March 7, 2025 • 42 mins
With all the market volatility related to tariffs, Chris Boyd invites
Senior Portfolio Manager Brian Regan on the podcast. Also joining the episode is Jeff
Perry and Russ Ball. Chris and Jeff open the show with a summary of the latest tariff
moves by President Trump as well as commentary why tariffs can be an effective or
harmful tool in political and economic arenas. Brian responds to questions from the
AMR Team related to his views about the impacts of tariffs on the stock market, inflation,
and corporate earnings. Brian also reviews recent positive moves in fixed-income assets.
For more information or to reach Chris Boyd or Jeff Perry, click the following link:
https://www.wealthenhancement.com/s/advisor-teams/amr
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome to Something More with Chris Boyd.
Chris Boyd is a certified financial planner, practitioner,
and senior vice president and financial advisor at
Wealth Enhancement Group, one of the nation's largest
registered investment advisors.
We call it Something More because we'd like
to talk not only about those important dollar
and cents issues, but also the quality of
life issues that make the money matters matter.
(00:22):
Here he is, your fulfillment facilitator, your partner
in prosperity, advising clients on Cape Cod and
across the country.
Here's your host, Jay Christopher Boyd.
Welcome everybody to another episode of Something More
with Chris Boyd.
I'm here with our team members.
I've got Jeff Perry, our co-host pretty
much every week here.
(00:43):
I've got Russ Ball and Brian Regan, all
of us of the AMR team at Wealth
Enhancement Group.
And Brian is our senior portfolio manager and
a good one for us to talk to
this week as we're thinking about volatile markets.
The markets have caught everyone's attention again, as
(01:06):
we've had really following two very good years
with market movements, a little bit of volatility
reentering the scene.
We haven't had much in the way of
dustups when it comes to the market.
And with the onset of tariffs being on
the minds of investors, we've seen markets get
a little dicey.
(01:28):
And that's not to say that there haven't
been some ups as well as the downs,
but we've seen a decline from where we
were earlier in the year.
And I don't know, I'm sure all of
you are feeling the same way, but we're
hearing clients reach out a little more regularly
with some concerns and some questions.
(01:49):
How should we be responding to this?
Is this something we're worried about?
How are we dealing with it?
So we thought this show would be a
good opportunity to talk a little bit about
our views as it relates to first on
what's happening and two, how we're responding to
that when it comes to our portfolios or
(02:10):
how we have been positioning for it previously,
and then a little bit of what may
come out of that.
So Jeff, what do you think?
Did I cover everything as far as the
setup there?
I think you did.
I think the key word that I'm hearing
from clients past couple of weeks is uncertainty,
right?
(02:30):
What's going to happen?
How does this affect me?
Should we do something?
Should we get in?
Should we get out?
You know, on both sides of that equation,
just that uncertainty that people are feeling right
now because of geopolitical events, political events that
are on the front page of the newspapers
or the first story off the news and
(02:51):
makes people nervous.
And I'm glad we had Brian on to
get his perspective on how he views all
this.
Well, Brian, that's probably a good in for
you to chime in.
I mean, I think when we talked about
this, the first thing you wanted our team
to know and to be able to communicate
with our clientele is just because markets are
(03:12):
down, doesn't mean clients accounts are necessarily down
for the year at this point.
What do you want to focus on first?
Yeah, it's interesting, right?
When you say markets, what you really mean
is like the S&P 500, right?
I think that's what people are focused on.
You're right.
Yeah.
But when I hear the word markets, I
(03:33):
think of, you know, all the possible investments
you could make.
And there are markets that are doing well
here in the beginning of 2025.
And I think that's which are some of
those, for example.
Do you mind elaborating?
Yeah.
I mean, most notably, the fixed income market's
doing really well here to start the year.
Right.
And most of our clients have a combination
(03:53):
of stocks and bonds.
So, you know, the first thing that I
wanted to point out is that, you know,
when I wrote an email to you the
other day that, you know, let's let clients
know that despite, you know, the tariffs and
the drawdown that we've had recently, that the
portfolio is probably in the black still for
(04:13):
the year, despite all that.
So, you know, this is a win for
diversification when it comes to fixed income and
individual stocks.
Elaborating on just for a minute, if you
don't mind.
You know, last year, it seemed that it
was a different kind of story than what
we're having this year.
(04:33):
The more focused on the S&P 500,
the large cap growthier names seem to be
better you did that Magnificent Seven or whatever.
And then this year, you know, we're getting
a little bit of a different story.
(04:55):
Yeah, that's right.
I mean, fixed income did well last year,
too.
So let's just say that, you know, that
we are changing gears here.
I think, you know, you want to dissect
individuals, the stock market, right.
The individual sectors of the stock market.
And I think you're absolutely correct.
Right.
So, you know, the more indexed you were
to the quote unquote Magnificent Seven, the better
you probably did.
(05:16):
And that's true over the last couple of
years.
But here in 2025, diversification in the stock
market, not just, you know, not just having
bonds in your portfolio, but within the stock
market has helped out as well.
We allocate towards a low volatility portfolio, which
has done well in the black so far
this year.
International markets have done exceptionally well, including Europe
(05:38):
and China.
We don't really allocate towards China, but it
has had notable performance here in 2025.
And we have benefited from having an allocation
towards, you know, the eurozone, which has done
very well, especially now that Germany is moving
off their austerity position.
Finally, you know, we've had utilities in the
(06:00):
portfolio for about a year now, and my
view might have been unpopular at the time.
It seems like people are kind of coming
around to my way of thinking.
But the idea was, we're going to get
more growth out of this sector that we
have historically.
And for a variety of reasons, from from
data centers to onshoring, to population growth.
(06:21):
But at the same time, you know, it's
a regulated market, which should should give us
some support if things fall on the downside.
And that's been the case, you know, we've
had we've had nice performance from utilities as
well.
So, you know, this is again, one in
the wind column for diversification.
We've preached it.
And, you know, we're certainly benefiting from it
(06:42):
here in 2025.
Yeah, that's a good point.
Jeff, you want to add anything to that?
I appreciate and agree with everything Brian said.
I do have maybe a question that investors
or clients might be thinking about.
Does any of the moves, the political moves,
the tariffs specifically, I guess, is what we're
(07:03):
focusing on here.
Have you consider any of the holdings, moving
them in or out, you know, more or
less based upon the action and the tariffs
specifically?
I'm trying hard not to have any knee
jerk reactions, because I actually think it's a
complicated subject.
Believe it or not, I know that the
(07:23):
opinions come, they come fast.
And, you know, when you have a complicated
subject, what I find is the best thing
to do is to do nothing, contemplate what's
going to benefit, what's going to, you know,
be hurt, what's at risk, and be careful
with how you move the portfolio.
(07:44):
And that's part of the reason why we,
you know, we make decisions quarterly.
It's to not overreact.
We don't want to make, you know, harsh
reactions to one data point.
What we saw in 2019 was that the
tariff news changed regularly, right?
You'd have a big announcement that $300 billion
worth of goods from China is going to
(08:05):
be tariffed, and then market would sell off
10%.
And then, you know, three weeks later, there
would be some reversal, and then the market
would rally 15%.
So we want to be cognizant of that
possibility and not overreact.
And that might be a lesson for investors
to recognize that it's very likely we're going
(08:26):
to have some of that same kind of
movements, you know, up and down.
I don't know for sure, but that's what
happened the last time we went through this
with the same president, right?
So it seems like most likely based on
that historical experience.
You know, Chris sent me a note yesterday
afternoon, and he was asking me if his
(08:47):
comment was accurate.
And basically, it had two, you know, contrasting
statements in it, which I think was what
he was struggling with, right?
In the first part of the note, he
was saying, you know, this might be a
detriment to growth, and we might see the
Fed react by cutting rates.
And then in the last sentence, he said,
on the flip side of that, we might
(09:07):
have inflationary pressures, and the Fed might have
to react in the other direction.
And the truth is, he was absolutely right.
I mean, both those things are, even though
they're contrasting, I think are both possible.
And when you look at inflation expectations in
the near term, in the longer term, they're
at odds too, right?
In the near term, inflation expectations ratcheted up.
(09:29):
In the longer term, they actually went down.
So what is the market telling us?
Well, in the short term, they think this
is going to be, you know, increase inflation.
I wasn't sure whether I should say, you
know, be a positive or a negative, because
the number is expected to rise.
And in the longer term, growth is expected
to suffer from this.
So, you know, tariffs are bad policy generally,
(09:52):
and this is why, right?
We're going to get inflation and negative growth
from this, which is also why I don't
necessarily think it will last.
So, you know, that's the quick, I mean,
this seems like it's a moving target, but
maybe we can just do a quick review
of what has been implemented, what is anticipated
(10:15):
in the next month in terms of, it
seems like there's a fair amount of tariffs
that have been announced and anticipated.
But as we saw just in the last
few days, there's been like, oh, well, we're
going to have auto manufacturing.
Well, we'll hold off on that.
You know, some of this can change and
it is fluid, but what are we seeing?
How much is this tariff change?
(10:38):
What are the amounts?
And then how impactful is that on what
that means to maybe GDP or, you know,
the growth of the economy?
I guess we should.
Maybe start off with a tariff, huh?
Well, I was going to say maybe we
should tell listeners it's 11 o'clock on
March 6th.
Okay, because it may be very different a
(11:01):
day or two from now and this is
out there.
A day or two could be different this
afternoon.
Right, right.
So.
It's unbelievable how right you are.
A tariff just to review is essentially an
added tax on goods being brought into the
country so that it makes those tariffs more
(11:25):
costly, those goods more costly and therefore less
appealing relative to the thought is to a
domestically produced product, trying to inflate the appeal
of producing goods and services in the United
States versus brought here from other parts.
Which is a reason, one of the reasons
(11:48):
to do tariffs, right?
Is you're trying to bolster your domestic production
of a given product.
That's the stated objective, I think.
One of them.
Or to punish the senator.
There's also the issue that it is usually
(12:10):
met with reciprocal response.
So then our goods become a harder to
sell in other parts of the world.
It also does to the point about another
reason it may be advantageous and all this
focus on the expenses of government, which we've
(12:33):
seen a lot of attention on over the
last few weeks.
There's also, you know, this is a revenue
source for government as well.
So in any case, I think the bigger
picture that Brian, you know, bottom line of
minute ago is that ultimately this has historically
(12:54):
been considered bad policy because it slows the
economy.
It has an adverse impact generally.
And we've been in this prolonged effort to
create markets, to open up markets around the
(13:18):
world.
So our goods can be sold there, their
goods can be sold here.
It creates some thought as it creates a
greater interdependence and a lesser likelihood of adversarial,
you know, risk of conflict around the world.
And so that it is desirable to have
(13:39):
more open markets.
There is, I think, a focus on fairness
in this administration that is all this being
done in a way that is mutually beneficial,
probably worth, you know, more scrutiny than I'm
able to provide right now.
(14:01):
So in a perfect world, there'd be no
tariffs in or out, right?
And for total free market.
I agree.
But we don't have that here.
And many other countries charge us to send
our goods.
They have tariffs on us.
So I think that's what you're getting at.
Yeah.
So I think that's part of the motivation
(14:21):
as well as to try to air quotes,
you know, level the playing field, so to
speak.
But in any case, you know, I can't
help but think of Ferris Bueller and the
class, the lecture they have on economics, they're
talking about tariffs and the challenges that that
(14:42):
brought about when it came to the Great
Depression.
But in any case, so tariffs are part
of what's driving investor concerns when it comes
to the stock market because of the unknowns
as to how much this will have impact.
And I start off asking Brian if he
(15:03):
had any insights as to what kind of
impact this might have.
Are there any metrics you can share that
might be useful for our audience, Brian?
Sure.
So I think it's going to increase PCE
by between 50 and 100 basis points or
a half percent to one percent if this
(15:23):
persists.
Right.
And that's the key keyword if this persists.
And if that's the case, I think it'll
be very, very hard for the Federal Reserve
to cut rates if we do have a
growth scare, which we're having a growth scare.
I mean, the Atlanta GDP, GDP now stat
(15:45):
fell dramatically, fell more than six percent from
four percent to negative two point eight percent
within a couple of weeks.
So that estimate is almost always wrong.
But directionally, that's a scary move.
Right.
So even if it's half right, we're in
(16:07):
negative territory.
So this is concerning.
Between Doge and tariffs, I think that it
seems like the relative confidence of the consumer
is not good.
The consumer sentiment surveys, which I put almost
no stock into, are as ugly as they've
(16:29):
been in 50 years.
And the reason I put no stock into
them normally is because they're very political.
And the, you know, who answers surveys, it's
usually, you know, one demographic.
So, you know, you can discount that significantly.
But when they're seeing numbers that are basically,
you know, just falling off a cliff and
terrible, you know, it's something something to note.
(16:53):
It's at least a data point, even if
you discount it.
And the fact that, you know, it's political
is, you know, it's a fact.
But the people who you would think would
be politically motivated to say sentiment's good seem
to think that sentiment's bad.
So that's kind of moving in the opposite
direction of what you would typically assume through
(17:15):
the political lens.
So, you know, there's not a lot of
good data points going on right now there.
If I'm going to look for optimism, you
have a lot of high quality stocks that
are going on sale.
And that's something that I'm enthusiastic about.
You're seeing the 10 year treasury rally significantly.
(17:40):
So that's that's not only good for your
fixed income.
But if we have some stability at lower
rates, you know, it's going to be good
for the real estate market.
It's going to be good for stocks, you
know, all things equal.
So those those give you reason to to
be more confident.
Now, given the interest rate situation and the
(18:01):
kind of general sell off, I usually call
these liquidation events because they sell, you know,
indiscriminately.
It's usually just it seems like people are
raising, raising cash because they need it or,
you know, to pay debt service or whatever
it is.
You know, I think that's a great opportunity
to up the quality in your portfolio.
I was just in a WEG macro meeting
(18:24):
and that was my recommendation to everybody.
I said, this is an opportunity to clean
out things that might be more speculative, might
be more cyclical and add to quality and
secular, secular strength names that you can be
more confident that you're going to get at
a nicer price, you know, today than you
(18:46):
did a couple weeks ago.
Yeah, it's worth talking a little bit about
how we've been positioning for some of these
issues as well when it comes to some
of our discretionary managed strategies within our team
for our clientele.
You know, we can maybe talk a little
bit about some of the ways that we've
(19:08):
tried to be in a good position for
volatility, which has now begun.
Do you want to talk a little bit
about that, Brian, whether it's tips or whether
it's the way you talked earlier about the
utilities and low volatility positions in the mix
of the portfolio on the stock side.
(19:31):
Maybe talk about the fixed income side a
little bit and then our buffered strategy.
Yeah, so, you know, we've been banging the
drum that the S&P 500 is very
concentrated for a while, for at least nine
months, you know, and we've made an effort
to diversify away.
(19:51):
So diversify, diversify, diversify has been, you know,
our mantra and we don't have, you know,
excessive exposure, in my opinion, to any one
single name when you look through the portfolio
to the underlying holdings.
And that's very much on purpose.
And I think it has insulated us from
(20:11):
a lot of these sizable moves that we've
seen from some of the biggest stocks in
the market, you know, over the last couple
of weeks.
So, you know, I think that's number one.
You know, we mentioned the low vol strategy.
We mentioned utilities.
We mentioned, you know, we changed our value
portfolio.
We talked about our international allocation.
(20:31):
Those are all ways of taking that high
concentration from the growth names in the S
&P 500 and spreading out the risk.
And like I said, we've had some things
do really well on particularly international and low
vol and utilities.
And, you know, that's, again, you know, mark
one up for diversification.
(20:52):
Now, we also thought that this could be
a distinct possibility.
In the last quarterly, we talked about how,
you know, the Trump policies, although initially very
much favored by the market after him being
elected, mostly because I think the prospect of
further tax cuts, you know, them being maybe
(21:16):
made permanent rather than, you know, the sunsetting
provision.
There was a lot of optimism.
But we looked at the different policies and
saw that almost all of them had an
inflationary effect or all of them did have
an inflationary effect.
And tariffs are, you know, they're not only
inflationary, but they're depressive as well.
So, you know, we added tips to the
(21:38):
portfolio in the last quarter, and that's also
been beneficial to the portfolio.
We've probably stayed shorter in duration than the
average person or the average investor.
Or inflation protected treasuries, just for clarity, if
people aren't familiar with the term.
We probably stayed shorter in duration than the
average investor, and that's very much because, you
know, we are going to be insulated if
(21:59):
there is a rapid rise in interest rates
in the longer term.
But we very much have a barbell strategy
right now.
I mean, we're basically, we have short term
and we have intermediate term in equal weights.
And, you know, that's worked out for us
here.
And we also have a strategic income fund
that we want to take advantage of any
short term increases and spreads, which we've seen
(22:22):
spreads be very, very tight for a long
time.
Spreads are the difference between what you get
paid on a non-treasury bond and a
treasury bond.
And, you know, it's a good way of
measuring the credit risk in the market, but
also how much you're getting paid.
And you haven't been getting paid very much.
And I think the risk is only increases
(22:44):
with time.
So, you know, it's been an interesting market.
We're not in any credit oriented bonds to
any significant degree right now.
We have a very diversified equity portfolio.
And, you know, we've been very short in
duration and not taking a lot of interest
rate risk, which has really insulated our portfolio
and why, you know, I believe that our
(23:06):
strategies are doing, you know, fairly well here,
you know, at least in the black, despite
a difficult S&P 500 performance.
So it seems that we've had some of
these steps taken to try to be prepared,
one by, you know, this diversification, both within
(23:26):
stocks and within asset classes and this barbell
fixed income approach.
For our most conservative investors, we've also opted
to include a strategy that has a little
bit of a risk buffer to it on
the downside that can help be helping when
(23:48):
these kind of events occur to take some
of the sting out of the movement of
the portfolio.
Brian, we've also talked, you know, you mentioned
one of the drivers for, you know, some
of the concerns we had was not only
this concentration, but, you know, we've talked about
valuations a lot over the last several months,
(24:11):
you know, on the show and with our
clients.
You know, you've said in the past that,
you know, valuations don't really are, you know,
you can't really use them as a timing
mechanism for when to make changes, but it
can be insightful.
You know, how do you measure valuation?
You don't really like the PE as the
(24:31):
preferred way to do that, but this notion
of trying to look at valuation, have we
seen any material improvements with just modest volatility
we've seen in the last few weeks?
Has it, you said some things are looking
more attractive.
Is it having an impact in some of
(24:53):
the most expensive parts of the market?
Yeah, I mean, just take Nvidia, for example,
you know, it's in a 15% drawdown.
I don't think the growth expectations are any
worse really than they were prior to the
last earnings call.
So, you know, that stock, which is either
(25:14):
the biggest or second biggest stock in the
market on any given day, you know, to
me looks cheaper, just objectively cheaper.
So yeah, I mean, I do think it's,
you know, when you have a sell-off,
there's going to be opportunities.
I do think it's important.
You know, you mentioned one of the reasons,
you mentioned that I don't like the PE
(25:35):
ratio, which I don't, that's accurate.
So if the PE ratio, forward PE ratio
happens to go down on the S&P
500, you know, I'd love to know, did
they bring the E down too?
Yeah, that's something I was going to ask
you next.
What's the outlook for earnings?
It seems like tariffs are likely to, if
(25:55):
they stick around, it's not just a negotiating
ploy of some kind.
That would have some undermining impact on earnings.
Is that, or at least price, it would
have some inflationary effect on the cost, right?
But it seems like it would have some
consequence on earnings.
Is that not?
Yeah, when you look at the entire market,
(26:16):
I don't know how margins don't come in,
right?
This is either going to get passed on
to the consumer or it's going to get
eaten, taken to margins.
That's going to be worse with small cap
than it is with large cap.
But I think it's an inevitability, right?
And I think right now we're just thinking
about what sectors and what stocks are going
(26:41):
to be impacted more.
And I think it's inevitable probably that margins
will be cut.
But if margins are cut and revenue goes
up because they can charge through higher prices,
the E might be fine.
But I think that's what we're all trying
to sell right now, right?
(27:01):
And that's kind of why I said this
is a complicated subject and we don't want
to necessarily make a knee-jerk reaction.
Yeah.
So I always preach I want to be
proactive rather than reactive.
And what does that mean?
Well, I want to make a portfolio that
can weather kind of surprise changes and go
up with the market when it's going up
(27:21):
and hopefully give a little bit of a
buffer when it goes down.
But if you are just reacting to the
news headlines on a day-to-day basis,
you're just going to get whipsawed.
You know, this isn't an easy science and
it's not even necessarily a science.
I think there's some science and some art
to it.
And there's an overwhelming amount of data points
(27:43):
and opinions that are being thrown at, I
will say thrown at me right now.
And what you need to do is take
some time, maybe have some sleepless nights, which
there's no shortage of for me, and think
through what's important and what's not.
And ultimately, you know, you guys have heard
me say a million times, you know, earnings
(28:05):
and interest rates are going to drive the
total market and consistency and growth is what
I'm looking for in individual stocks.
Nothing's changed in that calculus, right?
So when it comes to the individual stock
portfolio, I'm looking at my portfolio and I'm
saying to myself, is this company not as
consistent as I thought it was?
Because if it's going to get, if the
(28:26):
whole business model is going to get upended
because of, you know, an event like this,
which we knew would be possible, then I
made a mistake and I need to re
-evaluate, right?
At the same time, is there a consistent
company out there that's growing that's not in
my portfolio that I'm getting a nicer price
(28:49):
on today than I was two weeks ago?
And, you know, those are the questions I'm
asking myself.
Now, when it comes to earnings, when it
comes to interest rates, they're decidedly lower right
now, at least the long-term rates.
So that's in the plus column.
When it comes to earnings, I think it's
probably going to have to get ratcheted down.
And it's a matter of degree.
(29:11):
But when you have lower interest rates and
lower earnings, they might be offsetting.
And that's something that you need to consider.
So, you know, luckily I don't have to
make any macro calls today.
The quarter doesn't end for another three weeks
and I have time to take in the
variety of opinions and look at what the
consensus opinion is for earnings growth and reassess
(29:35):
my valuation model.
And we feel like we're positioned pretty well
for what's going on, you know?
Exactly.
I mean, that goes back to being proactive
versus reactive.
You know, I think if our clients were
to look at their portfolios today, I think
they'd be pleasantly surprised.
And, you know, I'd rather them be pleasantly
surprised during a nervous moment than be, you
(29:58):
know, elated when things are great.
Let me give Russ a chance to chime
in here.
Yeah, thanks, Chris.
Yeah, I did have a question for you,
Brian.
I guess going back to this topic of
diversification and valuations, I watched Bloomberg in the
morning, and I saw some international fund managers
(30:19):
come on to talk about Europe and international
markets more broadly.
I have no doubt they're running to the
microphone these days, you know?
Yeah, yeah.
So, curious about your thoughts.
You mentioned it earlier.
But, you know, what are your thoughts on,
you know, this kind of movement towards these
international markets, towards Europe specifically, you said China
(30:39):
as well.
Is it just trying to get away from
some of these U.S. names that might
be, quote unquote, overvalued?
Or is there more substance to it?
And is Europe finally coming out of the
doldrums that they've been in for quite a
long time?
As a general rule, we have an allocation
towards international stocks.
(31:00):
It's part of our diversification strategy.
This isn't the tactical move that we have
to have an allocation internationally.
What we do have as our chosen allocation
in our ETF mutual fund strategies is a
fund that is fairly concentrated.
And that's purposeful.
We want to have a good allocation to
(31:24):
the best names in the international market.
And I think that we're achieving that.
So the idea is if the All Country
World Index XUS is up five, we want
to be up a little bit more than
that.
And then if we're doing that, then we
can be a little bit underweight international stocks,
particularly since we don't like being in China,
(31:44):
and still participate if the international market rallies.
And I believe that over the last couple
of months, we've seen that that strategy has
worked out for us.
Of course, I wish I had a lot
more of it when it does 7%
than the S&P 500 is down.
But nevertheless, I think we've achieved the diversification
(32:07):
goal there.
When it comes to China, we don't touch
it or try not to as much as
we can.
And here's my basic reasoning.
It's actually illegal for Americans to own Chinese
stocks in China.
When you buy a Chinese stock, you don't
actually own the company.
(32:27):
You own a legal structure in the Cayman
Islands or somewhere else that sells you a
certificate stating that you will get the economic
benefit from the Chinese stock.
So the Chinese could turn around and say,
well, that workaround is no longer palatable to
(32:49):
us.
And then you don't have anything.
And given the geopolitical tensions with the West,
I don't know if that's a gamble I
necessarily want to take.
I don't know if that's a gamble I
want to take ever.
But especially considering that.
Even if you do like it, the government
there, they're historically a communist regime.
(33:13):
And they'll change on a dime if they
think.
They did this in 2018.
I believe it was 2018.
They believed that the tech sector was doing
too well.
And they basically just killed it in a
day.
So you think of that, that's why we
stay out of China.
Generally speaking, international is going to be challenged,
I think, because of demographics in the long
(33:35):
term.
If you think of Europe, they have a
declining population.
Japan, they have an aging population.
China has an aging population.
The only real growth you're seeing in population
might be in South America and the EMEAs,
Africa and the Middle East.
So if you could find something in those
areas that you want to hold for the
long term, maybe that's something you're interested in.
(33:57):
I do think that's always a good reason
to go out of your way.
Yeah, I just want to chime in on
this notion.
If we talk about the All-Country World
Index that you typically refer to, Brian, it's
typically about 60-ish percent U.S., 40
percent non-U.S., correct, roughly, in that
(34:18):
ballpark?
It's a little bit more U.S. than
that now, but yeah, in the ballpark.
And so I think when we think about
our foreign exposure, that's our comparative as to
how much do we want to have.
And we've been consistently, in our own team
here, we've been consistently underweight international relative to
(34:41):
that benchmark with the equity exposure we have.
That is probably the question over time.
Will we want to alter that weighting?
I think a lot of that is relative.
How do we envision economic and market movements
relative to the U.S.? And that's how
(35:05):
we would negotiate that, navigate that decision as
to how much foreign exposure do we want
to embed in our clients' portfolios.
If we thought there was a prolonged opportunity
for outperformance relative to the United States, I'm
sure we would escalate our foreign exposure.
(35:28):
The question is, is that our expectation today?
And I think right now, Brian, correct me
if I'm wrong, your expectation for Outlook is
not necessarily that Europe or other foreign markets
are as likely to consistently outperform the United
States as we'd expect today the U.S.
to outperform or be a solid performer within
(35:51):
that context.
Yeah, I think that's accurate.
And if you look at the equity, it's
about 70% North America, which means it's
30% other, about 5% China.
It's recently been changed pretty significantly.
So if you strip that out, we're looking
(36:12):
at about 25% international.
Our portfolios are about half that in international.
And then we have a beta of about
1.2. So it's accelerated a little bit
because of the beta.
So we're underweight, but we're not crazy underweight.
And I think hopefully we're getting the benefit.
(36:34):
In addition to that, up until very recently
and still in one of our portfolios, we've
had emerging market bonds, which has worked out
really, really, really well for us.
And so instead of having exposure to the
stock market, some of these companies, we've had
dollar denominated debt, which, as you can imagine,
is going to be more consistent.
It paid a nice yield for a while.
(36:55):
And we did pretty well in that without
taking an abundant amount of risk while getting
some international exposure.
Jeff, let me give you a chance.
Anything you want to chime in on?
I'm thinking about this in conversation relative to
the recent market lack of correction.
Right.
(37:15):
So we talked about this in other times
when we've had Brian on about corrections.
We didn't have a correction of 10%
on the S&P in 2024, I believe.
And we're not there yet now.
But I was wondering what Brian thought.
We're talking about the geopolitical tariff impact on
the market and the volatility of it.
(37:36):
But as we know, it's normal to have
corrections in prices in healthy markets.
So do you think about this drawdown, these
difficult days that we've had, that this could
be just part of a normal market correction?
(37:57):
Well, corrections typically don't happen for no reason.
I mean, it's usually some kind of news
headline.
So yeah, I think if you're going to
be a stock investor, this is the kind
of volatility that you signed up for, right?
That's why you get the long term performance.
(38:18):
And I realize I do this professionally.
So I've trained my brain different than the
average person.
But I always say that the money is
made when the market's going down.
And it's just realized when the market goes
up, right?
This is when you need to do the
job.
(38:38):
If interest rates were steady and news headlines
were benign and the markets were ratcheting up,
well, we pretty much just go to the
beach, right?
But this is what I studied for all
those years.
This is what I've been training for.
(39:00):
And in some ways, I think since I've
been working with Chris and the AMR team
back before we were the Wealth Enhancement Group,
we had a bear market in 2018.
We had a bear market in 2020.
We had a bear market in 2022.
(39:21):
And this isn't anything that we haven't been
through before as a group.
And we've gotten through it and grown assets.
And I think we've made some really, really
good decisions during those times as well.
And that's my focus.
What are we going to do when we're
(39:44):
given the fat pitch?
Are we going to swing or are we
going to strike out?
And I'm looking to swing.
I'm looking for opportunities.
And that's what you can do if you're
being proactive and not reactive, right?
If you aren't prepared, if you have an
overly aggressive portfolio, if you're taking too much
(40:06):
risk, well, then when something like this happens,
you're almost in the position where you have
to sell, right?
And then you get these liquidity events.
But if you've already built a responsible portfolio
and you're getting a negative reaction to the
market, you could sit back and say, hey,
look, I got some firepower and I got
(40:27):
the bat on my shoulder and I'm looking
for great opportunities.
So that's what we're doing.
That's probably a good place for us to
pause the show.
Thanks, everyone, for your participation.
Brian, appreciate the perspective.
Help people get a sense of how to
make sense of what's going on in our,
just there's a lot of news, a lot
(40:47):
of things to pay attention to.
And we're trying to help people navigate that
and hopefully be anticipating some of the volatility
that comes along and how to be prepared
and then look for opportunities as they emerge.
So thanks, everyone, for your participation.
(41:07):
And I'll just mention as we close out,
if anyone would like a little help along
the way, if you're finding it difficult to
navigate these markets and would benefit from a
little bit of a second opinion, maybe get
some insights, don't hesitate to reach out to
us.
We're here to help.
What is the AMR-info at wealthenhancement.com.
(41:28):
And we're happy to be a resource to
you if you need any help.
Until next time, everybody, keep striving for something
more.
With Chris Boyd.
Call us for help, whether it's for financial
planning or portfolio management, insurance concerns, or those
quality of life issues that make the money
matters matter.
Whatever's on your mind, visit us at somethingmorewithchrisboyd
(41:51):
.com or call us toll-free at 866
-771-8901.
Or send us your questions to AMR-info
at wealthenhancement.com.
You're listening to Something More with Chris Boyd
Financial Talk Show.
Wealth Enhancement Advisory Services and Jay Christopher Boyd
provide investment advice on an individual basis to
(42:12):
clients only.
Proper advice depends on a complete analysis of
all facts and circumstances.
The information given on this program is general
financial comments and cannot be relied upon as
pertaining to your specific situation.
Wealth Enhancement Group cannot guarantee that using the
information from this show will generate profits or
ensure freedom from loss.
Listeners should consult their own financial advisors or
conduct their own due diligence before making any
financial decisions.
Welcome to Something More with Chris Boyd.
Chris Boyd is a certified financial planner, practitioner,
and senior vice president and financial advisor at
Wealth Enhancement Group, one of the nation's largest
registered investment advisors.
We call it Something More because we'd like
to talk not only about those important dollar
and cents issues, but also the quality of
life issues that make the money matters matter.
(00:22):
Here he is, your fulfillment facilitator, your partner
in prosperity, advising clients on Cape Cod and
across the country.
Here's your host, Jay Christopher Boyd.
Welcome everybody to another episode of Something More
with Chris Boyd.
I'm here with our team members.
I've got Jeff Perry, our co-host pretty
much every week here.
(00:43):
I've got Russ Ball and Brian Regan, all
of us of the AMR team at Wealth
Enhancement Group.
And Brian is our senior portfolio manager and
a good one for us to talk to
this week as we're thinking about volatile markets.
The markets have caught everyone's attention again, as
(01:06):
we've had really following two very good years
with market movements, a little bit of volatility
reentering the scene.
We haven't had much in the way of
dustups when it comes to the market.
And with the onset of tariffs being on
the minds of investors, we've seen markets get
a little dicey.
(01:28):
And that's not to say that there haven't
been some ups as well as the downs,
but we've seen a decline from where we
were earlier in the year.
And I don't know, I'm sure all of
you are feeling the same way, but we're
hearing clients reach out a little more regularly
with some concerns and some questions.
(01:49):
How should we be responding to this?
Is this something we're worried about?
How are we dealing with it?
So we thought this show would be a
good opportunity to talk a little bit about
our views as it relates to first on
what's happening and two, how we're responding to
that when it comes to our portfolios or
(02:10):
how we have been positioning for it previously,
and then a little bit of what may
come out of that.
So Jeff, what do you think?
Did I cover everything as far as the
setup there?
I think you did.
I think the key word that I'm hearing
from clients past couple of weeks is uncertainty,
right?
(02:30):
What's going to happen?
How does this affect me?
Should we do something?
Should we get in?
Should we get out?
You know, on both sides of that equation,
just that uncertainty that people are feeling right
now because of geopolitical events, political events that
are on the front page of the newspapers
or the first story off the news and
(02:51):
makes people nervous.
And I'm glad we had Brian on to
get his perspective on how he views all
this.
Well, Brian, that's probably a good in for
you to chime in.
I mean, I think when we talked about
this, the first thing you wanted our team
to know and to be able to communicate
with our clientele is just because markets are
(03:12):
down, doesn't mean clients accounts are necessarily down
for the year at this point.
What do you want to focus on first?
Yeah, it's interesting, right?
When you say markets, what you really mean
is like the S&P 500, right?
I think that's what people are focused on.
You're right.
Yeah.
But when I hear the word markets, I
(03:33):
think of, you know, all the possible investments
you could make.
And there are markets that are doing well
here in the beginning of 2025.
And I think that's which are some of
those, for example.
Do you mind elaborating?
Yeah.
I mean, most notably, the fixed income market's
doing really well here to start the year.
Right.
And most of our clients have a combination
(03:53):
of stocks and bonds.
So, you know, the first thing that I
wanted to point out is that, you know,
when I wrote an email to you the
other day that, you know, let's let clients
know that despite, you know, the tariffs and
the drawdown that we've had recently, that the
portfolio is probably in the black still for
(04:13):
the year, despite all that.
So, you know, this is a win for
diversification when it comes to fixed income and
individual stocks.
Elaborating on just for a minute, if you
don't mind.
You know, last year, it seemed that it
was a different kind of story than what
we're having this year.
(04:33):
The more focused on the S&P 500,
the large cap growthier names seem to be
better you did that Magnificent Seven or whatever.
And then this year, you know, we're getting
a little bit of a different story.
(04:55):
Yeah, that's right.
I mean, fixed income did well last year,
too.
So let's just say that, you know, that
we are changing gears here.
I think, you know, you want to dissect
individuals, the stock market, right.
The individual sectors of the stock market.
And I think you're absolutely correct.
Right.
So, you know, the more indexed you were
to the quote unquote Magnificent Seven, the better
you probably did.
(05:16):
And that's true over the last couple of
years.
But here in 2025, diversification in the stock
market, not just, you know, not just having
bonds in your portfolio, but within the stock
market has helped out as well.
We allocate towards a low volatility portfolio, which
has done well in the black so far
this year.
International markets have done exceptionally well, including Europe
(05:38):
and China.
We don't really allocate towards China, but it
has had notable performance here in 2025.
And we have benefited from having an allocation
towards, you know, the eurozone, which has done
very well, especially now that Germany is moving
off their austerity position.
Finally, you know, we've had utilities in the
(06:00):
portfolio for about a year now, and my
view might have been unpopular at the time.
It seems like people are kind of coming
around to my way of thinking.
But the idea was, we're going to get
more growth out of this sector that we
have historically.
And for a variety of reasons, from from
data centers to onshoring, to population growth.
(06:21):
But at the same time, you know, it's
a regulated market, which should should give us
some support if things fall on the downside.
And that's been the case, you know, we've
had we've had nice performance from utilities as
well.
So, you know, this is again, one in
the wind column for diversification.
We've preached it.
And, you know, we're certainly benefiting from it
(06:42):
here in 2025.
Yeah, that's a good point.
Jeff, you want to add anything to that?
I appreciate and agree with everything Brian said.
I do have maybe a question that investors
or clients might be thinking about.
Does any of the moves, the political moves,
the tariffs specifically, I guess, is what we're
(07:03):
focusing on here.
Have you consider any of the holdings, moving
them in or out, you know, more or
less based upon the action and the tariffs
specifically?
I'm trying hard not to have any knee
jerk reactions, because I actually think it's a
complicated subject.
Believe it or not, I know that the
(07:23):
opinions come, they come fast.
And, you know, when you have a complicated
subject, what I find is the best thing
to do is to do nothing, contemplate what's
going to benefit, what's going to, you know,
be hurt, what's at risk, and be careful
with how you move the portfolio.
(07:44):
And that's part of the reason why we,
you know, we make decisions quarterly.
It's to not overreact.
We don't want to make, you know, harsh
reactions to one data point.
What we saw in 2019 was that the
tariff news changed regularly, right?
You'd have a big announcement that $300 billion
worth of goods from China is going to
(08:05):
be tariffed, and then market would sell off
10%.
And then, you know, three weeks later, there
would be some reversal, and then the market
would rally 15%.
So we want to be cognizant of that
possibility and not overreact.
And that might be a lesson for investors
to recognize that it's very likely we're going
(08:26):
to have some of that same kind of
movements, you know, up and down.
I don't know for sure, but that's what
happened the last time we went through this
with the same president, right?
So it seems like most likely based on
that historical experience.
You know, Chris sent me a note yesterday
afternoon, and he was asking me if his
(08:47):
comment was accurate.
And basically, it had two, you know, contrasting
statements in it, which I think was what
he was struggling with, right?
In the first part of the note, he
was saying, you know, this might be a
detriment to growth, and we might see the
Fed react by cutting rates.
And then in the last sentence, he said,
on the flip side of that, we might
(09:07):
have inflationary pressures, and the Fed might have
to react in the other direction.
And the truth is, he was absolutely right.
I mean, both those things are, even though
they're contrasting, I think are both possible.
And when you look at inflation expectations in
the near term, in the longer term, they're
at odds too, right?
In the near term, inflation expectations ratcheted up.
(09:29):
In the longer term, they actually went down.
So what is the market telling us?
Well, in the short term, they think this
is going to be, you know, increase inflation.
I wasn't sure whether I should say, you
know, be a positive or a negative, because
the number is expected to rise.
And in the longer term, growth is expected
to suffer from this.
So, you know, tariffs are bad policy generally,
(09:52):
and this is why, right?
We're going to get inflation and negative growth
from this, which is also why I don't
necessarily think it will last.
So, you know, that's the quick, I mean,
this seems like it's a moving target, but
maybe we can just do a quick review
of what has been implemented, what is anticipated
(10:15):
in the next month in terms of, it
seems like there's a fair amount of tariffs
that have been announced and anticipated.
But as we saw just in the last
few days, there's been like, oh, well, we're
going to have auto manufacturing.
Well, we'll hold off on that.
You know, some of this can change and
it is fluid, but what are we seeing?
How much is this tariff change?
(10:38):
What are the amounts?
And then how impactful is that on what
that means to maybe GDP or, you know,
the growth of the economy?
I guess we should.
Maybe start off with a tariff, huh?
Well, I was going to say maybe we
should tell listeners it's 11 o'clock on
March 6th.
Okay, because it may be very different a
(11:01):
day or two from now and this is
out there.
A day or two could be different this
afternoon.
Right, right.
So.
It's unbelievable how right you are.
A tariff just to review is essentially an
added tax on goods being brought into the
country so that it makes those tariffs more
(11:25):
costly, those goods more costly and therefore less
appealing relative to the thought is to a
domestically produced product, trying to inflate the appeal
of producing goods and services in the United
States versus brought here from other parts.
Which is a reason, one of the reasons
(11:48):
to do tariffs, right?
Is you're trying to bolster your domestic production
of a given product.
That's the stated objective, I think.
One of them.
Or to punish the senator.
There's also the issue that it is usually
(12:10):
met with reciprocal response.
So then our goods become a harder to
sell in other parts of the world.
It also does to the point about another
reason it may be advantageous and all this
focus on the expenses of government, which we've
(12:33):
seen a lot of attention on over the
last few weeks.
There's also, you know, this is a revenue
source for government as well.
So in any case, I think the bigger
picture that Brian, you know, bottom line of
minute ago is that ultimately this has historically
(12:54):
been considered bad policy because it slows the
economy.
It has an adverse impact generally.
And we've been in this prolonged effort to
create markets, to open up markets around the
(13:18):
world.
So our goods can be sold there, their
goods can be sold here.
It creates some thought as it creates a
greater interdependence and a lesser likelihood of adversarial,
you know, risk of conflict around the world.
And so that it is desirable to have
(13:39):
more open markets.
There is, I think, a focus on fairness
in this administration that is all this being
done in a way that is mutually beneficial,
probably worth, you know, more scrutiny than I'm
able to provide right now.
(14:01):
So in a perfect world, there'd be no
tariffs in or out, right?
And for total free market.
I agree.
But we don't have that here.
And many other countries charge us to send
our goods.
They have tariffs on us.
So I think that's what you're getting at.
Yeah.
So I think that's part of the motivation
(14:21):
as well as to try to air quotes,
you know, level the playing field, so to
speak.
But in any case, you know, I can't
help but think of Ferris Bueller and the
class, the lecture they have on economics, they're
talking about tariffs and the challenges that that
(14:42):
brought about when it came to the Great
Depression.
But in any case, so tariffs are part
of what's driving investor concerns when it comes
to the stock market because of the unknowns
as to how much this will have impact.
And I start off asking Brian if he
(15:03):
had any insights as to what kind of
impact this might have.
Are there any metrics you can share that
might be useful for our audience, Brian?
Sure.
So I think it's going to increase PCE
by between 50 and 100 basis points or
a half percent to one percent if this
(15:23):
persists.
Right.
And that's the key keyword if this persists.
And if that's the case, I think it'll
be very, very hard for the Federal Reserve
to cut rates if we do have a
growth scare, which we're having a growth scare.
I mean, the Atlanta GDP, GDP now stat
(15:45):
fell dramatically, fell more than six percent from
four percent to negative two point eight percent
within a couple of weeks.
So that estimate is almost always wrong.
But directionally, that's a scary move.
Right.
So even if it's half right, we're in
(16:07):
negative territory.
So this is concerning.
Between Doge and tariffs, I think that it
seems like the relative confidence of the consumer
is not good.
The consumer sentiment surveys, which I put almost
no stock into, are as ugly as they've
(16:29):
been in 50 years.
And the reason I put no stock into
them normally is because they're very political.
And the, you know, who answers surveys, it's
usually, you know, one demographic.
So, you know, you can discount that significantly.
But when they're seeing numbers that are basically,
you know, just falling off a cliff and
terrible, you know, it's something something to note.
(16:53):
It's at least a data point, even if
you discount it.
And the fact that, you know, it's political
is, you know, it's a fact.
But the people who you would think would
be politically motivated to say sentiment's good seem
to think that sentiment's bad.
So that's kind of moving in the opposite
direction of what you would typically assume through
(17:15):
the political lens.
So, you know, there's not a lot of
good data points going on right now there.
If I'm going to look for optimism, you
have a lot of high quality stocks that
are going on sale.
And that's something that I'm enthusiastic about.
You're seeing the 10 year treasury rally significantly.
(17:40):
So that's that's not only good for your
fixed income.
But if we have some stability at lower
rates, you know, it's going to be good
for the real estate market.
It's going to be good for stocks, you
know, all things equal.
So those those give you reason to to
be more confident.
Now, given the interest rate situation and the
(18:01):
kind of general sell off, I usually call
these liquidation events because they sell, you know,
indiscriminately.
It's usually just it seems like people are
raising, raising cash because they need it or,
you know, to pay debt service or whatever
it is.
You know, I think that's a great opportunity
to up the quality in your portfolio.
I was just in a WEG macro meeting
(18:24):
and that was my recommendation to everybody.
I said, this is an opportunity to clean
out things that might be more speculative, might
be more cyclical and add to quality and
secular, secular strength names that you can be
more confident that you're going to get at
a nicer price, you know, today than you
(18:46):
did a couple weeks ago.
Yeah, it's worth talking a little bit about
how we've been positioning for some of these
issues as well when it comes to some
of our discretionary managed strategies within our team
for our clientele.
You know, we can maybe talk a little
bit about some of the ways that we've
(19:08):
tried to be in a good position for
volatility, which has now begun.
Do you want to talk a little bit
about that, Brian, whether it's tips or whether
it's the way you talked earlier about the
utilities and low volatility positions in the mix
of the portfolio on the stock side.
(19:31):
Maybe talk about the fixed income side a
little bit and then our buffered strategy.
Yeah, so, you know, we've been banging the
drum that the S&P 500 is very
concentrated for a while, for at least nine
months, you know, and we've made an effort
to diversify away.
(19:51):
So diversify, diversify, diversify has been, you know,
our mantra and we don't have, you know,
excessive exposure, in my opinion, to any one
single name when you look through the portfolio
to the underlying holdings.
And that's very much on purpose.
And I think it has insulated us from
(20:11):
a lot of these sizable moves that we've
seen from some of the biggest stocks in
the market, you know, over the last couple
of weeks.
So, you know, I think that's number one.
You know, we mentioned the low vol strategy.
We mentioned utilities.
We mentioned, you know, we changed our value
portfolio.
We talked about our international allocation.
(20:31):
Those are all ways of taking that high
concentration from the growth names in the S
&P 500 and spreading out the risk.
And like I said, we've had some things
do really well on particularly international and low
vol and utilities.
And, you know, that's, again, you know, mark
one up for diversification.
(20:52):
Now, we also thought that this could be
a distinct possibility.
In the last quarterly, we talked about how,
you know, the Trump policies, although initially very
much favored by the market after him being
elected, mostly because I think the prospect of
further tax cuts, you know, them being maybe
(21:16):
made permanent rather than, you know, the sunsetting
provision.
There was a lot of optimism.
But we looked at the different policies and
saw that almost all of them had an
inflationary effect or all of them did have
an inflationary effect.
And tariffs are, you know, they're not only
inflationary, but they're depressive as well.
So, you know, we added tips to the
(21:38):
portfolio in the last quarter, and that's also
been beneficial to the portfolio.
We've probably stayed shorter in duration than the
average person or the average investor.
Or inflation protected treasuries, just for clarity, if
people aren't familiar with the term.
We probably stayed shorter in duration than the
average investor, and that's very much because, you
know, we are going to be insulated if
(21:59):
there is a rapid rise in interest rates
in the longer term.
But we very much have a barbell strategy
right now.
I mean, we're basically, we have short term
and we have intermediate term in equal weights.
And, you know, that's worked out for us
here.
And we also have a strategic income fund
that we want to take advantage of any
short term increases and spreads, which we've seen
(22:22):
spreads be very, very tight for a long
time.
Spreads are the difference between what you get
paid on a non-treasury bond and a
treasury bond.
And, you know, it's a good way of
measuring the credit risk in the market, but
also how much you're getting paid.
And you haven't been getting paid very much.
And I think the risk is only increases
(22:44):
with time.
So, you know, it's been an interesting market.
We're not in any credit oriented bonds to
any significant degree right now.
We have a very diversified equity portfolio.
And, you know, we've been very short in
duration and not taking a lot of interest
rate risk, which has really insulated our portfolio
and why, you know, I believe that our
(23:06):
strategies are doing, you know, fairly well here,
you know, at least in the black, despite
a difficult S&P 500 performance.
So it seems that we've had some of
these steps taken to try to be prepared,
one by, you know, this diversification, both within
(23:26):
stocks and within asset classes and this barbell
fixed income approach.
For our most conservative investors, we've also opted
to include a strategy that has a little
bit of a risk buffer to it on
the downside that can help be helping when
(23:48):
these kind of events occur to take some
of the sting out of the movement of
the portfolio.
Brian, we've also talked, you know, you mentioned
one of the drivers for, you know, some
of the concerns we had was not only
this concentration, but, you know, we've talked about
valuations a lot over the last several months,
(24:11):
you know, on the show and with our
clients.
You know, you've said in the past that,
you know, valuations don't really are, you know,
you can't really use them as a timing
mechanism for when to make changes, but it
can be insightful.
You know, how do you measure valuation?
You don't really like the PE as the
(24:31):
preferred way to do that, but this notion
of trying to look at valuation, have we
seen any material improvements with just modest volatility
we've seen in the last few weeks?
Has it, you said some things are looking
more attractive.
Is it having an impact in some of
(24:53):
the most expensive parts of the market?
Yeah, I mean, just take Nvidia, for example,
you know, it's in a 15% drawdown.
I don't think the growth expectations are any
worse really than they were prior to the
last earnings call.
So, you know, that stock, which is either
(25:14):
the biggest or second biggest stock in the
market on any given day, you know, to
me looks cheaper, just objectively cheaper.
So yeah, I mean, I do think it's,
you know, when you have a sell-off,
there's going to be opportunities.
I do think it's important.
You know, you mentioned one of the reasons,
you mentioned that I don't like the PE
(25:35):
ratio, which I don't, that's accurate.
So if the PE ratio, forward PE ratio
happens to go down on the S&P
500, you know, I'd love to know, did
they bring the E down too?
Yeah, that's something I was going to ask
you next.
What's the outlook for earnings?
It seems like tariffs are likely to, if
(25:55):
they stick around, it's not just a negotiating
ploy of some kind.
That would have some undermining impact on earnings.
Is that, or at least price, it would
have some inflationary effect on the cost, right?
But it seems like it would have some
consequence on earnings.
Is that not?
Yeah, when you look at the entire market,
(26:16):
I don't know how margins don't come in,
right?
This is either going to get passed on
to the consumer or it's going to get
eaten, taken to margins.
That's going to be worse with small cap
than it is with large cap.
But I think it's an inevitability, right?
And I think right now we're just thinking
about what sectors and what stocks are going
(26:41):
to be impacted more.
And I think it's inevitable probably that margins
will be cut.
But if margins are cut and revenue goes
up because they can charge through higher prices,
the E might be fine.
But I think that's what we're all trying
to sell right now, right?
(27:01):
And that's kind of why I said this
is a complicated subject and we don't want
to necessarily make a knee-jerk reaction.
Yeah.
So I always preach I want to be
proactive rather than reactive.
And what does that mean?
Well, I want to make a portfolio that
can weather kind of surprise changes and go
up with the market when it's going up
(27:21):
and hopefully give a little bit of a
buffer when it goes down.
But if you are just reacting to the
news headlines on a day-to-day basis,
you're just going to get whipsawed.
You know, this isn't an easy science and
it's not even necessarily a science.
I think there's some science and some art
to it.
And there's an overwhelming amount of data points
(27:43):
and opinions that are being thrown at, I
will say thrown at me right now.
And what you need to do is take
some time, maybe have some sleepless nights, which
there's no shortage of for me, and think
through what's important and what's not.
And ultimately, you know, you guys have heard
me say a million times, you know, earnings
(28:05):
and interest rates are going to drive the
total market and consistency and growth is what
I'm looking for in individual stocks.
Nothing's changed in that calculus, right?
So when it comes to the individual stock
portfolio, I'm looking at my portfolio and I'm
saying to myself, is this company not as
consistent as I thought it was?
Because if it's going to get, if the
(28:26):
whole business model is going to get upended
because of, you know, an event like this,
which we knew would be possible, then I
made a mistake and I need to re
-evaluate, right?
At the same time, is there a consistent
company out there that's growing that's not in
my portfolio that I'm getting a nicer price
(28:49):
on today than I was two weeks ago?
And, you know, those are the questions I'm
asking myself.
Now, when it comes to earnings, when it
comes to interest rates, they're decidedly lower right
now, at least the long-term rates.
So that's in the plus column.
When it comes to earnings, I think it's
probably going to have to get ratcheted down.
And it's a matter of degree.
(29:11):
But when you have lower interest rates and
lower earnings, they might be offsetting.
And that's something that you need to consider.
So, you know, luckily I don't have to
make any macro calls today.
The quarter doesn't end for another three weeks
and I have time to take in the
variety of opinions and look at what the
consensus opinion is for earnings growth and reassess
(29:35):
my valuation model.
And we feel like we're positioned pretty well
for what's going on, you know?
Exactly.
I mean, that goes back to being proactive
versus reactive.
You know, I think if our clients were
to look at their portfolios today, I think
they'd be pleasantly surprised.
And, you know, I'd rather them be pleasantly
surprised during a nervous moment than be, you
(29:58):
know, elated when things are great.
Let me give Russ a chance to chime
in here.
Yeah, thanks, Chris.
Yeah, I did have a question for you,
Brian.
I guess going back to this topic of
diversification and valuations, I watched Bloomberg in the
morning, and I saw some international fund managers
(30:19):
come on to talk about Europe and international
markets more broadly.
I have no doubt they're running to the
microphone these days, you know?
Yeah, yeah.
So, curious about your thoughts.
You mentioned it earlier.
But, you know, what are your thoughts on,
you know, this kind of movement towards these
international markets, towards Europe specifically, you said China
(30:39):
as well.
Is it just trying to get away from
some of these U.S. names that might
be, quote unquote, overvalued?
Or is there more substance to it?
And is Europe finally coming out of the
doldrums that they've been in for quite a
long time?
As a general rule, we have an allocation
towards international stocks.
(31:00):
It's part of our diversification strategy.
This isn't the tactical move that we have
to have an allocation internationally.
What we do have as our chosen allocation
in our ETF mutual fund strategies is a
fund that is fairly concentrated.
And that's purposeful.
We want to have a good allocation to
(31:24):
the best names in the international market.
And I think that we're achieving that.
So the idea is if the All Country
World Index XUS is up five, we want
to be up a little bit more than
that.
And then if we're doing that, then we
can be a little bit underweight international stocks,
particularly since we don't like being in China,
(31:44):
and still participate if the international market rallies.
And I believe that over the last couple
of months, we've seen that that strategy has
worked out for us.
Of course, I wish I had a lot
more of it when it does 7%
than the S&P 500 is down.
But nevertheless, I think we've achieved the diversification
(32:07):
goal there.
When it comes to China, we don't touch
it or try not to as much as
we can.
And here's my basic reasoning.
It's actually illegal for Americans to own Chinese
stocks in China.
When you buy a Chinese stock, you don't
actually own the company.
(32:27):
You own a legal structure in the Cayman
Islands or somewhere else that sells you a
certificate stating that you will get the economic
benefit from the Chinese stock.
So the Chinese could turn around and say,
well, that workaround is no longer palatable to
(32:49):
us.
And then you don't have anything.
And given the geopolitical tensions with the West,
I don't know if that's a gamble I
necessarily want to take.
I don't know if that's a gamble I
want to take ever.
But especially considering that.
Even if you do like it, the government
there, they're historically a communist regime.
(33:13):
And they'll change on a dime if they
think.
They did this in 2018.
I believe it was 2018.
They believed that the tech sector was doing
too well.
And they basically just killed it in a
day.
So you think of that, that's why we
stay out of China.
Generally speaking, international is going to be challenged,
I think, because of demographics in the long
(33:35):
term.
If you think of Europe, they have a
declining population.
Japan, they have an aging population.
China has an aging population.
The only real growth you're seeing in population
might be in South America and the EMEAs,
Africa and the Middle East.
So if you could find something in those
areas that you want to hold for the
long term, maybe that's something you're interested in.
(33:57):
I do think that's always a good reason
to go out of your way.
Yeah, I just want to chime in on
this notion.
If we talk about the All-Country World
Index that you typically refer to, Brian, it's
typically about 60-ish percent U.S., 40
percent non-U.S., correct, roughly, in that
(34:18):
ballpark?
It's a little bit more U.S. than
that now, but yeah, in the ballpark.
And so I think when we think about
our foreign exposure, that's our comparative as to
how much do we want to have.
And we've been consistently, in our own team
here, we've been consistently underweight international relative to
(34:41):
that benchmark with the equity exposure we have.
That is probably the question over time.
Will we want to alter that weighting?
I think a lot of that is relative.
How do we envision economic and market movements
relative to the U.S.? And that's how
(35:05):
we would negotiate that, navigate that decision as
to how much foreign exposure do we want
to embed in our clients' portfolios.
If we thought there was a prolonged opportunity
for outperformance relative to the United States, I'm
sure we would escalate our foreign exposure.
(35:28):
The question is, is that our expectation today?
And I think right now, Brian, correct me
if I'm wrong, your expectation for Outlook is
not necessarily that Europe or other foreign markets
are as likely to consistently outperform the United
States as we'd expect today the U.S.
to outperform or be a solid performer within
(35:51):
that context.
Yeah, I think that's accurate.
And if you look at the equity, it's
about 70% North America, which means it's
30% other, about 5% China.
It's recently been changed pretty significantly.
So if you strip that out, we're looking
(36:12):
at about 25% international.
Our portfolios are about half that in international.
And then we have a beta of about
1.2. So it's accelerated a little bit
because of the beta.
So we're underweight, but we're not crazy underweight.
And I think hopefully we're getting the benefit.
(36:34):
In addition to that, up until very recently
and still in one of our portfolios, we've
had emerging market bonds, which has worked out
really, really, really well for us.
And so instead of having exposure to the
stock market, some of these companies, we've had
dollar denominated debt, which, as you can imagine,
is going to be more consistent.
It paid a nice yield for a while.
(36:55):
And we did pretty well in that without
taking an abundant amount of risk while getting
some international exposure.
Jeff, let me give you a chance.
Anything you want to chime in on?
I'm thinking about this in conversation relative to
the recent market lack of correction.
Right.
(37:15):
So we talked about this in other times
when we've had Brian on about corrections.
We didn't have a correction of 10%
on the S&P in 2024, I believe.
And we're not there yet now.
But I was wondering what Brian thought.
We're talking about the geopolitical tariff impact on
the market and the volatility of it.
(37:36):
But as we know, it's normal to have
corrections in prices in healthy markets.
So do you think about this drawdown, these
difficult days that we've had, that this could
be just part of a normal market correction?
(37:57):
Well, corrections typically don't happen for no reason.
I mean, it's usually some kind of news
headline.
So yeah, I think if you're going to
be a stock investor, this is the kind
of volatility that you signed up for, right?
That's why you get the long term performance.
(38:18):
And I realize I do this professionally.
So I've trained my brain different than the
average person.
But I always say that the money is
made when the market's going down.
And it's just realized when the market goes
up, right?
This is when you need to do the
job.
(38:38):
If interest rates were steady and news headlines
were benign and the markets were ratcheting up,
well, we pretty much just go to the
beach, right?
But this is what I studied for all
those years.
This is what I've been training for.
(39:00):
And in some ways, I think since I've
been working with Chris and the AMR team
back before we were the Wealth Enhancement Group,
we had a bear market in 2018.
We had a bear market in 2020.
We had a bear market in 2022.
(39:21):
And this isn't anything that we haven't been
through before as a group.
And we've gotten through it and grown assets.
And I think we've made some really, really
good decisions during those times as well.
And that's my focus.
What are we going to do when we're
(39:44):
given the fat pitch?
Are we going to swing or are we
going to strike out?
And I'm looking to swing.
I'm looking for opportunities.
And that's what you can do if you're
being proactive and not reactive, right?
If you aren't prepared, if you have an
overly aggressive portfolio, if you're taking too much
(40:06):
risk, well, then when something like this happens,
you're almost in the position where you have
to sell, right?
And then you get these liquidity events.
But if you've already built a responsible portfolio
and you're getting a negative reaction to the
market, you could sit back and say, hey,
look, I got some firepower and I got
(40:27):
the bat on my shoulder and I'm looking
for great opportunities.
So that's what we're doing.
That's probably a good place for us to
pause the show.
Thanks, everyone, for your participation.
Brian, appreciate the perspective.
Help people get a sense of how to
make sense of what's going on in our,
just there's a lot of news, a lot
(40:47):
of things to pay attention to.
And we're trying to help people navigate that
and hopefully be anticipating some of the volatility
that comes along and how to be prepared
and then look for opportunities as they emerge.
So thanks, everyone, for your participation.
(41:07):
And I'll just mention as we close out,
if anyone would like a little help along
the way, if you're finding it difficult to
navigate these markets and would benefit from a
little bit of a second opinion, maybe get
some insights, don't hesitate to reach out to
us.
We're here to help.
What is the AMR-info at wealthenhancement.com.
(41:28):
And we're happy to be a resource to
you if you need any help.
Until next time, everybody, keep striving for something
more.
With Chris Boyd.
Call us for help, whether it's for financial
planning or portfolio management, insurance concerns, or those
quality of life issues that make the money
matters matter.
Whatever's on your mind, visit us at somethingmorewithchrisboyd
(41:51):
.com or call us toll-free at 866
-771-8901.
Or send us your questions to AMR-info
at wealthenhancement.com.
You're listening to Something More with Chris Boyd
Financial Talk Show.
Wealth Enhancement Advisory Services and Jay Christopher Boyd
provide investment advice on an individual basis to
(42:12):
clients only.
Proper advice depends on a complete analysis of
all facts and circumstances.
The information given on this program is general
financial comments and cannot be relied upon as
pertaining to your specific situation.
Wealth Enhancement Group cannot guarantee that using the
information from this show will generate profits or
ensure freedom from loss.
Listeners should consult their own financial advisors or
conduct their own due diligence before making any
financial decisions.
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