Welcome to the latest episode of Rise UP!—your go-to weekly market and economic recap, where the week’s biggest financial stories meet expert analysis. Hosted by Terri Kallsen, CFP® of Rise Growth Partners, alongside special guests Peter Boockvar (CIO of Bleakley Financial Group) and Andy Schwartz (Founder & Principal of Bleakley Financial Group).
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Terri Kallsen 0:15
Welcome to rise up. This is where we take a look at the biggest stories each week and break them down to really help you understand what’s happening in the markets, what’s going well, what’s not going well, and how do you protect your portfolios when there’s so much going on today? My name is Terry Colson, and I’m a managing partner at Rise growth. I’ve been a CFP all my life, and leader of Investor Services at Charles Schwab, very excited to be with our two co hosts today. Andy Schwartz, who’s the founder of bleakly Financial Group. He’s also the CEO and a CFP, and Peter Bucha, who’s the CIO and editor of the book report, which he shares daily macro intelligence with traders around the world Andy and Peter, thanks so much for being with us today. Awesome. Well, you know, it’s an important day. We really want to recognize some of the challenges that have happened this week, and we want to offer our deepest condolences for the victims of this week’s tragic collision American Airlines flight and the Black Hawk military helicopter. You know, officials, even as we chart this today, we’re still trying to figure out what happened. And then, obviously, there’s still the fallout from LA and Chubb insurance this week highlighted that there are over 1.5 billion in claims thus far, and we’re not even done with that. Before that, as you know, it’s been a difficult time. We had hurricanes in Florida, floods in North Carolina. Well, just today, at Rise up, we have published, through wealthion, a new show about how to prepare for these catastrophes and how to plan for them so they don’t financially wipe us out in the process. So I want to encourage you to watch that, to listen to it, share it with your family and friends. If you haven’t subscribed yet, subscribe. This is where we really want to bring value to our bureaus and help you think through all the things that could happen. So the first part of our agenda today is to really go over this week’s big three. And as you know, there’s been a lot of things going on, but our first one this week is really about the Fed, the Fed versus the Fed. The Fed keeps saying, you know, they’re going to keep rates the same. There’s really they need to see more progress on inflation. And you know, TRUMP, President Trump has said that the Fed has failed to stop the problem they they created, and have done a terrible job on banking regulations. So, you know, Peter, I’d really like to get your thoughts. You know, President Trump, he’s not the only critic of the Fed. But what’s your take on the Fed move and lack of move, and What power does the President even have in this case?
Peter Boockvar 3:13
So the Fed sitting on their hands was well anticipated. This follows, since last September, a total of 100 basis points of rate cuts on the short end of the yield curve. The thing though, that happened since was that long term interest rates went up instead. So the bond market didn’t necessarily agree with the level of rate cuts that the Fed gave us, but because of this, still pretty good economic data at the headline level, at around two and a half percent inflation that’s been sort of sideways at around this 3% level, and a wait and see, until we get more details on the extent to which we’ll find tariffs on other countries and how, and what the administration’s game plan is on how they will extend the Trump tax cuts. You know, one of the things last year that that Powell said was a trigger for him to cut rates was to have confidence in the Outlook and the trajectory of inflation and growth. I think right now it’s somewhat hard to have the same level of confidence. So they did the right thing by sitting on their hands. Now, with respect to Trump, this is sort of what we heard in his previous administration when he sort of tried to draw bone Jay Powell into cutting interest rates, because who doesn’t like lower interest rates? But I think this time around, just as it did last time, it’s not going to have much of an impact on what the Fed will do. The Fed will try to be as independent as possible. Will try to focus on what they focus on, and try to be less influenced by what Trump has to say. Yeah, it’s
Terri Kallsen 4:43
pretty hard to spend your time not being influenced on what he’s saying. But Andy, I’d love to hear what you have to say. You know, they’re pausing on drape rate drops. There’s new policies affecting the economy, and we talked about February 1. This is the day of tariffs. Should we be? Concerned about this? Well, I
Andy Schwartz 5:01
think the Fed made the right decision to not do anything. Now the February 1 date you were alluding to would be Mexico and Canada. And so far, that looks like a 25% but who knows what is going to happen? And the reality is, I think the concern that a lot of people have, not just the Fed, but markets as well is that if they do get more aggressive, you know, on tariffs, you know terrorists are, or at least believed to be inflationary. And I think that’s our view. I know Peter talks about that all the time. And so if you fear that the tariffs are coming, and one of the things that you know, there are people out there that say, Don’t worry about the terrorists, because all he’s doing is basically negotiating. My concern would be, is that if they want to do things that are going to change tax policy, everything’s going to have to go through reconciliation. They don’t have the votes. Otherwise, you have to pay for reconciliation. It sounds like they all say when I say they the administration that the way they’re going to pay for all these things, you know, these tax cuts is going to be through tariffs. Well, if that’s true, then they’re really serious about collecting serious money for terrorists. If you’re going to collect serious tariff money, you’re raising prices is going to be inflationary. So I think the Fed is wise to wait and understand the landscape. What’s the rush, you know? So, yeah, I think that they’re, they’re right where they should be, and I think they’ll probably ignore Trump, at least for the short term. Yeah. You
Terri Kallsen 6:25
know, it’s really interesting. I just read an article this morning from the Atlantic saying, you know, last week, Trump started the budget freeze right away and then retracted that and created a lot of chaos across the country. And, you know, the article actually said he’s doing this purposely to be able to move forward with his executive power. So some of these things are pretty hard to ignore, but interesting that that would be his strategy to create chaos, that was the name of the article, how he can create more chaos, which is a little different approach than we’re used to, but always makes these stories really interesting. So let’s go on to our second one, which is about market volatility. You know, we’ve seen lower GDP than expected. We have the the deep seat claim that they can build cheaper AI with less data and earnings reports. We’re on a big roller coaster. This week we saw Nvidia started to come back a little bit. But, you know, the the market was down. The Magnificent Seven was down. You know, there was just a lot of things. People are rethinking their positions. Or is this an overreaction? Andy,
Speaker 1 7:34
you know, I would think that it’s probably wise to rethink your position. I mean, the whole premise that has driven up the the mag seven, you know, plus a few other companies, is the idea that AI will change the world, which it probably will, just like the internet changed the world, but there’s going to be lots of winners and lots of losers. And the bottom line is, is that, if you’ve got companies are investing 10s of billions of dollars under the assumption you know that they’re going to somehow win some race, and if we turn around and realize that they could have spent, you know, fractions of those, you know, dollars, and there’s there’s payers, and then there’s receivers, Nvidia was the right loser in the deal, because if they really can do what they say, and it looks like maybe they can, then the reality is, there’s no reason for people to be spending the kind of money that they’re spending, and Nvidia won’t be the recipient. When you think about a company trading, what do they get? Are they 70% 75% margins? You can’t the way the world works is someone’s in front they do really well, then everybody else catches up, and then all of a sudden, things get competitive. Prices go down, margins go down, but they’re priced, you know, to perfection. And so I think what happened on Monday makes perfect sense. Video also, and talk this. Here’s solar reflex. The part down doesn’t necessarily mean they should, but that still seems to be the muscle memory, at least for the moment.
Terri Kallsen 8:57
Yeah, that’s right. And you know, there’s been a lot of question about is this deep seek any good, like, how do clients, how do prospects, how do consumers even get to the truth? You know, Peter, can you give some information? I know you’ve got some of this in your book. I know you’ve been tweeting on this on x, but how do you help consumers find the truth in all this? Well,
Peter Boockvar 9:19
it’s clear that deep sea sort of piggy banked on a lot of what open AI did. But putting that, aside from everything that I’ve read and from people that have directly used the product and have analyzed it, is that it’s a high quality product, similar to some of the other large models that are out there, like open AI and what llama has come up with, and it’s open source, which means that anybody can really contribute to it. So it’s not just deep seek that’s doing all the work. There’s a lot more to it. Since it’s, as I said, open sourced, I think the point is, is that we learned that the dominance of building. AI models is not just located in the US. It’s not just with meta, Google, Microsoft and Amazon, that there are other major competitors out there building similar models, particularly in China. And it’s not just deep seek, it’s Alibaba, it’s Baidu, and there are others that are building similar models. So it just begs the question of whether these models get commoditized, and that the ultimate beneficiaries will be lower prices. And will be the users of generative AI. It’ll be businesses that integrate it into what they do to make themselves more efficient and more productive. It’ll be households that integrate AI into their daily lives to make things easier in terms of scheduling, making a restaurant recommend the reservation, or booking a trip, for example. But that’s what technology at the end of the day, does these innovators spend a lot of money, and a lot of times it’s the consumers that that benefit the most from it, but, but I think the point is, is that so much money got into these stocks, and I think deep seek was sort of a catalyst to make people rethink, can this AI tech trade continue on as is, or is this something that has changed the environment and landscape that maybe it’s time to start to more better analyze the valuations that we’re paying for these stocks.
Terri Kallsen 11:22
Yeah, that’s right. I really think you know this is bound to happen. It’s not just going to be in the US. We’re going to always have global competition. So this is our learning here, and we’ll take it forward. But Peter, you know, for our third story, you talked a lot in your book about international investment in AI, and this week’s story is all about Norway’s sovereign wealth fund set record earnings for 2023 because of their heavy investment in AI. And you pointed out on X that the Swiss national banks say that 10 times fast has the top nine holdings are all in tech. So a lot of people in this country and around the world are betting on AI, you know, Andy talked about, it’s going to be as big or bigger than the internet was decades ago. But let’s just talk about why you think that this is important to point out this international investment in AI. So
Peter Boockvar 12:20
one of the big characteristics of the stock market, the US stock market, in the context of the global stock market of the past few years, is US GDP as a percent of global GDP is about five US corporate earnings as a percent of global profits is about 30% but US market cap, as a percent of global market cap, is about 60% and that’s because of the dominance of these big cap tax stocks that have just sucked out all the oxygen from the global stock market. And it’s not just us investors that have piled into these stocks. It’s international investors. And the point you made about Norway, they’ve done it. I pointed out the Swiss National Bank that out of printed money, so money out of thin air, they used to buy US stocks. They have a portfolio totaling about $150 billion and very top heavy in all the names we know, Nvidia and Microsoft and Apple and so on. So the global investor has piled into US stocks to the point where we have to ask ourselves, can this continue and at the pace that it has, or is the boat so loaded with bulls in these tech stocks that maybe it’s time to look at other things to buy.
Terri Kallsen 13:43
Yeah, exactly. I mean, there’s a lot of other opportunities out there. So, you know, now this is my favorite part of the show. We get to hear questions from our viewers, and so we’ve got three big questions that we want to talk about. So, you know, I think one of the most important questions that are out there is, you know, deep seek has brought now, for the very first time, uncertain expectations around AI, so there’s fears that for the first time ever, that we’re not going to have the earnings we had initially planned for in the coming year, because Nvidia, broad Kyle and others. So, you know, even meta, despite deep seek announcement, is still doubling down on their 65 billion in AI this year. And so there’s a lot of things happening. Are we in a recovery? Are we not? You know what’s going on in the AI world? So Peter, can you answer that?
Peter Boockvar 14:37
Well, that’s what’s so interesting about this. If you rewind the clock a week, I don’t think people were going into the weekend thinking about deep seek, even though there was some chatter about this and people started to focus on it. But it was a very small universe that was so a lot of times, when you get big market moves, it’s when the news comes out of nowhere. And this certainly that’s. Yeah, I, as I said earlier, I do think it’s, it’s any tech investor, anybody that’s overloaded in these stocks, should start to think about is, what is the future from here? And just maybe a lot of these models, as incredible as they are, as I said earlier, it had become, or becoming commoditized, which means that it’s, good for the ecosystem in the sense that it lowers the cost for users to integrate this into what they do every day. But I think we need to scrutinize the extraordinary stock market performance of these players that maybe their product, again, has intensifying competition around the world.
Terri Kallsen 15:40
Absolutely. Andy, have you gone on the deep sea app yet?
Speaker 1 15:44
I have not. No, I has not. I tried
Terri Kallsen 15:48
originally, when, you know, because I’d never heard of it, and it was down because there were so many people going on it. So what’s
Speaker 1 15:55
the number? It’s the number one app on on Apple’s ecosystem. I mean, yeah, one, yeah, overnight.
Terri Kallsen 16:00
So you can see, like Peter said last weekend, no one would have been talking about deep seat. Now we all at the tip of our tongue how the world changes, but let’s talk now about the market volatility. So you know, we had another viewer come in and you know, talk about 70% of S P stocks actually rose on Monday, but with the mag seven driving 33% of the s, p, you know, though, that cell wiped out a trillion in gains. So leads us to think about the second question. We talk a lot about having balanced portfolios and really riding through the storm of volatility, but what should we be thinking about for investors who are heavy in the Magnificent Seven and tech, should they be looking to rebalance? Or where would you send them?
Speaker 1 16:47
I mean, personally, I think that we’re there’s a risk today, because there’s a lot of FOMO in the world. You know, everybody knows somebody that bought apple, you know, 510, years ago, or or Microsoft, or Tesla, and I think that and everybody owns the stocks, as Peter said, The problem is, when everybody owns a few stocks, if this thing goes south, how does anybody get out? I mean, that’s how you can have a drop in a and a stock price of 15% a day. So to me, we’re not sellers, and we’re not short sellers. So I’m not, I would never suggest that you shorty to these companies. These are great companies. The question you have to ask yourself is, if these companies have grown so dramatically over the last 10 years, and they’re some of them were 4 trillion or were $4 trillion companies, are they going to become $8 trillion companies? And the answer is, maybe. But the reality is, is that for us, and I apologize to clients every day for being respectful of their capital and having diversified portfolios. Because the truth of the matter is, if you own the S p5 100 only for the last 10 years, you were a big, big winner, because southern rate stocks dominated. That I personally and we own the S P, but we own other things as well. And I think that what’s happening now, we hear it from advisors, we hear it at conferences. We hear from clients that people are starting to question, why do I own anything else? And I think we might be at an inflection point. And I think everybody should be very, very careful, because when you can own assets that are trading at half or less mean, we talk about this, Peter, what are we three standard deviations? Now, you know, from the s, p to these other assets, so I would just say, I would just caution people not to leave where they are. But I would caution people, meaning you can still own the s, p, the Russell 3000 obviously, US markets, but do not leave those other assets that are so much cheaper and probably offer so much more opportunity, at least in the near term, if the if the tech stocks get crushed in 23 when the sovereigns was with the Swiss bank or was Norway, yeah, not a bad trade, right? Because in 22 those sucks, got punished. So if med is down 40% Yeah, I’m a big buyer. I was a big buyer, but, but today that’s not the case. So I would, I would caution people that maybe diversification has a place, and we will say, but we are going to maintain diversified portfolios for our clients, for sure.
Terri Kallsen 19:05
Yeah, sometimes people think diversification or the fundamentals are boring, right? But, but it’s still, can help you through these, you know, to really overcome some of these big drops that we’re seeing in one day. And, you know, Richard Bernstein this week, he basically said it’s a really good time to push for fundamentals. And so that could be good news for stocks outside of the mag seven. So it might be time to start. Are we seeing a tech bubble? I mean, I was around when we had our last tech bubble. It was not pretty. So Peter, like, what are you thinking? Are we about to start a tech bubble or not?
Peter Boockvar 19:44
Well, the valuations in those in these names have gotten sort of nosebleed and their market caps as well. But as Amy said, it can continue. It’s hard to figure out what the catalyst for change is. I just think that with Amy. Interest rates staying elevated with the long rate, the long end of the yield curve, the 10 year yield, for example, four and a half, four and three quarters, and the stock market P ratio being above 20. I think it’s always prudent when you get to sort of those levels, to always reassess your positioning and look for other things, and the gap between the outperformance of big cap, tech, grotike stocks versus value and everything else has gotten so wide that I think we’re putting pieces into place that can result in some reversion of the meme. And there are a lot of cheap stocks out there, both domestically and internationally, and while investors continue to want to pile into the same names, we think it’s worth looking at other parts in the market.
Terri Kallsen 20:49
Yeah, I agree. And you know, as a CFP, myself, working with clients and Andy, you’re a CFP, I mean, a lot of viewers might think, well, I can time the market. I can pull out when I need to, and get back in just like this week, right? I That’s something I can do. You know, I’ve always thought that’s a pretty high hurdle to jump, at least consistently. I’d love to know your thoughts. Yeah,
Speaker 1 21:14
I’ve been doing this for 40 years, and I would say, if someone comes to you and says, invest with me meeting an advisor, because I’m going to tie the market for you. I wouldn’t tell you to walk away from that conversation. I would tell you to run away from that conversation. You know, I think physicians say, What do no harm. And I think advisors should be the same. You know, my my fundamental starting point is, don’t think that we’re so smart, that we’re so arrogant, that we can outsmart the market, because those are the people that can really hurt you. And so we started sort of a level of do no harm, and having quality owning quality assets, having proper liquidity, having reasonable diversification, or good diversification. Yeah, we’re never going to be up 50% in a year because we’re not using leverage and we’re not in one asset, but at the same time, on Monday. Monday was a non event for us. We I think our average portfolio was down maybe 50 basis points. You know, it was no big deal, you know, because we owned so many other things, other than the stocks were being crushed. Now, with that said, on a day when Nvidia is up, you know, 10% or 5% a day would certainly be seen those days, that’s not a big mover for us, because we’re not piled in. And we own it, but we own it proportionally to some of the other things. So yeah, I would be beware of advisors that think that they can outsmart the market. Because what I always say to clients is, if you have an advisor that thinks they can time the market, outsmart the market, why in the world would they be wasting their time talking to you? Because all they would be doing is trading their own account. They would be a billionaire. They would be living on some private island somewhere, and they would not want to be being annoyed by by clients. So I would just say that be very, very careful that it’s a fool’s errand. I think for sure. Yeah, and scary and scary,
Terri Kallsen 22:55
yeah. I like that word, fool’s errand. The other word I tell our viewers to listen for, is fiduciary, right? If, if you’re if an advisor, like Andy, you’re a fiduciary, your team is a fiduciary, obliquely, is a fiduciary. And what that means is they are obligated, by law, by regulations, they have to do what is best for clients, and not just do no harm, but what is clearly best for clients. And so as you’re thinking about advisors during these volatile times, remember to think, get a fiduciary, someone who can really help you through the ups and downs and not be short term thinkers. So for sure. All right, so now we’re to the top three stories that we’re going to think about for next week, and it’s probably going to be another week of volatility. So Peter, what are your thoughts?
Peter Boockvar 23:44
I think that next week is going to be another one filled with corporate earnings, particularly Amazon and Google being the two biggest, after seeing some tech names this week and also next Friday, the payroll number, in addition to the ISM numbers, payroll numbers are obviously big, even though they get revised many times. Markets respond in a big way, typically, to these numbers. The prior month, we saw a monthly job gain of 256,000 but was not corroborated by other things, and we look for, therefore a revision potentially, but that’ll be the big economic number, and then we get to see whether Trump follows through with, as we talked about earlier, the February 1 tariffs on Canada and Mexico. We’re obviously hoping that he does not, but if he does, then there’ll be responses for sure, even Monday if he does that. So those are things that we’ll be watching for.
Terri Kallsen 24:43
Yeah, I think unemployment numbers will certainly be telling for us in terms of our stability. I also think about February 1. It’s my son’s birthday, but it’s also another big day for Canada and Mexico. So you know, Andy, what are you going to be thinking about for these terror. And if they are enacted, yeah,
Speaker 1 25:02
I mean, look, we’re going to have to let this play out. If they, if they are aggressive with the tariffs, then my guess is the market’s going to react negatively. The most important thing, I think, for clients, is to try not to focus on the short term. You know, I don’t want to say that. I don’t care. You know, what happens on February 1? Because obviously we care, but at the end of the day, you know, Nick Murray is a wonderful, you know, in our industry, and I don’t know if you’ve ever gone to a Nick Murray seminar, Nick Murray said something I was at a seminar, and he said something that I’ll never forget. So he said, client calls and the market’s up or it’s down, so the market’s down today, and the client calls and he says, Nick, you know, the market’s on. He goes, Well, you know, I’m not really sure where the market is today. Do you want me to turn on my TV and check? And the point is, does it really matter? And I would argue that it doesn’t really matter if it matters where the market is in one day, the day he announces tariffs. Maybe they do the tariffs, maybe they don’t. Then you’re not invested properly. Because the reality is, if you’re that short term and you’re thinking that should be in Treasury cash, because that’s liquid money. We invest money for, you know, for the longer term. So for the clients that are in equities, that’s a three year, four year, five year, sort of Outlook the first three years we have set aside. So again, that that takes us away from this idea of trying to outsmart and time the market, because, again, you’re going to lose. But I would say that if the markets fall enough then, and some of these to ask it cheaper, we’ll be happy to buy them, you know. And so, because we want to have whatever we’re buying, we just want to know that there’s value. We want to own quality assets that offer some reasonable value, you know, growth at a reasonable price, I guess is what you know. Our healthcare manager David Neil Obama does a great job for us. Likes to say he’s not a value manager, he’s a growth manager, but at a reasonable price. So yeah, so again, look, we’re watching the news. You know, we have to know what’s going on, but we’re not going to react day to day to what’s happening in the marketplace. Because if everybody’s running around reacting day to day, especially with President Trump, because, as you said, he really likes to mix it up. He likes to create chaos. He likes to create noise. He’s going to be on TV every single day for the next four years. People have to just kind of chill a little bit relax. A lot of what he says is hyperbole. We can’t be reacting to all that, because it’s so we’re going to exhaust ourselves, and we’re going to make mistakes and so but yes, we are definitely watching and interested in what’s going to be happening over the next couple of weeks in the financial in the financial news,
Terri Kallsen 27:26
I agree. You know, I’m so glad you mentioned Nick Murray. I have been to a couple of his sessions, but one of the books that I recommend our viewers actually read is called behavior Investment Consulting. Behavior Investment Consulting by Nick Murray, because that’s exactly what you’re talking about, right? I’m investing, but what are my behaviors? Am I short term? Am I long term? Am I reacting? Am I selling? Am I buying? How am I feeling? The fear, the anxiety? Well, this book can really help a viewer really understand how they behave during this volatility. So I’m really glad you mentioned that. And I’d also just like to thank viewers for coming. I’d invite you back next week, because I think we’re going to have another big week of news, of volatility, maybe some anxiety, but we could be, you know, your Friday afternoon relaxation moment, where we can help you. We can help you think these things through. We can help you with your behaviors and your actions so that you’re always growing and protecting your portfolio for the long run, because we want you to hit your lifetime goals. So you know again, please comment. Please send questions, subscribe, but thank you again for watching rise up.
