WEBVTT - Markets, Banks, and M&A 0:00:00.840 --> 0:00:04.000 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.040 --> 0:00:05.280 my co host Matt Miller. 0:00:05.640 --> 0:00:09.720 Every business day we bring you interviews from CEOs, market pros, 0:00:09.720 --> 0:00:13.600 and Bloomberg experts, along with essential market moving news. 0:00:14.160 --> 0:00:17.279 Find the Bloomberg Markets Podcast on Apple Podcasts or wherever 0:00:17.360 --> 0:00:20.000 you listen to podcasts, and at Bloomberg dot com Slash 0:00:20.040 --> 0:00:23.360 podcast For broadcasting Live from the COMMONWEALTHS twenty twenty three 0:00:23.760 --> 0:00:26.720 National Financial Advisors Conference, We're at the Gaylord Rockies Resort 0:00:26.720 --> 0:00:29.760 in a rural Colorado, a world class water park. 0:00:29.840 --> 0:00:32.080 I will report for those that are into the water 0:00:32.159 --> 0:00:35.199 park thing what we're doing here. There's a lot of 0:00:35.800 --> 0:00:39.400 registered investment advisors here. People manage money for others. They 0:00:39.440 --> 0:00:42.840 gather here along with their platform, the folks at Commonwealth. 0:00:42.880 --> 0:00:45.360 Matthew Jessup joins up piece as CEO and managing partner 0:00:45.360 --> 0:00:48.199 of Jessup Wealth Management. So, Matthew, you've been in this 0:00:48.240 --> 0:00:52.040 business a long time. You started a UBS wealth management, correct, 0:00:52.240 --> 0:00:54.720 then you go off to form your own firm. Why 0:00:54.720 --> 0:00:56.760 do you go off to form your own firm and 0:00:56.840 --> 0:00:59.080 talk to us about you know, what it was like 0:00:59.160 --> 0:01:00.440 building that business. 0:01:00.720 --> 0:01:02.280 So, Paul, when I got started in the business that 0:01:02.360 --> 0:01:04.200 was back in the day of you know, cold calling, 0:01:04.400 --> 0:01:06.920 right yep, you know, smile and dial and I was 0:01:06.920 --> 0:01:09.960 able to build a client base. And in the late 0:01:09.959 --> 0:01:12.480 two thousands, you know, you go through the GFC. You know, 0:01:12.520 --> 0:01:14.200 the last thing I wanted to worry about is the 0:01:14.200 --> 0:01:16.960 custodian where my money was held. And you know, being 0:01:17.000 --> 0:01:20.080 independent had gave me the ability to invest money the 0:01:20.080 --> 0:01:23.120 way I wanted and grow the business in my fashion. 0:01:23.160 --> 0:01:25.160 And it's worked out really well over the years. We're 0:01:25.200 --> 0:01:28.160 managing over three hundred million of assets, over four hundred 0:01:28.160 --> 0:01:30.480 households across the US. 0:01:30.560 --> 0:01:32.600 So how do you build that business? What are some 0:01:32.640 --> 0:01:35.399 of the tools you use to build that business? So 0:01:35.560 --> 0:01:36.679 you know a lot of it is going to be 0:01:36.680 --> 0:01:38.600 word of mouth and referrals. I do it old school 0:01:38.640 --> 0:01:40.240 now these days, you know, the days of smile and 0:01:40.280 --> 0:01:42.920 dialing is obviously over. But you know, if you look 0:01:43.000 --> 0:01:45.480 at you know how that business has grown, it's mainly 0:01:45.520 --> 0:01:47.960 through that word of mouth, through our entire client base. 0:01:49.360 --> 0:01:50.360 In terms of. 0:01:51.840 --> 0:01:53.840 What you do to get your message out there, beyond 0:01:53.840 --> 0:01:58.840 word of mouth, I'm thinking about social media, posting on Twitter, 0:01:58.880 --> 0:02:02.080 for example. Bailey was just talking about putting charts up there, 0:02:02.320 --> 0:02:04.960 or maybe even going a little bit further a YouTube 0:02:05.120 --> 0:02:08.760 account or a podcast. What do you think are the 0:02:08.800 --> 0:02:11.760 best bang for your buck ways to spread the word. 0:02:13.160 --> 0:02:15.440 Matt, great question for us, It's gonna be our podcast. 0:02:15.480 --> 0:02:18.880 So we started the Independent Advisor's Podcast. We've been doing 0:02:18.919 --> 0:02:22.760 it for two hundred and twenty two consecutive weeks. Each 0:02:22.800 --> 0:02:25.560 of those podcasts last about thirty forty minutes. And what 0:02:25.600 --> 0:02:28.240 we do is a really good job of educating our 0:02:28.320 --> 0:02:31.200 client base and potential clients. You know, we're gonna talk 0:02:31.200 --> 0:02:33.639 about big news and headlines over the past week. We're 0:02:33.639 --> 0:02:37.840 gonna highlight you know, tweets or exes, articles and research, 0:02:38.120 --> 0:02:40.040 and then we do financial planning topics of the week. 0:02:40.080 --> 0:02:42.440 And this was started with me and my business partner, 0:02:42.480 --> 0:02:45.160 Mark mcavy, who's our firm's chief investment officer. 0:02:45.560 --> 0:02:48.880 So what do you find that your clients need the 0:02:48.919 --> 0:02:51.440 most these days? I mean, if you kind of just 0:02:51.480 --> 0:02:53.840 lose yourself in social media or in the news, it 0:02:53.880 --> 0:02:56.120 can be dizzying. So I mean, how do you try 0:02:56.160 --> 0:02:58.120 to get your clients to focus on. 0:02:58.440 --> 0:02:59.960 You know, at the end of the day, it's helping 0:03:00.040 --> 0:03:02.720 them meet their long term financial goals and avoiding the 0:03:02.760 --> 0:03:07.320 short term noise, and we if we look at the 0:03:07.360 --> 0:03:09.800 market day to day and react to that, we're going 0:03:09.840 --> 0:03:11.640 to get them off base. And so I think we 0:03:11.720 --> 0:03:15.520 do a good job putting the news headlines into perspective. 0:03:15.800 --> 0:03:18.239 You know, let's take geopolitics as an example. You know, 0:03:18.320 --> 0:03:20.959 if an investor was waiting for the absence of geopolitics, 0:03:21.200 --> 0:03:23.560 they never own stocks. And so I think we do 0:03:23.600 --> 0:03:26.680 a good job managing and balancing what they're seeing day 0:03:26.720 --> 0:03:28.960 to day in the markets pall, and managing that with 0:03:29.000 --> 0:03:29.959 their long term goals. 0:03:30.200 --> 0:03:32.959 So how do they think? I mean, everybody's different or 0:03:32.960 --> 0:03:36.000 everybody's got different goals here when you start off the 0:03:36.000 --> 0:03:39.200 conversation kind of where would you like to take them? 0:03:39.280 --> 0:03:41.960 For most of these people, it's say sixty forty portfolios 0:03:42.280 --> 0:03:44.680 still the place to start or is there a different place? 0:03:44.800 --> 0:03:46.680 You know, if a lot of retirees, I think that's fine. 0:03:46.720 --> 0:03:48.480 You know, I think that the sixty forty, due to 0:03:48.480 --> 0:03:50.360 the way the market was in twenty twenty two, is 0:03:50.400 --> 0:03:52.840 getting a bad rap lately. We don't think it's dead, 0:03:52.960 --> 0:03:56.320 you know. I think ultimately the way our firm manages money, 0:03:56.360 --> 0:03:58.520 we don't sub anything out mainly to third parties. We're 0:03:58.600 --> 0:04:01.920 using individual securities, our own research, and we have our 0:04:02.280 --> 0:04:04.600 own in house trader, and right now, I know we're 0:04:04.640 --> 0:04:05.800 going to get to it a little bit. You know, 0:04:05.840 --> 0:04:08.720 we're overweight equities right now. We have a different contrarian 0:04:08.840 --> 0:04:14.240 view than Wall Street right now. Why well, ultimately we 0:04:14.280 --> 0:04:16.960 think that Wall Street is too pessimistic right now. I 0:04:17.000 --> 0:04:18.719 think when you look at a lot of the indicators, Matt, 0:04:18.800 --> 0:04:21.360 it could be everything from investor sentiment, y you look 0:04:21.360 --> 0:04:23.480 at a lot of the extreme ratios we've seen over 0:04:23.520 --> 0:04:26.640 the past year. I think the market can't get around 0:04:26.640 --> 0:04:29.040 the fact that stocks can do good in higher interest 0:04:29.080 --> 0:04:31.960 rate environments. You know, NYU did a great study that 0:04:32.040 --> 0:04:36.839 looked at four variables, rising rates, falling rates, rising interest rates, 0:04:36.880 --> 0:04:40.120 falling with inflation on the other two variables. And when 0:04:40.120 --> 0:04:42.919 you look at those and all those scenarios of falling 0:04:43.000 --> 0:04:47.279 interest rates in inflation, ultimately stocks only do bad in 0:04:47.320 --> 0:04:49.760 one of the three, and that is going to be 0:04:49.880 --> 0:04:53.960 a rising inflationary environment. And ultimately we are seeing inflation 0:04:54.080 --> 0:04:55.760 come down. It's not going to come down every month. 0:04:55.880 --> 0:04:58.320 We know that data point just recently, but we're making 0:04:58.360 --> 0:05:00.760 a lot of headway and these fed rates hikes take 0:05:00.880 --> 0:05:03.160 time to work their self through the system. 0:05:03.520 --> 0:05:04.320 Yeah, fair enough. 0:05:04.480 --> 0:05:06.800 Hey, I want to know about your take on the 0:05:06.839 --> 0:05:09.520 long end of the curve here. I think a lot 0:05:09.520 --> 0:05:11.799 more people have been learning about it. Certainly we've seen 0:05:11.960 --> 0:05:16.960 massive inflows to TLT, which is a twenty year plus 0:05:17.080 --> 0:05:17.960 bond fund. 0:05:17.720 --> 0:05:20.240 ETFU and YEP. 0:05:20.640 --> 0:05:23.920 And one of the things that I think people are 0:05:24.160 --> 0:05:30.640 noticing is small moves in yield contribute to very big 0:05:30.680 --> 0:05:34.159 moves in principle on the long end. But a lot 0:05:34.160 --> 0:05:36.760 of your investors, a lot of your clients may be 0:05:36.920 --> 0:05:39.480 looking at say the thirty year at four and three 0:05:39.560 --> 0:05:42.240 quarters percent and saying, I don't care about moves in 0:05:42.279 --> 0:05:44.400 the principle over the time because I'm gonna hold this 0:05:44.440 --> 0:05:45.080 to maturity. 0:05:45.920 --> 0:05:48.680 Those rates look juicy. Are they gonna look juicy when 0:05:48.680 --> 0:05:51.080 we look back in ten fifteen years. 0:05:52.640 --> 0:05:53.920 Well, man, I will kind of take the other side 0:05:53.920 --> 0:05:55.120 of it. Right now, we're on the short end of 0:05:55.160 --> 0:05:58.360 the curve, because the big concern for us is ultimately 0:05:58.480 --> 0:06:00.440 rates are gonna come down, we feel over the next 0:06:00.520 --> 0:06:02.279 couple of years, and what we're going to look for 0:06:02.400 --> 0:06:05.320 is a definitive move and consistency before we start locking 0:06:05.360 --> 0:06:07.440 in some of those longer term rates. Now, I don't 0:06:07.440 --> 0:06:10.080 think I'm unique in that feeling ultimately, but I think 0:06:10.160 --> 0:06:14.160 at a certain point, owning individual bonds for our clients 0:06:14.600 --> 0:06:17.040 takes away a lot of the risk that you just mentioned, sir. 0:06:17.760 --> 0:06:20.799 All right, So Matthew talk to us about some younger investors. 0:06:20.839 --> 0:06:23.200 How do you go out and try to attract younger 0:06:23.200 --> 0:06:25.599 investors because a lot of folks are just concerned that 0:06:25.640 --> 0:06:27.640 maybe they're not saving enough early enough. Maybe they're not 0:06:27.680 --> 0:06:30.040 because they have a lot of challenges, whether it's student 0:06:30.120 --> 0:06:32.920 debt or other things. How do you approach some of 0:06:32.960 --> 0:06:33.960 the younger investors out there? 0:06:34.040 --> 0:06:37.080 Great question, Paul, So you and matt were just talking about, 0:06:37.120 --> 0:06:39.120 you know, presence on social media. You know, if you 0:06:39.160 --> 0:06:42.800 look at these next generational investors, they're looking towards professionals 0:06:42.800 --> 0:06:45.240 that can guide them and provide that advice, but they 0:06:45.240 --> 0:06:46.839 want to connect on a personal level. 0:06:47.160 --> 0:06:47.359 You know. 0:06:47.600 --> 0:06:49.919 I'm at a firm where I'm the oldest team member 0:06:49.920 --> 0:06:52.880 in my young forties. So what's great is I've built 0:06:52.960 --> 0:06:55.119 up Me and Mark have built up a great team 0:06:55.480 --> 0:06:57.480 that can sit down one on one with these younger 0:06:57.520 --> 0:07:00.760 investors who can relate to them right to their goals. 0:07:00.760 --> 0:07:02.760 That they're dealing with. And so I think that's a 0:07:02.800 --> 0:07:05.320 good thing, is that ultimately we can relate on a 0:07:05.360 --> 0:07:08.000 one to one basis in multiple levels. And what do 0:07:08.000 --> 0:07:09.960 you think they do they want anything different in their 0:07:10.000 --> 0:07:12.760 investments than maybe some of the I don't know. The 0:07:12.760 --> 0:07:15.680 baby boomers are just some of the older investors, great question, Paul. 0:07:15.880 --> 0:07:18.200 They're more risk averse, believe it or not. Okay, So 0:07:18.240 --> 0:07:21.160 what we find out is that investors in their twenties 0:07:21.200 --> 0:07:25.000 and thirties, they're not having experience shed in investing into equities. 0:07:25.200 --> 0:07:27.080 And so what we see in a lot of times is 0:07:27.080 --> 0:07:29.560 we are spending a lot of time educating in Paul 0:07:29.720 --> 0:07:34.760 up front on risk, reward, volatility, goals and objectives because ultimately, 0:07:34.880 --> 0:07:37.280 with the time horizon they have, they're going to be 0:07:37.400 --> 0:07:40.400 very much benefited by having that equity exposure. But then 0:07:40.440 --> 0:07:42.360 we have to get them past those day to day 0:07:42.400 --> 0:07:45.880 and month to month headlines that might derail that bigger 0:07:46.320 --> 0:07:47.160 plan if you think of it. 0:07:47.200 --> 0:07:49.800 And it's interesting, I mean the younger investors now fixed 0:07:49.840 --> 0:07:52.560 in come is actually an option. There's a generation of 0:07:52.600 --> 0:07:56.040 people who have had nothing but zero interest rates that 0:07:56.080 --> 0:07:58.120 it had to go out and take more and more risk, 0:07:58.680 --> 0:08:02.160 whether it's equities or alternative Now fixed income can really 0:08:02.200 --> 0:08:04.080 be a percentage of your portfolio. 0:08:04.120 --> 0:08:04.720 Absolutely. 0:08:04.760 --> 0:08:06.680 I mean I think, you know, going back to Matt's 0:08:06.720 --> 0:08:08.360 point about it, at some point, you know you've got 0:08:08.400 --> 0:08:10.880 to start thinking about locking in some longer term rates. 0:08:11.560 --> 0:08:14.040 While we have these great short term rates, you got 0:08:14.040 --> 0:08:15.880 to go out and enjoy that. It's time to harvest. 0:08:16.360 --> 0:08:18.520 But at a certain point, I think over the next say, 0:08:18.600 --> 0:08:21.240 you know, six to twelve months, looking at longer durations 0:08:21.320 --> 0:08:22.640 is probably gonna make a lot of sense. 0:08:22.720 --> 0:08:25.000 What are you were hoping to gain from this week 0:08:25.040 --> 0:08:26.720 here at this conference. 0:08:26.760 --> 0:08:30.040 First and foremost easy question. Networking with my peers. That's 0:08:30.040 --> 0:08:33.040 where I get a lot of good information best practices. 0:08:33.320 --> 0:08:35.280 You know, we're not here to reinvent the wheel, and 0:08:35.320 --> 0:08:38.199 so I have a good group of like minded individuals 0:08:38.200 --> 0:08:40.200 that we network with. We have a great study group 0:08:40.200 --> 0:08:42.640 of about ten other advisors that me and my business 0:08:42.640 --> 0:08:45.439 partner Mark we meet with and we share and get 0:08:45.480 --> 0:08:47.600 a lot of good ideas on how to run our practices. 0:08:47.640 --> 0:08:49.320 All right, Matthew, thank you so much for joining us. 0:08:49.320 --> 0:08:53.040 Matthew Jessup, he's a CEO and managing partner. Jessup Wealth Management. 0:08:54.200 --> 0:08:58.040 You're listening to the tenth can'shur Live program Bloomberg Markets 0:08:58.080 --> 0:09:01.160 weekdays at ten am Eastern conn Bloomberg dot Com, the 0:09:01.280 --> 0:09:04.400 iHeartRadio app, and the Bloomberg Business App, or listen on 0:09:04.440 --> 0:09:06.559 demand wherever you get your podcasts. 0:09:08.040 --> 0:09:11.520 We're broadcasting live from Commonwealth's twenty twenty three National Financial 0:09:11.520 --> 0:09:15.280 Advisors Conference at the Gaylord Rockies Resort in Aurora, California. 0:09:15.320 --> 0:09:18.000 Today we're joined with our host here, Brad McMillan. He's 0:09:18.040 --> 0:09:22.120 the CIO, that's Chief Investment Officer for Commonwealth. Brad, thanks 0:09:22.160 --> 0:09:23.720 so much for joining us. Thanks for having us out 0:09:23.760 --> 0:09:27.800 here in Denver. Appreciate it. So I see a bunch 0:09:27.840 --> 0:09:31.559 of your clients walking around here, registered investment advisors. When 0:09:31.600 --> 0:09:34.080 you sit down and talk with them and mingle with them, 0:09:34.160 --> 0:09:36.240 what are some of their biggest concerns here is they 0:09:36.240 --> 0:09:38.640 try to figure out how to navigate these markets on 0:09:38.679 --> 0:09:39.480 behalf of their clients. 0:09:40.200 --> 0:09:42.480 There's a couple of things that are really dominating the 0:09:42.520 --> 0:09:46.079 conversation right now. One is inflation. We see it coming down, 0:09:46.559 --> 0:09:48.280 but you know there's a real fear is it going 0:09:48.320 --> 0:09:49.840 to go back up? Is it going to go back 0:09:49.880 --> 0:09:53.320 to normal levels? And what are normal levels anyway, So 0:09:53.440 --> 0:09:55.920 that's one thing, and very closely tied to that as 0:09:56.000 --> 0:09:58.720 interest rates. And you just had Matt jessipull in here, 0:09:58.920 --> 0:10:01.240 you know, talking about how rates are evolving and we 0:10:01.360 --> 0:10:04.319 have you know, very good short term rates right now 0:10:04.320 --> 0:10:07.000 and people love that. But is that going to last? 0:10:07.080 --> 0:10:09.000 You know, how is that going to change? So how 0:10:09.000 --> 0:10:13.480 do we navigate this significant shift in the fiscal and 0:10:13.600 --> 0:10:15.680 monetary structure. It's a real challenge. 0:10:16.240 --> 0:10:19.160 So what do we What are some of the big 0:10:19.200 --> 0:10:21.040 issues here? I mean, I think we heard some We 0:10:21.080 --> 0:10:22.839 had some earnings today from some of the big banks 0:10:22.880 --> 0:10:25.160 this morning, and it seems like pretty solid out there. 0:10:25.200 --> 0:10:27.640 I mean, you know, they had some good loan growth, 0:10:27.640 --> 0:10:29.640 they had some good net interest markets, some of their 0:10:30.160 --> 0:10:32.920 capital markets businesses are pretty pretty strong. So at least 0:10:32.960 --> 0:10:36.240 looking just from today's companies reporting, it looks like the 0:10:36.240 --> 0:10:38.640 economy is in decent shape. Is that concidned with how 0:10:38.679 --> 0:10:39.880 you guys think about it? 0:10:39.880 --> 0:10:42.160 It does because we've had a lot of talk over 0:10:42.200 --> 0:10:44.320 the past year eighteen months about how we're going to 0:10:44.320 --> 0:10:47.120 have a recession, and a recession is inevitable and the 0:10:47.160 --> 0:10:49.040 world is coming to an end and so forth, and 0:10:49.080 --> 0:10:52.160 so on. What we've been saying consistently is we see 0:10:52.160 --> 0:10:54.600 an economy driven by the consumer, and we see the 0:10:54.600 --> 0:10:57.800 consumer getting more jobs at higher wages. You know, when 0:10:57.840 --> 0:11:00.160 you have when you have this kind of job growth, 0:11:00.200 --> 0:11:02.240 and we've just seen that is not softened. Really, we 0:11:02.320 --> 0:11:04.560 just saw the most recent data. You know, when you 0:11:04.600 --> 0:11:06.360 have this kind of job growth, when we have this 0:11:06.480 --> 0:11:10.920 kind of wage growth, when have this kind of spending 0:11:10.960 --> 0:11:14.160 ability growth, we don't see a recession. So when you 0:11:14.200 --> 0:11:16.760 look at the earnings expectations, they're kind of based on 0:11:16.800 --> 0:11:19.600 that recession thesis and we just don't see that. And 0:11:19.600 --> 0:11:22.400 I think, as you say today's data, the banks are 0:11:22.400 --> 0:11:25.280 doing okay because people are out there spending. 0:11:25.679 --> 0:11:26.920 Concern that're spending. 0:11:26.960 --> 0:11:30.480 My concern is that people are out spending their income 0:11:30.640 --> 0:11:33.720 because we have seen wage growth, but it has not 0:11:34.000 --> 0:11:38.160 kept up with inflation. So prices are rising faster than 0:11:38.200 --> 0:11:42.599 people's paychecks. And you can see that everywhere when you 0:11:42.640 --> 0:11:47.839 look at the affordability of homes, of cars, of gasoline, 0:11:47.880 --> 0:11:50.280 all the things that the Fed doesn't really necessarily want 0:11:50.280 --> 0:11:53.520 to put into the core inflation category, right, but the 0:11:53.520 --> 0:11:58.480 things that we need excess savings have been spent off. 0:11:58.760 --> 0:12:02.640 People are putting much more or in terms of payments 0:12:02.679 --> 0:12:06.200 on credit cards. They're also delinquent on those credit cards 0:12:06.240 --> 0:12:08.760 at a higher rate, delinquent on auto loans which are 0:12:08.880 --> 0:12:10.720 too much for them to afford at a higher rate, 0:12:10.920 --> 0:12:13.440 and they've got to start paying back student loans, which 0:12:13.480 --> 0:12:15.400 they haven't been doing for a couple of years. 0:12:16.360 --> 0:12:17.720 Doesn't the consumer worry you? 0:12:20.200 --> 0:12:22.920 The consumer does worry me. And everything you've pointed out 0:12:23.040 --> 0:12:26.520 is are real issues. But at the same time, when 0:12:26.520 --> 0:12:29.440 you look at the data, we have gotten worse than 0:12:29.440 --> 0:12:31.800 we've been over the past year, and that's true, but 0:12:31.800 --> 0:12:33.800 we're still better than we have been, you know, at 0:12:33.840 --> 0:12:36.920 typical points previously in the cycle, so we still have 0:12:36.960 --> 0:12:39.920 some running room here. I mean, things are softening, We're 0:12:39.960 --> 0:12:42.520 seeing consumers maybe start to pull back a little bit, 0:12:42.520 --> 0:12:45.800 and certainly interest rates are having an effect, there's no 0:12:45.880 --> 0:12:48.600 doubt about that. But the flip side of this is 0:12:48.840 --> 0:12:52.280 a lot of people own homes with low mortgages locked in. 0:12:52.320 --> 0:12:54.840 Their spending is not going to be affected by interest rates, 0:12:55.160 --> 0:12:57.520 So there's another side to the story. But are things 0:12:57.520 --> 0:12:59.800 slowing Absolutely? Does that mean we're going to have a 0:12:59.800 --> 0:13:03.040 re anytime soon? I don't see it in the data. 0:13:03.240 --> 0:13:05.480 All right, So what do you want this Federal Reserve 0:13:05.520 --> 0:13:07.200 to do? We're gonna you know, I mean, it's they've 0:13:07.240 --> 0:13:10.160 been very, very clear and very aggressive in fighting inflation 0:13:10.679 --> 0:13:12.800 and rise and raising interestratetions. What do you think they're 0:13:12.800 --> 0:13:14.160 gonna do over the next several meetings. 0:13:14.559 --> 0:13:16.320 I think they've gotten to where they need to be. 0:13:16.800 --> 0:13:19.000 When you look at the inflation numbers, they're going to 0:13:19.040 --> 0:13:22.040 be trending down, if only because of housing. We know 0:13:22.080 --> 0:13:23.959 how the housing numbers are gonna trend. They're going to 0:13:24.040 --> 0:13:26.880 trend down. We should see inflation in the three three 0:13:26.920 --> 0:13:28.640 and a half range by the end of the year. 0:13:29.240 --> 0:13:31.320 That being the case. When you look at the surge 0:13:31.360 --> 0:13:34.920 in tenure yields, that's already done a significant amount of 0:13:34.960 --> 0:13:35.560 the tightening. 0:13:35.840 --> 0:13:36.000 You know. 0:13:36.040 --> 0:13:38.240 If the Fed wants rates to be in the five 0:13:38.360 --> 0:13:41.680 range for the ten year, hey guess what we're about there. 0:13:42.320 --> 0:13:44.600 So they have little, if anything more to do. I 0:13:44.640 --> 0:13:47.640 expect them to keep talking hawkishly because that's what the 0:13:47.679 --> 0:13:51.520 Fed does, you know, But I don't see a need 0:13:51.559 --> 0:13:54.480 to raise rates much further, if at all. 0:13:54.960 --> 0:13:57.319 All Right, So given that backdrop here, as you talk 0:13:57.360 --> 0:13:59.760 to some of these ris, I mean, are you sensing 0:13:59.760 --> 0:14:01.600 that now it's the time to get a little bit 0:14:01.640 --> 0:14:05.280 more aggressive here. Maybe you know, maybe increase your equity allocation, 0:14:05.360 --> 0:14:07.000 maybe go out a little bit more duration in your 0:14:07.000 --> 0:14:07.920 fixing come portfolio. 0:14:08.440 --> 0:14:10.760 We are talking a little bit in going out in 0:14:10.800 --> 0:14:14.400 the equity and the duration of the portfolio. You know, 0:14:14.440 --> 0:14:16.800 as Matt was talking about a minute ago. Now is 0:14:16.800 --> 0:14:18.800 the time to lock in some rates. Yeah, you can 0:14:18.840 --> 0:14:21.680 get more, you know, on a current basis, but at 0:14:21.680 --> 0:14:24.640 the same time that's going to change. So if I'm 0:14:24.640 --> 0:14:27.240 looking to lock in a longer term liability and I 0:14:27.280 --> 0:14:30.800 can get you know, four eight, four nine percent, that's 0:14:30.880 --> 0:14:34.200 a great long term yield to lock in. And I 0:14:34.240 --> 0:14:36.680 think you're going to start seeing that with insurance companies 0:14:36.720 --> 0:14:39.840 for example. As far as equities go, I'm not as pessive. 0:14:39.920 --> 0:14:42.640 I'm still optimistical inequities going forward. I think we have 0:14:42.680 --> 0:14:46.360 some opportunity for some earnings out performance. We talked about that. 0:14:46.680 --> 0:14:49.240 I think valuations, most of the hit has already been 0:14:49.280 --> 0:14:51.920 taken from rising rates, So I do think there's some 0:14:51.960 --> 0:14:54.320 optimism there. I am a little bit concerned at the 0:14:54.360 --> 0:14:57.480 index level when you look at the vulnerability to the 0:14:57.520 --> 0:15:01.120 seven major socks, so you know, individual stocks. Yeah, I 0:15:01.160 --> 0:15:02.920 think there's a running room for a lot of them, 0:15:03.160 --> 0:15:05.520 but we might see some volatility at the index level. 0:15:06.360 --> 0:15:09.600 What is your outlook in terms of rate cuts? I mean, 0:15:09.600 --> 0:15:13.800 if you're optimistic on the economy and not too worried 0:15:13.840 --> 0:15:17.680 anymore about rising rates, do you see them being held 0:15:17.680 --> 0:15:20.520 at this level for much longer or do you think 0:15:20.560 --> 0:15:24.320 that the Fed cuts rates for any particular reason next year? 0:15:26.520 --> 0:15:28.680 You know, it's interesting a lot of people are calling 0:15:28.680 --> 0:15:31.240 for rate cuts, and I think that's the wrong question. 0:15:31.720 --> 0:15:33.400 I don't think we should be asking when does the 0:15:33.400 --> 0:15:35.920 Fed cut rates? I think the question has to be 0:15:36.040 --> 0:15:38.680 why would the Fed cut rates? They are at a 0:15:38.760 --> 0:15:42.400 level that historically is normal, you know, And I think 0:15:42.480 --> 0:15:46.320 one of Powell's overriding objectives is to restore normality to 0:15:46.400 --> 0:15:49.760 the market, so he's there. So what would make them 0:15:49.760 --> 0:15:54.280 cut rates? If inflation were to rise again, they're going 0:15:54.360 --> 0:15:56.880 to raise rates. If inflation goes down to normal and 0:15:56.920 --> 0:15:59.160 they don't have to cut rates, why would they cut rates? 0:15:59.640 --> 0:16:02.040 The only thing that really might make them cut rates 0:16:02.080 --> 0:16:04.720 is a severe recession, and as I said, I don't 0:16:04.760 --> 0:16:06.640 see that. So I don't see any rate cuts for 0:16:07.120 --> 0:16:08.600 probably at least through next. 0:16:08.440 --> 0:16:11.960 Year, all right, So I guess one of the other. 0:16:12.280 --> 0:16:14.240 When you speak to some of your rias here, are 0:16:14.240 --> 0:16:17.080 you telling them maybe like some of the sectors you 0:16:17.120 --> 0:16:19.760 guys like like, you know, I'm still bullish on tech, 0:16:19.800 --> 0:16:21.800 or I think there's still room and energy. How do 0:16:21.800 --> 0:16:23.000 you kind of frame that discussion? 0:16:23.960 --> 0:16:27.640 Generally speaking, we're not tactical investors, but at the same time, 0:16:27.680 --> 0:16:31.120 we do recognize that, for example, small cap has outperformed 0:16:31.120 --> 0:16:33.920 over the past several years. Value has outperformed over the 0:16:33.960 --> 0:16:36.320 past several years, and we look at that and we 0:16:36.400 --> 0:16:38.600 know why that is, and we see, you know, potential 0:16:38.640 --> 0:16:42.560 catalysts for more outperformance going forwards. So we do have 0:16:42.640 --> 0:16:45.520 some overweights in those spaces. You know, when people talk 0:16:45.520 --> 0:16:49.280 about vulnerabilities, we've already talked about the magnificent seven there. 0:16:49.680 --> 0:16:51.680 I think there's a chance that we might see a 0:16:51.760 --> 0:16:56.600 repricing of that as we see higher yielding investments like 0:16:56.720 --> 0:16:59.600 value stocks start to become more stable. In other words, 0:16:59.640 --> 0:17:01.440 I think we're going to see a rotation. We've seen 0:17:01.480 --> 0:17:04.760 some outperformance in large growth. I think the reverse of 0:17:04.760 --> 0:17:06.600 that is due to do some catch up. 0:17:06.680 --> 0:17:08.359 All Right, we're out here in Colorado. I feel like 0:17:08.400 --> 0:17:11.280 it's kind of energy country. What's your energy call here? 0:17:11.280 --> 0:17:12.639 I mean with these energy stocks. 0:17:13.560 --> 0:17:16.440 The interesting thing is when you look at energy, you're 0:17:16.440 --> 0:17:18.960 basically talking about the oil and gas prices, and that 0:17:19.640 --> 0:17:21.640 has gone up a bit, but it hasn't really gone 0:17:21.720 --> 0:17:24.120 up that much. And I think the real tell here 0:17:24.200 --> 0:17:27.399 is what's happened in the Middle East. We haven't seen 0:17:27.720 --> 0:17:31.320 oil prices spiked to any significant degree, and that tells 0:17:31.320 --> 0:17:33.800 me a couple of things. First of all, there's a 0:17:33.840 --> 0:17:36.399 perception out there, right or wrong, that this is not 0:17:36.440 --> 0:17:39.159 going to be a wider war. Second of all, that 0:17:39.240 --> 0:17:42.200 we have the US production as a stabilizer now, and 0:17:42.240 --> 0:17:44.960 I think we just hit an all time high for production. 0:17:45.119 --> 0:17:47.680 So the US oil industry is continuing to do very 0:17:47.680 --> 0:17:51.439 well and that's stabilizing prices. So I'm not sure I 0:17:51.480 --> 0:17:53.800 see too much upside from prices. I do think we're 0:17:53.800 --> 0:17:55.800 going to see consolidation, as we just saw with the 0:17:55.800 --> 0:17:59.240 Exxon deal. So you know, it's very much an industry 0:17:59.280 --> 0:18:01.119 in fox. I think I'm not sure there's a lot 0:18:01.119 --> 0:18:02.840 about performance going forward there. 0:18:02.920 --> 0:18:05.280 All right, Bret, thanks so much for joining us. Brad McMillan, 0:18:05.560 --> 0:18:08.800 he is the CIO of Commonwealth, the host of this 0:18:08.960 --> 0:18:11.240 gig add here in Aurora, Colorado. 0:18:11.600 --> 0:18:14.720 You're listening to the tape Cat's our live program Bloomberg 0:18:14.800 --> 0:18:18.399 Markets weekdays at ten am Eastern on Bloomberg Radio, the 0:18:18.440 --> 0:18:20.400 tune in app, Bloomberg dot Com, and. 0:18:20.359 --> 0:18:21.680 The Bloomberg Business App. 0:18:21.720 --> 0:18:24.520 You can also listen live on Amazon Alexa from our 0:18:24.560 --> 0:18:29.560 flagship New York station, Just say Alexa play Bloomberg eleven thirty. 0:18:30.200 --> 0:18:33.600