(Visual description: Video starts with a slide saying: “Truist Market & Economic Insights, Live from the Truist studio, April 10, 2024.” with the Truist logo and Truist Advisory Services, Inc., including the disclaimer: “Securities and insurance products and services are not FDIC or any other government agency insured, are not bank guaranteed, and may lose value.)

 

Upbeat music plays.

 

(Visual description: Four men and a woman sit at a Truist-branded desk in a studio.)

 

Oscarlyn:

 

“Welcome to Truist Wealth’s Economic and Market Insights Quarterly live stream. We appreciate you joining us today.”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“I'm Oscarlyn Elder, Co-Chief Investment Officer for Truist Wealth.”

 

(Visual description: On-screen text, “Oscarlyn Elder, CFA, CAIA | Co-Chief Investment Officer)

 

Oscarlyn:

 

“My team is responsible for selecting and analyzing the investment solutions and strategies that your Truist advisor uses in creating your portfolio. Let me start by saying thank you for sharing your questions.

 

“Your questions really centered around our outlook for markets for the rest of the year with how we are assessing valuations and the potential impacts of inflation, interest rates, elections, and geopolitical tension. And the national debt is really on your mind too. You asked a lot of questions about that. We intend to answer your questions and then to also zoom out and highlight some longer-term perspectives as well.

“And we'll have an important conversation about alternative investments, including private equity, private debt, and hedge funds. Joining me is Keith Lerner”

 

(Visual description: Close-up of Keith Lerner.)

 

Oscarlyn:

 

“Co-Chief Investment Officer, and Chief Market Strategist. Keith and his team got Truist advisors and clients through multiple types of market environments. They provide timely investment advice with the objective of helping clients achieve their long-term wealth goals.

His work is highlighted regularly and often in the financial press, and you'll see him on CNBC. Bloomberg TV and Yahoo Finance with regularity.”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“Joining the discussion today is Mike Skordeles”

 

(Visual description: Close-up of Mike Skordeles.)

 

Oscarlyn:

 

“Head of U.S. Economics and Chip Hughey, Managing Director of Fixed Income.”

 

(Visual description: Camera pans to Close-up of Chip Hughey.)

 

Oscarlyn:

 

“Both are seasoned investment strategists”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“and helped craft our investment guidance. They too appear and are cited frequently in the media. And today, we'll introduce you to another member of our team”

 

(Visual description: Close-up of Spencer Boggess.)

 

Oscarlyn:

 

“Spencer Boggess, Managing Director of Alternative Investments.”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“Now let's turn to the economy and markets. 2024 is off to a strong start with global and U.S. GDP growth estimates being upgraded during the first quarter. Equity markets also posted positive performance, with global stock markets as measured by”

 

(Visual description: On-screen graphic detailing Oscarlyn Elder’s experience, including leading the teams researching and selecting traditional and alternative investment solutions, guiding innovative focus areas of Diverse Asset Managers and Sustainable Investing, and host of I’ve Been Meaning to Do That, an award-winning podcast from Truist Wealth)

 

Oscarlyn:

 

“the all country world index, or the ACWI, up over 8% and U.S. large caps as represented by the S&P 500, increasing over 10%.

“While the first quarter was a solid one, the market's been a little jittery of late.”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“The ten-year U.S. Treasury yield started the year at around 3.9%, and now it stands at around 4.5%. Monetary policy has completely dominated investor concerns, with the market repricing expected, federal Reserve rate cuts in 2024 from six to around three., as the market really grapples with the impact of a stronger than anticipated economy and sticky inflation.

“And we cannot forget that geopolitical tensions continue to remain high and that this is the year of more than 40 major elections globally and the US presidential election campaign is ramping up. So, Keith, with all of that, let's turn to the equity markets first. What's behind the really strong start to the year?”

Keith:

“Sure, and first Oscarlyn, great to be with you and the team and welcome, Spencer to the studio. As you mentioned, it's a bit jittery more recently, but for the first quarter, we had a really strong start to the year. And you said, what's the reason behind the well, you mentioned some of them”

(Visual description: Close-up of Keith Lerner.)

 

Keith:

 

“is the economy. The economy, both globally, especially in the US, has been more resilient”

 

(Visual description: On-screen graphic detailing Keith Lerner’s experience, including leading the portfolio and market strategy, equity and fixed incomes teams; combining fundamental research and technical analysis in macro market forecasting, and a regular guest on CNBC, Bloomberg TV, and Yahoo! Finance)

 

Keith:

“and that's translating into strong profit growth. So, earnings trends are moving higher and those strong earnings trends are leading to stock prices to which made a recent high or an all-time high before pulling back, you know, more recently.

“And we also came into the year after a big year last year, I think people were actually somewhat pessimistic still.”

 

(Visual description: Close-up of Keith Lerner.)

 

Keith:

 

“So, we've surprised to the upside again.”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“So surprising to the upside, we're beating expectations and the growth has been there.”

 

Keith:

 

“It’s a big part of growth this year.”

 

Oscarlyn:

 

“We've got a lot of ground to cover today. Before we jump in further, what are the three things that you want folks to remember to take away?

(Visual description: Close-up of Keith Lerner.)

 

Keith:

 

“Sure. And focus in on the on the equity markets.”

 

(Visual description: On-screen graphic detailing three takeaways: 1) Primary stock market trend remains positive, though expect normal pullbacks; 2) Earnings remain strong and market participation broadening; and 3) Maintain U.S. and large cap bias until evidence shifts.)

 

Keith:

 

“We think the primary market trend is still higher. So, we think over the over the year, by the end of the year will likely be higher than where we are today. But we also expect more normal pullbacks during the year, which we didn't see in the first quarter. So, we'll talk more about that.

The other part is I kind of alluded to this, but we are actually seeing strong earnings trends”

 

(Visual description: Aerial shot of all four panelists with moderator at Truist-branded desk in a studio.)

 

Keith:

 

“that are supporting this market and we are seeing broader participation.”

 

(Visual description: Close-up of Keith Lerner.)

 

Keith:

 

“So, it's not just about tech this year. I think that's a positive. And then thirdly, from more of a positioning standpoint, we're still Team USA. We all globally diversified, but we still have a preference for the US on the equity market and also focusing more on large caps, which has been a long-standing view of ours.”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“So those are your three points. Let's start to unpack those. The first point is that the primary stock market trend continues to be positive, though. Expect some normal pullbacks. Unpack that for us. Explain that for us.”

 

(Visual description: Close-up of Keith Lerner.)

 

Keith:

 

“For us from just more of a price action standpoint. For five months, we were up before this month, five months in a row. We also had for the first quarter up more than 10%. When people see those strong, that strong price momentum, I think it gets people nervous. But when we actually look and test this out, when you have a strong price momentum, that's tends to be a sign of a bull market.”

 

(Visual description: Aerial shot of all four panelists with moderator at Truist-branded desk in a studio.)

 

Keith:

 

“There's a lot of buying intensity. And when we look back historically as a starting point is that when you have a 10% first quarter”

 

(Visual description: Close-up of Keith Lerner.)

 

Keith:

 

“quarter by the end of the year, you've been up ten out of 11 times, right?

“That's not a guarantee as a starting point. And the other say, is it being is it being supported by fundamentals? And in this case, as I mentioned, we are seeing earnings validate those trends as well. So I think the path is still higher. All right. What's crucial is the deepest pullback we saw in the first quarter was less than 3%.

“That's not normal. And we always say the admission price to the market are pullbacks. But starting to see a little bit of that now. There's only been three years. If we go back over the last 40 where we haven't seen at least a 5% pullback. So I just want to make sure people, you know, understand like, you know, we are likely to see you said the elections around the globe, we have inflation.

“We're going to probably see more of a two-way market. But we think the underlying trend, the most important thing is is still ultimately higher over the course of the year.”

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“We saw in the questions that folks submitted to us that there appeared to be a fair amount of anxiety, stress around how far the market has come and what they perceive to be a short amount of time. So, you know, over the last five months and year to date, and what I'm hearing in your message is that folks shouldn't be too overly concerned about about that movement.”

(Visual description: On-screen chart showing market prices accelerating after breaking out above 2022 peak on the S&P 500. The general trend lines show a mostly downward trend from October 2021 to August 2022 and an upward trend line from early 2023 to March 2024. Data source: Truist IAG, FactSet. Past performance does not guarantee future results.)

 

Keith:

 

“The new highs are not a bad thing as long as they are supported by fundamentals, too. And let me just walk through a couple of charts, maybe help us zoom out a little bit.

“I think it's important. The first chart we're looking at is just the S&P 500 since 2021, and we may forget that in 2022 we were down over 20%. So, you know, if you look at it, we have a round trip. We went down in 2022. We had this big up year last year. And then finally earlier this year, we actually made a new all-time high.

“But if you go back to the peak where we were in the beginning of 2022, we're only about 8% above that, that peak. So some perspective is in order”

 

(Visual description: Close-up of Keith Lerner.)

 

Keith:

 

“So, the other thing in our work, when we make a new high for the first time in more than a year, historically, that is a positive sign as well.”

 

(Visual description: Aerial shot of all four panelists with moderator at Truist-branded desk in a studio.)

 

Keith:

 

“So again, a little bit extended, all that buying pressure is, makes us a little bit vulnerable from a very short-term basis.”

 

(Visual description: Close-up of Keith Lerner.)

 

Keith:

 

“But again, as we look out over the next 12 months, we still think there's upside. The second point, which I've alluded to is earnings, fundamentals”

 

(Visual description: On-screen chart Earnings Supporting Stocks showing the S&P 500 growth versus earnings estimates from March 2023 to March 2024. The trend line shows a mostly upward trend from December 2023 to March 2024. Data source: Truist IAG, FactSet. Past performance does not guarantee future results.)

 

Keith:

 

“corporate profitability and what this chart shows and overlays the S&P 500 in the dark purple line, along with forward earnings expectations or estimates over the next 12 months, the light purple line.

“And what you see is that movement together. Right. And that makes sense. The more profitability those companies are, they should support stocks because at the end of the day, you're buying companies as well. So I think that is, you know, again, a support that we expect to continue, especially if the economy continues to be resilient as it as it has.”

(Visual description: Aerial shot of all four panelists with moderator at Truist-branded desk in a studio.)

 

Oscarlyn:

 

“You know, and this chart is very powerful. Hopefully folks find comfort in looking at how the earnings estimates have been moving up.”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“And a big piece of that story has been technology.”

 

(Visual description: Close-up of Keith Lerner.)

 

Oscarlyn:

 

“And another trend that we saw within the questions”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“was around technology. Is tech in a bubble? Is the bubble, is that bubble about to burst? Should I be worried?

“Should I be concerned? What's what, what are your thoughts around kind of the role of technology in the market today?”

 

(Visual description: Close-up of Keith Lerner.)

 

Keith:

 

“It's one of the major questions that I'm getting as I'm meeting with our clients as well.”

 

(Visual description: On-screen chart Technology due for a breather but we don’t see a bubble, showing the historic technology sector 3-year performance relative to the S&P 500 from 1994 to 2024. During the technology bubble in 2000, the tech sector saw a 253% rolling 3-year performance, whereas the average for the 30 years shown is 27%, which is closer to where the technology sector’s 3-year performance is in 2024. Data source: Truist IAG, FactSet. Past performance does not guarantee future results.)

 

Keith:

 

“First of all, I was I was in the business in the mid-nineties and I know you know anecdotally what that feels like.

“I would say this is not a bubble that I can quantify it too that the chart we're looking at is the three-year return or outperformance of of the technology sector relative to the S&P. Right. So, it's a three-year rolling return. And if you look back on this chart, back leading into the bubble around where the bubble was, the technology sector outperformed the S&P by 250%.

Right. That's a lot. That's a lot. If you look today over the last three years, they've outperformed the tech has outperformed by about 26, 27%. So, the magnitude is totally different. I do think there's pockets of speculation. You can see all these companies, all the sudden they're all talking about AI, whether it's really affecting their business or not. But and maybe on a short- term basis”

 

(Visual description: Close-up of Keith Lerner.)

 

Keith:

 

“they become a bit extended and do for pause.

“That's been our expectations. But more broadly, we don't see this as comparable. And the last point is, you know, the earnings like these companies, these big cap companies, they're making a lot of profits right now. And that's somewhat different than what we saw in the late 1990s, like around the 2000 time as well.”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“So technology technology's been really important. In addition to technology”

(Visual description: Camera pans up on view of four panelists with moderator at Truist-branded desk in a studio.)

 

Oscarlyn:

 

“Another question that we've gotten has been about the broadening out of the market. Is the market right now only technology or how is the rest of the market participating? What what have you seen”

 

(Visual description: Close-up of Keith Lerner.)

 

Oscarlyn:

 

“ within the market regarding broadening out?”

 

Keith:

 

“Yeah, well, I think the character”

 

(Visual description: On-screen charts market participation has broadened, depicting six charts between March 2022 and March 2024 of the S&P 500 at record high, technology sector at record high, industrials at record high, S&P 500 Equal Weight at record high, S&P Midcap 400 at record high, and financials at record high. Data source: Truist IAG, FactSet. Past performance does not guarantee future results.)

 

Keith:

 

“of this market has shifted. Last year it was really just the growth sectors.

“This year we've seen a lot of broadening. So and I think part of that is because the economy is somewhat stronger, so that's benefiting more companies as well. But as we look more broadly, we're seeing now not only the S&P up until recently at a record high and technology at a record high, but we're seeing financials, right, Industrials, mid-caps, and it's also a global affair.

We can look at places like Germany and Japan. So I think, you know, there's been a perception that it's only tech. And I will say this year in specifically is much more than just tech.”

 

(Visual description: Close-up of Keith Lerner.)

 

Keith:

 

“And that’s a good thing”

 

Oscarlyn:

 

“That’s a good thing.”

 

Keith:

 

“It's a healthier market, right? That's right. Tech slows down a little bit. There's another area of the market to kind of keep things in check.”

(Visual description: Aerial shot of all four panelists with moderator at Truist-branded desk in a studio.)

 

Oscarlyn:

 

“Thank you for that information. I'm going to pivot us a little bit”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“because another set of questions that came from the folks who registered today centered around the presidential election and folks wanting to understand how does the presidential election factor into our outlook? How do we think about how it impacts markets or doesn't impact markets? So share with us what you think about that”

 

(Visual description: Close-up of Keith Lerner.)

 

Keith:

 

“Outside of tech, this is probably the number one question, again, I've been through many cycles on the election side.”

(Visual description: On-screen chart market and sector returns under recent presidents may surprise you of annualized total return of sectors under Obama, Trump, and Biden. The S&P 500 returns were 12 % under Obama, 14% under Trump, and 16% under Biden. Data source: Truist IAG, Bloomberg. Obama= Performance from Election Day 2008 to Election Day 2016; Trump = Performance from Election Day 2016 to Election Day 2020; Biden = Election Day 2020 to March 28, 2024. Past performance does not guarantee future results.)

 

Keith:

 

“I think just upfront, I think I want our clients to know or what I would stress is people often make the wrong investment decision based on their politics. We say don't mix your portfolio in politics because conventional wisdom is often wrong when it comes to the elections and the impact. There is an impact. But I would say, you know, people focus so much just on the election and what we what we often say is it matters, but other factors tend to matter more.

“You know, what's the direction of the economy, what's what's going to happen with inflation? What are central banks doing around the globe, What's happening with innovation? You know, so there's all these other factors. And, you know, an interesting study that we've done recently is we looked at the last three presidents and we looked at the the overall market performance as a whole, and we broke it down by sectors as well.

The first thing that really stands out is under the last three presidents where there's been the different policies, the market in each case has annualized at a stronger than average rate around, you know, you know, 12 to about 14, 15%. Right. So that's one like, if you would have sold just based on who came in as president, that would have been the wrong decision.”

Oscarlyn:

“Right.”

Keith:

“The last few years. The other thing that is notable is the sector performance. Normally, as you head into the election, there's so much discussion of what sector is going to do well, based on who's in Washington, it's the same thing. It matters. Policy matters, it will affect industries and so forth. But what's really notable in this chart, it shows the sector performance by each president. Technology, because the innovation that the strong earnings momentum has been a leader among each of the last three presidents.

“Right. So that that's something that I think stands up. The other point is under both President Obama and President Trump, the energy and finances were the worst sectors, even though they had drastically different policies. And part of that was we were in a slower economic growth environment. You know, we were after the global financial crisis as well. And then more recently, when President Biden was elected, there was a lot of discussion that, like energy and finances would suffer the most.

“But they've been the top three sectors. So again, I'm not here to say it doesn't matter. It does”

(Visual description: Aerial shot of all four panelists with moderator at Truist-branded desk in a studio.)

 

Keith:

 

“but other factors matter more. It's just one part of the”

 

(Visual description: Close-up of Keith Lerner.)

 

Keith:

 

“of the overall equation. And I again emphasize I wouldn't make decisions or especially drastic decisions based on a political view or outcome.”

 

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“Yeah, Thank you, Keith. I think you're really clear with your statement there that there are other factors that matter more.

“This is important, but there are other factors that matter more and we're really building portfolios for the long term and that we're going to have multiple presidents over over that long term and companies adjust also.”

 

(Visual description: Close-up of Keith Lerner.)

 

Keith:

 

“I mean, one last point. That's it. Yeah, you know, that's a really important point because regardless of what happens in politics, once companies understand the rules of engagement, they adjust.

“And I've been through a lot of cycles, you've been through a lot of cycles, and we see companies adapt.”

 

(Visual description: Aerial shot of all four panelists with moderator at Truist-branded desk in a studio.)

 

Keith:

 

“And if you want to have optimism about something, have optimism about”

 

(Visual description: Close-up of Keith Lerner.)

 

Keith:

 

“our companies ability to adjust.’

 

Oscarlyn:

 

“Absolutely.”

 

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“Well, I know we're going to be talking a lot more about the election as we move through the year that it's going to be highlighted throughout.

“So, we'll talk again, I'm sure, in July about it and then also in October. This is a great segue, I believe, over to Mike. Mike, what are we seeing in the U.S. economy and what are the three key points that you want folks to take away about the economy?”

(Visual description: Close-up of Mike Skordeles.)

 

Mike:

 

“Yeah, so first and foremost is the U.S. is stronger for a longer, although I'll flesh that out as to what that really means.

 

“The other is consumers remain very resilient, but they are distracted, as Keith mentioned, by the politics and the dysfunction in Washington.”

 

(Visual description: On-screen graphic detailing Mike Skordeles’ experience, including shaping Truist Wealth’s macro outlook on the U.S. economy, authoring Truist’s Economic Commentary and Economic Data Tracker, and offering expertise in making sense of complex economic trends for Truist Wealth clients.)

 

Mike:

“And then the third point is inflation really complicates the Fed's path. We saw that again today with the hotter inflation print. So it's definitely going to complicate things for the Fed.”

 

Oscarlyn:

 

“All right. Well, let's jump in.”

 

(Visual description: Close-up of Mike Skordeles.)

 

Oscarlyn:

 

“Your first statement was stronger for longer, and you recently bumped up our 2024 economic forecast for the US.”

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“So, tell us what's behind that.”

(Visual description: Close-up of Mike Skordeles.)

 

Mike:

“So, the biggest piece that is that much like Keith was was talking about from the sector standpoint is that there's been this broadening out of what's been pulling the wagon”

(Visual description: On-screen graphic with economic trends, including 1) U.S. growth is stronger for longer, 2) Consumers remain resilient, but overly distracted by political dysfunction, and 3) inflation complicated the Fed’s path)

Mike:

“if you will, from an economic standpoint and specifically the couple of sectors that were the weakest during 2022 and 2023 were manufacturing and housing.

Now we're starting to see those stabilize”

(Visual description: Close-up of Mike Skordeles.)

 

Mike:

 

“and move higher. So again, everything else is participating, but also getting those two sectors to start moving higher as well. But it's not off to the races as the chart that we're kind of showing here”

 

(Visual description: On-screen chart U.S. economy – bumping up outlook but expect slower growth than ’23 of growth domestic product by year from 2010 to 2024. The average growth of gross domestic product from 2010-2019 is 2.4%, with 2020 being the only year showing negative growth of –2.2%. Data source: Truist IAG, Bureau of Economic Analysis, HIS Markit. Change in real gross domestic product year over year, actual for 2010 through third quarter of 2023. Truist IAG forecasts 1.9% for fourth quarter 2023 through 2024.)

 

Mike:

 

“is that we're bumping up the outlook is that it's not off to the races. We're back to roughly trend growth in even around 2%.

“It's, it's nothing to get overly excited about right. But to Keith’s point of rules of the road, it is good for companies to understand where we're likely to avoid a recession and consumers remain stronger. Lastly, let me put a finer point on that point, which is wages are growing faster than inflation”

 

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

 

Mike:

 

“ and that means there's more money in consumers’ pockets.”

 

(Visual description: Close-up of Mike Skordeles.)

 

Mike:

 

“It doesn’t mean everyone has more money. But on the big picture macro level, it means that most people have more money and they'll be able to continue to spend. So ultimately, the US will stay stronger for longer.”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“Well, let's turn a moment to the inflation word again. We had a big number out this morning. We have CPI out, so everybody's talking about inflation today, especially, is inflation going to cooperate enough to let the Fed cut rates?”

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

 

Mike:

 

“It's complicated. Yes”

Oscarlyn:

“It got more so today.”

Mike:

“ even a little more so today.”

(Visual description: Close-up of Mike Skordeles.)

 

Mike:

 

“Definitely. But that the Fed is really looking for validation. Ultimately, that's what's going to drive where policy goes. Rates have been relatively tight. That's kind of restricting growth. That's part of the reason why we don't think that the economy is going to go off to the races, but it's also likely to stay out of recession.

“But there's a couple of key points to make sure for, for clients. And one is that when we talk about inflation, we're talking about the rate of change, not the level of prices. So don't look for that car that you're looking to buy. See the price come down dramatically. That's not going to happen. But the prices aren’t going to continue to escalate that it had the way it had during 21, 22, and certainly part of 2023.

“The other one is that the Fed doesn't need to wait for inflation to get all the way down to that 2% objective before they start cutting. They're just going to need a little bit more validation. Unfortunately

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“They didn’t get it today.”

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

 

Mike:

 

“They didn’t get it today. So it's likely going to delay things a little bit farther. It doesn't mean that they're not going to cut.

“But also, again, take home point is they don't have to wait until it gets all the way down.”

(Visual description: Close-up of Mike Skordeles.)

 

Mike:

 

“They just need additional validation. We're probably not going to get that before June, which is what the expectation was. So it's bumping it back a little bit farther into the the second half of the year.”

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“Chip, what does the bond market tell us about this?”

Chip:

“Yeah, we've really seen we've really seen expectations from the bond market really move towards what we've been saying for quite some time”

(Visual description: Close-up of Chip Hughey.)

 

Chip:

 

“ that the Fed is going to need to move really slow, really slowly and be very cautious before starting to ease policy and lowering interest rates. So, the market really kind of came around”

 

(Visual description: On-screen graphic detailing Chip Hughey’s experience, including establishing Truist Wealth’s fixed income outlook and strategy, authoring Truist’s Fixed Income Perspective and frequently contributing to publications, and deep expertise helping advisors and clients craft bond portfolios.)

 

Chip:

“to that idea. I do think that the likelihood of a delay in the first cut probably is more likely after the CPI that we saw today.

“You know, into that July, September timeframe. We do think that ultimately, though, the Fed does lower interest rates this year, perhaps, you know, one or two additional times”

(Visual description: Close-up of Chip Hughey.)

 

Chip:

 

“after that. But I mean, as Mike just said, right, the, the, the, the economic data that we're seeing, the stickier inflation, it does validate this go-slow approach that we're seeing.

It does make sense to be to be careful here. I think the good news is that if you look at expectations for inflation going forward, they have come up a little bit, but they do remain fairly well-behaved, fairly well anchored. That's really important to keep that credibility for the Fed so that they can continue to execute the policy they need to.”

 

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

 

Keith:

 

“If I can just jump in for a second.

“You know, one of our mottos this year has been we would prefer a stronger economy with less rate cuts than an

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Keith:

 

“economy that needs a lot more rate cuts”

 

(Visual description: Close-up of Keith Lerner.)

 

Keith:

 

“So, I think that still is valid because those stronger economies should help support earnings on a short-term basis. We can definitely see kind of an adjustment from those expectations.”

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

 

Keith:

 

“But again, why is why would the Fed be moving back as maybe inflation is a little bit stickier, but we have that strong growth as well, right?”

 

Oscarlyn:

 

“Yeah, I want to shift us from inflation over to national debt.”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“So again, when we looked at the questions that came to us from the folks who registered today, there were a lot of questions about the U.S. debt situation overall.

“And so what I'd like to do is start with you, Chip, first. How concerned should we be about the situation?”

 

Chip:

 

“Yeah, I think I would just plainly state upfront that we are not in a debt crisis”

 

(Visual description: Close-up of Chip Hughey.)

 

Chip:

 

“now and we are not at risk of default. What is a little bit more concerning is if you look at the amount of debt that the US has issued starting post financial crisis and then accelerated post-pandemic, it's not a great trend”

 

(VISUAL DESCRIPTION: On-screen graphic with key takeaways related to national debt, including 1) now is the time to capture yield in the front end of the curve; 2) longer-dated fixed income restoring value; and 3) emphasize quality.

 

Chip:

 

" and especially if you take that out for the next the next decade or so, right? It’s clear we're going to have to address both spending and the amount and the amount of of debt that's being that's being issued”

(Visual description: Close-up of Chip Hughey.)

 

Chip:

 

“I think that if you look though at the where we are today, how much the US government”

 

(Visual description: On-screen chart net government interest outlays as a percentage of GDP showing historical net interest outlays as a percentage of the gross domestic product from 1940 to 2024, with a high of 3.2% in the early 1990s and a current percentage of 2.5% in 2024. The chart includes Congress Budget Office predictions for the next decade through 2034 that continue to rise above previous highs. Data source: Truist IAG, Bloomberg, Congress Budget Office, and International Monetary Fund. Past performance does not guarantee future results.)

 

Chip:

 

“government is spending on interest payments relative to GDP, we've been here before. In fact, we were at higher levels throughout most of the 1980s and in the 1990s.

“So, I think that the risks are not it's not default, right? The risks are more the potential for a rating downgrade, the higher volatility the market imposing higher borrowing costs on the US government until our fiscal house gets more in order. Those are the risks, but we've gotten a lot of questions about the risk of default. That is not something that we are concerned about.”

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

 

Oscarlyn:

 

“Right. So, at this time, not a risk of default, just a situation that we've seen levels like this before. And you know, Mike, I would turn to you now. What what would you add?”

 

Mike:

 

“Yeah. So first I want to kind of help clients understand it's a valid concern, right? In the short term, as Chip mentioned, it's not as much of an issue. Longer term”

(Visual description: Close-up of Mike Skordeles.)

 

Mike:

 

“if we continue to pile on budget deficits year after year, it's a problem. So one is the massive debt, as Chip mentioned, and the other is the political dysfunction. So how do you fix the problem? Well, you need bipartisan cooperation and unfortunately, for the past two decades, the one bipartisan thing they've done is run up deficits.

“So that's a problem. They need to get that resolved. But I would say we've done it in the past. We certainly did it around the turn of the century. We've done it other other times prior to that, probably about 30 years before that. So, it's possible. The other thing to remember is that this cycle, because of that growth I was talking about, and that's stronger for longer, is that tax receipts.

“So, taxes coming into the government is running about 7% ahead of where it was last year. So that in and of itself is going to help some of it.”

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

 

Mike:

 

“Rates stabilizing is going to help as well. So, in the near term, this is manageable. It's not a great situation”

 

(Visual description: Close-up of Mike Skordeles.)

 

Mike:

 

“ but it is manageable.”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“Lets”

 

Keith:

 

“Mind if I jump in and bring it back into the portfolios a little bit too”

 

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

 

Keith:

 

“ because this is like the elections and debt are the two biggest topics that come up over the last decade. And I think sometimes clients think about, Hey, there's a date with destiny. I don't know where that is.”

(Visual description: Close-up of Keith Lerner.)

 

Keith:

 

“It's very hard to invest in. But I would say if you're concerned about debt, a lot of our companies are flush with cash as well. So, you know, just be careful. I mean, there are things when a portfolio to hedge some of these things and have a diversified portfolio.

But again, there's a lot of companies flush with cash. If you're concerned about the debt issues of the government.”

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

 

Mike:

 

“And to put the final point on that, is that the tipping point, which is an adjacent question, when is the tipping point for us?”

 

(Visual description: Close-up of Mike Skordeles.)

 

Mike:

 

“That's unknowable. But if you're waiting for a tipping point to invest or to change your investments, you're kind of Waiting for Godot.”

(Visual description: Close-up of Keith Lerner.)

 

Keith:

 

“Yeah.”

 

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

 

Oscarlyn:

 

“And so the bottom to the bottom one takeaway there is that this situation with the national debt really shouldn't”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“drive what portfolio construction at this point or your willingness to shape a portfolio for the long term?”

 

Keith:

 

“Indeed.”

 

Oscarlyn:

 

“Yeah. All right, let's move on. I want to talk now. I want to move us to talk about interest rates. And so, Chip”

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

 

Oscarlyn:

 

“let's turn to the bond market. And let's start with what are the three things that you want the audience to take away just upfront?”

 

Chip:

 

“First, I would say now is a good time to”

 

(Visual description: Close-up of Chip Hughey.)

 

Chip:

 

“ deploy cash balances for those looking for short dated, lower volatility, high quality fixed income. Now's a really good time to deploy that cash. More recently”

(Visual description: On-screen chart yields ate still high relative to past two decades of 10-year U.S. Treasury yields from 2004 to 2024, trending upward since a low in 2020 and with an average yield in the last 20 years of a little more than 4%. Data source: Truist IAG, Bloomberg.)

 

Chip:

 

“with the rise in interest rates that we've seen, we've seen some value restored in longer dated fixed income as well. We move down very aggressively lower and it's move we've moved higher this year and it has restored some of that that yield value.”

(Visual description: Close-up of Chip Hughey.)

 

Chip:

 

“In the interim, though, we would continue, third,”

 

(Visual description: On-screen graphic with key takeaways related to U.S. Treasury yields, including 1) Now is the time to capture yields in the front end of the curve; 2) Longer-dated fixed income restoring value; and 3) Emphasize quality)

 

Chip:

 

“to continue to emphasize quality. We don't feel like now is a great time to take on a lot of risk the fixed income portfolios.”

Oscarlyn:

“So, let's talk about the 10-year Treasury. A lot of folks want to know what do we think is going to happen with it the rest of the year?”

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

 

Oscarlyn:

 

“And, certainly, it's been moving some today as as we all know. How do you see it unfolding?”

 

Chip:

 

“So, it's going to be a bumpy process.”

 

(Visual description: On-screen chart yields ate still high relative to past two decades of 10-year U.S. Treasury yields from 2004 to 2024, trending upward since a low in 2020 and with an average yield in the last 20 years of a little more than 4%. Data source: Truist IAG, Bloomberg.)

 

Chip:

 

“But if inflation does continue to cool this year, if we see growth moderate a little bit like Mike has talked about, But then the Fed is also in a position to lower interest rates that should put downward pressure on bond yields as we progressed through this year and into next.

“If we kind of zoom in, let's talk about the next couple of months, three months about what we expect. We think we're kind of rangebound here for the for the ten-year bouncing in this channel from 3.75 to roughly 4.75. And I think the reason that we've seen some value restored is that that is our view, which it is, that at 4.50 today on the ten-year, that's towards the top end of the range, we've, we've seen some value come back in there.

“One thing that I would say is we kind of need to recalibrate ourselves for a higher interest rate regime than maybe we've been used to over the course of the past decade or two. So the fact that we have a little bit structurally higher inflation now probably limits how much lower we can go. We don't think we're going back down”

 

(Visual description: Close-up of Chip Hughey.)

 

Chip:

“down to 2%, but we do think that that broad, the broad trend is lower. Two risks to that potentially to see those overshoots like we saw in this past this past October”

 

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

 

Chip:

 

“ concerns around US deficits and debt and also if we see inflation reaccelerate or continue to”

 

(Visual description: Close-up of Chip Hughey.)

 

Chip:

“on the upside, that's not our base case scenario. But there are risks that are worth acknowledging and how we could go up to the higher threshold in the ten-year.”

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“So, we see a channel basically for the ten-year. We're at the upper end of that. And as the Fed, if the Fed embarks, we expect that they'll embark in reducing the Fed funds rate sometime in the latter half of the year. We would expect perhaps to move down in the channel. Is that fair?”

(Visual description: Close-up of Chip Hughey.)

 

Chip:

“That’s fair.”

Oscarlyn:

“But we're not. Again, we just want folks to understand we're in a new regime”

Chip:

“Right.”

Oscarlyn:

“ and 2% is we don't see that in the cards.”

Chip:

“That’s right.”

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“So let's talk about cash balances, because there's been a lot written about the liquidity, the cash balances for both consumers and businesses”

 

(Visual description: Close-up of Chip Hughey.)

 

Oscarlyn:

 

“ and just how large”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“large that cash cushion is right now. Is there an opportunity for folks to deploy cash given the environment that we're in?”

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

Chip:

 

“Yeah, we get this question a whole lot, right? Is it is now a good time to invest those cash balances? Should I wait? Is the Fed going to have to continue raising rates, therefore making yields higher? Is it better to wait on those cash balances and deploy them at that point? We actually think”

(Visual description: Close-up of Chip Hughey.)

 

Chip:

“that now is the time to do that. We don't think that the Fed is going to have to continue raising rates. They may have to pause right longer. Hold hold for longer, and that will keep those yields attractive for a bit longer. But now is an attractive time to deploy that and take advantage of those productive yields, because as the Fed, as the Fed's guidance changes more towards cuts and they ultimately are able to lower interest rates, the policy rates in particular, those yields are going to start start declining. So, we think it is an opportune time now to go ahead and deploy that cash and capture these yields.”

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“Thank you. That's good information. Hopefully, folks will take that away and have conversations with their advisors about that advice specifically. Another one of your points was that we continue”

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

Oscarlyn:

“ continue to emphasize really high quality”

Chip:

“Right.”

Oscarlyn:

“and let folks can go get higher yields outside of high quality right in the high yield space. But our advice has been continually now for some time to lean into quality. Explain that to us.”

(Visual description: Close-up of Chip Hughey.)

 

Chip:

“Right. Emphasizing quality and then and that's really a relative value discussion. If we look at credit spreads, which are simply how much more yield are you getting paid to invest in these companies over U.S. Treasuries is at historically tight levels. We're not at average levels. We are at very low or tight levels, that sends a really good”

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

Chip:

“economic signal right then that that's great thing from an economic perspective of the next 6 to 12 months. That's a good thing”

(Visual description: Close-up of Chip Hughey.)

 

Chip:

“from an investment standpoint. The conversation shifts over to relative value, and we think that until that risk reward becomes into a better equilibrium, we're better emphasizing as productive, high-quality yields.

“Until those spreads reflect some of the things that we're seeing. Right. We have seen defaults rising a little bit in the riskier corners of fixed income. We've seen higher borrowing costs that companies start to take a little bit of a bite. And we do expect growth to moderate a bit. Right. So, all of these things are just not being reflected accurately.

“We are looking for tactical opportunities that once those things are more priced in, there may be opportunities there. But for now, we want to we want to continue to emphasize quality.”

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

Oscarlyn:

“So your view is you're not really getting paid enough”

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“or your expectations of return are just really not enough to take on the risk of that higher risk kind of debt right now within high yield.”

Chip:

“That’s well said.”

(Visual description: Close-up of Chip Hughey.)

 

Chip:

“And if those spreads do widen, that's underperformance to get to those higher yields up and prices down.

Oscarlyn:

“Right.”

Chip:

“So so that adjustment, we want to be patient and maybe have a better entry point. Yeah.”

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“Yeah. So thank you, Chip. Keith, we've talked about a lot of different things already. What we haven't touched on”

(Visual description: Close-up of Keith Lerner.)

 

Oscarlyn:

“is our tactical positioning and portfolio. So”

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“Given our view of stock markets and bond markets and the economy, how does that translate into our tactical positioning in portfolios?”

 

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

Keith:

 

“Sure. And if we just start more broadly”

 

(Visual description: On-screen graphic key positioning depicting Truist’s key positioning for asset classes, global equities, and fixed income. Truist is neutral on equity, fixed income, and cash asset classes. U.S. large cap equities are more attractive for Truist, U.S. small cap equities are neutral, and international developed less attractive investments and and emerging markets are the least attractive. For fixed income investments, U.S. government is most attractive, U.S. investment grade corporates are less attractive, and U.S. high yield corporates and leveraged loans are least attractive investments.)

 

Keith:

 

“with stocks versus bonds versus cash, we're basically saying be be more aligned with your long-term targets. Looking for some of those tactical opportunities both in the equity and fixed income markets that we think will present themselves over this year. There's you know, we're still we’re only in April. So, we have a long way to go.”

Oscarlyn:

“Got a lot of time left.”

Keith:

“Yeah. And as we think about global equities, that's where you see a lot more differentiation. As I mentioned earlier, we're still Team USA. Again, we're globally diversified. So I want to make sure that that people understand we do invest outside the U.S. We're seeing the opportunities there, but we still see the better economic trends, the stronger earnings trends within the US, and partially because of those higher interest rates and maybe a little bit more volatile environment, we're sticking with large caps that can persevere and push through some of these uncertainties as well.

“Small and mid-cap areas of the markets are very cheap. They would likely do better if when the Fed comes closer to a pivot and those interest rates come down and much more sensitive to interest rates because a lot of that debt is floating rate debt as well. So keep that in mind when we think about international, again, we have exposure, but less than the US, we've been particularly more negative for over the last few years.

“And emerging markets where China is the biggest component, we're seeing some stimulus. There's a little bit better action, but we're not seeing their earnings follow through yet. So, you know, that's one thing in our strategy meetings we talk about a lot because we've been so underweight looking for the turn. We're not seeing it yet, but we're definitely open to a shift.

“We're just not seeing it as of yet. And as Chip mentioned, more on the fixed income side, really trying to keep it simple and focus on on high quality.”

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“Yeah. And so I want to bring bring to mind something that I've heard you say over and over. And when you talked about mid-caps and small caps, it just came to mind again, the weight of the evidence so that folks understand this is our positioning. We have liked large caps”

(Visual description: Close-up of Keith Lerner.)

 

Oscarlyn:

 

“for quite awhile”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“At some point when the weight of evidence points us in that direction to move more into smaller and mid-caps, you'll do so we just we it just hasn't evolved yet.”

 

(Visual description: Close-up of Keith Lerner.)

 

Keith:

 

“That's right. And that's one of the most important parts of our process has found the way the evidence now we look at things like earnings trends, valuations, price, momentum signal as well. We want to see more things on the left-hand side”

Oscarlyn:

“On the positive.”

Keith:

“ and we also we’re risk managers too. So we're also in our strategy means we're focused on where we're not allocated or if we have too much exposure. That's where a lot of our time goes, because just because you've been on the right side of a trend, you don't want to get comfortable there. You want to keep challenging that position. That's what I think our team does a really good job of.

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“Thank you for sharing that. I thought it was really important that folks hear that once again, because it's an important part of our process. It's an important element to who we are. So it's just always good to keep that front of mind.”

(Visual description: Close-up of Keith Lerner.)

 

Keith:

 

“That's broader, too. I mean, the we're talking about the economy, inflation, you know, every every week we start off fresh, right. And the trends change. We'll change our view. But I mean, we are very data driven. I think that's one of the things that differentiate us from some of our other competitors out there, to be frank.”

 

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

Oscarlyn:

 

“Yeah. So you've highlighted our tactical positioning in public markets. We've talked about that. But in addition to focusing on public markets, our teams also focus on the alternative investment markets as well, which can play a really important role in portfolios, especially in periods where there's”

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“uncertainty, where there's volatility and also it can present us with really a broader opportunity set. So what I’d like to do is, Spencer bring you into the conversation because I think unsurprisingly, given this environment, given that we're talking about the national debt and we're in a new interest rate regime, even though I guess it's not that new now, we're still calling it a new regime, but it's been with us for a while. Given this environment”

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

“we're hearing about alternative investments more frequently. I feel like it's in the financial press more frequently. Different organizations can have different definitions of”

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“alternative investment. So, I really want to start the conversation out with what are our definitions, what's our framework for the alternative investment space?”

 

(Visual description: Close-up of Spencer Boggess.)

 

(VISUAL DESCRIPTION: On-screen graphic detailing Spencer Boggess’ experience, including leading the team that analyzes private equity, private debt, and hedge funds; deep expertise in portfolio construction for high net worth and ultra-high net worth clients; and consulting directly with advisors regarding bespoke portfolio construction.

 

Spencer:

 

“Thank, Oscarlyn. From our viewpoint from a true as well vocabulary standpoint, we view all terms of having three primary categories. There’s private equity, private debt and hedge funds.

“So, let me stop for a second”

 

(Visual description: Close-up of Spencer Boggess.)

 

Spencer:

 

“and just detail that a little bit more substantively. The private equity strategies generally involved investing in the equities of companies that are not available on public stock exchanges. They're often small and medium sized companies, and we're getting exposure to these to private equity through companies, through funds, if you will, that have a focus on growth and and long-term financial improvement from their target portfolio companies. Now, in terms of private debt strategies that these are investing”

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

Spencer:

“in the debt of the companies that are not listed on public exchanges”

(Visual description: Close-up of Spencer Boggess.)

 

Spencer:

 

“and private debt refers to this lending, which is outside of traditional bank lending. And these are borrowers who typically cannot or will not access public markets for their capital needs. And this has been an area of very significant growth since the financial crisis, and that's when we've seen a lot of traditional lending activities for banks.

“Simply, we've seen them back away, retreat a little bit from that right now. Last, but not least, hedge fund strategies, these are typically”

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

Spencer:

“investments in a range of global asset classes, including equities, fixed income currencies”

(Visual description: Close-up of Spencer Boggess.)

 

Spencer:

 

“commodities and credit. We also see them apply what we call nontraditional techniques, things like it could be fundamental stock picking on one side of the spectrum.

“It also could be more quantitatively driven models, perhaps applied to statistical arbitrage. There's a very wide spectrum of performance objectives. There are very aggressive funds with high return targets and very high associated volatility. And there's others that seek a much more consistent, stable return with lower volatility overall.”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“And Spencer, our approach within Truist wealth is really to favor those strategies that are more oriented towards lower correlations with stocks and bonds and kind of modest, consistent returns over time. Is that right?”

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

Spencer:

“That's absolutely right. We emphasize or prefer strategies or combination of strategies that help deliver diversification relative to traditional assets”

(Visual description: Close-up of Spencer Boggess.)

 

Spencer:

 

“and also sort of tend to seek out that more consistent return profile with lower volatility overall.”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“Now that we've defined the world of alternative investments, I'd like to ask both you and Keith to help our audience understand the why”

 

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

Oscarlyn:

 

“Why do we believe alternative investments are playing this role in portfolios?”

Keith:

“Sure, maybe I'll kick it off, Spencer, if that's okay. I think today is a good day. Example.”

(Visual description: Close-up of Keith Lerner.)

 

Keith:

 

“You know, we're seeing over the last year or two, stocks and bonds kind of move more together than they have historically. And that may shift over time, but today we're seeing, you know, bonds selling off along with stocks just up from some of these other asset classes.

“Alternatives act differently. So, there's a diversification aspect of it as well. And then as we look at portfolios, if clients that have the capital and also are comfortable with the illiquidity, there's some nuance to this. So, we have to make sure it's right. Our clients, we can see more optimal portfolios. And let me kind of unpack that a little bit, right?

“So, Spencer talked about the different categories. You have something like Private equity, which is more of a growth asset in our work. When we look over the next five and ten years, we have higher return expectations for that asset class also more risk, right? Then you add in the hedge funds, which is that diversifier typically in down markets, they hold up better than equities.

“And then as you mentioned”

 

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

Keith:

 

“also the private debt where you have the income and also capital appreciation.”

 

(Visual description: Close-up of Keith Lerner.)

 

Keith:

 

“So you have other levers to pull add into our portfolio at different levels. And our work strongly suggests when you do the overall risk return of those portfolios improves.”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“Yeah, absolutely. And part of that, Keith, is especially within the private space, you're capturing some of the illiquidity premium”

 

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

Oscarlyn:

 

“because, you know, because those assets are not liquid, you know, there's a premium”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“to being in that, to locking up your capital during that period.”

(Visual description: Close-up of Keith Lerner.)

 

Keith:

 

“So that that's an element of that in the private equity and that historically they've over a ten-year period they had 200 or 300 basis points spread. That's not guaranteed by any extent in the world it's changing but that's exactly right. And then as we often talk about the opportunity set just expands, you know.”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“Absolutely the opportunity set, when we look at public the public markets where I think we're at around 4300 public companies, we used to be well over I think 7000. So that universe is shrinking, whereas the universe of really private companies both in the US and globally is expanding. It's, it's a significant multiple of what we see in the public markets. So, it's just an opportunity set that's somewhat, somewhat unique from the public markets. Spencer, what would you add?”

(Visual description: Close-up of Keith Lerner.)

 

Spencer:

 

“Just a simple observation”

 

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

Spencer:

 

“Look, we are in the business of trying to find superior active managers, and the alternative investment space contains a good number”

 

(Visual description: Close-up of Spencer Boggess.)

 

Spencer:

 

“of them. And so from a research perspective, it's really important for us to be able to pursue those opportunities for our clients. There is such a material spread between average and the best performing private equity managers and hedge fund managers. And so this is an area where manager selection really matters and it really rewards our research focus.”

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

Oscarlyn:

“Yeah, so manager selection, the research focus there is really important to driving the outcomes over the long term.”

Spencer:

“Absolutely.”

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“Spencer, let me ask you, we again, we've talked about a higher rate. So in this era of higher rates, what are you seeing? What are our asset managers talking to us about? Where's the opportunity within private equity right now? What's one of the opportunities, I should say, not the only.”

 

(Visual description: Close-up of Spencer Boggess.)

 

Spencer:

 

“Well look we're seeing some pretty material dislocation in the private equity markets and into the venture space in particular secondary funds which purchase the interests of active private equity investors are providing potentially better than average returns right now.

“This is a space that's grown a lot in the last several years, and it's now totals about 160 billion in assets under management. It is no longer a niche institutional market and we find that to be compelling.”

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

Oscarlyn:

“And so this is the secondary space. So to give folks a definition of what this is, you know, primary is, is when the funds are first raised and the investment is made, and it might be a ten or 12-year commitment that you're making to a fund.

“And sometimes they're investors who for whatever reason, they may be rebalancing their portfolio others, they may need liquidity. They actually have a need to sell some of that primary into what's called the secondary market. It's a it's a liquidity source”

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“for folks who need it. It's not ideal. You don't want to have to do that. But if you do, there is the secondary market within that market. Are there subsets that we're seeing attractive opportunities?”

 

(Visual description: Close-up of Spencer Boggess.)

 

Spencer:

 

“Yeah. One person's need is another person's opportunity. Look in the venture secondary has been a it's a, it's a subset of the secondary market, as you just alluded to. And what we've seen is startup firms are having a little bit more trouble raising capital and we're also seeing traditional venture investors need to find alternative sources of liquidity. They're looking or exploring options to sell some of their holdings.”

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

Spencer:

“Secondary venture investors. Managers typically are looking for the best”

(Visual description: Close-up of Spencer Boggess.)

 

Spencer:

 

“venture funds, and they're also looking for the best venture companies and trying to buy them at a discount. Our managers are telling us that they're finding discounts of about 25 to 30%. And on a historical basis, that is the best valuations we've seen in about 20 years. So, we're compelled by that from a research investment perspective.”

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“Let's shift and talk about private debt. So we've talked about private equity within private debt, which private debt is about 30% of the credit space. We've really seen it move up substantially as a percentage of that market. What observations do you have from trends within the private debt marketplace today?”

(Visual description: Close-up of Spencer Boggess.)

 

Spencer:

 

“Well, this is an area where the climbing rates have really revealed an opportunity set. What we're seeing is something quite constructive here as relates to senior direct lending. We're seeing deals pricing at 10 to 12% yield and we're certainly compelled by that. I'd say also just sort of stepping back, this isn't a temporary phenomenon. We've seen private businesses stay private for longer, a number one.

“And number two, we're seeing a lot of dry powder in the private equity space and as a function of that. So we see an intermediate and longer-term opportunity here for for private debt. And so, again, this is where research and focus on the best managers matters a lot.”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“And I just want to make a point that within private debt, I want to make it clear to the folks who are listening today that private debt, to be clear, is not public debt.

“We're not talking about investment grade debt. We're not talking about high yield. But this is specific. It's a private market. It's a it's a different marketplace than the publicly traded debt. And so it has a different risk profile. It has a higher risk profile, which is why you're talking about the yields that you're mentioning there. You know.”

 

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

Spencer:

“That’s right. I mean, I think Chip's brought it up on another occasion. So there's issues of transparency and also marginal illiquidity.”

 

(Visual description: Close-up of Spencer Boggess.)

 

Spencer:

 

“But again, that's why our research is important in terms of focusing on very astute, very experienced, very disciplined managers.”

 

Oscarlyn:

 

“The manager that you select in the space”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

“is really important to the outcome.”

Spencer:

“Yeah. Absolutely.”

Oscarlyn:

“And lastly, let me ask about hedge funds again. We've got this higher rate environment, you know, volatility in certain places, volatility raised volatility. How are our managers responding to that?

Spencer:

“Well look with hedge funds, a higher rate environment has has brought”

(Visual description: Close-up of Spencer Boggess.)

 

Spencer:

 

“wider spreads generally and bouts of higher market volatility. And that's made hedge funds largely more attractive”

(Visual description: On-screen graphic with key takeaways from alternative investments, including 1) private equity secondary markets compelling opportunities; 2) private equity offers a “yield premium” to traditional markets; and 3) higher interest rates may benefit many hedge fund strategies.)

Spencer:

“and certain strategies in particular. So one thing I would like to sort of highlight is that global macro managers have certainly had a a compelling investment opportunity. Since ‘21, you've seen rates go much higher and that's created really attractive”

(Visual description: Close-up of Spencer Boggess.)

 

Spencer:

 

“trading opportunities in both global fixed income and currency markets. And we've seen global macro managers pursue that opportunity.”

 

Oscarlyn:

 

“And, so, Spencer, when we have different countries”

 

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“across the globe behaving in divergent ways in kind of the same time period. That really can be a place where a skilled manager can take advantage, take advantage of those differentials.”

Spencer:

 

“That’s right.”

 

(Visual description: Close-up of Spencer Boggess.)

 

Spencer:

 

Things like circumstances like changing in monetary policy, for example, we saw that offer some very attractive trading opportunities in Japan just last month in March. And then prior to that last 12 to 24 months in Eastern and Central Europe. So those markets relative to U.S. markets as an example. So again, as you pointed out, those divergences can create really attractive investment opportunities. And for skilled managers, we've seen them be able to capitalize on that.”

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

Oscarlyn:

“Well, I want to thank both you and Keith for talking today about alternative investments. And I know that we're going to continue to update our clients around this area.”

(Visual description: Close-up of moderator Oscarlyn Elder.)

 

Oscarlyn:

 

“And I want to make sure that I remind folks who are listening in that alternative investment strategies are not suitable for all investors.

The risk profile of private investments. So the private equity and the private debt that we mentioned, it's higher and different than that of other asset classes. So working with a trusted advisor is really important if you're going to invest in that space. In closing, we've covered a lot of ground today, so let me quickly recap our main market and economic messages.

The primary US stock market trends continue to be positive. Though, normal pullbacks, Keith, as you talked about, are normal and we should be expecting those. Our positioning remains Team USA with a focus on large caps. US growth is expected to be stronger for longer, with the Fed moving to cut rates in the back half of the year. And also from a bond perspective, now is a good time to evaluate capturing shorter term yields like Chip talked about.

And and we continue to favor higher quality fixed income. And alternative investments, are strategic, they’re long term investments that may provide an expanded opportunity set within a portfolio context for qualified clients. If you want to view the charts that we share today and explore other market and economic visuals, Truist Wealth’s monthly publication The Market Navigator is available through your advisor or through Truist.com/wealth/insights.

Our latest edition was published on April 3rd. We want to remind you that regardless of the near-term market movements and we're having some of those today, we're having some of those movements, we believe that really leaning into the benefits of a diversified portfolio that's built on the long term view of markets with an understanding of your unique financial situation is the way to go.

A Truist advisor can support you on your investment journey. They're going to listen to you. They're going to understand your goals and they can help you put really complex market environments as well as potential opportunities and a long term context, helping you to make prudent adjustments along the way. Thank you for trusting the Truist team to be part of your journey.

And lastly, I have a request and I'm crossing my fingers here because last time it didn't work so well. But we're hoping it will this time. We want this live stream series to be really a meaningful experience for you. So if all goes well in a few seconds, a survey is going to appear on your WebEx screen. Please take the time to complete it and give us your feedback.

Your opinions will help us shape our future events. Thank you again for joining us. We look forward to talking with you in July.”

(Visual description: Wide shot of four panelists with moderator at Truist-branded desk in studio.)

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