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- Welcome back, how deep and meaningful

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is the recession that lies ahead

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and what are the implications
of it for the economy?

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- You know, Merrill,

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I think the first question
that we have to ask ourselves

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with the recession is
when is said recession

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going to happen?

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There certainly seems to be concession,

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consensus excuse me,

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that there will be a recession.

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Some economists are forecasting it

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in the second half of this year.

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We think that it's gonna happen

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in the first half of next year.

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There's been so much
resiliency in our market.

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And so we think that that's
gonna push the recession

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out till next year.

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We're hopeful that a strong labor market

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and some other positive
factors which I mentioned

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will keep the recession somewhat shallow.

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But there's going to
be a lot of volatility

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we think through the end of 2024.

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There's been tremendous
uncertainty this year

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with the Fed and the rates and inflation.

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And even as we get to
the other side of that

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and have more clarity on rates
staying higher for longer,

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which we believe they will,

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will inflation hit 2%?

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We think it will.

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But again, we don't
think that's gonna happen

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till the end of next year.

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We're gonna have clarity on
some of these underlying issues.

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But then we start 2024

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and we're in an election year.

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And election years, in
the best of circumstances,

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always bring about a lot of volatility.

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And we would argue

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that this is not the
best of circumstances.

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- What are the chances that the recession

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is truly deep and meaningful?

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- We don't see that happening

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unless there's something unforeseen.

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And there are a lot of
unknowns in the market

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and that's why our portfolios

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have been positioned quite defensively

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for a couple of years now.

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There's so much uncertainty
around rates, inflation,

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and then the upcoming election.

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So we're overweight fixed income,

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we're overweight alternatives.

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We are underweight traditional equities

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and we're happy with these interest rates

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that we're really being
paid to sit on the sidelines

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and wait and see,

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being able to wait and
see what's gonna happen.

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- In your daily life,

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you're generally advising
large enterprises

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about what to do with their funds.

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What is your advice for consumers

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in terms of categories

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and asset classes they
should be looking at?

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- So my clients are mostly ultra
high net worth individuals,

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endowments, and foundations.

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And again, we're underweight
equities in general.

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We are overweight alternatives.

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We specifically like private
equity and private debt

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if you can afford the illiquidity.

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But the beauty of that market today

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is there are so many ways to access

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the alternative asset class

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even if you can't afford the illiquidity.

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And in fixed income,

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we're continuing to stay pretty short

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and pretty conservative

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in our fixed income allocation.

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- As a class, and without
talking about specific stocks,

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do you recommend that consumers

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perhaps sell their
technology holdings right now

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and this is a good moment to do that?

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- You know, you have to
weigh the benefit of the gain

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against the tax implication of the sale.

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And then, you have to look
from a risk perspective

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of how overweight you are

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to anyone's security or asset class,

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and managing the risk in your portfolio.

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So there are a lot of considerations

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that are so specific to every client.

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- But you are advising
prudence at the moment?

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- Absolutely.

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- Thank you, Holly, great having you.

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- Thanks, Merrill.

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- [Merrill] For more of
today's top business news,

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as well as timely analysis,

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stay with qz.com.