Straight to today’s action and the quarters action with our first guest, Rich Weiss of American Century Investments. Rich, well, how do we get here to these record levels As for stocks in the first quarter and what do you think it says about where we might go next? Well, you know John, it it’s always hard when we hit new highs or quarter like we just had record quarterly growth in the S&P to come on and be that guy, the cautious guy, I’d like to say the voice of reason. But in this momentum driven market, right, it’s basically a FOMO market at this point. Momentum as a stock driver, always worrisome, very fickle stock market driver unlike valuations or growth or profitability when people are bought, investors are buying stocks simply because the stocks are going up. It’s circular reasoning. It’s like picking up nickels in front of the proverbial steamroller. So we’d definitely be a little cautious here. I’d love to come back on in three months. Let’s talk after another quarter, ’cause I do not see us repeating this quarter as good as it’s been. OK. Well, I mean it. I guess it’s not saying too much to say we won’t repeat this quarter, but could it still be good from here? I I don’t know what I want to move on to what you’re saying about fixed income, you favor the safe yields there before we even get to the appreciation that would arguably come if and when we get the rate cuts that many expect. Tell tell me more about that and how much you lean into fixed income right now. Oh only at the margin, you know we we’re not market timers, we don’t move in and out of the market wholesale. So we’re tilting about 5% into fixed income assets along with some other tactical positioning within the stock market, small cap and reads. But in fixed income generally staying higher credit quality a little bit long on duration to your point you know looking for the slow down that’s probably the safe place to be. And with yields, you know with a 4% handle or better depending on how low you go in the credit quality, if you do the math there, you know maybe a 2% drop in in in rates if it were across the board. We’re not envisioning that so quickly average duration around 5-6 years you can get quite a hefty appreciation, something much more attractive than what we see in some of the large cap growth stocks right now. It’s interesting to hear you talk about this because what was so unusual about this first quarter is the fact that you had this torrid rally in stocks, but you also had gold reaching record high. You had crypto and Bitcoin touching a record high. You had a big rally in crude and the and the energy commodity complex as well. The dollar re strengthened particularly notably against the yen here in recent days, in recent weeks and yet treasury yields are higher on the quarter two. Is that a sustainable dynamic going forward and how does it speak to to dig even more deeply into your investment thesis around fixed income, right. I we do not believe it’s sustainable, not in the near term now maybe by the end of the year once we get through some of this market froth, right or animal spirits I think is a term I’ve been seeing lately. It’s all part of this momentum trade that’s been going on earnings, they’re just not there. They’re slowing down at aside from tech and a few key names, many of the sectors of the S&P had negative or low single digit earnings recently. So we don’t see the fundamentals driving it. And with rates staying high, at least for the foreseeable future, you’d have to be a professional contortionist to find something positive in those latest CPI reports. So with rates staying higher, we’re not going to see PE expansion here. It it, it feeds into our outlook, which is relatively cautious again for the next quarter or two, OK. But if rates are staying higher because the economy is stronger and consumers are remaining at least a little bit more resilient than everybody had anticipated, isn’t that actually a good thing potentially for earnings potentially. But rates are staying higher because inflation staying higher and feds afraid to to pivot too early for the governor’s comments the other day. So it’s not necessarily the economy is so strong, we see it as slowing down or decelerating with high inflation that that’s that’s not a great outlook for stocks. OK Rich Weiss, great to get your thoughts today.
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