00:00:10:22 - 00:00:44:25
Oscarlyn Elder
Hello and welcome to Truist Wealth’s Economic and Market Insights Quarterly livecast. Thank you for joining us today I'm Oscarlyn Elder, co-chief investment officer for Truist Wealth. My team’s responsible for selecting and analyzing the investment strategies that your Truist advisor uses in creating your portfolio. Joining me is Keith Lerner, co-chief investment officer and chief market strategist. Keith and his team got Truist advisors and clients through all types of market environments.
00:00:44:27 - 00:01:11:21
Oscarlyn Elder
They provide timely investment advice with the objective of helping our clients achieve their long term wealth goals. His work is highlighted regularly in the financial press, and you'll often see him on CNBC, Bloomberg TV and Yahoo Finance. Joining the discussion today is Mike Skordeles head of U.S. economics. He's responsible for analyzing U.S. and global economies and financial markets.
00:01:11:23 - 00:01:47:29
Oscarlyn Elder
Chip Hughey managing director of fixed income, also joins us today. Chip is responsible for our analysis of fixed income markets and leads our fixed income guidance. Both Mike and Chip are seasoned investment strategists and they appear frequently in the media. And also joining us today is Scott Yuschak, managing director of Equity Strategies. Scott is the lead portfolio manager for two U.S. large cap equity strategies that are proprietary to Truist Wealth, the strategic core equity and the core equity income strategies.
00:01:48:02 - 00:02:24:28
Oscarlyn Elder
Welcome to the livecast, Scott. Now let's turn to markets and the economy. Year to date, the S&P 500 is down about 8%. And the MSCI All Country world index is off about 4%. Investor concerns about the potential economic impact a still uncertain trade policy has weighed heavily on US equity markets. Year to date, the ten year Treasury yield has moved from a high of about 4.8% to a low of almost 4%. Last week in a dramatic move.,
00:02:25:00 - 00:03:01:01
Oscarlyn Elder
yields moved back to around 4.5% as bond investors really positioned in an environment of elevated uncertainty for both trade and domestic fiscal policy. It appears that many businesses are on hold or pause as they await more trade policy clarity. Additionally, consumer sentiment surveys are indicating a softening of confidence regarding the economic outlook. Multiple uncertainty indices are reading at elevated levels. With this significantly different backdrop from our January livecast,
00:03:01:04 - 00:03:24:09
Oscarlyn Elder
let me share that we've reviewed every question that you've sent us. We've extended our time today to an hour to allow for more discussion. Given the importance of this moment, we're going to cover multiple topics as you can see on the agenda, and we'll focus on major takeaways and significant insights that we believe can help you navigate successfully this environment.
00:03:24:11 - 00:03:58:22
Oscarlyn Elder
If you want to go more in depth on a specific topic, we encourage you to connect with your advisor for a conversation and also request a full market navigator. So Keith, with that, uncertainty is certainly the word of the year. Before we get into markets and economy, I'd like for us to start out. Let's start out with a discussion about how our team makes investment decisions, not only when markets are more normal than they are today, but also in times like today, where there's elevated uncertainty.
00:03:58:24 - 00:04:02:09
Keith Lerner
Yeah, certainly it's very timely that we're here. I mean, there's a lot going on,
00:04:07:14 - 00:04:17:01
Keith Lerner
great to be with you, but I'm happy to that Scott's joining us as well. We have a lot to cover. But let me go to your first question. The word uncertainty. It is the word of the year.
00:04:17:01 - 00:04:36:26
Keith Lerner
But I would also remind folks, we always live in a constant universe of uncertainty. Sometimes we just don't know how uncertain it is. You know, Warren Buffett talked about the world was uncertain on September the 10th, 2001, we just didn't know what was going to happen in the next day. From our standpoint, from an investment standpoint,
00:04:36:28 - 00:04:45:11
Keith Lerner
what we're really trying to determine is are we being adequately compensated for the uncertainty that exists today?
00:04:45:14 - 00:04:56:12
Oscarlyn Elder
And Keith, as you're approaching, as the team is approaching, evaluating the uncertainty and the opportunity, we have a framework for that, right? Will you share that with us?
00:04:56:13 - 00:05:12:03
Keith Lerner
We do. And part of our investment philosophy. You know, one of the questions I get, especially as I'm on the road or even with the media, is how do you make decisions that the world is so uncertain? And we do have a process. And what we're trying to do is get the weight of the evidence on our side so we can make decisions.
00:05:12:10 - 00:05:32:20
Keith Lerner
Hopefully, with that produced better outcomes. So what we're going to do is maybe just spend a, you know, a few minutes just discussing that framework and then I'll bring it to life a little bit about how we've actually navigated so far this year. And things have changed, as you mentioned, very swiftly. So what you're looking at is kind of a simplified four step process of what we look at when we make decisions.
00:05:32:23 - 00:05:48:29
Keith Lerner
The first step, when we do market analysis is to have a historical lens. Where are we in the cycle? What tends to happen? Where are we in this bull market cycle? Where's the you know, where's the Fed? Just give us a historical norm. Because often what we find is people have an assumption that isn't borne out by the data.
00:05:48:29 - 00:06:07:02
Keith Lerner
So we start with that historical lens. I'll use Warren Buffett one more time here. He said if all you needed was history, the richest people would be librarians. So you can't just say, well, this has happened this time, it's going to happen exactly this time because we're creating a new history every day. But that's the starting point. Then from there, we layer on where are we in the economic cycle?
00:06:07:05 - 00:06:27:12
Keith Lerner
And the way we think about that is early in an economic expansion we want to be more on offense. And then as we mature and we start to see more recessionary signs, we want to be more on defense. And then the next step, the third step is we want to layer on what are valuations. What are earnings. What's being priced into the market today?
00:06:27:12 - 00:06:50:13
Keith Lerner
Right. And then lastly is market signals. What's the message of the market. What's the primary market trend. And then also what are we seeing from sentiment. Because at the end of the day from a day to day fear and greed really drive this market. So we put all this together to form an opinion and find out where there may be opportunities but also risk.
00:06:50:16 - 00:07:04:27
Keith Lerner
And then finally, probably as important as anything else I just mentioned is continue to follow that weight of the evidence. Keep an open mind and adjust as the data changes as it changes. So don't just be stubborn about a point of view, especially in a world today where it's so fluid. Yeah.
00:07:05:00 - 00:07:22:05
Oscarlyn Elder
And Keith, this framework kind of the second pillar of our investment philosophy, this is really these four components are lenses through which you're making tactical decisions. Just take a second and explain the tactical element. And what we mean by that to our viewers.
00:07:22:06 - 00:07:40:16
Keith Lerner
Sure. So we should still be grounded in a long term outlook. But what we're trying to do is smooth the ride. So you know, from from our longer-term asset allocation, we may take some risk off the table meaning be a bit more defensively. Maybe we take down equities a little bit or conversely increase them. So it's almost like you think about a pilot.
00:07:40:22 - 00:08:00:01
Keith Lerner
They know the destination they want to go to. But along the way they may have some turbulence that was unexpected. And what we try to do with tactical decisions over, say, the next six, 12 months is to make some adjustments, not wholesale changes to reflect some, some changes in the data. And maybe it would be helpful to just kind of give you an example of what we've done this year.
00:08:00:01 - 00:08:07:02
Oscarlyn Elder
Absolutely. Walk us through how you've used this approach and and how our views have evolved this year.
00:08:07:03 - 00:08:27:20
Keith Lerner
Sure. So going back to the historical lens that we were just talking about. Back in February, we actually downgraded our short term view of equities. And at that point the market had gone the longest stretch without even a 5% pullback. So just from a starting point they said, hey, the market may be vulnerable to any bad news. And we knew there was a lot of event risk coming up.
00:08:27:22 - 00:08:53:25
Keith Lerner
At the same time, if we moved to that second step on the economy, we already started to see some cooling in the economy relative to the consensus expectations back in February. The third component is we saw earnings or fundamentals, start to change a little bit. The earnings for the market start to flatline. And then finally back in February, as the market was making an all time high, only about 50% of stocks within the index were actually making new highs.
00:08:53:26 - 00:09:24:01
Keith Lerner
So that that just said that the market wasn't as strong as the index suggested. So we look at the, you know, the history, the economy, the fundamentals, and then the, the technicals. And it said to us there was some complacency. The risk reward had become a little bit less attractive. And then I will just say more recently when when the market was down 19%, we use the same framework to say, at least on a short term basis, the rubber band got stretched too far to the downside, and we expected to see some stabilization and probably a little bit of a of a bounce back, which we've subsequently have seen.
00:09:24:04 - 00:09:32:27
Oscarlyn Elder
Yeah. So Keith, you've walked us through kind of the evolution year to date of our tactical positioning. Where do we stand currently?
00:09:33:00 - 00:09:55:02
Keith Lerner
Okay. The main caveat I will just say when you say currently we are actively evaluating our current stance. So we may have some changes based on the data that we're looking at very closely. With that said, where we stand today is we had a big market move down. We've had over a 10% move back up. I think that our baseline view is this is not going to be what we call a V-shaped recovery
00:09:55:02 - 00:10:14:13
Keith Lerner
back to new highs. We think it will be bumpy because we think there's been some at least some damage done to the economy or the or the investor sentiment that will take time to repair. So, one is be braced that the path forward is likely to remain bumpy. And we also Oscarlyn as you know, we'll have all different clients in different circumstances.
00:10:14:13 - 00:10:29:15
Keith Lerner
Right. We have some folks that may have had a liquidity event where they have a lot of cash. The question is, what do I what do I do with that? Well, we would recommend more of a dollar cost average approach in especially as we've already rebounded a lot. And if you get deeper pullbacks then to be a little bit more aggressive.
00:10:29:18 - 00:10:46:21
Keith Lerner
And our advisors can help set up that plan. On the other side, even though we've had a pullback here the last couple of years, have been really good times for the market. So some of our clients may have been on offense and still on offense. We would say bring those rates somewhat back down. Dial back the risk.
00:10:46:23 - 00:11:08:25
Keith Lerner
If you were kind of taking maybe more risk on as you have this as, as you have this bounce. And then, you know, as far as, um you know, some stocks since November are down a lot. There may be some tax loss opportunities. And more broadly, what you're looking at is our key position. And we where you can see and you know, we have kind of an even split between our views of equity, fixed income and cash.
00:11:08:25 - 00:11:30:13
Keith Lerner
Again under you know we're evaluating this today. But when we look at global equities we still have more of a US bias. We brought that in a little bit this year because the US has outperformed by so much, and then we'll talk to Chip later on the fixed income side we've been more high quality focused. And then lastly, we've been positive on gold, all year long.
00:11:30:14 - 00:11:36:27
Keith Lerner
We're still positive. It's getting a little bit extended on a short term basis. But as a diversifier within a portfolio, we think it makes sense.
00:11:36:29 - 00:12:05:10
Oscarlyn Elder
So Keith thank you for highlighting for folks our current tactical positioning and within that you were talking about a high level equities, fixed income. So the different asset classes that we often find within a multi asset class portfolio, most of our clients are invested in that diversified portfolio. That's that that's what we really believe in is the power of diversification over time. For a frame of reference,
00:12:05:12 - 00:12:17:17
Oscarlyn Elder
how has the diverse, diversified portfolio held up this year versus some of the data that I'd shared at the beginning, where, you know, equities in the US are down about 8%?
00:12:17:19 - 00:12:35:15
Keith Lerner
Well, the answer is I would say exceptionally well given the current environment. We were just talking earlier today. If you ask the average person on the street who wasn't maybe following this as closely and said, how much is the market down? I think they may be surprised that a diversified portfolio is holding up as well as it is.
00:12:35:16 - 00:12:56:26
Keith Lerner
So as as you mentioned, the numbers, what we're looking at is the traditional 60/40 portfolio, 60% stocks and 40% bonds, which has kind of been, you know, you know, a key asset allocation that we've had for, you know, generations, I would say. So this year, as you mentioned, the S&P is down about 5%. Global equities down about four.
00:12:56:29 - 00:13:27:17
Keith Lerner
But bonds are actually in the green up almost 2%. You put that together a 60, 60% US focused portfolio with 40% bonds down less than 5%. Again I'm using the S&P maybe, whereas if you have other things in there as well. But just as a simplified baseline and then a global portfolio is down less than 3%. So what does this telling you that's telling you as stocks have gone down that you're seeing diversification benefits from bonds, but also for the first time in some time, international is also providing more of a buffer as well.
00:13:27:23 - 00:13:49:02
Keith Lerner
And maybe lastly, Oscarlyn in the chart we have to the right. It shows historically how has this 60/40 portfolio done over different time frames. And the key message here is as you expand your time horizon, the probability of success increases. So you look at portfolio, any rolling five year period, you've been up 99.7% of the time.
00:13:49:07 - 00:13:58:02
Keith Lerner
I can't guarantee that's the future. But it does tell you we've been through recessions in different market environments, and these portfolios have withstood the test of time. Yeah.
00:13:58:05 - 00:14:15:15
Oscarlyn Elder
So, Keith, thank you for that perspective. Again, we want to anchor in the diversified portfolio. But now let's double click into the stock, the equity side. As you've noted I mean we I think we all know there's been a lot of volatility this year. So from a stock perspective where are we?
00:14:15:17 - 00:14:30:24
Keith Lerner
Yeah. And I will mention that we just talked about a 60/40 portfolio. We know we have some clients that are much more growth oriented and may have a bigger hit. So we're going to we're going to go a little bit deeper into the equity side. And we thought it would be helpful to zoom out a little bit using this chart of the S&P 500
00:14:30:24 - 00:14:55:17
Keith Lerner
that goes back several years. So so what do you see on this chart is that from late 2000 I'm sorry late 2022. We've had this really nice up move in the market right. And until the peak we saw in February. What we've seen more recently, we've seen a 50% retracement of this up move. That's a little bit of technical jargon, but that's a normal kind of retracement of what we call a bull market.
00:14:55:20 - 00:15:16:02
Keith Lerner
And as the market was coming down, as we were talking to our advisors over the last, you know, ten days, we said this is a critical level that we expect to see some stabilization in the market, that 50% retracement. And lo and behold, the market, the S&P formed this low right around 4800 on the S&P. And that's where that 50% retracement.
00:15:16:08 - 00:15:45:15
Keith Lerner
The reason why some of this stuff works is because there's other folks and traders that are looking at this, and we have seen some stabilization. Now we've had this kind of what I call reflex rally back up. We got too stretched to one side. That rubber band got really stretched and now we move the other way. At this point, as we move back up, you know, I think we could squeeze a little bit higher, but I think we're going to start turning into more of a choppy period, because if you look at that top section, everyone after the election who bought in.
00:15:45:20 - 00:16:03:15
Keith Lerner
Yeah. You know, until today, it just said let's use the S&P as a proxy is actually in a losing position. So what does that mean from a psychological standpoint? All of a sudden, as someone who is buying equities may have seen that their portfolio or to the equity that they bought then was down almost 20%. So that's oh, I made a wrong decision,
00:16:03:15 - 00:16:25:00
Keith Lerner
but I don't want to take a loss. As stock's come back up, some of those investors will look to sell to break even. And that creates kind of what we call supply. So what I think we're going to see and we’re already seeing it from day to day is a battle between fear and greed. Fear that market’s going lower, and also greed that I don't want to miss the upside and each data point is is over extrapolated.
00:16:25:03 - 00:16:37:28
Keith Lerner
Maybe lastly, and importantly again, because of that supply dynamic and other reasons that we'll talk about later, we don't think we're going to go right back to new highs. We think it's going to be a process and it's going to take some time.
00:16:38:00 - 00:16:59:21
Oscarlyn Elder
Yeah. So message is bumpiness ahead. It's going to take some time. That's that's the key message there. So we've had a lot of volatility a lot of swings in the market this year. You've highlighted several of those instances. Can you put those swings, put the volatility into historical context for folks.
00:16:59:23 - 00:17:19:18
Keith Lerner
Yes, definitely. And going back to the investment philosophy that we started off with, we look at these things through a historical lens first. So the chart we're looking at now is one that we view, as you may have seen it in some of our publications, it's just the S&P 500 chart since March of 2009. That's when the end of the bear market of the global financial crisis started.
00:17:19:20 - 00:17:42:05
Keith Lerner
And what you see is you see a nice line up for the S&P over that time. But you also see these purple areas. And those are places where we've seen at least a 5% correction. So here's what's really noteworthy. We've had a really strong market. But since 2009 we have seen 30 corrections of at least 5%. 30. Right.
00:17:42:11 - 00:17:57:13
Keith Lerner
And I would, I'm sure I pretty much have written about every single one of them. And I've probably forgotten about half of them, but every single one of them come with something, comes with something. It's got bad news, right? And and every time there is a different reason behind them. But the fear and greed side of the market stays in as well.
00:17:57:13 - 00:18:20:23
Keith Lerner
And you can look back, you know, we had the Covid decline, which was 34%. We had the 1 in 2011, 19.4 around the US debt downgrade. Here's the other really key point. Despite these 30 corrections over that entire time, the S&P from that trough to the peak in February was up more than 1,100%. So we always say the admission price to the market, all these pullbacks.
00:18:20:25 - 00:18:29:16
Keith Lerner
But we're certainly feeling that more recently as well. But I would keep that in mind as well. That is the admission price for the potential of a high, along with higher long term returns.
00:18:29:23 - 00:18:49:25
Oscarlyn Elder
And Keith, to your point there are different catalysts or reasons, unexpected bad news in essence that drove those pullbacks. But at the same time, that fear and greed element, that stays the same, and that investor behavior doesn't seem to change. There's always been fear and greed.
00:18:49:27 - 00:19:19:16
Keith Lerner
I mean, it's a key driver. And that's why we do look at the economy. We look at fundamentals, but we also pay attention to the fear and greed because that can also provide us, signal on what we should be doing as well. So we did have, as you mentioned, the historical, historic selling pressure recently. And what we also tried to do is when we see like a big two day decline, like we've seen, our first instinct is to say, okay, have we seen this before and how has the market tended to act? Again as a starting point.
00:19:19:18 - 00:19:24:24
Keith Lerner
So the table we're looking at and by the way, I apologize by having so many numbers on a table for presentations.
00:19:24:24 - 00:19:25:23
Oscarlyn Elder
Look at the colors. Look at the.
00:19:25:23 - 00:19:26:06
Keith Lerner
Colors.
00:19:26:06 - 00:19:26:24
Oscarlyn Elder
Look at the color.
00:19:26:26 - 00:19:46:06
Keith Lerner
But I think it's important. So this is looking at the largest two day declines in market history back to the 1950s. So what we just saw, it was a historical event that we've only seen three other times. Right. We saw a Black Monday in 1987. We saw it during the global financial crisis, and then we saw it during Covid.
00:19:46:06 - 00:20:05:00
Keith Lerner
So those are three different periods that really stand out in market history. And now we can add the recent one around tariffs. So the question is after you have these big two day declines what's the tendency for the market. Well what the data suggests, realizing this is a sample of three, so just as a starting point is that on the short-
00:20:05:02 - 00:20:05:16
Oscarlyn Elder
very small.
00:20:05:16 - 00:20:24:25
Keith Lerner
Small sample. On the, on the short term, the market returns are pretty inconsistent. There's not really sometimes we're up a lot, sometimes we're down a lot. It's very inconsistent. As you expand your time horizon over a year or two years, the probability of the market being higher expands. Now, I do want to say a caveat on this.
00:20:24:25 - 00:20:49:24
Keith Lerner
So the data says this skews positive over time. In the last two instances, in particular, Covid and the global financial crisis, there was an enormous policy response that helped the market out. Meaning in Covid, not only was there vaccination out there as something the market could grab onto, but there was also the bazookas came out from the from the from the monetary side, the Fed and fiscal side.
00:20:49:28 - 00:21:14:15
Keith Lerner
And that really supported the markets. Also with the global financial crisis, it came in later. Right. But we had a lot of stimulus come in. This time we are in an environment where you're seeing fiscal spending kind of come in somewhat. Right. And the Fed is is somewhat more constrained. We still think they're going to act this year to cut rates, but they're likely not going to be as aggressive as they normally would because of why? Tariffs and inflation concerns as well.
00:21:14:15 - 00:21:25:16
Keith Lerner
So I guess to wrap this up, the data still skews positively. But the caveat is historically, we've needed a policy response in order to really see those gains. Yeah.
00:21:25:19 - 00:21:29:07
Oscarlyn Elder
And there's limited flexibility. Now, to be able to respond.
00:21:29:07 - 00:21:30:06
Keith Lerner
In that relative to the.
00:21:30:06 - 00:22:02:27
Oscarlyn Elder
Last relative to the last two, when folks submitted questions to us, the question that came up the most or the request was around recession, talk to us about recession. And so I guess that's like the second word of the year is that we weren't talking about recession in January, but it certainly has become, you know, a more frequently, used word in the last few weeks, specifically. Help folks understand how does the stock market typically behave around recessions?
00:22:03:03 - 00:22:28:14
Keith Lerner
It's an important question, because what the market was trying to do a few weeks ago was trying to price in the probability of recession very quickly, almost in a couple of days, because of some of the uncertainty. So just as a, as a again, as a framework, historically, we've had about 10 or 11 recessions since 1948. The, the, the average peak to trough decline for the stock market is about 29%.
00:22:28:17 - 00:22:48:11
Keith Lerner
The median, is about 24, right. So that's that's good context. And then what's also important to realize is once you hit a low during a recession, the market that the first year out tends to be a strong rebound as well. So keep that in context because also historically the the good times tend to last more than the bad times.
00:22:48:16 - 00:23:13:23
Keith Lerner
The average expansion tends to be 4 or 5 six years, right? The average recession tends to be less than a year. Even the global financial crisis, which was, you know, not a typical recession, was 18 months. So keep that in mind. But going back to the market when we were down, you know, 19% the lows, the market was pricing in, you know, a very high probability of recession now, as we backed off of that, is pricing a little bit of recession.
00:23:13:23 - 00:23:18:26
Keith Lerner
But that is still the key question that the market is, is trying to grapple with right now.
00:23:18:28 - 00:23:42:00
Oscarlyn Elder
And so with that, let's move from market, equity markets over to Mike to talk economy. I think I said, yeah, trade uncertainty, tariff uncertainty maybe ten, 15 times already. Because again, uncertainty seems to be the word of the year. Given that, where is our economic outlook currently?
00:23:42:02 - 00:24:08:21
Mike Skordeles
Well, I'm going to say tariff again. Yeah. Tariffs are still on the show. It's created, it's clouded decision making not just for policymakers like the Federal Reserve, as Keith mentioned, but also businesses and consumers. So that's that's much of the reason why, lots of people are talking about, hey, there's a potential for a recession, especially within markets.
00:24:08:23 - 00:24:35:09
Mike Skordeles
So that's the the kind of the bad news. But let's understand the tariff piece just for a second. And on the screen we're showing what the average tariff, tariff would be today. Yes, we agree with a lot of what the market sentiment that's out there that this is a negotiating stance and it's likely to come lower. However, I want to stress that our outlook coming into the year where the tariffs we're going to increase, we still think that tariffs are going to increase.
00:24:35:09 - 00:24:52:19
Mike Skordeles
So even if that number doesn't end up being the average tariff at 24%, it's not going to be the prior of 2.5% or the the baseline effective rate of a little bit lower than that. The tariffs are going to go up. So people need to understand that.
00:24:52:21 - 00:25:11:24
Oscarlyn Elder
So Mike, what you're saying is if we move to again if if what you see is the high end of where things may be, if we move to, let's say, an average or effective rate of around 10%, that's still a notable dramatic increase from where the economy was.
00:25:11:26 - 00:25:36:00
Mike Skordeles
Yeah. Prior. Yeah. Coming into the year of the year, again, the baseline was 2.5%. So it's like so it's a four. It's four times what it was. That said, it's not fatal. Yes. It acts like a tax. And yes it increases prices. And increases prices is a fancy, the not fancy way of saying inflation. So that's that's something that we're going to have to deal with both in businesses and consumers.
00:25:36:00 - 00:25:59:04
Mike Skordeles
But again, back to the clouding judgment as to what does it cost to to bring goods as part of your supply chain or what have you? Autos is the most obvious, but it's across any good or, you know, even some of the services require some goods, provided as well. So it's definitely, you know, causing companies to sit back.
00:25:59:06 - 00:26:05:00
Mike Skordeles
Unfortunately that sit back and wait, while it might be prudent for their business is not pro-growth.
00:26:05:03 - 00:26:15:14
Oscarlyn Elder
Right. That's right. And because of that, we came into the year with growth estimates of around 2.5%. Right. We're not expecting to land there now.
00:26:15:14 - 00:26:35:10
Mike Skordeles
No, we're we're likely to be roughly half of that. Okay. So that's something to keep in mind. Um, the other thing that we've seen is that some of it, we call it hard data, but counting how many cars have been sold or things that are bought rather than sentiment, which we call soft data. Soft data has been very sour.
00:26:35:16 - 00:27:04:07
Mike Skordeles
Yes, but the hard data has hung in there. But that might be a little bit of a mirage, insofar as we've seen a lot of businesses pulling forward purchases, especially things that are internationally sourced so they can get ahead of these tariffs. Additionally, we've seen consumers front running the tariffs, especially in March. So great example auto data. New auto sales were up 11%. In an average month up a half a percent
00:27:04:07 - 00:27:11:05
Mike Skordeles
is a, is a really good month. Up 2% is a really really good month. Up 11% month over month,
00:27:11:08 - 00:27:13:07
Mike Skordeles
it's largely unheard of. Right.
00:27:13:09 - 00:27:34:24
Mike Skordeles
It's unheard of and unsustainable. So what that creates and yes, that's auto sales. But we've seen that in many industries you're creating a bit of an air pocket when demand kind of normalizes, if you will, after this pull forward of demand to get ahead of tariffs, that you're going to hit an air pocket and it's going to be weaker at some point.
00:27:34:26 - 00:27:57:23
Mike Skordeles
Right. But again, I'll come back to the the longer this uncertainty stretches out and businesses and consumers are sitting back, that's not pro growth. And that drags on growth as well. At this point, for the most part we've seen a lot of businesses delaying activity rather than canceling the activity. So it pushes it out further in the year and maybe pushes some activity into 2026.
00:27:57:25 - 00:28:05:15
Mike Skordeles
But the longer this uncertainty hangs around, you're going to start seeing those delays become canceled. And that does drag on growth. Yeah.
00:28:05:17 - 00:28:23:13
Oscarlyn Elder
And so Mike I'm really hearing three primary points. Number one tariff tariff regime will be higher than certainly what we came into the year with and possibly higher than maybe where initial expectations were. But hopefully not as high as kind of where where you indicated.
00:28:23:14 - 00:28:40:08
Mike Skordeles
Yeah or where they're currently at. Yeah. Again they're being negotiated. Yeah. We've heard things including Japan and other countries have tried to do that. But it's also a lot of company by company, which gets a lot more messy and a lot more nuanced than just, well, we made a deal with Canada.
00:28:40:11 - 00:29:04:09
Oscarlyn Elder
And the second thing that folks need to look for, the situation is very fluid. We saw consumer and business behavior accelerate or change more in March, buying more goods. And what you're seeing is we're taking that from future growth. We're taking future growth and pulling it into the current time. And so that may leave some future quarters weaker than we had expected because of that.
00:29:04:12 - 00:29:22:16
Oscarlyn Elder
Right. Yeah. Very good. And then I think your third point there around tariffs, you know, when you're looking at that kind of your third point that you want to leave folks with is refresh folks on that third point, I just want to make sure that.
00:29:22:18 - 00:29:29:10
Mike Skordeles
They're going to be higher. It doesn't necessarily have to be a recession, I think, is the other the one that you know well.
00:29:29:11 - 00:29:35:09
Oscarlyn Elder
And uncertainty, if we can clarify the uncertainty more quickly, that would be better for the economy, generally. Yeah.
00:29:35:09 - 00:29:51:18
Mike Skordeles
And ultimately, here's the thing about, you know, recession, not recession, don't get fixated on it. That's the way that we've been talking to clients. Yeah. Because whether it's a half a percent positive or a minus a half a percent, it's going to feel roughly the same.
00:29:51:21 - 00:30:04:15
Oscarlyn Elder
Yeah. And and that is a question that we're getting a lot is, look, are we going to go in recession? And and my question to you, is it a given that we're going to go into recession like folks want to know, is this like 100% certain that we're going to hit there?
00:30:04:17 - 00:30:29:07
Mike Skordeles
We are not it's a it's not a it's not a it's not a given. It's not a certainty. That said, before I finish the why the US may or may not is some of our trading partners, including Canada and Mexico, likely will go in a recession. And we're saying that the US is probably 50/50 again, depending on how long this saga drags out.
00:30:29:10 - 00:30:46:02
Mike Skordeles
But in places like Canada, it's likely that they're going to be in a recession. They were they were already close to a recession coming into this period, adding this uncertainty and the waiting, it's going to definitely, you know, in their case, tip them into recession. Yeah.
00:30:46:04 - 00:30:52:20
Oscarlyn Elder
And and regardless of whether or not we go into the formal recession, your key message is: growth is slowing.
00:30:52:22 - 00:31:04:11
Mike Skordeles
Growth is slowing. And the longer that this saga drags and drags out, you're dragging on growth. Yeah. And it's just you're gouging into growth. As we move through the year.
00:31:04:14 - 00:31:25:16
Oscarlyn Elder
Mike, even though kind of these headwinds have emerged, employment as of yet has held up. And I know over the past two years employment has been a key part of your message about the economy. Yeah. So maybe talk to us about employment's role in the in the environment.
00:31:25:18 - 00:31:48:07
Mike Skordeles
At the end of the day, the recession discussion is all about jobs. You, it is a key component. You need to have job loss to have a recession. We may get a negative quarter as far as gross domestic product or GDP. That may happen whether we have two consecutive quarters. That may also happen. But if we don't have job loss, we don't have a recession.
00:31:48:12 - 00:32:05:18
Mike Skordeles
We saw this in 2022, where we had a couple of negative quarters but didn't have the accompanying job loss. That happens with it. You got to have the job loss. Whether we look at weekly jobless claims or other things. That's all been hanging in there. Yeah. Now that's not forward looking right.
00:32:05:18 - 00:32:06:07
Oscarlyn Elder
It could change.
00:32:06:07 - 00:32:33:21
Mike Skordeles
It could change. But at this point it's been hanging in there. The one thing I will say as we talk to businesses, there's a lot of scar tissue from the pandemic period. And they know if they're looking through these tariffs and saying, well, this is a negotiating period, and by the summer or by the fall, six months, three months, whatever that period is, we're going to be able to look through it and demand is going to come back, maybe not quite as strong, but it comes back.
00:32:33:24 - 00:32:57:18
Mike Skordeles
How am I going to scramble to find workers the way it did during Covid? And it took me a year or two years to fill some of these positions. So companies might be reticent to let people go and hoard those employees as long as they can, as long as they, you know. But the difficulty for them as well is that holding on to employees means you got to have the wherewithal to do that.
00:32:57:20 - 00:33:14:20
Mike Skordeles
Yeah, larger companies are going to be able to navigate some of these supply chain shifts and other and sourcing things from other places, these household names that everybody knows they're going to be able to do that. For the most part, they may take a margin hit and profit might be a little less, but they'll generally be able to do that.
00:33:14:23 - 00:33:42:01
Mike Skordeles
But for Main Street, small businesses and micro-businesses their price takers. When their suppliers say this is what it costs, there isn't a whole lot of negotiating. So they're, they're, they’re at the blunt end of that spear, and they're likely going to take the hit for it. The difficulty here is that from a job growth perspective, roughly 40% of new jobs come from those small Main Street businesses that have less than 50 employees.
00:33:42:04 - 00:33:44:24
Mike Skordeles
So that's something that we're keeping a pulse on.
00:33:44:29 - 00:34:04:03
Oscarlyn Elder
Yeah, absolutely. And we'll continue to update folks as we move through this year with how that's shaping up. Let's move to the Federal Reserve. So, so far this year, the Fed has remained on hold. How are we expecting the Fed to behave as we move through the rest of the year?
00:34:04:05 - 00:34:35:02
Mike Skordeles
Yeah. So everyone famously knows about the Fed has a dual mandate of employment, maximum employment and inflation. The difficulty here is that with inflation and in a lot of these cases, adding a task, tax is increasing price, that is inflation. So that's likely to be the Fed's primary focus. Not that they're going to ignore the employment side. But as I mentioned the employment side has been relatively stable.
00:34:35:04 - 00:35:04:08
Mike Skordeles
They're going to remain focused on the inflationary piece. Yeah. The other thing is the jumping around of policy on the on the trade side reinforces the notion and the approach that the Fed has had thus far to say, we're also going to be in wait and see mode. So as in, for instance, a month ago, the beginning of this month, even when the initial tariffs were announced, there were market expectations and talk of, well, the Fed will do an emergency rate cut.
00:35:04:11 - 00:35:22:27
Mike Skordeles
Had they done an emergency rate cut, and then we paused the tariff for 90 days, or at least most of the tariffs. Would they have backed out that rate cut? Right. Yeah. So the practical is it was better off to sit and wait, which likely means they're they're constrained on what they can do and they're likely to wait.
00:35:22:29 - 00:35:42:21
Mike Skordeles
So it ends up looking like the middle of the year is when they end up doing it. Additionally, we had expected coming into the year, two rate cuts were still sitting on two rate cuts. We haven't seen a big deterioration in the hard data. However, if we see the hard data turn the other way, the Fed's likely to do a whole lot more than two.
00:35:42:29 - 00:35:56:14
Mike Skordeles
They're likely to do four or more. Which markets may cheer a little bit in the near term, and I'll let Keith, Keith mention that. But the difficulty here is that's not coming from a strength, of a place of strength, right?
00:35:56:17 - 00:36:13:14
Keith Lerner
Yeah. Oscarlyn as I mentioned earlier, we showed that chart. What happens after these big down days? And there's normally a policy restraint I'm sorry, a policy response. Right. Mike just kind of re-emphasized that the Fed is somewhat more constrained. And if they do have to then start going quicker, that means they’re probably late as well. So just something to keep,
00:36:13:14 - 00:36:14:06
Keith Lerner
Keep in mind.
00:36:14:08 - 00:36:25:07
Mike Skordeles
Late. And worse correct. It's not because the economy's doing well that they're cutting rates, it's because things have deteriorated rather quickly. But again, they will likely be late.
00:36:25:09 - 00:36:38:09
Oscarlyn Elder
Mike, let's turn to another topic that's connected to tariffs. And that is the US dollar. And the dollar has certainly moved around dramatically this year. How are you thinking about the dollar?
00:36:38:11 - 00:37:11:16
Mike Skordeles
Yeah. So again the historical lens earlier in the year when US growth appeared to be stronger and that the Federal Reserve was going to wait the, we saw dollar, the dollar strengthened quite a bit. Now as the tariffs were announced through March and the beginning of April, there's been a bit of a backlash from foreign buyers, you know, in an all uh whether it's equities or bonds and so less demand for dollars.
00:37:11:16 - 00:37:34:09
Mike Skordeles
We've seen the dollar weaken rather dramatically. But again, let's pull back zoom out and see where we've been. And when you look at the chart that's on the screen today, you could see we've largely stayed in this broader range, although that's been a pretty quick move up and rapid move back down. And we don't like to see it move quite that much nor that quickly.
00:37:34:11 - 00:37:58:06
Mike Skordeles
We're still trading roughly in that range. Nonetheless, the take home point here is especially for businesses where complicating that or clouding that view of how much it cost to bring goods as part of their supply chain into the US, because there's the tariff piece now and we've got a volatile dollar. So it makes it a lot harder for businesses to bring in goods.
00:37:58:09 - 00:38:11:10
Oscarlyn Elder
Chip, let’s bring you into the dollar discussion, because recently we've seen yields as we talked about spike, right. And at the same time we've seen the dollar weaken. That's a bit unusual. Tell us what you think is happening there.
00:38:11:11 - 00:38:31:20
Chip Hughey
You're exactly right. I mean, it definitely is very unusual to see the dollar weakening when you're seeing yields rise, typically in a vacuum when yields are rising, that typically is a net positive for a strengthening dollar. And we've seen really just the the exact opposite. And I think what that does is does show a little bit of an aversion right now for global investors towards US assets.
00:38:31:20 - 00:38:50:22
Chip Hughey
And we have actually seen purchases go up in Germany, in Switzerland, in Japan. I think that's, I think that's part of it, part of where some of those flows actually may be going. But I think that the fears of, of there being broad based sort of dumping, there's been a lot of headlines about that of US assets of US treasuries have been talked about quite a bit.
00:38:50:22 - 00:39:11:16
Chip Hughey
I think that's a bit, I think it's a little bit overblown. And I would point to last week's, US Treasury auctions in extremely strong demand for the ten year auction among foreign and foreign investors. So I think I would categorize it more as sort of global diversification, into other areas that maybe, you know, to sort of diversify away from some of this policy uncertainty.
00:39:11:16 - 00:39:18:18
Chip Hughey
We're seeing some of the volatility. But we're not characterizing as sort of a mass exodus from from US assets.
00:39:18:20 - 00:39:25:02
Oscarlyn Elder
We've talked about the ten year repeatedly. How high do you think yields could go in this environment?
00:39:25:02 - 00:39:47:26
Chip Hughey
Well for the past couple of months we spent a lot of time between that four and 4.5% range. But it has been in a very, against a very volatile backdrop. We've seen interest rate volatility jump to about a 2 year high. So those intraday swings are bigger. And we've also seen signs of some challenging liquidity conditions as well. So again making it, making those moves you know a bit more noisy.
00:39:48:01 - 00:40:07:16
Chip Hughey
It does raise the risk of a potential overshoot really in either direction. But how high? You know if we did see if we did see a rapid move back towards those previous highs this year 4.80 starting to drift towards 5%, we would view that as a as an opportunity to probably unless we see a big kind of difference in that economic picture Mike just discussed.
00:40:07:16 - 00:40:28:19
Chip Hughey
Right. That's going to be an opportunity to add long dated exposure. You know, at that point. It's sort of a tactical opportunity because for right now we're we're positioned a bit more neutrally. So but what I would say though is that as the Fed is able to, you know, gradually, ease policy as we move through the year, I do think that yields will decline, but probably not quite as, not a tremendous amount.
00:40:28:19 - 00:40:39:23
Chip Hughey
I think that the ten year is going to have trouble getting much lower than call it three and a half, 3.75 because of that gradual path. And frankly, the policy uncertainty we're still in the midst of.
00:40:39:26 - 00:40:50:26
Oscarlyn Elder
Chip recently, you and the team have become more favorable on credit. We you've, we've seen a shift there. Can you explain why you've made that shift?
00:40:50:26 - 00:41:00:25
Chip Hughey
Yeah, absolutely. We've, we've said for quite some time that that we should really be emphasizing high quality fixed income right now. And really that hasn't changed. Overall. We are still emphasizing quality.
00:41:00:28 - 00:41:06:29
Oscarlyn Elder
So high quality is still the core, the foundation of bond portfolios we believe?
00:41:06:29 - 00:41:28:05
Chip Hughey
That's right. That's right. And the reason that we've been saying that is because credit spreads were extremely tight, historically tight. And all that is to say is small is they were small, right. Investors were not getting paid very much extra over US treasuries to invest in these companies, both investment grade and high yield. But over the past few months, that's really that's really changed pretty, pretty quickly.
00:41:28:05 - 00:41:47:22
Chip Hughey
We've seen those spreads widen. We've seen some of the of the risk of being, being priced in. And investment grade and high yield spreads are back towards their their ten year averages. So this was just an it's an incremental acknowledgment that the credit landscape has changed a bit. There is better compensation there. That risk reward is a little better and your starting point’s a little bit better.
00:41:47:22 - 00:41:57:05
Chip Hughey
So we did take from in the case of high yield a very negative view and just upgrade, upgraded that say okay at least we’re pricing in some of these risks that that Mike was just discussing.
00:41:57:07 - 00:42:07:29
Oscarlyn Elder
So you made a tactical shift, an incremental move because there's better compensation given the, given the environment within the credit. Exactly. Right now. Yeah.
00:42:08:01 - 00:42:11:02
Keith Lerner
Hey Chip, real quick. Just because we talk about spreads a lot.
00:42:11:03 - 00:42:12:08
Chip Hughey
Yeah. Right.
00:42:12:10 - 00:42:20:06
Keith Lerner
But investors they're going to get the the absolute you know yields. Can you just give some context to what the actual level of yields are for some of these?
00:42:20:06 - 00:42:35:11
Chip Hughey
For Sure, yeah. High yield comes up a lot. Like what is what's been that. What's been that affected in high yield between absolute yields rising over the past you know a couple of months plus the spread widening which is that additional. And if you look at the high yield the broad based high yield index, now the yield there is now 8.5%.
00:42:35:13 - 00:42:40:27
Chip Hughey
That's that's a big, a big change from from where we've been really over the course of the past, you know, a couple of years.
00:42:40:29 - 00:42:42:15
Mike Skordeles
Thank you. Yeah. Thanks.
00:42:42:18 - 00:43:09:20
Oscarlyn Elder
All right Scott I'm going to bring you into the conversation. Thank you for being so patient. During a number of our recent live cast and with our communications with clients, often they're asking us for views on our views on sectors and industries that they would like us to highlight that for them. You've got perspective on how companies are managing through the current environment, and then also how opportunities may be evolving.
00:43:09:25 - 00:43:34:22
Oscarlyn Elder
And I want to make sure everybody knows Scott is not giving us Scott. Scott is not giving us stock recommendations. So to be really clear, we're not making stock recommendations today. We're really talking broadly about trends that we're seeing within the economy, within specific industries. And we just encourage you to connect with your advisor. If you want to have a deeper conversation, then what Scott is going to provide us with today.
00:43:34:22 - 00:43:58:17
Oscarlyn Elder
So with that, Scott, let's start with technology, because I think every livecast last year we talked about the Magnificent Seven or we talked about generative AI. Like those were really two areas that were, I guess, the words, the terms of the year, if you will, will for 2024. Can you update us on what's happening within technology today?
00:43:58:20 - 00:44:14:18
Scott Yuschak
Yeah, absolutely. Thank you. I'm so excited to be here. Well, I have one chart, but there's a lot of information and a lot of important stuff to talk about that comes off of that chart. And the first thing in reference back is just that, that top of the top panel there is the is the technology sector's performance going back, back to the Covid years.
00:44:14:18 - 00:44:34:25
Scott Yuschak
But going back to Keith's chart that shows the 1,100% return since since the great financial crisis, what we've seen is the engine that has driven those returns is technology. Technology is a very important driver. One of our core beliefs with with what we're doing from a management perspective, is we look for companies that have relative earnings growth versus the market.
00:44:34:25 - 00:44:53:11
Scott Yuschak
Generally speaking, if companies are growing their earnings faster than the market, the stocks are going to do well. That's a core belief of ours. I don't have that information up there. And there's a good reason for that, because when you look at that data currently for the last few months, it's not a blip, the the the outperformance of the forward estimates for technology sector is still very strong.
00:44:53:17 - 00:45:18:06
Scott Yuschak
What the market is saying is they don't believe those those estimates, they believe that that those estimates will be coming down. We'll wait and see. But the important part is the other part of it is as the stocks have have appreciated, the valuations have gone up as well. So as we went through last year and especially towards the end of last year, what we've what we saw, we started to get a little uncomfortable with some of the, some of the valuations and the expectations that were built into the tech, tech stocks.
00:45:18:08 - 00:45:35:20
Scott Yuschak
We felt that there were good companies that were being thrown away or being sold because everybody was chasing the next Nvidia. Everybody wanted everybody wanted that big pop. So there were good companies that were being sold, but that being said, we felt like coming into 2025, we still had good visibility into tech spending. There's still a lot of data center spend.
00:45:35:20 - 00:45:53:29
Scott Yuschak
There's still a lot of technology spend as an important part of any company. So we felt like there was enough visibility in 2025 that we'd at least be able to get through the first couple quarters with a with a good tech print or good tech tape. The 2026 was a problem to deal with in the summer. But then what happened was at the end of January, we had DeepSeek.
00:45:54:02 - 00:46:18:12
Scott Yuschak
DeepSeek was released. What DeepSeek is essentially just think of it as a competitor for for ChatGPT. But it wasn't just a regular old competitor for ChatGPT. It was a cheaper model that was that was built faster than what ChatGPT was. So up until this point, everybody's expectations were that we had to put a lot of infrastructure, a lot of expensive chips into these data centers to come up with AI, and DeepSeek brought that into question.
00:46:18:19 - 00:46:36:18
Scott Yuschak
So what that happened, what happened there was it it caused the stocks to sell off and created what was at the time even felt like a short term top for, for the sector. But what we've seen since then or what what happened after that was just like the beginning of the internet. Once the internet became cheap for everybody to have at home, everybody got the internet.
00:46:36:18 - 00:46:54:21
Scott Yuschak
So the fact that AI was becoming cheaper wasn't necessarily a bad thing. It meant that a lot of people would become more affordable and you'd be able to put it into more, more processes. So investors started to get comfortable with it. But then as we've been talking about, tariffs happened and that was that was that was kind of a changing event.
00:46:54:29 - 00:46:55:20
Oscarlyn Elder
Yeah.
00:46:55:22 - 00:47:18:25
Oscarlyn Elder
So Scott, technology is essential right to to our economy and to the market. But it's not the only sector in the economy. Talk to us about some sectors that you believe, are important where you see interesting trends evolving that perhaps folks aren't paying enough attention to.
00:47:18:27 - 00:47:44:03
Scott Yuschak
A lot of this comes back to the a lot of what is driving where we're seeing a lot of interest or we see interesting things happening is off of the offshoots of the data center trade, that there is more and more data centers being built, and that's going to require a lot more power. There's estimates that in, that by 2030, data centers will be consuming as much power as is the country of Japan currently is currently consuming.
00:47:44:03 - 00:48:06:18
Scott Yuschak
And that requires a lot more infrastructure. The data centers itself. Right now, a data center consumes the power of 100,000 homes. That's supposed to grow up, go up 20 X as we get into AI. So we're looking at utilities as being an attractive place to be, not only utilities from a from a secular growth perspective, but also in interesting times.
00:48:06:20 - 00:48:22:17
Scott Yuschak
Utilities are a place to play defense as well. So it's not just a matter of we're hiding somewhere, but we're also there's something constructive going on within utilities as well. We also like, we also like industrials have a lot of, a lot of places that they can fit into that they can fit into the data center as well.
00:48:22:17 - 00:48:38:26
Scott Yuschak
So from a cooling perspective, there's things going on within industrials. The last area that that we like coming into the year, we still like because we think but we just think it's been too late so far as the financials. Financials, look attractive. You know, they're supposed to be a lot of M&A going on. That hasn't happened yet.
00:48:38:27 - 00:49:02:25
Scott Yuschak
We haven't had any M&A since. And with the lowest amount of M&A in the first quarter since since 20, since 2020, that eventually we believe will change. And that's good for companies with capital markets exposure. So we like the financials. And then lastly, when it comes down to the when it comes down to regulation, there was an expectation that this administration would be, would rollback some regulations, which would be very positive for the, for the, for the large cap banks.
00:49:03:01 - 00:49:20:21
Scott Yuschak
So we still think that financials have a, have a good place to be. We just we don't know the timing of it. So again, going back to, you know, not having recommendations, we want exposure to these AI stocks. We want exposure to the technology sector. We want exposure to utilities and to an into financials. But when it comes down to it there's a lot of volatility.
00:49:20:21 - 00:49:35:14
Scott Yuschak
We're seeing it today with Nvidia. It's a company we like. But Nvidia also is dealing with with trade restrictions that's impacting the stock today. So you have to be, you have to you have to have dry powder so to speak, and be willing to wait and pick your spots.
00:49:35:16 - 00:50:00:20
Oscarlyn Elder
And Scott, you know, it's important that folks know you manage an entire strategy, two entire strategies. So we might highlight various trends and themes. But at the end of the day, you're approaching the portfolio really more from a holistic perspective because you're responsible for the entire strategy. Yes. I just want to make sure folks understand that. Keith, let me come back to you as we start to close out our time together.
00:50:00:22 - 00:50:26:18
Oscarlyn Elder
We've talked about the investment philosophy multiple times today. The first pillar of our philosophy is to stay anchored and to filter out the noise. And that perspective that we're trying to emphasize there is really one of long term investing. It's that long term perspective. What do you want to share with our viewers today about that long term perspective as we start to close out?
00:50:26:21 - 00:50:47:19
Keith Lerner
Well, I think you hit it, it’s that the long term perspective is core to thinking about investing, because we're not just investing and we want to make money, right? But it's really typically because there's some type of goal we're trying to meet. And the chart we're showing today, the first one on the left hand side just provides some perspective of markets, the up markets versus the down markets.
00:50:47:19 - 00:51:06:16
Keith Lerner
And what this chart really shows well is that the good times tend to last a lot longer than the bad times. Part of our job tactically is to make some adjustments and some tweaks, just like that pilot would, but we also want to stay focused on what our end destination is as well. So I would say stay grounded in that--
00:51:06:18 - 00:51:18:15
Keith Lerner
what the focus is. And remember, your not, most of our clients aren’t investing for the next week, the next quarter; they’re investing for the next few years, five years, ten years for retirement, for education.
00:51:18:15 - 00:51:19:08
Oscarlyn Elder
For legacy.
00:51:19:08 - 00:51:39:07
Keith Lerner
For legacy. Exactly. So keep that in mind. And eventually, as Mike alluded to, companies will adjust the economy, will understand the rules of engagement, and we'll move through this. But I'm also being realistic that I think the near-term path is somewhat bumpy. The other part is, especially now with the political backdrop, it's a very emotional time for investing as well.
00:51:39:09 - 00:52:02:06
Keith Lerner
And what we have found repeatedly through history is that emotional decision making tends to be detrimental to long term returns. The chart we have on the right shows what if you just missed the one best days going back to 1990? What if you missed the five best days? What if you missed the ten best days and all of these periods since 1990?
00:52:02:06 - 00:52:08:04
Keith Lerner
And what would that do to your investment returns? And you can see you have a dramatic impact on just missing a couple of days.
00:52:08:04 - 00:52:08:25
Oscarlyn Elder
It impairs it.
00:52:08:27 - 00:52:28:22
Keith Lerner
It impairs it. And just as a perfect example, at the heat of the moment, the last couple of weeks we just had out of nowhere a Tweet that sent the market up 9.5%. Right. So some of them pulled out the day before, and then they missed that one day, which is, you know, the third strongest day we've seen in history.
00:52:28:24 - 00:52:50:02
Keith Lerner
In some ways, it's hard to make that up. So be grounded and check back with your advisor. Make sure you have the right mix to get you to that long term goal. And then also, as I mentioned, we're actively evaluating today changes along the way to help mitigate the risk and to smooth things out, but try to be cognizant of not making these emotional decisions, whether it's investments or even in life.
00:52:50:05 - 00:52:54:19
Keith Lerner
Typically, emotional decision making is not, is not beneficial.
00:52:54:19 - 00:53:11:13
Oscarlyn Elder
Not the best. That's right. It's not typically not the best path. Keith, let's end on what are the key considerations that we want our viewers, to think about, to discuss with their advisors, you know, as they leave the livecast today?
00:53:11:16 - 00:53:30:03
Keith Lerner
Sure. And some of the things we've talked about since we've had we've had a long discussion. I just want to re-emphasize those before we head out. So first, I mean, we do expect the road ahead to be bumpy. There is some damage done. Mike talked about some of the uncertainty in the economy and then Chip and Scott also talked about some of the the crosscurrents in the fixed income and the equity markets.
00:53:30:03 - 00:53:50:28
Keith Lerner
So we expect this repair process to take time. And we don't anticipate a quick trip to new highs. Doesn't mean it can't happen. It's just not the most likely scenario. Again, we'll continue to follow the the evidence as well. So as I mentioned in the beginning, we have all different investors coming in or at different points. Some folks may have a lot of cash, dollar cost averaging.
00:53:50:28 - 00:54:09:27
Keith Lerner
If we get deeper pullbacks, we would likely say be more aggressive. We'd be a little bit less aggressive as we're moving back to, you know, back to what was called the Liberation Day for the market. We've gone up 10% in a short period of time. Again, if you're above benchmark weighting or above targets, you've been on offense, use this bounce to bring things in a little bit.
00:54:10:00 - 00:54:31:09
Keith Lerner
And I also want to just also highlight people talk about risk and uncertainty. There's definitely a risk in the market. There's risk that the markets are going to go lower. But there's also risk of not meeting the goal of of your money as well. So keep that in mind. And I think the last and really the most important thing is we're talking about real high level things at this point.
00:54:31:12 - 00:54:46:24
Keith Lerner
Our advisors know our clients best, and what their goals are, and risk tolerance. So this is a great time to connect with them, understand how our our high level view may impact them, or how they may be a little bit different based on their individual circumstance. So connect with them. Good check-in time.
00:54:46:24 - 00:55:16:00
Oscarlyn Elder
The conversations with the advisors are essential. And so we really encourage that. And you know Keith, Mike, Chip and Scott, thank you all so much for being here, for your insight and your expertise. And we know we've covered a lot of ground today. If you want to view the charts that we shared and explore other market and economic content, Truist Wealth’s monthly publication that we've talked about several times, the Market Navigator, is available through your advisor.
00:55:16:02 - 00:55:44:17
Oscarlyn Elder
And I also want to point you towards an episode of “I've Been Meaning To Do That”, which we expect to be available next week, around April 22nd through Apple Podcast and Spotify, and also through truist.com/dothat. So recently Keith joined me for a conversation and we discussed in detail Truist Wealth’s investment philosophy. So I really encourage you to listen to it as it may help you navigate these challenging times.
00:55:44:20 - 00:56:10:21
Oscarlyn Elder
Our team wants to remind you that regardless of the short term market movements, and we've talked a lot about the short term movements here today, that we believe in the benefits of leaning into that diversified portfolio that's built on a long term view of markets with an understanding of your unique financial planning situation and goals. This is the time that your Truist advisor can really support you on your investment journey.
00:56:10:23 - 00:56:33:11
Oscarlyn Elder
They’ll listen to you. They’ll understand your goals as well as your concerns, and they'll help you put the current market environment as well as potential opportunities into that long term context that we talked about, helping you to make prudent adjustments to your portfolio along the way. Thank you for trusting the Truist team to be part of your financial journey.
00:56:33:14 - 00:56:52:21
Oscarlyn Elder
And lastly, as always, I have a request. We definitely want this livecast series to be a meaningful experience for you. And in fact, we've brought you this event on a new platform, hoping to improve that experience. So in a few seconds, a survey is going to appear on your screen. Please take the time to complete it and give us your feedback.
00:56:52:28 - 00:57:50:03
Oscarlyn Elder
We look at every comment that you make and we use your assessments to help us shape future events. Thank you again and we look forward to talking with you in July.