Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside my co host Matt Miller.
Every business day we bring you interviews from CEOs, market pros, and Bloomberg experts, along with essential market moving news.
Find the Bloomberg Markets podcast called Apple Podcasts or wherever you listen to podcasts, and at Bloomberg dot com slash podcast. We are live from the World Center Maria in Orlando, Florida at the b NY Melon Pershing Insight Conference. Two thousand members of the financial advice community are gathered here for learning, inspiration, and networking. And we are joined right now by no Tosh, head of Partnerships and Revenue at Pershing X. Noan, thanks so much for joining us here.
It's graef you down here in Orlando with you guys talk to us about Pershing X. What are you guys doing there?
Absolutely thanks for having me. Pershing X is a startup within Pershing within b and Y Melon focused on working with our advisor community and helping them integrate the various technology platforms that they're using.
Today.
We're looking to deliver to them interoperability. We're looking to deliver to them a more seamless experience with their technology and essentially provide to them a level of efficiency that gives them time back with their clients so that they can help more people.
Is this kind of a you know a sense, a little bit of a client servicing kind of effort here, because again, there's so many financial service folks kind of leaving the big brokerage firms going out on their own, the registired investment advisor business that seems to be a huge wave within retail financial services. That's where you guys kind of fit in to help those folks.
So we certainly help those folks, and I would say
we're a technology first platform. It's about delivering to them an end to end platform that can help them from everything from their prospecting all the way through account opening into their day in the life, everything that they're trying to do within technology platforms today, we have a stat that we've seen where you know, up to seventy five percent of their time is being spent on administrative work, on technology, on entering data in one platform, and you
know what, having this wile their chair and go enter this very same data in the next platform. So we've seen an opportunity to deliver efficiency and to enable them to do that just once and that will give them more time to work with their clients, with their investors.
Speaking of those platforms, talk to us about these partnerships that you're going to announce at Insight.
Absolutely, so a big part of my role is actually curation and curating the various technologies that exist out there in the ecosystem, finding the best and brightest emerging technologies, working with some of the big tech providers. Not everything needs to be or will be built in house, and so the partnerships are key part of the platform we're delivering. We have a fantastic partnership we announced late last year with a company called Conquest Planning. We're bringing them to
the US market alongside us. They essentially are an emerging provider of financial planning that we found to be pretty elite in what they do, and so we're looking for partners like that who can really bolster the capabilities we have on the platform, but essentially drive value. The more value we can give to our clients, and being able to find these types of partners and put them in our client's hands, that's where we want to play a role of curation.
So talk to us about kind of this is a role of technology. It seems like if I'm managing money for others, it's not just enough to be the smartest guy in the room. I have to have the technology to kind of service my clients, give them the type of service that they're used to with their Wells Fargo app or something like that. So I mean is that that's a big investment on the part of these folks.
It is a big investment, and I think it's why we exist. We recognize that over time, what's ended up happening is technology made a promise that it was going to deliver efficiency and make lives easier for advisors. But what's ended up happening is a lot of point solutions that don't integrate, that don't speak to each other, has actually created a burden on advisors and created a whole
other area that they need to learn. With Pershing X in the platform that we're launching in just four hours here, we think we can solve a big chunk of that through that integration and through that curation and give advisors back, you know, take a little bit of that burden off the advisor. Talk to us about your panel that you're hosting coming up later today. It takes a tech village.
Is the types of tech village? What are you guys can be focusing on there? That's a lot of that.
It's about collaboration, you know, And if we think about fintech, I think just a few years ago, the big story about fintech and banks was disruption and how FinTechs were disrupting what banks were trying to do. But I think we've come full circle on that. We are now at a point where it's not about disruption. It's about collaboration and how can banks and FinTechs work together to deliver that value to our shared clients. And a lot of that boils down to shared values. What are we all
trying to do. We're trying to enable an ecosystem where technology serves that we do deliver on that promise of efficiency, where we're simplifying the lives for advisors, and ultimately that results in a market where more people can be helped by financial advisors.
You mentioned about partnering up with Conquest Planning. What other big tech providers do you plan to work with or hope to If you can give us any divulge some of that information.
So another one I can share that we announced recently with Snowflake. That's a huge partnership for us where we're bringing the capabilities of cloud and data optimization to our clients. We have a handful of other ones, but I know I can't share them until tomorrow morning.
I we'll report that tomorrow. Down here from or land out.
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Joining us here at live is Tanya Bottoms. She's a managing director and senior managing counsel for BE and My Melon. We want to talk about diversity and inclusion. That is a challenge across society, across the economy, across corporate America, and certainly within the financial services industry. So Tony, thanks so much for joining us. Thanks for having me talk to us about you know, we're surrounded here by all types of financial services people. Talk to us about the
financial services industry in terms of diversity inclusion. Where is the industry today versus ten years ago? And where does it need to go?
I mean, look, I think what we really talk about is the opportunity in financial services. Even just looking around this conference, seeing all the different people and backgrounds, the opportunity within financial services to bring your individual perspective to your.
Work is huge.
Representation is definitely growing across the industry. We still have a lot of work to do, but the opportunity to show how diverse thought, diverse perspective, diverse experience can really positively impact how we bring services to the broader community. It creates a big opportunity for people to experience diverse perspectives, to work with someone who may not necessarily look like them, right through that collaboration push for positive community impact and business outcome.
All Right, So if I walk into a financial services firm, you know, any town, USA, and there's forty advisors there, how many are going to be you know, maybe non Caucasian mail. Somebody's gonna look like me, a middle aged white guy. I mean, how diverse are we today? And kind of how much more has to be done?
Do you think your representation question is the you know, is the seminal one and absolutely as the as the population of financial advisors is aging.
There will be some shift in that representation.
Financial advisors are actively looking to diversify their practices because they want to be able to serve the communities in which they live and reside. To your point, yes, the numbers are still overwhelmingly non diverse, but there is a lot of effort and actual intention, not just thought, around how we're actually going.
To change those numbers.
So it's bringing financial services into schools so that students, even at some of the most young ages, understand what they could do in a field like this and seeing people.
Who look like them.
How we're bringing financial services to the community, whether that's through pro bono financial work or through other mentoring and sponsorship programs where we're you know, bringing the depth and breath of financial services to life. So we have a lot of ground to cover, but I'm optimistic about where we'll end.
When you talk about representation growing in the financial industry, what specific corners do you see improvement right now?
So I think we've definitely seen the improvement from a gender perspective, where the representation of genders has definitely grown, and you've seen more of a balance. I think we still have opportunity with regard to our LBGTQ population as well as you know with our ethnic representations.
Seeing senior.
Women, men who are from those various ethnic groups, from those various identities, having more visibility, more senior leadership roles is something that will have to have a lot of more action and attention around in order to see those numbers go up.
Are there certain you know, I'm just wondering, are there certain parts of the financial services industry that are doing better than others, maybe some consumer facing versus back office have you? Are there certain areas that are doing better than others?
So historically I think more of the operational focused areas have represented more diverse numbers. What we have seen though, is as those numbers climb in increased responsibility or more seniority, then you start to see some of that balance than out.
So definitely looking internally where the talent is already there, and looking for ways to create additional career paths and how to take the experience that they've had in one area and where are those transferable skills applicable in another part of the financial services world.
When you talk about the management positions, what do you think has been typically the issues that have stood in the way, whether it's females or the LGBTQ community from trying to get more towards those promotions that you were talking about.
You know, I think there's a there's a lot of research around this. One of the challenges that we all face is you you know, everyone has a natural affinity to work with, engage with, get to know people who are more like them. So creating the opportunities for engagement, creating the opportunities for you know, senior leaders to get to know the diverse LBGTQ or gender diverse talent in their organizations, more of those opportunities are are being created.
So how about is just as important, but.
Also understanding and knowing those pathways to leadership is equally important.
I've done a lot of college campus recruiting for investment banking firms over my career, and you go down there and you make your pitch and for if going to a historically black or university or college, what's the success rate that a financial services firm has. I mean, they are they having successes that where some of the kids want to go into financial services.
Yes, you know, and I know you mentioned HBCUs, but it's true of college campuses right across the country. Having the high school and college students understand the different careers that you can have in financial services.
Has to be eye opening. My background is that I'm a lawyer.
When I was in law school, I would never have described to you the job that I have today in financial services. So having college students and high school students and others actually see people doing the things that they could potentially do will create, I think one a lot of that interest and take away a lot of that mystique around how do you get into these financial services firms?
What can you do if you.
Don't necessarily just want to be a financial advisor?
Right?
Exactly? All right, Tanya, thank you so much for joining us. Tanya Bottoms, she's a managing director and senior managing counsel for BNYML and talking about diversity inclusion. It is a key issue across corporate American, including the financial services industry, and it is front and center here at the Insight conference. We appreciate getting some comments from Tanya. They're looking at the market chare I mean, there's so much you're.
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Eleven thirty.
We are live from the World Center Marion in Orlando, Florida, at the B and Y Melon Pershing Insight Conference. Two thousand members of the financial advice community gather here for learning, inspiration, and networking. I want to talk about alternative investing. I mean, it's a big thing for institutional investors, not so much for independent retail investors. Our next guest wants to change that.
Matt Brown. He's a founder and CEO of CASE. Matt Dix so much for joining us here at the conference. Talk to us about what you guys do at CASE.
Paul, thanks so much for having me on the show.
But this is a very exciting time for financial advisors to be able to get access really at the level of institutions to alternative investments. And when we say alternative investments, we're really talking about institutional quality, private equity, private credit, hedge fund strategies, real estate strategies, the things that and strategy that the institutions have been putting capital behind for decades that have largely been off limits for financial advisors and
their clients. And what our platform does as a technology company, we actually have a marketplace platform where financial advisors for the first time can come onto the platform, look at strategies, understand those strategies, and invest in those strategies on behalf of their clients.
Can they get financial advisors, regiro investment advisors. Can they get access to or is access provided by a KKR car level? I mean, are any of their funds open to retailers?
Now? All of them are?
Oh, you've just hit upon probably one of the biggest trends in alternative asset management. From the perspective of the asset manager. You're seeing all the firms you just mentioned, the Blackstones, the Apollos, the Carlisles, the kkrs and so many others that are not those daily household names making sure that wealth management becomes a priority for growing their
asset base and diversifying their asset base. And this is actually a good thing because what's happening is they've always thought about wealth as a source of capital of growth, but they never really focused on it to the point where they would necessarily create unique investment vehicles or really cater specifically to that market. Well, that game's over, and it's over because there are trillions of dollars about to come into that market for them, and they want to be able to capture that.
Matt, this is Jess flitting in for an area doing well. I wanted to ask you about this rise of the modern three dimensional portfolio. Talk to us about what that is, holloworks.
Sure, well, I think we all know the traditional sixty forty portfolio. That term has been around quite a long time, but it was never one that was adopted by institutional investors. There is always that what we're now calling the modern three dimensional portfolio, where it's maybe more of a fifty
thirty twenty and twenty being alternative investments. Now institutions have all closer to forty or fifty percent, But we're saying to the RIA or to the advisor on behalf of their client, let's just try to get those allocations up to ten percent, fifteen and twenty percent, and that really gives a more well balanced portfolio that stands a much better chance in uncertain markets like we're in right now to perform for the long term.
And when you're talking about uncertain markets, how does this play into Obviously everybody's looking ahead to next week with the Federal Reserve decision, expecting a potential pause but maybe a skip rather we could see potential another hike in July. How does that affect when you're trying to obviously have these allocations in these portfolios.
Well, uncertainty overall, whether it's rising or unknown levels of interest rates, or global macro uncertainty or election uncertainty. You know, you can kind of laundry list out the things that are giving and financial advisors of anxiety right now about
making sure that their portfolios are performing. But a different alternative investment strategies, whether there are private equity or venture investing or private credit investing, they all have a home and a portfolio based on different market cycles, and they have that impact of dampening volatility and getting access to certain types of investments that are not made available in the traditional public market.
So your typical registered investment advisor, to the extent they have been reluctant to put their clients into alternatives, has it been a I don't necessarily understand the asset class or B. It's just not easy to do. The technology is not there, It's not easy for me to do as opposed to just pushing a button and buying a stock.
Short answer, yes, okay to both and several other things.
The entire alternative.
Investment process, from education to execution to management of a portfolio once you own alternatives has really only been designed for large institutional investors. What CASE has done is it's use technology to break down all the pain points along the way to make alternative investing as easy to invest in as say a mutual fund or ETFs. Now, that
doesn't address the biggest issue though, what it is. Survey with recently with Mercer, large global consulting firm, and it's nine out of ten financial advisors find that it's a lack of education and understanding of strategies that really prevents them from putting money or more capital to work in alts. So that's why CASE is really, you know, invested in and will continue to invest in modern ways of delivering content, strategy information, implementation information to financial advisors.
Now, what are you hearing from clients specifically when it comes to what they're looking for when it comes to alternative investments.
Well, our client, and that's a good point distinction. Our client is the financial advisor, and then they have clients, which are the individual investors. So what we're hearing generally bubble up through the financial advisor is that they want strategies right now that will one give them access to huge growth opportunities that are not readily available in the public markets.
So that would be private equity.
So much of our growth economy is in private equity or private markets, So that's number one.
They want to participate in the growth of America.
And if they're not investing in private markets or private equity, they're not getting a large swath of that opportunity too. They really want to see income oriented strategies like private credit have an impact on their portfolio and more and more so we're seeing now as a platform again, just to kind of take a half step back, as a platform, we don't tell advisors where to put money. We just observe where money goes. So we're seeing trends in data.
More and more capital we're seeing now flowing into what would be traditionally called macro trading strategies, Asset managers that have real flexibility to look at different opportunities and volatility globally and make bets.
Matt just met the thirty seconds left. What's a question you're getting most often here on the floor from your customers.
You know, it's back to how do I get started?
Yea?
You know, there is, of course a large community of financial advisors that are fluent in alternative investments, but the vast majority are just getting started. And so we always say, you know, sign up for Case, have the tools that we can deliver and arm you to be competitive in building your client's portfolios, and we can begin to walk you through those beginning steps.
All right, great stuff, Really appreciate it, Matt Brown, He's a founder and CEO of CASE.
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Right now, let's head back. We are back here down in Orlando. We're live from the World Center Marion in Orlando at the BNY melon Pershing Insight Conference. Two thousand members of the financial advice community. You're gathering here for learning, inspiration and a lot of networking, and they network very well. I can tell you that. Joining us here right next to me is Stephanie Pearce. He's the CEO at Dreyfus Melon and Exchange Trade of funds at B and Y Mellon.
WHOA wow, there's a lot going on that you do, Stephanie, talk to us about kind of what your what's your focus here at this insight conference today? What do you the message you want to get across?
Well, not going to sneak previews some of the announcements we have comedy, you'll hear about those, But right now I would love to talk to you about what's going on at Dreyfus and in the cash markets as well as in our ETF business and in the ETF market.
So you pick, all right, let's go.
Let's go ETF. That's where the cool kids hang out.
Excellent. You want me to start?
Sure?
What do I mean? What are the key things? I mean? I know that ETF business growing assets going there like crazy. Uh, A couple of big players, but I see lots of smaller players coming in with really unique ETFs leverage. This three times leverage. This I mean you.
Want to give me a want me to give you fact?
You won't know?
Yes, first quarter this year, if you had to guess, it's a loaded question. Who is the fastest growing ETF issuery in the United States in the top forty oh Q one of this year.
That's I mean, I'm gonna have to go to you guys.
That's right, B and y Melon yep, Okay, So she didn't.
Know that I did not, So talk to us about your business. The funds flows, you're seeing what's hot, where are people putting money?
So look, you know, flows speak for themselves.
Here's another single that you may not know of the one hundred and eight billion dollars of net ETF flows in this country in the United States in the first four months of the year. Wow, thirty percent went into active ETFs. That's the highest number we've seen. Clients are voting with their feet. They like the vehicle. They like it not just for passive, but for active as well. And we've been doing the same thing. We've got about half of our seventeen funds and active, the other half
in passive. We launched two new ones in the last couple of weeks here you may have heard about them. One is an innovator's etf BKIV and this is actively managed concentrated portfolio.
And the statistic here that I'll.
Give you is that this is this is a fund that's focused on disruption, right, not just technology, but companies that are disrupting the way we live, the way we work, the way we play, the way our kids will do that fifty two percent of the S and P five hundred companies have disappeared in the last fifteen years, So this is really investing in that next generation of companies on that thesis that.
What you see today is not going to be what you see tomorrow.
The other fund is BKWO bn Y MEL and Women's Opportunities Fund. I can tell you as a woman executive my company, all fifty thousand people at BNYMEL and are very proud that we launched this.
And the thesis here is that.
Companies that are doing a better job recruiting, retaining, promoting, and supporting women in the workplace and letting them do it all actually outperform companies who don't, both in terms of stock performance and profitability. And there's real data to support that. So really excited like these funds in market.
Stephanie, this is Jess Mitten in our Interactive Brokers studio in New York. Can you talk to us more about the direct indexing platform and exactly how it works as far as if you're a customer and you want to go and do that, how do you get started?
Sure?
So direct to next thing and actually called that a number of years ago. Right now, it's called direct insect if I think of it as a client who can own exactly like our institutional clients, a direct position all the stocks in the major index. But on top of getting that benchmark turn for a very attractive price, we can also customize to their preferences and needs.
They may be values, they may.
Be exposures they want, and on top of that, we give them better tax treatment. So we give them the index return, but over the period of a year or more than a year, we're actually harvesting losses.
Now.
I know it sounds crazy to say losses are good for you, but you all know this, right. Muta funds are not super efficient, and so if you have gains in your muta funds and you have the benchmark urn plus some tax loses you can use in your direct account.
You can wipe away a lot.
Of the payments that you have to pay to the US.
Government by parmage and the two in a portfolio.
So advisors love that because that allows them to add in criminal value to investors.
So one of the things I don't understand or I thought I understo about ETFs is low costs because not much has happened and there's no portfolio manager and research departments. So an active ETF, how do you square that with the low fees? Or our fees higher for active.
So fees are generally higher for active products ETFs or any other kind. Having said that, the ETF structure allows you to structurally release gains, right, we can actually manage by tax slots. So when we have the opportunity to rebalance, or we have redemptions and subscriptions into the fund, we can actually utilize that to release gains that don't ultimately get worn by the investors. So it's structurally a better vehicle from a tax perspective, whether it's active or passive.
So is the is there a snare where the mutual fund business does not just go away? I mean ETF you talk about the numbers and it's every single quarter. And then you've got mutual funds converting from mutual funds to ETFs. I mean, do why not need to go up to Boston like I did for thirty years just to visit Fidelity Wellington and all those people putingam.
Well, listen, it's not an accident that you see all the large mutual f flayers, including ourselves, putting ETFs into the marketplace. Right, we're really responding to clients. So it's less about just what's inside the wrapper. It's about the vehicle itself, right, And if you think about the shift of fee based advisors, they love these vehicles. They're less
expensive for them to buy. Even the active ones are generally slightly less expensive just because of the chassis is more efficient, right in terms of all the operating functionality that you need. So you know, for investors, it's a great solution right there. You know, think about it. It's the ultimate democratization of finance. There's one price, there's no share classes. Everyone gets the same thing, whether you're a large investor, small investor. It's fully transparent. You could trade
it all day every day. Right, it's the ultimate democratization. You could buy on any platform. Technically you don't even need an advisor, although most clients want to have one to guide them through it. So for me, when I think about my thirteen year old, right, is she ever going to buy a much fund, maybe a money market fund, but she'll probably buy ETFs.
Yeah, Stephanie, what kind of shifts have you been seeing in ETFs this year, whether it's particular types of flows just given the backdrop of the Federal Reserve and potentially maybe they're getting closer to the end of that rate hiking cycle.
Yeah.
Absolutely.
One of the conversations that intersects really between my money market business at Dreyfus and the ETF business that I run is exactly what you just said. It's fixed income and right now what we're seeing if you look at your to date is fix income ETFs have seen this kind of barbell in flows right where a long government intermedia core bond, you've seen a lot of flows there,
but also in ultrashortytfs. We actually have an ultra ETF managed by our Dreyfus money market market team BKUI, and what we're seeing is clients are barbelling between kind of the long and the shorter end of the curve. But we're also seeing in the ultrashort space clients starting to extend duration now that the FED is approaching what appears to be the peak and terminal rates and starting to exten duration and looking to diversify from just the money
market allocation into ultrashortytfs. And that's really the cash segmentation conversation that we're having with clients is where do you put your cash?
Clients are very focused on not only where.
They put it, but who's managing it and how they're managing it and the combination of debt sealing, net failures and terminal rates.
What's the key topic that you're finding yourself having here at this insight conference.
Well, I would say cash is sexy again, yep, right, we're at five percent yields gives no pun intended but it gives you a run for your money and any assea class.
So that's clearly one.
And again, how you segment it now that we're beyond the debt sealing debate? And then I think absolutely this combination of tax efficient and reasonably financially attractive you know, returns that you can get through ETFs and direct in
mixing type vehicles. If you look at the advisors out on the floor here, Paul, these are the things that they're focused on, is how do I deliver extra value from my client in terms of you know, reasonable fee, is alpha generation tax, alpha asset location, as well as acid allocation.
And these are the vehicles that do that.
They're not just buying and selling bonds and stocks anymore.
It's a different world, different.
Exactly, all right, Stephanie, we really appreciate it talking about all that ETF stuff, and it is a story that just keeps on giving. Stephanie Pierce, CEO at Dreyfus, Melon and Exchange Trade of Funds at BNY Melling.
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We are live from the World Center Mario in Orlando, Florida, at the B and Y Mellon Vergon Insight Conference. Two thousand members of the financial advice community gathered for learning, inspiration and some network and I see some networking going on right now at the lunch tables as people break between the various sessions. Let's talk markets here, let's get a broad view of the markets. We like to do that with the Fill, Orlando, chief equity strategist at Federator Hermes.
He joins me here down in Orlando, Phil, Good to see you again. Here. We were talking off air about the lack of breath in this market. If you take the SPX up ten eleven percent and sp thew is basically flat. That's a problem.
It's a huge problem, and it's been growing all year. The S and P five hundred from the beginning of the year now is up about ten or eleven percent. But if you look at what they refer to as the Magnificent seven in the technology industry, the seven big tech names Microsoft, Apple, In, Nvidia, Google, Facebook, Tesla, and Amazon, now I got them. All those stocks collectively are up
fifty percent five zero percent. The other four hundred and ninety three stocks in the SMP five hundred are essentially break even, and those seven tech names are dramatically overbought. So someone that studies the market the way we have over the course of history, suggests that that maybe these
stocks have gotten ahead of themselves. Maybe the AI hype is a little too frothy, and at some point over the course of the next couple of months, next cup quarters, there may be a bit of a reversion to the met.
Phil This is Jess in New York. I wanted to jump in here and get your thoughts on You were just talking about this potentially being frothy when it comes to technology and growth shares. I know you're not a portfolio manager, you're an equity market strategist, But how exactly are you advising clients to potentially position or your thoughts as far as how the market could move moving forward obviously going into the second half of the year soon.
So, Jess, that's a great question.
And the way we've looked at the year is that we thought we would have a barbell shape performance year in the s and P. Five hundred, We thought we would start the year in great shape. The first quarter or two we have, we felt that there would potentially be some chop here in the middle of the year, and certainly the dichotomy between these seven technology stocks, and the rest of the market potentially is sowing those seeds. We think we end the year in pretty good shape.
So if we're right that we potentially hit an air pocket here for any number of reasons, we can talk about the fundamentals that would suggest playing defense. That if growth has gotten ahead of itself, and we believe that they have value stocks are extraordinarily cheap. They're underperformed growth by about forty or forty five percent right now in terms of valuation. So we like domestic large cap and
small cap value stocks. We like international both emerging markets as well as developed markets.
We like cash.
We like bonds as a potential flight to quality as the economy slows later in the year. So the plan is play defense. There may be some rockiness to the market here over the next couple of months, next couple of quarters, and the idea is, let's try to preserve some capital and look for an opportunity to re enter some of these stocks at better price points later.
In the year.
How about bad valuation here? I mean, I guess we have to adjust for those seven names, but just broadly defined valuation are we I guess when you back out those seven big names that have just kind of ripped this year. Is how's the market looking in terms of valuation?
Well, overall, you're probably looking at about a twenty multiple, and you know we'd be a lot more comfortable in the mid teams. Ye, But some of these, you know, the big high flying tech names that we talked about in video, what are they selling thirty forty times forward revenues? You know, the the numbers, the nosebleed numbers are just making us nervous. Now for older guys like me and you, Paul, a lot of gray hair here. You know, I remember the cryptos, not a but a couple of years ago.
I remember the Y two K build up in you know, nineteen ninety nine, early two thousand and I had a young colleague sent me a text the other day telling me, Phil, you don't understand these seven technology stocks, these the defensive stocks. Now it's a new error, it's a new economy. And that was exactly what they were telling us in nineteen ninety nine and early two thousand and we remember how that ended.
Phil, I have to ask and follow up because you had talked about when it comes to value stocks, liking those bonds. But then you brought up cash, and I noticed that money market mutual funds, you've actually seen the fastest piece of flow since July twenty twenty, over the past thirteen weeks. And you were talking about how to preserve capital and re enter later in the year. What do you need to see in order to potentially use that cash and put it back to work in the equity market.
Well, right now, we like cash. Cash is a real asset class. Again, it's yielding five percent, so why wouldn't
you like cash? But if the market over the course of the next couple of quarters were to hit an air pocket of you know, ten fifteen percent, and we felt better about the fundamental outlook from an inflation standpoint, from a or a reserve standpoint, from an economic growth incorporate uring standpoint, then you've utilized that cash as one of your defensive tools to preserve capital, and then you can get more offensive later this year or the beginning
of next year when the fundamentals look better and when the valuations look more attractive. So I'm not suggesting that that cash at five percent is an offensive tool, but certainly in this kind of an environment, if you think that that growth stocks are ahead of themselves. Then cash potentially could be one of the vehicles you we utilized to try to preserve capital.
And I'm glad you brought up a yield, especially when you're talking about being around five percent, very different dynamic, right than compared to what investors had seen over the past decade or so. So then would we need to see a shift with what we're seeing in yield in order for investors to move away from either cash, money market funds and things of that nature and to move more aggressively back into equities.
Well, so now you get into the question of the underlying fundamentals in terms of inflation, and our view is peaked and it is starting to come down, but it's coming down at a very very gradual pace. And then that raises the question, what's the Federal Reserve going to do. We've got a big meeting coming up next Wednesday. You know, our best guess right now is that the Fed goes on pause at you know, next week's meeting. But given the fact that the Core Personal Consumption Expenditure Index and
the last set of data actually ticked up. We saw very hot jobs report, non farm payrolls just last Friday. We've got another big CPI report coming out next Tuesday. If the data continues to run hot, the Federal Reserve's bias has got to be that they need to maintain an elevated level of interest rates. That the immaculate pivot thesis is one that we do not subscribe to. The Federal Reserve has told us and their last sep Yeah, I think we're going to get core inflation back to
two percent, and they put a date on it. We think that by the end of calendar twenty twenty five will be there. If that's two and a half years from now. The Federal Reserve is not cutting interest rates next week if they think it's going to be two and a half years before they get inflation back to the level that they're comfortable with.
All right, Phil, as always great to hear from you, great to get your opinions. Lots of conviction there as always Phil Orlando, chief equity strategists at Federator Atturnemies, joining me live here in the Insight conference from Orlando, Florida.
Thanks for listening to the Bloomberg Markets podcasts. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer I'm Matt Miller. I'm on Twitter at Matt Miller nineteen seventy three and on Fall.
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