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Gradient Investments Sees More Growth Ahead for Google

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Bloomberg Dec 27, 2024 10:03 · 16.3k Views

Jeremy Bryan, Senior Portfolio Manager at Gradient Investments, discusses markets, the economy and why he sees more growth ahead for Google. He speaks with Paul Sweeney and Caroline Hyde on "Bloomberg Markets."

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more

Transcript

  • 00:00 I'd love to read kind of your,
  • 00:01 you know, your letter for 2025 for your
  • 00:05 investors.
  • 00:06 What's the theme you're telling?
  • 00:07 What's, how are you kind of setting up 2025?
  • 00:11 Yeah,
  • 00:11 I think the biggest theme is what I've been calling pretty simply is bring an umbrella,
  • 00:16 right?
  • 00:16 Bring an umbrella doesn't mean it's going to rain outside, but it means you're prepared in case it does.
  • 00:21 You know, we've had two phenomenal years in the stock market, right?
  • 00:24 20% plus both years
  • 00:26 and there is historical precedent that we could have another positive year in 2025.
  • 00:29 So I'm not assuming that that is a possibility at all.
  • 00:33 But what I'm saying is that you probably have over over exceeded what you've what from your growth perspective over the past couple of years if you've been participating at all.
  • 00:42 So
  • 00:43 from that side taking some of it off to protect assets that you've made over the past couple of years is a prudent strategy and that's one that we've been advocating for.
  • 00:53 Bring an umbrella doesn't mean sell everything, it just means be prepared and have some assets that are protecting in case we do not have another 20% year in 2025.
  • 01:04 How about that 6040 portfolio?
  • 01:05 I mean, I kind of grew up with a 6040 allocation near stocks, bonds and the bonds were supposed to kind of protect me from some of that volatility.
  • 01:13 Didn't work
  • 01:14 so well in 2022 and everything was down.
  • 01:16 But
  • 01:17 how do you think about fixed income going forward?
  • 01:20 Yeah, I think with the rise in rates here recently, I think it's actually relatively opportunistic.
  • 01:25 You know, from our side, when you have a 4.6% Treasury yield,
  • 01:29 really that gives you bonds that are giving you 5-6 percent
  • 01:33 just from the yield alone.
  • 01:34 And so if interest rates were to fall for the remainder of the year, that would be, you
  • 01:39 know, additive on top of that.
  • 01:40 So
  • 01:41 from our side, you know, I think 6040 being dead was
  • 01:45 you know certainly 2022 it felt dead.
  • 01:47 I think that's overestimated.
  • 01:49 From our side.
  • 01:50 I think that having a balance and having a component of bonds and therefore that income protection
  • 01:55 is one particular strategy, but it doesn't have to be the only protection strategy used.
  • 02:00 There are other asset classes out there to find out come options based strategies that can also give you a level of protection against the markets that doesn't take the interest rate risk in bonds.
  • 02:11 So I think having a component of multiple sectors and multiple ways of protecting your assets
  • 02:16 is probably the preferred method.
  • 02:18 OK, so that protection, that
  • 02:20 ultimate umbrella, what is causing the rain?
  • 02:24 What is the catalyst for you?
  • 02:25 Are you watching the economic data, you obsessing about CPI or the inflation gauges that the Fed looks at?
  • 02:31 Are you more looking at the headlines coming out on Truth Social or on
  • 02:35 X, or what is it that you keep a keen eye on in 2025?
  • 02:40 Yeah, to us it's always jobs.
  • 02:43 Jobs I know are lagging indicator, I get it completely.
  • 02:46 But from our side here,
  • 02:48 jobs are always going to drive consumer sentiment, which is going to drive spending, which is going to drive our economy.
  • 02:54 That's really what we're trying to do and what we're trying to accomplish in economic growth, right.
  • 02:59 So jobs are kind of, if Americans have a job or feel like they can get a job, they're going to continue to spend money.
  • 03:05 I know we're hitting levels of,
  • 03:07 you know, credit card debts at all time highs and these kinds of things.
  • 03:10 In my opinion, as long as they still have jobs, we'll, we'll still be firing
  • 03:14 from a spending perspective.
  • 03:16 And if that's the case, that's what we're going to watch the most is if that starts to turn over for whatever reason,
  • 03:22 if we start to see job, you know, cracks in the job market, I really do believe that that's going to be the catalyst of a potential reduction in just economic growth and activity.
  • 03:33 And that would be the thing that we're most concerned by coming into 2025.
  • 03:38 OK, so you're talking high frequency data, jobless claims and the like.
  • 03:41 Are you still setting your stall on an on farm payrolls number that just keeps getting revised month in, month out?
  • 03:48 Right.
  • 03:48 Trying to rely on that as the perfect data.
  • 03:51 You know, it's the best we have in certain regards.
  • 03:53 But yeah, high frequency data, claims data, you know, claims trends is much more what I would say than claims data.
  • 03:59 Point to point really doesn't matter a whole heck of a lot.
  • 04:01 But if you start to see upward trending and consistent upward trending in the claims data,
  • 04:06 that's actual data you can somewhat rely on.
  • 04:09 And if that number continues to rise upward, that's where I would start to get a little bit more cautious.
  • 04:14 Jeremy, how about you and your team?
  • 04:16 You woke up the day after the election.
  • 04:17 Did that alter
  • 04:19 kind of how you think about markets, investing opportunities,
  • 04:23 risks?
  • 04:24 Has that changed?
  • 04:26 So after the election, I think the biggest thing that changed was we had a pretty decisive outcome,
  • 04:32 right at the end of the day.
  • 04:33 And what we've always said is that a mixed Congress and a mixed presidential,
  • 04:38 you know, having having a balanced attack, it just really
  • 04:41 lowers the volatility of what can actually be accomplished
  • 04:45 in Washington.
  • 04:45 And sometimes that allows businesses to actually plan ahead a little bit more because they know there's not going to be dramatic amounts of interference in what's going on because they can't get anything passed.
  • 04:55 I think that's probably the biggest change that we've seen is that there are opportunities for an.
  • 05:00 Agenda to be more
  • 05:02 aggressively mandated going forward just simply because the numbers are somewhat more in their favor than probably was anticipated
  • 05:10 prior to the election.
  • 05:12 So it didn't really change, you know, our fundamental focus and our business fundamental focus didn't really change a whole heck of a lot.
  • 05:19 What really did change is saying, OK, we have to assume that some of these Republican discussions and agendas with regard to tax situation, which is probably fairly favorable,
  • 05:30 and then tariff situation which is the bigger unknown has greater likelihood of implementation than it did before.
  • 05:37 And how does that adjust our numbers and who's benefited and who's hurt?
  • 05:40 That's really we take the analysis we don't take.
  • 05:43 You know, I can tell you clearly we did not make any actions with regard to political action in our portfolios.
  • 05:50 What we're trying to do is more understand who is benefiting, who is hurting and making those adjustments within their based upon business fundamentals.
  • 05:58 What's really interesting is if you go into some of your single names you've been
  • 06:02 talking about
  • 06:03 Alphabet is one of them.
  • 06:04 And for me that still has a regulatory headwind, quite a big one with a new administration even like the old one.
  • 06:10 But for you it's more about evaluation position with Alphabet and indeed perhaps some of the quantum good news helping them have late.
  • 06:17 Yeah, completely.
  • 06:19 And I think that's the consistent theme of cross the names that I'm talking about is
  • 06:23 where have even if stocks have performed well and you know,
  • 06:27 alphabets up 40% this year or 37%.
  • 06:30 So it's it's had a really good year.
  • 06:32 But even with that, the valuation is stillwell within long term average ranges.
  • 06:37 So it's not excessively valued to where there's an aggressive amount of expectations in the stock.
  • 06:44 And that's where I'd be being most careful right now is stocks that used to trade at 2025 times are now trading at 4050 times earnings.
  • 06:51 There's just a higher bar and a higher hurdle and a higher level of expectations in those names.
  • 06:57 And So what I'm looking for is companies that I think can continue to grow.
  • 07:00 And I still think Google, despite the regulatory concerns and the risks that are out there,
  • 07:05 is still going to grow.
  • 07:06 I think YouTube is a phenomenal business.
  • 07:08 I don't think search is going away from AII think it's pivoting, but I don't think it's going away next year.
  • 07:13 So from our side, we can take what we think is a reasonable valuation in Google and still get that growth upside to hopefully maybe get a double whammy of price appreciation via growth and price appreciation via valuation extension well.