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A Look At Markets And ESG Investing · 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. We're gonna bring in
• 0:21
  Speaker 1: Thriyan Smallock right now. He is a principal and portfolio
• 0:24
  Speaker 1: manager at hood River Capital Management. They have three and
• 0:27
  Speaker 1: a half billion dollars under management and UM on a
• 0:32
  Speaker 1: day like today, when we're seeing some volatility but not
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  Speaker 1: a lot of movement in stocks, does it feel peaky
• 0:38
  Speaker 1: to you? Does it feel like we're hitting um the
• 0:41
  Speaker 1: top As far as this market is concerned, we don't
• 0:45
  Speaker 1: think it's peaky. We're constructive at this point. I think
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  Speaker 1: the market has just been digesting huge games over the
• 0:52
  Speaker 1: last twelve to eighteen months. Folks are worried about inflation
• 0:59
  Speaker 1: starting to pick up with with the economic backdrop flowing somewhat,
• 1:04
  Speaker 1: but we think earnings revisions are gonna be positive from here.
• 1:08
  Speaker 1: Most companies that we talked to, we talked around four
• 1:10
  Speaker 1: public trade companies every quarter. In small cap, we think
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  Speaker 1: demand is really strong and costs are relatively contained. Street
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  Speaker 1: estimates to move up and valuations three attractive. So we
• 1:19
  Speaker 1: think as earning season plays out this quarter and over
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  Speaker 1: the next couple of quarters, the market will move up
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  Speaker 1: with earnings and and you want to be in stocks.
• 1:28
  Speaker 1: You guys are in small caps, smaller caps, small big caps, Bryant,
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  Speaker 1: UH give us a sense of how those performing, how
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  Speaker 1: you think they should perform going forward. So year today,
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  Speaker 1: small cap has lagged the S and P five hundred,
• 1:44
  Speaker 1: the Rustle two thousands behind approximately five basis points of
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  Speaker 1: the Rustle two dozen growth, which is our primary benchmark,
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  Speaker 1: where small cap growth investors is only up five per cent. UH.
• 1:57
  Speaker 1: We think that the value we should for small cap
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  Speaker 1: versus large cap is particularly attractive, especially we look at
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  Speaker 1: small cap growth valuations on a relative basis or a
• 2:07
  Speaker 1: parody on a pe basis for next year, usually at
• 2:10
  Speaker 1: the premium because you have higher growth. Which comes back
• 2:12
  Speaker 1: to what I said earlier, where if earnings come through
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  Speaker 1: in small cap companies and in large cap companies, they're
• 2:19
  Speaker 1: both what they're gonna move up, but small cap is
• 2:20
  Speaker 1: gonna move up more than large cap. What are the
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  Speaker 1: biggest head winds to that? To earnings growth, Inflation is
• 2:32
  Speaker 1: probably the biggest headwind um. Also, if you get to
• 2:36
  Speaker 1: slow down internationally in places like China, that that that
• 2:40
  Speaker 1: would be a that would be a head wind um.
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  Speaker 1: And so far companies are managing it pretty well, especially
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  Speaker 1: in small cap. They're pretty nimble. They've been able to adjust.
• 2:50
  Speaker 1: But if wages move up significantly and demand slows down,
• 2:54
  Speaker 1: that would also be a bad recipe. But right now
• 2:57
  Speaker 1: we aren't seeing evidence that that tilts us negative. The
• 3:00
  Speaker 1: CEO of Phillips this morning said his problems are chips
• 3:04
  Speaker 1: and ships, so he's having a real problem getting stuff
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  Speaker 1: shipped around h Prices are very high for that and
• 3:11
  Speaker 1: he's having a real problem getting the chips he needs
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  Speaker 1: to put in his products. Yeah, so I don't think
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  Speaker 1: that's a surprised anyone or any of the companies we
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  Speaker 1: talked to at this point. They've been able to navigate
• 3:23
  Speaker 1: that situation. And that's baked end of people's estimates going forward,
• 3:27
  Speaker 1: which again that's why I come back to it. Demands
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  Speaker 1: better and supply chains us enough, which I think in
• 3:33
  Speaker 1: general that's going to happen. Uh, then you can see
• 3:36
  Speaker 1: an upper provision to earnings estimates as that works through
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  Speaker 1: the system over the next nine to twelve months. All right, Brian,
• 3:42
  Speaker 1: you mentioned earnings were just starting to get really into
• 3:45
  Speaker 1: the thick of things here. We had some good numbers
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  Speaker 1: out of some of the big financials last week. What
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  Speaker 1: are you going to be listening for and looking for
• 3:51
  Speaker 1: this quarter? So what we like in small cap is
• 3:57
  Speaker 1: that you can find stocks that are and efficiently priced,
• 4:01
  Speaker 1: where the analysts estimates uh tend to be a little
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  Speaker 1: bit stale, you have less analysts are covering them, and
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  Speaker 1: so you can buy good companies with good valuations where
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  Speaker 1: the fundamentals for the companies that we buy or be
• 4:14
  Speaker 1: better that with embedded in street expectations. So we have
• 4:16
  Speaker 1: around a hundred stocks of the portfolio and we're gonna
• 4:19
  Speaker 1: be monitoring the amount a case by case basis bottoms
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  Speaker 1: up as to whether or not delivering on the on
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  Speaker 1: the key performance metrics for for that particular business and
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  Speaker 1: in general, I expect things to be really strong across
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  Speaker 1: the board, which which I think is good in almost
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  Speaker 1: every sector. UH, based on a lot of macro factors
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  Speaker 1: that you've talked about, kind of baked in the numbers,
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  Speaker 1: demands super strong. When you look at I mean speaking
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  Speaker 1: of consumers, when you look at the savings rates here,
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  Speaker 1: do do they spend it back down to the historical average?
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  Speaker 1: I think so, Um, we're overweight consumer right now. UH.
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  Speaker 1: There are a lot of UH stocks in small cap
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  Speaker 1: where they're priced at median or historical valuations, and we're
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  Speaker 1: seeing the consumer come back and a lot of stocks
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  Speaker 1: that we are one of our biggest positions to Sea World,
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  Speaker 1: for example, which which has been a really good stock
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  Speaker 1: and demand is accelerating. They're based on consumers wanting to
• 5:21
  Speaker 1: get back out and about evaluations attractive and they've really
• 5:24
  Speaker 1: worked through a good margin profile business. I like that one.
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  Speaker 1: All right, Brian, thank you so much for joining us.
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  Speaker 1: We always appreciate chatting with you. Getting an update on
• 5:32
  Speaker 1: the world of small cap stocks. Brian Smaller. Brian Smaller
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  Speaker 1: principal portfolio managered Hood River Capital Management three point three
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  Speaker 1: billion dollars in assets under management. Looking at the small
• 5:43
  Speaker 1: cap stocks and again is Brian was mentioning they've underperformed
• 5:47
  Speaker 1: UH this year. But I think a lot of you know,
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  Speaker 1: fund managers have exposure to the small caps, particularly if you,
• 5:54
  Speaker 1: you know, part of your cyclical trade, particularly part of
• 5:57
  Speaker 1: the reopening trade. A lot of fun managers looking for
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  Speaker 1: exposure with small cap stocks think that they can get
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  Speaker 1: some better bank for the buck in terms of a
• 6:04
  Speaker 1: reopening economy and the impact that that could have on
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  Speaker 1: smaller companies. Now, let's bring in David Diets out of Summit,
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  Speaker 1: New Jersey's a managing principle and senior portfolio strategists at
• 6:18
  Speaker 1: Peapack Private Wealth Management, where they have nine point eight
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  Speaker 1: billion dollars of assets under management. David, I find today's
• 6:26
  Speaker 1: market really interesting, as we're seeing such a jump in
• 6:28
  Speaker 1: rates globally on the short end of the curve in
• 6:32
  Speaker 1: it mostly in two years and in some five years
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  Speaker 1: UM and we saw here in Europe a sell off
• 6:38
  Speaker 1: in stock so it was bonds down, stocks down, and
• 6:42
  Speaker 1: everyone this morning was talking about the sixty forty portfolio.
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  Speaker 1: What's your take on the age old construction? Well, I mean,
• 6:52
  Speaker 1: you know, I think stocks are making at least the
• 6:55
  Speaker 1: United States here hugging the flatline after one of the
• 6:58
  Speaker 1: strongest weeks since July. Pretty good showing, given um those
• 7:02
  Speaker 1: concerns on on inflation and and so forth, that you
• 7:05
  Speaker 1: just mentioned Um, you know, I think equity investors have
• 7:10
  Speaker 1: to take a long term view here. Valuations are high,
• 7:15
  Speaker 1: blasphemy all the time. Is this the right time to
• 7:17
  Speaker 1: invest in? All I can say is this is the
• 7:19
  Speaker 1: wrong time to be in cash and and most of
• 7:23
  Speaker 1: fixed income, because of course, you know, the only thing
• 7:26
  Speaker 1: more expensive than stocks are our bonds, the fidel cash
• 7:29
  Speaker 1: reserves yielding one hundred of one percent. And we know
• 7:33
  Speaker 1: inflation is here. Inflation is gonna get worse. We don't
• 7:37
  Speaker 1: know how transitory or permanent maybe, but this is a
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  Speaker 1: tough time to just be sitting there in cash. And
• 7:42
  Speaker 1: so I think we're seeing, particularly among retail investors that
• 7:46
  Speaker 1: continuing by the diet mentality, and of course we just
• 7:49
  Speaker 1: had to kick off their earnings week last week. Um
• 7:53
  Speaker 1: of the companies of reports so far top earnings per
• 7:55
  Speaker 1: share expectations that should be a great earning season, and
• 7:59
  Speaker 1: in so things actually look reasonable for equity investors going forward. Here,
• 8:05
  Speaker 1: David I c W T, I Crew Oil and North
• 8:08
  Speaker 1: of Barrel, How do I play this in the stock market?
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  Speaker 1: So Um, I think that UH investors should of course
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  Speaker 1: stay diversified, and of course energy stocks are up six
• 8:23
  Speaker 1: year to date, but there may be more room to go.
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  Speaker 1: And and here's why. Although normally the cure for high
• 8:30
  Speaker 1: prices is higher prices, we've got a situation here where
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  Speaker 1: energy producers don't want to produce because um, you know, governments,
• 8:39
  Speaker 1: policy makers, banks are telling them, no, you've got to
• 8:42
  Speaker 1: go green, and so they're saying, well, why should I
• 8:44
  Speaker 1: invest it? Take advantage of these higher prices, because that's
• 8:47
  Speaker 1: not the future. So you could have a situation and
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  Speaker 1: I think we do have a situation where supplies kind
• 8:53
  Speaker 1: of dwindle or stay constant. Meanwhile, and and therefore, but
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  Speaker 1: consumers and users cannot switch over to green sources as
• 9:02
  Speaker 1: quickly as possible. And of course, what we've heard from
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  Speaker 1: the UK is some of the hope for green sources,
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  Speaker 1: for example, wind have not been as productive as hope
• 9:10
  Speaker 1: because wind speeds have died down. Who knew, but that's
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  Speaker 1: what we have. It hasn't been very windy here. Apparently.
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  Speaker 1: Let's get to your stock picks, David, Um, what do
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  Speaker 1: you like in the US? We'll gets you pumped in
• 9:23
  Speaker 1: the morning. What do you what do you what are
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  Speaker 1: you excited to recommend when somebody asks um for a pick?
• 9:29
  Speaker 1: So you know, tying into that energy theme. We do
• 9:33
  Speaker 1: think that UM energy stocks are still well off their
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  Speaker 1: all time highs, have great dividends, are being very conservative
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  Speaker 1: about spending money for new production and rather returning money
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  Speaker 1: to shaubles in the form of higher dividends and stock buybacks.
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  Speaker 1: You know, one of the bluest of all the blue
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  Speaker 1: ships is Chevron Um, you know, with about a four
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  Speaker 1: percent dividend, very low price to earnings ratio. The stock
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  Speaker 1: was at one point well over on thirty. I think
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  Speaker 1: it's in low hundreds right now. UM even if some
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  Speaker 1: energy even if there's volatility and some energy companies go under,
• 10:08
  Speaker 1: you know, that just works out better for your your
• 10:11
  Speaker 1: ultimate blue chip here, which is Chevron. So that's one
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  Speaker 1: we would like. The other areas, I think investors have
• 10:18
  Speaker 1: to look at his healthcare and I'm not quite sure why.
• 10:20
  Speaker 1: I think there's a couple of reasons, but a lot
• 10:22
  Speaker 1: of the healthcare stocks, despite the fact that is the
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  Speaker 1: healthcare companies that are getting us to the other side
• 10:27
  Speaker 1: of the valley in terms of COVID nineteen, are just
• 10:30
  Speaker 1: way out of favor by investors. So one I would
• 10:33
  Speaker 1: say here is Bristol Myers squib is at a fifty
• 10:35
  Speaker 1: two week low. Uh, you've got like a three point
• 10:38
  Speaker 1: seven percent divid in which is more than twice which
• 10:41
  Speaker 1: the yield on the s trading about eight times earnings.
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  Speaker 1: And what I like about Bristol Myers is they fine
• 10:47
  Speaker 1: tune their focus onto oncology into immunology. Those are the
• 10:51
  Speaker 1: areas of the healthcare thing where people don't worry about prices.
• 10:55
  Speaker 1: When you've got cancer, people will pay what it takes.
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  Speaker 1: And so they've got the highest origin focus here. And
• 11:01
  Speaker 1: what I like is they've got a great R and
• 11:03
  Speaker 1: D pipeline, but they're great in terms of acquiring other
• 11:07
  Speaker 1: companies to augment that pipeline. Of course, they made a
• 11:09
  Speaker 1: big deal with Selgy not too long ago, which gives
• 11:11
  Speaker 1: him all the cell gene products. So Bristol Myers fifty
• 11:14
  Speaker 1: two week old, great dividend. What's not to like here?
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  Speaker 1: David Diets, thank you so much for joining us. We
• 11:20
  Speaker 1: always appreciate chatting with you, getting your thoughts on these markets,
• 11:22
  Speaker 1: on some specific names that you like at this time.
• 11:26
  Speaker 1: David Diets is a managing principle and senior portfolio strategist
• 11:29
  Speaker 1: at Pepeck Private Wealth Management. They about nine point eight
• 11:32
  Speaker 1: billion dollars in assets on their management. Uh, and he
• 11:35
  Speaker 1: is located in the bucolic town of some of New Jersey. Matt,
• 11:39
  Speaker 1: maybe you should think about Summit. We come back to
• 11:41
  Speaker 1: the do you know I absolutely love Summit and um no, seriously,
• 11:46
  Speaker 1: and some of my closest friends lived there. The thing is,
• 11:51
  Speaker 1: I don't want to commute to Penn Station. Yeah, good point.
• 11:54
  Speaker 1: I can't imagine the worst place to go than Penn Steve,
• 11:57
  Speaker 1: But I'll give you this, mat there really finally finally
• 12:01
  Speaker 1: doing a huge renovation of pet Penn Station. So we
• 12:05
  Speaker 1: can only done by the time my daughters in college. Exactly.
• 12:08
  Speaker 1: I've been waiting for this for thirty years, but they're
• 12:10
  Speaker 1: finally starting to get it done here, so we'll see
• 12:12
  Speaker 1: what happens. Now, let's get over to Janelle Woodword, president
• 12:18
  Speaker 1: of Mackay Shields. They have hundred six two billion dollars
• 12:21
  Speaker 1: in assets under management, and Janelle, I think it's interesting
• 12:25
  Speaker 1: you have tested some market correction scenarios, all of which
• 12:29
  Speaker 1: don't seem terribly unlikely. A resurgence of the virus, persistence
• 12:34
  Speaker 1: of inflation, credit problems in China. What's your biggest concern?
• 12:39
  Speaker 1: What's the biggest headwind. Yeah, sure, I think that's a
• 12:43
  Speaker 1: great point. I mean, I think if we look back
• 12:44
  Speaker 1: over the third quarter of those scenarios, we tested um
• 12:48
  Speaker 1: and we saw some volatility of the market, but really
• 12:50
  Speaker 1: we saw investors continue to engage in sponsor risk assets.
• 12:55
  Speaker 1: So because there's some competence as we see some headline
• 12:58
  Speaker 1: related noise that investors are going to to need to
• 13:00
  Speaker 1: stay engaged. But to your question, what are we watching?
• 13:03
  Speaker 1: Certainly right now, we're watching inflation data, UM, We're watching rates,
• 13:08
  Speaker 1: and we're watching the fed UM as we look forward
• 13:11
  Speaker 1: to really you know how we'll wait expect markets to
• 13:14
  Speaker 1: unfold over the bounce of one and into twenty two.
• 13:18
  Speaker 1: So I'm actually a big believer in the wall of warrior.
• 13:21
  Speaker 1: I'm a natural warrior, Janelle. Given that, how should I
• 13:25
  Speaker 1: be thinking about these markets? What are you guys doing
• 13:28
  Speaker 1: in terms of positioning your portfolios here given what we
• 13:32
  Speaker 1: do know about all those macro issues you just mentioned. Yeah,
• 13:36
  Speaker 1: I think what we're really thoughtful about is is creating
• 13:38
  Speaker 1: flexibility and optionality, And I think one of the things
• 13:41
  Speaker 1: that matters right now a lot is liquidity. Both as
• 13:44
  Speaker 1: we think about the unknown to the market is as
• 13:46
  Speaker 1: you rightly highlight UM but also appreciate that that markets
• 13:50
  Speaker 1: continue to trade to trade pretty well. But we want
• 13:53
  Speaker 1: to make sure that we have liquidity freed up to
• 13:55
  Speaker 1: take take advantage of volatility as it presents itself. UM.
• 13:59
  Speaker 1: I think actually when it comes to fixed income, we're
• 14:02
  Speaker 1: looking for some inflation protection structures and portfolios staying a
• 14:07
  Speaker 1: little bit shorter interest rate UM. But we do remain
• 14:10
  Speaker 1: fundamentally constructive, and we think that there's still significant opportunity
• 14:14
  Speaker 1: in in credit markets in particular, we're we're in credit markets. Yeah,
• 14:20
  Speaker 1: I think you know, some some areas that we're really
• 14:23
  Speaker 1: focused on is on the consumer side, the housing side, UM,
• 14:27
  Speaker 1: and we still think there's some select albeit less opportunities
• 14:31
  Speaker 1: in some of the COVID recovery sectors. UM. So some
• 14:34
  Speaker 1: of those are some areas that that we're focused on
• 14:37
  Speaker 1: UM as we kind of construct portfolios, But we certainly
• 14:40
  Speaker 1: do appreciate when we step back and look at aggregate
• 14:43
  Speaker 1: spreads and what things look like that markets are certainly
• 14:46
  Speaker 1: not as cheap as they were several months ago. All Right,
• 14:50
  Speaker 1: given that valuation concern, which I think a lot of
• 14:52
  Speaker 1: people certainly have, UM, it makes this earnings period that
• 14:56
  Speaker 1: we're really starting to get into the teeth of right now.
• 14:58
  Speaker 1: This week all that more important for many investors. Do
• 15:02
  Speaker 1: you know, what are you looking for from these earning reports?
• 15:05
  Speaker 1: We had the fanciers last week, pretty strong numbers across
• 15:07
  Speaker 1: the board. What are you looking for going forward? Yeah,
• 15:10
  Speaker 1: I think I'd hadlight two things that we're looking for.
• 15:12
  Speaker 1: The first things we really are watching the margin story,
• 15:15
  Speaker 1: and this ties back to the earlier conversation on inflation,
• 15:19
  Speaker 1: on how supply team pressures and energy price pressures in
• 15:22
  Speaker 1: particular are really flowing through earning statements and to what
• 15:27
  Speaker 1: extent those are not being passed on to the end customer.
• 15:30
  Speaker 1: I think the other thing that we're watching from a
• 15:32
  Speaker 1: fixed income perspective is really thinking about balance sheets. The
• 15:36
  Speaker 1: strength of corporate balance sheets has been really important for
• 15:40
  Speaker 1: the overall credit sector to whether this period, and now
• 15:43
  Speaker 1: we're at the point of time where we're looking how
• 15:45
  Speaker 1: how our entities redeploying cash um and are they doing
• 15:49
  Speaker 1: in a way that that is supportive of both long
• 15:52
  Speaker 1: term business trends but also savor bolt of creditors. What
• 15:57
  Speaker 1: um how much return can you back to be from
• 16:01
  Speaker 1: real focus on E s G. I mean, do you
• 16:04
  Speaker 1: give up some return in order to do the right thing,
• 16:07
  Speaker 1: or can you still make as much money as you
• 16:10
  Speaker 1: want to and you know, um not invest in big
• 16:15
  Speaker 1: E S G centers. You know, it's it's a great question,
• 16:19
  Speaker 1: especially if we think about credit markets through that lens
• 16:22
  Speaker 1: and recognize who issues in those markets and what does
• 16:25
  Speaker 1: it look like. And I will say, you know, going
• 16:27
  Speaker 1: back to portfolios, we are seeing a broadening of what
• 16:31
  Speaker 1: it means a fiduciary duty and what it looks like
• 16:34
  Speaker 1: and how do we think about materiality specifically within within
• 16:39
  Speaker 1: fixing com portfolios. And it's something we're very thoughtful about.
• 16:42
  Speaker 1: I think the academic studies have been mixed and are
• 16:45
  Speaker 1: still evolving in terms of this potential trade off between
• 16:48
  Speaker 1: returns and E S and G factors. But it's really interesting.
• 16:52
  Speaker 1: You know, we've recently I worked with Excellnal consulting firm
• 16:55
  Speaker 1: to do a survey of some of our institutional clients
• 16:58
  Speaker 1: and we're seeing that Mike, that that begin to shift.
• 17:02
  Speaker 1: We're seeing that investors actually believe you can get both
• 17:05
  Speaker 1: and on a risk adjusted basis, investors are better awful
• 17:10
  Speaker 1: or at least uh position the same to include E
• 17:14
  Speaker 1: S G factors within their investment mandates, and you know
• 17:17
  Speaker 1: that was something that really stood out to us. Do
• 17:20
  Speaker 1: you know one of the issues I hear about E
• 17:21
  Speaker 1: s G investing is, you know, the data is just
• 17:25
  Speaker 1: not great to help me make a decision here, like
• 17:27
  Speaker 1: for traditional financial analysis of my income statement, balance sheet,
• 17:31
  Speaker 1: casual statement, but nothing comparable in terms of breath and
• 17:34
  Speaker 1: depth on the E s G side. How do you
• 17:36
  Speaker 1: guys think about that? It's a great point and something
• 17:40
  Speaker 1: we ask ourselves every day. You know, we've been investing
• 17:42
  Speaker 1: a lot in our E s G data architecture and
• 17:45
  Speaker 1: making sure that we get that in and the truth
• 17:47
  Speaker 1: is the data is still very much evolving. One of
• 17:50
  Speaker 1: the things we're looking for UM is really looking for
• 17:54
  Speaker 1: more guidance from regulators in terms of providing clarity on
• 17:59
  Speaker 1: terms and death A missions and objectives to bring some
• 18:03
  Speaker 1: better clarity to some of these data points. UM. So
• 18:07
  Speaker 1: we've been really thoughtful on what we've seen to be
• 18:09
  Speaker 1: material to date, UM, but make sure that we're continuing
• 18:12
  Speaker 1: to build that out and think about it UM and
• 18:14
  Speaker 1: not be too prescriptive as we look forward. Right, And
• 18:17
  Speaker 1: I'll note on the f A function on the Bloomberg
• 18:19
  Speaker 1: terminal financial analysis. There is a data tab for E
• 18:22
  Speaker 1: s G data, so Bloomberg certainly contributing to the data
• 18:26
  Speaker 1: and analysis there. Janelle Wouldward, President McKay Shields located in
• 18:31
  Speaker 1: New York City. We'll have more coming up. This is Bloomberg. Now,
• 18:38
  Speaker 1: I want to get to Tim Gortney joining us now
• 18:41
  Speaker 1: out of Oklahoma. He is a chief investment officer at
• 18:44
  Speaker 1: Essential Wealth Advisors. They have four billion dollars in assets
• 18:49
  Speaker 1: under management. And uh, let me first get your take
• 18:53
  Speaker 1: on what we see today. There's not a lot of
• 18:56
  Speaker 1: action in stocks, Tim, but there is a big uptake
• 19:00
  Speaker 1: in rates, especially at the shorter end of the curve,
• 19:03
  Speaker 1: and I think increasing concern about lingering inflation and rising rates. Yeah, yes,
• 19:11
  Speaker 1: and it's probably overdue, you know. I think so many
• 19:15
  Speaker 1: other metrics have been showing these price pressures and and
• 19:19
  Speaker 1: certainly uh, company managers have been talking about it now
• 19:22
  Speaker 1: for several quarters. Um, and uh, you know, they've confirmed
• 19:26
  Speaker 1: it doesn't look like it's going away anytime soon. We've
• 19:29
  Speaker 1: seen it in the in the prices of so many
• 19:34
  Speaker 1: goods and services across the whole economic spectrum that I
• 19:37
  Speaker 1: think now you know, rates are finally just acknowledging and
• 19:41
  Speaker 1: reflecting the reality that that we've all kind of seen
• 19:44
  Speaker 1: and known for for several quarters. And it's healthy. It
• 19:47
  Speaker 1: needs to go up. I think for not only investors
• 19:51
  Speaker 1: who are in those fixed income investments who need to
• 19:54
  Speaker 1: hold them so they can actually have a slightly better
• 19:57
  Speaker 1: return and hold onto more of their per just in power,
• 20:00
  Speaker 1: but um, it's also I think just healthy to have
• 20:05
  Speaker 1: some rates move higher so that so many other assets
• 20:08
  Speaker 1: like home prices and certainly the prices of stocks, can
• 20:12
  Speaker 1: start to be valued more more fairly and not based
• 20:14
  Speaker 1: on you know, in essence zero interest rates. You know, Tim,
• 20:19
  Speaker 1: when I when I think of Oklahoma City, I think
• 20:21
  Speaker 1: of you know, oil, natural gas and w T I
• 20:24
  Speaker 1: crude oil here over two of barrel. You're in energy country,
• 20:29
  Speaker 1: oil country. What's the feeling in Oklahoma City when they
• 20:32
  Speaker 1: think about where we are in the energy cycle. Yeah, well,
• 20:36
  Speaker 1: you know, I think, um, I think so many people
• 20:40
  Speaker 1: are feeling a little bit better about things. You know,
• 20:42
  Speaker 1: we had a really rough stretch and in many ways,
• 20:47
  Speaker 1: you know, the energy industry was was victims of their
• 20:50
  Speaker 1: own success. They were so successful at getting energy out
• 20:54
  Speaker 1: of the ground that the supplies, you know, drove the
• 20:57
  Speaker 1: prices down, and it was great time for con sumers.
• 21:01
  Speaker 1: As prices you know, between basically two thousand and fifteen
• 21:04
  Speaker 1: and two thousand twenties stayed really low um, and you know,
• 21:09
  Speaker 1: as such, producers were not as uh you know, not
• 21:14
  Speaker 1: as incentivized to go invest in new products and open
• 21:18
  Speaker 1: up new, um, new sources of a production. And so
• 21:23
  Speaker 1: seeing the price move up, I think is is kind
• 21:26
  Speaker 1: of like a bitter suite ending to what's been a
• 21:29
  Speaker 1: really rough time period. People are are are feeling much
• 21:32
  Speaker 1: better about things, and because there have been such you know,
• 21:36
  Speaker 1: so little investment in these areas and because companies are
• 21:40
  Speaker 1: so hesitant to go open up new sources, I think
• 21:43
  Speaker 1: you know, it's likely to stay maybe higher, for for longer.
• 21:46
  Speaker 1: As we've been talking about inflation just in general, do
• 21:49
  Speaker 1: you get the sense that people are still conservative? I know,
• 21:52
  Speaker 1: saving rates, savings rates nationwide have gone up, um. You know,
• 21:57
  Speaker 1: even as government spending has soared, is is concerned about
• 22:03
  Speaker 1: future tax increases and you know, just the volatility situation
• 22:09
  Speaker 1: holding people back from investing in the future. Yeah, yeah,
• 22:15
  Speaker 1: you know, I'm not sure exactly why there is so
• 22:19
  Speaker 1: much cash and why um, so many people have made
• 22:22
  Speaker 1: the decision to hold cash and and hold things like
• 22:25
  Speaker 1: like short term bonds or bank deposits. Clearly, the banks
• 22:29
  Speaker 1: um are over you know, over capitalized. They don't necessarily
• 22:33
  Speaker 1: need those extra deposits, and that's why they're not earning
• 22:35
  Speaker 1: anything on those, um you know. I think we're probably
• 22:41
  Speaker 1: going into a period of time in the markets where
• 22:45
  Speaker 1: the last twelve to eighteen months have been very easy.
• 22:47
  Speaker 1: We haven't had any corrections. Everybody has enjoyed the ride higher.
• 22:51
  Speaker 1: It's been a fairly smooth ride. But now because of
• 22:54
  Speaker 1: those things that you just mentioned, um, you know, the
• 22:57
  Speaker 1: government has spent, the government has gone into debt. It's
• 23:00
  Speaker 1: likely that we'll have higher taxes moving forward, everything else
• 23:05
  Speaker 1: being equal, that's going to be a drag on growth.
• 23:08
  Speaker 1: I think people and companies have held a lot of
• 23:10
  Speaker 1: cash reserves because they don't know exactly what's coming and
• 23:15
  Speaker 1: it could be that, you know, growth is going to
• 23:17
  Speaker 1: be slowing and then they want to have some some
• 23:20
  Speaker 1: more conservative holdings. So I think markets are going to
• 23:23
  Speaker 1: find in the economy is gonna find we're gonna have
• 23:25
  Speaker 1: to earn our growth going forward more than we have
• 23:28
  Speaker 1: in the last year and a half, where it's been,
• 23:30
  Speaker 1: you know, relatively smooth sailing. Tim, you mentioned higher tax rates.
• 23:34
  Speaker 1: What are you telling your clients as they think about
• 23:37
  Speaker 1: positioning their portfolios for an environment that will likely have
• 23:40
  Speaker 1: higher personal and corporate tax rates. Yeah, so, you know,
• 23:45
  Speaker 1: we still obviously don't know the specifics. We know in
• 23:49
  Speaker 1: general that the the trend is going to be higher,
• 23:52
  Speaker 1: as you say, both on the corporate side. On the
• 23:55
  Speaker 1: corporate side, that's going to lead all the other things
• 23:57
  Speaker 1: being equal to slightly lower earnings than than they would
• 24:01
  Speaker 1: have been otherwise. And then on the personal side, changes
• 24:05
  Speaker 1: and things like capital gains rates, UM are going to
• 24:10
  Speaker 1: probably move markets in in some way as people reposition
• 24:15
  Speaker 1: their portfolios for the for the new tax rates that
• 24:17
  Speaker 1: we're gonna be living under. UM. You know, we're going
• 24:21
  Speaker 1: to probably wait and see on on on portfolio management
• 24:27
  Speaker 1: in terms of the way that these things come out.
• 24:29
  Speaker 1: There has been some talk about the removal of the
• 24:31
  Speaker 1: step up in basis rule, although I think that's that's
• 24:35
  Speaker 1: probably dead. More more concerning to us are the planning
• 24:40
  Speaker 1: text rules and UM, so we're gonna be watching more
• 24:43
  Speaker 1: heavily on that side to see if people might need
• 24:45
  Speaker 1: to make changes in their estate planning first and then
• 24:47
  Speaker 1: probably look at portfolio management second. All right, Tim, thanks
• 24:51
  Speaker 1: so much for joining us and really appreciate you lending
• 24:53
  Speaker 1: some of us learning your time to us. Tim Courtney,
• 24:56
  Speaker 1: Chief Investment Officer, Except Wealth Advisors, located in Oklahoma City, Oklahoma.
• 25:03
  Speaker 1: Thanks for listening to the Bloomberg Markets podcast. You can
• 25:06
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• 25:10
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• 25:14
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• 25:18
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• 25:21
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