The Markets, Ukraine, Cyberthreats, And Supply Risks

money to work? In that type of backdrop, let's check in with Katie Nixon. She's a c IO of wealth management at Northern Trust. That is a big, big account for me back in the day when I was in analyst, when I went to Chicago, had to check in with the good friends of Northern Trust, had to get their I I vote back in the day, and I'm proud to report today always did. Okay, what's the I I vote. It's the Institutional Investor magazine. Yes, that benchmark your total

wealth in the total worth in the world. And so in Chicago it was Northern Trust plus a couple of others. All right, Katie, thanks so much for joining us. Here. What's an investor to do here? In a rising interest rate environment, slowing growth economy, it seems like a tough backdrop. Well, good morning, and yes, a very difficult period certainly for investors, as all periods of transition are. And you noted we're in a period of transition related to some of the

macro outlook. We have slowing growth UM our perspectives will also have slowing inflation as we get towards the middle and the later part of this year. But we're also wanted very important transition with respect monetary policy, going from alter easy to less so UM. But what we would

characterize it as UM tighter, not tight. We still believe that conditions are going to be at the end of the day still quite accomminative UM, mainly because we don't think the Fed is going to be able to go through with all the rate hikes that are now built into built into market expectations. Do days then, like uh, well this morning or Friday presented buying opportunity because clearly

this sell off is on the back of geopolitical risk. Well, I mean, I think if you look historically, what you see as periods of high volatility typically are outside of recessions, good time a good time to buy. What I would say though, when it kind of goes back to one

of the comments made earlier about cash. You know, investors right now need to go back to their plan and make sure that their plan is right, that it's aligned with their financial goals, that they have the liquidity, that they have cash on hand to fund their goals during periods of volatility. And right now we see volatility in both the stock and the bond market, so you don't want to be forced to sell your investment grade bonds,

your muni bonds, or your equities under durest. So it's pretty safe to say it's a good strategy to have, you know, a year of spending sitting in cash. Sometimes it's an expensive insurance policy, certainly with zero interest rates and an expensive insurance policy, but it's worth it during periods like this when you can draw down your cash

and avoid having to sell other assets under durest. So my best advice right now is go back to your plan, make sure you have the cash that you might need over the next year, because we're certainly going to be in for a period of volatility here. This is becoming consensus cash went from cash to king right as at my wad of cash Paul. Paul has always been a bullish cash. But but honestly, Katie, we've seen, um, you know, cash was not favored last year, and it seems that now,

I mean you're talking about it. Golden Sacks I mentioned earlier is recommending investors go to a substantial portion of cash. So, um, it seems like the right time. Well, I would say we always give that advice. Though. We have a goal based framework where we specifically align clients financial goals with assets and strategies, So we always recommend having a year

of cash um in portfolios. But I would say, though, is you know, it's been a tough call for tactical investors with respect to cash because you're you know, you're getting zero um interest rates. You know, with high level inflation, you're getting a deeply negative real rate. So for tactical investors or shorter term time horizons that aren't aligned against goals, it's been very difficult and challenging to hold cash. All right, So if I'm not in cash, I want to be

in equities. I have the courage to be in equities. As Tom King would say, am I looking at the big growth names that have been so good for so long. I'm thinking more than a decade? Really, Uh, you know, the Damazons and the Apples have delivered for shareholders. Or do I stick with that cyclical trade um that's worked so well over the past couple of years. You know,

I would say both, um, And here's the reason. So we we certainly see economic growth being above trend um for this year, So that would suggest leaning into some of those cyclical areas, including European stocks that have high leverage, high exposure to global growth. That's said, though, think about the forward forecast going into and beyond. Growth is going to come off the boil, and when growth balls you tend or or is the very slow and sluggish you

tend to see growth stocks outperform. So I would say, don't try to time the turn in the cycle. You want to own both and if you can add an additional layer of sort of quality over both your growth and value stocks, I think those are the kinds of companies that will be able to really serve you well during this period of excessive volatility and probably slower growth

going forward. You just want to finally wrap up your thoughts on the FED because you said you don't think they're going to be able to go through with the what um, four or five rate hikes and then reducing the balance sheet. What do you think is going to flip the Fed? Well, I mean, I think the markets

right now piking in somewhere between five and seven rate hikes. UM. We think that's way too aggressive given given our outlook for where the economy is going and really what the economy is going to look like, um and the next uh, you know, once we get past sort of the spring in early summer, and I would say, you know, the Fed may prefer they want to raise rates and start normalizing, but the constraint is going to be the YEO curve, and what we see right now is starty basis point.

The market is not giving the Feed a lot of wiggle room here to raise rates five to seven times. We think maybe the Fed's going to go and March. That's that's a fet a complete could be fifty fifty basis points. We hope they do. That will give a strong message to the market that they're they're trying to catch up, and then they may go a couple more times. But We certainly don't think five to seven is in the cards. All right, Katie, thank you so much for

joining us. Always appreciate getting your thoughts. Katie Nixon, ce I O of Walth Management at Northern Trust, giving our thoughts on these markets. Again, we have got a sell off in the markets right today. In the last two years, we've all been or many of us, many of us have been working from home, learning from home. That's putting a lot of data out there in the cloud. It's putting it outside of the corporate offices, which raises all

kinds of cybersecurity issues. Let's get a handle on how that's developing here, David Brittain, Global Strategy, were identity and fraud from the firm experience at the ESPN Trades in London. Uh, David, thanks much for joining us here. What have you guys noticed from your clients in terms of data security, cyber fraud, all those issues. How have they trended over the past

couple of years. Yeah? Thanks, it's a well, first of all, it's a pleasure to be with you guys again and to share a little bit of the thoughts that we've gotten. Maybe for a little bit of context, are The group that I work within where I leave strategy is the identity and fraud group within Experience, as you rightly pointed out, which we get access to a lot of interesting insights. Uh And and with this rush to digital, unfortunately, the digital progress has caused real rush to digital fraud as

well in fraud vulnerability. And so we we put out a number of different predictions where we think fraud is moving this year. It includes areas like we believe that you know, we've all been hearing about ransomware. We think ransomware a tax is going to increase going forward. Um, and the and the crime that occurs there's not us the ransom payout, that's the one that everybody is seemingly

most concerned about. But there's also data theft issues there When those procesters get in and start to disrupt the networks, there's a disruption to business. And then there's data theft and compromise, which ultimately leads to a loss of trust. So that's one thing that I think businesses need to be increasingly aware of coming into the new year. How do we the next one is David. First of all, Nathan's mom works for you, and UH, we heard that Nathan's mom works from home a lot of time. So

you have workers at home. Are you confident in UM your ability to keep things safe even as not all of your employees are in the office. You know, it's we We absolutely embrace what we call a security first philosophy here at Experience, and we we ensure that the people, the systems, and the processes are under a constant review UH to ensure that they maintain we maintain a best in class security posture, and we spent a lot of time and energy on that. Not really the area of

MYFA specifically. I'm more focused on some of the solutions, the data, the solutions and technologies we offer to the market, and that's where we see things like along, I didn't really mean your ability to to stay safe. I meant all of us, you know, because we're all doing that right now, David Um not being Paul but or Nathan, but everyone else seems is working from home and UM

there haven't been any massive catastrophes yet. Yeah. I think it speaks to the work that had been done leading up to this, the trends around what businesses were investing in to be able to enter and maintain that security, the practices that were being laid out, they had to be accelerated. We advanced the agenda of what it meant to be digital very quickly over the course of two years, probably ten years in advance and when they thought they may need them. Um and and so there's a number

of different things. And for consumers themselves, Uh, there are a couple of other things to consider. One is around the evolution of the crypto and the crypto scams that

are happening. There's reportedly half a billion dollars in losses recorded last year on crypto payment scams, and that goes to uh, sort of a bit appropriate to the topic today, appropriate for Valentine's Days, are on the romance scams, where we've seen a lot of an increase over the last year, specifically in the vulnerability and as you mentioned, we're all working from home, we're all sort of isolated during the pandemic and there's a need to reach out, and so

romance scams were it was the most profitable year for romance scams last year in the market. Yeah, yeah, interesting. All right, David, too short a time. We're gonna get you back on. We'll chat. I want to talk about zel scams with David. Yes, and honestly about the the the the solutions they offer consumers. You know, I guess the question here is a micron as it eases here in many parts of the country, particularly here in New York, it's the infection rate is extraordinarily low, kind of pre

um kind of omicron levels. The question once again end for employers turns back to how do I get people back to work? Do I want to get people back to work? Do people want to come back to the office per se? Uh? It continues to be an issue for Corporate America. John Fish, he's a CEO and chairman of Suffolk Construction Company. John, thanks so much for joining us here. What's your take of how this might normalize? I e. Will people come back to the office, will

they work from home? Will they hybrid? What's your take? Well, Matt and Paul, it's a pleasure to be with you this morning. I want to thank you very much. I do believe it's not if, but it's when. I think most people want to return to the work once they feel safe. So I think what we need to be doing is a society is really following the data all along and right now, I think we really are transitioning really from a pandemic to an endemic, and we can

see that through the numbers. So my sense right now, the average office is about forty full. I think by the springtime we're gonna be seeing eight and hopefully by the summertime end of the sum we're seeing about But I think at the end of the day, I think that's a direct we're going in right now. I gotta push back against that. Um, if I were allowed to work from home, I would never want to come back to the office because I'd be working from home in Montana.

You know I would. But now you're gonna be in Westchester community, and I love coming here, so don't get me wrong. UM, And I love Westchester and I love Suffolk County. I don't know where you are, John, but UM, I'm guessing Boston. I think I think most people who can are going to move are the kids, let's say, are going to move to someplace that's not New York prices and work for a place that is New York salary. UM, I don't know, Uh, I don't know. I guess the

answer and we'll find out. But what are you hearing from business leaders as far as getting people back in. You know, I think fundamentally in the United States today, in order for us to be competitive globally, we need that energy, We need that cultural impetus to drive our successes at our companies right now. And we saw the experiment with education. Education really was a failed experiment. I don't think the kids retained or learned much during the

last eighteen months during this virus itself. And also the impact and we talk about the cities. When you think about service oriented type of jobs that are really our economy, they basically shut down in our city areas and people the white college jobs were able to work remotely. But at the end of the day, if we don't have thriving cities, we're not going to have a strong economy

of the overall. And lastly, I would say this way is that when you think about competitive edge, I've never heard of anybody really having been able to build a culture remotely, or mentor remotely, or provide a sense of leadership remotely. And probably most how do people get promoted remotely? And I'm not saying people cannot work remotely, but I'm saying, generally speaking, in order for this our society that continue

going forward in a productive, equal way. We need our cities and our offices to come back to full health. You know, I see a lot of you know on TV and things. When I see you know, stories about coming back to the office. I see a lot of officers have the plastic dividers up between deaths. Have you seen that around? What? What do you what are you seeing in some of your building, some of your clients?

You know? What's really about is I think over the last ten years is we know cities have grown quite a bit old temper cent over the last ten years, and this whole office space grew quite a bit and it became very expensive. So what people did is they took of the average squift foot allocation for a person from probably about a hundred and seventy five down to

some even went below a hundred square feet. I think what we're gonna see now with the omicrone virus subsiding, I think people coming back to work and that squift footage figure is probably gonna move back to that one fifty to two square foot range. So at the end of the day, in the next two or three years, I do think the office market will move back to where it originally was. It will set this resiliency and I think people will want to come back to work

with each other. I wonder about travel between you know, along the Eastern Seaboard. You are obviously, um we hear a little Boston there, and I think you're rated one of the one most important people in Boston one hundred most influential people in Boston by Boston Magazine. You also sit on the executive committee of the Real Estate Board of New York, so you're up and down the Eastern Seaboard. Is the mobility what you want to see right now? You know it's again I'm gonna go back to this

issue of safety going to the airport's right now. I think you look at their protocols have been put in place, and I believe it is safe for people to travel today, especially on your lines. You take a look at the how to improve the hb A system on these build planes. It's never been as strong as it has been right now. But at the end of the day, what we are

seeing is dealing with an endemic. Right now. The numbers in the data show the things the virus is subsiding, and we are getting close hopefully to what we call herd immunity. At the end of the day, if we can achieve that, I think we're all back in business. I think at the end of the day, in a competitive society, especially in globalization, we have to be with each other. Totally agree. I just want to wonder what

you want to see beyond it. I mean, Paul and I were done with the pandemic, so what's next to me? I think in a sense of normalcy, I think what people want to be they want to be with their families with a sense of confidence and comfort, they want to be with their work is in work and having that social experience. At the end of the day, we all think about building up personally and professional balance sheets. We can't build that personal balance sheet or our professional

balance sheet working remotely in isolation. And I think the whole issue of the school experience naturally prove that out. Hey, John, thanks so much for joining us. Really appreciate getting some of your time here, John Fish, CEO and chairman of Suffol Construction Company, getting a little sense of kind of what the new normal might look like for back to work. Um, you know, it's it's interesting here in New York city. You cannot get an apartment. There's not any vacancies for apartments.

But I don't know where the do the kids still go to hobo? They do, but yeah they do, But I mean, but they're not going to the office. Is that's really odd. One of the topics that Matt and I like to discuss is the supply chain issue, which has become such an economic headwin on a global scale as as a one of the fallouts from this pandemic. And when we do that, we often talk about some of the big, big companies, whether it's a big box retailer like Walmart or a big transportation company like some

of the railroads. But I'm gonna go at it from the angle of some smaller, newer businesses, and our next guests can help us talk about that. Laura Modi, CEO and co founder of Bobby. Bobby is a baby formula delivery startup that sells direct to consumer and offers a subscription service to parents across the United States. Laara, thanks so much for joining us here. Talk to us about

your business getting stuff, delivering stuff. How are you dealing with what is in you know, a supply change challenge for so many sectors of this economy. Yeah, I'm delighted to be chatting at you guys again. Look, I mean there's global supply chain issues in every industry, but I think we're seeing it. And the anxiety around infant formula is it's at an all time high. And it is because if there's any product that you shouldn't be running out of, I mean, infant formula is one of those.

So what we offer is we're directed consumer infant formula delivery service. Bobby is one of the first organically and infantformers on the market in the last six years, and we get the product wherever you are, to your door. Like when you do look at why is there a shortage? The consumer behavior is rapidly changing, and it's changing in the way they shop, where they shop, the quantity at which they're buying. And because of that, retailers are just

not quick enough to be able to respond. But online we are last order. In Q four of last year, we saw a hundred and eight percent increase in our subscriptions because parents want the security in getting their formula well and because it's difficult to get the kind of formula you offer in this country. As you know, we've spoken before. UM, I just moved over here from Berlin, and the formula that um, everybody on Park Avenue wants is is only available in Europe, it seems, so why

is that? Why? Um, have you been the first person to fill this gap? You know, why didn't anybody else see the problem and shoot in first? Well? First, I mean Berlin, Germany is the birthplace of high quality insan formia and in many ways was the inspiration to getting Bobby off the ground. I would say many people noticed it, and you know, as a tired, exhausted mom, it's the first thing you see, which is why are returning to a black market for European infant formula? Why are we

not able to get high quality intant formula here? Now? It would be remiss to not say that this wasn't a journey. It takes a long time to essentially redesign an intrant formula, find the suppliers of choice, and then get it approved here in the US. So we went on a three year journey just to get the FDA green light to launch our formula. This is not a pantry product. You can't just enter the market easily. It takes a lot of rigor a lot of quality, and

we're very fortunate. By the way. I don't want to go off on too much of a tangent, but when I think of the importance of formula and nutrition for infants and children, it always reminds me of there was a Freakonomics in the first book when they talk about changes made in the seventies lead to drops in crime rates in the nineties. And I always think about the

importance of feeding our children well nutritionally. Um is up there with like giving them love right in terms of creating better citizens when they're eighteen, you know, and we don't, and we have a real problem with that, I think, Um, in this country, Laura, I don't know if if you've noticed it, because judging by your accent, you didn't grow up here, but it could make such a big difference. Um, what do you do for the to help the underserved

or the underprivileged people who can't afford good formula? Yeah, well said, I mean, I think we forget as well that infant formula is the first food that a baby is going to consume. So why is it that the first ingredient is corn syrup or not setting them up for success. We need to make sure that the nutrients and ingredients in this product do set them up for

success at an adolescent as an adult. Um So for the underserved, I mean this is really really important for us that the affordability and access to high quality formulas out there for everyone. We've made a commitment that every CAWNT purchase it equals a feed to a baby, and we've made many different partnerships with those underserved communities like Brilliant a Choice where we're giving Bobby back to make sure it is accessed by everyone. Lauren, thank you so

much for joining us. We always appreciate getting your perspective on the day to day small business in America dealing with some of the challenges of growth and supply chain. Laura Modi, CEO and co founder of the firm Bobby, which provides a baby formula delivery. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews of Apple podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm on Twitter at Matt Miller. Put

on fall Sweeney I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio,