Full Transcript: Victoria Greene On the Badger Market

G Squared Private Wealth CIO Discusses 2026 Market Outlook

Justin: Victoria, welcome to Excess Returns.

Victoria: Thanks, Justin. Great to be here.

Justin: We’re looking forward to having this discussion with you today because I always find you to be very thoughtful, balanced, and grounded in real world market experience. You’re a regular contributor to CNBC. That’s how I first learned about you, and so it’s always nice to have.

Someone with your sort of level of experience in the markets, but also, like I said, taking like a balanced long-term approach to how you kind of look at. The market. So

Victoria: It’s almost like blue collar investing, like we’re, we’re, we’re here to try to speak in a way that people resonates with people and, and make sense.

And, we’re not trying to be crazy. We’re just trying to make a, a lot of money and, and be where we need to be and avoid any of the landmines that we need to avoid.

Justin: I love it. And that’s how you kind of approach, how you work with clients at G Squared Private Wealth. today we’re gonna work through a number of different.

I think themes and investment ideas, including things like why you say cash flow, never lies, the importance of diversification, particularly this year. what you mean by a potential badger market and a bunch of other things that I think are on investors’ mind, including AI market concentration and sort of where you see maybe some of the rotation in leadership coming, in this market today.

Before we get into all that, I do just wanna say, your website is g square private wealth.com. On there, you can sign up and get on their distribution. They have a whole bunch of market insights, quarterly outlooks, and a bunch of great content. A lot of it that we use to kind of formulate this sort of outline.

Victoria: And we’re very proud. We don’t use AI to write anything. I will put that disclaimer, so if there’s typos or grammar or I use the wrong there, there, or it’s, it’s because it’s written by me. And if I fat fingered things, it’s my bad. But that is all. And I feel like there needs to be a disclaimer in this day and age as content gets, gets a little bit less, individualized.

It’s what’s actually being written versus what’s being AI written.

Justin: I love that. We’ll hold you to it. Maybe you can come on in the future and we’ll see if, AI has influenced any of these articles. But, so let’s start, let’s start with your investment philosophy, which this is you, you kind of. Express that it starts with a top down macro view, but you’re also using fundamental bottoms up analysis to inform your stock and your positions.

And then there’s an overlay of technical analysis. So give us a sort of overview of how that all comes together for,

Victoria: yeah, it’s basically like the mosaic theory, but we always start top down where are there opportunities, and most importantly, where are the risks? So number one, I have it on my portfolio side for individual stock selection, but we’re also looking on the private client side of where do we wanna be in our asset allocation range as risk, on risk off.

So number one is always gonna be start with macro and that’s where do we see growth? Where do we see opportunity? And for the first time in a very long time, we are moving out and have been moving. For the last 12 months, we still got core US holdings, but we’re also adding in a little more international and em, for a long time there it definitely paid to be concentrated in US large caps 100%.

And we’ve been there about eight, nine years, like almost no international EM or small cap. And that was rockin and rolling, but you cannot fight a little bit of the fact there’s an underlying shift, a little bit of a sector rotation going on here and, and a little bit of a risk management trade just in case Sell America accelerates.

Some of its. The dollar. But all of this comes into play with macro, where do we think we are in the economic cycle? Where do we think we are in this, this AI eventual bubble cycle? where do we think other countries are? and, and where do we think there are opportunities on currency?

But also because I work a lot with private clients, we are very focused on risk management. So it’s not just where’s the opportunities on the macro, it’s where are the risks. And I talk about it as stepping on a landmine. I can maybe survive stepping on one. I don’t wanna step on two or three. So I have to be very picky and choosy about where I wanna layer in risk and beta and, and, and take that, that opportunity versus where do I wanna play defense.

And that I think is key this year. So we start that macro, then we go into and say, okay, if we like this, we wanna be more defensive. here’s maybe some sectors we want to overweight, or here’s, we want a little more international. Then from that on the, the, the individual equity models, obviously then we wanna look at fundamentals, right?

So maybe we want more in energy, but who do we wanna own in energy? are we services integrated, refiners, emps? And then from there, who do we think is best to breed in? Each sector obviously has a little bit different, you want us, I love cash cashflow. I always talk about that.

But you can’t really evaluate necessarily a growth tech. Company on cash flow. So you have to be really looking at individual companies. What matrix matters most to them. Is it valuation, which oftentimes for growth companies not as much. Is it, cash flow? Is it, is it, is it growth? Is it, is it p and e?

Is it balance sheet? Is it, different ratios? So, you always have to say, it’s, it’s very hard to have one size fits all for individuals, companies. And then finally, we can’t be agnostic to technicals based on broad market trends. Short term technicals can be a really great indicator. we’re not a hedge fund.

We’re not trading around every single month, but we can’t be agnostic to different trends, whether it’s a sector rotation, whether it’s, moving averages, advanced declines, who’s and, and where, where we are on, on how many people are above trading above their 200 day moving averages or below.

So you put all of that together and I think you can build a quality portfolio.

Justin: That’s great. that’s a great overview. So talk about, you mentioned cash flow, so, and I know like you said, it doesn’t apply to every single sector because some sectors are gonna be based on different metrics that you’re, you’re gonna be selecting based on different metrics that you’re, you’re looking at.

But I know that cash flow is very important. You have this line that cash flow never lies. So can you explain that principle and apply it so.

Victoria: And I’m gonna be a little bit nerdy here and I apologize, but there are so many ways you can kind of jack around earnings. You’ve got depreciation, you’ve got ebitda, like by the time you get to the EPS earnings numbers, there’s a lot of manual adjustments happening in there.

And a big one obviously can be depreciation or tax expense or, or interest expense and all this other stuff that goes into that. I love cashflow from operations as a way to say, is a company. Actually making money doing what it says it’s going to do, and have they successfully grown. That said, money that they said they were going to do because you can’t cash flow from operations means did you actually generate free cash flow doing what you said you were going to do, and then you can look back and say, how’s this cash flow been growing?

is this something that we feel comfortable with? Is it sustainable? What are their moats, what are their catalysts? And so I love it because really it doesn’t lie, like free cash flow is, is one of those matrix, I think doesn’t lie and, and, and, and really tells you the health of the underlying business works a little bit better on the value side than the growth side, obviously.

But for a value company, a quality company, a blue chip, I’m like the, one of the first matrix I’ll pull up and look at is free cash flow. Cash flow from operations, and then also what the, the growth trajectories of those are.

Justin: You talked about, sort of diversifying a little bit more into other areas, non-US.

You mentioned international, you mentioned em, but what, there’s obviously relative strength or price performance in some of those areas versus the US market, but what else is driving this emphasis of diversification this year for you guys?

Victoria: Yeah. For us, one, it’s a presidential, second year presidential election cycle.

Not a great year historically for the US and for growth stocks. Number two is a little bit, we can’t be agnostic to some of the things US is doing with tariffs and other things that maybe wants us a little bit more diversified. And then number three is what’s happening with currencies in the US dollars.

with the US dollar coming down, that is great for some multinationals, but we also think it’s a good driver for a lot of international markets as well. and some of it’s also the valuation. we think there’s opportunities. Europe’s investing heavily, Japan’s finally breaking out.

South Korea is really fascinating. We’re not the only people that are really good at technology. A lot of Southeast Asia is phenomenal. India’s been a little bit mired, but the opportunity set is there if they can get it together. And you’ve got all of these gifting trade and tariffs and alliances.

And so for us, we’re saying we’re. We have been so concentrated though in US large cap. Some of it is just taking a little bit of that risk off the table and saying, we, we just want a bit more diversification. Diversification can be killer to returns, but at the same point when the markets get a little bit harder and we’re seeing a little bit more breadth and, and broadening out of what’s working, we want more value and we want more international and we want more.

Justin: Well, we, like we talked about before, we jumped on, I mean Microsoft, which is like a stalwart here, down 12% today, so.

Victoria: Yeah. And that’s, that’s that one of those, when you’re priced to perfection, like just meeting expectations no longer is great, you know? And so that’s one of those, it was a great earnings.

I think if you gave somebody a, a case study in five years and were these were Microsoft’s for votes versus expectations, what do you think would happen to the stock? Almost everybody would be oh, well it went up. Right? They did great. And then the problem is the expectations are so high.

You can’t just meet ‘em. You gotta beat ‘em and raise and just blow it out of the water. And so. Being a little bit picked on, right? It’s all about, it’s all about Azure. For them, it’s all about the Azure growth came in right on the spot, 38% growth, not what people wanted to see. They wanted to see more than expectations.

So you’re seeing a little bit and, and they also, again, when we say we look at technicals, they’re charted, looked a little ugly going into the. So we still own some Microsoft that we had trimmed it earlier in January, a little bit below market weight. we still think it’s a core holding a wonderful quality company, but occasionally that doesn’t matter, right?

Market sentiments against them. They’re laser focused on what’s happening on the, the hyperscaler on the cloud side. And, and candidly, we have a little concern about copilot and monetizing that. and then you’ve got all the messiness with, open AI and that kind of just made it allow quarter for them.

So when expectations are high, you can’t afford to have any works. And you’re seeing that today.

Jack: You’re, just, I dunno if you guys saw this, but on your point about expectations, Liz Ann Sanders tweeted something yesterday that companies are, are, are essentially getting punished for both beats and misses this quarter so far.

Yeah. So just to show the expectations are probably higher than even what we think the expectations are. Com companies seem to be getting punished regardless right now.

Victoria: Yeah, there’s a hidden number they have to hit. Nobody knows what that is, but it’s not the announced, average analyst estimate, and then for us, we knew it’s always gonna be, right now it’s about Azure.

It’s the same with when Amazon reports. It’s gonna be about AWS there’s gonna be, focuses that matter a little bit more. We know everybody spent a billion dollars buying Christmas gifts on Amazon. The question’s gonna be what their AWS growth looks and it kind of overshadows things in this AI world.Justin: What did you mean when you described 2026 as potentially being a badger market? What is that concept?

Victoria: Okay. I, I do occasionally, like being silly and I’m an old millennial, so you guys remember the memes, the honey badger don’t care. Badger don’t give up. Yeah, so when I looked at it, it’s actually a twofold reason.

I call it a badger market. First off, I think this market’s going to move ferociously like a badger, and it’s gonna have spurts that it’s just

Justin: nah.

Victoria: And it’s gonna bite you a little bit and just be ferocious. So you’ve got to, to be ready for that, that. And then the second one is, as an investor, you gotta have your little bit honey badger don’t care ‘cause you’re going to get caught out.

I think you’re gonna have policy announcements, policy by tweet is happening. And so things change very rapidly right now. So a little bit, you gotta. Channel your inner hunting badger, find that courage to, confront all of the, the craziness in the market and not to panic. So partially it’s, we think the, the market’s gonna act like a badger.

And partially we think that as an investor you need to channel your inner ferocious and inner hunting badger and be, be prepared to, to stand in the face of danger and, and understand some of these drawdowns might look terrible and ferocious, but you need to have that courage and conviction and, and stand your ground even if you got a little short, like.

Justin: So 106 million views on YouTube. If you want to watch the Honey Badger video, which I will be watching this

Victoria: afterwards. what made me sad? It was like 13 years ago now, and I was dang it, I’m old. Justin: what do you think of the, I mean, a lot of the 60 40 had done so well up until a few years ago, and even since the end of 22 has actually been a pretty solid performing strategy.

It’s very simple. 60% stocks, 40% bonds. Do you see any sort of possible or potential flaws in that? Or how do you guys think of the 60 40 just in general? Yeah.

Victoria: I don’t think the 60 40 is dead. I think you got a lot of alts managers. I like to say the 60 40 dead because that’s what they would like to see happen and have less in bonds and more in alts.

but we’re seeing a struggle bus on the, the, endowment side. Right. you’re seeing your Yales and the other things, that, that are struggling because of their overweight alts. So I don’t see anything wrong with, with. 60 40. I have been layering in a little bit more commodity exposure, because I think that’s gonna be a place that investors want to be as a hedge against the US dollar, a hedge against risk, a kind of caution jumping in now with silver and gold being parabolic.

I think a month ago we were oh my goodness, gold could get the 5,000 and now we’re like 7,500, silver to 200. some of this like voracious demand for metals, but not just metals. You’re seeing the precious metals. You’re seeing copper rise, you’re seeing oil rise. Some of the stuff when the commodity set, which has been pretty beaten down, starts to rally.

I do think commodities do take a little bit of a next look, and I, I don’t mind some of the alternative income sources. I think you gotta be a little bit careful just loading up on alts because alts is such a broad terminology, and I think you, that is one area we talk about using a scalpel, not a sword, that you really need to understand what you’re owning, what the liquidity is like.

is this really gonna be the place you wanna be? we’re, we’re, we’re just a little concerned, private credits obviously having, having a few little issues this year because so much money flowed into it. And I’m not saying with doom and gloom, I’m just saying investors need to be very picky and choosy and.

Alts could mean anything from a hedge fund, a venture to private equity, to private capital, and even within private capital, right? You’ve got all your sub-sectors, asset based or where they are and they all like to talk about, oh, we’re middle market and we’ve got all these great deal flows and.

We’re still getting, all of the, we’re not covenant light yet. And I’m Hmm, there’s a lot of covenant light loans getting written right now. ‘cause so much floated into it. So maybe a little bit fuddy duddy on us. We’re not huge into alts. We, we like our 60 40, we have layered in a little bit more commodity or commodity exposed stocks.

and some of that, again, it’s a hedge against inflation and hedge against the US dollar and a and a hedge against geopolitical risk, which I’m not sure you notice, just a wee bit scooch of, of risk out there.

Jack: That is definitely true. As someone who talks to clients on a regular basis, these geopolitical risks, I’m hearing more and more about it.

but it, it seems like despite all this, you still are, as much as you think the market might be up and down this year, you are still ultimately positive, on the market for this year. So what are some of the positives you’re seeing that might drive us higher this year?

Victoria: Obviously, and a lot of these, in my opinion, outweigh it.

So we have this huge doom and gloom macro kind of oh, what’s happening with politics? Or, it’s been 20 minutes since I checked the news. Are we at war with somebody else? I’m not quite sure. You know? So we have all of this risk out there, but to me, what matters much is. Fundamental earnings growth, which is 100% intact, and earnings are still working.

We’re seeing the, the shift, we’re seeing the productivity increase from AI come that’s great for corporate profits. Not maybe amazing for labor, but great for corporate profits. And we see continued layoffs. Amazon, I think Dow today said they’re gonna lay some people off. That’s wonderful for corporate profit margins.

So corporate profit margins are growing. Profits are growing, that means you’re making more money and you’re keeping more of the money that you can give to shareholders. Number two is the tax refund day. Lose is a real thing. We’re expecting at least a thousand dollars more on average, or maybe another a hundred billion or so in stimulus.

We’re gonna start seeing that come down the pipe here in February, March. it’s very front end loaded. We think you’re gonna get some good refunds from people that the IRS, never gave guidance to update people’s withholdings after the tax bill passed last year. So the likelihood people see more favorable tax.

Policy as well as corporate tax policy this year is, is pretty good. And, and some of the deductibility for depreciation on things should drive little more economic activity. And then lastly is AI to us is still early, mid innings, right? You’re still having plenty of activity. Look at Caterpillar today.

they’re not selling the big yellow tractors as much. Theirs is about energy and power and gas generations and turbines and everything else. That’s where Caterpillar’s growth is coming from. It’s not just people are buying big old, tractors and, and cranes and, and everything else. To build, which is what I think people traditionally think of Caterpillar.

Caterpillar’s got more of an AI play to it, and so you’re seeing all this ancillary in the industrials that should continue to support economic expansion. And then number three, it’s an election year, so. Candidly, they’re gonna do everything they can to keep everybody happy through, through November, because people are gonna vote with how their wallets feels.

So affordability is a, is a big issue. They’re trying to get more and more money into, into people’s pockets, as quickly as they can. So you put all that together and that to me is a rosy picture for, for equity, equity fundamentals and equity growth. And, and I know kind of have to, put your, your binders on or find your inner badger because there’s gonna be so much noise you just kinda have to drive through it.

Jack: Yeah, that putting your blinders on is, is, it’s such an interesting time for that because when you talk to clients, on one hand you’ve got a market that just keeps going. And on the other hand, you’ve got in the news every single day, something new, something crazy is going on and, and like I think people have trouble like separating those two things.

Like they want to, when I talk to clients like they wanna sell because of all this stuff in the news, but they realize the market’s going up. It’s it’s an interesting dichotomy like investors have to fight through.

Victoria: Yes, yes it is. And also key Italy. It kind of matters how they feel about the world.

If you’re Republican, you tend to be very bullish and maybe overly bullish. And if you’re a Democrat, you tend to be a little bit bearish and, and possibly overly bearish because that’s the way you view what’s happening with, with kind of Trump and his policies around the world. But I always talk to people that politics matters much more to us personally than it does to the market.

Yes, there are going to be some. Currently you’re having a pretty large swing in executive actions. you’ve had, had actions against, the defense contractors potentially, or credit card cap. you’re having things that are a little bit targeting sector specific and not quite the regulatory light we thought we’d be getting.

But at the same regards, the overall framework has been. Lower taxes, lower regulations, which is, is good for, for business, you know? and I think that, that you have to just ignore the, the noise. We talk about this market being a Teflon market. Like you’ve thrown so much at it. And, and it really truly is, powering forward because markets often care more about what’s coming down the pipe than what’s happened, right?

So is this good for us or is this bad for us? And, and if you look through and you look at a study of markets and war and conflicts, historically, conflicts have not had a last. Impact on the US markets. And, and, and I always find that surprising, and I’m not trying to minimize conflict or war.

I think they’re horrible there, there’s a huge human cost to it. if you, but if you look at it purely economic from a market situation standpoint, war wars are a little bit less consequential. political stuff’s a little less consequential because a lot of it, especially now that we’re in year.

Five of, of the, the Trump administration between first and, and now people are kind of used to the bombastic, like you’re just starting to get a little bit worn down by it. Now, candidly, I love to wake up one morning and not be oh, what consequential event happened while I was asleep? I would be super great.

just not sure I’m gonna get that.

Jack: Yeah. To your point, as an investor, you almost have to ask yourself the question over and over, how will what I’m seeing affect the earnings of US companies? Because to some extent, like a lot of this other stuff becomes noise when you, even though you feel very strongly about it personally.

Like it becomes noise when you sit, when you try to attach it to, is it actually gonna affect the earnings of companies that comprise the stock market?

Victoria: Yeah, and we also tell people not to pre panic, because that can also happen. You kind of work yourself up and you start doing the what if, what if, what if, and, and that can kind of cause you to, to, to pre panic.

And I’m well, let’s maybe take this in stride. often things don’t play out exactly how we think it will in their, our heads. there, there’s, we try to give a empirical data of well, this is how markets have performed during different types of administrations, and this is how markets have performed during shutdowns, or this is how markets have performed during wars and conflicts and just.

Trying to put that information out there is empirical data. and just to say, sometimes this isn’t quite as bad as we think it’s going to be. and, and the, the but the desire a little bit right now to kind of. pre-PA is, is, is, is significant because the what ifs do you feel endless, or Iran or Taiwan, or we’re gonna completely break up with Europe and what’s happening with China, you know?

And so you look at all that and, and, and you just have to take a step back and realize that, that oftentimes the headline news is not actually what’s getting implemented. And, and you gotta kind of take it and divide it by like 10 in your head, you know? So if you’ve got some event, you’re this is the massive event.

Event, go ahead and divide it a little bit and be all right, well this might be impacted.

Jack: Yeah. One of the things you wrote that I thought was really good, ‘cause investors tend to overuse valuation as a timing indicator, and one of the things you wrote is that it’s policy error and not valuation that historically kills bull markets.

So can you explain that?

Victoria: God. Yes. So it is either fiscal or monetary policy that will kill off this bull market and that is the tried and true way to kill off a bull market. It is not because of pe. So if you’re looking at PE or you’re looking at Case Schiller, it’s a terrible way to, to value where we are in this bull market.

and I’ll candidly say Case Schiller has been a really terrible indicator for, if you’ve been on that, you’ve been sitting on the sidelines for like five years. ‘cause it’s been massively overextended. Policy will be. So it’s either gonna be fiscal or monetary. So the Fed gets it wrong, right?

That we are, that we’re holding rates now and, labor market completely implodes and they’ll be late. Or they’re holding rates here and inflation accelerates and we have a 22 again. and, and, and that, that they’re late to that fed error is one. But you can also have, the other side of it, that they can’t get out of their own way.

We have a massive, tariff issue or trade issue. dissolve the, the, all the trading blocks we have, and now we’re like 50% tariffs with everybody around the world, that could have a massive impact that, that, that markets wouldn’t like. so those are kind of the tried and true ways. And, and so the one thing is, and I know the glib being like valuations don’t matter.

But if that’s, you’re looking at ‘em and being oh, the PE is is, and, and keeps climbing, that’s a really bad reason to sell out. You should sell out because you think fundamentals are deteriorating because markets typically don’t go enter a bear market when earnings are growing. So if you look at your fundamentals and they’re actually helping moderate pe right?

you look at the, the PE of some of the Mag seven and you take Tesla out of it. ‘cause that one’s just the insane one. your PE is actually fairly moderate, not cheap. Nobody’s arguing this market is cheap, but because earnings are growing, you are actually not seeing PE just skyrocket like it did in the mid nine or the late 1990s.

Jack: So through that lens of monetary and fiscal, it seems like things are probably pretty okay right now. Right? I mean, you, you had an article where you said, don’t fight the admin in addition to the yoju, don’t fight the Fed. And it seems like the administration right now is having mostly pro-market policies and the fed’s kind of in hold mode, but they have been cutting.

I mean, do you see any, anything on the horizon that concerns you on either one of those two things?

Victoria: I mean a little bit what the Fed does. can we, the Fed independence, I think is one thing we want to, to remain independent. I think that could shake global. you say what’s consequential?

if suddenly he really goes after Powell and gets him fired, try fires. Powell, I think you’ll see a knee jerk from that. But unlike, don’t fight the admin, the admin wants to go to Venezuela and get oil. You should probably be long refiners in oil service companies. the admin’s pushing for, for, for more oil.

Exploration. Like for me, some of this stuff is, is you really don’t want to be on the other side of, of pol actual policy, not tweets, but things that are, are Hey, this has been picked up by, by all of the, the people in the administration and, and carried water. But I do, I think the economy, it, it, I wrote a piece a while back and I refer to it as the subway sandwich economy.

‘cause what, does anybody really love going to Subway? No. It’s not like your dream to have lunch at Subway, but. Is it acceptable? Yeah, you’re on the road, you’re at an airport. candidly, they do a fine job. It’s tasty sandwich, like nothing wrong with Subway, just not excited about it. That’s the way I look at this economy.

Like it’s fine, it’s trucking along. There are definitely risks out there. There have definitely been better economies. But is it fine? Yeah. And the Fed reiterated that yesterday and it was like a very melt toast fed because basically it’s yeah, things are balanced. We’re a little worried about inflation and labor, but things are okay and stable and we’re just kind of in status quo to see which way it breaks.

So either the economy’s gonna grow and break up, or, and, and, upward trajectory. And we’re gonna have labor stay stable and inflation stay stable and things are gonna run. Or candidly it might start breaking the other way. and I, I was a little surprised they weren’t as concerned on labor.

Obviously we’ve, we’ve had some good labor numbers, but, to me that one is, is the bigger risk. And, and we’ll get into that a little bit ‘cause I, I do have continued concerns on the whole khap economy and, and what that’s doing. And with the, the labor work.

Jack: And on the labor market, it does seem like if the Fed has a choice, like they’re going to lean towards the labor market, versus inflation.

So it does seem like if we see more deterioration in the labor market, they probably will continue to cut. It seems like they’ve indicated that’s gonna be the one they’re gonna favor, at least for now.

Victoria: And candidly, the Fed is doing a great job. They don’t really get a lot of credit. It’s a horrible, thankless job, right, because they’re often wrong.

Because they have minimal tools. They can, they, they, they can actually use and everybody loves to blame them when the the market ends. but look, we are in like the third year of a bull market. We have more stable inflation. But I always have to remind people that stable inflation is not deflation. So we’re not going back to 2019 prices.

That’s just not happening. Like grocery stores, are they are what they are. Like that is just the, the natural world order that inflation. Now we had a period of high rapid inflation, but short of deflation, you’re not getting these prices back. So some of this is like recalibrating, getting people off their base of, remember when, when we’re all gonna sound like 90 year olds sitting on the front porch?

Gas was, a dollar 25 a gallon and eggs were this, and, and, and just some of that is, okay, well this is what it costs now and, and that is getting absorbed a little bit better because the, the sticker shock of some of it has stayed stable now for a while. It’s just not getting cheaper. But you need deflation for that.

And, obviously that was a bit of a concern on, on will, will we ever get deflation? And I, I think that’s really hard for us to get in this environment.

Jack: You mentioned the K shape economy, and that’s something a lot of people have concerns about. Well, we’ve had a good economy, but a lot of it has been driven by the top end and, and many people worry about if that’s sustainable long term.

Like how are you thinking through that?

Victoria: I’m hoping tax refunds help a lot. but I’m very concerned about the KS shape recovery because it has, if you looked at consumer spending and you actually broke out the consumer spending, almost 50% of that was by the top 20%. and that’s not sustainable. I mean, they’re still spending money and that’s one reason you’ve seen luxury brands do fairly well.

you, you’ve seen, cruises and cruise lines are taking off today. People are still paying money to travel. They love to travel. They want their experience, they want to eat out, they want the fancy car. You’re seeing some things that are really great, but on the other end, you’re seeing the the, the bottom, which is the K shape, right?

So if you’re upper, middle or upper, then your incomes, you’re doing fairly well, your four, oh, you’ve got 4 0 1 Ks, you’ve got investments. You likely own a home. That stuff has gone up, so you have seen your net worth. Grow and oftentimes outpacing what’s happening with inflation. with the market growing the last couple years, 15% plus, you’ve seen your 401k grow or your brokerage account has grown, you likely have money in savings that you were getting paid higher interest on.

But if you don’t have those and you’re on the bottom half, you have really been on the struggle. Right, because you haven’t seen your investments grow. You have minimal or no investments and your paycheck doesn’t stretch as long as it far as it did, a decade ago. And so that continued. I think, right now we’re, we are betting a little bit on tax refunds, but we also don’t mind, as a play on the markets, like a Dollar General or Walmart, people that are picking up the value seeking consumer.

We have seen that be a huge play across the markets that you either need to be upper end or you need to provide value. With that middle, it’s been crushed. And I, it’s the kavas and Chipotles of the world that nobody really wants to spend $20 on a burrito bowl. But Chili’s, who is really great at communicating their value, is doing phenomenal.

So it’s not all restaurant traffic is slowing. It’s if you’re in the middle and you’re either not upper end and providing an experience or you’re not providing value, you’re really seeing that that middle part of the economy on, on companies get crushed. and, and that’s the one you say, what’s the biggest.

My biggest concern is that the K shape breaks and, the lower income just starts to break and, and employment rolls over because instead of 15 people working in a call center, you need, three people in, in an AI algorithm or, back office staff keeps getting trimmed and we are seeing more of that.

you talk about Jolts or a DP and, and consumer confidence and people seem much less confident about finding a job. Much more. I wanna stay put because we’re very worried about. Can I find a new job? and then, you, you have seen continued layoffs. Now some of that’s been picked up and absorbed.

but we’re, we’re seeing all these pressures and you’re gonna say, what, what could break the market other than policy errors? Unemployment just starts to, to roll over pretty hard. And the, the, the lower middle income part of the US just gets stop spending. They can’t do it anymore.

Jack: I just saw an advert chilies the other day and they’re giving you a lot for your money.

there was like all kinds of stuff you’re getting for like 10 or $12 or something. They’re, they’re doing a good job of taking advantage of this.

Victoria: Yeah, no, and, and I think, and that’s why Costcos and, and Walmarts, anybody that can be Hey, what, what, what can you come in and, and feel like you’re getting a good deal?

Those companies have generally done fairly well, because they appeal to the consumer. And the other thing we look at when we look at Kha and kind of on the, the pushing back on why we’re still bullish is look at that credit card companies almost universally banks and credit cards. We had, MasterCard today.

Delinquencies aren’t rising rapidly. People are using their credit cards, credit card balances are growing, but they’re not concerned yet. So if you’re saying most of our US financial system that is publicly traded has reported on the banking side, and nobody’s really setting aside huge things for loan losses, nobody’s really saying, we’re worried about the consumer.

Almost universally though, like the consumer is, okay, so they are stretched, they’re not happy, but they’re still spending money. Now, what shuts the economy down is if they finally stopped. Spending money ‘cause they’re tapped out, but for right now, they’re not tapped out. and yeah, they are some using credit to get there, but they’re still certainly spending money and, and, you can check under the hood.

That’s why I think financials are, are hugely important, for the health of the US economy is under the hood. People really weren’t worried. They were pretty bullish on the consumer. So you kind of have to say, okay, well if the people that are actually lending and holding the money feel pretty good about the consumer, while I’m worried about it, at the same point, it’s not manifesting itself yet.

So I don’t want to kind of. Fully bunker away from consumer spending.

Jack: Another thing we’ve been talking about the podcast, which gets to the same issue, is the separation between hard data and soft data. the hard data says the economy’s doing really well. If you ask people about anything though, they think things are going very, very badly.

And, and it’s it’s just interesting to think about how does that potentially resolve, over time. do you have any feelings on that?

Victoria: well, they’re trying desperately to resolve it for before November. but I think a little bit of that’s IC on a pig. it’s very hard because our base case is still pre COVID, right?

Most of us adults are well, this is what it costs. And, and so affordability. and, and, and it’s easy because I think the world feels terrible. That you find reasons to not like your position. Now candidly, there is a, a widespread of the US population that is struggling. They’re living paycheck to paycheck, and that paycheck is not stretching as much.

So again, I’m not trying to be glib for people that are struggling, but at the same point, when the world feels terrible. It’s kind of like everybody likes to, to, to be well, it, it doesn’t give you a lot to be excited about. The future feels uncertain. We’re worried about inflation, we’re worried about our jobs.

We’re worried about, how we’re gonna pay bills. what if we go to war with someone, you put all of these what ifs in a jar and shake it up, which is basically what we’re at. And then it’s very hard for people to have a good sentiment. Reading out consumer sentiment was the lowest it’s been in a long time.

And a lot of that was just, their outlook is terrible right now. so if we can dial back some of this noise, give people a little bit more certainty that cool, we’re not gonna invade anybody, and maybe we’re just gonna be a little bit more status quo. I think the messaging, could be a little bit better and that would make people feel more certain that, okay, the economy is good because that’s getting lost in all the noise.

The average person doesn’t feel good because there’s so much noise. It’s hard for them to, they’re not following. meta’s earnings or, they might loosely look at the stock market. They’re feeling the noise from all of the, the crazies surrounding the world today. And I don’t know how you fix sentiment other than to dial down the crazy.

Jack: So yeah, to your point earlier, I, I have to think political polarization is playing a role here too. I mean, people are just seeing people at war with each other constantly. that has to affect how you feel about the economy and how you feel about what’s going on in the world.

Victoria: Yeah, and it feels, I mean, almost everybody in their life has somebody they, either a family member or friends that they’re in disagreements with now it feels right?

Because of the polarization. And that just makes it hard because then you feel your relationships maybe don’t feel as certain, and that just brings the kind of polarization closer to you and. Very hard for people that feel upset about what’s happening in the world, to feel good about anything, even if, they got a raise.

there’s just, it’s, it’s the counterbalance with the noise is just causing people to, to be worried about, about what’s coming. And so that soft data is, is generally gonna be difficult until I think you can get the noise dialed down.

Jack: You mentioned the labor market before, and I wanted to dig into that a little bit because I think there’s a lot of different factors going on right now.

You’ve got the usual economic factors of the labor market, but you’ve also got this AI thing sitting out there. You’ve got the reduction in the labor supply through immigration sitting out there as well. It seems like a very tough thing to analyze right now. So can you talk more about how you’re thinking about the labor market?

Victoria: Yes, I am waiting and watching. I am not pre panicking. I think labor is one of the bigger risks. I think unemployment’s one of the bigger risks. I think dislocation in employment is also a big risk of matching people with the right skill sets and the right geographies with job openings, and that dislocation is gonna be hard.

I also have a whole rant about, data collection right now with the federal government and how these. Surveys are actually getting, collected, like for me, like Jolts is the worst reading ever. Like use jolts as like barely directionality. like it shouldn’t be readed month to month because the, the actual survey response is like 20%, 30%.

And so they’re extrapolating so much data from low survey response. And so you have to be a little bit worried about, and it is not, not saying they’re cooking the books, I’m just saying all of this stuff is done by survey. and that’s why you see some difference between the A DP, which is just private payrolls, but then the US Labor employment and some of these revisions is just their survey response.

nobody wants to fill out a survey. So you’re seeing a little bit more survivorship bias or response bias because you’ve had response rates and there’s 30, 40%. It used to be, 80% of people would respond and you got a really great reading, now you’re having a lower response rate. So some of these things get jerked around.

and so for me, I, I, some of this stuff is. Especially Jolts. I’m use that as like a six month trend line. Do not look into Jolts as a month to month reading that, oh my gosh, we missed by a hundred thousand in Jolts because it just gets jerked around tremendously. ‘cause it has one of the lowest, response responses across the federal government.

So one, some of this is you gotta have good data and it’s getting harder and harder to get good data as people don’t want to fill out surveys. So one is, is, is data issues. Two is then obviously, what, what are we seeing as employment opportunities? We’ve seen so much. Do it on the service side, right.

It’ll be hospitality, travel, things like that where at the same point manufacturing’s been stuck. So there’s so many dislocations that it’s very hard for me to get a good read. And so I’m just a little bit, if you can be neutral, I’m about as neutral as I can be. I think there’s some bright spots, but manufacturing’s.

Thorn in our side, both on, on ISM, and, and other economic readings as well as employment. And so we’re, we’re waiting for that number to kind of get better. But for right now, a lot of that employment continues to trend down as people move more and more towards automation.

Jack: Another thing you mentioned in, in one of your outlooks is this idea that you think the yield curve might steepen, in 2026.

So can you talk about why that is?

Victoria: Inflation concerns on the rising debt level. Like there are multiple things. If you look at that long end, I think the long end may stay a little bit higher, even if, if the short end in rates come down because people are worried about the long term health. as we continue, to, to grow the deficit and we continue to have, continue issue treasuries and, and there’s continued risk on, on inflation.

If we have massive policy changes, tariff changes the US dollar. And so I think that long end’s gonna stay a little bit higher and that’s. Steeper could be a little bit painful at times, and so, yeah, I think the two year and 10 year treasuries are the two areas that people pay the most attention to, which you should.

but then you gotta look at that long end and, and the long end’s telling you they think there’s some, some concerns on inflation. And so, intermediate’s been a decent sweet spot. bonds have been great. we had that run there was it 22 and 23, where bonds were net negative for two years, which were just brutal, the portfolios.

And that’s when the. Rally and cry of the 60 40 is dead, started, started coming out. But at the same point, we’ve, you’ve seen some decent returns from bonds and especially if you look at global bonds and international, we’re, we’re, we’re fine staying on the corporate side. but I would take a little bit more, credit over duration right now, I want medium, moderate duration, but I’m not, dumping it all into TLT chasing after that

Justin: and talk.

How are you thinking about,

Jack: go ahead Justin.

Justin: Just on this, talk about the idea that, the one thing is the Fed is. excuse me. Trump is obviously pressuring the Fed to lower rates, but yet they only really impact the short-term rates. long-term rates are much more driven by inflation expectations, growth expectations.

So those two things are sort of in conflict and I think a lot of the Trump’s policies, are sort of like a little bit more inflationary in na in nature. so it’s, it’s kind of a disconnect between. What he’s saying and what, what would actually happen if the Fed lowered rates possibly.

Right?

Victoria: Yeah. And, and again, I think they’re hyper-focused on November. So can they get two more cuts before November or kind of stimulate, juice, juice, the numbers a little bit, as much as you can juice the economy, get, get money flowing. ‘cause right now. Looking at it, it’s looking pretty ugly on the, on the reelection side for Republicans, because people are, are angry.

They, they, they feel like they’re broke. They feel like the world’s uncertain, and they’re gonna vote with that. And if they don’t have, a better feeling about the economy, they’re, they’re not gonna be happy in November. But yeah, the Fed, like I said, it’s a thinkless job. They don’t control exactly everything.

People think they control, they all they can do is set right. And then they, they can do obviously open market purchases to keep the liquidity and bond market flowing. but but you even heard Powell push back yesterday. US Dollar stuff. Oh, that’s all Treasury, not touching it. we’re not, we’re not in charge of that department.

And so I think you’ve gotta realize the Fed controls, front end and short term rates. Long term is driven, like you said, by inflation expectations. And people are worried that some of these, especially, either tariffs or, or what were happening on the geopolitical side, or if commodities, come up in pricing.

that’s been a, a, a really great add to inflation. Recently it was the low gasoline prices, energy prices have been a deflator. now we got WTI chicken up to 65. The oil costs are, are up, about 13%. We just saw like a huge spike in power costs, huge spike in natural gas. energy could come back and bite a little bit on the inflation side.

Move from helpful and deflationary to more inflationary. If we see this continued, commodity cycle continue to go up. So I think the market’s not wrong on long-term inflation. I think there’s, there’s risk to upward inflation over the next three to five years because of, of policy and cycles.

Jack: Are you thinking more we’ll, we’ll have the type of inflation we have now, which is above target inflation, longer term, or are you thinking there’s a risk of acceleration?

Victoria: I think there’s a risk of acceleration. if you look at the seventies and eighties charts, you could potentially get, get, get an acceleration here. and some of that just may be driven also then with everything that’s happening with currencies, it’s all interconnected. So if the value of the dollar falls and the, the, the price of foreign goods is higher, for us.

Coming in, that feels inflationary even if it’s not truly inflationary. But if we’re importing goods, they cost more for US citizens that that’s not a great place to to be. travel’s gonna be more expensive. And so for us, we look at it and say, yeah, there’s a risk, there’s a real risk of, of Reinflation here.

I’m not sure it’s gonna be rampant and runaway. I’m not calling for like 10, 12% inflation. But there’s a risk of re-acceleration, which is again, why the Fed is, is, I feel like they’re in the middle of a teeter-totter, desperately trying to not let it tip one way or the other, but they are gonna have to be ready to react.

what was it six months ago? Everybody’s favorite term was stagflation. and, and we have seen good TDP growth, so that’s kind of been taken off the, off the table. but yeah, there’s, there’s real risks because of, of some of these policies being a little bit inflationary and look at M two, like you look at the amount of money in the system and the amount of money still being printed and the amount of tax refunds we’re gonna issue.

that’s not great off for inflation if you’re pumping money into the system. That’s historically been fairly inflationary.

Jack: When you look at the steepening yield curve and you look at potentially higher inflation, how is that affecting how you’re constructing portfolios?

Victoria: I mean, we, we are playing a little bit more defense this year.

Like I talked about. we’ve picked up some energy. We’ve picked up some more, some cyclical, some defensive, a little bit away from tech. some of that was just, we wanted to broaden out the portfolios and diversify a little bit. but some of it is playing a little defense, right? We get some more inflation.

We get the economy a little bit, rockier than, than you wanna play a little bit more defense, your utilities. Staples energy, industrials, financials have a little bit more value and I get growth has beating the pants off of value the last three to five years. I’m just saying looking forward if we have a bit of a rockier time, some of those growth stops are, are hugely rate sensitive.

They’re gonna be more concerned on inflation because, they’re, they’re pro promising future profits. And if we have big inflation, those future profits may not be quite worth quite as much as they are today. And so a little bit more value in there just helps you take some of that risk and, and, and minimize its own.

And you’re seeing that sector rotation play out. energy’s the top performing sector in January. Cereals is doing well, again, some of the commodity cycles you want. And then Staples. Staples has come back from the dead. nobody wanted to touch staples like you’re poking a dead animal with a stick Last year with staples, like you couldn’t, nobody wanted a staple to save their life.

And suddenly everybody’s a little more excited about defense this year.

Justin: Let’s get into ai, here. So we wanted to ask you, how are you, is there any way that you guys are specifically playing ai or is it more like allocating to the large tech companies because they have their hands in ai? How, how are you viewing that?

Victoria: I both, two-pronged approach. I think you need some of the big names and nothing wrong with Nvidia. Meta, in my opinion, has always been the company that has utilized AI best, maybe outside of Palantir, to actually drive revenue growth through AI targeted ads. If you were to say Hue actually is using ai, meta is, in my opinion, one of the best uses of AI because they’ve targeted ad growth.

They were able to charge about 9% more, and their revenue target blew it outta the water. So I think you want a toehold in that, but I tend to think you need to be careful on the software side. And be a little bit more on the hardware side because a lot of this build out is, we want, and that’s why memory stocks are running a little bit this year.

You want your chip, you want your memory, you want your infrastructure. and I think you gotta be careful on the software side because to me, those are most, at risk for disruption. And that is a really hard question right now of moat is sustainable and who is at risk for, for AI just completely destroying their business.

and you’re seeing that play out a little bit today. if you look at the, the losers today is almost all on the services side, and, and software. And so I think you gotta be kind of careful on that, I think, and then you’ve gotta pick your battles on what an AI are you most excited about?

Are you saying, Hey, we’re gonna have all this CapEx investment. That’s why, to me, hardware and infrastructure is attractive because people are. Absolutely still printing money and, the, the data center play isn’t dead, is it? Hey, I want the, the companies that are supporting AI with the build out, like a Caterpillar, an energy company or natural gas companies or power companies, so you have kind of your whole full life cycle of AI that I think is worth looking at.

and at the bottom of my ranking is most software and services stocks, because I’m very concerned in three to five years, how much are people gonna be? Paying for that. If there’s a lot of great free models out there now, I think there’s a lot to do with say an IBM who we’ve owned for a very long time, who is in the consulting.

‘cause companies right now are looking at this and saying, how do we implement ai? Are we gonna build it or are we gonna buy it? Right? That’s the first question. are we gonna buy modules from people and kind of piecemeal together, kind of prebuilt, prefab AI and, and piecemeal that in?

Or are we gonna try to build our own? We want our own kind of servers. We want our own networks. We wanna build our own AI models and kind of have a private and public AI that maybe have, Gemini or some other large language model, plus what they’re building on the private side and database side.

And then you want your own infrastructure. And some of that’s what’s your size of your company? How much CapEx are you willing to do? But that is happening across the US ecosystem right now. How are we actually gonna do this? Okay, great. You put an AI chat bot in. Good for you. What’s next? How do you actually use AI across your company to drive higher, higher profitability, higher margins.

And that’s actually a harder question that, that maybe you have to pay somebody to come in and consult because, and, and then help you build it or help you figure out what modules you need to buy to to put it together. And then the last one I look at it, I think is, is key, is cybersecurity. I think as AI gets better, I think you, there’s gonna be a ton of money flowing into cyber because the, your risks of, of hacks continue to go up and up and up.

And candidly, I can keep myself up at night when I think about, quantum and AI together. Quantum computing and AI is terrifying for bad actors right now. Our good actors are working hard to counteract that. So every time something, you have technologically breakthrough. That, but that’s happening so fast that it to me that, that those two things together, quantum computing and ai, when not.

Comes together in the next few years, that is a game changer on how fast things are gonna move. And, and there’s gonna be a lot of people and countries and companies unprepared for, for some of these, these potential cyber attacks. And, and, that, that’s gonna be, how do you, how do you. Protect from that.

How do you recover from that? How do you, people are probably gonna buy a lot more cybersecurity insurance of, of how do I recover from a, a, a data attack because it’s going to be so much harder to prevent them as the speed moves through this world and, and AI moves and then their compute power behind it goes exponential with quantum.

Justin: I think one of the things that a lot of investors are trying to figure out is where we are in this technological AI revolution. We’ve had some people on the podcast that. Sort of say if this were the nineties, we’d be like in the 1997 period, and there was still a couple years of great returns, therefore, those tech stocks.

I heard a guy, recently saying he thinks this is we’re 1994, which would really put us early in sort of this ai technical sort of revolutionary, timeline. Do you have any thoughts on where you think we might be?

Victoria: So this is a time lag series. The dark blue line here is nasdaq. Starting in 96 through 2000. green line here is the Mag seven, starting out, coming off of the bear market, in 2022. And the same then for s and p and, the NASDAQ deposit. So these three are starting in 2022 coming off the bear market.

The blue line is starting in 1996. So if you look at that and you ask where we are, I mean, look at the Mag seven, we’re 98, 99, maybe. Now you got a ways to go before we’re peaking, but to my opinion, we’re sixth, seventh inning. Maybe just looking at some of this and the, and if you look at, data doesn’t always, history doesn’t repeat, but it rhymes.

to me, especially considering how correlated things were, at some point we may potentially get a little bit more of a parabolic move. and that parabolic move is when I’m gonna go a little bit more nervous about bubbles popping. But for now. Sixth, seventh inning. we’ve got a couple more years, a year and a half, two years, I think, easy.I don’t think we’re 94 though. Especially if you look back at, at how the markets have moved. for, for this kind of, new technology and, and new technology and innovation, you

Justin: obviously spend time thinking about bottoms up, fundamental analysis and stock selection. ‘cause you, some of these work their way into the portfolio.

You have opinions on them. Do you think that. Fundamental analysis has become tougher for active managers just given the dominance of passive investing? Or do you think the field is still ripe and there’s alpha and there’s edge for people that are willing to do the work?

Victoria: I think there’s still alpha and edge.

I think it was a bad market to be an active manager in a 23 and 24, 25 was a little bit better when Nvidia. you’re so top weighted, it’s hard to be overweighted and not be crazy, right? So if you’re thinking Nvidia at one point was 8% of the s and p 500, if I liked Nvidia, I needed to be 10% of a portfolio in Nvidia.

For me that that’s outside of our balance of what we would do. So it became extremely difficult to beat the s and p 500 due to the market cap concentration in those names. And those names doing fairly well. Finally, last year we did see a little bit of divergence. In the last six months, we’ve seen like this broadening out, which is much, much better for, for active manager.

So I look at it when anything is rallying and the, and the big guys are rallying, it’s very difficult for active to outperform without taking undue risk. And that’s not my job. We’re not a hedge fund, we’re never gonna be 15, 20% in a stock. that, that is un unacceptable risk in a, in a, in any type of basic equity portfolio that you’d wanna hold as an investor.

So you have this conflict between risk management and concentration and what the market was doing, which became extremely difficult to, to outperform. Now, if you were, say, a growth manager and you, you had other kind of growthier names you could add, that that did well. But for a while there, the s and p was just brutal to beat because the, the hot top weighted names were, were leadership and that became extremely difficult to, to outperform.

But I don’t think activist dead, I think it’s actually gonna have a better comeback here. In 26 because it’s gonna matter where you are a lot more. And especially if we see some of these seven names falter. Like how were you weighted with Microsoft? it’s not just own all seven, it’s, it’s where were you, versus bench on on some of these names.

candidly, it’s gonna come down to what Nvidia says some, or what Apple, you’re talking about, 15% of the market cap between those three stocks. Theres. That became an issue as an active manager of, of how do you outperform a market that was so concentrated in some individual names that, in my opinion, we really couldn’t set up an underlying, core equity portfolio that, most, most managers right, have a mid max security position.

and candidly, most won’t go above, 8%, 10% max. It became extremely hard to overweight. Now we came around that right? We have, Broadcom did very well for us, so maybe it wasn’t on the video. You also had a Broadcom, but, we, we, it was, it was a really tough 23 and 24 and anytime. Also, it’s a crazy bull market.

It’s very hard often for active to outperform because sometimes, especially if you have, like I do. A quality bias. Quality doesn’t do great in a raging bull market. Nobody cares about quality. Everybody cares about what are you gonna do for me lately? What are you gonna do for me next? it becomes like the, the value and the blue chips fall out of favor and everybody wants to put it all in Nvidia and Palantir.

Justin: One of the nice things about wealth management is, hopefully your clients aren’t always holding you to the benchmark. If you’re building their wealth over time and you’re getting decent returns and managing risks like you guys are doing. the vast, vast majority of clients will be happy.

But my question is, and you had mentioned valuation earlier, and that, clearly it can’t be used as a timing tool, but when you, and this might be a little bit more wealth management oriented question, but when you sit down with your clients and you look at valuations and then you talk about future returns, future expected returns.

And helping clients meet their goals, do those valuations come into play at all? When you are looking out over, let’s say, a seven to 10 year time horizon and trying to do probability based analysis with your clients, like how do you approach that? Or does that come into the picture?

Victoria: So one we always use super conservative assumptions with, with our Monte Carlo analysis for planning.

‘cause we always, always tell people, I don’t wanna depend on the market to get you there. Like we’re gonna have like a very low, candidly, we, we estimate a five, five to 6% equity return when we do forecasting and probabilistic monitoring for clients. Because the point is, can you make it even if you have a bad decade and the sequencing of returns matter so much for people, you retired in thousand was brutal.

Right, right. And you got hit with the tech bubble, then you got hit with oh eight and just horrible sequence of returns. You retire in 2009 and you’ve been on a glorious run of excess returns. excess returns, take it, to, to that have, have, have made retirement. We had some people that retired in, 2000 9, 10 11, that have more money now than they started with because the market’s been on such a good bull.

I tend to think we’re still in a secular bull, but the way I talk about it is I talk about average annual returns used to be 7%. Now the s and p’s averaging about 10. But I talk to them that 20%, 15%, that’s not normal. That’s still above average returns. Doesn’t mean we can’t still have a glorious decade, which we think we are in a secular bowl, so we should have above average returns.

It’s still gonna have a bear market in there or that, but we’re not thinking it’s gonna be the end of the world. Bear just a normal, average bear. and then we’ll continue our march up on this secular bowl, but that, hey, 15, 20%, that’s not normal. Used to be, we were talking about average returns back in the, the two thousands, 2010s, you’re talking 7%, right?

And now we’re talking 10 percent’s average return. And so, some of it’s just setting expectations. 20% a year in the s and p is not a normal average returns. And I do a lot of times talking about the lead up to the tech bubble and, and, and periods of expansionism. And I tend to think, I’m not one of those, I know a lot of people lower their Cap M market expectations.

tremendously for average equities, I think equities can still average your, your, eight to 10% over the next decade. We just maybe have to own some other things other than just large cap growth and, and be prepared at some point. Large growth in tech is probably gonna kick you in the face.

not to say that there aren’t gonna be great survivors from that and great companies, but in the history of the world, whenever we have had a move like this, there hasn’t always inevitably been a bubble.

Justin: So we like to ask all of our guests two standard closing questions. The first is, what is one thing you believe about investing that most of your peers would disagree with you with?

Victoria: There is more than one way to skin a cat. I think everybody goes out there and like my way’s the best way ever, and I do tend to think my way’s the best way ever, but I’m a very understanding that there’s a lot of different ways to make money in this market. There’s a lot of different ways to view the market.

You can make money as a quant trader, you can, small cap growth might, there’s tons of different ways. You either evaluate a stock, you look at a stock, or you look at a market. That can be extremely successful. Now some of it can be cherrypicked, what timeframe are you looking at?

You’re what are your returns versus your benchmark? but I tend to think there are multiple different ways to skin a cat, and that’s okay. I like to learn and listen about how everybody else is viewing the market. I think that’s one of the best and most exciting parts of finance, so that you and I can look at a earnings release and have.

Two diametrically opposed responses to it. like you can look at, Tesla is always one of the most polarizing stocks. You can look at Tesla and, and, and take what he had to say in their earnings release and be this is the stock for the next decade. you should be overweight Tesla because this is robotics and it’s about what they’re bringing and they’re gonna get full self-drive license.

You could look at that earnings and be man, their core business is getting decimated. They’re selling less cars. They’re making this kind of slightly conflicted. $2 billion invested in XI. Their CapEx is doubling this. This company doesn’t know who it is anymore. Elon Musk is often very late with, they might get there, but it might take him five to 10 more years to get there.

And so I love that about investing. We can look at this same data at the same time, unless you’re. Kind of doing Martha Stewart cheating. We’re looking at the same data at the same time and we evaluate it differently and that’s what makes the market work. And so I tend to think like it’s great if you’re a technical analysis and you’re good at it, good for you.

If you’re a quant trader and you’re doing algorithmic trading, good for you. If you’re a pure bottom up fundamentalist, I feel sorry for you ‘cause you probably aren’t doing great, but good for you. like I, I tend to, to think there’s a lot of different ways to make money in this world.

Justin: Love that.

And last one, based on your experience in the markets, what’s the one lesson you would teach your average investor?

Victoria: Don’t let one mistake become two. You are going to make mistakes and you’re gonna get things wrong. And I often talk to people about what you do with a mistake. is, is almost as important as how you made the mistake.

So let’s say that you didn’t believe in ai. you need to evaluate it going forward, not back. Don’t look at your sunk costs, don’t look at your what ifs. figure out how you maybe made the wrong decision, but then make a good new decision going forward. And don’t be got into the what if the, the sunk costs, or, well, I’m too late, or, well now it’s too expensive.

Like either, you need to have your conviction. You need to not let your conviction be shaken just because you get something wrong. Because candidly, we’re all gonna get trades wrong. We’re all gonna make dumb decisions. And it’s a badge of honor in finance being honestly, if you sit around a bar talking with a whole bunch of traders, you’re usually talking about what I got.

Right? But a lot of times they’re talking their, their were horror stories of oh, I missed this trade, or I got this one wrong. So one, nobody gets it right a hundred percent of the time, and then two. But how you deal with that, either you missed something, you’re late on a trade, you, you bought a stinker.

and, and it, it’s going to happen to you. So don’t let one mistake become two. And then the, the, the, the kind of the same. Part of that is there is a very fine line between conviction and stupidity and make sure you walk on the right side of that because having conviction about something is great, but you might just be wrong about it and being stupid.

Like you’re not, sometimes the market does under, misprice or under evaluate things, and you might be right about it, but sometimes you’re just flat out wrong. So that, that whole, what is a high conviction that the market just doesn’t appreciate yet and what is just, I was flat out wrong and I’m being stupid.

That line is extremely, extremely fine line to walk, especially with under performers.

Justin: All right, Victoria, I am gonna go watch the Honey Badger video and grow the subway sandwich. So, thank you very much for joining us. This has been great. Really appreciate it.

Victoria: It was fun guys. Thanks for having me.