Michele Martin Featured in Bloomberg Radio

Matt Miller:

You're going to hold?

Paul Sweeney:

I'm done.

Matt Miller:

You're going to hold to maturity?

Paul Sweeney:

Yes. Why not? I mean, why do I have to take all that crazy risk of all this kind of stuff? But, I don't know.

Matt Miller:

But why wouldn't you buy a 20-year treasury? You get a bigger rate if you want to hold to maturity.

Paul Sweeney:

What's a 20 year? I don't have that on my screen.

Matt Miller:

You just type WB and then you click on United States-

Paul Sweeney:

Now, that's too many clicks.

Matt Miller:

... and you can see. So, 20-year maturity, a 20-year rate, 5.231%.

Paul Sweeney:

Oh, all right, I'll do that, I mean.

Matt Miller:

So you're getting an extra 200 basis, you're getting extra 20 basis points over the 30 year-

Paul Sweeney:

All right, I'll do that then. All right, I'll call up my guy.

I have a guy, I'll call my guy. Michele Martin, joins us. She's the president of Prosperity. That is an EisnerAmper Company. Michele, thanks so much for joining us here. I mean, again, buy a 20-year bond, 5.2% I'm done. But you can't really do that, can you? What are you telling your clients these days?

Michele Martin:

Nice to be here today. Thanks for asking, Paul. You're asking the question that everyone is thinking about right now, which is set it and forget it. And when is the last time that we've had treasuries at five or over five and money market accounts at over 5%? It's really the silver lining in all of this higher interest rate dialogue that people are talking about. I think we can now diversify our portfolio with much lower risk investments on the fixed-income side and have a really solid foundation going forward.

Matt Miller:

So, what would you recommend clients do? I mean, I feel like especially if you're getting close to retirement-

Paul Sweeney:

He looks at me.

Matt Miller:

... set it and forget it makes sense. Paul's never going to retire. I look at my parents, I don't want them taking on any additional risk, and 5% is just fine.

Michele Martin:

No, you're exactly right. And at Prosperity, one of the things we're working with a lot of clients that are just entering retirement, or really needing that income to make distributions from their portfolio. So, fixed income should be a core part of that. There's no doubt at all. And in fact, for clients, particularly, who are somewhat risk averse, we've been underweighting the equity market just because of the volatility. But, you still want some exposure to equities because you're going to have a retirement these days for most people, that's going to last over 30 years. So, you still need an element of growth in your portfolio. It's just that bonds are actually working, and we haven't seen that in over a decade... in terms of the yield that they provide.

Paul Sweeney:

Yeah, but how about alternatives? We were at a, or I was at an RIA conference recently. I was surprised about how many of the advisors were saying that their clients were asking about alternative investment, whether it's private equity, private credit, hedge funds. How do you guys think about that?

Michele Martin:

Absolutely, and I would tell you over the last couple of years, alternatives have kind of saved the day for us. You hear things about the 60/40. Is it dead? I don't think that's the case, but we've added a sleeve of alternatives into our portfolios, about 10%. It's not a huge piece, but it was really, with interest rates rising, we added some real estate, some distributions that would be created by the portfolio when bonds weren't really doing the job. And then, some structured notes or things that buffer the market volatility. Those are just really good core pieces that we've had in our portfolios at Prosperity for at least the last couple years. And really as we look at volatility, that's the time when alternatives truly do make sense.

Matt Miller:

What do you think about ETFs? If you want some equity exposure, or if you want a little bit more juice than just buying treasuries, mutual funds seem to be on the way out. ETFs seem to be the new investment vehicle.

Michele Martin:

ETFs can be an amazing vehicle, particularly when you are doing dollar-cost averaging and entering the market. Think about it, if you had just bought the SPY 10 years ago, that was almost a set it and forget it, right? It's really done well, but diversification's really important. I do believe that active management, when we're in uncertain times like this, the active managers over the last year, 18 months, have been outperforming ETFs. I think the way we look at it is kind of a mixture. If we can't find managers that are going to outperform the market, and ETF strategy actually is the preferred way to go, because of the lower cost ratio and the broad exposure.

Matt Miller:

Yeah, I don't think, I mean, if you could find me somebody who's outperformed the queues over the past five, 10, or 15 years, I would like to talk to that woman or man.

Michele Martin:

Absolutely. Absolutely. I totally agree.

Paul Sweeney:

So Michele, as I understand it, you guys are underweight in the equity market. What would be a catalyst to maybe get you a little bit more aggressive there?

Michele Martin:

I think what we would like to see is just a stabilization in the interest rate environment. That does tend to affect the equity market and quite frankly, company earnings. We've had a little bit more of a volatility in terms of, what are we seeing now? Amazon just came out yesterday and that was pretty amazing, but it's really about just seeing how much these higher interest rates are affecting company fundamentals. So, we'll watch that just a little bit more. The recession that we haven't seen yet was kind of the most broadly, widely broadcast recession we've heard about, but we're just a little cautious as it relates to understanding how hot this economy is and how the higher rates are going to affect corporate earnings.

Paul Sweeney:

Are you guys factoring in another rate increase, or do you think perhaps the Fed Reserve, and again, we'll hear from them next week, you think the Federal Reserve is going to stay pat here?

Michele Martin:

I think we're really close to the end. They've talked about one more increase, but if they do, I think it'll be small. I think we're starting to see things get somewhat muted. Consumer spending is still really strong, but inflation has shown us some improvement, so I'm really hopeful that the Fed will give this a little bit of time to work its way through. I'm not someone that thinks that we're going to see rates go down again really quickly in '24. I think it's higher for longer. Going back, I've been doing this for a while now. If you go back to 2004, it was kind of the timeline we're looking at here. When we've had rates like this, they stayed steady for, it was, I don't know exactly, but three to five years, so we could see that again.

Paul Sweeney:

Okay, very good. Hey Michele, thanks so much for joining us. Really appreciate getting some of your thoughts and analysis. Michele Martin, she's the President of, the firm name is Prosperity. That is an EisnerAmper Company. We know the EisnerAmper folks well. They've been good supporters of this program over the years. We're going to have more coming up. This is Bloomberg.

_{Securities offered through DAI Securities, LLC, Member FINRA/SIPC.
Advisory Services offered through Prosperity – An EisnerAmper Company.
Prosperity – An EisnerAmper Company is not affiliated with DAI Securities, LLC.}