Stephen Burke discussed the Fed's pause on policy, emphasizing the impact of tariffs and deregulation on small business optimism. He noted that while tariffs are a concern, the economy is stable with low inflation (under 3%). The Fed is unlikely to cut rates in March, with a 10-year yield hovering around 4.5%. Bill's survey revealed increased optimism post-Trump election, with energy transition and productivity gains as exciting factors. Concerns include rates, inflation, and liquidity. The survey also highlighted the importance of private credit and energy transition in private markets. The discussion concluded with plans for Survey 19, focusing on tech investments.
Stephen Burke discussed the Fed's pause on policy, emphasizing the impact of tariffs and deregulation on small business optimism. He noted that while tariffs are a concern, the economy is stable with low inflation (under 3%). The Fed is unlikely to cut rates in March, with a 10-year yield hovering around 4.5%. Bill's survey revealed increased optimism post-Trump election, with energy transition and productivity gains as exciting factors. Concerns include rates, inflation, and liquidity. The survey also highlighted the importance of private credit and energy transition in private markets. The discussion concluded with plans for Survey 19, focusing on tech investments.
Stephen Burke discussed the Fed's pause on policy, emphasizing the impact of tariffs and deregulation on small business optimism. He noted that while tariffs are a concern, the economy is stable with low inflation (under 3%). The Fed is unlikely to cut rates in March, with a 10-year yield hovering around 4.5%. Bill's survey revealed increased optimism post-Trump election, with energy transition and productivity gains as exciting factors. Concerns include rates, inflation, and liquidity. The survey also highlighted the importance of private credit and energy transition in private markets. The discussion concluded with plans for Survey 19, focusing on tech investments.
So I'm going to talk briefly about the Fed pause and policy today. Last week, deep seek and the Trump policy blitz have left investors scratching their heads, wondering where we go from here. I would suggest that this is a perfect time for people to take a step back and take a deep breath and not over react to all the stuff that's going on right now. Tariffs have kept on for an extended period. Will be inflationary, but as we saw yesterday with Mexico and Canada, President Trump left an off ramp, and we'll have to see where we go in 30 days. But there will be pushback, I would say this is not the policy approach towards allies that I would prefer to see the US take. It's a little heavy handed, but we've had a lot of red lines that we've laid out as a country over the last bit of time that we haven't followed up on. So Trump is actually the one thing we have to keep in mind when you're dealing with President Trump is what he laid out on the campaign trail, is what he's going to try and do. The fact that we had tariffs put on yesterday, or threat to be put on yesterday, was not a surprise to people, because he'd been talking about it for over a year. I do think lost in the tariffs is some positive things that are going on. I think the efforts of dodge to rein in spending, while awkward and off putting in a lot of ways, is actually a positive to get spending under control in the US. I think deregulation is a big deal, and I think it's underestimated by a lot of people. And I also think the other side of deep sea not what it means for the big tech but what it means for small and medium size businesses, and their ability to increase productivity faster is probably still being underestimated. I would say that small business optimism has shot up since the election, and if you saw a chart of that small businesses viewed regulations as their number one concern and fed policy as their number two concern. I think both of those are moving to more favorable SKUs for them. While I don't believe Fed is going to be dropping rates. We'll talk about that in a minute. I think that rates will be somewhat controlled on the up side, and therefore their two biggest concerns are being eased. While the tariffs are a top three concern, I think they're going to see that as it as it comes, in terms of it the real effect on their business. But as I think, as we step back and we've been reminded over the last couple of weeks, love them or loathe them, the President will follow through on what he said, and you should expect that the policies that he's talked about on the campaign trail, he's going to try and enact, regardless of how you feel about them. So I want to just touch on the Fed pause quickly and make the case for it. Obviously, a lot of people are concerned about the tariffs, but I think the real issue is that the economy is doing quite well. We're growing at a very solid pace. Employment is stabilized at reasonably low levels, while you can expect it to move up because of immigration issues, other and other concerns, the labor market remains quite solid, inflation remains elevated, but is still at a reasonable range under 3% I think the trip from three to two is going to be, still be a bit of a journey, and as we will experience over the next couple months, policy uncertainty will remain high. The Fed's market is not favoring another cut from the Fed in March, low probabilities of a rate cut, I think there is still a chance you did see Atlanta Fed, Bostic and gos from the Chicago fed both indicating that they're in no rush to see lower rates. You will hear some other policy makers make some comments. But of all the Trump announcements over the last week, I think one of them that didn't get as enough attention was Sunday night, when he said that he agreed with the Fed, not with the Fed, going on pause, which is really unusual for Trump to be saying any po anything positive about the Fed. But I think he even understands that, as he was talking about there will be some pain if the tariffs go on. That is an inflationary pain, which would be exacerbated if the Fed was cutting rates right now. I think we saw that when the Fed cut earlier, but the Fed is not going to be pushing through cuts in part because of the PC numbers still flirting in the high twos. I think that's going to be an issue he's going to be focused on. I think you're going to see public debt is projected to exceed the post world war two level. That is a cause for concern of the markets, and it's becoming a bigger concern, and you saw that with rates moving up considerably. Since the Fed rate cut in September, so the 10 year hovering around 450 is probably a plus or minus range. We could see that for some time, deficits are becoming a bigger concern, even for some of the progressive politicians and certainly for the conservatives, it's going to be a question of, how does the Republican Party deal with their fiscal responsibility versus the President's desire to extend or lower taxes, extend the tax cuts or lower taxes. But I think one of the big issues and one of the challenges for the Fed and for the president who wants lower rates is the fact that we're seeing divergence in policy. In this chart bill, we'll get into a little bit more about the divergences in a minute, but you can see if we are on pause, the ECB is talking about lowering rates. The Bank of England probably needs to lower rates some more. The Bank of Japan is raising them. But around the world, you are seeing a tendency towards lower rates, which will continue to lead to a stronger dollar. And the dollar has been exceptionally strong since the election and since the Fed beginning rate cuts. If the Fed pauses and other countries continue to cut rates, that's going to put more pressure on the dollar, in addition to what we're seeing with tariffs. So I think this is going to be one of the challenges for the President's policies, and one of the issues we will see is President Trump going to react to the markets, or is he going to be focused on just putting through his policy? I think he is very market sensitive, so I think that's something to keep an eye on. What we saw last week and what we'll see over the next couple months is an spike in policy uncertainty. You can see that from the chart here. We're moving back towards pandemic levels. Certainly this has been a shock. You've seen the pandemic here, and you also see at this level. And then you see back in 21 with the war in Ukraine. And now we're back above those levels. So policy uncertainty remains high. You have that with a lot of leadership changes going on around the world, in Europe, in Canada and other places where leaders on fragile footing, Trump's policies are coming aggressive. We had a very difficult time so deep sea can and the policy blitz have changed the calculus. Clearly, I would have advised people not to be too aggressive in making changes if they had a good balance in their portfolio and a good fundamental view of where they want to see the world 18 to 24 months out, I don't think you react too much to what occurred in the last week. I think the US continues to be the place that's going to attract capital. But if we are too heavy handed and treat allies as adversaries to too great a degree, that could change pretty quickly, and we will start forming alliances away from the US that will be unhealthy for us longer term. While I've been negative on China and Europe for some time, the market is a discounting mechanism, and you are starting to see some attractive opportunities from the investment side, as Trump has been aggressive in attacking friends and FOs, but you have seen some positive moves in the German market and other areas in anticipation of things getting better in the next couple quarters. I think the broadening out will depend on interest rates in the US, and rates will depend on policy and inflation, and right now that means that rates are going to be, I think, a little bit more elevated, so the broadening won't be quite as much as everyone had anticipated coming into the year. And I think the debt and deficit levels are complicating policy and will require very uncomfortable trade offs over the longer term, and that we're going to have to deal with that, and even some of them are going to be very uncomfortable decision the shorter term, particularly for Republicans trying to balance what has been a view of being conservative, but also delivering on the promises that the President made On the campaign trail, which economically were proved to be pretty positive, although I don't believe the mandate is quite as strong as they thought they had. So Mark, I'm going to stop there, because I want to get to Bill's discussion on the asset allocation.
Okay, you still threw a lot of lot of things out there, Steven, so let's see if anybody's got any questions or comments,
I guess a quick one, Stephen and maybe Barbara is the old saying, markets don't like uncertainty. I don't even know how to answer my own questions, so I'll let you try.
That's the question?
Yeah, what's the question is? The is an old saying, which is a truism, markets don't like uncertainty. Well, if there's nothing else in this conversation, we have uncertainty. So is there anything one can draw from from that? Or. Is it just something we should ignore?
I think they're going to have to deal with uncertainty, whether they like it or not. I think the real issues come down to for us, we always go back to the three fundamental basics for security valuation, which is the outlook for earnings, interest rates and inflation. And I think the outlook for all three of them is trending favorably right now, if we don't mess it up with tariffs and create an inflationary spiral that I don't see happening. I do think that while the market hates uncertainty, they do like deregulation, they do like lower energy prices, and they do like a fairly favorable interest rate environment, which they have, I don't think they are going to get the tail winds from rate cuts, so I think you're going to be in an earnings driven market. And I did put our latest news letter into the chat, and I think that's really what we're focused on, is the positives. And there's a quote from the out look that says both optimists and pessimists contribute to society, and I think that's true for the markets. The optimist invents the airplane, the pessimist invents the parachute. I think we're in an environment where both are going to be at play. Have a parachute, but be optimistic, because I think the opportunities are really exciting in this environment.
Tim, you have a question, Hey, can you
explain a little bit about the uncertainty index, how they build it, what it is, how it works.
It's a cumulative effect of it's a group that just takes a policy sentiment and looks at policy changes and government leadership and rolls it all up for various countries, it's more of a sentiment indicator. So it's more just a trend indicator for me than anything else. Tim, ironically, small business optimism, if you overlaid the two charts, looks exactly the same. So in the US, while that uncertainty is going on, since the election, small business optimism has risen exactly like that chart. So their view is deregulation and not a rise in interest rates from these levels is positive backdrop for them to move forward. So it's very interesting how different it is. And you have to remember, Tim, globally, we have a lot of leadership uncertainty from leading economies around the world, Canada, France, Germany, the UK, are all seeing leadership issues going on that adds to that uncertainty, and you have now the debt and deficits that are weighing on those policy decisions. All those things come in and create that which is brew of policy uncertainty.
Michael Hammer,
Stephen, you mentioned tariffs and US screwing things up with tariffs. I've been over the past couple days speaking with friends in Canada, and it sounds like there's a very strong movement to boycott US goods. So my question to you is, and you indicated you don't really like this policy of being beating up on friends, I'm paraphrasing. Have we already caused damage just because of how it's played out so far,
probably, but not. I doubt it's irreparable yet, if we keep going too far, that it becomes an issue. But he had, he's doing what he said he was going to do, and changing behaviors. If you cripple these countries, it'll be a problem if you adjust behaviors that I don't think it will be. So I think it's how heavy handed is, the heavy handedness, and how long does it go on for? And do we embarrass people or not? And I think that's really the the risk that we take mark I'm a little worried that we go too far and not get to build stuff so you can figure out how you want to deal with this. But Bill
off, that's why we gave him this, this this time, yes and yeah, maybe if we could leave, you know, if it's not like a five part question, Adam, because sometimes you do those, like, real quick, I'm gonna give everybody one minute if you had your hand up, and then three minutes return to you. Bill, go Adam, thank you. Mark.
Stephen, my question is about the strength of the dollar, and How sustainable is that, and how long do you think it will it will last its impact on coming from its impact on emerging markets. I think
the strength of the dollar is a reflection of as much the weakness of other nations is the strength of the US, which means we can't fix that easily if it's their problem. But I think the I think it's going to be. Hunger for a while, because rates are are we're not going to be cutting rates as aggressively as other countries are, and I think that's going to add to dollar strains for those nations.
As interesting. Go ahead. Michael, thank you.
Steven. Two things. Can you repost the news letter because I joined late in the chat. Yes, was on one of your slides on the debt. Debt levels are growing concern. I don't see anything on the vertical access. Do you recall what that is?
Yeah, dollars, percent of GDP, whatever it's percent
of GDP. So that's normal, like that is a percent of GDP. I'm sorry.
So that's normalized over time. Is the point?
Got it? Sarah, thank you,
Carl, you were sort of the bell of the ball. And at Florida, everybody wants to meet Carl pro he's doing these recycling tire plants around the country.
Stephen question on with Trump slash and all these programs and putting cash on hold. How do you think with is going to go with the do ease innovative clean energy loan guarantee program?
And clean energy is going to be a tough area for the short term. I think that's an area that Trump has not favored as much as other areas. I think that might be one of the areas he looks to fund other projects with,
unless it's Eddie project.
Eddie. Last question, buddy,
yeah. So
yeah, thanks, guys. It's interesting that the chart you showed that same chart you showed about economic policy uncertainty, if you look at that, decide which I did, and you look at the methodology, which is interesting. You look at the US version of that chart. Interestingly enough, it's not as much uncertainty. So the economic policy uncertainty that is caused by sort of the Trump decrease increased, sort of thermal globally, but the economic policy in the US remained relatively,
uh, let's say stable. And so that's, that's, I think that was an interesting observation.
Yeah, the you know, where our economy is doing really, pretty well, if you if you got rid of all the noise that we're creating, the economy is doing well. The problem is that's an aggregate, and a lot of the people on the lower end are getting slaughtered in this environment. So I think those are the kind of the challenges that exist for for you know, how we feel in aggregate, there's a there's so much money floating around, it's just poorly allocated right now. And I think that's the where a lot of the conflict comes and how people are feeling about things. And I thought all
the methodology interesting. So three parts, it's newspapers, it's federal tax code provision set to expire, and disagreement among economic forecasters, which is interesting too. And then, and then. And then the dispersion between individual forecast prediction about future level of the Consumer Price Index, federal expenditure, the states and local expenditures. So it's kind of an interesting concoction of things, the methodology,
well, well, let's turn to Bill D clar has been doing these presentations for a long time. The first one was when we were had, we had Kissinger. We listened to his views of the world five years ago, when it was and he put some slides together. And he's, he's the man. I thought I was worried, with all everybody being sick in Florida, that we had another interesting virus going around, because he also put six updates on the virus, put the great panels together. But this is, I don't know, this is survey 18. He sort of took over this, I don't know, survey five or six. And he's been, you know, we got a really good group of people this time. And this is these are anonymized results. So survey 18, have at it. Bill, good.
Can you all see the My shared screen? Okay, perfect. Good, yeah. And once again, thanks so much for everyone who filled it out. We did have a really great response, which is super helpful. And I hope everybody was taking mental notes on Steven comments, because it is a perfect segue into the survey results and what we're going to talk about this morning. So hold, hold everything that Steven said in context as we, as we go forward here. So with regard to kind of. Optimism, pessimism. We wanted to find out how people thought about their view at the time President elect Trump. Now, President Trump and in general, a big shift from pessimism to optimism. With this latest sample, the view on the markets came in a couple of points. But as we were talking just a moment ago, regulatory environment, us, economy, and in particularly the geo political situations, a lot more optimistic than in the previous survey. So we're going to go through a number of slides here in terms of, kind of like, what, what's scary out there. And I think these, these are the high the highly mentioned ones in the large font. You can see geo political is in here twice. I don't know why the software did that, but you can, but because of that, you can see this is probably should be double the size of font. People very concerned about the geo political thing. This was also the survey when people were responding, when Trump was making his initial pronouncements, which I think caught everybody off on. So that's a lot. Trump figures prominently on the tariff side. You know, now we're seeing kind of like some resolution in terms of of what those tariffs really meant. I'll make a side note that Hugh, he had an excellent segment on these, and he characterized, you've got economic tariffs, and then you have national interest tariffs. And what Trump has been doing is national interest tariffs. They really aren't economic it's just an economic hammer, so to speak. And but the but the end game for all those is really national inputs. So anyway, moving forward in terms of so you have what scares you, and then looking more specifically at your portfolio, what's your biggest perceived risk factor? And you can see that rates really figured very, very prominently here, inflation, liquidity and a couple of call outs that, you know, liquidity in the sense of DC stagnation, you know, not, not a lot of distributions coming back on the east side, lack of funding by LPS for new companies, things like that. All that was is tied into this liquidity mention. Here you can see geopolitics was a was a big one. So what? What are people thinking about, doing about where they're concerned in 2025, and the biggest mentions by far were international and then China taking down public equity. Which I can I can tell you, from the pension fund, we're on the trustee, we're actually overweight in our public equity by a couple of points, probably verging on on the area, on the region where we need to rebalance. So it could just be that we've had such a great run, but these are the areas where people are looking to maybe pull back some. I thought this was an interesting comment, actually, where, except for banking, residential real estate in Canada. So what are people specifically doing about trying to hedge those risk factors? And I think that it breaks down that there is some more specific action that people are talking about in general. Found that cash rebalancing and diversification were mentioned quite a bit. I won't go through and read all these, but it's interesting that for the first time in a long time, gold has showed up in the in the summer. And you know, we're now, you know, into whole all time highs for that. You know, back when I was the first family office, we were big into gold. We thought it would be at 3500 a long time ago, not quite, but it's made a move, and I think the uncertainty that people are feeling has brought gold to the forefront for that. All right, so let's, let's look at the other side of the coin in terms of what's exciting out there. And while Trump was scary for people, it's also exciting for some, and figured relatively prominently, probably more prominently, was energy transition productivity gains through a lot of times the you know, the extended answer to this was related to AI, but not necessarily just AI alone. But I think people are excited about just tech enabled productivity. And then, of course, defense has shown up prominently so in terms of dividing that out, in terms of what's going to be your major focus in public versus private markets, you can see here on the public side we just talked of. A second there on the previous slide about energy, and here it is, figuring promise, figuring prominently on the public market side pack. And this is really, this is, again, this is like AI, but it's also all kinds of tech, and I just consolidate down to make the response easier to digest. So a lot of people are looking at effective increase there. There's one that I wanted to call, I don't know if you can see this on your screen, but it's indexing. Also figured prominently, and specifically, the KLB 400 I haven't heard of that in a long time. The KL D was arguably one of the first mutual funds to come out in the SRI or socially responsible investing movement, way back in in the in the 80s and 90s. And someone said, you know, this is where we're going to be moving. Okay, on the private market side, interesting enough. Private credit figured very promin. We've talked a lot about that last in the past year, but it remains a prominent response. With regard to energy, you can kind of see, you know, here's energy transition I highlighted that out on oil and gas or data centers is one oil and gas just regular. And also there's another spot in here renewables. There we go. So we have both legacy oil and gas, and then we have new energy in terms of renewables, all of that are areas where people want to focus in on on the private market side, in terms of maybe a little further out there. What's an idea that you really want to look at? Early stage? VC was one that figured prominently, and we had some great presentations in Naples, Miami for that. Nick talked a lot about early stage. Todd, of course, is a great guy for that. You know, I'm involved with it as well, so that is a big one. But tech, crypto and bio technology also there. And I think again, sort of energy providers for AI and data centers was mentioned several times, a little hard to encapsulate that, but I called it out specifically. As far as changes. Mark was just talking about changes on in terms of just broadly across the community. It's almost split. The previous response with the earlier sample was more nos than yes is, and the yes is just ek a little bit more so. But so the community is pretty well split as far as whether or not they're going to do anything in 2025 and you can see here a wide range of options that people are looking at into for those who do want to change. Okay, let's go to the numbers talking about inflation. You know, it's, it's being more contained here, you can see all these bars are across the g20 most are below 5% the great majority are below 3% so we're, we're generally in pretty good shape there, specifically on the core CPI. This is kind of an interesting chart where the shorter term measures. So like one month, three months, six months, they're all beginning to converge right around the 3% range. So it seems as though you know CPI is becoming sticky in the 3% the latest data just came out for PCE, and of course, this is the one that the Fed looks at. There's a big difference in terms of CPI versus PCE in that I think you might remember from earlier charts that I showed where housing for the CPI is 40% of that calculation for PC, it's 65%
services and 35% goods. So it's much more heavily weighted for the services side of things. And last print moved up just ever so slightly, core at 2.8 headline of 2.6 still below 3% but above 2% and you can see here I've broken out, you know, from September, this is essentially looking at this little dip right here in the in the headline, going from 2.1 you know, kind of ever so slightly moving up, but moving up from September of last year. The other thing that the Fed is looking at is unemployment. And as Stephen mentioned, we're really in a good range. And if you kind of bridge across COVID, you write down. Here, you know, into the low, kind of mid threes, and now we're up into the fourth but overall, putting all the way back to 1950 we're lower than most of the time. Most of the time, it's been spent like around 5% or or higher. And people always talk about what structural unemployment, don't know, but I think people were assuming that it 5% Well, we're now in a regime between, you know, both this, this current, last and previous administrations, all you know, coming down from a very high of 10% back right after the TFC, in terms of personal income, which is, sort of, how are people dealing, feeling with with inflation, this is probably a little bit hard to see, but what I wanted to do is real personal income has flattened out a little bit. And I use the I fit in a trend line in here, so you could see the difference between, sort of, you know, prior to COVID, which had a slightly, slightly higher rate of growth in terms of real income versus what we're experiencing right now. Now, clearly nominal income is is increasing rather dramatically, but that's, of course, inflation driven, because, you know, people are trying to keep keep up with inflation, but, but on a real basis, we're actually sort of slowing down as far as per capita, real income, going into rates expectations. We're, we're very much in line. The community is very much in line at 437 that's sort of a convenient numerical average where the Fed is right now. And of course, you know, they put things on hold for 25 to 450 right in here. But you can see this is the Atlanta Fed forecast has flattened out considerably over the last number of months before this was a much steeper curve. The short end was much higher going out into the future. It was, it was looking to come down even more now. It's really hovering around 4% going out in 2027 but as far as you know, internationally, UK bank rate, they just held theirs and the same as well. Again, Stephen said ECB is expecting to cut so this may come down, and the trend for the community in terms of expectations was down as well. Here's the yield curve taken yesterday. The community is expecting the 10 year to be about 4.2 not that far away from where we are right now, at 4.52 or 4.53 but you can see the dramatic change from where we were, a dramatically inverted curve, the now one that's positively slow and elevated from where we were just, you know, three, six months, you know, a year ago. This is significant. On the return on the 30 year has been negative almost 13% because of this roughly 40 basis point. You know, move up at the very long end of the curve. Of course, you know things that come down at the short end, but you'll notice too that there's a slight bit of inversion from around the 18 to 20 year mark out into the long end. So, so the question is, is the long end going to continue to move up, even though it's come down just a little bit in the last month. But will it continue to move up, or will the curve flat and a little bit more here in the central part that's, I think, the question that's out there. Needless to say, Bond volatility has increased rather significantly, almost doubling from a few years ago, and that's clearly an outcome from inflation. So let's go to recession expectations. As far as you know, the US is concerned, a very solid no in the UK, kind of maybe, maybe no Europe, Saud, maybe Japan, probably not China, maybe, maybe yes, Asia, Southeast Asia, pretty definitely no on that one for the community. What are the here's the S and P forecast. And across the globe. It's probably difficult to see the numbers behind this chart, but I think the point of it being is that across the globe, S and P is very positive GP forecast for all areas, so they don't expect a recession anytime soon. These red and orange things are just changes from previous, previous assessments. The the q4 print came out not, not too long ago, and that put us at 3.3 discount, a little bit from 3.1 for the fourth quarter of 2024 which is interesting, that it has come in. The one thing that I wanted to I found this chart, and I think it's, it's very helpful, because what's, what's been holding it back? It's gross private domestic investment, and generally speaking, this category of spending has been positive. You know, going back into the prior years. But so if we can just flip domestic investment into the positive area, then you're going to see a nice bump, assuming consumer spending, which is purple bar, assuming consumer spending stay strong, if we can get investment, capex, etc, into the positive range, then, you know, we could see a nice bump in terms of GDP for the US. Something I mentioned, you know, when I was in Miami, the growth of US money supply has been decreasing, so it's still increasing, but at an ever decreasing rate. But this is essentially a tightening. This is a very macro tightening on the economy. Similarly, the dollar value of the world money supply has now hit zero in terms of its growth. So this is also worldwide tightening, I would venture to say that this is tough for outside the US because of the strength of the US dollar. So, you know, these, these two charts kind of don't go very well. And if the Fed had to cut, this is probably not a bad reason, even though it's outside what they're normally. All right, expectations for stock and bond markets for 2025 the last sample came in for the expectation for the S and P would be 9% and this is down significantly from the earlier sample, which was admittedly much smaller, that was at 14. But the range of expectation also widened out considerably, up to 25% most optimistic. 28% the most estimates this. This would be a tough on on the bond market, pretty much, you know, coming in at 5% I've got a chart, you know, coming up that's going to show you the best estimate for future bond returns, current yield for maturity, and that's about where we are. So again, you know, pretty reasonable, but also a pretty wide range. You know, this is, this is like, 10% is rates coming way down. 0% is rates going on. That's what that important. So we'll see how it all pans out, looking at the recent past, I thought this was a very interesting way to see how returns have stacked up the last couple of years. I've just been saw this is 2123 and 24 last year, in the 20 to 30% range, somewhat rare, but not that much, but still, to have these three years out of the last four cluster together so closely, it has been exceptional. So this is, if you will, sort of the last administration. And now, you know Trump. I put in Trump 1.0 to see. Well, what did that look like? Well, also, he had three out of four years that were, that were very strong equity markets. So we'll see. Is past pro Bo you know, not sure. But again, we've come off a really strong period of time. Just to say, see a closer look at what Trump, what the markets did during the Trump first term. It was a cumulative rise, price change only of 69%
and you know, Peter was saying there are two bear markets. Well, maybe there was the COVID crash and then there was 2018 but overall, you know, a very strong period of market performance during the term first term, again, we'll see if path is problem when we had also, you know, in terms of valuation, which is something that we always want to hold in the background. This is an interesting chart. I apologize that it's probably pretty small for you to see, but the takeaway is that we are now a little bit over one standard deviation away from fair value for equity markets, and that's, that's relatively rare five space, you know, going this chart goes all the way back to 1994 and this is, again, sort of the fit of bond yield, starting yield and what the subsequent return was. And again, you know, I just said, yield to maturity. That's the best estimate for bond returns. This is the proof of that statement. So we get to expected returns 25 to 34 so for the next 10 years, these are average across six, six data points. Sorry, seven data points that I have for their averages. Arguably, these are media manager or asset class broadly. And as I've illustrated in past years, here's the 7% line, which is a typical strategic target for endowments, foundations, country, funds. You know you really need 7% to account for inflation, growth at administrative costs, not too many assets are above 7% private credit and private equity are the only two. Private credit arguably, is the most efficient asset class above and I'm no longer with private credit firm, so I'm not talking my book, but it remains in this nice Northwest position. Hedge funds came up a little bit in terms of their expected return this year, and so they're above the line. So they're your overall sharp ratio is a little higher than any other asset class, but again, their expectation for returns is a little bit lower. US equities are open here again, you know, long term, a little bit, you know, below, sort of just below 6% and bonds, you know, as we mentioned, kind of down here. So here's the change in value from last year to the current year, as I mentioned, hedge funds moved up a little bit. Us, core real estate also moved up. Everything else see, private equity moved up to state here, and cash moved up here, which brought higher interest rates and short end. Everything else decreased in terms of its expected return, the most being international stocks going down, you know, 325, basis. This chart, I thought was fascinating, because it looks historical versus current, and the difference between the solid bars and the pink bars is the difference. Okay, the paint bars are what the asset classes actually did over a 10 year period versus forecast. So for bond, which is over on this side, the forecasts were optimistic and bond returns were actually slightly lower than what the forecast was. With regard to equities, and this is public equities, the forecast were more pessimistic, and the realization was much better, particularly in US large cap, which we've all lived through that over the last couple of years. Once again, we'll see across the pro bottom there. And then something to always keep in mind, this is, this is the spread across the managers, you know, between, you know, lowest quartile down here, lowest percentile, highest percentile are here, with regard to public markets, that spread is narrower in private markets. It's much higher, particularly in private equity. So if you can't see it, the spread between the bottom and the top performers and private equity are 30 points. So if you should be in that area, you definitely want to make good decisions about where you're investing. We could talk for a long, long time about this one. We'll just leave it up here. All right. So finally, last slide, uh, interesting between the prior survey, not 17, but the prior sample, we've seen a flip as far as we'll tell where chair will chair Powell served out the rest of his term from decidedly no to decidedly once. So I think that's a little bit less of a point at this particular point in time. But anyway, that is the survey once again. Thank you so much. Appreciate the extra time Mark. You're very
late. Thank you. I guess quick question on the the chart that you had with the performance of the equities clustered no further back, the one with the return stack, keep going the where you showed the four years on top of each other with the good performance back again, ah, it's where you did the returns for the years in that cluster chart.
There you go.
Yeah. What's interesting about this is, if you match that. To the fiscal and monetary stimulus that went on during the that period. I think that would fully reflect where the why the clustering was so strong for that four year period since 2020 when the pandemic hit, we went to zero interest rates and 50% of GDP thrown at the problem in the US alone. So looking at this understanding that impact of the fiscal, monetary stimulus, I think is worth noting, because a lot of people thought they were really smart during this period, and we had a lot of support in that in that time. So just worth noting on those numbers, why you'd have those four years being so strong relative to the rest,
right? Yeah, absolutely, we kind of look, you know, here's, here's a lot of the teens right here, in this far, you know, even 2011 right here. This is a reference, you know, the worst of the GFC, arguably, right here. 2008 you know, down in the 30, minus, 30 to 40 region here and then, but a lot of the 2000s Wow. So a lot,
lot of multiple expansion from zero interest rates in there, in those numbers, very
much
just Just a comment. Andrew, before you, the questions come is what we we're now already thinking of survey 19, we talked about earlier, at 1030 and we will be rolling it out next week for the February 25 conference in New York. So if anyone has questions or suggestions, Adam ostrich was saying, what was the latest deal you did? And then interesting discussion. You may not want to name names, but you may want to profile the kind of deals you're doing, but we welcome the questions so we can shape survey 19 with that. Andrew,
thanks, Bill, that's a great job. A lot of thorough research there. Great to see you in Florida, by the way. Unless I missed it, to what extent do distressed assets show up in your research as an asset class? And I'm thinking maybe, in particular, commercial real estate, things like that.
Andrew, that is a very good observation. And the answer is, they have. I have not seen distress show up for a while. Every now and then it does pop up in terms of, you know what excites you? And I think in particular, probably earlier last year we I think it popped up a little bit, but I think it's somewhat conspicuously absent from the response, where'd
you go to school? Andrew, good question.
Little school, Central Ohio, liberal
arts thing in its fines.
Michael Hammer,
yeah, great presentation. Bill, can you share your slide deck before I ask my question? I would be happy to thanks. So for the upcoming survey, I think an interesting question to ask people is, what should a US sovereign wealth fund invest in?
So that's a that's a really, that's a really interesting question. Michael, I have been surprised that sovereign wealth funds are interesting animals. A lot of times they are kind of bar build in terms of fixed income and private equity, which is unusual. And then you look at the Norwegian Oil Fund, which is the biggest in the world, and they are to a very big they are in public markets. They are actually prohibited from investing in private markets. Bill, I think 1.7%
of every company in the US or something, every company in the world
last, last year, 200 and something billion in profits. Well,
right? Yeah, absolutely. I think that, you know, you can kind of contrast that there is a comment in the chat a little earlier about the potential of a US sovereign wealth fund. There are actually a couple of sovereign wealth funds in the US currently. Probably the most well known is the Alaska Permanent Fund, which is a fund that that takes a little bit of the oil revenue from Alaska, and have sock it away for Alaska revenues. It's a nice deal. If you live in in Alaska, you get a check every year, no matter if you are two years old or if you're 92 years old, you get a check. And I know I. They used to be a client of mine, many, many years ago, their portfolio is actually quite diversified. So my comment not with standing earlier, that's probably more characteristic of some of the nine US and Asian sovereign wealth fund, although New Mexico
has one two. Date of New Mexico has gone, yeah,
New Mexico, I think, I think there's a mineral fund in either Wyoming or Montana, one of the two. So there are a couple of those, and they follow very much kind of the classic endowment model.
Other comments, questions.
We get Bill slide presentation, if he's put a link, I don't see it, but just thought I would ask if I may, I have excellent
so I have what we showed in Miami, okay? Or has it changed?
Yes, yes, yeah. Sent you to copy. Wait last night. Okay, last minute.
Okay, any other any other comments, questions?
Bill, hi, thank you, Mark. I have a question on why is it that the privates have such a high standard deviation?
Yeah, that's a that's a great question, Anthony, because, you know, obviously it's like real estate, you know, they're, you know, they're assessed values. So I think, I think what you're seeing is these are probably more mark to market, a pure private equity. And there are some Yes. So you're, you're seeing the difference between, you know, sort of regular Mark versus mark to market. There certainly encompassing J curve effects. Private credit. There are some having been in that space for a while now. There are some managers that do have a relatively high standard union. I think 10% is too much. I mean, it's north of 10% I would put private credit, you know, back in mid single digits, you know, at us, or at worse. So, you know, I hear you there, same thing for real estate, but these are all expectations. It's all model driven by these folks. I think if, if we were to have, you know, what's, what's, what's put all the all the heads together in the community, have lunch one day, and let's come up with our own expectations through asset class.
I can give you one example. I'll give you one example because technically, high yield debt is private credit. It is not. There's no market for high yield debt. So if they included things like that in building this, this data, you wouldn't have, like, direct lending dominating it. You would have things that you actually price, trade and move.
I mean, I think obviously the source be there's silly, clearly, some kind of call, let's say unintentional contamination, because a lot of the underlyings have products, right? So they, obviously, it's a discussion, but they would argue that, you know, where are they getting that data from? But I think if you ask the community, I doubt the community would would think that private equity has a volatility of, you know, 25 right? Many would say that it that it's less volatile than public equity markets. That that was my point, the way I perceive it. So it just seems to be skewed. Yeah, I mean, I doubt Bill,
you use five or six sources for this. You always have,
yeah, I, you know, I'm just thinking that that could potentially be related more to the spread in terms of performance across all the managers. So, if you will, you really, in a sense, this isn't, this isn't 25 you know? Well, strictly speaking, if your mean is 9% and you have a standard deviation of 25 that means you're definitely going to get into negative territory. But, you know, it could be that. But I think also mark where you were going. I've got talent, their consultants invest or various. They are also consultants as well. You know, be and why, certainly has got more public equity. You know, Black Rock, probably, you know more public equity, but certainly a lot of private stuff in there. Well, boy and Vesco a Monday. It's a pretty broad sample. Of folks, and again, you know, two of them are consultants, but don't have an access to Brian as far as the product
totally. But my, my takeaway from this, not that anyone's asking, is that this is not entirely efficient or accurate, and that part of it has to do with the the inefficiency and media mediocrity that comes from the collective sources, right? In some way, in that their own data is inefficient for whatever the reason, right, whether it's deliberate, undeliberate, whether it's Yeah, and obviously you've done a remarkable, you know, great job aggregating it all. That's not, that's not my point, just to be clear, right? I think it's wonderful what you've done, but it just says something, even if you look at this chart, like, why would you invest in hedge funds with the illiquidity, if the 6040 gives you arguably better returns, right? With with daily liquidity. So there's something sort of skewed by this, by the and obviously the hedge funds is a the aggregate. And this is the last thing I'll say. It's remarkable that when a lot of these these shops put the hedge fund in, they think of it as the they call it, and articulate it as an alternative to fixed income. And so the standard deviation and the returns are very low, but we all know that hedge funds are all over the place, and you have very high, you know, high returning hedge funds and very low returning hedge funds. But generally, this idea that they're, you know, evolve six with a return of 456, A, is more, I think the outlier than than the norm. Yeah, I don't think that's why people go buy hedge funds. Is my point. What do you think? Stephen,
well, why don't we bring on? I know Dan from various let's bring him on. Yeah. Because you're probably, you're right. And you got your high vol hedge funds and your low vol baskets, and you got your, you know, they're all over the place,
right? Yeah, see, CTA is versus, you know, arbitrage, right? That's huge. But I think just to expand your point a little bit, Anthony, if you look at the white dots, which these are all the median points media managers for for these strategy categories, that probably coincides pretty well with, with what the expected return chart looks like. But if you if you did an expected return chart using just these orange bars, which essentially is the top four file you're going to get something that's going to look a whole lot different. Now the volatilities, that would be very interesting to see what the volatility is of the top four File Manager. But, but clearly, you know, you're going to see, rather than, you know, sub 10% for private equity, you're going to see, like, high double digits, you know, high teams. I love
to aggregate and slice this data ourselves the way we want to do
it. It would be good getting the underlying. I mean, the charts. One thing getting underline is a whole another thing, but maybe, maybe the people at various would, would be willing to work with but I, I do think that looking at top four, because everybody has expectations for top four trials, and I think that it's, it's not unreasonable, you know, to have something you know better than median, so that that would be a very interesting chart, for sure. Anything I think you know, once again, it just the spread between the media, which is not an unreasonable expectation from a conservative standpoint to top quartile performance there, there's, there's work that has to be done to get you from from the dot into the orange.
Well, again, if anybody has questions they want to suggest for survey 19, you know, ping me, ping bill. I'll make this available to everyone that's on this call. And what's the Yeah, tomorrow we're going to talk about other events, and particularly Riyad. We have a we have our site, our ministerial support. 85% of our agenda, so there still chance to get involved in the agenda. So that'll be in it for us as a community. That'll be an interesting game changing event. Of course, we got like five other events before then, but and launches in these briefings. But I. You want to be involved. That'll be next, that'll be tomorrow, okay, but that
great job on Florida mark. Really, really good events down there.
Well, thank I think it go from start to finish like you. You do. It's a roller coaster. Ste on the pickleball court so and
Bill given some nit picky questions, it was a really, really good pulling all this data together. I mean, it's a it's a lot of different data from a lot of different places, because I, I've seen it all it takes, takes a lot of work just telling everybody, that's a lot of work.
Well, thank you. Thank you very much.
Yeah, you know, and I do appreciate the 50 questions. They're all good, all good.
Great day.
Thank you.
Thanks everyone. You
take care everyone.
Once again. Bill, okay, you're welcome. Gotta take about 19 now I know
I'll come up with something. It might. I don't know if it's the 25th that's only 20 days now and then. I don't know if you want to give it a rest or but we can forge on you. You're the chief. I'm thinking
we should make it tech oriented a little bit, since that is a theme you know where, and maybe go. So that's that, like one, one part the Barbara. Maybe you could tag team with Barbara. Barbara invests in the publics in tech. She's, she's, there's a whole tech panel on the public so like that woman, Kate roll of right? Who's got a on in tech? Stephen, of course, has a tech part of his portfolio. And we could test, you know, even to that, to this, to this discussion, she'll be be in tech, in public and private stage.
No, um, yeah, I think that's really interesting, sort of, you know, it's their life outside of fin time, essentially.
Maybe you could even have some guest a guest question, like Ken Goldman ask a question, and then you present the answers. In your context. We can have like, you know
in advance, I don't want to be on the other side, on the table for the kids.
No, just do one part of this presentation, one part of the this segment. Yeah. Did you hear his answer? Ask him how many K ones he receives. I know 300
I'm sure his account is a good friend.
All right. Well, thank you. Everybody still got some people on, but free and team. Let's I'll stop this meeting. We'll come back. Thank you again. All right.
Appreciate Mark. Thank you.