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- So the Fed is likely to cut.

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What's the market's
reaction going to be? So I

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- Think the market is
likely to react positively,

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perhaps not dramatically so

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because it's becoming
increasingly priced in.

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But I think the general
environment will be positive

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and I think we'll see an
environment that is supportive

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of risk assets for months to come

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because there is an anticipation
that this is not a one

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and done that we have a
number of rate cuts ahead of

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- Us.

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You said it's gonna be supportive

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of risk assets. What does that mean?

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- So it means that we're likely
to see stocks perform well

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as well as those areas of
fixed income like high yield,

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that have more stock like performance.

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I would anticipate they do well

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looking back at 19 95, 19 96

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as a possible playbook.

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Now we know history doesn't repeat itself,

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but it often rhymes.

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And so I'm hopeful we can take some clues

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from what happened then.

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That was the last time the
Fed was able to tighten

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and still avoid a recession.

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And so seeing the performance

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of asset classes once
the Fed started easing,

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I think can be informative.

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And what we saw was

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that in the six months following the start

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of fed easing risk assets, equities

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in particular performed well.

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We saw value outperformed
growth, but not dramatically.

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We saw large caps outperform
small cap but only modestly.

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But in general it was
an environment in which

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stocks moved higher.

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- How should today's
investors prepare for this?

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- I am a big believer in
maintaining a long time horizon

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and focus because we do tend not to need

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to see goals reached for a long time.

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So I wouldn't make any
massive changes as a result

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of my expectations.

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I would be well diversified,

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but I would have adequate
exposure to a variety

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of different equity asset classes.

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And by that I mean not just
domestic but international

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and within the domestic space,

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most investors probably are
underweight, value cyclicals

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are probably underweight small caps

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because they've underperformed
in recent years.

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So if you're not doing
regular rebalancing,

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you probably have a need to
increase your exposure there.

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I also would say the same
thing about international.

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We probably have many
investors with portfolios

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that are underweight international

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because it has underperformed
in recent years.

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And so this would be a good opportunity

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to not necessarily take from their growth,

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take from their tech holdings,

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take from their large cap holdings,

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but actually take from the
cash sitting on the sidelines

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because many investors are,

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are very overweight cash right now

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and deploy that into
small caps and cyclicals

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and international equities as well

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as some great fixed income options

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like high yield, like municipal bonds.

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There is a lot of opportunity
in this environment.

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- September is historically
a rough month for investors.

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Do you see a recession ahead at all?

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- I don't. I think the US will
be able to avoid a recession

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and there are a few
different reasons for that.

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First of all, the US consumer has been

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relatively insulated from the aggressive

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rate hikes of the Fed.

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Unlike other countries

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where mortgage rates
adjust relatively quickly

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or their floating rate, this
has been their aggressive rate.

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Hike cycles have been oppressive

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and have had a greater
impact on consumers.

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In the US we have about 92%

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of mortgages are long-term
fixed rate mortgages.

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The average rate on those
mortgages is a little over

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3.6%.

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So many consumers
haven't felt the pressure

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of rising rates in one of
their biggest line items

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of spending, again, unlike
peers in other countries.

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And so that has been a positive.

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We've also had very
significant fiscal stimulus.

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This has been a result of,
of covid in addition to other

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fiscal spending that has
created an environment in which

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consumers are in relatively good shape.

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They've also shored up
their balance sheets.

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So it's a very different
environment I think,

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and one in which even though
there is pressure on lower

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income consumers, I think
we're going to be able

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to avoid a recession.

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The the takeaway for me
from earning season is

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that there's definitely differences

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among different income
groups and consumers

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and we do have

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to worry about the pressure
on lower income consumers.

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But what we can look to is the fact that

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inflation adjusted wage
growth is improving,

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real wages are improving, that
should be a positive catalyst

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and rate cuts should
be a positive catalyst.

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Certainly every day that
rates are this high,

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the recession risk increases,

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but as soon as we start easing, I think

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that will take some pressure off consumers

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and frankly the overall economy.

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And that again should help us,

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even though I recognize
there are lagged effects

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for monetary policy that should
help us avoid a recession.