September 2025
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Watch previous episodes here:
Ep. 152 Why Too Much Cash Can Hurt Your Future
Ep. 151 Gold, Silver, Platinum: Myths vs. Market Realities
Meghan, I always find the economic and news headlines as it relates to our industry. So funny, because they're either fear like the world is going to end. Markets are going down, or just wait until the Fed speech. Jackson Hole on Friday. They're going to tell us all the answers that we've been waiting to hear, and everything's going to be fine.
It's like this knee jerk reaction to headlines when really the Fed speech was... it was nothing interesting, nothing great came out of it in terms of like, oh, wow, that's something that we didn't know. And now you're changing economic policy.
Well, first of all, I think we should question your sense of humor. Maybe you have to get out more on things. So I find some stuff that's more entertaining in your life, as opposed to the economic headlines. But I will say there are a lot of people who watch that speech very closely and who... it's a lot less to your point of like, oh, there's some clear conclusions about this is what's going to happen now and more interpreting of language.
And was it more dovish. Right. More inclined to lower interest rates or more hawkish. Oh they might raise interest rates. And so there are a lot of people reading the tea leaves on this trying to interpret, you know what it meant.
And Jerome Powell, he's very good at sort of being very vague and opaque. When he does speak, he says that's their job.
It's like he wants to maintain independence. But, you know, he had the same rhetoric in terms of we care a lot about inflation. We want to see how tariffs could impact, you know, the future inflation. This time, he said oh well, tariffs might just be a one time bump in prices. We're not confident that it's going to you know cause inflation to run.
But also we may be in a position to where we might need to lower interest rates in the future, which is different than what he might have said in the past. I think that has to do with more of the bifurcation of the economy. You've got wealthy people spending and doing fairly well with asset prices higher, but you've got credit card defaults, auto loan defaults and consumer spending for the middle and lower class a lot more stretched.
Yeah. And the other big one, people at job numbers have started to come in on the weaker side. And so I think all of those things to your point, support the concept of do you lower interest rates sooner rather than later?
How much do you care about the Fed's Jackson Hole speech or some of these bigger events that the media likes to tout as it relates to managing portfolios for clients and being our chief investment officer...
Not as a person. You don’t care about how I feel as a person. I'm glad we established that. Look, I think first of all, that what's important before we get to my personal feelings is the market care is very much right. The market cares a lot. And even you saw last week there were actually the market was a little bit weaker. And then it rallied, you know, upon some of his comments that the market interpreted as being more dovish or more inclined toward lowering interest rates.
And so a lot about even the economic news that comes out, sometimes bad economic news comes out and it's actually good for stocks like stocks rally because they're like, ooh, the Fed's going to lower interest rates. And so there's a lot of I think the market hinges a lot on that of like will it continue. You know will they lower rates?
The flip side to that is I would have said previously that the markets would have reacted very badly to increasing interest rates. And there were periods where it did. There were periods where when as rates were going up, markets didn't like it. It was volatile. But ultimately, you know, we're we're at all time highs here. So it's not clearly that wasn't the deciding factor or four.
So truly in terms of like how much does it does it matter for portfolios? I think it's really hard to make predictions about how will it exactly impact different asset classes. So that's that's why we've always been very focused on finding asset classes that we think will be less sensitive to that, because who knows. Do they lower it?
I want to be prepared for either direction. Right. Like if they lower it that could be very good for risk assets. Right. So your stocks would do potentially very well in that scenario. Be good for real estate, things like that. And if they raise it, which I think most people aren't thinking is possible in the short term, I would agree.
But ultimately, if inflation stickier is that possible? The rates actually go up or there's more risk to the upside. You want to be also in asset classes that could do well in that environment as well.
I think what's fascinating to me in terms of the markets being at all time highs and the fed talking about lowering rates and the market responding positively. It's like, wait a minute, let's take a step back. When markets are at all-time highs, the Fed's going to lower interest rates. If there's a need for growth or if the economy's not doing well.
But really we're sort of in this situation because the market is high because of the Magnificent Seven. So to speak. They're the ones that have sort of propelled the market to new all time highs over the year. Having such a high percentage of those indices, whether it be the S&P 500, Nasdaq. So on and so forth. So really lowering rates might support those other 490 companies that have not been driving the growth of the market recently.
It's definitely been a very bifurcated market. Where to your point, there's a handful of stocks that are really driving the strong performance, and there's others in even other industries that are performed much worse and struggled through the higher interest rate environment. So the headline numbers don't really tell you what's going on under the hood.
So as it relates to you being our chief investment officer and making decisions around, you know, certain targets or percentages that we want to have in various asset classes between US stocks, international gold, private lending, real estate, all of those things. How often do you think you make big changes to your thoughts around that?
Well, I do not make big changes related to the fed, specifically, or what's going to happen at a specific event because again, that's it's tough to know or predict those things or have them exactly in line, you know, great. If the fed does this will react this way. Right? We want to also be set up ahead of time.
And then we don't have to react to those kinds of events. So I would say the biggest thing that matters when it comes to coming up with targets for different risk assets is valuations. So valuations, you know, short-term valuations might not do or mean anything. Long term valuations are the the most important factor in terms of what drives returns.
So we're at a historically high level right now. You can depending on which measure you use. You're either at you know extreme highs or you're at just more moderate highs. But it's certainly not cheap by any measure. And so because of that and also in addition, that's one piece, the other big piece, I think looking at is more uncertainty.
So just right now geopolitical, in between what will happen with interest rates, tariffs, all these different pieces, the higher level of uncertainty also makes you say, hey, does that make you want to have a lower target to risk asset. So those two things combined make it so that we are at a lower overall target level. That doesn't mean we don't have any.
And if we have a client who's, let's say more aggressive or on the younger side, they would have potentially a decent-sized allocation to stock. So it's more around like what's the right fit for that client. If we get it in a neutral environment, everything was things weren't as uncertain. Valuations for more reasonable it would probably be a little bit higher.
So those are some of the factors that go into it.
And so you're looking more long term from an allocation standpoint. When I saw the market going down, you know, a few days before the Fed Jackson Hole speech, it made me think that maybe people are just rebalancing their portfolios a little bit, taking some risk off the table because they've had such a nice run since, since March. How often do you look at rebalancing or do you think that we do it for for clients at the firm level?
So I can tell you again, it's much less reactive. It's not like, oh, okay. The speeches coming quick takes them off the table or adds some based on what you think the outcome is going to be that, my crystal ball is, is, not fine tuned enough for that. So it actually comes down to each individual client's target.
So again, based on more of those big picture factors, right, valuations, levels of uncertainty in the world where we think we want to be, we'll pick a target for each client or each type of clients portfolio. And that target, you'll have some flexibility around. Right. There's ban. So let's say you start with a certain percentage. You start with 25% in stocks and it runs up a certain amount.
And the markets do well. All of a sudden that's a bigger percentage of the portfolio. We have bands around that where it'll trigger my team on the trading side to come in and say, oh, this person's over target. It might be time to pare them back to that target or closer to it.
And then so that's on the upside. And what about the downside?
Same thing on the downside. You know we haven't had this in a little while. But in the event that you had big pullbacks in the market and suddenly now you were out of tolerance, right. Or too low relative to that target, it would trigger a buy and saying, okay, is it time to buy and add a little risk at this point because it's become too low a percentage of the portfolio?
The idea here being, though, that ideally it's somewhat systematic, it's not quite as, you know, where it's just no problem because you would of course factor in if there again, big events going on. So it's not just it's not like an algorithm where it's automatically being treated that way, but it is definitely those targets. You're trying to take a little bit of the emotion out of it and say, hey, if this is the right target for that client, these are the parameters we've decided are reasonable.
Let's trade within those parameters.
As an advisor, I know how I work with you and your team in the sense of, you know, we're trying to figure out the right risk tolerance. How much growth does this client actually need for their plan to be successful? How much risk are they comfortable with from a volatility standpoint? And so we look at their different types of accounts, different assets that they have that they come in with.
And then we try to figure out how to rebalance their portfolio. So that way we kind of get it more into the targets that we're looking for. But as an advisor, I work very closely with your team, not on the certain bands that you build out, but the asset location. Which assets do I want to have in that particular account to help meet their needs?
Lower taxes, drive more income? We even have clients that might have a large concentrated position in one company that they've owned for a very, very long time. I'm not going to say any names, but, in, in some, in some cases that client says, you know, that's a do not sell. So me as an advisor, I have to communicate that to the portfolio management team who day to day might be doing some of these rebalances of term.
And then ideally you communicate with that client that, hey, it's maybe a little too large in a do not sell. How about a little bit less. Oh there are taxes. How much are we going to take in taxes to take some risk off the table? It's very nuanced. So look, in a perfect world, you could systematize this, right?
And again, then the AI machines could come down and just handle it and no problem. Snap your fingers. Why are you laughing? Because that's for love.
I do love. I think the technology's amazing.
It's going to be great. So the the reality is, though, again, there's just so much customization and nuance that goes into it. So I can have my targets all day. And again, you're trying to take out some of that emotional factor of like, ooh, it's up a lot. You know, is it going to keep running. Do you want a little bit more at this point versus oh it's down.
It's at a scary time to buy. The flip side of that, the advisor is so important in that because you're the one who knows, right. The nuances to that client's life, to their risk. What do they need to your point asset location. If that client is spending a lot of their taxable money as opposed to their retirement account, you might not want to put like all their stocks in their taxable account, because you don't want to have to sell the stocks at the wrong time to generate income, as an example.
Yeah, that's a good point. So that brings us to taxes. Obviously, we work as an advisor very closely with the client to figure out, okay, how much tax are you okay realizing in a given year. So that way we understand how much we can rebalance without, you know, causing a big tax burden. But then on the flip side, you know, we own a lot of different assets that move, you know, up or down.
Not really this year. They all seem to have gone up this year, but they move up or down. And that gives us an opportunity to do something called tax loss harvesting. Sell something at a loss. Put that loss in our pocket, use the cash to go buy something that's similar, to to then hopefully see it grow and that that tax loss that's in our pocket can help reduce the tax burden down the road.
When we do actually take gains, how often do you and your team look at tax loss harvesting opportunities that.
Well, one is we're looking at the funds that we invest in every single week. You know, if not, one of our a couple of our team members are more daily. And so in the event that you see large moves and one of those that would be the triggering conversation of like, oh, there was a large move downward here.
The first question is going to be like, why does this make sense? Or... comfortable like understanding what happened. But in the event let's say it was more it's just short term volatility, you know, is that a point where then the trading team goes and looks right away and says like, you know, is this an opportunity to take tax losses?
So it's something that's being monitored fairly regularly. To your point, it hasn't been quite as proactive of late because, everything seems to be doing quite well in the current environment. And one thing to just consider is and so now you can, you can I guess I'm communicating it now, but you can communicate to your clients as well.
This is a good problem to have when everything is up, and we actually don't have losses to take. I don't enjoy losses. I'm happy to take them from a tax standpoint if they occur. But if everything's up and it's the right thing to do to take a little gains to trim it down. I'm not talking about blowing out a huge positions and having these massive numbers, but like taking a little bit of gains so that you can take a little of that hard, hard-won profits off the table, I think is, is a very prudent thing to do in an environment like this.
I always enjoy working closely with you and the team in terms of helping clients with their portfolios and figuring out the right mix. I know you've been here for a long time. How do you think we've done in terms of getting better at implementing solutions and processes for clients and working together with now having a portfolio management team that's been in place for several years.
But 20, 30 years ago, advisors was a little bit more like the Wild West. Not saying it was the Wild West here, but it was not as systematized or structured as we have today.
I have been here a long time. It's actually going to be 20 years full time next, next spring. And then before that, I was an intern. They didn't pay me, but we can go back and deal with that later. The the reality is, the evolution has been been huge. And this is I think this is broader in the industry.
And back then, they would. Yeah. I think each advisor did sort of everything like they were together as advisors, but they were somewhat of a one man, one woman, one shop as it related to, you know, knowing the client risk profile, doing the financial planning, doing the trading on the individual portfolio. And so they maybe had like targets and like fund research that help support that.
But they... each advisor had to do everything. And so the question becomes is that the most efficient right. Is each advisor the best person to make each of those calls and be watching and monitoring to your point of like, is it up or down? When are their tax losses?
And what happens when they're on vacation?
No vacations here. We don't take vacations. The I think I think the evolution to having it be centralized but very collaborative with the advisor has been really positive. It just again, it makes it so there there is more of that systematic review process. And then you bring in the human component with the advisor who knows that client intimately when there's any changes or nuances in their risk profile or liquidity.
Alternative recommendations I think the again, the one one man or woman shop to the more collaborative team process and centralizing some of it has been, I think, very beneficial to the end client.
Megban, thank you so much for talking today and sharing a little bit more with how your team works closely with advisors on behalf of our clients. You know, the key takeaways are the valuation does matter. Having a long term mindset in terms of the decisions that we make in terms of allocation and not necessarily reacting to the news or headlines, or just because the media says Jackson Hole is a really big deal, that it actually really is a big deal.
You know, and again, there's there's the media. The markets are going to care about what they're going to care about. We can't we can't control it or predict it exactly. Which is which is why we diversify and why we look for things that ideally will not be as connected.
