Speaker 1: Layla Pence is with us. Leila is a president at
Speaker 1: Pence Wealth Management. She's on the line from Newport Beach, California. Glad,
Speaker 1: I got your name right, Leila. Um. We got a
Speaker 1: lot of earnings to deal with this week, particularly Microsoft
Speaker 1: in alphabet tomorrow after the bell I'm trying to, in
Speaker 1: terms of looking at the price action inequities, understand whether
Speaker 1: this is mostly optimism cautious optimism about earnings, or whether
Speaker 1: the market is really kind of focused on this idea
Speaker 1: that the Fed is going to begin to adjust to
Speaker 1: smaller sized rate hikes after the first of the year. Well,
Speaker 1: I think it's both. I think that the you know,
Speaker 1: the optimism about maybe going fifty basis point in December
Speaker 1: and then twenty five business point in February that really
Speaker 1: has since that was kind of leaked in by the
Speaker 1: Wall Street Journal. Uh, that brought a lot of optimism
Speaker 1: even for the earnings. And then so far the earnings
Speaker 1: have really been holding up we a lot better than expected.
Speaker 1: So it's a bit of both. And of course tomorrow
Speaker 1: is a big day in the whole week is a
Speaker 1: big day with all the text talks. But we do
Speaker 1: think that they've already been discounted so much that they
Speaker 1: could surprise to the upside. But I mean, how does
Speaker 1: that You know, you may have positive surprise they're given
Speaker 1: how ratcheted down we have in terms of expectations, But
Speaker 1: how much again, do you think this is going to
Speaker 1: matter in the overall wall of worry we have. It's
Speaker 1: gonna matter if they if they actually the outlook, It's
Speaker 1: not so much what past earnings. If they give us
Speaker 1: a good outlook, like some of the banks give us
Speaker 1: a good outlook. Some of the companies have given us
Speaker 1: good outlook, and that is really what it matters. What
Speaker 1: the actual earnings, you know, that's great. But if if
Speaker 1: they have somehow knowing everything that we're going through, the
Speaker 1: inflation numbers and the higher interest rates, if somehow they
Speaker 1: can still have a good outlook, then those are the
Speaker 1: companies are going to benefit and and they're coming in
Speaker 1: actually surprisingly it's still may hear them very good outlook. Yeah.
Speaker 1: But one of the things that we have heard from
Speaker 1: a number of these companies I'm thinking Microsoft, is that
Speaker 1: the strong dollar is really a significant head. When do
Speaker 1: you think that's going to be the case for some time? Well,
Speaker 1: I think once once the Federal Reserve starts actually reducing
Speaker 1: the amount of interesting because right now the market is
Speaker 1: already pricing in a very high terminal interest rate of
Speaker 1: about four point seven five to five. So if somehow
Speaker 1: they don't go that far, then that will affect the dollar,
Speaker 1: and that will help the international sales LA just you know,
Speaker 1: looking at what's going on with the treasury market now,
Speaker 1: a price which I said, yield being a function of
Speaker 1: price notwithstanding, is actually value in the short end of
Speaker 1: the yield curve at the moment of what it represents value.
Speaker 1: And does the price that you pay well be the
Speaker 1: one which is the thing which is likely to move
Speaker 1: the most of the downside arguably, Well, if you you know,
Speaker 1: go with a two year treasuries or you know, really
Speaker 1: short term even if the value, even if interest rate
Speaker 1: which we know are going to continue to go up, uh,
Speaker 1: you know, the whole maturity, you're pretty much gonna get
Speaker 1: that return. So it is good value. Its value that
Speaker 1: we haven't seen in fifteen years, we have not seen
Speaker 1: interest rates, uh. And I believe that that is gonna
Speaker 1: have more people go into more fixed income, which is
Speaker 1: got to hurt the stock market a little bit because
Speaker 1: they have competition now, So where are you in looking
Speaker 1: at opportunities offshore? We've been talking a lot about the
Speaker 1: US here, and we had quite the sell off, not
Speaker 1: just in the Chinese A d R S, but yesterday
Speaker 1: in Hong Kong the market was very hard yet the
Speaker 1: tech index down another ten percent. Are you tempted to
Speaker 1: nibble when you look at the situations like that, No,
Speaker 1: unfortunately not I really, you know, there's just so much
Speaker 1: risk outside, especially in the Chinese market. We have and
Speaker 1: out of that market for some time now, especially of
Speaker 1: course after today, there's so much opportunity in the US.
Speaker 1: We have many companies here are down, you know, and
Speaker 1: they have much more of an upside potential. So when
Speaker 1: you're looking at risk reward, you know, we don't see. Yes,
Speaker 1: there could be opportunities in the Chinese, but that's not
Speaker 1: something we look at because we see opportunities here in
Speaker 1: the US, which is a lot more predictable. Knowing that
Speaker 1: potentially inflation is going to come under control and the
Speaker 1: Federal Reserve will pause and then eventually maybe a couple
Speaker 1: of years from now, we'll start reducing interest rate. We
Speaker 1: have a lot more predictable way to recover in this market.
Speaker 1: We don't know really in China and Hong Kong, you know,
Speaker 1: with the government, what is the outlook things are you know,
Speaker 1: this are very low, but they can go lower. Okay,
Speaker 1: you've got three conviction cools. One of them was quite
Speaker 1: interested in, and that's a payment processes. Yes, we really
Speaker 1: think that that is a great option, uh, and a
Speaker 1: great area of the markets because as you know, as
Speaker 1: you know, products of course are all costing more money. Travel. Uh,
Speaker 1: anything we buyas costing more money. And these payment companies
Speaker 1: they make a percentage of the transactions, so as these
Speaker 1: transactions are more expensive, they're automatically make higher profits. And
Speaker 1: they don't have uh it's not a business that has products,
Speaker 1: of course or a lot of employees, so their overhead
Speaker 1: costs is somewhat limited comparing to other companies. And they
Speaker 1: are just we think they're going to continue to make
Speaker 1: more money. Inflation is there are benefactors of inflation. So
Speaker 1: when you when you make a call like this, are
Speaker 1: you looking at the relative strength or health of the
Speaker 1: American consumer. And I'm curious to get your take. How
Speaker 1: do you think the consumer is holding up? The consumer?
Speaker 1: All the data says they're holding up pretty good because
Speaker 1: they're all getting increases and wages, you know, and the
Speaker 1: you know, the lower income consumer, they all the minimum
Speaker 1: wage here have gone up. The higher income consumer, they've
Speaker 1: gotten increases. We've seen source security benefits of here there
Speaker 1: are going up by eight point seven percent. Next year
Speaker 1: they're gone. They've gone up by five nine percent. These
Speaker 1: are numbers aren't heard of. So the consumer actually has
Speaker 1: more money, and they're spending, and they're gonna spend because
Speaker 1: that's what they do, and and these payment companies are
Speaker 1: going to benefit from it. Greig word reasonable banks really
Speaker 1: like regional banks. They don't have the foreign exposure. They
Speaker 1: are making um then to continue to make a net
Speaker 1: interest income. Basically, they're paying out a lot less interest
Speaker 1: than what they're getting in and and there's a lot
Speaker 1: of people that are still putting just money in the
Speaker 1: you know, saving account or checking account and earning a
Speaker 1: lot less with or somewhere else. And the banks, the
Speaker 1: original banks are going to make that and they don't
Speaker 1: have a lot of risk of currencies and loans and
Speaker 1: things outside the United States. So we're really staying with
Speaker 1: the regional banks. We think that's a safer bed for us.
Speaker 1: Later Pence thank you so much for joining. Is the
Speaker 1: President and Pence Wealth Management getting her take on the
Speaker 1: market action