23. Is It Time to Move Cash Into Bonds? Navigating a "Bond Picker's Market" | Matthew Wrzesniewsky

With over $8 trillion in dry powder sitting in money market accounts and a brand-new Federal Reserve Chairman taking the helm, the fixed income landscape is facing a massive regime shift. Is your portfolio positioned correctly?

In this episode of Positively Sloped, host Jake sits down with Matthew Wrzesniewsky, Head of Fixed Income Client Portfolio Management at Vanguard, live from Chicago ahead of the Morningstar conference. Together, they unpack why today’s environment has officially evolved into a "bond picker's market" and how long-term investors should navigate tight credit spreads, stubborn inflation, and geopolitical volatility.

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Kingsview Wealth Management is an investment adviser registered with the SEC. Registration does not constitute an endorsement of the firm by the SEC nor does it indicate that Kingsview has attained a particular level of skill or ability. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. All opinions expressed by the Positively Sloped participants are solely their opinions and do not reflect the opinions of Kingsview Wealth Management, its parent company or any of its affiliates. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Positively Sloped participants deem reliable. Kingsview Wealth Management serves as portfolio manager to separately managed account strategies and investment adviser to exchange-traded funds. As of the date of this recording, those strategies and funds held positions in NVIDIA, AMD, and Apple and did not hold positions in Google or Berkshire Hathaway.

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Transcript

SPEAKER_00 0:05

On today's Positively Sloped, I am joined by a special guest. It is head of fixed income client portfolio management, Matt Resky. We are in this beautiful studio brought to us by Vanguard. You're here for the Morningstar conference in a couple days. I'm looking around and uh some incredible boom lights and mics, and the background is real if anybody thought that was fake. But uh I really appreciate you joining us today. Um I'm very excited for this opportunity.

SPEAKER_01 0:30

Look, I'm happy to be here too, Jake, and great to partner with Kingsview in Chicago. Nice to be in Chicago. Always nice to be in Chicago. Especially this time of year. Exactly. This is a great time of year for Chicago. I did open the Uber and it was very windy, so it's a windy city. Um, but I had some interesting conversations in my Uber. One of my Uber drivers was a world-class pool player. Competitive. Okay. Going to Vegas. Wow. Gonna be uh competing in Vegas. But uh I don't know how that relates to fixed income, but well, we're gonna tie it in somewhere.

SPEAKER_00 1:01

Okay, all right. Do I need to tell you that the windy city is not about the wind, or do you know that? Tell me. It's about politics and how politicians come and go like the breeze in Chicago. Interesting.

SPEAKER_01 1:12

Very interesting. I did not know that. There we go. We learn something new every day. Isn't Chicago like known? Is it the onion or something? Is it some sort of word or trend? It could be. Totally. It could be. Maybe it could be. The second city.

SPEAKER_00 1:23

Well, that's the first thing that we learned today. We're gonna learn a lot more today. We're gonna break from our usual, you know, usually Matt on Positively Slope. We cover the markets, we touch on fixed income. Today's gonna be really focused on the fixed income market in our in our discussion. And let's just jump right into it. Um, and I'm gonna put you on the spot here early and often, but you know, fixed income's kind of been a point of contention for clients and investors over the last couple years, especially dating back to 2022, but even before that. Um, you know, why is fixed income in an interesting spot right now?

SPEAKER_01 1:55

Come on, bonds are always interesting, but that that's coming from a bond guy. Seriously, when we look at the bond market today, what you want to have in your bond portfolio is a good amount of income. And that's exactly what we have right now with respect to where interest rates are. So you're talking about 2022. Sure. That feels like a long time ago. Very long, right? It was much long ago. Rates were at a zero lower bound. They were kind of pinned to zero for a very long period of time. And coming out of COVID, coming out of all of those fiscal policy measures, monetary policy measures that occurred, we had some inflation, right? We had this incredible response to kind of conquer this pandemic. And what happened was we we the byproduct was this inflationary shock, which the response was a significant readjustment in monetary policy. So rates rose.

SPEAKER_00 2:49

Yeah. Yeah, absolutely. I I was listening to something that you said uh a couple weeks ago or a couple of months ago at this point, maybe, but you described this as a bond picker's market. Uh, maybe unpack that for for the folks listening here that don't typically dive into the fixed income markets, because we always talk about fixed income markets obviously exponentially larger than the equity markets, but if I may say so, and this doesn't offend anybody behind the scenes here, a little less sexy than the equity markets. You're not getting the SpaceX IPO or uh, you know, the NVIDIA AMD run-ups and those kinds of stocks.

SPEAKER_01 3:18

Like that. You're getting a lot of interesting things come to market. But we what we mean by bond pickers market, again, maybe that was me trying to make the bond market sound sexier. Um, but the the key thing here is we're in an environment today with all of the issues that we've had to go through and kind of had to face over the last couple of months. We were talking earlier. We started the year with some volatility. There was headlines around Greenland, there were headlines around Venezuela. We've had a conflict in the Middle East, we've had a significant uh jump and spike in oil prices now where we start this. We're at the precipice of a new phase. We're talking about the war potentially being over. There's there's a deal. We've had a number of deals. Uh, you know, maybe this is the final deal that's signed on Friday. And this is also an important week for the bond market. It's it's the it's the Fed it's Fed week. The Fed meeting's happening this week. But what I mean by bond pickers market, it's about selectivity. We're in an environment with incredibly tight credit spreads. What I mean by that is the amount of incremental yield or income that you're getting on top of the risk-free rate is actually pretty narrow by historical standards. And what does that mean is there's a heightened need to take a little bit more of a discerning look at what you're buying in the bond market. So all these factors have an impact in driving pricing. And we you had mentioned earlier about AI and and you know, the hyperscalers, or I think it was with SpaceX. All of these factors are affecting the bond market as well. There's a lot of bond issuance that's occurring to finance data centers. There was even a bond deal in the municipal bond market that was that was brought to finance uh some of these data centers. It was a prepaid gas deal. So we're seeing it everywhere.

SPEAKER_00 4:58

What? That was for Google.

SPEAKER_01 4:59

That was really for Google, yeah, exactly. So it's it's kind of ubiquitous, it's kind of everywhere. So we want to be very focused on selectivity at this game, and that's that's what we're really focused on in our portfolios.

SPEAKER_00 5:09

Yeah, it's it's a very interesting time. I mean, as we record this June 16th, we've got, like you mentioned, the the first Fed meeting for new chairman uh Kevin Walsh tomorrow. We've got potentially an end to the Iranian war on Friday if there's a deal that gets signed. Um and like you said, there's there's all these kind of geopolitical factors maybe moving against stability, but yet we've got tight credit spreads. I think you mentioned earlier, 70, 72 basis points. It's historically tight. We've got an economy that on the employment side is churning out job growth. I mean, February we had a step back, but there were some external factors for that. Um, but yet you've got this heightened inflation that we're trying to fight. So uh it's a very, very interesting time. It's a very volatile time. I mean, uh, and the bond markets were relatively flat this year, at least from the ag standpoint, but that's not for a lack of volatility. Um, it's been pretty up and down throughout the entire year. So, you know, what does that look like in terms of volatility? Where does that move to in the markets? How do the bond how does the bond market digest volatility?

SPEAKER_01 6:12

Well, the the the bond market is always focused on data and and data points that are gonna give you a sense of perhaps the direction of the economy, the direction of inflation. And ultimately this is gonna have an impact on policy, right? The you mentioned the Fed meeting. The Fed meeting is is very, very important this week in particular, and it's important this week because this is the first meeting with a new Fed chair. So everything's gonna change. Uh maybe, but maybe not. I think the ultimate thing with the Fed is to create an environment of stability. And we all can recognize with the new Fed chair, what does that really mean? Well, history will tell you if you look at, say, the two-year treasury, there'll be an interesting indicator. The two-year treasury is gonna give you kind of the market's sense of where it thinks the policy rate, the Fed funds rate, kind of ought to be. And looking at Janet Yellen's start to her uh term as Fed chair, or even Jerome Powell's start to the term at the Fed chair, um, the response from the market around the times of these respective initial conferences, there's a little bit more volatility. So, again, the the Fed chair, their job is to take all of the thoughts and perspectives that occurred at the meeting, and when they deliver that press conference, it's to really reflect the broad views. And what do we know now? It's that there's a possibility that that could be a little bit different than we've seen in the past. Communication might be different. There are a couple of uh factors that the markets focus on. The balance sheet is one. It's a significant amount of money that the Fed has on its balance sheet, uh, as well as perhaps the relationship between the Treasury as well as the Fed. There's there's a lot of things that are perhaps in flight, but ultimately you got to focus on the data. It's gonna be very hard for the Fed to continue to have a bias towards easing policy at this point where inflation has continued to be above trend.

SPEAKER_00 8:03

For sure. And we'll further unpack uh the Fed meeting tomorrow and and maybe a new new sort of commentary from the chairman. Um if you had to describe the state of the bond market right now to somebody that really only checks their retirement account a couple times a year, um, that would be, in my mind, the best investor there is because we know uh markets are positively sloped. But how would you describe the bond market right now?

SPEAKER_01 8:27

I would say that the the is the bond market positively sloped. You said positively sloped, I thought it was about the yield curve. Right. Um but the the thing that I would say there is income drives through the fog of uncertainty. That is the key factor. That with fixed income investing, in general, when you are picking good credits, time is ultimately on your side. And if you're a long-term investor, you should be really focused on income and what's what you're getting in portfolios. Like you said earlier, we've had a lot of volatility so far this year. A whole host of factors have been thrown at the market. We have flat the slightly positive return in the fixed income market. Uh, in the more credit-intensive corners of the market, you have some positive, a little more positive returns. But we know what do we know now? We have about six months left of the year. And if you think about just the return potential and just looking at the income that you're starting with, it's not unreasonable to think you're gonna have a positive return if nothing happens. But the past hasn't shown that that nothing's gonna happen. So focus on the income.

SPEAKER_00 9:26

Yeah, absolutely. And and uh to further expound on the new chairmanship that we have coming into rain tomorrow uh at this point. You know, we were we haven't cut rates um since 2025. Uh we've been stable. Uh we're we're down about 175 basis points from that peak of before we went into this rate cutting cycle a couple of years ago. But now all of a sudden we're we're pricing in hikes. And obviously that is because of the inflationary pressures uh from the Iranian war. Um, that is because of the job growth that we have. But um you know, what is your view on the Fed and and how the next three or four or five meetings might go? What is your guys' base case for the rest of the year?

SPEAKER_01 10:09

Well, that's something that's changed, uh, as a as a lot of the data has really indicated, that there's two things that are going on. One, the economy is growing quite well, right? And that's reflected in the health of the labor market, which I think at the beginning of the year there was more concern that maybe the labor market might be a bit weaker. And many uh in the bond market had an anticipation of the Fed probably easing rates, maybe two cuts this year. That's what the forecast was at the beginning of the year. So the sh the shift in the market's expectations has market's expectations have really changed this year. And again, that's the new information that the market has had to address. It's the fact that the economy has continued to grow, that the labor market is perhaps a little bit stronger than folks had anticipated. The expenditure that we're seeing is that companies are investing an incredible amount of money in AI, in this this new technology that is innovative, it's substantial, it creates a tremendous productivity gains. Let's start to see what that really is, what that means down the line. And there's also inflation, right? So ultimate right now, the market has really been gyrating between two tail scenarios. We're worried about perhaps the economy overheating a little bit too much. Um, on the one side, we're also thinking about, you know, maybe that there's perhaps some risks, that there's a tremendous amount of investment in all of these factors that maybe might be too much that could maybe affect growth. But the reality is we kind of just push through this fog of uncertainty. The economy is growing, credit spreads are telling you that there's strength in the bond market. Overall, markets are continuing to move in a trading range, which I think is pretty remarkable given all of this the disruptions that you've seen kind of get thrown at it.

SPEAKER_00 11:52

Yeah, absolutely. And that's something that we cover is is I think, and you know, this is off the fixed income path, but testament to company earning strength and how uh robust Q1 was across the board, not just in the Mag 7 and other AI players. Um but look at banks. Banks, exactly. They let off the earnings season and they were strong. Incredible. Most of their revenue streams growing. Um and so I want to get your your sense. You said something earlier and I responded kind of sarcastically with everything's gonna change uh now that we've got Warsh in office. I think you know, for somebody that's not super tapped into the markets and and to bonds, you get a new person at the head. It looks like a new head coach, if you will, for a for a sports reference. But you know, really what we're looking at here is is there's still a it's a committee uh by nature. He's he's got an obligation to um the US economy and the American people. And regardless of being put in by um a president who wants lower rates, they're still gonna vote. And so what do you expect to see tomorrow? Um, and and obviously this will be retroactive, but what are you looking for?

SPEAKER_01 12:55

What are we looking for? The first thing is you're making the point about a committee, it really matters. It's a consensus decision, it's a consensus-driven body. And we can think about how the Fed chair can actually have an effect on the board. There's certainly different Fed chairs that have had different personalities. We can look at Volcker, a very different environment back in the early 1980s, aggressive inflation having to respond very significantly to kind of kind of win the war against inflation, and we saw tremendous volatility in rates. Then we had the green span years, and greenspan was remarkable with the the term Fed speak, kind of starting to baffle the market with how they were responding. And then we've kind of moved through this period here uh through Bernanke and Tigellan, and even partly uh with POW, there's been a lot of communication to the market. A lot. A lot of communication about expectations. And if if the market starts to get a little bit off from where the Fed's expectations are, what do we see? We see a bunch of Fed governors that are on CNBC or Bloomberg, or they're speaking at different economics clubs. So the one of the things that we're looking for is how does the market respond to communication style being differently? And ultimately, we're in an environment right now that the economy is not on life support. If you can go back to post-2008 when we had Bernanke, we had a tremendous amount of need in the economy to have clarity around the direction of policy. Remember, we kept rates incredibly low. Today it's a very different story. So maybe the market could be tolerant of some slight difference in the tone and the messaging. But the other thing, too, is the Fed chair can make their mark, like I mentioned earlier, whether it's different programs, different styles. The key things that we're focused on are one, is there a reduction or an elimination in this easing bias? Right? We're coming into this anticipating that the Fed is likely to cut rates. Now, given where inflation is right now, it's very hard to continue to do that. The other thing, too, that is going to be important too, it's the balance sheet. The Fed, in you know, during the last crisis during COVID, took a number of emergency measures and acquired treasuries and mortgages onto its balance sheet. Now, the Fed has been very focused on kind of unwinding that and reducing the size of that. So what has to happen is they need to find balance sheet exposure elsewhere in the economy to find place for those securities. Today, the the balance sheets as a weighted average maturity of around eight or nine years, is actually quite long. If you think about what's happened over the last couple of years, they've tried to have an effect on longer-term interest rates. So we would perhaps think that maybe the weighted average maturity gets a little bit shorter. What is that gonna mean? Maybe there's some more discussion around issuance patterns from the Treasury Department, as well as the issuance patterns that coincide with where the Fed is using its marginal dollar to reinvest. That helps to reduce the maturity there. So a lot to look at, but a lot of this is gonna take a lot of time. And I think that's the most important thing. It's gonna take a lot of time. So bond geeks like me get really excited about all this stuff, but the ultimate reality is the Fed wants to have financial stability. And that's very important for an operating capital market. Sure.

SPEAKER_00 16:05

Sure. Let me let me ask you something, maybe just for fun here, but what do you expect of Jerome Paolo? You think he sticks around until the end of his term to avoid the DOJ? Or you got any uh brave predictions for the other?

SPEAKER_01 16:15

I'm not gonna make brave predictions, but uh it it's gonna be interesting dynamic to have him on the board still. Um I think it says a lot about his his focus on governance and his focus on the institution itself and what it means. And he brings, I think, a lot of credibility to folks in the bond market with his experience. So uh we'll we'll see what this what this means. It's obviously uh we've ripped up the script in in a lot of regards. For sure.

SPEAKER_00 16:40

For sure. You you said you know the um the Fed is is kind of been focused more on affecting longer-term rates since we may see them shortened, which has been the general trend of the bond market over the last few years as as rates went up, was to shorten duration because you're getting compensated pretty well for a year or you know, three-month CD or six-month CD. Um, that led us to the highest money market holdings in you know financial history. And and even with rates coming down of 175 to 200 basis points in the last year and a half or so, we still have about eight trillion dollars of dry powder. Um, you know, and and that's split between institutional and retail. You know, we know uh Apple's keeping cash, we know that uh you know, Buffett and now Able are always keeping cash. So um you know what does that tell you? And and do you think this is the time to start deploying some of that cash into fixed income securities? Because you're no longer getting 5%, 525, 475 on money markets. You're now in the three and a half to 370 range. It all comes down to time, right?

SPEAKER_01 17:42

And it it it it's it's important to really think about what the role for that money is. And if you're if that money is sitting there doing little and nothing and it's two years back and you go, gosh, I could have could have learned this, maybe you could take a little bit more risk. Um, and are there other ways you could deploy it, right? The reason why you'd want to move out of cash is because cash is very much tied to Fed policy, right? The Fed policy is gonna really dictate the level of yield or income that you're gonna get in these shorter term or shorter dated instruments in the market. The longer part of the market, like longer-term maturity, treasuries, longer-term bonds, the market dictates that. The market's view on inflation, market's view on growth are gonna have an effect on that. So we think there's a good value in rolling up the curve just a little bit because of two things. One, you get a little bit more income, just like the title of your your podcast here, positively sloped. So King's view's on the mark uh with respect to the theme here. You're getting a little bit more income. You have the ability to capture what we call in the bond market is roll or roll down. So if I own a five-year bond and I hold it for a year, now that's a four-year bond. Now that has to trade with all the other four-year bonds in the market, and there's a positive slope, that bond has to price, the price of that bond has to go up. So there's some a price appreciation you can get in the market in that part of the market. The other thing that I would say is like if taxes matter, look at munis. I mean, there's there's an opportunity uh to really be be thoughtful from a from a tax perspective. So if that money is just burning a hole in your checking account, doing really nothing, there are other things to do. Maybe there's equity opportunities too.

SPEAKER_00 19:24

Sure. And and you know, I like the point about uh that if you're really tied to the Fed funds rate, you're not necessarily representative of the open market. That's what we saw at the end of 24 when we had those precipitous rate cuts and the open market was not agreeing with the rate cuts. We had we had the 10-year, the 30-year, the two-year bouncing as we were dropping 25-50 basis points. Um you a fan of The Office, the show? I've seen it. Yeah, I've seen it. All right, so this might land. Not a joke, but uh explain reinvestment risk to me like I'm five. Do you know what the reference of that of that episode? I'm familiar. I'm familiar. Explain surplus to me like I'm five. You know, my dad gave me $10 to do a lemonade stand, I spent $9. Instead of giving back the one, I have to spend the extra one so I get $10 again next year. Then the other guy's like, well, next year I'm six. But explain reinvestment responsibility.

SPEAKER_01 20:16

So is this a lemonade stand? Like we we I have two little boys, so if they're running a lemonade stand in their new near their new labor neighborhood, what does that mean? That like there's no more lemonades lemons when they have sold a lemonade to make more lemonade with? Yeah, I think so. Maybe maybe it costs maybe it costs less. Maybe, maybe it costs less. But I look, the the the the reality is the pro it's the probability, there's always probability here, that you can't find another opportunity for that that that dollar when it comes due. That there may not be an opportunity that is as good as it was when you found it. And I think that's that's a really big thing, is particularly when you look at you know money market rates. And why does this matter? It's because it has to do with policy. There are always emergencies that happen. And I'll remember COVID, COVID comes to mind and the tremendous response that central banks had. I remember it was it was like a Sunday afternoon. I was in my apartment in New York City and we were debating whether we should stay or not. And the Fed cut interest rates to zero and began to do this dramatic bond buying program, uh, you know, exploding their balance sheet just to support the economy. So if your money was sitting in cash, earning, you know, one and a half percent or two percent or whatever it was at that time, all of a sudden it's zero. And that happens very, very quick. There's other parts of the market that can give you a little bit more predictability. And right now, with the economy where it is, in a in a pretty good position, a positively slope to quote Kingsview again, positively sloped yield curve, there's better opportunities than just you know doing nothing with it and sitting in cash.

SPEAKER_00 21:52

Sure. And and on the opportunity front, I think something that came out of COVID and came out of the 2022 drawdown, um, which was you know very related to the the growth that we saw in 2020 2021 and then um you know was bonds are dead uh the protection you get from bonds bond market was down what eight nine percent equity markets were down 18 19 percent investors kind of felt like they were left with no protection and that maybe uh was a a contributor to the rise of this money market allocation but coming out of that I feel like there's been an emphasis on no more 6040 uh the 6040 is dead you've got to find alternative places to put money whether that's a 6030 10 or a 60 2020 or upping equity allocations and keeping the rest in an emergency cash fund. But you know what would you say to the 6040 is dead folks out there?

SPEAKER_01 22:41

Well I don't I it's gonna be hard for me to believe that your 6040 is still a 6040. Sure. But get given the run up we've seen it in equity just in the last you know couple of days uh the equity market has continued to move um it's very positively sloped as as you'd say. So again there's always an opportunity to take profits. There's always an opportunity to rebalance it's a prudent thing from a long-term investment standpoint. You know from a bond market perspective you want to have something in your portfolio to provide ballast, to provide income, to provide that opportunity to tolerate some of that volatility in the market. I'd say the reason why the 6040 portfolio is said to be dead was because you had simultaneous drawdowns in stocks and bonds. That's something that's incredibly rare. And still when even you look at the bond market, we could look at the US ag the U.S. which is the collection of you know all investment graded securities in in the market um it's an index that goes back to January 1st I believe it's maybe January 31st is the first month end 1976. There have been five years that the U.S. aggregate index has delivered negative returns. That's again a pretty good track record if you're just looking at calendar year returns. Those years are 2022, 2021, 2000, 2013 remember the taper tantrum, and 1994, which was like the legendary bond market debacle that everybody talks about, but we had the big one in 2022 when interest rates were pegged at zero. So it's a rarity to see that type of return be be to really occur in the market. And a lot of that is just a function of the fact where yields were they were artificially suppressed for way too long and the market had to adjust and unfortunately adjusted very quickly.

SPEAKER_00 24:26

Yeah and and I like the point about needing something um to produce income and provide income which will bring me to to our last topic today and and something that we've discussed on the show um throughout the year, but is this rise of the private private credit uh craze, if you will. And it seems like quickly we've seen a rise and then a subsequent fall in terms of investor demand. But we now have the retailization and the ETF uh you know complex of private credit and private debt and all of these opportunities that were previously not available to the retail investor now in a package product. And you know we've seen the crazy redemption requests from all these private credit funds over the last few months but you know is private credit something that you can own in place of fixed income? Because some of these funds obviously people get the the sticker shock at 13, 14% distribution rates and um you know they think okay well I can get 14% off this position. It might be ordinary income but um that's a strong contributor to the portfolio. So do you look at the private credit rise as as a replacement to fixed income or maybe more of a supplement?

SPEAKER_01 25:35

Or neither you can totally I'm gonna go I'm gonna go maybe with with neither if you're saying you have that type of return generation or income generation that sounds a little bit more like equities and bonds can do a lot of things for you. There are parts of the bond market that offer a lot of yield right you look at high yield leveraged loans emerging markets debt that have more stock like properties this is something that's going to have more equity like properties and the reality of it is what are you investing in it's a pool of lower quality debt. And over the last several years as these markets have kind of evolved and matured, as companies have looked to put money to work and raise capital, you've had options you can go to the the public high yield market at issue debt you could work with the the broadly syndicated bank loan market and get a bank loan which is floating on top of some type of credit risk that you're adding to it. Now there's private credit. And what's happened is the credit quality in general in the high yield corporate market has improved because so much issuance has gone into private credit. And what does this what does this really mean if I'm an investor you really need to be very focused on selectivity. It's the same thing as you mentioned earlier this bond pickers market or a theme. This is an opportunity to really be careful in looking at the managers you're working with and ultimately do they have a track record? Have they been investing through credit cycles? What's the team look like and the one of the reasons why you're seeing some of these redemption requests a lot of these names that are in these portfolios are or seasoning. They kind of came to be in that period of time where interest rates were super, super low, right? And there was also a proliferation or concentration in a certain area software that that's something that's come up a lot more. So again anytime that there's a misunderstanding between retail investors and liquidity that's where it's a really good opportunity to work with a financial advisor but but ultimately it's an education opportunity. I don't think it's it's an asset that should be completely avoided in portfolios. I think what we're saying it's it's not for nobody but it's certainly not for everybody if that if that kind of makes sense.

SPEAKER_00 27:50

It does and and we you know we echo that sentiment we've had this discussion um on the pod before we talk about it with our retail investors with our financial advisors is you know as as an RIA at Kingsview we offer optionality to the private markets. And in some cases on the ETF and mutual fund side you don't have the traditional minimums you don't have the the qualified investor requirements of of a $250,000 investment that is you know an interval fund. And so we always say it's sort of a double-edged sword you can offer these products you can offer the the access to these different asset classes but there's a hundred percent a an educational gap as you pointed out and that's that's what I've really chalked up the the redemption request to for the most part is retail investors like you said not really being able to stomach the lack of liquidity. I mean that's why for decades that's that's an institutional access point is because it's an interval fund. You may have only you know uh three times or four times a year to get to get in and out and and retail investors that are used to stocks and bonds and mutual funds and ETFs are not accustomed to that sort of lockup. And so I'm it's very interesting to see the redemption request coming through. It's an asset class I own personally it's an asset class that that you know clients at the firm own. But I think the the really important part for retail investors is to understand what you're buying and that stems directly from work with the financial advisor and make sure that financial advisor is is coaching you appropriately. But let's let's wrap up with with some of your thoughts on on the rest of the year. What are you looking out in the next let's say six to 12 months so rest of the year and then first half of next year what are you looking for closely in the fixed income market?

SPEAKER_01 29:29

I I think ultimately we want to understand whether or not inflation is more temporary or it's here to stay or it's going to accelerate. I think that the the signs are showing that it's been a mechanism of transmission because of this this of the war in the Middle East. Now if the war starts to fade it's not unreasonable to start to think that oil can really start to drop pretty dramatically which has a more positive effect on the broader economy. So that that's one thing I think inflation is going to be key. The second is this transition at the Fed you know what does that mean for the reaction function? How does this new Fed begin to you know communicate to as well as kind of interact with the market that's going to be really key and the last ultimately is is growth. Growth is in right now underpinned by a tremendous acceleration of spend into AI and all the infrastructure related to that and underpinned by a consumer and the consumer in particular it's not been even there's there's this K-shaped economy discussion we'll talk about but the data will will kind of help to support that the household net worth of the baby boomer generation is equivalent to that of millennials, Gen X, Gen Z, Gen Alpha there's a tremendous amount of concentration of kind of boomers kind of helping the economy to boom. What does that mean, obviously for your business a tremendous transition here from from a wealth standpoint but there's a lot of this is tethered to the equity market. So a lot of this has been tremendous gains if we continue to see so maybe it's not a bad time to have some you know predictability in your portfolio with with the bond market.

SPEAKER_00 31:06

Yeah absolutely and and last question maybe a little uh a little tricky one um maybe a little spin on the cue ball if you will to break to break the uh pool game but what's some what's something about I had to tie it back what's something about the bond market that you think is widely misunderstood whether it be retail investors or financial professionals time matters time matters for investing you talk about being positive sloped the the equity market moves a lot quicker than the bond market but it's it's the income that helps to drive your returns in the bond market.

SPEAKER_01 31:39

But you know professional bond investing also is about I think really understanding two factors. It's where are we in the credit cycle and where are we in the economic cycle those are kind of different but kind of similar and they're interconnected. That's something that also is going to be really important understanding how to put smart portfolios together. Like we said earlier credit spreads are really narrow right it's an environment we've been in an elongated economic expansion there's a lot of good things to be said but ultimately it's not a time where you want to really load up on risk. So understanding where we are in the credit cycle really matters.

SPEAKER_00 32:12

Last last question for today and I I know I've said that but uh where where can the listeners of the show advisors clients investors go to hear more from you your team and everything you're doing.

SPEAKER_01 32:23

Sure we're we're involved in a number of ways you'll probably see us working with clients we we're at different types of conferences and ultimately you can find us on YouTube at Vanguard for advisors.

SPEAKER_00 32:35

Perfect perfect well Matt thank you very much for being with us on Positively Sloped today uh absolute honor to be here with Vanguard you're the first guest in Positively Sloped history this is a lot of fun I really appreciate it I appreciate the opportunity with Vanguard good luck at the Morningstar conference and we'll catch up soon