00:00 Speaker A
Um, as we know, people feel nervous right now. And we’ve been talking to people all day long and really over the past several weeks about how they can sort of protect themselves or navigate through this environment. What kind of calls are you getting from uh clients? And what is sort of the top message you’re trying to send to them?
00:25 Mona Mahajan
Yeah, look, this is a time of of uncertainty, and perhaps even peak uncertainty, given uh we don’t know yet exactly what we’ll go through on April 9th, this Wednesday, in terms of what tariffs will become effective or not. We don’t know yet what countries will negotiate and what which ones will retaliate. We’re getting a early sense of that. Um but generally, markets don’t like uncertainty and that has certainly been reflected in their performance as well. As you noted earlier, the S&P 500 was on pace this morning for that 20% bare market decline. But what we’re saying to clients is, look, when you look more broadly across asset classes, not just at the broader S&P or NASDAQ indexes, there are parts of the market that are holding up better. We’re seeing that in bond performance. We’re seeing that in international markets. We’re seeing that even within the S&P 500, defensive sectors, like healthcare, utilities, staples, all are actually higher year to date. Um so parts of the market have held up better. It really does come down to this theme of diversification in portfolios. And if you think about it, that theme didn’t hold up as well over the last couple years when mag 7, mega cap tech really was the name of the game. Uh now that, you know, if you’ve had that tried and true diversification strategy in place, you’re finally seeing some of that downside protection come to bear.
02:34 Kenny Polcari
You know, Mona, it’s Kenny Polcari. Um it’s interesting because, to your point, while it may not have worked for the last couple years, if you had it, you had it. So when you needed it, you actually had it. And that’s the point that I say to, I’ve been saying to clients, as a wealth manager myself, to the same point. People are nervous. I say, “Okay, let’s look at the broader portfolio. Let’s see, okay, your stocks are down. But your bonds are up, your alternatives are doing well. So there you have some stability. So you’re not neces-, you know, you’re not getting crushed. You’re your portfolio is not down 20% at all because you’ve got the other parts of this of this portfolio.”
03:46 Mona Mahajan
Absolutely, and well said, by the way. I think uh that diversification message, you know, maybe you were participating on the upside to some extent over the last couple years, but really when folks see those negative returns, that’s when those emotionally driven investment decisions really start coming to the forefront. That’s what we want to avoid. You know, we always say if you’re trying to sell out of the market and buy back in, you have two decisions to make, when to sell and then when to buy, and investors are notoriously not great at timing either. Um the other point I’d make is bare markets do happen, and sometimes they happen even when we’re not in a recession. What’s interesting this time around is we’re we’re down close to 20% from the peak in the S&P. Markets may be starting to price a recession, but the hard data right now doesn’t yet reflect that. In fact, the good news is we came into the year with pretty solid momentum in the US economy. I think that is helpful. We saw a labor market that was still holding in there last week. Uh we may start to see, you know, some of that sentiment data that’s showing up in in the basket start to show up in the hard data, but if we don’t see a deeper, prolonged recessionary environment, perhaps markets are already reflecting some of that. So we’ve seen a lot price get priced in over the last even several days, which is a good news for those that are looking more opportunistically, for those long-term investors that are looking to either rebalance, diversify, or just add quality investments at better prices.
05:58 Kenny Polcari
Well, and I think you, I think there’s a lot of places now where you can find that quality at lower prices and add to your current positions. Without you don’t necessarily want to get overweight, but you certainly can find opportunity to put some money to work. And on the other side, you know, it’s funny because last year it was bonds that were underperforming, right? They were down negative on the year. Stocks were up. And this year, now stocks are significantly down so far this year. But yet, you know, the TLT and the TLH are both up, you know, six and a half percent, the AGG is up about three percent, so to a lot of people that are wondering about, you know, uh why they hold bonds, this is exactly why you hold bonds.
07:03 Mona Mahajan
Absolutely. And you know, look, I think uh a lot of people and a lot of folks that may be closer to retirement or in retirement, um they are hopefully well positioned for this as well. They have more fixed income type assets in their portfolios and are not seeing the same level of volatility. So that is a benefit uh of that fixed income, to your point. And look, a 10-year treasury even here, close to four four and a quarter percent, um not a bad risk free rate to lock in. So we are still, you know, hopeful that bonds will continue to play that diversification role in balanced portfolios.