Latest / Bloomberg Intelligence / Investing In Technology, ESG, And The Markets

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Investing In Technology, ESG, And The Markets · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
• 0:04
  Speaker 1: my co host Matt Miller. Every business day, we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
• 0:11
  Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
• 0:15
  Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. Well, during this pandemic,
• 0:22
  Speaker 1: I think I'm probably like a lot of people where
• 0:25
  Speaker 1: I'm using technology even more. It's not just Zoom. I'm
• 0:27
  Speaker 1: thinking about just kind of my personal banking for example.
• 0:31
  Speaker 1: I'm much more uh engage with the digital offerings from
• 0:35
  Speaker 1: my financial institution, and I can't even imagine why I
• 0:38
  Speaker 1: would ever need to go into a branch again. But uh,
• 0:40
  Speaker 1: and I think a lot of folks, you know, again,
• 0:42
  Speaker 1: embracing technology across a lot of different fronts. Let's check
• 0:45
  Speaker 1: in with Nisha Hate, chief Digital Officer for Charles Schwab.
• 0:49
  Speaker 1: They have a new report out Investing in Technology Study,
• 0:52
  Speaker 1: and it's kind of looking at how the pandemic has
• 0:54
  Speaker 1: changed tech trends. Nisha, thanks so much for joining us here.
• 0:57
  Speaker 1: What are some of the key takeaways um your charge
• 1:00
  Speaker 1: Schwab report Yeah, well thanks thanks for having me. Um
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  Speaker 1: and uh, Paul. What you shared is probably the experience
• 1:07
  Speaker 1: that many have had, which is we saw, um, you know,
• 1:10
  Speaker 1: in our survey, we saw a lot of investors talking
• 1:12
  Speaker 1: about how they've used technology and more in different ways
• 1:16
  Speaker 1: than they ever had prior to the pandemic. UM. But
• 1:19
  Speaker 1: what one of the interesting things is that they continue
• 1:22
  Speaker 1: to say that they're going to use technology at an
• 1:24
  Speaker 1: accelerated pace. And when we asked them, however, what it
• 1:28
  Speaker 1: what it is that drives trust and technology, often they
• 1:31
  Speaker 1: come back to the way that we used to work,
• 1:34
  Speaker 1: which is they want to be able to have access
• 1:36
  Speaker 1: to humans. Um, whether it's on a phone line or
• 1:39
  Speaker 1: even actually, as you mentioned, walking into a branch. So
• 1:43
  Speaker 1: you know, there's this desire to use more technology but
• 1:45
  Speaker 1: at the same time wanting to build trust through human connection.
• 1:49
  Speaker 1: Are there demographic or generational differences in that desire for
• 1:54
  Speaker 1: human versus technology contact? You know, there are some, um,
• 2:00
  Speaker 1: although you know, not as much as we might think so. UM. So,
• 2:03
  Speaker 1: for example, one of the questions we asked was, you know,
• 2:06
  Speaker 1: do you think it's possible to have a relationship with
• 2:09
  Speaker 1: a financial company through technology only? And if you asked
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  Speaker 1: the overall population, just over half would tell you that
• 2:16
  Speaker 1: that it is possible to have a personal relationship with
• 2:18
  Speaker 1: a financial services institution with technology only. But if you
• 2:22
  Speaker 1: ask what we call Generation I, so Generation Investor, which
• 2:26
  Speaker 1: is UM folks who came into investing for the first
• 2:29
  Speaker 1: time in one they would tell you almost three quarters
• 2:34
  Speaker 1: of them would tell you that it is possible to
• 2:36
  Speaker 1: have a personal relationship through technology only. Now that Generation
• 2:40
  Speaker 1: I does sue a little bit younger, but really it's
• 2:42
  Speaker 1: more about newer investors coming into the industry. So we've seen,
• 2:47
  Speaker 1: uh nitche really since the beginning of this pandemic a
• 2:50
  Speaker 1: spike in retail trading in the stock market, whether it's
• 2:54
  Speaker 1: some of the meme stocks that got so much attention
• 2:57
  Speaker 1: earlier on or just in general, and not a lot
• 2:58
  Speaker 1: of folks, including I believe Charles Shrob, you know, low
• 3:01
  Speaker 1: costs or no cost trading, give us a sense of
• 3:05
  Speaker 1: kind of what you're seeing in the retail side of
• 3:08
  Speaker 1: the business. Yeah, I mean the engagement digital engagement, and
• 3:13
  Speaker 1: that's you know, a lot of our trading comes through
• 3:15
  Speaker 1: our digital channels. Of course, is just tremendous. I mean
• 3:17
  Speaker 1: we saw over a billion and a half mobile and
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  Speaker 1: weblog ins last year four times the trading on the
• 3:24
  Speaker 1: mobile apps than we've ever seen before. So incredible engagement,
• 3:29
  Speaker 1: especially earlier this year in one when you know, when
• 3:32
  Speaker 1: markets were very active and we saw a lot of engage,
• 3:35
  Speaker 1: engagement and that continues, although it has you know, stepped
• 3:38
  Speaker 1: back just a bit. Well on that point, obviously, there
• 3:42
  Speaker 1: was this narrative last year, I mean even in the
• 3:44
  Speaker 1: pandemic and earlier this year where it was all about
• 3:48
  Speaker 1: all the liquidity was out there, you had ample stimulus
• 3:50
  Speaker 1: coming on the monetary side, and then on the fiscal
• 3:52
  Speaker 1: side you had stimulus checks burning a hole in people's pockets.
• 3:55
  Speaker 1: Now that those impulses are kind of fading, how was
• 3:59
  Speaker 1: retail investor behavior changing? Well, what's interesting, you know, And
• 4:04
  Speaker 1: one of the things we asked about in the survey was,
• 4:06
  Speaker 1: you know, why are you investing and what is it
• 4:08
  Speaker 1: that you're trying to accomplish? And while you know, I
• 4:10
  Speaker 1: think we talked a lot about the investors who are
• 4:12
  Speaker 1: you know, trading the meme stocks and kind of really
• 4:15
  Speaker 1: active in the market. Um, a lot of these investors
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  Speaker 1: this generation, I would tell us that they're actually trying
• 4:20
  Speaker 1: to figure out how to get to better financial outcomes.
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  Speaker 1: You know, they actually had this this disruption, the pandemic
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  Speaker 1: disrupted their lives and they've had that moment of reflection
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  Speaker 1: and and trying to figure out what to do next
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  Speaker 1: with their financial lives so that they have a security net.
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  Speaker 1: So we've we've seen you know, an increase in, for example,
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  Speaker 1: engagement in digital financial planning. So you know, in just
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  Speaker 1: in the second quarter, we had twenty thousand folks do
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  Speaker 1: digital financial plans through our Schwab dot com channel. And
• 4:45
  Speaker 1: so it's this you know, it's not just about trading UM,
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  Speaker 1: but it's actually now about getting educated about how to
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  Speaker 1: actually build out your financial portfolio UM and get to
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  Speaker 1: the outcomes that you're looking for. We should give us
• 4:57
  Speaker 1: a sense of kind of what a typical charge Schwab
• 4:59
  Speaker 1: customer looks like today versus maybe several years ago. It
• 5:02
  Speaker 1: just feels like with all the technological changes and advancements
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  Speaker 1: and ease of interaction, maybe skewing a little bit younger
• 5:09
  Speaker 1: than maybe we've seen in the past. UM, we are
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  Speaker 1: a little bit a little bit younger than we were
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  Speaker 1: a few years ago. UM. Over you know, I think
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  Speaker 1: over of our investors are under the age of forty
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  Speaker 1: one at this point. So when when they're coming in
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  Speaker 1: every year, so are new to firm investors UM and UH.
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  Speaker 1: And they do tend to leverage digital channels much more
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  Speaker 1: than you know, our traditional investors. So definitely more engaged digitally.
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  Speaker 1: But as I mentioned at the beginning, I think what's
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  Speaker 1: most interesting is even so you know Generation I, as
• 5:39
  Speaker 1: I mentioned, even when you ask them about you know,
• 5:42
  Speaker 1: what what happens during the market downturn, what do you
• 5:45
  Speaker 1: want when? What kind of support do you want? You know,
• 5:47
  Speaker 1: one of the staffs we have of them wanted to
• 5:51
  Speaker 1: talk to a person to discuss their finances when there
• 5:54
  Speaker 1: was a market downturn. So even though we talk about
• 5:56
  Speaker 1: them as being different, sometimes I wonder if they're really
• 6:00
  Speaker 1: that different because they still want that human connection to
• 6:02
  Speaker 1: build the trust and confidence in their strategy. Yeah, really
• 6:05
  Speaker 1: fascinating stuff, but good to see some of the younger
• 6:07
  Speaker 1: folks getting invested. Nisha Hati, chief Digital Officer for Charles Schwab.
• 6:13
  Speaker 1: They have a new report out Investing in Technology study
• 6:16
  Speaker 1: how the pandemic has kind of changed UM, maybe how
• 6:20
  Speaker 1: some people view their investing habits and the emergence of
• 6:23
  Speaker 1: technology to help them interact with their financial services providers.
• 6:28
  Speaker 1: So interesting stuff coming out of Charles Schwab. E s
• 6:33
  Speaker 1: G investing is not for the faint of heart. Just
• 6:35
  Speaker 1: listen to a couple of these headlines. Just in the
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  Speaker 1: last couple of days, Oil fouled California beaches, rekindled demands
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  Speaker 1: for offshore ban, Tesla racism trial juror says company failed
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  Speaker 1: to protect workers. Facebook's Zuckerberg denies putting profit over user safety.
• 6:53
  Speaker 1: And I'm supposed to apply E s G investing characteristics
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  Speaker 1: UM in my portfolio. That's gotta be tough. James Kat's
• 6:59
  Speaker 1: founder and CEO of Humankind Investments. He does just that. James,
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  Speaker 1: I love to get your thoughts about when you see
• 7:05
  Speaker 1: headlines like that as an investor, UM, how do you
• 7:10
  Speaker 1: think about investing in companies through a E s G lens? Sure? Well,
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  Speaker 1: first of all, thanks so much for having me, And
• 7:17
  Speaker 1: just to answer your question, I think if there's a
• 7:19
  Speaker 1: takeaway from the stories that we're seeing about oil spills
• 7:22
  Speaker 1: and discrimination lawsuits, UM and all this, I think it's
• 7:25
  Speaker 1: that a company's human impact has consequences, and when when
• 7:29
  Speaker 1: companies hurt people, they'll have the incentive to come together
• 7:32
  Speaker 1: to complain and ultimately either punish or reform the company
• 7:36
  Speaker 1: through legal action, additional regulation, etcetera. And and and then that
• 7:39
  Speaker 1: can really hurt the bottom line for shareholders. How do
• 7:41
  Speaker 1: you quantify that quote unquote damage a company does? Sure well,
• 7:47
  Speaker 1: So human kind investments be trying to put a dollar
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  Speaker 1: value on every impact that a company has on humanity.
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  Speaker 1: So starting of course with the investors. Investors are people too,
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  Speaker 1: and they should have a good return on their investment
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  Speaker 1: and not be defrauded. Right. Employees are they being read
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  Speaker 1: it fairly? Are they being paid well? Customers are creating
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  Speaker 1: a product that's useful and beneficial or is it toxic
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  Speaker 1: and society? Right? You could be creating a lot of
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  Speaker 1: value for your investors, customers, and employees, but maybe your
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  Speaker 1: factory viewing a lot of pollution into a into a
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  Speaker 1: town somewhere, and people in that town are paying millions
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  Speaker 1: of dollars of dollars in medical bills as a result.
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  Speaker 1: So we try to put a dollar value on all
• 8:20
  Speaker 1: these different impacts, add them up, and that's how we
• 8:23
  Speaker 1: come up with a human kind value of what each
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  Speaker 1: company is providing to humanity. Super voting stock James, that's
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  Speaker 1: a problem here. So, I mean, take a look at
• 8:32
  Speaker 1: a company like Facebook where Mark Zuckerberg has of the
• 8:38
  Speaker 1: voting stock, um, super voting stock. How do you think
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  Speaker 1: about that in E s G? Does that just is
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  Speaker 1: that a screening item or you just say I'm staying
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  Speaker 1: away from supervoting companies that have the supervoting structure. Sure well,
• 8:50
  Speaker 1: the way we deal with that human kind is we
• 8:53
  Speaker 1: preferentially invest. We work to preferentially invest in the share
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  Speaker 1: classes that have more voting power. Um. So, just because
• 9:01
  Speaker 1: the company has different kinds of of of share classes
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  Speaker 1: with differential voting power, it doesn't mean necessarily that you
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  Speaker 1: know they're an evil company right off the bat. I
• 9:09
  Speaker 1: think it's just a question of making sure that we're
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  Speaker 1: investing in the in the share class that will hopefully
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  Speaker 1: give us the biggest voice in how the company is
• 9:16
  Speaker 1: going to be run. When you are approaching E s
• 9:19
  Speaker 1: G investing, how hard is it to avoid kind of
• 9:24
  Speaker 1: greenwashing that seems to be a perennial problem in the
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  Speaker 1: s G? Sure so? UM, I kind of have a
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  Speaker 1: simple trick for for the folks at home who are
• 9:32
  Speaker 1: trying to figure out, you know, whether something is greenwashing
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  Speaker 1: or not. Um, I think the question that you have
• 9:38
  Speaker 1: to be asking yourself is what is the nature of
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  Speaker 1: the asset manager that's providing the E s G product
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  Speaker 1: or service. Is E s G just one of many
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  Speaker 1: flavors of investing for them or is it the only
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  Speaker 1: flavor worth having? Because think about what these kind of
• 9:49
  Speaker 1: large traditional asset managers are saying when they have a
• 9:52
  Speaker 1: bunch of non E s G products and then also
• 9:54
  Speaker 1: some E s gum on the side. They're saying, look,
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  Speaker 1: we did the research, we figured it out. These are
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  Speaker 1: the good companies, these of the bad companies, and we
• 10:01
  Speaker 1: only invest in the good companies in these few portfolios.
• 10:04
  Speaker 1: But in all the rest of our business we ignore
• 10:06
  Speaker 1: everything that we just learned, and its business as usual.
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  Speaker 1: We invest in all the bad companies. So if they're
• 10:10
  Speaker 1: not taking their own socially responsible investment research seriously, then
• 10:14
  Speaker 1: why should we? James, One of the things I've heard
• 10:17
  Speaker 1: from folks that are active in E s G investing
• 10:20
  Speaker 1: is that the quality of the data they need in
• 10:22
  Speaker 1: their analysis just isn't up to par. I mean, if
• 10:24
  Speaker 1: I'm for my financial analysis, I've got the income statement,
• 10:27
  Speaker 1: the balance she think, you know, cash flow statement for
• 10:29
  Speaker 1: E s G it comes down to, I don't have
• 10:32
  Speaker 1: great data, give us a sense of where we are
• 10:35
  Speaker 1: in terms of E s G data and its ability
• 10:37
  Speaker 1: to help you in your analysis. Sure, I agree, that's
• 10:40
  Speaker 1: probably one of the biggest hurdles that people who want
• 10:43
  Speaker 1: to invest in a socially responsible way of face UM
• 10:46
  Speaker 1: and and out there that you know, there we identified
• 10:48
  Speaker 1: a lack in in a lot of the data that exists.
• 10:50
  Speaker 1: And that's why humankind we actually work to create a
• 10:53
  Speaker 1: lot of our own data UM and and it's really
• 10:56
  Speaker 1: it's it's definitely the biggest challenge I think that people
• 10:58
  Speaker 1: are facing out there. We're actually working to solve it
• 11:01
  Speaker 1: a humankind. So, given all the data that you have,
• 11:03
  Speaker 1: where do you see the greatest opportunities to invest UM
• 11:08
  Speaker 1: the greatest opportunities Well, the way that we look at things,
• 11:10
  Speaker 1: it's really a question of where there's UM the most
• 11:14
  Speaker 1: positive human impact versus the most negative human impact. So
• 11:17
  Speaker 1: avoiding companies that are UM, you know, involved in causing
• 11:20
  Speaker 1: a great deal of death and harm and destruction UM
• 11:23
  Speaker 1: and really over investing actually in companies UM that are
• 11:27
  Speaker 1: creating positive value by saving lives. So you know, healthcare, UM,
• 11:31
  Speaker 1: companies that are doing a bunch of healthcare R and
• 11:34
  Speaker 1: D that will hopefully extend and improve um, you know,
• 11:37
  Speaker 1: human life companies that are providing water access, food access.
• 11:41
  Speaker 1: These are things that really help people, uh, you know,
• 11:44
  Speaker 1: thrive and and flourish. And that's that's where we think
• 11:46
  Speaker 1: there's more opportunity from a socially responsible investing perspective. Yeah, James,
• 11:52
  Speaker 1: just about ten seconds. Just give us a sense of
• 11:54
  Speaker 1: how your returns have been. Um so in terms of
• 11:58
  Speaker 1: the return earns UM, Well, so we UM. We've been
• 12:05
  Speaker 1: generally speaking, um, you know, tracking the market more or less,
• 12:09
  Speaker 1: although I've actually been looking to see, you know, some
• 12:12
  Speaker 1: some divergence because the way that we invest is actually
• 12:14
  Speaker 1: not just tracking a general index. So um. The way
• 12:18
  Speaker 1: that we think about these um you know, these sort
• 12:21
  Speaker 1: of performance metrics is actually really quite different. But I'm
• 12:24
  Speaker 1: looking forward to seeing what that's going to look like
• 12:26
  Speaker 1: in the future. All Right, James, thanks so much for
• 12:28
  Speaker 1: joining us. We appreciated. James Kat's founder and CEO of
• 12:31
  Speaker 1: Humankind Investment. The volatility continues in this market. Uh. We've
• 12:37
  Speaker 1: had one percent moves in either direction over the last
• 12:41
  Speaker 1: four days, and today we've got about a six tenths
• 12:43
  Speaker 1: moved down in the SMP. Let's get a sense of
• 12:46
  Speaker 1: whether we need to get accustomed to this volatility. Let's
• 12:49
  Speaker 1: check in with a professional. Rich Steinberg, chief market strategist
• 12:52
  Speaker 1: at the Colony Group. They have seventeen billion dollars in
• 12:55
  Speaker 1: assets under management. I think there's somewhere up in Boston
• 12:58
  Speaker 1: or something like that, and I think they play baseball
• 13:00
  Speaker 1: up there. I'm not sure. Rich, thanks so much for
• 13:02
  Speaker 1: joining us here. Talk to us about this volatility. Is
• 13:06
  Speaker 1: it's something we should be concerned or about or is
• 13:08
  Speaker 1: this just what you see when markets are at or
• 13:11
  Speaker 1: near all time highs. Not only are they not only
• 13:15
  Speaker 1: the issue around all time highs, but I think investors
• 13:19
  Speaker 1: are struggling with the growth value dynamics in the markets,
• 13:23
  Speaker 1: and you're seeing kind of these mini rotations from you know,
• 13:28
  Speaker 1: small cap back to mega cap and then mega cap
• 13:31
  Speaker 1: being oversold and growth going one way or another. And
• 13:35
  Speaker 1: I think we just need to embrace the volatility somewhat
• 13:39
  Speaker 1: um and allow investors to reposition portfolios that might have
• 13:44
  Speaker 1: gotten out of sync with either their asset allocation or
• 13:48
  Speaker 1: sector or asset class waitings, and use the volatility as
• 13:51
  Speaker 1: your friend and not necessarily your foe. So you think
• 13:54
  Speaker 1: it's not time to maybe be pulling back on risk. Here, Listen,
• 13:59
  Speaker 1: the over the last forty years, we three quarters of
• 14:02
  Speaker 1: the time you get twelve to four into a year
• 14:08
  Speaker 1: draw downs with the market still finishing up. This is
• 14:11
  Speaker 1: why equities give you a higher long term return than
• 14:14
  Speaker 1: treasury built. So you need to be in it to
• 14:18
  Speaker 1: win it, and you need to understand your own kind
• 14:21
  Speaker 1: of risk profile and when those moneys are going to
• 14:24
  Speaker 1: be needed. If you're an endowment, if your family, if
• 14:26
  Speaker 1: you're a foundation, So it's you know, risk is very personal, alright.
• 14:31
  Speaker 1: So we're heading into Q three earning season. Earning is
• 14:35
  Speaker 1: always important to these markets. What do you need to see?
• 14:39
  Speaker 1: What do you expect to see? What do you need
• 14:40
  Speaker 1: to see out of this earning season? Listen, I think
• 14:44
  Speaker 1: we're going to continue to have the winners being rewarded
• 14:47
  Speaker 1: in the losers being spent. But you know, margin numbers
• 14:52
  Speaker 1: are quite high, uh, and you're starting to continue to
• 14:56
  Speaker 1: see pretty decent revenue growth. Just to kind of put
• 15:00
  Speaker 1: numbers onto it, you know, uh, projected earnings growth for
• 15:04
  Speaker 1: next years like nine point six percent and revenue growth
• 15:08
  Speaker 1: is just shy of seven. We're gonna see some companies
• 15:12
  Speaker 1: use the pandemic and kind of supply chain issues as
• 15:16
  Speaker 1: as um excuses, So we have to really see where
• 15:20
  Speaker 1: their core businesses are. And I think it's important for
• 15:24
  Speaker 1: investors not to be all in on like a value
• 15:27
  Speaker 1: opening trade and not to be all in and megacap growth,
• 15:31
  Speaker 1: but to kind of continue to walk that fine line
• 15:34
  Speaker 1: of a balance between both because earnings are going to
• 15:38
  Speaker 1: still evolve over the next couple of quarters. Well, Rich,
• 15:41
  Speaker 1: you talk about kind of the supply chain excuse. To me,
• 15:44
  Speaker 1: that seems pretty valid given some of those constraints that
• 15:48
  Speaker 1: are out there. If they prove to be more persistent,
• 15:52
  Speaker 1: then maybe the market anticipates right now, what is the
• 15:55
  Speaker 1: implication of that? So I actually think they are I
• 15:58
  Speaker 1: didn't mean to minimize and I appreciate your comment. Um,
• 16:02
  Speaker 1: the supply chain issues are real, but the question is
• 16:06
  Speaker 1: whether or not that that pent up demand. Maybe we
• 16:09
  Speaker 1: have a short term issue and earnings, but the outlook
• 16:14
  Speaker 1: for the quarters coming out starts to look better. I
• 16:16
  Speaker 1: think it's a wait and see kind of issue that
• 16:18
  Speaker 1: we have to uh continue to evaluate and as the
• 16:23
  Speaker 1: feed is m alright, so, Rich, what are the sectors
• 16:27
  Speaker 1: then given that backdrop, given your expectations. What are the
• 16:30
  Speaker 1: sectors where you guys are you know, doing some work
• 16:32
  Speaker 1: these days? Yeah, so, I you know, in the portfolio
• 16:36
  Speaker 1: that I run for the firm, I'm I kind of
• 16:38
  Speaker 1: float at thirty thousand feet. I think you need to.
• 16:41
  Speaker 1: I had trimmed back some some tech exposure. Um, and
• 16:46
  Speaker 1: I'm overweight healthcare. I have a little bit of kind
• 16:49
  Speaker 1: of like a low volatility and dividend play just because
• 16:52
  Speaker 1: dividends did not work out last year. Um. The thing
• 16:56
  Speaker 1: that's perplexing, especially today is just seeing a lot of
• 16:59
  Speaker 1: weakness and mall cap. I'm really interested in adding to financials,
• 17:03
  Speaker 1: but I'm not there yet, and you're seeing this kind
• 17:06
  Speaker 1: of weird rotation in the last few days out of
• 17:10
  Speaker 1: you know, out of financials and out of small cap.
• 17:12
  Speaker 1: And you know, if if the Yeld curve does steepen,
• 17:16
  Speaker 1: you would think that financials should be a place to
• 17:18
  Speaker 1: go as a small cap just because of the makeup
• 17:21
  Speaker 1: of that index not playing out yet. No, Rich, I'm
• 17:25
  Speaker 1: so glad you brought up the small caps because I
• 17:26
  Speaker 1: just pulled up a chart on my Bloomberg terminal and
• 17:29
  Speaker 1: it is up until the right through about mid March.
• 17:32
  Speaker 1: You know, really solid and then just totally flat lines
• 17:35
  Speaker 1: for the next six months. Really, what do you think
• 17:38
  Speaker 1: would be the catalyst to renew some of that excitement
• 17:41
  Speaker 1: in the small cap kind of cyclical space. So I
• 17:44
  Speaker 1: think it's probably a three legged stool. Right. You have
• 17:48
  Speaker 1: kind of the the yield curve steepening, but not so
• 17:52
  Speaker 1: much that it will kill the economy UM And I
• 17:56
  Speaker 1: think over the last ten plush years it's been like
• 17:59
  Speaker 1: mega cap growth UM and kind of a rotation to
• 18:03
  Speaker 1: people being back to overweight, and I would admit cap
• 18:06
  Speaker 1: back into that UM and those tend to be more
• 18:09
  Speaker 1: domestically oriented. So if we start to you know, get
• 18:14
  Speaker 1: back to kind of normal growth rates, then I think,
• 18:17
  Speaker 1: and you have a strong dollar based on higher UM
• 18:21
  Speaker 1: interest rates, small MidCap could outperform. Additionally, like I said,
• 18:25
  Speaker 1: there's a lot of financials in small cap. Rich thanks
• 18:28
  Speaker 1: so much for joining us. Really appreciate getting your thoughts
• 18:31
  Speaker 1: on these markets here as volatility picks up really over
• 18:34
  Speaker 1: the last four or five trading sessions. Good to get
• 18:36
  Speaker 1: a little bit of a mooring here. Rich Steinberg, chief
• 18:39
  Speaker 1: market strategist at the Colony Group. This is Bloomer Philip Plumbo,
• 18:47
  Speaker 1: founder CEO, and chief investment officer. I'm sure he's got
• 18:49
  Speaker 1: some thoughts these Plumbo Wealth Management joining us on the phone. So, Phil,
• 18:54
  Speaker 1: when you see markets like this again, these kind of
• 18:56
  Speaker 1: significant moves on a daily basis, seemingly without much direction,
• 19:01
  Speaker 1: how are you framing this market as we go into
• 19:03
  Speaker 1: Q three yearnings? Yeah, well for us, Hello Paul and Kayley,
• 19:07
  Speaker 1: thank you for having me on again. It's gould to
• 19:08
  Speaker 1: be back. Um. So you know, we're pretty vocal that,
• 19:12
  Speaker 1: you know, we believe that we're in a bubble with
• 19:14
  Speaker 1: risk assets. A lot of strategists really don't want to
• 19:17
  Speaker 1: talk much about that, and but ultimately, when you think
• 19:21
  Speaker 1: about the speculation that's going on there and markets, whether
• 19:24
  Speaker 1: it's Bitcoin, whether it's other cryptocurrencies, and f t s
• 19:28
  Speaker 1: valuations with somebody's innovative businesses, Um, you know we're at
• 19:31
  Speaker 1: levels that are are overvalued. So you know, we're in
• 19:35
  Speaker 1: the camp that when you're in a bubble like environment,
• 19:39
  Speaker 1: it could go on for long enand people thinks you
• 19:41
  Speaker 1: can't try to time when it's gonna pop. But we
• 19:44
  Speaker 1: think what's prudent to do in this current environment today
• 19:47
  Speaker 1: is to reduce risk with your equity portfolios, right, So
• 19:49
  Speaker 1: for example, if you have fifty percent equities or is
• 19:52
  Speaker 1: supposed to be in fift percent equities and it's sixty
• 19:54
  Speaker 1: five percent equities, or you've got to rein that in
• 19:57
  Speaker 1: and bring you back down to or even maybe give
• 20:00
  Speaker 1: maybe get a little bit more conservative, so pulling back
• 20:03
  Speaker 1: on echoit exposure and then adding exposure to what. So
• 20:07
  Speaker 1: we believe having cash right now is okay, even though
• 20:10
  Speaker 1: it's not paying much. But if you're in a bubbly
• 20:13
  Speaker 1: type environment where valuations are rich, having some cash available
• 20:18
  Speaker 1: to buy in on any type of dip we think
• 20:20
  Speaker 1: could make sense. The way we run portfolios and I
• 20:23
  Speaker 1: talked about this a bit last time, is we do
• 20:25
  Speaker 1: use gold, we do use commodities, and we use intermediate
• 20:29
  Speaker 1: and longer term treasuries and tips. So we will rebounce
• 20:32
  Speaker 1: capital into those particular areas as well as some cash. Alright, So, Phill,
• 20:37
  Speaker 1: as we head into this third earning season here, what
• 20:40
  Speaker 1: are you going to be watching for UM over the
• 20:43
  Speaker 1: next several weeks. M Well, expectations are that we had
• 20:47
  Speaker 1: peak earnings already, so we think that maybe more disappointments
• 20:51
  Speaker 1: to the downside entity upside based on supply issues, inflationary
• 20:55
  Speaker 1: pressure is a lot of these companies of facing. So
• 20:58
  Speaker 1: ultimately we don't have high expectations for Ernie's going into
• 21:01
  Speaker 1: the season, which could also increase volatility. I hear the
• 21:06
  Speaker 1: word stag inflation getting thrown out more and more and more.
• 21:10
  Speaker 1: Do you think that is an apt description for the
• 21:13
  Speaker 1: environment that we're in? Mhm, you know, I don't. I
• 21:17
  Speaker 1: think that we had a big move from the bottom
• 21:20
  Speaker 1: from March of two thousand and twenty to where we
• 21:22
  Speaker 1: are today, and you think about what we're faced with
• 21:24
  Speaker 1: going forward. You know, we have now a FED that
• 21:26
  Speaker 1: probably will taper sooner than longer. They may they may
• 21:30
  Speaker 1: raise rates in twenty two sooner than we think because
• 21:33
  Speaker 1: of inflationary pressures. You have the China issues that are
• 21:36
  Speaker 1: going on that could be contagion, COVID is not over yet,
• 21:39
  Speaker 1: and and and you have that ceiling and other that
• 21:43
  Speaker 1: you know, high depths all around the world. So when
• 21:45
  Speaker 1: you have a situation like that, it's really tough to
• 21:47
  Speaker 1: get strong growth. The only area that gives me a
• 21:50
  Speaker 1: bit of confidence is if there is a fisculous fiscal
• 21:53
  Speaker 1: bill that gets passed, and if they can get along
• 21:56
  Speaker 1: and make something happen within Congress that could be one
• 21:59
  Speaker 1: reason they could bring the leg up and give us
• 22:01
  Speaker 1: one more leg to the upside here overall with markets,
• 22:04
  Speaker 1: But other than that, it seems like a lot of
• 22:06
  Speaker 1: challenges in front of us. So the h the asymmetric
• 22:08
  Speaker 1: risk for the market, we believe it is more to
• 22:10
  Speaker 1: the downside than to the upside. How much downside feel
• 22:13
  Speaker 1: A lot of folks are saying, you know, a five
• 22:15
  Speaker 1: percent pullback in this market would be a healthy aspect
• 22:19
  Speaker 1: to what is otherwise a bowl market. How are you
• 22:23
  Speaker 1: thinking about the next pull back in this market? Again?
• 22:27
  Speaker 1: We did it, you know, roughly five percent off the
• 22:29
  Speaker 1: SMP high. Is at it or we have more to go. Well, historically,
• 22:33
  Speaker 1: when you get to a point where a FED starts
• 22:36
  Speaker 1: to talk about tapering and does start the taper and
• 22:38
  Speaker 1: move into the stimulus plan that takes money out of
• 22:42
  Speaker 1: the economy, liquidity out of the economy, you could see
• 22:44
  Speaker 1: a ten percent correction. You know, if you look historically,
• 22:47
  Speaker 1: that's been the case. So we wouldn't be surprised for that.
• 22:49
  Speaker 1: We don't really try to time markets in the short
• 22:51
  Speaker 1: term and really try to figure that out. We really
• 22:53
  Speaker 1: feel that it's difficult to do. You know, that's why.
• 22:55
  Speaker 1: We really believe if investors go back to fundamentals and
• 22:58
  Speaker 1: portfolio management and just say to themselves, you know, I
• 23:00
  Speaker 1: have fifty percent I'm supposed to be fifty percent of
• 23:02
  Speaker 1: my and I'm supposed to fifty percent of my money
• 23:04
  Speaker 1: in stocks. It's now sixty or six. Let me rein
• 23:08
  Speaker 1: that in to bring me back to I'm not trying
• 23:11
  Speaker 1: to time the market. What I'm doing is I'm selling
• 23:13
  Speaker 1: at high levels, not low levels, and we believe that's
• 23:16
  Speaker 1: preventing to do right rather than trying to figure out
• 23:19
  Speaker 1: is the market gonna be down ten percent from here?
• 23:21
  Speaker 1: From here? Um, we just think that's that's very difficult
• 23:25
  Speaker 1: to do and it doesn't make any sense from a
• 23:26
  Speaker 1: portfolio management standpoint. Trying to time the market is tough.
• 23:30
  Speaker 1: But we've seen time and again that dying of the
• 23:33
  Speaker 1: dip always seems to work. So maybe that's why you
• 23:35
  Speaker 1: want to have a little bit of cash on hand,
• 23:37
  Speaker 1: as Philip recommends. Paul. Yeah, absolutely, Hey, Phil, thanks so
• 23:40
  Speaker 1: much for joining us. I really appreciate getting your thoughts.
• 23:42
  Speaker 1: As always. Phil Palumbo he's founder, CEO, and chief investment
• 23:46
  Speaker 1: officer of Palumbo Wealth Management. They have about three million
• 23:50
  Speaker 1: dollars in assets under management, joining us on the phone
• 23:52
  Speaker 1: from Great Neck, New York. Thanks for listening to the
• 23:55
  Speaker 1: Bloomberg Markets podcast. You can subscribe and listen to interviews
• 23:59
  Speaker 1: of Apple Podcasts or whatever podcast platform you prefer. I'm
• 24:03
  Speaker 1: Matt Miller, I'm on Twitter at Matt Miller three, and
• 24:08
  Speaker 1: I'm fall Sweeney. I'm on Twitter at pt Sweeney. Before
• 24:10
  Speaker 1: the podcast, you can always catch us worldwide at Bloomberg Radio.