00:00 Brad Smith
Joining me now, we’ve got Will McGoff who is the Prime Capital Financial Deputy Chief Investment Officer. It’s been a wild week for the markets so far. So how should investors be navigating this type of volatility that we’re seeing here?
00:18 Will McGoff
Hey Brad, thanks for having me on and you just nailed it with the word volatility. We’ve been telling our advisors and our clients to prepare for volatility all year going back into January. We’ve got a new regime in Washington D.C. that’s obviously causing a lot of the volatility, but more importantly, we had two really good years, 20% plus back-to-back. So price-to-earnings ratios were extended to historical extremes, earnings growth was delivering 12 to 16%, so we were really at peak, you know, growth. Like there’s hardly any upside left and the volatility’s obviously been amplified by the trade wars that have started.
01:11 Brad Smith
And so with that in mind, what is the strategy that a lot of investors would be apt in that volatility in that volatility and in the valuations that were already kind of going through their own sniff tests at the beginning of the year, even prior to any type of trade war or negotiations on the tariff front being initiated?
01:47 Will McGoff
Right, so we’ve been saying you should be coring up exposure and by that, you just need to be cognizant of what your growth exposure is. The MAG 7 has a lot of concentration. It’s large cap growth, it’s a lot of large cap blend. So you just want to make sure that it’s balanced with value dividend paying stocks to help temper that volatility. So there’s a few ETFs that we’ve liked and used, dividend growers from Wisdom Tree, quality factor ETFs from BlackRock that kind of help just core up exposure. So that you don’t want to really take too much extra risk with growth. You want to be well diversified finally for the first time in probably 15 years away from the MAG 7, just simply be market weight, not overweight.
02:56 Brad Smith
Now globally here, how are you looking across some of the opportunities, especially knowing that US stocks and US exceptionalism was the trade to begin the year that we had heard from a lot of firms, but now it seems that we’ve seen some shifts.
03:21 Will McGoff
Right, there’s been massive shifts with the international investing landscape. We really haven’t needed international exposure for the better part of 15 years. US markets have dominated the world, but what we’re seeing and some friends from way back in the day used to always tell me to follow the money. So what’s happening abroad is a focus on spending. We’re trying to bring deficits down, Dodge, we’re trying to increase revenue through tariffs. So essentially there’s a tightening going on here in the States. Well, with some of Trump’s policies, he’s encouraging foreign countries to ramp up their defense spending. So you’re seeing foreign governments in Germany and Europe more specifically spend more money. So if you simply follow the money flows, you’re seeing money flowing out of the states and abroad, which is caused a massive divergence in performance this year for international specifically European ETFs versus those here in the states. So again, it’s it’s finally you need to be diversified. You haven’t needed that for 15 years with MAG 7, but there’s a period going forward where international exposure or small cap exposure or bond exposure makes a lot of sense to help bring down the volatility of the MAG 7 stock.