WEBVTT - A Look At Markets And ESG Investing 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 0:00:15.600 --> 0:00:18.479 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:21.840 at Bloomberg dot com slash podcast. We're gonna bring in 0:00:21.840 --> 0:00:24.840 Thriyan Smallock right now. He is a principal and portfolio 0:00:24.880 --> 0:00:27.800 manager at hood River Capital Management. They have three and 0:00:27.800 --> 0:00:32.320 a half billion dollars under management and UM on a 0:00:32.440 --> 0:00:35.640 day like today, when we're seeing some volatility but not 0:00:35.680 --> 0:00:38.519 a lot of movement in stocks, does it feel peaky 0:00:38.640 --> 0:00:41.199 to you? Does it feel like we're hitting um the 0:00:41.240 --> 0:00:45.320 top As far as this market is concerned, we don't 0:00:45.400 --> 0:00:49.640 think it's peaky. We're constructive at this point. I think 0:00:49.760 --> 0:00:52.680 the market has just been digesting huge games over the 0:00:52.760 --> 0:00:58.360 last twelve to eighteen months. Folks are worried about inflation 0:00:59.280 --> 0:01:04.080 starting to pick up with with the economic backdrop flowing somewhat, 0:01:04.240 --> 0:01:07.240 but we think earnings revisions are gonna be positive from here. 0:01:08.319 --> 0:01:10.480 Most companies that we talked to, we talked around four 0:01:10.880 --> 0:01:13.560 public trade companies every quarter. In small cap, we think 0:01:13.560 --> 0:01:16.920 demand is really strong and costs are relatively contained. Street 0:01:17.000 --> 0:01:19.319 estimates to move up and valuations three attractive. So we 0:01:19.360 --> 0:01:22.800 think as earning season plays out this quarter and over 0:01:22.800 --> 0:01:24.520 the next couple of quarters, the market will move up 0:01:24.520 --> 0:01:27.240 with earnings and and you want to be in stocks. 0:01:28.160 --> 0:01:32.080 You guys are in small caps, smaller caps, small big caps, Bryant, 0:01:32.240 --> 0:01:34.640 UH give us a sense of how those performing, how 0:01:34.760 --> 0:01:40.120 you think they should perform going forward. So year today, 0:01:40.240 --> 0:01:44.200 small cap has lagged the S and P five hundred, 0:01:44.640 --> 0:01:48.480 the Rustle two thousands behind approximately five basis points of 0:01:48.880 --> 0:01:52.680 the Rustle two dozen growth, which is our primary benchmark, 0:01:52.720 --> 0:01:57.320 where small cap growth investors is only up five per cent. UH. 0:01:57.720 --> 0:02:00.880 We think that the value we should for small cap 0:02:00.960 --> 0:02:04.200 versus large cap is particularly attractive, especially we look at 0:02:04.240 --> 0:02:07.640 small cap growth valuations on a relative basis or a 0:02:07.680 --> 0:02:10.040 parody on a pe basis for next year, usually at 0:02:10.080 --> 0:02:12.480 the premium because you have higher growth. Which comes back 0:02:12.520 --> 0:02:15.760 to what I said earlier, where if earnings come through 0:02:15.800 --> 0:02:19.120 in small cap companies and in large cap companies, they're 0:02:19.240 --> 0:02:20.919 both what they're gonna move up, but small cap is 0:02:20.960 --> 0:02:26.040 gonna move up more than large cap. What are the 0:02:26.040 --> 0:02:32.120 biggest head winds to that? To earnings growth, Inflation is 0:02:32.160 --> 0:02:36.359 probably the biggest headwind um. Also, if you get to 0:02:36.400 --> 0:02:40.480 slow down internationally in places like China, that that that 0:02:40.520 --> 0:02:44.000 would be a that would be a head wind um. 0:02:44.080 --> 0:02:47.840 And so far companies are managing it pretty well, especially 0:02:47.840 --> 0:02:50.760 in small cap. They're pretty nimble. They've been able to adjust. 0:02:50.840 --> 0:02:54.760 But if wages move up significantly and demand slows down, 0:02:54.800 --> 0:02:57.160 that would also be a bad recipe. But right now 0:02:57.560 --> 0:03:00.919 we aren't seeing evidence that that tilts us negative. The 0:03:00.960 --> 0:03:03.880 CEO of Phillips this morning said his problems are chips 0:03:04.040 --> 0:03:08.079 and ships, so he's having a real problem getting stuff 0:03:08.120 --> 0:03:11.640 shipped around h Prices are very high for that and 0:03:11.680 --> 0:03:13.679 he's having a real problem getting the chips he needs 0:03:13.720 --> 0:03:17.919 to put in his products. Yeah, so I don't think 0:03:17.960 --> 0:03:20.760 that's a surprised anyone or any of the companies we 0:03:20.840 --> 0:03:23.080 talked to at this point. They've been able to navigate 0:03:23.720 --> 0:03:27.160 that situation. And that's baked end of people's estimates going forward, 0:03:27.200 --> 0:03:29.840 which again that's why I come back to it. Demands 0:03:29.880 --> 0:03:33.079 better and supply chains us enough, which I think in 0:03:33.120 --> 0:03:35.960 general that's going to happen. Uh, then you can see 0:03:36.000 --> 0:03:38.760 an upper provision to earnings estimates as that works through 0:03:38.760 --> 0:03:42.520 the system over the next nine to twelve months. All right, Brian, 0:03:42.520 --> 0:03:45.200 you mentioned earnings were just starting to get really into 0:03:45.240 --> 0:03:47.240 the thick of things here. We had some good numbers 0:03:47.280 --> 0:03:49.320 out of some of the big financials last week. What 0:03:49.360 --> 0:03:51.120 are you going to be listening for and looking for 0:03:51.280 --> 0:03:57.160 this quarter? So what we like in small cap is 0:03:57.240 --> 0:04:01.160 that you can find stocks that are and efficiently priced, 0:04:01.200 --> 0:04:04.680 where the analysts estimates uh tend to be a little 0:04:04.680 --> 0:04:07.840 bit stale, you have less analysts are covering them, and 0:04:07.920 --> 0:04:11.360 so you can buy good companies with good valuations where 0:04:11.400 --> 0:04:13.960 the fundamentals for the companies that we buy or be 0:04:14.040 --> 0:04:16.880 better that with embedded in street expectations. So we have 0:04:16.920 --> 0:04:19.080 around a hundred stocks of the portfolio and we're gonna 0:04:19.120 --> 0:04:22.560 be monitoring the amount a case by case basis bottoms 0:04:22.640 --> 0:04:24.560 up as to whether or not delivering on the on 0:04:24.680 --> 0:04:28.520 the key performance metrics for for that particular business and 0:04:28.560 --> 0:04:32.839 in general, I expect things to be really strong across 0:04:32.880 --> 0:04:35.599 the board, which which I think is good in almost 0:04:35.680 --> 0:04:40.080 every sector. UH, based on a lot of macro factors 0:04:40.080 --> 0:04:41.880 that you've talked about, kind of baked in the numbers, 0:04:41.920 --> 0:04:46.680 demands super strong. When you look at I mean speaking 0:04:46.680 --> 0:04:49.040 of consumers, when you look at the savings rates here, 0:04:49.160 --> 0:04:53.760 do do they spend it back down to the historical average? 0:04:54.880 --> 0:05:00.000 I think so, Um, we're overweight consumer right now. UH. 0:05:00.320 --> 0:05:04.040 There are a lot of UH stocks in small cap 0:05:04.160 --> 0:05:09.560 where they're priced at median or historical valuations, and we're 0:05:09.600 --> 0:05:12.599 seeing the consumer come back and a lot of stocks 0:05:12.600 --> 0:05:14.360 that we are one of our biggest positions to Sea World, 0:05:14.400 --> 0:05:17.320 for example, which which has been a really good stock 0:05:17.400 --> 0:05:21.680 and demand is accelerating. They're based on consumers wanting to 0:05:21.720 --> 0:05:24.320 get back out and about evaluations attractive and they've really 0:05:24.320 --> 0:05:27.680 worked through a good margin profile business. I like that one. 0:05:27.920 --> 0:05:29.720 All right, Brian, thank you so much for joining us. 0:05:29.920 --> 0:05:32.479 We always appreciate chatting with you. Getting an update on 0:05:32.520 --> 0:05:35.640 the world of small cap stocks. Brian Smaller. Brian Smaller 0:05:35.680 --> 0:05:40.039 principal portfolio managered Hood River Capital Management three point three 0:05:40.040 --> 0:05:43.039 billion dollars in assets under management. Looking at the small 0:05:43.080 --> 0:05:46.560 cap stocks and again is Brian was mentioning they've underperformed 0:05:47.000 --> 0:05:49.520 UH this year. But I think a lot of you know, 0:05:49.600 --> 0:05:54.279 fund managers have exposure to the small caps, particularly if you, 0:05:54.480 --> 0:05:57.120 you know, part of your cyclical trade, particularly part of 0:05:57.120 --> 0:05:59.880 the reopening trade. A lot of fun managers looking for 0:06:00.000 --> 0:06:01.920 exposure with small cap stocks think that they can get 0:06:02.000 --> 0:06:04.599 some better bank for the buck in terms of a 0:06:04.680 --> 0:06:08.120 reopening economy and the impact that that could have on 0:06:08.200 --> 0:06:14.479 smaller companies. Now, let's bring in David Diets out of Summit, 0:06:14.520 --> 0:06:18.040 New Jersey's a managing principle and senior portfolio strategists at 0:06:18.040 --> 0:06:21.200 Peapack Private Wealth Management, where they have nine point eight 0:06:21.240 --> 0:06:26.080 billion dollars of assets under management. David, I find today's 0:06:26.160 --> 0:06:28.800 market really interesting, as we're seeing such a jump in 0:06:28.920 --> 0:06:32.279 rates globally on the short end of the curve in 0:06:32.480 --> 0:06:35.119 it mostly in two years and in some five years 0:06:35.640 --> 0:06:38.640 UM and we saw here in Europe a sell off 0:06:38.720 --> 0:06:42.280 in stock so it was bonds down, stocks down, and 0:06:42.400 --> 0:06:45.640 everyone this morning was talking about the sixty forty portfolio. 0:06:45.720 --> 0:06:52.200 What's your take on the age old construction? Well, I mean, 0:06:52.960 --> 0:06:55.200 you know, I think stocks are making at least the 0:06:55.279 --> 0:06:58.400 United States here hugging the flatline after one of the 0:06:58.440 --> 0:07:02.440 strongest weeks since July. Pretty good showing, given um those 0:07:02.480 --> 0:07:05.640 concerns on on inflation and and so forth, that you 0:07:05.760 --> 0:07:10.440 just mentioned Um, you know, I think equity investors have 0:07:10.600 --> 0:07:14.480 to take a long term view here. Valuations are high, 0:07:15.400 --> 0:07:17.560 blasphemy all the time. Is this the right time to 0:07:17.640 --> 0:07:19.680 invest in? All I can say is this is the 0:07:19.760 --> 0:07:23.000 wrong time to be in cash and and most of 0:07:23.080 --> 0:07:26.000 fixed income, because of course, you know, the only thing 0:07:26.080 --> 0:07:29.440 more expensive than stocks are our bonds, the fidel cash 0:07:29.480 --> 0:07:33.520 reserves yielding one hundred of one percent. And we know 0:07:33.840 --> 0:07:37.400 inflation is here. Inflation is gonna get worse. We don't 0:07:37.440 --> 0:07:40.840 know how transitory or permanent maybe, but this is a 0:07:40.840 --> 0:07:42.960 tough time to just be sitting there in cash. And 0:07:42.960 --> 0:07:46.040 so I think we're seeing, particularly among retail investors that 0:07:46.120 --> 0:07:49.360 continuing by the diet mentality, and of course we just 0:07:49.480 --> 0:07:52.240 had to kick off their earnings week last week. Um 0:07:53.680 --> 0:07:55.920 of the companies of reports so far top earnings per 0:07:55.920 --> 0:07:59.200 share expectations that should be a great earning season, and 0:07:59.400 --> 0:08:04.360 in so things actually look reasonable for equity investors going forward. Here, 0:08:05.120 --> 0:08:07.280 David I c W T, I Crew Oil and North 0:08:08.720 --> 0:08:11.000 of Barrel, How do I play this in the stock market? 0:08:13.000 --> 0:08:18.920 So Um, I think that UH investors should of course 0:08:18.920 --> 0:08:22.280 stay diversified, and of course energy stocks are up six 0:08:23.320 --> 0:08:25.960 year to date, but there may be more room to go. 0:08:26.440 --> 0:08:30.040 And and here's why. Although normally the cure for high 0:08:30.120 --> 0:08:34.120 prices is higher prices, we've got a situation here where 0:08:34.559 --> 0:08:39.480 energy producers don't want to produce because um, you know, governments, 0:08:39.480 --> 0:08:42.240 policy makers, banks are telling them, no, you've got to 0:08:42.280 --> 0:08:44.480 go green, and so they're saying, well, why should I 0:08:44.520 --> 0:08:47.440 invest it? Take advantage of these higher prices, because that's 0:08:47.480 --> 0:08:50.080 not the future. So you could have a situation and 0:08:50.080 --> 0:08:53.600 I think we do have a situation where supplies kind 0:08:53.600 --> 0:08:58.320 of dwindle or stay constant. Meanwhile, and and therefore, but 0:08:58.679 --> 0:09:02.920 consumers and users cannot switch over to green sources as 0:09:02.960 --> 0:09:05.000 quickly as possible. And of course, what we've heard from 0:09:05.040 --> 0:09:07.880 the UK is some of the hope for green sources, 0:09:07.880 --> 0:09:10.600 for example, wind have not been as productive as hope 0:09:10.600 --> 0:09:13.120 because wind speeds have died down. Who knew, but that's 0:09:13.160 --> 0:09:17.079 what we have. It hasn't been very windy here. Apparently. 0:09:17.320 --> 0:09:21.000 Let's get to your stock picks, David, Um, what do 0:09:21.080 --> 0:09:23.120 you like in the US? We'll gets you pumped in 0:09:23.160 --> 0:09:24.400 the morning. What do you what do you what are 0:09:24.440 --> 0:09:27.880 you excited to recommend when somebody asks um for a pick? 0:09:29.240 --> 0:09:33.120 So you know, tying into that energy theme. We do 0:09:33.320 --> 0:09:37.720 think that UM energy stocks are still well off their 0:09:37.760 --> 0:09:43.000 all time highs, have great dividends, are being very conservative 0:09:43.000 --> 0:09:46.640 about spending money for new production and rather returning money 0:09:46.720 --> 0:09:49.960 to shaubles in the form of higher dividends and stock buybacks. 0:09:50.200 --> 0:09:51.880 You know, one of the bluest of all the blue 0:09:51.880 --> 0:09:54.560 ships is Chevron Um, you know, with about a four 0:09:54.600 --> 0:09:58.360 percent dividend, very low price to earnings ratio. The stock 0:09:58.559 --> 0:10:00.800 was at one point well over on thirty. I think 0:10:00.800 --> 0:10:04.640 it's in low hundreds right now. UM even if some 0:10:04.760 --> 0:10:08.040 energy even if there's volatility and some energy companies go under, 0:10:08.480 --> 0:10:11.240 you know, that just works out better for your your 0:10:11.280 --> 0:10:13.800 ultimate blue chip here, which is Chevron. So that's one 0:10:13.840 --> 0:10:17.960 we would like. The other areas, I think investors have 0:10:18.040 --> 0:10:20.800 to look at his healthcare and I'm not quite sure why. 0:10:20.840 --> 0:10:22.720 I think there's a couple of reasons, but a lot 0:10:22.760 --> 0:10:25.160 of the healthcare stocks, despite the fact that is the 0:10:25.200 --> 0:10:27.840 healthcare companies that are getting us to the other side 0:10:27.840 --> 0:10:30.439 of the valley in terms of COVID nineteen, are just 0:10:30.800 --> 0:10:33.480 way out of favor by investors. So one I would 0:10:33.480 --> 0:10:35.960 say here is Bristol Myers squib is at a fifty 0:10:35.960 --> 0:10:38.720 two week low. Uh, you've got like a three point 0:10:38.840 --> 0:10:41.760 seven percent divid in which is more than twice which 0:10:41.840 --> 0:10:44.840 the yield on the s trading about eight times earnings. 0:10:44.960 --> 0:10:47.520 And what I like about Bristol Myers is they fine 0:10:47.559 --> 0:10:51.720 tune their focus onto oncology into immunology. Those are the 0:10:51.720 --> 0:10:55.720 areas of the healthcare thing where people don't worry about prices. 0:10:55.760 --> 0:10:58.480 When you've got cancer, people will pay what it takes. 0:10:58.720 --> 0:11:01.480 And so they've got the highest origin focus here. And 0:11:01.559 --> 0:11:03.240 what I like is they've got a great R and 0:11:03.320 --> 0:11:06.839 D pipeline, but they're great in terms of acquiring other 0:11:07.000 --> 0:11:09.360 companies to augment that pipeline. Of course, they made a 0:11:09.400 --> 0:11:11.880 big deal with Selgy not too long ago, which gives 0:11:11.920 --> 0:11:14.520 him all the cell gene products. So Bristol Myers fifty 0:11:14.520 --> 0:11:17.040 two week old, great dividend. What's not to like here? 0:11:18.040 --> 0:11:20.160 David Diets, thank you so much for joining us. We 0:11:20.160 --> 0:11:22.840 always appreciate chatting with you, getting your thoughts on these markets, 0:11:22.880 --> 0:11:25.920 on some specific names that you like at this time. 0:11:26.000 --> 0:11:29.240 David Diets is a managing principle and senior portfolio strategist 0:11:29.280 --> 0:11:32.320 at Pepeck Private Wealth Management. They about nine point eight 0:11:32.360 --> 0:11:35.520 billion dollars in assets on their management. Uh, and he 0:11:35.600 --> 0:11:39.360 is located in the bucolic town of some of New Jersey. Matt, 0:11:39.360 --> 0:11:41.200 maybe you should think about Summit. We come back to 0:11:41.280 --> 0:11:46.839 the do you know I absolutely love Summit and um no, seriously, 0:11:46.920 --> 0:11:50.160 and some of my closest friends lived there. The thing is, 0:11:51.400 --> 0:11:54.280 I don't want to commute to Penn Station. Yeah, good point. 0:11:54.440 --> 0:11:57.160 I can't imagine the worst place to go than Penn Steve, 0:11:57.240 --> 0:12:01.680 But I'll give you this, mat there really finally finally 0:12:01.720 --> 0:12:05.240 doing a huge renovation of pet Penn Station. So we 0:12:05.280 --> 0:12:08.080 can only done by the time my daughters in college. Exactly. 0:12:08.120 --> 0:12:10.079 I've been waiting for this for thirty years, but they're 0:12:10.080 --> 0:12:12.440 finally starting to get it done here, so we'll see 0:12:12.480 --> 0:12:17.840 what happens. Now, let's get over to Janelle Woodword, president 0:12:18.080 --> 0:12:21.760 of Mackay Shields. They have hundred six two billion dollars 0:12:21.760 --> 0:12:25.280 in assets under management, and Janelle, I think it's interesting 0:12:25.320 --> 0:12:29.840 you have tested some market correction scenarios, all of which 0:12:29.880 --> 0:12:34.000 don't seem terribly unlikely. A resurgence of the virus, persistence 0:12:34.040 --> 0:12:39.240 of inflation, credit problems in China. What's your biggest concern? 0:12:39.280 --> 0:12:43.000 What's the biggest headwind. Yeah, sure, I think that's a 0:12:43.000 --> 0:12:44.680 great point. I mean, I think if we look back 0:12:44.800 --> 0:12:48.600 over the third quarter of those scenarios, we tested um 0:12:48.640 --> 0:12:50.920 and we saw some volatility of the market, but really 0:12:50.960 --> 0:12:54.760 we saw investors continue to engage in sponsor risk assets. 0:12:55.200 --> 0:12:58.160 So because there's some competence as we see some headline 0:12:58.240 --> 0:13:00.679 related noise that investors are going to to need to 0:13:00.760 --> 0:13:03.720 stay engaged. But to your question, what are we watching? 0:13:03.880 --> 0:13:08.720 Certainly right now, we're watching inflation data, UM, We're watching rates, 0:13:08.760 --> 0:13:11.520 and we're watching the fed UM as we look forward 0:13:11.559 --> 0:13:13.640 to really you know how we'll wait expect markets to 0:13:14.120 --> 0:13:17.439 unfold over the bounce of one and into twenty two. 0:13:18.080 --> 0:13:21.200 So I'm actually a big believer in the wall of warrior. 0:13:21.240 --> 0:13:25.880 I'm a natural warrior, Janelle. Given that, how should I 0:13:25.920 --> 0:13:28.400 be thinking about these markets? What are you guys doing 0:13:28.480 --> 0:13:31.599 in terms of positioning your portfolios here given what we 0:13:32.000 --> 0:13:36.120 do know about all those macro issues you just mentioned. Yeah, 0:13:36.160 --> 0:13:38.640 I think what we're really thoughtful about is is creating 0:13:38.720 --> 0:13:41.120 flexibility and optionality, And I think one of the things 0:13:41.160 --> 0:13:44.360 that matters right now a lot is liquidity. Both as 0:13:44.400 --> 0:13:46.679 we think about the unknown to the market is as 0:13:46.720 --> 0:13:50.319 you rightly highlight UM but also appreciate that that markets 0:13:50.360 --> 0:13:53.680 continue to trade to trade pretty well. But we want 0:13:53.679 --> 0:13:55.800 to make sure that we have liquidity freed up to 0:13:55.840 --> 0:13:59.480 take take advantage of volatility as it presents itself. UM. 0:13:59.520 --> 0:14:02.240 I think actually when it comes to fixed income, we're 0:14:02.320 --> 0:14:06.959 looking for some inflation protection structures and portfolios staying a 0:14:07.040 --> 0:14:10.080 little bit shorter interest rate UM. But we do remain 0:14:10.320 --> 0:14:14.320 fundamentally constructive, and we think that there's still significant opportunity 0:14:14.360 --> 0:14:20.360 in in credit markets in particular, we're we're in credit markets. Yeah, 0:14:20.400 --> 0:14:23.400 I think you know, some some areas that we're really 0:14:23.480 --> 0:14:27.640 focused on is on the consumer side, the housing side, UM, 0:14:27.760 --> 0:14:31.920 and we still think there's some select albeit less opportunities 0:14:31.960 --> 0:14:34.880 in some of the COVID recovery sectors. UM. So some 0:14:34.960 --> 0:14:37.160 of those are some areas that that we're focused on 0:14:37.920 --> 0:14:40.840 UM as we kind of construct portfolios, But we certainly 0:14:40.880 --> 0:14:43.400 do appreciate when we step back and look at aggregate 0:14:43.480 --> 0:14:46.760 spreads and what things look like that markets are certainly 0:14:46.840 --> 0:14:50.040 not as cheap as they were several months ago. All Right, 0:14:50.080 --> 0:14:52.640 given that valuation concern, which I think a lot of 0:14:52.720 --> 0:14:56.240 people certainly have, UM, it makes this earnings period that 0:14:56.280 --> 0:14:58.320 we're really starting to get into the teeth of right now. 0:14:58.480 --> 0:15:02.440 This week all that more important for many investors. Do 0:15:02.480 --> 0:15:05.200 you know, what are you looking for from these earning reports? 0:15:05.280 --> 0:15:07.680 We had the fanciers last week, pretty strong numbers across 0:15:07.720 --> 0:15:10.480 the board. What are you looking for going forward? Yeah, 0:15:10.480 --> 0:15:12.320 I think I'd hadlight two things that we're looking for. 0:15:12.840 --> 0:15:15.320 The first things we really are watching the margin story, 0:15:15.800 --> 0:15:18.960 and this ties back to the earlier conversation on inflation, 0:15:19.640 --> 0:15:22.840 on how supply team pressures and energy price pressures in 0:15:22.920 --> 0:15:27.280 particular are really flowing through earning statements and to what 0:15:27.400 --> 0:15:30.200 extent those are not being passed on to the end customer. 0:15:30.720 --> 0:15:32.600 I think the other thing that we're watching from a 0:15:32.680 --> 0:15:35.920 fixed income perspective is really thinking about balance sheets. The 0:15:36.040 --> 0:15:40.080 strength of corporate balance sheets has been really important for 0:15:40.240 --> 0:15:43.480 the overall credit sector to whether this period, and now 0:15:43.560 --> 0:15:45.280 we're at the point of time where we're looking how 0:15:45.480 --> 0:15:49.280 how our entities redeploying cash um and are they doing 0:15:49.360 --> 0:15:52.080 in a way that that is supportive of both long 0:15:52.200 --> 0:15:56.800 term business trends but also savor bolt of creditors. What 0:15:57.360 --> 0:16:00.760 um how much return can you back to be from 0:16:01.360 --> 0:16:03.960 real focus on E s G. I mean, do you 0:16:04.040 --> 0:16:07.120 give up some return in order to do the right thing, 0:16:07.480 --> 0:16:10.720 or can you still make as much money as you 0:16:10.840 --> 0:16:15.520 want to and you know, um not invest in big 0:16:15.640 --> 0:16:19.120 E S G centers. You know, it's it's a great question, 0:16:19.240 --> 0:16:21.920 especially if we think about credit markets through that lens 0:16:22.000 --> 0:16:25.360 and recognize who issues in those markets and what does 0:16:25.400 --> 0:16:27.400 it look like. And I will say, you know, going 0:16:27.480 --> 0:16:31.360 back to portfolios, we are seeing a broadening of what 0:16:31.560 --> 0:16:34.240 it means a fiduciary duty and what it looks like 0:16:34.400 --> 0:16:39.320 and how do we think about materiality specifically within within 0:16:39.440 --> 0:16:42.280 fixing com portfolios. And it's something we're very thoughtful about. 0:16:42.840 --> 0:16:45.280 I think the academic studies have been mixed and are 0:16:45.280 --> 0:16:48.680 still evolving in terms of this potential trade off between 0:16:48.840 --> 0:16:52.280 returns and E S and G factors. But it's really interesting. 0:16:52.320 --> 0:16:55.760 You know, we've recently I worked with Excellnal consulting firm 0:16:55.840 --> 0:16:58.360 to do a survey of some of our institutional clients 0:16:58.720 --> 0:17:01.760 and we're seeing that Mike, that that begin to shift. 0:17:02.480 --> 0:17:05.560 We're seeing that investors actually believe you can get both 0:17:05.720 --> 0:17:10.520 and on a risk adjusted basis, investors are better awful 0:17:10.720 --> 0:17:14.359 or at least uh position the same to include E 0:17:14.520 --> 0:17:17.680 S G factors within their investment mandates, and you know 0:17:17.760 --> 0:17:20.159 that was something that really stood out to us. Do 0:17:20.160 --> 0:17:21.480 you know one of the issues I hear about E 0:17:21.560 --> 0:17:24.840 s G investing is, you know, the data is just 0:17:25.000 --> 0:17:27.240 not great to help me make a decision here, like 0:17:27.520 --> 0:17:31.080 for traditional financial analysis of my income statement, balance sheet, 0:17:31.080 --> 0:17:34.159 casual statement, but nothing comparable in terms of breath and 0:17:34.240 --> 0:17:36.639 depth on the E s G side. How do you 0:17:36.720 --> 0:17:40.080 guys think about that? It's a great point and something 0:17:40.119 --> 0:17:42.480 we ask ourselves every day. You know, we've been investing 0:17:42.520 --> 0:17:45.320 a lot in our E s G data architecture and 0:17:45.400 --> 0:17:47.359 making sure that we get that in and the truth 0:17:47.440 --> 0:17:50.200 is the data is still very much evolving. One of 0:17:50.240 --> 0:17:53.760 the things we're looking for UM is really looking for 0:17:54.080 --> 0:17:59.080 more guidance from regulators in terms of providing clarity on 0:17:59.359 --> 0:18:02.119 terms and death A missions and objectives to bring some 0:18:03.160 --> 0:18:07.080 better clarity to some of these data points. UM. So 0:18:07.480 --> 0:18:09.639 we've been really thoughtful on what we've seen to be 0:18:09.760 --> 0:18:12.639 material to date, UM, but make sure that we're continuing 0:18:12.720 --> 0:18:14.840 to build that out and think about it UM and 0:18:14.920 --> 0:18:17.359 not be too prescriptive as we look forward. Right, And 0:18:17.440 --> 0:18:19.720 I'll note on the f A function on the Bloomberg 0:18:19.800 --> 0:18:22.480 terminal financial analysis. There is a data tab for E 0:18:22.720 --> 0:18:26.320 s G data, so Bloomberg certainly contributing to the data 0:18:26.640 --> 0:18:31.000 and analysis there. Janelle Wouldward, President McKay Shields located in 0:18:31.280 --> 0:18:38.760 New York City. We'll have more coming up. This is Bloomberg. Now, 0:18:38.880 --> 0:18:41.160 I want to get to Tim Gortney joining us now 0:18:41.760 --> 0:18:44.800 out of Oklahoma. He is a chief investment officer at 0:18:44.960 --> 0:18:48.720 Essential Wealth Advisors. They have four billion dollars in assets 0:18:49.359 --> 0:18:53.000 under management. And uh, let me first get your take 0:18:53.080 --> 0:18:56.680 on what we see today. There's not a lot of 0:18:56.720 --> 0:18:59.400 action in stocks, Tim, but there is a big uptake 0:19:00.160 --> 0:19:03.040 in rates, especially at the shorter end of the curve, 0:19:03.240 --> 0:19:11.640 and I think increasing concern about lingering inflation and rising rates. Yeah, yes, 0:19:11.840 --> 0:19:14.960 and it's probably overdue, you know. I think so many 0:19:15.040 --> 0:19:19.240 other metrics have been showing these price pressures and and 0:19:19.359 --> 0:19:22.480 certainly uh, company managers have been talking about it now 0:19:22.560 --> 0:19:26.600 for several quarters. Um, and uh, you know, they've confirmed 0:19:26.720 --> 0:19:29.560 it doesn't look like it's going away anytime soon. We've 0:19:29.600 --> 0:19:32.880 seen it in the in the prices of so many 0:19:34.080 --> 0:19:37.080 goods and services across the whole economic spectrum that I 0:19:37.200 --> 0:19:40.720 think now you know, rates are finally just acknowledging and 0:19:41.000 --> 0:19:44.320 reflecting the reality that that we've all kind of seen 0:19:44.400 --> 0:19:47.560 and known for for several quarters. And it's healthy. It 0:19:47.680 --> 0:19:50.879 needs to go up. I think for not only investors 0:19:51.440 --> 0:19:53.960 who are in those fixed income investments who need to 0:19:54.000 --> 0:19:57.320 hold them so they can actually have a slightly better 0:19:57.480 --> 0:20:00.560 return and hold onto more of their per just in power, 0:20:00.680 --> 0:20:05.320 but um, it's also I think just healthy to have 0:20:05.560 --> 0:20:08.520 some rates move higher so that so many other assets 0:20:08.640 --> 0:20:12.119 like home prices and certainly the prices of stocks, can 0:20:12.200 --> 0:20:14.760 start to be valued more more fairly and not based 0:20:14.840 --> 0:20:19.240 on you know, in essence zero interest rates. You know, Tim, 0:20:19.280 --> 0:20:21.360 when I when I think of Oklahoma City, I think 0:20:21.400 --> 0:20:24.520 of you know, oil, natural gas and w T I 0:20:24.640 --> 0:20:29.520 crude oil here over two of barrel. You're in energy country, 0:20:29.600 --> 0:20:32.320 oil country. What's the feeling in Oklahoma City when they 0:20:32.359 --> 0:20:36.720 think about where we are in the energy cycle. Yeah, well, 0:20:36.880 --> 0:20:40.360 you know, I think, um, I think so many people 0:20:40.400 --> 0:20:42.600 are feeling a little bit better about things. You know, 0:20:42.680 --> 0:20:47.160 we had a really rough stretch and in many ways, 0:20:47.240 --> 0:20:50.440 you know, the energy industry was was victims of their 0:20:50.840 --> 0:20:54.920 own success. They were so successful at getting energy out 0:20:54.920 --> 0:20:57.600 of the ground that the supplies, you know, drove the 0:20:57.680 --> 0:21:00.440 prices down, and it was great time for con sumers. 0:21:01.040 --> 0:21:04.000 As prices you know, between basically two thousand and fifteen 0:21:04.080 --> 0:21:09.040 and two thousand twenties stayed really low um, and you know, 0:21:09.160 --> 0:21:14.320 as such, producers were not as uh you know, not 0:21:14.520 --> 0:21:17.880 as incentivized to go invest in new products and open 0:21:18.000 --> 0:21:22.320 up new, um, new sources of a production. And so 0:21:23.440 --> 0:21:26.560 seeing the price move up, I think is is kind 0:21:26.560 --> 0:21:29.359 of like a bitter suite ending to what's been a 0:21:29.440 --> 0:21:32.479 really rough time period. People are are are feeling much 0:21:32.560 --> 0:21:36.440 better about things, and because there have been such you know, 0:21:36.600 --> 0:21:39.960 so little investment in these areas and because companies are 0:21:40.000 --> 0:21:43.240 so hesitant to go open up new sources, I think 0:21:43.560 --> 0:21:46.280 you know, it's likely to stay maybe higher, for for longer. 0:21:46.320 --> 0:21:49.680 As we've been talking about inflation just in general, do 0:21:49.760 --> 0:21:51.920 you get the sense that people are still conservative? I know, 0:21:52.040 --> 0:21:56.879 saving rates, savings rates nationwide have gone up, um. You know, 0:21:57.040 --> 0:22:03.640 even as government spending has soared, is is concerned about 0:22:03.680 --> 0:22:08.360 future tax increases and you know, just the volatility situation 0:22:09.359 --> 0:22:15.120 holding people back from investing in the future. Yeah, yeah, 0:22:15.720 --> 0:22:19.280 you know, I'm not sure exactly why there is so 0:22:19.400 --> 0:22:22.520 much cash and why um, so many people have made 0:22:22.520 --> 0:22:25.000 the decision to hold cash and and hold things like 0:22:25.720 --> 0:22:28.640 like short term bonds or bank deposits. Clearly, the banks 0:22:29.440 --> 0:22:33.359 um are over you know, over capitalized. They don't necessarily 0:22:33.480 --> 0:22:35.840 need those extra deposits, and that's why they're not earning 0:22:35.840 --> 0:22:41.560 anything on those, um you know. I think we're probably 0:22:41.600 --> 0:22:44.160 going into a period of time in the markets where 0:22:45.200 --> 0:22:47.760 the last twelve to eighteen months have been very easy. 0:22:47.920 --> 0:22:51.280 We haven't had any corrections. Everybody has enjoyed the ride higher. 0:22:51.320 --> 0:22:54.560 It's been a fairly smooth ride. But now because of 0:22:54.600 --> 0:22:57.680 those things that you just mentioned, um, you know, the 0:22:57.760 --> 0:23:00.240 government has spent, the government has gone into debt. It's 0:23:00.320 --> 0:23:05.080 likely that we'll have higher taxes moving forward, everything else 0:23:05.119 --> 0:23:07.639