Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business
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Speaker 2: Retch swabinpat here in the Moscone Center. I just want
Speaker 2: to point out that UBS recently came out with a report.
Speaker 2: It found that millionaires already accounted for about one and
Speaker 2: a half percent of the adult population. They analyzed this
Speaker 2: in twenty twenty three, and they said, by twenty twenty eight,
Speaker 2: will that love risen in fifty two of the fifty
Speaker 2: six markets that it's surveyed. It's some markets the number
Speaker 2: of US dollar millionaires will increase by as much as
Speaker 2: fifty percent over the next five years. Wealth management has
Speaker 2: been a booming business for the last year, the last
Speaker 2: few years, I would say, and it continues to be so.
Speaker 3: Yeah, it's all kept those involved in the industry were
Speaker 3: busy client assets at the retail broker age Charles Schwab
Speaker 3: and the wealth arms of the six largest US bank
Speaker 3: Search five trillion dollars in the twelve months through September,
Speaker 3: twenty three percent jump is the group's revenue from the
Speaker 3: business collectively topped eighty four billion dollars so far this year.
Speaker 2: Let's get to it with a guest. He knows what's
Speaker 2: going on. We're delighted to be here in San Francisco
Speaker 2: with a Omar Aguila. He's the chief executive officer, chief
Speaker 2: investment officer at Schwab Asset Management. Omar. Nice to have
Speaker 2: you here with us. You see a lot. Tell us
Speaker 2: about what you guys are seeing in terms of wealth management.
Speaker 4: Yes, and welcome to impact.
Speaker 2: Thank you for having us.
Speaker 4: It's great to see you everybody here in San Francisco.
Speaker 4: You know, we see a continuous need and continuous demand
Speaker 4: of clients for advice. I think as people continue to
Speaker 4: grow in their lives and they continue to accumulate, well,
Speaker 4: you know, they need for them to have somebody that
Speaker 4: can rely on and continue to just work on how
Speaker 4: do what did I do with their money? How do
Speaker 4: they actually set up? And you know, it's kind of
Speaker 4: interesting with all the information that is available today, there's
Speaker 4: not a lot of people that actually can make a
Speaker 4: decision on what to do with their money. Seriously, and
Speaker 4: it's just difficult to do.
Speaker 2: Why what is it that they're lacking? What kind of
Speaker 2: information are they seeking?
Speaker 4: I think it's almost like when you go grocery shopping.
Speaker 4: There is a lot, a lot of options. You know.
Speaker 4: Back back when I started my career, you know, you
Speaker 4: wanted to say, for retirement, there was one option, just
Speaker 4: just a buy a target day fund. That's it. You're
Speaker 4: based on what year you're going to plan to retire.
Speaker 4: That's one option. But now today there's multiple options, multiple
Speaker 4: things you can do manager accounts, you could do it
Speaker 4: on your own, you could do a model, you can
Speaker 4: do there's several things that you can do. And therefore
Speaker 4: the there's a natural human you know, bias that tells you, oh, well,
Speaker 4: if there's too many options, I'm overly done. I cannot
Speaker 4: make a decision. It's almost like me trying to find
Speaker 4: a shampoo. It's like, no way you can actually pick
Speaker 4: something that will be good, and then once you pick it,
Speaker 4: there is a regret. It's like, well, did I pick
Speaker 4: the right one? Did I not pick the right one?
Speaker 4: Maybe it wasn't that or the price. And that's a
Speaker 4: big part of the same thing happens when it comes
Speaker 4: down to finances and where it comes that. That's why
Speaker 4: there is what we call a bull market for advice,
Speaker 4: especially when you accumulate wealth, there is a significant amount
Speaker 4: of need for clients to reach a financial advice or
Speaker 4: an RIA to be able to just find what is
Speaker 4: the right solution for them.
Speaker 3: What's interesting, though, is Charles Schwab offers both of these
Speaker 3: sort of different areas. You could do it all yourself
Speaker 3: using Charles Schwab's retail brokerage platform, or you could use
Speaker 3: an RIA whose back end is supported by Charles Schwab.
Speaker 3: How do you support both of those things even though
Speaker 3: they offer very different things.
Speaker 4: Yes, well, that's a big part of you know, the
Speaker 4: the institutional knowledge of trying to do things through client eyes.
Speaker 4: And in many cases there's many clients that you want
Speaker 4: to use their tools on their own and in many
Speaker 4: in many cases, they actually know what they want to
Speaker 4: do and they're looking exactly what it is and just
Speaker 4: thinking about you know, like a supermarket. You know, there's
Speaker 4: people that know exactly the brand they want, exactly how
Speaker 4: they want to do it, and they're loyal to what
Speaker 4: their pieces are and they will continue to do that.
Speaker 4: There are others that are feeling more comfortable, you know,
Speaker 4: relying on an advisor for them to find what their
Speaker 4: path is. And you know, both of them are reliable.
Speaker 4: Both of them are actually things that have people. There
Speaker 4: are some clients that like to trade every day. There
Speaker 4: are other clients that want to buy it today and
Speaker 4: forget about it. So there's a lot of flavors for everybody.
Speaker 2: Oh, Mark, in the wealth management business, I'm just curious
Speaker 2: how many people are you know, find it, park it,
Speaker 2: leave it there. They're thinking longer term and as a result,
Speaker 2: you know, we're gonna have a great bunch of the
Speaker 2: Schwab team tomorrow on Lysanne Sanders. We're going to talk equities,
Speaker 2: Global equities with you have Client hop. We're gonna talk
Speaker 2: fixed income with Kathy Jones. But increasingly we see people
Speaker 2: wanting access to the private markets, private credit, all assets.
Speaker 2: How much of that does that play with you guys too?
Speaker 4: Well, it is. It is a big part of the market.
Speaker 4: And I think to the first part of your question.
Speaker 4: You know, there's a lot of clients that like to
Speaker 4: have what we call a financial plan, that would like
Speaker 4: to have an asset allocation, that would like to have
Speaker 4: a long term setup and the majority of clients and
Speaker 4: our philosophy encourages for everybody to have a fundinancial plan.
Speaker 4: Everybody should have a financial plan. And then once you
Speaker 4: have a financial plan, you can set up your long
Speaker 4: term investment objectives on what you're investing for. And in
Speaker 4: many cases you could be retirement, it could be income,
Speaker 4: it could be you know, growing, it could be buying
Speaker 4: a house, it could be a lot of things that
Speaker 4: you can do and then put them money to work
Speaker 4: that way. Now that being said, the human part of
Speaker 4: every investor on every client basically shows that when you
Speaker 4: hear the word character currency, bitcoin, do you hear the
Speaker 4: worst AI? Do you hear them immediately you pick up
Speaker 4: the phone and say how can I be part of it?
Speaker 2: Do your clients do that?
Speaker 4: Of course they do that all the time, and they
Speaker 4: do it all the time in any situations where they
Speaker 4: have you know, and then you know how much exposure
Speaker 4: I have to the max seven? Do I need to
Speaker 4: get out of the max seven? Do I need to
Speaker 4: hedge my So the normal setup of a human behavior
Speaker 4: to try to act on recent information is something that
Speaker 4: happens all the time.
Speaker 3: What's the pressure that your clients are feeling when it
Speaker 3: comes to fees. And when I say your clients, I
Speaker 3: mean the rias and the wealth managers who are out
Speaker 3: there offering their services for a percentage of the assets
Speaker 3: that they're managing on your behalf. Because there are a
Speaker 3: lot of robo advisors out there, including a robo advisor
Speaker 3: from Charles Schwab.
Speaker 4: Yes, well, you know what we have done. We have
Speaker 4: run these studies over time that basically show what clients
Speaker 4: are looking for, you know. Number one, Yes, they're incredibly
Speaker 4: price sensitive. You know, price and cost is a big
Speaker 4: part of the driver for decision making. Transparency is a
Speaker 4: big part of Going back to the other question you
Speaker 4: had about private markets, that's a little bit of the
Speaker 4: hesitation today for clients to try to get more access
Speaker 4: to it. They're interested, they actually like to have, but
Speaker 4: they're cautious about it because of the transparency and the liquidity,
Speaker 4: you know, and in many cases, once you once you
Speaker 4: explain that there is less transparency and they're less liquidity
Speaker 4: for a private market, then they step back and say, oh,
Speaker 4: let me think about it. I mean, initially sounds great,
Speaker 4: and initially sounds like a great opportunity, and in fact,
Speaker 4: we encourage you know, a portion of their investments to
Speaker 4: be in private markets. However, you know, once you explain
Speaker 4: the trade offs, then it's started to just you know,
Speaker 4: make a big difference.
Speaker 2: I kind of love to hear that because I think
Speaker 2: I feel like we've spent so much time at various
Speaker 2: investment conferences and everybody just wants to talk about private
Speaker 2: equity and in particular private credit. But a lot of
Speaker 2: folks are saying, you know, you got to understand that
Speaker 2: you lock your money up, you can't get access, and
Speaker 2: the transparency issues are maybe not there. So it sounds
Speaker 2: to me that like your investors are savvy enough to
Speaker 2: be asking these questions.
Speaker 4: Yeah. No, And not only that, but the big part is,
Speaker 4: like you know, the investors like to see, especially younger investors,
Speaker 4: they like to see data. They like to see information,
Speaker 4: you know, before they make a decision. And this is
Speaker 4: a very you're looking at him.
Speaker 2: As younger investors are You're not looking at me.
Speaker 4: Looking at both of you. But when I actually think
Speaker 4: about it, when we do studies by generation, you know,
Speaker 4: like silent generation baby boomers, they tend to be a
Speaker 4: little more trusting in that sense, and in other words,
Speaker 4: like they trust the advisor they have a relationship with
Speaker 4: the advisor and they don't necessarily need to have that
Speaker 4: much evidence. You know, this happens actually when my kids,
Speaker 4: even when I recommend a restaurant, they still have to
Speaker 4: yelp it and try to figure out what the stars are.
Speaker 4: And even in many cases like that, what do you
Speaker 4: recommend that it only had three stars? So it is
Speaker 4: one of these that they suggest evidence. They need evidence
Speaker 4: to make a decision. And in those cases, when you
Speaker 4: compare performance on private markets and public markets, you immediately
Speaker 4: start saying, like, why would I lock my money in
Speaker 4: where I can actually in there? Now that's not the
Speaker 4: whole story, but I think that's a little bit of
Speaker 4: the hesitation.
Speaker 2: We tease that we were going to ask you about
Speaker 2: key behavioral biases to be able to look out for
Speaker 2: in today's environment.
Speaker 4: What are they said that again.
Speaker 2: The key behavioral biases that are out there in today's
Speaker 2: investment environment, Well.
Speaker 4: There is, I would say there are three that are
Speaker 4: incredibly you know, prevalent in today's market. There are Number
Speaker 4: one is hurting behavior. Hurting behavior, which is exactly what
Speaker 4: we're just talking about. And the Max seven was clearly
Speaker 4: a big part AI Max seven Bitcoin and video. You know, definitely,
Speaker 4: you know, part of like, you know, what's going to happen.
Speaker 4: A lot of people will be watching this afternoon actually
Speaker 4: in a few hours, just on that report. But that
Speaker 4: that component about that and in fact, for that particular thing,
Speaker 4: not a lot of clients knew what NBDIA was five
Speaker 4: years ago. It's not until now that became so popular.
Speaker 4: And that's and that's a big part of the what
Speaker 4: is it called the fomo And that's one of the biases.
Speaker 4: The second bias is called recency bias, which is people
Speaker 4: tend to just you know, look at the most recent
Speaker 4: information and extrapolate into the future. Oh, you know, the
Speaker 4: market has been up for three months, it should be
Speaker 4: going up forever. And that that's the kind of behavior
Speaker 4: that people tend to have. Well, the same thing goes
Speaker 4: back to, you know, to when things go wrong. It's
Speaker 4: like immediately they become like, well, if we have had
Speaker 4: two bad two bad days, it's time for get out
Speaker 4: and then try to just panic that right, And those
Speaker 4: are two of the typical, you know, behavioral biases that
Speaker 4: are very typical today.
Speaker 5: Uh.
Speaker 3: Carol mentioned crypto. So I got to asked about bitcoin
Speaker 3: because it did reach a new record.
Speaker 2: That's a whole show that's just about crypto. Everybody's doing
Speaker 2: your show that's just about crypto.
Speaker 4: Feel free to tune it, but it is.
Speaker 3: It's it's interesting because it's you know, the whole market
Speaker 3: of bitcoin, the whole market cap at Bitcoin, not even
Speaker 3: the market cap of Nvidia. So I think a lot
Speaker 3: of people would say there's still a lot of room
Speaker 3: for people who are crypto curious at this point. What
Speaker 3: portion of uninvestors' portfolio, if any, should be allocated to crypto.
Speaker 4: Well, we have had points of view on crypto in
Speaker 4: general to basically say, like, look, any any client could
Speaker 4: actually use you know, traits as a way to just
Speaker 4: generate or try to find any solutions they have for
Speaker 4: an strategic long term asset allocation. We haven't adopted crypto
Speaker 4: as being part of like what you would use for
Speaker 4: the long run. And in many cases the reason why
Speaker 4: is because for our strategic asset allocation work, we normally
Speaker 4: try to find what are the fundamentals that allowed that
Speaker 4: to be valued and what are the economic factors that
Speaker 4: drive the performance of certain asset classes. You compare NBDIA
Speaker 4: to crypto. Well, in the case of media. There is
Speaker 4: you know, earnings, there is clearly financial situations, there are results,
Speaker 4: there is everything else.
Speaker 2: In the case of this is actually regulatory SEC filings right.
Speaker 4: There is exactly they are accountable cash flows, the cash
Speaker 4: flow and actually there is that product out there that
Speaker 4: you can touch. In the case of crypto, a lot
Speaker 4: of these prices tend to be driven by supply and demand.
Speaker 4: It's supply and demand driven. You basically have people have
Speaker 4: asked me the question and said, like, well, but gold
Speaker 4: isn't gold the same like gold is also supply demand driven. Yes,
Speaker 4: it is, but the difference is there is a bar
Speaker 4: that you can touch.
Speaker 2: Oh, Mark twenty seconds. Top question you think on everybody's mind.
Speaker 2: Are registered investment advisors right now in this environment? Number
Speaker 2: one question? Investment question.
Speaker 4: The number one question is you know, what would we
Speaker 4: think about the market, you know, next year, given you
Speaker 4: know potential less regulation, potential tariffs and potential changes in
Speaker 4: the way that you know the sec you know will
Speaker 4: will move down their agenda next year.
Speaker 2: All right, good stuff, Thank you so much.
Speaker 4: It's good to see you guys.
Speaker 2: Great, great setup for us here on this Wednesday. Omar
Speaker 2: agolar He is the chief executive Officer, Chief Investment Officer
Speaker 2: of Schwab Asset Management. Joining us here Schwab Impact in
Speaker 2: San Francisco.
Speaker 1: You're listening to the Bloomberg Business This Week podcast. Catch
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Speaker 2: Co Master Jim Stanevik live at the Moscone Center in
Speaker 2: San Francisco, Schwab Impact surrounded by registered investment advisors, the
Speaker 2: Schwab team and really all of the support network that
Speaker 2: goes into the investment advisory world. There's just so much
Speaker 2: going on with its security, transparency, logistics, operational. This is
Speaker 2: what this event is about.
Speaker 3: Also, something different about an event in San Francisco. Lots
Speaker 3: of umbrellas here because it is raining a lot out there.
Speaker 4: What happened?
Speaker 6: I don't know.
Speaker 3: You come to California and you think it's going to beautiful.
Speaker 3: I had planned to go for a hike later today.
Speaker 3: That's not happening.
Speaker 4: That's fine, that's fine. Can we work on that. It's
Speaker 4: all good?
Speaker 6: All right?
Speaker 2: Listen. One of the things we want to talk a
Speaker 2: little bit about is the fixed income world, because we've
Speaker 2: seen the US government debt market declined since mid September
Speaker 2: on expectations the president, like Donald Trump's policies will boost
Speaker 2: growth and rekindle inflation. So we continue to see I
Speaker 2: think it's safe to say in twenty twenty four the
Speaker 2: narrative of around fixed income kind of evolved. We've got
Speaker 2: a great.
Speaker 4: Voice on this.
Speaker 3: Yeah, Manji Buriah's portfolio manager and head of Systematic Systematic
Speaker 3: Edge of Fixed Income and custom SMA Investments at all
Speaker 3: Spring at Global Investment Title.
Speaker 4: It is a big title. Does that fit on a
Speaker 4: business card? Is there an acroative you got to turnover for.
Speaker 3: The second half of title?
Speaker 5: Right?
Speaker 4: That's true?
Speaker 1: Yeah?
Speaker 3: Actually, well look, I mean you are responsible for overseeing
Speaker 3: all active factor based and enhanced passive fixed income capabilities
Speaker 3: and solution joining us here at Schwab Impact. What's the
Speaker 3: conversation that's happening right now around fixed income given that
Speaker 3: we have an election result, right, but it's kind of
Speaker 3: unclear what's going to happen in terms of government spending
Speaker 3: and also the collection of money from the government or
Speaker 3: by the government.
Speaker 6: Yeah, I think it's ups of policy away. So let's
Speaker 6: talk about what's in store for twenty twenty five.
Speaker 2: Do you feel like you have like transparency around it?
Speaker 4: Not really.
Speaker 2: As you set your forecast out.
Speaker 4: No, I don't think any of us have a crystal.
Speaker 2: But it's your best shot.
Speaker 4: That's my best shot.
Speaker 6: So let's think about the policy that's actually been outlined
Speaker 6: for twenty twenty five. Right, So there's going to be
Speaker 6: deregalation coming forward, right, so I don't know how much reregalation.
Speaker 6: And where the second is around tariffs, so you know
Speaker 6: potentially tariffs, right. And then the third one is tax cuts, right,
Speaker 6: So tax kits for corporations are wealthy individuals. So when
Speaker 6: I put it all three together, they're essentially inflationary in nature.
Speaker 6: So I think what's in store for us? I would
Speaker 6: say there's policy uncertainty, right. Policy uncertainty definitely translates to
Speaker 6: more wealthly across the different asset classes. And then also
Speaker 6: if all three or one of the three is enacted,
Speaker 6: I think there's potential inflation pressures that's going to actually
Speaker 6: creep in.
Speaker 2: So that's moves by the Fed.
Speaker 3: Then I don't know, potentially a pause, right, So from
Speaker 3: the pause December or pause next year, potentially a pause
Speaker 3: in December.
Speaker 6: Really, if you think about the you know what Chairman
Speaker 6: Paul has been talking about, right, So the recent directric
Speaker 6: that came out of him was essentially that he said
Speaker 6: that we will have to obviously be data driven, but
Speaker 6: he said that the rates at this point, the policy
Speaker 6: rates are in line with the expectations. So if there
Speaker 6: is sideways moment in inflation, if you don't see that
Speaker 6: creep down another like notchdown in the next month.
Speaker 4: Or so, potentially a pause.
Speaker 6: But if you look at the fet fund futures, that's
Speaker 6: actually pricing in like fifty percent probability.
Speaker 2: So we'll see what the data says, right, we get
Speaker 2: more inflation reads before the December meet, right where we
Speaker 2: used to have some data as you said, right, Yeah.
Speaker 6: But what this translates to in my view is right,
Speaker 6: higher rates for London. That's really what it really means
Speaker 6: for fixed income, right for twenty twenty five.
Speaker 2: So where do you find alpha? Then in the fixed
Speaker 2: income world, how do you do it? How do you
Speaker 2: find it?
Speaker 6: Yeah, so if their rates are going to be higher
Speaker 6: or moving sideways. So I think there are kind of
Speaker 6: three pieces. So one is focused on income, right, So
Speaker 6: you got to essentially maximize your income by diversifying duration.
Speaker 6: So one way to do that is to really kind
Speaker 6: of position across the curve, not really positioned on one
Speaker 6: or two parts of the curve, so you can essentially
Speaker 6: ladder across the curve.
Speaker 4: Right.
Speaker 6: Intermediate to long term rates is where I think there
Speaker 6: is alpha just because of the policy three five I
Speaker 6: would say five to fifteen, five fifteen or five to twenty.
Speaker 6: So because of the uncertainty in policy, I think there
Speaker 6: is going to be premium demanded by investors, so which
Speaker 6: means that the long term rates are going to stay
Speaker 6: higher for longer. The other part is really bring in
Speaker 6: some international exposure, right em international debt.
Speaker 2: So where internationally internationally it's a lot. Are you just
Speaker 2: saying pick a basket?
Speaker 6: I would say pick countries where there's divergence in market policy, right,
Speaker 6: so you essentially have some amount of divergence from market
Speaker 6: policy perspective, and then look for quality. Right So I
Speaker 6: think look for assets where there is potential you know,
Speaker 6: physical stability, you know, balancing of the budget and things
Speaker 6: like that.
Speaker 4: So I think you've got to pick wisely.
Speaker 3: We got news last week that the money market funds
Speaker 3: have are past seven trillion dollars in assets. Yeah, maybe
Speaker 3: it's good that I'm not in the job of managing
Speaker 3: money because I thought that as rates move lower, things
Speaker 3: would move out of the money market funds. Right, Well,
Speaker 3: how do you look at that seven trillion dollars in
Speaker 3: where it's going to go and when it's gonna go?
Speaker 6: Yeah, I mean that's the trillion dollar question, right, for the.
Speaker 4: Seven trillion dollar question?
Speaker 2: And should we assume it's going to go anywhere? Are
Speaker 2: people just gonna be happy and comfortable if rates go down?
Speaker 3: Then they might not be happy?
Speaker 6: Yeah, I mean that's again assuming the rates actually will
Speaker 6: go down rates.
Speaker 3: There's a lot of people assuming in the crypto and
Speaker 3: the equity markets that rates are going to go down.
Speaker 6: Yeah, but if you look at the allocation to crypto
Speaker 6: or any of the owls, that's a small portion of
Speaker 6: the overall portfolio. So I would say if the rates
Speaker 6: stay higher, right, not to four percent? I think people
Speaker 6: people don't really think about reinvestment risk, right. People are
Speaker 6: worried about what they're going to make over the next
Speaker 6: twelve months.
Speaker 2: Right, reinvestment risk, So make it taking out doing something exactly.
Speaker 6: Yeah, So if you think about, like why ladder strategies
Speaker 6: are really popular is because you don't have to worry
Speaker 6: about reinvestment risk and you can actually position for, you know,
Speaker 6: potential policy surprises. So I would say that's that's really
Speaker 6: the key question is what the Fed does in December,
Speaker 6: what the expectation says for the next year. After September FMC,
Speaker 6: there were like ten cuts priced in and now it's
Speaker 6: down to three.
Speaker 2: I think could change again. Mand you twenty seconds. What's
Speaker 2: the question you think every investor should be asking themselves
Speaker 2: right now?
Speaker 6: Just quickly, I would say, are they diversified enough? You know,
Speaker 6: do they have enough diversification in their portfolio? I think
Speaker 6: that's the key question.
Speaker 2: All right, great stuff. Hey, thank you so much, so much,
Speaker 2: thanks for having work on that title. Acronymic.
Speaker 4: I'm just kidding. You're gonna shot in next year.
Speaker 2: Yes, man, you berea joining us here portfolio manager head
Speaker 2: of Systemic Edge, Fixed Income and custom SMA Investments at
Speaker 2: all Spring Global Investments. We talk to their team a lot,
Speaker 2: always get some great insight.
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Speaker 2: All right, TikTok, everybody, we've got what about twenty minutes aft,
Speaker 2: Let's be right on the money, better on the money,
Speaker 2: eighteen minutes to go into the closing bell. It's a
Speaker 2: big day right in video earnings. That's certainly our focus
Speaker 2: front and center. I'm looking at the trade where up
Speaker 2: near our highs of the session, but it's not an
Speaker 2: exciting market. It does feel like a little bit of
Speaker 2: a wait and see mode. You've got the nasdak lower.
Speaker 2: We just heard Charlie talk about it. S and P
Speaker 2: call it relatively flat. But we're just kind of waited
Speaker 2: to see what kind of message does Nvidia say about itself,
Speaker 2: about the AI trade, about the momentum.
Speaker 3: I was listening to normal Inda and Matt Miller they
Speaker 3: were filling it for us, but back at they did
Speaker 3: pretty well.
Speaker 4: If you they were awesome.
Speaker 2: Yeah, don't get any ideas, guys.
Speaker 3: But Norma was talking about how Bank of America came
Speaker 3: out with a note that said sort of contextualizing how
Speaker 3: important video is, putting it on par with like a
Speaker 3: federal reserve, meaning other economic data.
Speaker 2: Yeah.
Speaker 3: I mean, given it's market cap of you know, three
Speaker 3: trillion dollars, it kind of makes sense. But we'll see
Speaker 3: what happens when they report today.
Speaker 2: Trading options signals this is going to be the most
Speaker 2: important catalyst left this year. Let's see what Brian Vednick
Speaker 2: has to say. He's chief investment officer at MJP Wealth
Speaker 2: Advisors one point two billion in assets under management. You're
Speaker 2: normally on the East coast. You're here on the West
Speaker 2: coast with us.
Speaker 5: How are you doing?
Speaker 4: Great?
Speaker 5: Great to see you, guys.
Speaker 2: So how often do your clients come in and say
Speaker 2: so about that in video? About that AI trade? Tell
Speaker 2: us what you hear.
Speaker 5: Look, it comes up a lot, because you know, that's
Speaker 5: been the driving force of the market over the last
Speaker 5: eighteen months or so predominantly. We start to see a
Speaker 5: little bit of a shift second half the year and
Speaker 5: the broadening out of earnings, you know, coming from areas.
Speaker 4: Outside of megacap tech.
Speaker 5: But look, this is an innovative trend that's still going
Speaker 5: to play out over the next five to seven years.
Speaker 5: And we look at Navidia tonight, investors really want to
Speaker 5: hear is competition changing in that space. I think it's
Speaker 5: more about not necessarily the demand, but can Navidia deliver
Speaker 5: on supply because when you look at analyst estimates for
Speaker 5: revenue growth year over year of over eighty percent, and
Speaker 5: these valuation estimates on future growth because people right now
Speaker 5: are overpaying for growth if you look at it from
Speaker 5: a traditional perspective. So if those future earnings reports are delivered,
Speaker 5: we're actually not overpaying for growth for Navidia, They're delivering exactly.
Speaker 5: But I think that the real issue garyl Is goes
Speaker 5: back to your question is with the new generation of
Speaker 5: chips coming with Blackwell right, it's we're starting to hear
Speaker 5: little rumors of can they keep production up to meet demand?
Speaker 5: And if those things start to show that there's an
Speaker 5: issue there, then that opens up competition to come in
Speaker 5: from AMD, Intel, other places. And then the other part
Speaker 5: of just add real quick is the tariff conversation, you know,
Speaker 5: the policy pieces, this mosaic that we're all moving through
Speaker 5: as investors. Well, if you look at Navidia's business, depending
Speaker 5: on how that policies are impacted, they could have some
Speaker 5: never to impact from shipping coming back for some of
Speaker 5: their Asian made products. But then at the same point
Speaker 5: in time, you need to hear from them to say
Speaker 5: well that actually could those tariffs even boost demand that
Speaker 5: could go to the Middle East, which is something that's
Speaker 5: kind of interesting.
Speaker 3: Explain explain the logic there.
Speaker 5: The reasoning, Well, because when you think about the things
Speaker 5: that have been said on the campaign trail from the
Speaker 5: Trump administration, they are creating a tariff regime that could
Speaker 5: be disproportional to different parts of the world. So if
Speaker 5: you're making something in Asia and you get hit with
Speaker 5: a significant tariff, that can change the pricing for your product.
Speaker 5: That could impact demand.
Speaker 4: But then are there areas of world that would be.
Speaker 2: Outside of that somebody else that benefits, right, right, And so.
Speaker 5: Could Navidia boosts more demand of their products going to
Speaker 5: areas that are underserved like in the Middle East for example.
Speaker 5: So these are the things that investors want to hear about,
Speaker 5: which is why we're in this period of time where demands,
Speaker 5: you know, expectations are high. The mosaic of these puzzle
Speaker 5: pieces need to play out a little bit more to
Speaker 5: kind of keep that sentiment going, I think, in the space,
Speaker 5: and that's why tonight is so critical.
Speaker 2: Do you feel like we yet know what the risks
Speaker 2: are for twenty twenty five? New administration, new White House?
Speaker 2: We've seen President Trump there before, but I do think
Speaker 2: it's going to be a little bit different. We're seeing
Speaker 2: what is administration looks like. We know the policies he's
Speaker 2: interested in, but there's what you say on the campaign
Speaker 2: trail and what you get done with the Congress. So
Speaker 2: do you feel like we understand clearly the risks to
Speaker 2: investors in twenty twenty five yet, so I'll.
Speaker 4: Be just overly transparent.
Speaker 5: No, well said, you know, I don't believe so, and
Speaker 5: just to be that a little bit more to that.
Speaker 5: I mean, anytime you try to predict what Trump is
Speaker 5: going to do, just don't because it always ends up
Speaker 5: being a different probability outcome. And I think the thing
Speaker 5: that investors are dealing with right now is this push
Speaker 5: and pull between an environment when earnings are expected to grow.
Speaker 5: You know, tax policy probably will be extended that will
Speaker 5: benefit stocks, and deregulation that part of the discussion. You
Speaker 5: know that the Fed still wants to cut rates over
Speaker 5: time to normalize relative to where we're seeing inflation going
Speaker 5: in different parts of the economy.
Speaker 4: But then you have the other side of it.
Speaker 5: You don't know exactly how the votes are going to
Speaker 5: play out on certain policy decisions. You don't know definitively
Speaker 5: if some of these folks are going to be nominated
Speaker 5: and go through the Senate process with approval. So I
Speaker 5: think this mosaic and these puzzle pieces I keep talking
Speaker 5: about have to play out, But the market will come
Speaker 5: back to fundamentals in a couple of months, Carol, that's
Speaker 5: really I think we'll.
Speaker 2: Be like earnings and valuations in.
Speaker 5: Consumer those types of things.
Speaker 4: Well, I have so many questions here. I'm wondering about
Speaker 4: two and a half minutes. Well, I'm going to go fast.
Speaker 3: How do you view the market as being a check
Speaker 3: on President Electrump and his policies.
Speaker 4: We know he follows the S and P. Five hundred
Speaker 4: so closely.
Speaker 5: I think anything that helps to support messaging is important
Speaker 5: to the administration. So if the markets are moving in
Speaker 5: a certain direction, if we're still getting positive economic growth
Speaker 5: on a quarter over quarter basis, if we're not causing
Speaker 5: a labor shortage due to implementation of an immigration policy change.
Speaker 3: Which would be very tough, if you're going to overnight
Speaker 3: pull eighteen eleven million people out of this country more
Speaker 3: or less.
Speaker 5: Right, So, these things and you look at some of
Speaker 5: the people that have been put in some of these positions,
Speaker 5: they're better than a maybe people that Trump had in
Speaker 5: Trump you know, one point zero and being communicators. So
Speaker 5: I think to your question, Tim, it definitely matters where
Speaker 5: some of these economic things go.
Speaker 2: What would you say the tone is or what you're
Speaker 2: hearing around here as you walk around and talk to people.
Speaker 2: What is is there a common thread in terms of
Speaker 2: what people are talking about.
Speaker 5: I think, recognizing these uncertainties, the thread is a heightened
Speaker 5: to where fareness of risk management making sure that you're.
Speaker 2: Not worse than a year ago.
Speaker 5: I believe so because I think we're in a totally
Speaker 5: different part of this unwinding of the unintended consequences of
Speaker 5: policy decisions that started back in twenty twenty, and now
Speaker 5: we have another set of policy decisions that are coming out.
Speaker 5: But going back to your question, it's very hard to
Speaker 5: do a probability assessment around politics and what Congress is
Speaker 5: going to do.
Speaker 2: Wait, you know what they're going to do.
Speaker 3: Well, let's say let's say Matt Gates gets confirmed as
Speaker 3: Attorney general, and that is that a signal to you
Speaker 3: that Senators will allow the Trump administration, will allow Trump
Speaker 3: to do whatever he wants?
Speaker 4: Can you extrapolate that from that?
Speaker 5: I think there's a I think it's fair to assume
Speaker 5: that there's a signal that there's more people in Congress
Speaker 5: that are more supportive of Trump now than his first administration,
Speaker 5: so that, yes, there could be pushing of the envelope
Speaker 5: in a certain direction. But I think going back to
Speaker 5: your earlier point there, it's unlikely that policies will go
Speaker 5: to extremes because of the unintended consequences of how it's
Speaker 5: going to impact the economy. To me, that's the check,
Speaker 5: But it takes time for people to realize that as
Speaker 5: it plays out.
Speaker 2: It's almost like you want to fast forward a year
Speaker 2: because you feel like things will settle in, will have
Speaker 2: a better feel of maybe what policies will actually make
Speaker 2: some changes. That's just kind of my gut feel.
Speaker 5: Well, I'm going to say the classic advisor thing or
Speaker 5: investor thing here before we go. This is the reason
Speaker 5: why you stay broadly diversified and you don't have all
Speaker 5: your money in just a few companies, right sec Tech?
Speaker 2: Got it, Brian, Thank you, thanks for stopping by. Thank
Speaker 2: you guys, Brian Viandick, President and Chief investment Officer at
Speaker 2: MJP Wealth Advisors.
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