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Katherine Ross [00:00:00]
So Nicole what are you looking at in the markets right now?
Nicole Webb [00:00:03]
We are looking at the return of volatility. So looking back over 2017, not just in the most recent 2018, but 2017 did not experience much volatility. Working with the retail consumer has been interesting to transition back into real volatility in the market. And we do not see that changing in the near term here in 2019. Our biggest goal right now is how do we work with the investor to keep them invested while we are mindful of the backdrop of volatility and its resurgence in the marketplace.
Katherine Ross [00:00:37]
I'm glad you brought up volatility because this week we've seen a very positive stock market that we opened up today were down.
Nicole Webb [00:00:44]
So it's going to be an interesting ride and we don't anticipate that to stop. We have the backdrop of we're unsettled in the political environment, we're unsettled in terms of Brexit. We're unsettled with trade negotiations with China. We're unsettled with whether or not interest rates continue to go up. Do they stay flat? Where are we directionally headed? And I think when we look at volatility today it is, is it the end of growth outperformance over value and how do we look and say What are the nimble moves we can make as investors to both stay invested, but look for pockets of where real return may come from as we look forward over the coming quarters.
Katherine Ross [00:01:26]
So what are you telling investors right now?
Nicole Webb [00:01:30]
We are looking at a lot of different underlying factors. One when we are picking the subsectors to invest portfolios. And so we think that we might actually finally see the change or the shift between who is leading the way. The foreign markets or the domestic markets. So when we go to the kind of relative valuations on price to sales, we still think that the US looks expensive over both emerging markets and developed international. When we look at the US specifically, we start to subsector out where do we anticipate return to come from. I think it might be the end of growth beating value. When we anticipate where we might overweight from a sector perspective in 2019 we start to trend back towards value and momentum.
Katherine Ross [00:02:19]
We've got earnings coming up next week and it's just the kick off of the earnings season what are you thinking there?
Nicole Webb [00:02:28]
It's one of those things where it's like they always come to us and say lower your expectations so that they can come to us with look at we outperformed what we said to the street that we might give you. We are anticipating pretty standard kind of standard data. So we're going to come to you and say hey don't be overzealous and that's what they've done thus far and then likely to come back to us and say oh we'll. Well we did it and we beat it just a little bit. So we still think that the economic data, that there's strength in the U.S. economy. We're not buying into an imminent recession at this point. But we do see probably more slowed and stable growth. We can't get that resurgence that we got out of jobs and tax reform. So closing on 2017 that really lifted numbers for 2018 but that math is not repeatable again in 2019. So we're going to need something more.
Katherine Ross [00:03:29]
And you just said you don't expect an imminent recession. Do you have any idea of when you think the recession hit?
Nicole Webb [00:03:35]
That's an unfair question! I don't like that one. No. I think that it's kind of a statistics problem at this point. You kind of need a lot of things to happen all at the same time to come together and have the real return that perhaps we are hopeful we might receive. I don't know that that's going to be the case. But at the same time the data is strong enough. When we think about it in an environment where the Fed keeps raising rates, although slow and steady and we're kind of split. I'm split. One day I wake up and think we're going to raise them again. The next day I wake up and go, Oh there's no way. But either way when you look back and you get thoughtful about it you can go, all right if we are continuing to raise rates that is an indicator of a fairly healthy economy. And so when you take one step further back and you look at the last three times that we went through a rising rate environment the equity markets in the U.S. did well. And so with all of that in conjunction. You know I just don't see any of the leading indicators today that that's something we have to be fearful of for tomorrow.
Katherine Ross [00:04:48]
Ok I'll give you a fair question. What about guidance. What are you looking at? We saw retail Macy's Kohl's and they just saying yes after releasing their so what are you thinking?
Nicole Webb [00:05:02]
It's so interesting to get thoughtful about what it is that the consumer is spending money on right now. I was actually thinking about this, this morning. So I'm originally from Minneapolis, Minnesota. Our firm Wealth Enhancement Group is headquartered there. That is the home of Target, Best Buy. Some of these big names in retail. And so we have to wait till March. I believe it is for Target to release their data, but when we look ahead to retail sales we just we do see a slowing which is so interesting when we look at the jobs reports and we see unemployment numbers where they are. And so I think there's going to be, I think there's going to be a rush to figuring out how do we transition from brick and mortar to more of an online environment. But at the same time Amazon was very quick to call out to us ahead of the holiday season that they anticipated slowing numbers and retail sales. So I don't think that that's really where we're going to see the most opportunity as we look ahead over the next few quarters. Again going back to our value and momentum tilt an outlook there, you know we see what is going to do well on the on the cusp of rising rates over time and so you can think about financials and banking, of things that traditionally make up the value sector. So that's that would be kind of. That.
Katherine Ross [00:06:24]
And we you say to expect volatility against a backdrop of high valuations can you explain that a little bit.
Nicole Webb [00:06:32]
Yeah, I mean I hate quoting people but sometimes quoting Warren Buffett is really fun. I completely agree. To paraphrase him when the liquidity tides go out you see the naked swimmers. And that is where we are. We created a lot of liquidity in the global markets. With that we created a cushion where volatility wasn't necessary. Not so much that wasn't necessary but it certainly got people to invest. People chased yield that wasn't present in the interest rate market. And it led to the demand for value equities or dividend and growth stocks. So with that now we think as that wave of liquidity goes out as the tide retreats there is going to be more room in the marketplace for volatility. And I think we as we as investors have to remember that volatility doesn't necessarily mean that the markets are not going to perform in a positive way. It means that it's going to be the reversion to something more normal in terms of the activity that we see intra day. Working again with retail clients, I think it's interesting because they want to blame a lot of this volatility on high frequency trading. Again my message there is that high frequency trading is not going to change the actual fundamentals. What it does change is what's happening intraday when we watch the markets move the volume that's moving. But the fundamentals are what we need to stay focused on. And those don't change based on the amount of trading activity intra day.
Katherine Ross [00:08:11]
All right Nicole, thank you for joining me.

Winter--I mean earnings--are coming. 

Nicole Webb, a financial adviser at Wealth Enhancement Group, sat down with TheStreet to talk about earnings and how investors can prepare their portfolios.

"It's one of those things where it's like they always come to us and say lower your expectations so that they can come to us with look at we outperformed what we said to the street that we might give you. We are anticipating pretty standard kind of standard data. So we're going to come to you and say hey don't be overzealous and that's what they've done thus far and then likely to come back to us and say oh well," said Webb.

"Well we did it and we beat it just a little bit. So we still think that the economic data, that there's strength in the U.S. economy. We're not buying into an imminent recession at this point," she continued. "But we do see probably more slowed and stable growth. We can't get that resurgence that we got out of jobs and tax reform. So closing on 2017 that really lifted numbers for 2018 but that math is not repeatable again in 2019. So we're going to need something more."

Webb also weighed in on volatility, interest rates and what's going on with the recent swings in the retail sector. You can watch the full interview here

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