oil spills 0:07:22.480 --> 0:07:25.680 and discrimination lawsuits, UM and all this, I think it's 0:07:25.760 --> 0:07:29.320 that a company's human impact has consequences, and when when 0:07:29.360 --> 0:07:32.280 companies hurt people, they'll have the incentive to come together 0:07:32.320 --> 0:07:36.000 to complain and ultimately either punish or reform the company 0:07:36.040 --> 0:07:39.120 through legal action, additional regulation, etcetera. And and and then that 0:07:39.160 --> 0:07:41.720 can really hurt the bottom line for shareholders. How do 0:07:41.760 --> 0:07:47.440 you quantify that quote unquote damage a company does? Sure well, 0:07:47.440 --> 0:07:49.280 So human kind investments be trying to put a dollar 0:07:49.400 --> 0:07:52.320 value on every impact that a company has on humanity. 0:07:52.440 --> 0:07:55.040 So starting of course with the investors. Investors are people too, 0:07:55.120 --> 0:07:56.880 and they should have a good return on their investment 0:07:56.880 --> 0:08:00.200 and not be defrauded. Right. Employees are they being read 0:08:00.240 --> 0:08:03.280 it fairly? Are they being paid well? Customers are creating 0:08:03.280 --> 0:08:06.080 a product that's useful and beneficial or is it toxic 0:08:06.560 --> 0:08:08.720 and society? Right? You could be creating a lot of 0:08:08.800 --> 0:08:11.840 value for your investors, customers, and employees, but maybe your 0:08:11.880 --> 0:08:14.080 factory viewing a lot of pollution into a into a 0:08:14.120 --> 0:08:16.320 town somewhere, and people in that town are paying millions 0:08:16.320 --> 0:08:19.040 of dollars of dollars in medical bills as a result. 0:08:19.120 --> 0:08:20.520 So we try to put a dollar value on all 0:08:20.560 --> 0:08:23.160 these different impacts, add them up, and that's how we 0:08:23.200 --> 0:08:25.720 come up with a human kind value of what each 0:08:25.720 --> 0:08:30.760 company is providing to humanity. Super voting stock James, that's 0:08:30.760 --> 0:08:32.480 a problem here. So, I mean, take a look at 0:08:32.600 --> 0:08:38.240 a company like Facebook where Mark Zuckerberg has of the 0:08:38.360 --> 0:08:42.400 voting stock, um, super voting stock. How do you think 0:08:42.400 --> 0:08:44.000 about that in E s G? Does that just is 0:08:44.000 --> 0:08:46.040 that a screening item or you just say I'm staying 0:08:46.040 --> 0:08:50.040 away from supervoting companies that have the supervoting structure. Sure well, 0:08:50.040 --> 0:08:52.640 the way we deal with that human kind is we 0:08:53.520 --> 0:08:57.800 preferentially invest. We work to preferentially invest in the share 0:08:57.840 --> 0:09:01.760 classes that have more voting power. Um. So, just because 0:09:01.760 --> 0:09:04.480 the company has different kinds of of of share classes 0:09:04.480 --> 0:09:07.319 with differential voting power, it doesn't mean necessarily that you 0:09:07.360 --> 0:09:09.040 know they're an evil company right off the bat. I 0:09:09.080 --> 0:09:11.440 think it's just a question of making sure that we're 0:09:11.440 --> 0:09:13.920 investing in the in the share class that will hopefully 0:09:13.920 --> 0:09:16.599 give us the biggest voice in how the company is 0:09:16.640 --> 0:09:19.440 going to be run. When you are approaching E s 0:09:19.480 --> 0:09:23.960 G investing, how hard is it to avoid kind of 0:09:24.160 --> 0:09:26.800 greenwashing that seems to be a perennial problem in the 0:09:27.000 --> 0:09:30.560 s G? Sure so? UM, I kind of have a 0:09:30.600 --> 0:09:32.640 simple trick for for the folks at home who are 0:09:32.679 --> 0:09:35.359 trying to figure out, you know, whether something is greenwashing 0:09:35.440 --> 0:09:38.000 or not. Um, I think the question that you have 0:09:38.040 --> 0:09:39.920 to be asking yourself is what is the nature of 0:09:39.920 --> 0:09:42.840 the asset manager that's providing the E s G product 0:09:42.920 --> 0:09:45.360 or service. Is E s G just one of many 0:09:45.360 --> 0:09:47.400 flavors of investing for them or is it the only 0:09:47.400 --> 0:09:49.839 flavor worth having? Because think about what these kind of 0:09:49.880 --> 0:09:52.720 large traditional asset managers are saying when they have a 0:09:52.760 --> 0:09:54.640 bunch of non E s G products and then also 0:09:54.760 --> 0:09:57.079 some E s gum on the side. They're saying, look, 0:09:57.080 --> 0:09:59.080 we did the research, we figured it out. These are 0:09:59.080 --> 0:10:01.160 the good companies, these of the bad companies, and we 0:10:01.200 --> 0:10:04.359 only invest in the good companies in these few portfolios. 0:10:04.400 --> 0:10:06.079 But in all the rest of our business we ignore 0:10:06.120 --> 0:10:08.760 everything that we just learned, and its business as usual. 0:10:08.800 --> 0:10:10.920 We invest in all the bad companies. So if they're 0:10:10.960 --> 0:10:14.120 not taking their own socially responsible investment research seriously, then 0:10:14.120 --> 0:10:17.680 why should we? James, One of the things I've heard 0:10:17.720 --> 0:10:20.120 from folks that are active in E s G investing 0:10:20.200 --> 0:10:22.400 is that the quality of the data they need in 0:10:22.440 --> 0:10:24.679 their analysis just isn't up to par. I mean, if 0:10:24.679 --> 0:10:27.120 I'm for my financial analysis, I've got the income statement, 0:10:27.160 --> 0:10:29.880 the balance she think, you know, cash flow statement for 0:10:29.960 --> 0:10:32.360 E s G it comes down to, I don't have 0:10:32.559 --> 0:10:35.120 great data, give us a sense of where we are 0:10:35.240 --> 0:10:37.920 in terms of E s G data and its ability 0:10:37.960 --> 0:10:40.679 to help you in your analysis. Sure, I agree, that's 0:10:40.679 --> 0:10:43.120 probably one of the biggest hurdles that people who want 0:10:43.160 --> 0:10:46.200 to invest in a socially responsible way of face UM 0:10:46.320 --> 0:10:48.719 and and out there that you know, there we identified 0:10:48.720 --> 0:10:50.880 a lack in in a lot of the data that exists. 0:10:50.880 --> 0:10:53.600 And that's why humankind we actually work to create a 0:10:53.640 --> 0:10:56.480 lot of our own data UM and and it's really 0:10:56.559 --> 0:10:58.440 it's it's definitely the biggest challenge I think that people 0:10:58.480 --> 0:11:01.120 are facing out there. We're actually working to solve it 0:11:01.120 --> 0:11:03.480 a humankind. So, given all the data that you have, 0:11:03.559 --> 0:11:08.120 where do you see the greatest opportunities to invest UM 0:11:08.160 --> 0:11:10.760 the greatest opportunities Well, the way that we look at things, 0:11:10.840 --> 0:11:14.040 it's really a question of where there's UM the most 0:11:14.480 --> 0:11:17.200 positive human impact versus the most negative human impact. So 0:11:17.240 --> 0:11:20.840 avoiding companies that are UM, you know, involved in causing 0:11:20.840 --> 0:11:23.559 a great deal of death and harm and destruction UM 0:11:23.640 --> 0:11:26.760 and really over investing actually in companies UM that are 0:11:27.559 --> 0:11:31.520 creating positive value by saving lives. So you know, healthcare, UM, 0:11:31.600 --> 0:11:34.559 companies that are doing a bunch of healthcare R and 0:11:34.640 --> 0:11:37.720 D that will hopefully extend and improve um, you know, 0:11:37.800 --> 0:11:41.040 human life companies that are providing water access, food access. 0:11:41.240 --> 0:11:43.960 These are things that really help people, uh, you know, 0:11:44.240 --> 0:11:46.520 thrive and and flourish. And that's that's where we think 0:11:46.760 --> 0:11:52.000 there's more opportunity from a socially responsible investing perspective. Yeah, James, 0:11:52.080 --> 0:11:54.000 just about ten seconds. Just give us a sense of 0:11:54.040 --> 0:11:58.480 how your returns have been. Um so in terms of 0:11:58.800 --> 0:12:05.839 the return earns UM, Well, so we UM. We've been 0:12:05.840 --> 0:12:09.240 generally speaking, um, you know, tracking the market more or less, 0:12:09.240 --> 0:12:12.080 although I've actually been looking to see, you know, some 0:12:12.080 --> 0:12:14.440 some divergence because the way that we invest is actually 0:12:14.800 --> 0:12:18.360 not just tracking a general index. So um. The way 0:12:18.360 --> 0:12:21.560 that we think about these um you know, these sort 0:12:21.559 --> 0:12:24.880 of performance metrics is actually really quite different. But I'm 0:12:24.880 --> 0:12:26.439 looking forward to seeing what that's going to look like 0:12:26.480 --> 0:12:28.480 in the future. All Right, James, thanks so much for 0:12:28.600 --> 0:12:31.080 joining us. We appreciated. James Kat's founder and CEO of 0:12:31.160 --> 0:12:37.679 Humankind Investment. The volatility continues in this market. Uh. We've 0:12:37.720 --> 0:12:41.320 had one percent moves in either direction over the last 0:12:41.520 --> 0:12:43.559 four days, and today we've got about a six tenths 0:12:43.679 --> 0:12:46.480 moved down in the SMP. Let's get a sense of 0:12:46.480 --> 0:12:49.160 whether we need to get accustomed to this volatility. Let's 0:12:49.200 --> 0:12:52.920 check in with a professional. Rich Steinberg, chief market strategist 0:12:52.920 --> 0:12:55.640 at the Colony Group. They have seventeen billion dollars in 0:12:55.679 --> 0:12:58.680 assets under management. I think there's somewhere up in Boston 0:12:58.800 --> 0:13:00.680 or something like that, and I think they play baseball 0:13:00.720 --> 0:13:02.760 up there. I'm not sure. Rich, thanks so much for 0:13:02.840 --> 0:13:06.599 joining us here. Talk to us about this volatility. Is 0:13:06.600 --> 0:13:08.520 it's something we should be concerned or about or is 0:13:08.520 --> 0:13:11.960 this just what you see when markets are at or 0:13:11.960 --> 0:13:15.480 near all time highs. Not only are they not only 0:13:15.520 --> 0:13:19.040 the issue around all time highs, but I think investors 0:13:19.040 --> 0:13:23.319 are struggling with the growth value dynamics in the markets, 0:13:23.360 --> 0:13:28.400 and you're seeing kind of these mini rotations from you know, 0:13:28.520 --> 0:13:31.680 small cap back to mega cap and then mega cap 0:13:31.720 --> 0:13:35.400 being oversold and growth going one way or another. And 0:13:35.440 --> 0:13:39.040 I think we just need to embrace the volatility somewhat 0:13:39.679 --> 0:13:44.360 um and allow investors to reposition portfolios that might have 0:13:44.440 --> 0:13:47.680 gotten out of sync with either their asset allocation or 0:13:48.200 --> 0:13:51.840 sector or asset class waitings, and use the volatility as 0:13:51.880 --> 0:13:54.840 your friend and not necessarily your foe. So you think 0:13:54.840 --> 0:13:59.600 it's not time to maybe be pulling back on risk. Here, Listen, 0:13:59.640 --> 0:14:02.880 the over the last forty years, we three quarters of 0:14:02.920 --> 0:14:08.120 the time you get twelve to four into a year 0:14:08.240 --> 0:14:11.040 draw downs with the market still finishing up. This is 0:14:11.120 --> 0:14:14.719 why equities give you a higher long term return than 0:14:14.880 --> 0:14:18.160 treasury built. So you need to be in it to 0:14:18.160 --> 0:14:21.640 win it, and you need to understand your own kind 0:14:21.680 --> 0:14:23.960 of risk profile and when those moneys are going to 0:14:24.000 --> 0:14:26.480 be needed. If you're an endowment, if your family, if 0:14:26.520 --> 0:14:31.400 you're a foundation, So it's you know, risk is very personal, alright. 0:14:31.440 --> 0:14:35.680 So we're heading into Q three earning season. Earning is 0:14:35.680 --> 0:14:39.120 always important to these markets. What do you need to see? 0:14:39.160 --> 0:14:40.560 What do you expect to see? What do you need 0:14:40.640 --> 0:14:43.800 to see out of this earning season? Listen, I think 0:14:44.600 --> 0:14:47.760 we're going to continue to have the winners being rewarded 0:14:47.800 --> 0:14:52.200 in the losers being spent. But you know, margin numbers 0:14:52.240 --> 0:14:56.720 are quite high, uh, and you're starting to continue to 0:14:56.720 --> 0:14:59.280 see pretty decent revenue growth. Just to kind of put 0:15:00.200 --> 0:15:04.560 numbers onto it, you know, uh, projected earnings growth for 0:15:04.640 --> 0:15:08.120 next years like nine point six percent and revenue growth 0:15:08.240 --> 0:15:12.800 is just shy of seven. We're gonna see some companies 0:15:12.880 --> 0:15:16.520 use the pandemic and kind of supply chain issues as 0:15:16.760 --> 0:15:20.520 as um excuses, So we have to really see where 0:15:20.560 --> 0:15:24.400 their core businesses are. And I think it's important for 0:15:24.440 --> 0:15:27.760 investors not to be all in on like a value 0:15:27.880 --> 0:15:31.080 opening trade and not to be all in and megacap growth, 0:15:31.480 --> 0:15:34.760 but to kind of continue to walk that fine line 0:15:34.760 --> 0:15:38.280 of a balance between both because earnings are going to 0:15:38.360 --> 0:15:41.520 still evolve over the next couple of quarters. Well, Rich, 0:15:41.600 --> 0:15:44.640 you talk about kind of the supply chain excuse. To me, 0:15:44.760 --> 0:15:48.080 that seems pretty valid given some of those constraints that 0:15:48.120 --> 0:15:51.640 are out there. If they prove to be more persistent, 0:15:52.120 --> 0:15:55.040 then maybe the market anticipates right now, what is the 0:15:55.040 --> 0:15:58.520 implication of that? So I actually think they are I 0:15:58.520 --> 0:16:02.520 didn't mean to minimize and I appreciate your comment. Um, 0:16:02.560 --> 0:16:06.160 the supply chain issues are real, but the question is 0:16:06.160 --> 0:16:09.520 whether or not that that pent up demand. Maybe we 0:16:09.600 --> 0:16:14.040 have a short term issue and earnings, but the outlook 0:16:14.080 --> 0:16:16.320 for the quarters coming out starts to look better. I 0:16:16.320 --> 0:16:18.720 think it's a wait and see kind of issue that 0:16:18.760 --> 0:16:23.560 we have to uh continue to evaluate and as the 0:16:23.600 --> 0:16:27.440 feed is m alright, so, Rich, what are the sectors 0:16:27.480 --> 0:16:30.640 then given that backdrop, given your expectations. What are the 0:16:30.680 --> 0:16:32.880 sectors where you guys are you know, doing some work 0:16:32.920 --> 0:16:36.280 these days? Yeah, so, I you know, in the portfolio 0:16:36.280 --> 0:16:38.360 that I run for the firm, I'm I kind of 0:16:38.560 --> 0:16:41.640 float at thirty thousand feet. I think you need to. 0:16:41.960 --> 0:16:46.200 I had trimmed back some some tech exposure. Um, and 0:16:46.240 --> 0:16:49.920 I'm overweight healthcare. I have a little bit of kind 0:16:49.960 --> 0:16:52.640 of like a low volatility and dividend play just because 0:16:52.680 --> 0:16:56.360 dividends did not work out last year. Um. The thing 0:16:56.400 --> 0:16:59.320 that's perplexing, especially today is just seeing a lot of 0:16:59.360 --> 0:17:03.840 weakness and mall cap. I'm really interested in adding to financials, 0:17:03.840 --> 0:17:06.880 but I'm not there yet, and you're seeing this kind 0:17:06.880 --> 0:17:09.520 of weird rotation in the last few days out of 0:17:10.119 --> 0:17:12.480 you know, out of financials and out of small cap. 0:17:12.520 --> 0:17:15.400 And you know, if if the Yeld curve does steepen, 0:17:16.280 --> 0:17:18.520 you would think that financials should be a place to 0:17:18.560 --> 0:17:21.320 go as a small cap just because of the makeup 0:17:21.359 --> 0:17:25.160 of that index not playing out yet. No, Rich, I'm 0:17:25.200 --> 0:17:26.840 so glad you brought up the small caps because I 0:17:26.920 --> 0:17:29.119 just pulled up a chart on my Bloomberg terminal and 0:17:29.160 --> 0:17:31.920 it is up until the right through about mid March. 0:17:32.119 --> 0:17:35.240 You know, really solid and then just totally flat lines 0:17:35.359 --> 0:17:38.000 for the next six months. Really, what do you think 0:17:38.000 --> 0:17:41.080 would be the catalyst to renew some of that excitement 0:17:41.160 --> 0:17:43.960 in the small cap kind of cyclical space. So I 0:17:44.000 --> 0:17:47.280 think it's probably a three legged stool. Right. You have 0:17:48.000 --> 0:17:52.359 kind of the the yield curve steepening, but not so 0:17:52.440 --> 0:17:56.000 much that it will kill the economy UM And I 0:17:56.040 --> 0:17:59.600 think over the last ten plush years it's been like 0:17:59.680 --> 0:18:03.280 mega cap growth UM and kind of a rotation to 0:18:03.400 --> 0:18:06.160 people being back to overweight, and I would admit cap 0:18:06.240 --> 0:18:09.400 back into that UM and those tend to be more 0:18:09.440 --> 0:18:14.160 domestically oriented. So if we start to you know, get 0:18:14.160 --> 0:18:17.760 back to kind of normal growth rates, then I think, 0:18:17.800 --> 0:18:21.800 and you have a strong dollar based on higher UM 0:18:21.840 --> 0:18:25.840 interest rates, small MidCap could outperform. Additionally, like I said, 0:18:25.840 --> 0:18:28.960 there's a lot of financials in small cap. Rich thanks 0:18:28.960 --> 0:18:31.359 so much for joining us. Really appreciate getting your thoughts 0:18:31.400 --> 0:18:34.159 on these markets here as volatility picks up really over 0:18:34.160 --> 0:18:36.880 the last four or five trading sessions. Good to get 0:18:36.880 --> 0:18:39.879 a little bit of a mooring here. Rich Steinberg, chief 0:18:39.960 --> 0:18:47.160 market strategist at the Colony Group. This is Bloomer Philip Plumbo, 0:18:47.200 --> 0:18:49.880 founder CEO, and chief investment officer. I'm sure he's got 0:18:49.920 --> 0:18:54.240 some thoughts these Plumbo Wealth Management joining us on the phone. So, Phil, 0:18:54.280 --> 0:18:56.720 when you see markets like this again, these kind of 0:18:56.760 --> 0:19:01.080 significant moves on a daily basis, seemingly without much direction, 0:19:01.400 --> 0:19:03.680 how are you framing this market as we go into 0:19:03.800 --> 0:19:07.440 Q three yearnings? Yeah, well for us, Hello Paul and Kayley, 0:19:07.480 --> 0:19:08.720 thank you for having me on again. It's gould to 0:19:08.760 --> 0:19:12.239 be back. Um. So you know, we're pretty vocal that, 0:19:12.480 --> 0:19:14.520 you know, we believe that we're in a bubble with 0:19:14.680 --> 0:19:17.880 risk assets. A lot of strategists really don't want to 0:19:17.880 --> 0:19:21.320 talk much about that, and but ultimately, when you think 0:19:21.359 --> 0:19:24.639 about the speculation that's going on there and markets, whether 0:19:24.680 --> 0:19:27.520 it's Bitcoin, whether it's other cryptocurrencies, and f t s 0:19:28.160 --> 0:19:31.600 valuations with somebody's innovative businesses, Um, you know we're at 0:19:31.680 --> 0:19:35.080 levels that are are overvalued. So you know, we're in 0:19:35.119 --> 0:19:39.040 the camp that when you're in a bubble like environment, 0:19:39.400 --> 0:19:41.760 it could go on for long enand people thinks you 0:19:41.800 --> 0:19:44.320 can't try to time when it's gonna pop. But we 0:19:44.400 --> 0:19:46.679 think what's prudent to do in this current environment today 0:19:47.080 --> 0:19:49.639 is to reduce risk with your equity portfolios, right, So 0:19:49.760 --> 0:19:52.480 for example, if you have fifty percent equities or is 0:19:52.480 --> 0:19:54.600 supposed to be in fift percent equities and it's sixty 0:19:54.640 --> 0:19:57.600 five percent equities, or you've got to rein that in 0:19:57.640 --> 0:19:59.920 and bring you back down to or even maybe give 0:20:00.119 --> 0:20:02.960 maybe get a little bit more conservative, so pulling back 0:20:03.000 --> 0:20:07.240 on echoit exposure and then adding exposure to what. So 0:20:07.280 --> 0:20:10.600 we believe having cash right now is okay, even though 0:20:10.640 --> 0:20:13.360 it's not paying much. But if you're in a bubbly 0:20:13.400 --> 0:20:18.320 type environment where valuations are rich, having some cash available 0:20:18.440 --> 0:20:20.560 to buy in on any type of dip we think 0:20:20.600 --> 0:20:23.199 could make sense. The way we run portfolios and I 0:20:23.200 --> 0:20:25.600 talked about this a bit last time, is we do 0:20:25.760 --> 0:20:28.840 use gold, we do use commodities, and we use intermediate 0:20:29.280 --> 0:20:32.720 and longer term treasuries and tips. So we will rebounce 0:20:32.760 --> 0:20:37.920 capital into those particular areas as well as some cash. Alright, So, Phill, 0:20:37.960 --> 0:20:40.560 as we head into this third earning season here, what 0:20:40.640 --> 0:20:43.480 are you going to be watching for UM over the 0:20:43.480 --> 0:20:47.520 next several weeks. M Well, expectations are that we had 0:20:47.560 --> 0:20:50.959 peak earnings already, so we think that maybe more disappointments 0:20:51.000 --> 0:20:55.040 to the downside entity upside based on supply issues, inflationary 0:20:55.040 --> 0:20:57.640 pressure is a lot of these companies of facing. So 0:20:58.480 --> 0:21:01.840 ultimately we don't have high expectations for Ernie's going into 0:21:01.840 --> 0:21:06.119 the season, which could also increase volatility. I hear the 0:21:06.119 --> 0:21:10.120 word stag inflation getting thrown out more and more and more. 0:21:10.200 --> 0:21:13.320 Do you think that is an apt description for the 0:21:13.400 --> 0:21:17.560 environment that we're in? Mhm, you know, I don't. I 0:21:17.640 --> 0:21:20.400 think that we had a big move from the bottom 0:21:20.520 --> 0:21:22.440 from March of two thousand and twenty to where we 0:21:22.480 --> 0:21:24.639