00:00Let's focus on a stock story, adding some weight to a record-breaking rally on a fifth straight day of
00:04gains.
00:05Jim Caron of Morgan Stanley writing, this is no longer a zero-rate world.
00:09Selectivity matters much more across both equities and fixed income.
00:13Jim joins us now for more.
00:15Jim, in some ways, and forgive the snark, just feels like just pick tech and semis and just ride the
00:19bull.
00:19Why do you think it's a little bit more complex than that?
00:22Well, for diversification reasons.
00:24And good morning, I've enjoyed listening to your show.
00:26A lot of really good information today.
00:29Listen, you know, this is a very selective market.
00:31It is a stock picker's market.
00:33Whenever you're constructing a portfolio, what you want to have is you want to have diversification.
00:38Why? Because you want to have durability of returns.
00:41So, you know, what you said, as you framed it, a little bit snarky, you know, just pick the semi
00:46-sector and, you know, and hope for the best.
00:49That's not entirely wrong, but it's not a very diverse portfolio.
00:53So what we've really been looking for is a broadening of this rally.
00:57And we saw that.
00:58We saw that in the beginning of the year.
01:00Then we had the crisis between the U.S. and Iran, you know, in the Middle East.
01:04And then that became, you know, much more of a narrow rally as the semi-sector has actually performed extremely
01:10well.
01:11But we do still think it's going to broaden out.
01:13So the way that we think about constructing a portfolio is having a good balance between small cap, mid cap,
01:20and also large cap.
01:21But you also have to have some of the tech sector in there as well.
01:25The question mark that we have, though, is what do you do with bonds?
01:29Bond performance this year has been roughly flat to slightly down because interest rates have actually moved higher.
01:36So when we think about holding bonds in a portfolio, we think about it more from its income and carry
01:42perspective as opposed to having duration contribute to returns, meaning we don't want to be reliant on interest rates to
01:50move down to generate returns in fixed income.
01:53But you want to hold high quality short term fixed income in case there is some type of a bad
01:59event in the world and you need that type of a hedge.
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