1 00:00:00,160 --> 00:00:03,080 Speaker 1: Layla Pence is with us. Leila is a president at 2 00:00:03,080 --> 00:00:07,120 Speaker 1: Pence Wealth Management. She's on the line from Newport Beach, California. Glad, 3 00:00:07,160 --> 00:00:10,360 Speaker 1: I got your name right, Leila. Um. We got a 4 00:00:10,360 --> 00:00:13,400 Speaker 1: lot of earnings to deal with this week, particularly Microsoft 5 00:00:13,440 --> 00:00:16,760 Speaker 1: in alphabet tomorrow after the bell I'm trying to, in 6 00:00:16,880 --> 00:00:20,480 Speaker 1: terms of looking at the price action inequities, understand whether 7 00:00:20,520 --> 00:00:25,040 Speaker 1: this is mostly optimism cautious optimism about earnings, or whether 8 00:00:25,079 --> 00:00:27,880 Speaker 1: the market is really kind of focused on this idea 9 00:00:27,920 --> 00:00:30,600 Speaker 1: that the Fed is going to begin to adjust to 10 00:00:30,800 --> 00:00:34,400 Speaker 1: smaller sized rate hikes after the first of the year. Well, 11 00:00:34,479 --> 00:00:37,519 Speaker 1: I think it's both. I think that the you know, 12 00:00:37,600 --> 00:00:41,920 Speaker 1: the optimism about maybe going fifty basis point in December 13 00:00:42,120 --> 00:00:45,360 Speaker 1: and then twenty five business point in February that really 14 00:00:45,920 --> 00:00:48,879 Speaker 1: has since that was kind of leaked in by the 15 00:00:48,920 --> 00:00:52,360 Speaker 1: Wall Street Journal. Uh, that brought a lot of optimism 16 00:00:52,440 --> 00:00:54,400 Speaker 1: even for the earnings. And then so far the earnings 17 00:00:54,440 --> 00:00:58,040 Speaker 1: have really been holding up we a lot better than expected. 18 00:00:58,200 --> 00:01:01,320 Speaker 1: So it's a bit of both. And of course tomorrow 19 00:01:01,760 --> 00:01:03,280 Speaker 1: is a big day in the whole week is a 20 00:01:03,280 --> 00:01:05,920 Speaker 1: big day with all the text talks. But we do 21 00:01:06,000 --> 00:01:09,959 Speaker 1: think that they've already been discounted so much that they 22 00:01:09,959 --> 00:01:13,440 Speaker 1: could surprise to the upside. But I mean, how does 23 00:01:13,480 --> 00:01:16,000 Speaker 1: that You know, you may have positive surprise they're given 24 00:01:16,240 --> 00:01:19,480 Speaker 1: how ratcheted down we have in terms of expectations, But 25 00:01:19,920 --> 00:01:22,040 Speaker 1: how much again, do you think this is going to 26 00:01:22,160 --> 00:01:26,800 Speaker 1: matter in the overall wall of worry we have. It's 27 00:01:26,840 --> 00:01:30,039 Speaker 1: gonna matter if they if they actually the outlook, It's 28 00:01:30,080 --> 00:01:32,319 Speaker 1: not so much what past earnings. If they give us 29 00:01:32,319 --> 00:01:34,640 Speaker 1: a good outlook, like some of the banks give us 30 00:01:34,640 --> 00:01:36,880 Speaker 1: a good outlook. Some of the companies have given us 31 00:01:36,920 --> 00:01:39,959 Speaker 1: good outlook, and that is really what it matters. What 32 00:01:40,080 --> 00:01:44,679 Speaker 1: the actual earnings, you know, that's great. But if if 33 00:01:44,720 --> 00:01:48,360 Speaker 1: they have somehow knowing everything that we're going through, the 34 00:01:48,400 --> 00:01:51,360 Speaker 1: inflation numbers and the higher interest rates, if somehow they 35 00:01:51,400 --> 00:01:53,920 Speaker 1: can still have a good outlook, then those are the 36 00:01:53,920 --> 00:01:56,160 Speaker 1: companies are going to benefit and and they're coming in 37 00:01:56,240 --> 00:02:01,680 Speaker 1: actually surprisingly it's still may hear them very good outlook. Yeah. 38 00:02:01,680 --> 00:02:03,000 Speaker 1: But one of the things that we have heard from 39 00:02:03,000 --> 00:02:05,760 Speaker 1: a number of these companies I'm thinking Microsoft, is that 40 00:02:05,800 --> 00:02:08,760 Speaker 1: the strong dollar is really a significant head. When do 41 00:02:08,800 --> 00:02:12,280 Speaker 1: you think that's going to be the case for some time? Well, 42 00:02:12,320 --> 00:02:18,120 Speaker 1: I think once once the Federal Reserve starts actually reducing 43 00:02:18,160 --> 00:02:20,840 Speaker 1: the amount of interesting because right now the market is 44 00:02:20,880 --> 00:02:24,400 Speaker 1: already pricing in a very high terminal interest rate of 45 00:02:24,440 --> 00:02:27,160 Speaker 1: about four point seven five to five. So if somehow 46 00:02:27,680 --> 00:02:30,480 Speaker 1: they don't go that far, then that will affect the dollar, 47 00:02:30,760 --> 00:02:36,880 Speaker 1: and that will help the international sales LA just you know, 48 00:02:36,960 --> 00:02:39,519 Speaker 1: looking at what's going on with the treasury market now, 49 00:02:39,720 --> 00:02:42,079 Speaker 1: a price which I said, yield being a function of 50 00:02:42,160 --> 00:02:47,160 Speaker 1: price notwithstanding, is actually value in the short end of 51 00:02:47,160 --> 00:02:51,280 Speaker 1: the yield curve at the moment of what it represents value. 52 00:02:51,560 --> 00:02:55,360 Speaker 1: And does the price that you pay well be the 53 00:02:55,400 --> 00:02:58,080 Speaker 1: one which is the thing which is likely to move 54 00:02:58,160 --> 00:03:02,600 Speaker 1: the most of the downside arguably, Well, if you you know, 55 00:03:03,280 --> 00:03:06,200 Speaker 1: go with a two year treasuries or you know, really 56 00:03:06,200 --> 00:03:08,640 Speaker 1: short term even if the value, even if interest rate 57 00:03:08,720 --> 00:03:11,760 Speaker 1: which we know are going to continue to go up, uh, 58 00:03:11,520 --> 00:03:13,880 Speaker 1: you know, the whole maturity, you're pretty much gonna get 59 00:03:13,919 --> 00:03:16,840 Speaker 1: that return. So it is good value. Its value that 60 00:03:16,880 --> 00:03:19,000 Speaker 1: we haven't seen in fifteen years, we have not seen 61 00:03:19,080 --> 00:03:22,600 Speaker 1: interest rates, uh. And I believe that that is gonna 62 00:03:24,000 --> 00:03:26,400 Speaker 1: have more people go into more fixed income, which is 63 00:03:26,440 --> 00:03:28,760 Speaker 1: got to hurt the stock market a little bit because 64 00:03:28,760 --> 00:03:33,040 Speaker 1: they have competition now, So where are you in looking 65 00:03:33,080 --> 00:03:36,240 Speaker 1: at opportunities offshore? We've been talking a lot about the 66 00:03:36,320 --> 00:03:38,600 Speaker 1: US here, and we had quite the sell off, not 67 00:03:38,680 --> 00:03:40,880 Speaker 1: just in the Chinese A d R S, but yesterday 68 00:03:40,960 --> 00:03:43,800 Speaker 1: in Hong Kong the market was very hard yet the 69 00:03:43,800 --> 00:03:47,800 Speaker 1: tech index down another ten percent. Are you tempted to 70 00:03:47,920 --> 00:03:51,600 Speaker 1: nibble when you look at the situations like that, No, 71 00:03:52,160 --> 00:03:56,080 Speaker 1: unfortunately not I really, you know, there's just so much 72 00:03:56,320 --> 00:04:00,040 Speaker 1: risk outside, especially in the Chinese market. We have and 73 00:04:00,200 --> 00:04:04,040 Speaker 1: out of that market for some time now, especially of 74 00:04:04,040 --> 00:04:08,040 Speaker 1: course after today, there's so much opportunity in the US. 75 00:04:08,080 --> 00:04:12,640 Speaker 1: We have many companies here are down, you know, and 76 00:04:12,680 --> 00:04:16,160 Speaker 1: they have much more of an upside potential. So when 77 00:04:16,160 --> 00:04:19,960 Speaker 1: you're looking at risk reward, you know, we don't see. Yes, 78 00:04:20,000 --> 00:04:22,520 Speaker 1: there could be opportunities in the Chinese, but that's not 79 00:04:22,640 --> 00:04:24,960 Speaker 1: something we look at because we see opportunities here in 80 00:04:25,000 --> 00:04:28,440 Speaker 1: the US, which is a lot more predictable. Knowing that 81 00:04:28,600 --> 00:04:31,360 Speaker 1: potentially inflation is going to come under control and the 82 00:04:31,440 --> 00:04:34,880 Speaker 1: Federal Reserve will pause and then eventually maybe a couple 83 00:04:34,920 --> 00:04:37,159 Speaker 1: of years from now, we'll start reducing interest rate. We 84 00:04:37,240 --> 00:04:41,640 Speaker 1: have a lot more predictable way to recover in this market. 85 00:04:41,640 --> 00:04:45,000 Speaker 1: We don't know really in China and Hong Kong, you know, 86 00:04:45,120 --> 00:04:49,400 Speaker 1: with the government, what is the outlook things are you know, 87 00:04:49,480 --> 00:04:53,200 Speaker 1: this are very low, but they can go lower. Okay, 88 00:04:53,279 --> 00:04:56,120 Speaker 1: you've got three conviction cools. One of them was quite 89 00:04:56,120 --> 00:05:01,000 Speaker 1: interested in, and that's a payment processes. Yes, we really 90 00:05:01,320 --> 00:05:04,919 Speaker 1: think that that is a great option, uh, and a 91 00:05:04,960 --> 00:05:08,000 Speaker 1: great area of the markets because as you know, as 92 00:05:08,040 --> 00:05:12,560 Speaker 1: you know, products of course are all costing more money. Travel. Uh, 93 00:05:12,640 --> 00:05:16,680 Speaker 1: anything we buyas costing more money. And these payment companies 94 00:05:16,720 --> 00:05:20,080 Speaker 1: they make a percentage of the transactions, so as these 95 00:05:20,080 --> 00:05:26,120 Speaker 1: transactions are more expensive, they're automatically make higher profits. And 96 00:05:26,160 --> 00:05:30,480 Speaker 1: they don't have uh it's not a business that has products, 97 00:05:30,520 --> 00:05:34,960 Speaker 1: of course or a lot of employees, so their overhead 98 00:05:35,000 --> 00:05:40,360 Speaker 1: costs is somewhat limited comparing to other companies. And they 99 00:05:40,360 --> 00:05:43,600 Speaker 1: are just we think they're going to continue to make 100 00:05:43,640 --> 00:05:47,800 Speaker 1: more money. Inflation is there are benefactors of inflation. So 101 00:05:47,839 --> 00:05:49,640 Speaker 1: when you when you make a call like this, are 102 00:05:49,680 --> 00:05:52,080 Speaker 1: you looking at the relative strength or health of the 103 00:05:52,120 --> 00:05:55,200 Speaker 1: American consumer. And I'm curious to get your take. How 104 00:05:55,240 --> 00:05:58,600 Speaker 1: do you think the consumer is holding up? The consumer? 105 00:05:58,760 --> 00:06:01,440 Speaker 1: All the data says they're holding up pretty good because 106 00:06:01,440 --> 00:06:05,080 Speaker 1: they're all getting increases and wages, you know, and the 107 00:06:06,200 --> 00:06:09,800 Speaker 1: you know, the lower income consumer, they all the minimum 108 00:06:09,839 --> 00:06:13,159 Speaker 1: wage here have gone up. The higher income consumer, they've 109 00:06:13,200 --> 00:06:18,320 Speaker 1: gotten increases. We've seen source security benefits of here there 110 00:06:18,320 --> 00:06:20,960 Speaker 1: are going up by eight point seven percent. Next year 111 00:06:21,240 --> 00:06:23,560 Speaker 1: they're gone. They've gone up by five nine percent. These 112 00:06:23,560 --> 00:06:27,440 Speaker 1: are numbers aren't heard of. So the consumer actually has 113 00:06:27,480 --> 00:06:30,320 Speaker 1: more money, and they're spending, and they're gonna spend because 114 00:06:30,680 --> 00:06:33,160 Speaker 1: that's what they do, and and these payment companies are 115 00:06:33,160 --> 00:06:38,400 Speaker 1: going to benefit from it. Greig word reasonable banks really 116 00:06:38,520 --> 00:06:42,599 Speaker 1: like regional banks. They don't have the foreign exposure. They 117 00:06:42,640 --> 00:06:46,880 Speaker 1: are making um then to continue to make a net 118 00:06:46,920 --> 00:06:50,760 Speaker 1: interest income. Basically, they're paying out a lot less interest 119 00:06:50,839 --> 00:06:53,520 Speaker 1: than what they're getting in and and there's a lot 120 00:06:53,600 --> 00:06:55,480 Speaker 1: of people that are still putting just money in the 121 00:06:56,200 --> 00:06:59,039 Speaker 1: you know, saving account or checking account and earning a 122 00:06:59,080 --> 00:07:02,240 Speaker 1: lot less with or somewhere else. And the banks, the 123 00:07:02,279 --> 00:07:04,400 Speaker 1: original banks are going to make that and they don't 124 00:07:04,440 --> 00:07:08,640 Speaker 1: have a lot of risk of currencies and loans and 125 00:07:09,240 --> 00:07:11,880 Speaker 1: things outside the United States. So we're really staying with 126 00:07:11,960 --> 00:07:14,640 Speaker 1: the regional banks. We think that's a safer bed for us. 127 00:07:15,600 --> 00:07:17,640 Speaker 1: Later Pence thank you so much for joining. Is the 128 00:07:17,760 --> 00:07:22,640 Speaker 1: President and Pence Wealth Management getting her take on the 129 00:07:22,760 --> 00:07:23,760 Speaker 1: market action