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Speaker 1: We've got Dana Dorio with this co c I O

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Speaker 1: and group president at invest Neet Solutions, Dana among the

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Speaker 1: many battles being waged in the markets, So would be

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Speaker 1: seasonal tail winds right now for risk assets, it's a

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Speaker 1: pretty decent time of year versus uh, the the all

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Speaker 1: powerful FED. It's it's higher interest rates and it's QT programs.

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Speaker 1: Is it kind of safe to say that maybe on

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Speaker 1: the tactical side we can go with the seasonal tail winds,

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Speaker 1: but on the strategic side, the heavyweight of the FED

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Speaker 1: will probably keep things at bay over the next six months.

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Speaker 1: Oh yeah, no, I think you've you've called it right.

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Speaker 1: I mean, certainly everyone was hoping for some sort of

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Speaker 1: a Santa rally and we're getting a little pop. But uh,

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Speaker 1: this this year is pretty bad one, pretty much worse

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Speaker 1: than two thousand eight, right, and you know we're we

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Speaker 1: have the FED to thank for that, not that they're

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Speaker 1: not doing what they need, but you know, after you

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Speaker 1: think back a year ago, you know, transitory inflation and

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Speaker 1: and now here we are massive rate hikes all in

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Speaker 1: one year. So certainly the fadways heavy. I think it's

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Speaker 1: going to continue away heavy. Ine I don't think there's

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Speaker 1: any um, you know, kind of there's not a lot

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Speaker 1: of disagreement about that. The question is when does it

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Speaker 1: start to ease a bit? When does the job When

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Speaker 1: do the jobless numbers really start to increase? That you

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Speaker 1: know kind of has to maybe pivot. And you know

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Speaker 1: what I'm seeing is probably halfway through the year we

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Speaker 1: might expect something like that, So the fad won't stop

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Speaker 1: till the job is done. How are you positioning, Dana?

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Speaker 1: What are the best defensive plays for next year? Yeah?

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Speaker 1: A few things. One I think, you know, been scared

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Speaker 1: off on fixed income in a lot of respects um,

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Speaker 1: you know, in the in the advisory community, and a

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Speaker 1: lot of searching for alternatives because of what happened. Obviously,

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Speaker 1: we had double digit losses in fixed incomes is very unusual, right.

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Speaker 1: The bedrock of the portfolio that drives a lot of

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Speaker 1: retail clients is the sixty and it wasn't you know,

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Speaker 1: They're accustomed to seeing big double digit drops in their

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Speaker 1: equity if they've been in the market for any length

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Speaker 1: of time. To seeing it in fixed income was top um.

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Speaker 1: But you know, we're past a lot of that pain, right.

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Speaker 1: The market has priced in, if not all, a great

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Speaker 1: majority of what we're going to see. So, you know,

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Speaker 1: number one, get your fixed income position back to what

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Speaker 1: it should be relative to your risk tolerance. Uh, we're

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Speaker 1: you know, fixed income is very viable and you're actually

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Speaker 1: earning income now. Right. For years and years financial repression,

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Speaker 1: you weren't getting any uh you know, any yield. Now

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Speaker 1: you are, so that that would be job number one.

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Speaker 1: On the equity side, there are certainly defensive plays, you know, quality,

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Speaker 1: low volatility, those sorts of um plays that you can

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Speaker 1: do in a recessionary environment. Sometimes we overthink things a

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Speaker 1: bit in uh in chasing equities because you want to

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Speaker 1: outsmart the market and everything. But if you think about it,

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Speaker 1: this was a horrible year, but last year was a

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Speaker 1: quite extraordinary year, and the year before when we actually

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Speaker 1: had COVID hit from the beginning of the year to

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Speaker 1: the end of the year, where modest gains. If you

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Speaker 1: put these three years together, you still probably have overall

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Speaker 1: gaining about seven percent annual over the past three years,

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Speaker 1: which is is not really horrible. So you know, maybe

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Speaker 1: we should just go ahead and go ahead and try

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Speaker 1: to sleep at night and not worry too much about it. Yeah,

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Speaker 1: I couldn't agree more. Look, if you're in equity markets,

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Speaker 1: if you're in capital markets at all, you're putting your

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Speaker 1: capital at risk, and it's it's got to be a

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Speaker 1: long haul play for you. We you know, we we

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Speaker 1: certainly can talk about what we think may outperform in

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Speaker 1: the their term, but your your overall portfolio needs to

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Speaker 1: be positioned more for a long haul because you have

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Speaker 1: to expect that within a short period of time there

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Speaker 1: could be significant losses. So agree, you talked about sixty three,

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Speaker 1: should sixty be tilted to fixed income instead? So at

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Speaker 1: the moment, you know, I get information from a lot

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Speaker 1: of different economics sources, and I would say there's there's

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Speaker 1: somewhat a bias towards that. That being said, I think

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Speaker 1: there's a lot of positioning with the understanding that hey,

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Speaker 1: things are going to ease and there's an opportunity for

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Speaker 1: stock to really bounce next year. So you know, how

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Speaker 1: short term is your thinking? Right? But how how short

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Speaker 1: term are you positioning? You certainly might be how to

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Speaker 1: percent you should be at the income that you need

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Speaker 1: to be in terms of your risk tolerance. But I

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Speaker 1: would not be getting out of equity markets either. I

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Speaker 1: think as we get into three, as the labor market

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Speaker 1: starts to weep in. Right, if you see, if you

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Speaker 1: look back the the unemployment rate actually spell in the

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Speaker 1: last eight tightening cycles, um, eight of them. But you know,

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Speaker 1: if you look eighteen months out from the tightening cycle, UM,

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Speaker 1: the unemployment rate increases by about a hundred and ninety

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Speaker 1: basis points. So they put that together and say, yeah,

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Speaker 1: we're not there yet. The fet is empowered to continue

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Speaker 1: to raise rates. But you know, as we get into

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Speaker 1: as I say, the second half of next year, and

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Speaker 1: you start to potentially see weakness in the labor markets,

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Speaker 1: the FED you know, does start to ease a bit,

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Speaker 1: and inequities could and around. Yeah, even if we have

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Speaker 1: weakness in the US, so we we need to consider China.

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Speaker 1: We played those comments from Edgar Danny basically saying it's

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Speaker 1: a really narrow path. You have to have inflation come down,

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Speaker 1: but that may not be factoring in the kind of

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Speaker 1: revenge spending that we could see from China, which you know,

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Speaker 1: that's an economy, a country that's bigger than the US

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Speaker 1: and and and an economy that's getting very close to

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Speaker 1: the size of the US. Do you see revenge spending

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Speaker 1: in an aggressive Chinese consumer this year or not so much.

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Speaker 1: You know, there's a push and pull with China, and

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Speaker 1: this is one of the reasons you want to be

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Speaker 1: globally diversified, because you want to benefit if in fact

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Speaker 1: you know China and x US in general. This is

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Speaker 1: this is one of the kind of reasons that you

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Speaker 1: do want to be invested overseas. Um, and I'll stay

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Speaker 1: quickly right. Markets are cyclical. What's worked in the last

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Speaker 1: ten years that the dominance between US and x US

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Speaker 1: tends to flip. We've had US out performance for ten years.

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Speaker 1: If you looked at the last decade, the ten years

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Speaker 1: before that, it was the other way around. So definitely

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Speaker 1: you want a position so that you can, you know,

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Speaker 1: have opportunity regardless of whether it's US or China. Now

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Speaker 1: on your the specifics to your question, Um, yeah, China's reopening.

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Speaker 1: I think you're seeing the government obviously back way off

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Speaker 1: of the zero COVID policy. You're also seeing them make

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Speaker 1: efforts to boost the property market. Um, so you could

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Speaker 1: see some real strength there. The thing is investors went

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Speaker 1: from extreme pessimism to extreme optimism. Is China made an

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Speaker 1: exit from COVID zero. How much of that China reopening

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Speaker 1: trade is already done. I So I would say this,

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Speaker 1: when you look at prices, obviously they can only resplect

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Speaker 1: sort of this weighted average expectation. And of course, what

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Speaker 1: we've seen with China, and we have to bear in mind,

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Speaker 1: is that at the end of the day, the government

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Speaker 1: drives a lot of what's going to happen there. So

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Speaker 1: so we saw just the clamp down zero covid uh

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Speaker 1: you know what they what what kind of property market

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Speaker 1: and some of the other areas of the market there,

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Speaker 1: it was just massive clamp down. Now we're seeing that easing,

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Speaker 1: So that to your point, just a complete swing and sentiment.

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Speaker 1: You gotta head your bets right because as you move

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Speaker 1: into that, you know next year could bring other news

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Speaker 1: that that kind of changes that picture. So what's known

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Speaker 1: as priced in but there there's just a lot of

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Speaker 1: potential turmoil that can upset that. And then of course

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Speaker 1: let's not discount the fact that you know, we're seeing

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Speaker 1: a change in just the overall government agreement and globalization

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Speaker 1: and supply chains. Right, we're seeing a movement away from

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Speaker 1: supply China for supply chain, so this kind of stuff

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Speaker 1: is going to work its way in over time as well. Yeah,

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Speaker 1: clearing supply chains could help bring inflation down a little bit,

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Speaker 1: I suppose, and then the strength of the consumer could

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Speaker 1: be big. But as you say, I mean we we

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Speaker 1: had a guest on hasn't I talked to a guest yesterday.

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Speaker 1: It was quite forthright in saying that UM prosperity, Shijun

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Speaker 1: Ping's benchmark policy hasn't gone away. He's not being talked

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Speaker 1: about now, especially not from the foreigners that are pouring

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Speaker 1: money into Chinese assets. But that will come back to

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Speaker 1: haunt at some point down down the road. I guess

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Speaker 1: a lot of that becomes political. Do you view that

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Speaker 1: Shijun Ping and his UM and his camp um stays

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Speaker 1: in power for the next many years to come, and

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Speaker 1: whether they do revisit that policy, And I think you're

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Speaker 1: in cap voting it. Well, right, this is the risk

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Speaker 1: that you have to catch. And I've always kind of said,

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Speaker 1: China is a big part of global production. UM, it

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Speaker 1: needs to be in the portfolio, but you need to

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Speaker 1: head your bests a little. You know, if you look

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Speaker 1: at what the size of China was in the Emerging

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Speaker 1: Markets Index, So if you had a position in the

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Speaker 1: Emerging Markets Index or any sort of a mutual fund

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Speaker 1: that kind of tracked to that and looked at tracking

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Speaker 1: order that you're a really big China position, you might

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Speaker 1: want to consider having a cap on that, and Dana

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Speaker 1: to that point, imagining Asia has often taken its key

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Speaker 1: from China. If you're looking at a twelve to twenty

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Speaker 1: four month time frame, would imagine Asia be the place

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Speaker 1: to be to still pick up equities, build your exposures.

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Speaker 1: Valuations are still low. There, there's an there's absolutely an

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Speaker 1: argument for that, right for UM taking a position there

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Speaker 1: and saying, okay, you know, um, potential for growth, for

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Speaker 1: higher growth over time, potentially weakening dollar. Right, we had

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Speaker 1: such a strong dollar this year, and now as we

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Speaker 1: move into three, I don't think the dollar just you know,

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Speaker 1: I think the strength of dollar can trying to maintain

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Speaker 1: for a while. I think the US Central Bank is

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Speaker 1: gonna be more hawkish than non US banks, so you're

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Speaker 1: going to see continued strength to a certain extent. But

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Speaker 1: the expectation I think is generally around a weeker dollar,

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Speaker 1: which does favor what you should saying, okay, your single

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Speaker 1: best pick, but you can't tell us why we don't

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Speaker 1: have time, your single best pick and then we'll talk

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Speaker 1: about it next time. Well, I don't I don't speak

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Speaker 1: to individual stacks, but I will say value over growth. Okay, alright,

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Speaker 1: value over growth. So kind of a continuing situation for

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Speaker 1: a while. We've been chatting here at DANA. Thank you

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Speaker 1: very much for being with us Dana. Doris been with

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Speaker 1: us CO c I, O and Group President and Vestnet

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Speaker 1: Solutions