Lead-Lag Live

Is the Fed about to start cutting rates — and what does that mean for your portfolio?

• Michael A. Gayed, CFA

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In this Lead Lag Live webinar, Michael Gayed sits down with Jay Hatfield, CEO of Infrastructure Capital Advisors, to break down the current macro landscape, why inflation fears may be overblown, and where the biggest investment opportunities lie as we enter a new market phase.

Topics Covered:

Why small caps could surge as rate cuts begin

The truth about inflation, the BLS data lag, and money supply

Outlook for the bond market, preferreds, and high-yield credit

How active management can outperform in a cutting cycle

Why “bubbles” might actually be good for investors

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SPEAKER_01:

If you are here for the C credits, I will uh email you at the end of this webinar to get your information, submit it to the CFP board. So just stay tuned for that. Just the trickyest folks you got to stay to the end of the presentation. And I promise you it's gonna be well worth it. If you're an advisor and you happen to be in a physical office right now, do me a favor and please tell your fellow colleagues, your fellow advisors to tune in and watch and register and attend this webinar. We'll do a live QA towards the end. I think a lot of interesting insights here when it comes to the rest of the year and how to think about uh some of these big shifts that are taking place beneath the surface, because believe it or not, it's more than just a tech story now. Uh a lot of other areas of the marketplace are starting to wake up, uh, value, particularly small cap in particular. And Jay uh is particularly excited for that. So with that said, my name is Michael Guy. This conversation, this webinar is sponsored by Infrastructure Capital. Jay, all you are, my friend, and again, appreciate those that are here.

SPEAKER_00:

Great. Thanks, Michael. It's great to be on. As many of you know, we think it's always critical to spend time on the macro situation. And the reason for that is Michael already alluded to it, which is that um if you don't get the macro right, you're not gonna get in the micro or the investing right. And um, so we'll spend some time on that because you know, particularly the Fed does really drive a lot of these rotations. Uh, in other words, the reason small caps are working is that you want to own small caps when you're coming out of a tightening cycle. And right now we are, and that's why they're starting to work. Everybody saying, Oh, well, I've been out of small caps for so long and it's worked, and I'll just stay out of them and they're low quality or something like that. But they're ignoring the fact that we're in this cutting cycle, uh, and we'll get into uh our views on the on um the economy and stock market, bond market. And we have been extraordinarily accurate historically and this year, including this year. Uh, we had said early in the year that the Fed would cut three times, even though they're making noises that fit like they wouldn't. But we had expected the uh labor market to weaken. And we also were disappointed in the BLS, but for a couple of different reasons than the president. We thought that the labor market had already weakened, and they took forever to figure that out and finally report that. Whereas you could see if you use leading indicators, which the Fed never does, like continuing claims, you could have seen the weakness or the weakness in housing is also a leading indicator. Of course, the Fed ignored that, but finally they're figuring that out. That's why, by the way, we're not concerned about the shutdown. We actually think it's a mile positive because the BLS puts out really inaccurate information about both CPI and the labor market. And right now the Fed is on track to cut rates. So to the extent they're in an information vacuum and continuing to cut rates, that's fine. But it's important to know because we get questions on webinars like this well, what happens if inflation accelerates? But what that question misses is inflation doesn't magically accelerate. It accelerates from really just one source, which is excessive money supply growth. Um, and that's what we had during the pandemic, obviously. It can um be sourced from huge increases in energy prices, but that almost never happens, except in the 70s. We had wage and price controls, so U.S. production collapsed. It's probably not gonna happen again. So we're optimistic about inflation because the money supplies dropping. We also have the third boat here. Uh, we calculate CPI-R, um, which is real-time inflation. So the BLS purposefully delays inexplicably their updating of the shelter component by six months, and then they use renewing rents, which also substantially delays uh the reflection in the marketplace. So we use Zillow and apartment list, come up with our own CPI, real time, and also PCE. Both of those, well, PCE real time is around two, slightly below two. CPI dash R is uh 1.2. So inflation's already contained. Um we don't think we're gonna have recession because really the only two things you need to know to follow both inflation and GDP is um in terms of the cycles. Monetary policy, so it's been very tight. The um housing markets started to weaken, but the only key financial condition that matters is the 30-year mortgage rate. It's gone from well over seven down to about 630 in anticipation of Fed rate cuts. The terminal rate determines the 10-year. It's usually about 100 over. That's extract exactly on top of that. So that's driven uh 30-year mortgages down. If the Fed keeps cutting, housing should recover, should have 3% growth. And um a couple of other just misconceptions. The recent OBBBA was not a budget buster. That's a political talking point. It was a budget buster if you looked back eight years ago when it was passed, but we've already adjusted to that. It was a mild, had a little bit of cut to the budget projection relative to current law, but not significant. And a little bit of a middle class tax cut, if at least if you give chips and overtime and collect Social Security. But so, of course, everybody distorts that because they want to use the same talking points they did in 2017. But uh even the CBO was projecting 1.9 trillion this year, 1.7 next year. But if you include tariffs, that's the last point here, um, we're projecting 1.3 trillion. And there's a lot of Trump administration policies that are actually do reduce the deficit. So we could even do better than that. We'll see how it unfolds. But if the economy's stronger, tariffs continue to bring in revenue, then we're very optimistic about the budget deficit. Um, it is important. So we raised our target recently from 6,600 to 7,000. That's 23 times. We think that's sustainable. As long as the 10 years somewhere around four, corporate tax rates don't go up, everybody forgets that when they reduce the corporate tax rate, that increased the long-term sustainable multiple of the SP. So if somebody says, well, 23 times is super high over the last 30 years, what you should say to them is, well, what about the last eight years? Because that's when we had those corporate task cuts. Of course, a lot of those eight years were distorted by the pandemic. So we don't really have good data. But we think 23 is sustainable and for this year and next year. So if you take, and again, when you do uh price targets for year end, you have to look at next year's SB earnings. So next year's earnings were estimated, or which is in line with consensus 305. The following year is about 335. So if you just take 23 times, you get 7,700. Both of these points are critical because you do have a lot of uh billionaires out there saying, oh, we're in a bubble and should get out of the market. But I'd say two things about that. We do think we're in a bubble. We think it's great that we're in a bubble, and we think it's gonna burst in about five years. So if you want to get out now and listen, miss out on five years' returns, um, that's probably not a good idea. And the other thing I'd point out is uh we did a regression on the net worth of uh of individuals who make predictions relative to the accuracy of their predictions. And it was 100% negatively correlated. So the higher their net worth, so if they were worth 50 billion, their their opinions were worth virtually worthless. And I don't know about being homeless, but people have to earn a living, actually have to make reasonable projections. So um we do think it's it's actually economic now bubbles. So as stock prices rise, which most of the companies we follow, not Palantir, but Pro Tesla, but Broadcom, et cetera, the MAG8, if you will, ex Tesla, are reasonably priced. They probably will become unreasonably priced. Um, then there'll be just a ton of IPOs, flood of IPOs. But you probably won't actually get the bubble to burst until the Fed becomes too loose, which they're nowhere near right now, money supply grows fast, you get increased inflation, and Fed tightens. So keep in mind the 2001 bubble burst because the Fed tightened. And tech drove the market, uh, the wheel, the GDP lower. So don't get scared out by nervous billionaires. They're always nervous. It's easy to be nervous if you have 500 million in cash. Um, here's a uh a couple of uh detailed points on the economy, and you can get these on our website. But you should watch housing starts. We call it the Hopfield rule. You might have heard the Psalm rule is about unemployment, but this is a leading indicator, that's a lagging indicator. So housing's caused 12 out of 13 post-World War II recessions. You can see in the 2001 recession, housing dipped just slightly, but overall was increasing. And that's because that was a tech bursting of the tech bubble, and global rates were coming down as the retirement boom started. So that's the one exception. But otherwise, watch housing. The Fed was playing with fire. You can see starts were declining. But the point also of this slide is see how these peaks here were, you know, during the 70s. I remember this housing boom vaguely. It's not that old, but and then you had the boom, of course, before the great financial crisis. So starts got almost to 2.5 million. But even during this recent boom when the Fed lowered rates dramatically, we didn't get anywhere near there. So then the decline is more muted. There's fewer layoffs, fewer change, uh, less change in economic activity. So that's why, even though we went through a Fed tighten cycle, we had a slowdown in the old economy, a boom in the new economy, and no recession. We would have had a recession though if the Fed didn't capitulate, but finally they have capitulated. And then this is great data, you won't get anywhere else here. So the other uh slide that's um we should put in here too is that investment is what causes all recessions, not the consumer. Consumers two-thirds of the economy, but very um not volatile at all. It's not that sector's not volatile. Investment's very volatile. So you can see here what I was talking about down at the bottom, last 12 months, structures have dropped top percent, so they're in recession. Residential dropped 0.2, so that's sector's in recession, but IP products, tech and equipment, which mostly like semiconductor related, and also um data centers, power is doing quite well. So we've had sluggish um growth or modest growth, really, in investment overall, ignoring inventories are volatile. And so that's accounts for the slowdown in the economy, but not actual recession. So you can see here this is one way to look at it. Every recession was precipitated by a drop in investment in 2000. Um we need to make these data more clear. It's unclear what the actual year is, but you can the big drop in investment at the turn of the century was in in tech, not in housing. But every other one is in housing. It's just a graphic example that our index of inflation leads, what the Fed follows, and the BLS put which the BLS puts out. So inflation's already contained. If you're in inflation, fearing inflation, you should not. Eventually, CPI-eu will come down to R when the BLS finally, when their data set finally catches up to reality. Uh, we are still getting global rate cuts. Most of them happened, particularly in the Eurozone. Still have 100 left in the US, very bullish time to invest. That's the part of our bull case. Fed loosening AI, easy to get along this market. We've been correct so far. If people tell you, oh, the budget deficit rates are going to infinity. Um, budget deficit's not the key determinant of the 10-year. 10-year trades, 100 over Fed funds. When we're inverted, it's really 100 over the terminal rate of Fed funds, which is roughly 310 right now. So 10 years probably gonna stall around 410. Um, and that'll be pretty static unless there's a change of the Fed, um, which I don't think that'll happen. We of course we'll get a new Fed chairman next year. So inevitably we're gonna get those cuts. It's bullish for the bond market, bullish for stock market, bullish for particularly for preferreds, you know, our funds, PFFA there, BNDS on the bond side. So we're bullish on rates, but as I pointed out before, it's critical that we're right about rates because you cannot justify a 23 multiple if rates are at five. Every 25 basis points in our model costs you an SP uh multiple. So if we're at five, then the the equilibrium rate, I'm sorry, multiple would be 18. So rates have to be contained to justify 23. Just more data to validate, just use 100 over. Um, if you want to predict long-term rates over Fed funds, Fed funds usually trade 75 over inflation, inflation's tracking right around to not just by our index, but also if you take the six-month running inflation, it's also below two in all categories, PPI, CPI, PC. So inflation is not a problem. If there is more inflation from tariffs, it should be ignored. Not, I recognize that nobody wants to pay tariffs, um, but it should be ignored for the purposes of making monetary policy. It's unpopular, good for the budget deficit, very unpopular. So the base is shrinking. It's a great indicator of inflation. If the Fed uh was mildly competent, which they're not, when this big spike in the money supply would have concerned them. Um, it concerned us massively. Um, and then they finally tightened rates and you know got the money supply down. Um, but Milton Friedman's theory of inflation, which is excess money supply growth creates inflation, worked perfectly. It was the perfect experiment. So the Keynesian model, Phelps Kerb, blew up, inflation was 22%, money supply grew 60%, and nominal GDP grew 38%. So excessive money supply growth will keep create inflation. When everything's really low, it's hard to grieve that. The Fed did this almost like a controlled experiment, worked perfectly. If Nolan Friedman was still alive, he'd be dancing in the streets. Nobody seems to care, but you should if you want to accurately predict the economy. Uh, U.S. rates are high relative to the rest of the world. So don't get too worried. We don't think they're going to come down a ton, but it's a global bond market. So these other lower rates do help keep U.S. rates down. Natural gas continues to be a growth sector because we have the cheapest natural gas in the world. Benefits our fund AMCA that holds a lot of natural gas transportation companies. Uh, we're going to talk a little bit about more about our funds before we open up for questions. So BMDS is our high-yield bond fund, invest in asset-intensive companies, uh, which we think are better credits than the average credit. Um, the the yield's 8%. This is the SEC yield, but it actually distribution yield is eight. Should drift up over time to eight this SEC yield. And um, well, actually, that's the index and not our fund. So that's why it's seven and not eight. We do think active management makes sense for fixed income, particularly, because um, of course, you want to avoid bad credits, you want to limit interest rate risk in good total returns. But the higher risk fixed income is where you want to be if we're close to correct about the stock market. So when stock market's rising and rates are dropping or lease statement stable, high yield and preferreds will significantly outperform investment grade bonds. And you've seen that so far this year. And we expect that to continue. Um, one great thing about high yield bonds is they're less volatile than other asset classes in the fixed income sun. So your uh return is quite high relative to the volatility. So if you're one, probably some of you on PFFAs, our flagship fund has a great total return, great yield, but there's a little more volatile than BNDS. So BNDS is a good alternative. Um, it also has more less favorable tax treatments. It's good for an IRA. You do we'll pay close to full tax if you're having a taxable account. PFSA is more like low 20s and an effective tax rate. Um, we talked about this already. Um, current yields, um, you can see high yield as much is the highest. Senior loans are high now, but their floating rates are gonna come down. Um, so these are just the returns. And you can see that uh high yield has led uh so far over the last 10 years. Just if you're sort of if you're taking more risk and get more return. This is actually a slide about um preferred stocks because they're more inefficient than high yield bonds. High yield bonds are more institutional, preferred stocks are more retail. 71% of uh institutional preferreds are index funds. So here's an example that what happens is the big index funds rebalance every month. So if they include a security like this one we have graphed here, you can see there's this enormous spike in the price because they quickly buy it at the end of the month, irrespective of price, bid it way up, and then it comes down to normal, more normal levels. And so we were able to take advantage of we sold all of our position at high prices and then bought a little bit back when it came down. So index funds are not good for fixed income, create opportunities for us, and that's why PFFA is outperformed since we launched it seven years ago. Um, now just talking about some of our other funds, um ICAP is a large cap dividend fund. As I mentioned, um it's more challenging with equities to add alpha. So what we do with uh large cap dividend stocks is we not only pick stocks, we do run low leverage, about 20%, enhance the yield with preferreds, and then we write uh individual call options on stocks where we have a gain where we think they're close to full valuation, and we write it very short term. The reason I point all that out is there's big call writing funds like Jeppy that writes the whole portfolio. And you'll notice that they significantly outperform, underperform, sorry, during bull markets like this year. So we don't believe in that. We believe in very short-term uh using HI and your judgment, human intelligence, and we think you can add a ton of alpha. We, of course, always want to add alpha by stock picking. We look at relative valuation, but the short-term call writing is very powerful and adds a little bit of income. What we don't believe is having all of your income come from options, particularly index options. So we think our strategy is better. We have substantial SEC yield, in other words, cash yield, like six, and about two coming from options. So ICAP has performed really well. We think it'll continue to do well because of that strategy of not just picking great stocks, but also providing short-term call options. Um, you can see here that dividend stocks in the long run have outperformed. Um, obviously, tech stocks have done better recently. But we do think there'll be a rotation, as Michael was indicating, to come out of this cycle. Um tech stocks were actually not just AI for a long time, but also just viewed as being defensive. So when we're in a Fed tightening cycle, great to be tech stocks. We think, at least on a risk-adjusted basis, large cap dividend stocks will perform well. And in fact, uh ICAP is does have competitive returns, a little bit lower, but with uh SP this year. And you know, we what we do to pick the stocks is we use uh a GARP valuation frame for work. So in other words, we look at the valuation P ratio to growth plus the yield. You need to keep the yield in mind. Um that's really how we pick the stocks. And we try to um, or not even try, but we deliver monthly income. We've been able to grow that income. And we do have substantial yields, so we do like stocks that pay significant dividends, um, so that we're not just using options to deliver income. You can look this up on our website. Performance has been strong, it's well diversified. We do think financials do well, so we have a lot of financials right now. Um small caps, controversial. There's a lot of misunderstanding about call small caps. A lot of people think that these are just over-levered companies and they're paying too much with all short-term debt, and they're paying too much, and that's why they're gonna benefit. It's not the key dynamic. They're essentially the same leverage, essentially have the same amount of floating. You know, they can always swap their floating rate debt. So you have to take analyze that. It's not the key dynamic. Key dynamic is there are more value sectors, less tech. The IWM or Russell 2000 is only about 10% tech. SP is 40. So if we get a rotation out of tech, small caps will do well. Um a lot of the riskier money-losing companies are doing well. Uh, we don't have those in SCAP, um, but we are substantially outperforming the other indices that track the money-making companies like IJR. Um, we don't believe in investing in money-losing companies. You're basically doing um public venture capital. You want to be a venture capitalist? It's a great business, should do it full-time, go sit on the boards. Um, make sure that you have dry powder to give to those companies. Doing it in public form, we think is a mistake. Um, the biggest holding of the IWN, which is allegedly the value index for the Russell, is Ockla, which is projected, it's a nuclear company, no operating assets right now, and it's projected to lose money for the next five years. Not to say you shouldn't potentially, if you want to gamble on that, fine, it is gambling. But we believe in more sustainable, profitable companies, trading at reasonable multiples, paying dividends. You're taking enough risk in small caps, you don't need these money-losing venture companies that are publicly traded. Um, same screening methodology. We're looking for yield, we're looking for it has to be profitable. And we do write a small amount, so we have substantial income. We also have preferred using low leverage that enhances the cash income. I think it's about five SEC yield for SCAP. And then we target 2% writing a small amount of index calls, usually about 30% of the portfolio. Um, we have a small amount of IWM, so we're writing IWM calls. We don't believe in writing individual small cap options. First of all, there's no weeklies, so you have to do longer term. That caps your upside in big market rallies like we've had this year. And also small caps tend to be pretty digital. They get acquired often, they beat earnings, they can be up 20 or 30 percent. Large caps, every once in a while that happens, like AMD. It's not in any of our funds, but was up like 25%. But normally they don't go up like that. So it's a better asset class to write on large cap individual than small caps. So we write index calls that's worked really well. Should look the returns up, but we've beaten the our computing indices quite substantially if you verify that though. Um, and small cap value is done really well in the long run, notwithstanding recent returns. So don't ignore the asset class fees are lower by sector. So we have it laid out here by sector, because you know, everything gets distorted by tech. So small caps are cheaper across the sector. So we do think they'll outperform for that reason. But you are making when you buy small caps, you're making sector bet. You just want to gamble on tech stocks, small caps are not the best way to do that. Some more background data for disclosure. You can look this up on our website as well. And here's even more disclosures. So, with that, Michael, I would open it up to see if you or anybody else have any questions.

SPEAKER_01:

Yeah, and just as a reminder, folks, for those are here for the CE credits, uh, just wait uh a bit longer and I'll email you to get the information. If you have any questions, just put it in the QA or in the put in the chat. I'm happy to address that. Um let's talk about BNDS for a bit. Uh, credit spread's extraordinarily tight, uh, as you know. Um and I think it's relatively unusual for the Fed, correct me if I'm wrong, to do an aggressive cutting cycle in the absence of spreads widening. Does the uh fact that spreads have been so tight suggest that the Fed is going to be much slower in this interstrade cutting cycle? Uh what are your thoughts on that?

SPEAKER_00:

Um we don't think so. This has been a very unusual cycle, as we've mentioned. So we never have the blowout and Spreads because we never had a recession. We haven't had recession for the two reasons I described. Number one, we have a less cyclical housing sector. The other factor there is we have investors, which we didn't have in 2008, who will come in and buy houses for cash, even when mortgage rates are high. So very resilient housing market, even in the face of these very, very high Fed funds rates. And then this tech boom. So we never had the recession, but we do have an unsustainably high Fed funds rate, really low monetary growth, slowing employment. So the Fed absolutely needs to cut. Even the Democratic slash Keynesian members of the Fed realize that now. They may, if it was exactly the same Fed we have now, to your point, we might stall out in the say 350 range. So another two or three cuts. But with the new Fed chair coming in in May, we think that that Fed chair will be more of a monetarist, uh less of a Keynesian, less focused on uh tariffs as uh fallaciously as a source of long-term inflation. So we'll get down to the four. So it actually does make sense. And if you were wondering about that, like I said, look at the money supply. If you looked at the money supply as you saw from that chart, you would have been very, very concerned about inflation early in 2021, unlike the Fed, that took all year to figure it out. So watch the money supply, watch housing. Housing's really slow, money supply really growing negatively, which is very dangerous. Fed does need to cut rates.

SPEAKER_01:

Question from uh Adam What market developments would favor an increase in PFFA, which Adam owns?

SPEAKER_00:

So the the two factors. So again, lower risk bonds do well when rates are dropping, or they outperform rather, rates are dropping and the stock market's dropping because they're not spread sensitive, so they're just rate sensitive. Higher risk fixed income, so that's both high yield bonds, BNDS, and PFFA, do better when they're coming out of a tightening cycle. Rates are going lower, but the stock market's going higher. So the risk of recession is dropping. The level of stock market's a decent indicator of the risk of recession. The stock market's telling you there's no risk of recession. That means spreads are going to tighten. And I was talking to a friend, I helped him manage his money. And he was saying, Oh, well, I'm going to wait for a, you know, I have cash. I'm going to deploy it really slowly. I'm going to wait for his 10 or 20% pullback. And I'm like, you know, come out of a Fed rate cycle and AI, maybe you get that, but probably not. And so we think it's a good time to move money off the sidelines out of money markets into preferreds. But it's not just us that's happening. And preferreds are going higher. Um, it may not seem like that. They it's kind of like watching grass grow, but they are grinding higher and more likely to grind higher over the next year or two as rates gradually come down, Fed funds rate, investors move off the sidelines, buy preferreds. They should go back to par, which is roughly 25 on PFFA. That's what's happened in the past. No guarantees this time, but that's what the past would tell you. But it's not going to be exciting. It's not like owning AMD this morning when they announced their open AI deal. Just something where you grind it out. And by the way, if you stall out and you get a 9% yield, that's not so bad either. That's competitive with most stock returns, not with tech necessarily, but with stock returns. Tech is twice as risky as the stock market as a whole, too. But um we do think that we're an ideal environment for higher risk fixed income versus lower risk fixed income.

SPEAKER_01:

From a um valuation perspective, is there anything from your knowledge from your history that suggests that valuations matter more in a cutting cycle than a hiking cycle?

SPEAKER_00:

No, not necessarily. So, of course, um valuation, therefore, would be I mean, it's not a good idea to just get out of the market because you think 23 is too high. And again, you know, 23 next year, right now, not next year's earnings, but the following year's earnings are really like 21. So I wouldn't use valuation as an excuse to get out of a market. Like it's unambiguously bullish for the Fed to be cutting rates and unambiguously bearish for them to be increasing rates. So even if the money was really cheap and the Fed was increasing rates, I would still wouldn't necessarily be in the market. Usually there's a recession. Like in 20, early 22 is horrible to be in the market, horrible to be in bonds, too, by the way. So watch the money supply. That'll predict what the Fed will have to do, even if they don't understand it, because we have an incompetent Fed. Money supply is low, needs to grow at 5% to just keep the economy stable. Rates have to come down. Want to be long stocks, and kind of as implied by your question, getting super refined about oh, the multiples too eyes, not a good idea. You're gonna miss out, most likely miss out and rally. Like if you have been concerned by evaluation, you missed out on one heck of a power round.

SPEAKER_01:

Let's talk about um the final few minutes here again, folks. If you have any questions, feel free to type in the QA uh box. Um your phones are active. Um let's talk about active versus passive in a cutting cycle.

SPEAKER_00:

Well, I think the the key is to look at what strategies are being employed that are likely to produce alpha or outperformance. So with fixed income, it's super easy to outperform by being active because you're managing call risk, which is non-managed managed by the index funds, um, interest rate risk, default risk. So you kind of always want to be in active when it comes to fixed income. You don't want to be doing those silly things like buying that preferred stock at 33 that's really worth 25 to 26. Then when it comes to equities, um, it could be that in a downturn, active management is more important because you can take off exposure and uh be a more conservative element of areas, but of course you can be in riskier areas on the way up. But I do think that looking at some of the techniques, like we do think all riding, if done properly, can add a lot of value. Being focused on valuation, GARP, not overpaying for stocks like Palantir. Like stock like Palantir will work. When they miss earnings, though, like go look at a chart of Kava, is a restaurant company, but they were trading like 100 times earnings, they disappointed and they went down like 40%. So you want to try to avoid this blow-up. So if your AFTA manager is looking at valuation and you avoid the Teslas, that stuff's working right now, but we think it's very, very risky. You avoid the Kavas and the and maybe Palantir. So you don't blow up. So you get your consistent, you know, double-digit returns. So we think active management can make sense in most markets, as long as you use some of these other techniques like call writing and then are very disciplined about valuation and avoid blow ups like the Kava's. Um, but to be fair, like maybe in a down market, it'd be better. It's kind of the more risk you take in an upmarket, the better. So maybe um a passive index has a ton of Tesla and Pollanty, and they're doing well for now. Um, you could outperform. So I guess the answer is probably down market, but we still like ICAP's doing really well this year compared to any other dividend fund. So we're a little bit more risk-on there. We have more financials and um so less drugs and staples. So the active manager should be able to outbreak help in both markets. It's probably a little bit easier in the down market because it's easy to be conservative in a down market.

SPEAKER_01:

Yeah, it's a uh good place to wrap this webinar up, folks. Again, appreciate those that attended this. Uh, learn more about the funds. Uh, obviously a big fan of Jay Hatfield, as you can tell on my end. Hopefully, you found this intriguing. Again, I'll send you an email on the CE credits, and hopefully, I'll see you all in the next webinar. Uh thank you, Jay. Appreciate it.

SPEAKER_00:

Thanks, Michael. Great feel. Cheers.

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Michael A. Gayed, CFA

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