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Welcome to Nasdaq trade talks,

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where we meet with the
top thought leaders

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and strategists and
emerging technologies,

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digital assets, a regulatory

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landscape and capital markets.

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I'm your host, Jill Malandrino,

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and joining us this afternoon,
we have Brian Stetson,

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managing partner at Equity
Investments, and Mike Ko,

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CNBC contributor and
strategist at yield ETFs.

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We're here to discuss
market volatility

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and sector rotation.

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We're also going to meet
with Chris Krueger,

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president of Standard of Care,

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on mismatches with
retirement planning.

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Lots to unpack here. It's great

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to have the three
of you with us.

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Let's discuss volatility
rotation and financials.

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We're certainly seeing
compressed volatility VIX

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relatively near lows.

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And this recent
rotation into banks

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amid fed cut rate expectations.

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Brian let's kick this
off with you volatility.

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It stayed stubbornly low.

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What do you make of that
environment right now.

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Yeah we saw the
VIX and volatility

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really kind of pop
and traded up to 26.

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And now we're sitting
back down towards

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sort of mean average
levels for the VIX.

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It's kind of interesting
because you're seeing a lot of

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volatility in those
growth kind of names.

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It kind of led the
charge to the downside.

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Uh Bitcoin that is
to the downside.

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And then it seems like a lot
of these other growth names,

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we've gotten some
earnings reports

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recently that have sort of

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raised the level of
volatility in the growth.

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But when you look at
VIX you know here on

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this chart it's really
come down pretty hard.

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And I think you know

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Mike and I are used to
it as options traders.

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When we see sort of
correlations start to come

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down meaning like certain areas

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of the market doing very well,

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other parts not doing so well.

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The S&P or the Nasdaq as

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a whole starts to
get wishy washy and

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sidetracked sideways
as things kind of

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shake out and you see
this rotation occur.

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So this is probably why you're

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seeing the VIX at
such a low level,

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despite some areas of

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the market having some
levels of volatility in it.

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Right. And Mike
meanwhile though we're

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seeing capital rotate
into financials.

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What do you think is
driving the move there.

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Well I think a little bit

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of that is certainly going to be

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some of the great expectation
things, you know.

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Um, you know, I think
a lot of folks,

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when they think about
because I often will hear,

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uh, folks comment about,

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oh, improve housing
affordability,

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we'd like to see rates
come down and then

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they start talking
about fed rate cuts,

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as if a rate cut at

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the short end necessarily

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is going to drive
mortgage rates,

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which are largely propelled by

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the ten year on the long end.

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And actually, what we've
seen in the most recent cuts

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is actually that the yield
curve has steepened.

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And one of the
things we know about

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a steeper yield curve is
that what do banks do.

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They borrow short lend

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long steeper yield curves are

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typically better for financials.

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And unsurprisingly
we've seen them

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do reasonably well on
the back of all of this.

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So, uh, and also

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I would just add to
Brian's point, you know,

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one of the reasons that
on a day like today,

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you saw that the
Nasdaq at one point

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was down more than
200 basis points,

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and the S&P was certainly

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outperforming the
Nasdaq is because

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of that rotation that
he's talking about that

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we've seen it was the
really high beta,

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sort of high risk
stocks that came

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off hard off at the
beginning of October,

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and that sort of move out of
the really high beta stocks.

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You know, I'm talking now about

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the hims and hers, the palantir,

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things like that, in addition
to the crypto trade,

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because those aren't necessarily

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crypto trades themselves.

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You know, that has now sort
of extended into, you know,

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bigger names that aren't

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necessarily part of
that, like hood.

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Uh, that's the name we own.

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Broadcom. Obviously the results

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weren't all that
well received today.

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Uh, and I think that seeing
it broaden out though

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and seeing that the volatility

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in the S&P isn't that great.

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That's a net positive and

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sort of gives me some comfort
going into the new year.

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Mhm. Well Brian and Mike let's

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debate this for a
moment here Brian.

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Is this shift into
banks a tactical trade.

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Is it a timing of the
rotation or do you

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think it's something that's more

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sustainable for the long term.

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Yeah, I mean this shift
has been pretty dramatic.

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If you look at the
charts just in the last

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couple of days, the Xlf,

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which represents financials
Versus, you know,

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something like the Nasdaq

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really outperforming
the last few days.

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And I think the trigger to

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Mike's point is this
yield curve shift, right.

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The two year ten year when

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we've seen the fed
now cut rates here in

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December probably going
to get another cut in 26.

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And if the back end
of the curve kind of

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hangs in there and steepens out,

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that's probably going to be
very good for financials.

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I think that's what people
are expecting here.

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And that's why you're
seeing sort of

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the run in financials.

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We've kind of made a little
bit of shift ourselves

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to sort of add just
a little touch

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of financials into our sort
of portfolio of stocks.

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We'd been a little bit maybe

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underweight that
more kind of techie.

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And I think we're we're we're

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feeling like that shift is real.

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And that probably kind
of continues here.

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Yeah. Well Mike, here's
a question though.

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You have fed policies
a tailwind versus

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earnings strength and
true fundamentals right.

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So is your investment thesis

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only because rates
are coming down.

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Shouldn't there be more
fundamentals behind that.

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Well I think there are
more fundamentals.

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I mean financials uh, you know,

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they're not expensive
relative to the market.

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They're actually cheap
relative to the market.

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Now, I would add a caveat
that is generally true.

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You know, you look at
a name like JP Morgan,

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and this is not a name that
you typically see trading 24,

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25 times forward earnings.

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This is the kind of name
that's typically in

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better times probably
trading 1516 times.

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But you know, if you're an
investor and you're sort of

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looking at the backdrop for,

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you know, the rate picture
and how that's going

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to impact in, in this case,

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the money center banks,

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you have to say, okay, well,

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I'm actually comforted
buying it at

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these multiples because I think

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they're going to have
the wind at their backs.

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So, you know, you're getting

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it at a cheaper
turn to the market.

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Some of these other stocks
maybe not terribly cheap.

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And then there's another
question which is,

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can the rate of growth in

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the highest flying sections
of the market continue?

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Um, if everybody expects Nvidia

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to be the most profitable
company next year,

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but are they expecting it to
then turn around and deliver

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5,060% EPs adjusted EPs
growth in full year 2027.

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I think sort of people
are starting to moderate

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their exposure there because

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they're moderating
their expectations.

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Yeah. And of course, it's
the end of the year.

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Can't believe we're
saying that already.

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So let's talk about 401
K and asset allocation,

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something that's
perhaps only looked

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at once a year or at
the end of the year.

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And for that we turn
to Chris Krueger,

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president of Standard of Care,

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who specializes within
the retirement space.

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Chris. It's great to
have you with us.

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Welcome to Trade Talks.

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Uh, there's been a lot of talk

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about mismatches in
retirement planning.

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What's the disconnect
that you're seeing?

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Yeah. Hey, Jill, that's
a great question.

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Uh, our users and software
see two big disconnects,

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often under looking under
the hood of A41K plan.

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Uh, first, usually
investors risk

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tolerance doesn't match
their asset allocation.

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Uh, our users will
meet participants

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in retirement plans that, uh,

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potentially say they're
conservative but have

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95% exposure to equities.

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Or maybe they want more
growth and they're

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sitting in a cash fund.

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They're not doing
it intentionally.

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It's usually just a set
and forget approach.

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Or they may have
multiple different old

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for one or IRAs or
other investments.

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When combined in view,

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we find that they're
not commonly working

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together towards that
person's risk tolerance.

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Uh, the other thing is,

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as life and careers
changes happen, uh,

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you shouldn't be what you
were at 25 when you're 45.

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Job changes and income growth,

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these checkpoints,
uh, prompt updates.

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And most people only look
at their 4K once a year.

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In fact, they never asked,

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does this fit where
I should be today?

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Yeah. And that's a
good point that you

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make because we're always

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taught set it and forget

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it, especially when
you're younger.

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It'll pay off over time.

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So Chris, are people
looking at the S&P 500 and

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just seeing it go up over
a 30 year time horizon?

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Um, are they just perhaps too

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complacent about owning
a target dated fund?

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Yes, there's definitely
a comfort factor.

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Target date funds are
easy money cases.

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They're appropriate. But, uh,

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a couple of important challenges
often get overlooked.

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Target dates have
become the default fund

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in most foreign K plans.

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And because they're the default,

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most people assume
that it means they're

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automatically on the right
strategy for retirement.

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And sometimes that can kind of

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create a false
sense of security.

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But like any investment,

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a target date fund needs to

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be aligned with your
risk tolerance,

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your goals, even your
contribution rate.

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If you're saving what
you're saving into the plan

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and the glide path can't do
it all the work for you.

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Uh, then there's another
layer of complexity.

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Target dates have a 2
or 3 retirement plan.

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Glide. Glide path.

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Uh, that means how
much equity exposure

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you have towards retirement.

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Um, most participants have
no idea how these work

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and how to utilize them
to retire successfully.

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It's important that
fiduciaries of

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retirement plans also understand

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how their default fund works,

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and to educate plan
participants on that.

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Yeah. And Chris, there's been
big demand this year with

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retail investors
and advisors to get

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involved in the
alternative space.

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Could you own liquid
alternatives in a 401 plan?

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Is it even worth it to do that?

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Short answer is yeah,

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but there's a bigger challenge
that most fiduciaries

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aren't using these or
making them available.

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Uh, not because they don't
necessarily want to,

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but they don't fully
understand how to fit

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those into their plan
investment menus.

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00:09:00,640 --> 00:09:02,300
There's also an
education component.

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Once you add an
alternative strategy

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to a plan investment menu,

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you now take on the
responsibility of helping

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participants understand
what these are,

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how they should be used
inside of asset allocation.

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Uh, from an investment
standpoint,

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00:09:15,020 --> 00:09:17,260
alternatives can be a
terrific diversifier.

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In fact, over the past 15 years,

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the rise of liquid
alternatives have given

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everyday investors access
to these strategies,

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which historically were
only institutional,

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um, but used appropriately,

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they can help reduce volatility,

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smooth out your ride, uh,

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and make them more resilient

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portfolio so alternatives
have a potential role in

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retirement plans but
something fiduciaries

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00:09:38,100 --> 00:09:40,440
and their advisors should
help them figure out.

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00:09:40,440 --> 00:09:42,420
All right Chris, we
appreciate the insight.

283
00:09:42,420 --> 00:09:44,100
Thanks so much for
joining us, Brian.

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00:09:44,100 --> 00:09:45,220
Speaking of alternatives,

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00:09:45,220 --> 00:09:46,580
what do alternatives
look like for

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00:09:46,580 --> 00:09:48,019
retirement portfolio that needs

287
00:09:48,019 --> 00:09:50,200
more than just passive exposure?

288
00:09:50,200 --> 00:09:52,440
Yeah, I mean Chris
brings up a good point.

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00:09:52,440 --> 00:09:55,139
I mean, liquid alternatives
own a place in any sort

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of investment management
risk portfolio.

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00:09:57,960 --> 00:10:01,019
I think, you know the old 60
over 40 traditional stocks

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00:10:01,019 --> 00:10:03,540
and bonds or index
passive funds.

293
00:10:03,540 --> 00:10:06,400
You just set it and forget it
like you guys talked about.

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I think there belongs someplace

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00:10:07,860 --> 00:10:09,340
of liquid alternatives.
How you do that.

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00:10:09,340 --> 00:10:12,780
Well, in some 401 plans you
can have them self-directed.

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00:10:12,780 --> 00:10:14,320
And from there you can kind of

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00:10:14,320 --> 00:10:16,439
educate yourself
and add certain,

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00:10:16,439 --> 00:10:19,739
you know, long short strategies,
macro trend strategies,

300
00:10:19,739 --> 00:10:22,120
CTA programs that are
offered actually in

301
00:10:22,120 --> 00:10:25,040
fund format or even,

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00:10:25,040 --> 00:10:26,480
you know, something
we do where we're

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00:10:26,480 --> 00:10:27,940
long equities, we're
long volatility.

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00:10:27,940 --> 00:10:29,780
So some sort of hedged
equity product.

305
00:10:29,780 --> 00:10:31,160
Those are the kind of
things I would look to

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00:10:31,160 --> 00:10:32,600
sort of add as a small sleeve,

307
00:10:32,600 --> 00:10:35,160
call it 10 or 20% in A41K plan.

308
00:10:35,160 --> 00:10:36,460
But you know, if it's not

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00:10:36,460 --> 00:10:38,500
self-directed, I highly suggest,

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00:10:38,500 --> 00:10:40,020
just like Chris
said, reach out to

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00:10:40,020 --> 00:10:41,980
your investment
advisor. Get educated.

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00:10:41,980 --> 00:10:43,460
Whoever is heading up

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00:10:43,460 --> 00:10:46,639
the fiduciary responsibility
that 41K plan to educate,

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00:10:46,639 --> 00:10:48,539
what funds can we add
to that sleeve so

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00:10:48,539 --> 00:10:50,540
that it's just not all
about set it and forget it,

316
00:10:50,540 --> 00:10:54,370
and just hope the S&P has
30 years of of progress.

317
00:10:54,370 --> 00:10:55,509
Because look, I mean,

318
00:10:55,509 --> 00:10:56,930
you've seen what
happened in Japan.

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00:10:56,930 --> 00:10:58,610
They had years of
nothingness, right?

320
00:10:58,610 --> 00:10:59,850
We had ten year horizons

321
00:10:59,850 --> 00:11:01,049
before in the past
where we've had

322
00:11:01,049 --> 00:11:02,250
these volatility events and then

323
00:11:02,250 --> 00:11:03,530
stock market does nothing.

324
00:11:03,530 --> 00:11:05,210
You don't really want to
be caught up in that.

325
00:11:05,210 --> 00:11:06,409
And to get educated about

326
00:11:06,409 --> 00:11:08,250
different avenues
is very important.

327
00:11:08,250 --> 00:11:09,570
All right. Great advice.

328
00:11:09,570 --> 00:11:10,809
As always. Mike, I want to

329
00:11:10,809 --> 00:11:12,289
wrap this up and go
back to tech for

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00:11:12,289 --> 00:11:15,030
a moment here and the market's
reaction quick read on it.

331
00:11:15,030 --> 00:11:16,630
Oracle reported Broadcom just

332
00:11:16,630 --> 00:11:19,050
reported what are you
seeing in the numbers.

333
00:11:19,050 --> 00:11:21,270
What are investors
questioning here.

334
00:11:21,270 --> 00:11:23,050
Yeah. And it's
interesting because

335
00:11:23,050 --> 00:11:24,730
we had exposure to
all of these names.

336
00:11:24,730 --> 00:11:28,210
We were actually short
Oracle going into earnings.

337
00:11:28,210 --> 00:11:29,949
We were long Broadcom

338
00:11:29,949 --> 00:11:32,490
um you know both
actually have sold off.

339
00:11:32,490 --> 00:11:34,649
We can we can see that the

340
00:11:34,649 --> 00:11:37,370
Oracle situation I view
that very very differently.

341
00:11:37,370 --> 00:11:39,790
Um you know and one of the
things it's something that

342
00:11:39,790 --> 00:11:41,289
Warren Buffett often said and

343
00:11:41,289 --> 00:11:43,009
it's certainly something
that I hold dear,

344
00:11:43,009 --> 00:11:44,490
which is that when I'm

345
00:11:44,490 --> 00:11:46,549
evaluating a company's
performance,

346
00:11:46,549 --> 00:11:49,350
I kind of feel like
the balance sheet is,

347
00:11:49,350 --> 00:11:51,049
you know, the
window of truth on,

348
00:11:51,049 --> 00:11:52,370
on a On a business affairs.

349
00:11:52,370 --> 00:11:53,850
And in the case of Oracle,

350
00:11:53,850 --> 00:11:55,370
we understand the investments

351
00:11:55,370 --> 00:11:56,050
that they're trying to make.

352
00:11:56,050 --> 00:11:57,750
But it's adding a heck
of a lot of debt.

353
00:11:57,750 --> 00:11:59,330
I mean, they've got
about $100 billion

354
00:11:59,330 --> 00:12:00,570
worth of debt right now.

355
00:12:00,570 --> 00:12:02,130
And if that turns out to

356
00:12:02,130 --> 00:12:04,249
be a little bit
too much exposure,

357
00:12:04,249 --> 00:12:05,729
an investment to this space,

358
00:12:05,729 --> 00:12:07,730
they are more exposed than most.

359
00:12:07,730 --> 00:12:09,929
And we do see a little
of the blue bloom

360
00:12:09,929 --> 00:12:12,230
coming off the AI rose
here a little bit.

361
00:12:12,230 --> 00:12:14,850
Now in Broadcom's case
I remain bullish.

362
00:12:14,850 --> 00:12:17,630
We continue to hold the
stock. We haven't sold it.

363
00:12:17,630 --> 00:12:19,570
I do wish we'd had
tighter hedges

364
00:12:19,570 --> 00:12:21,650
going into the
print, to be honest.

365
00:12:21,650 --> 00:12:23,750
But um, you know,
I think that look,

366
00:12:23,750 --> 00:12:26,650
their partnership with
alphabet on the TPU side,

367
00:12:26,650 --> 00:12:27,830
I think is strong.

368
00:12:27,830 --> 00:12:29,210
And I do think that
people who have

369
00:12:29,210 --> 00:12:30,570
exposure to Nvidia and look,

370
00:12:30,570 --> 00:12:33,630
anybody who's involved in the
S&P has exposure to Nvidia.

371
00:12:33,630 --> 00:12:34,889
They should actually be looking

372
00:12:34,889 --> 00:12:36,310
to broaden that trade
out a little bit.

373
00:12:36,310 --> 00:12:39,750
We've actually cut our
position in Nvidia completely.

374
00:12:39,750 --> 00:12:41,570
All right. Appreciate
your insights.

375
00:12:41,570 --> 00:12:43,570
As always thanks for joining
us on trade talks I'm

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00:12:43,570 --> 00:12:47,130
Joe Malandrino global
markets reporter at Nasdaq.