MARIA, BACK TO YOU.
MARIA: THANK YOU, SUSAN.
AS YOU MENTIONED IT WAS ANOTHER
EXTREMELY VOLATILE WEEK FOR THE
MARKETS.
COMMENTS FROM THE PRESIDENT
ABOUT CLOSING THE BORDER AS
WELL AS THE SAUDI CONFLICT,
WORRIES ABOUT GROWTH, GETTING
IMPACTED BY THE FEDERAL RESERVE
RAISING INTEREST RATES.
ALL IMPACTING INVESTORS THIS
WEEK TO.
MY NEXT GUEST WE GO FOR
REACTION, BANK OF AMERICA
GLOBAL WEALTH AND CHIEF
INVESTMENT OFFICER, GOOD TO SEE
YOU.
>> GOOD TO SEE YOU.
MARIA: THANK YOU FOR JOINING
US, ARE YOU WORRIED ABOUT ALL
OF THESE THINGS?
>> YOU GET WORRIED WHEN YOU SEE
A SIZABLE FALL.
WE CALL IT A BACKDRAFT.
IT'S PRETTY MUCH HALLMARK OF A
RESET.
THERE'S A LOT OF PORTFOLIO
RESETS GOING ON BETWEEN
EQUITIES AND FIXED INCOME AND
SPECIFICALLY WITHIN EQUITIES, A
LOT OF FLOW GO FROM THE
ULTRAOVEREXPOSURE TO GROWTH
BACK INTO VALUE.
OVEREXPOSURE TO U.S., SOME OF
THE HIGH MARKET CAP NAMES NOT
NECESSARILY TO NON-U.S. BUT
GOING DOWN THE CURVE, CASH HAS
GONE UP, LONG DURATION ASSETS
ARE GOING DOWN.
WORRIED FROM THE STANDPOINT OF
HOW QUICKLY IT HAPPENED, BUT
NOT WORRIED ABOUT THIS IS THE
END OF THE CYCLE.
MARIA: AND, YOU KNOW, YOU
WOULDN'T BE SURPRISED, REALLY,
WHEN YOU LOOK AT THE RATES
WHERE WE ARE.
EVEN IN THE TWO-YEAR, FOR
EXAMPLE, WE TALKED ABOUT THIS
LAST WEEK ON THIS PROGRAM.
IF YOU GET CLOSE TO 3% OR 3%
FROM THE TWO-YEAR NOTE, MAYBE I
CAN TAKE MONEY OUT OF STOCK
MARKET AND PUT IT IN THE
TWO-YEAR, I GET THE SAFETY OF
SLEEPING AT NIGHT AND I KNOW
I'M NOT GOING TO LOSE MONEY ON
THAT.
>> NO QUESTION ABOUT IT.
IF WE PUT OURSELVES THREE, FOUR
YEARS AGO, THE TWO-YEAR YIELD
WAS CLOSE TO ZERO AND THE
PROSPECTS OF COMING DOWN THE
CURVE WEREN'T THERE.
NOW A TWO-YEAR YIELD STARTED
OUT THIS YEAR COMPETITIVE TO
THE DIVIDEND OF THE S&P, THE
TWO-YEAR YIELD IS CLOSE TO 3%
WHICH IS COMPETITIVE TO THE
10-YEAR YIELD THAT WE SAW
COUPLE WEEKS AGO.
SO WE'VE GONE UP 17 BASIS
POINTS IN THE 10-YEAR YIELD,
AND ALL OF A SUDDEN THE WORLD'S
COMING TO AN END.
MARIA: YEAH.
>> IT DOESN'T HAPPEN LIKE THAT
OVERNIGHT.
MARIA: WOULD YOU RECOMMEND,
THEN, PUTTING MONEY IN
INSTRUMENTS LIKE THAT, LIKE A
TWO-YEAR, TO GET THE YIELD?
I DON'T WANT TO DISCOUNT THE
STOCK MARKET.
WE'RE TALKING ABOUT THE
BACKDROP STRONG.
EARNINGS ARE BETTER THAN
EXPECTED.
EXPECTING 22% EARNINGS GROWTH
FOR THE FOURTH QUARTER.
>> THAT'S RIGHT, THIS IS A
RESET AND THE STOCK MARKET IS
ABOUT TOTAL RETURN.
THE FIXED INCOME MARKET PEOPLE
HAVE BEEN TAUGHT RECENTLY AS
RATES HAVE COME DOWN TO RECORD
LOW LEVELS, EXCEPT FOR THIS
YEAR TO LOOK AT FIXED INCOME AS
TOTAL RETURN.
FIXED INCOME BY ITS NAME, FIXED
INCOME.
SO IF YOU'RE THINKING ABOUT
WHERE YOU ALLOCATE, CERTAINLY
THE LOW END OF THE CURVE IS
VERY ATTRACTIVE RIGHT NOW.
YOU HAVE VERY NEGATIVE TERM
PREMIUMS OR ZERO TERM PREMIUM.
IF YOU GO OUT DURATION, EXTRA
SIX, SEVEN YEARS, TO PICK UP
25-BASIS-POINTS IT DOESN'T MAKE
SENSE.
MARIA: DO YOU THINK THIS HAS
BEEN OVERDONE, THEN?
YOU DON'T THINK THE CYCLE IS
OVER THEN, YOU STILL WANT TO
BUY STOCKS?
>> YES, STILL WANT TO BUY
STOCKS.
MARIA: THERE'S A BUT COMING.
>> BUT IS COMING IN ABOUT 10
SECONDS.
MARIA: OKAY.
>> THE FIRST PART OF THIS IS
MAKE SURE YOU ARE DIVERSIFIED.
I KNOW IT'S AN EASY THING TO
SAY, AND WE SAY IT ALL THE
TIME.
DIVERSIFICATION WORKS WHEN YOU
NEED IT THE MOST, AND THAT'S
RIGHT NOW.
HEADING INTO A YEAR WHERE THE
REGIME SHIFT IS HAPPENING,
GETTING LATER IN THE CYCLE.
RATES ARE GRINDING HIGHER.
EQUITIES, DON'T BE OVEREXPOSED
TO ONE AREA, FREE CASH FLOW IS
ABSOLUTELY CRITICAL IN THIS
STAGE AND CLEAN BALANCE SHEETS.
HIGH QUALITY, ON THE WEAKNESS,
MARIA, WE WANT TO OWN THIS
WEAKNESS, WE WANT TO BUY INTO
THE WEAKNESS IF YOU HAVE CASH
AND LIQUIDITY THERE.
IF YOU ARE FULLY INVESTED, YOU
GOT TO HANG ON AND RESET AND
REBALANCE AT THE END OF THE
YEAR AND GET READY FOR LOWER
RETURN ENVIRONMENT.
EQUITIES ARE FAVORABLE THAN
BONDS.
MARIA: YOU SAID A MINUTE AGO,
THERE'S BEEN A SHIFT GROWTH
VALUE, GROWTH BEING THE AMAZON
AND THE GOOGLE PARENT OF THE
WORLD.
THESE STOCKS, NETFLIX, TESLA,
TESLA THOUGH IT SOLD OFF
RECENTLY, IT'S UP 80% YEAR TO
DATE.
IS THAT WHAT YOU'RE TALKING
ABOUT WHEN YOU SAY GROWTH?
>> I THINK BECAUSE OF THE
ADVENT OF WHAT HAVE YOU DONE
FOR ME LATELY?
WHETHER YOU ARE A FUND MANAGER
OR AUTOMATED INVESTMENT PROGRAM
WHICH HAS A LOW BREAK POINT.
LOW NUMBER OF DOLLARS NEEDED TO
GET INTO THE PROGRAM, YOU'RE