Let's get to the big story breakdown.
It is finally Fed day.
Investors do expect the Fed to cut interest rates by 0.25 basis point on Wednesday, the focus now shifts to Chair Powell's tone, hawkish or dovish and his press conference, and most traders are pricing in that rate cut.
And of course we'll be paying attention to what happens in terms of the summary of economic projections.
Joining me this morning is Luke Lloyd, CEO and founder of Lloyd Financial Group.
Luke, great to have you here.
Thank you so much for joining me.
I love being here.
It's just so much energy.
It's like so much a little different than Cincinnati, Ohio.
Absolutely.
Well, of course we are looking at the major US stock averages hovering near record highs.
A lot of anticipation.
The countdown is on for the Fed.
What are you expecting today?
I think we have to have a macro overlook of what's going on out there.
I think there's no doubt in my mind we get a 25 basis point cut.
Let's put that up front and center, right?
But we have to look at the backdrop.
There's 3 things that we look at at LFG that we talk about actually every morning in our newsletter that comes out.
It's 8 a.m.
We talk about 3 things. interest rates, and we talk about growth.
Those are the three most important things you need to look at when it comes to portfolio allocation, and we try to complicate things way too much in this investment world.
Like there's so much going on.
It's impossible to digest it all.
But when you look at those three things, growth still looks great.
Inflation has come down a lot.
We're still above that 2% target, but we're sitting at 2.9%.
And we look at liquidity, liquidity is basically like at all time highs with M2 money supply.
We still deficit spending $2 trillion as a government.
So much liquidity in the system.
So when it comes to the asset allocation side of things, the economy is still looking strong, but that doesn't, isn't going to stop the Federal Reserve from cutting 25 basis points because they still are too high to adjust for maybe the future returns down the road.
Yeah, and Luke, this afternoon we're going to be hanging on every word coming out of Powell's mouth at the press conference, but we'll also be paying attention to what's going on within the FOMC.
But given that prices are so high for the major equity averages and we know where the concentration.
Risk is how are you adding to your risk on assets?
So we did not own technology basically for 3 or 4 months.
We were very value tilted, which actually worked out pretty well, to be honest, because a lot of the value stocks kind of caught up over the past week.
We started to get a little more growth because of those 3 things we talked about the growth, inflation, and liquidity looking so good.
We wanted to get some growth tilt in our portfolio.
So I think as a manager you have to make sure that you're taking into account the current environment, looking down the road, but also making sure.
Controlling risk along the way, so we kind of felt like the value kind of tilt in our portfolio was a little too heavy.
So now that we're a little bit more growth, we aren't looking to Microsoft, Apple, Google and Amazons of the world.
We're looking even deeper into some of the names that even some of the IPOs, I'm sure we'll get into some of the stocks like the IPO.
I think last time I was here, Bullish BLS SH, you know, Peter Thiel stock, like you know those kind of things we're looking at adding more growth to our portfolio.
That's something unique that a lot of people aren't doing.
These these stocks have sold off a lot, the ones we've been adding, yeah, and.
Speaking of IPOs, we have another one here at the New York Stock Exchange with StubHub.
We'll be keeping a close eye on where shares opened this morning, but zooming out outside of the US and looking overseas, I know you're also paying attention to currency risk as well as policy moves overseas.
So what does that mean in terms of investment?
Yeah, so I think when you look at the kind of whole world kind of aspects of things, we've talked a lot over the past couple of months of me being here with you.
We've talked a lot about the DXY.
We talked about the dollar index.
We talked.
About the Federal Reserve cutting interest rates with a dozen of dollars.
So I have been looking a lot international now.
The runs happened a lot this year.
Earlier this year, year to date, you look at international stocks, South Korea, South Africa, you look at all the international areas, they've rocketed a lot higher over the past year.
So we actually sold our international stocks because they did so well, frankly, over South Korea, South Africa, India.
India wasn't as great as some of the other ones, but we sold those positions over there.
We're now looking at North America and South America and the The reason being is we do think there's a lot of that manufacturing until coming back to the US.
One of the stocks we own is DOW.
It's been sold off like 50% so far this year, like down to 50% year to date.
It's a good value play.
It's not the sexiest name in the world, but like the manufacturing play, that's one way we're playing it here in North America.
But I think internationally you look at Mexico.
We've been adding more to Mexico.
FMX and CIB are two stocks or international stocks.
CIB operates over in Mexico.
I think it's boring, but it bottles, they bottle Coke.
Pepsi products, right?
FMX down in Colombia's down in South America.
I think those are the spots you want to start looking at as money starts flowing out of international across the seas.
It comes back over here in North and South America.
Yeah, and Luke, finally, before I let you go, I do want to bring our focus back to the US.
So for viewers out there who are watching right now and wondering what does all this mean for their lives, especially since we're watching mortgage rates go down and we've got those retail sales figures, but we So have to keep in mind that there's a lot of politics and geopolitics and tariffs.
So what does this mean for the average investor?
The average investor needs to know that the only way the economy can fully function for all of us, because corporations, governments, consumers, we all love that debt, right, whether it's mortgages, cars, we all love to extend those payments.
The only way the economy can function is lower interest rates.
So interest rates are going to go lower, and that's going to allow the debt pond scheme to continue to exist.
I think you want to start looking at this non-traditional. classes like we just added a lot of crypto plays.
I mean circle bullish like I talked about other kind of areas like ASTS, like the launching satellites into the air, like these technology kind of focuses.
I think when interest rates go lower, these kind of not necessarily unloved areas because they've been loved for years, but they have sold off a lot this year.
A lot of these circles the circles I'm talking about, ASTS, these stocks are down like 50% or 30% from the highs in some sort of instances.
There are opportunities for you to add to these kind of positions as interest rates.
Lower because they allow these smaller companies, these growth companies, to borrow money cheaper.
I think that's the environment we're in and take advantage of the lower interest rates.
I mean, when you leverage isn't necessarily a bad thing.
No one to use leverage, you know, whether it's a business owner.
I think this is the best time in history.
You talked about that before as a business owner, small business, to open a business, use AI, use leverage as interest rates do come down over the next couple of years.
I think it's going to be a phenomenal way for small business to catch up.
OK, Luke, well, thank you so much for joining me.
Always great having you on the show and I appreciate your time and insight.
Always fun.
