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