Eric Bailey, executive managing director of Steward Partners' Bailey Group, speaks with Quartz in the latest installment of our “Smart Investing” video series.
Watch the interview above and check out the transcript below. This transcript of the conversation has been lightly edited for length and clarity.
Andy Mills (AM): It could be a crazy week for earnings. There was technology on deck. What do you expect?
Eric Bailey (EB): Expectations are high. The market is trading near highs. For the S&P 500, the market is saying good returns so far, but this week is important, right? You have the great name of the Magnificent Seven, Alphabet. (google)apple (AAPL),Amazon (AMZN)all reports.
morning: All Mag 7s are at or near all-time highs. They have been part of a huge wave of growth. How high can they climb? Should investors stay invested in these seven technology names?
EB: Because they have been proven over time to deliver great results for investors and shareholders, and they continue to grow. So some of them, you could argue that the valuation is attractive, but it's important to see what that valuation is, what those numbers are. It will be. clearly.
AM: One thing I'm sure we'll get some information on is spending on AI. Do you think the market could react badly if investors haven't yet felt any specific results from their spending, or is it too early to say?
EB: No, I think so AI is a strong major trend for the long term. You can't ignore it, right? we've seen it. Look at Nvidia (NVDA) It is currently one of the largest companies in the world as demand for chips is off the charts. It's because of this AI phenomenon. So meta (meta)formerly Facebook and Amazon, they're all in that business for the long term and have invested billions of dollars. So I think AI is a long-term trend that will be positive for the market and investors.
AM: Technology is still okay. Do you have any other advice for investors?
EB: Well, there's obviously a lot going on, right? Employment numbers will be released this Friday. That will be very important in determining the health of the economy. And that will determine the future of Fed policy, with several more interest rate hikes expected. This is reflected in the yield curve and is positive for the asset class as a whole. Lower interest rates are a plus. Then obviously there's an election, right? It's going to be massive. The market is currently trading on election expectations. That's very important. After that, a Fed meeting is held and the Fed's thoughts are presented. Are you planning to cut rates again?
Morning: Election. It's going to be tough, but is there any way investors can prepare for it? Should they sell everything? Should they double? I don't want to do anything drastic or dramatic, but what do you think?
EB: Well, as financial advisors, we look for long-term goals to help our clients achieve their objectives. These are the 5-year, 10-year, 15-year, and 20-year financial plans we put together. So while this election is huge and very emotional for many people, we have to take a long-term view. You have to look at your own situation and make those decisions. I think we're seeing that, traders. Indeed, there is currently a lot of trading activity predicting whether Harris or Trump will win. The way I see it is that the market is currently predicting a Trump victory. We can see that certain asset classes are performing well and could potentially do better under President Trump.
AM: For example?
EB: cipher, number one. You're obviously looking at that. Pro-Trump media stocks have risen significantly over the past week.. In other words, the market is showing signs of leaning toward Trump.
AM: What does the market expect from Friday's job numbers?
EB: I think that's a good number. The market is doing very well again. You can see that the stock price continues to rise. What's interesting about the current market is that interest rates, long-term rates on the yield curve, 10-year Treasury yields and longer-term rates are actually rising. And it predicts that the economy will remain strong and healthy. So while we see further rate cuts; [there will be] Not as many as predicted. So I think we're going to see some strong numbers on Friday, so the Fed will cut rates, but it's going to be a small cut and they'll probably put a pause on rate cuts sometime next year.
Morning: Okay. Despite all the news coming out, it seems like we're in a good place right now.
EB: The trend is very positive, the trend is strong, right? Investors usually don't fight trends. At the moment, the trend is higher and there are good signals. The company's third quarter performance is strong. The economy is doing well and interest rates are coming down. These are all very positive for the asset class in general.
AM: Your company is a fan of what are called “dividend aristocrats.” What is Dividend Aristocrat and what are your recommendations?
EB: Well, I'm a fan of Dividend Aristocrats. This means that these companies share their profits with their shareholders, which has proven to be a good long-term investment. I mean, they've done it through their dividends, and they've increased their dividends every year for 25 years in a row, which is hard, right?If you look back over 25 years, there's been all kinds of economic cycles. Although companies have their ups and downs, these companies have been proven to continuously increase their dividends. That's why I like these companies. There are three, I like Walmart. (WMT)S&P Global (S.P.G.I.)and the insurance company Brown and Company. All of these have outperformed the S&P 500 on a five-year and 10-year basis. So for me, these are great long-term investments.
