BISA Portfolio Podcast
BISA Portfolio Podcast
3 Primary Investment Themes Right Now With Gene Goldman and John Olerio
In this episode of the BISA Portfolio Podcast, John Olerio, BISA president and vice president of wealth management at Lighthouse Wealth Advisors, talks with Gene Goldman, chief investment officer at Cetera, about his top three investment themes for 2025 — the "Great Moderation," the evolving role of the Federal Reserve and the renewed importance of diversification — and how they remain relevant in the last part of the year.
Listen in here or on your favorite podcast app for insights from Goldman:
- Why the economy is showing signs of a slowdown and why the Fed may hold off on rate cuts amid persistent inflation concerns.
- How tariffs — once deflationary — are now expected to drive inflation higher, with 41% of CFOs planning price increases in response.
- Despite market headwinds, Goldman remains optimistic, viewing pullbacks as buying opportunities. He emphasizes the critical role of clear communication and data-driven analysis in navigating market corrections.
This episode is sponsored by Cetera.
Lighthouse Wealth Advisors is a marketing name of Cetera Investment Services. Securities and Insurance offered through Cetera Investment Services, LLC, member FINRA/SIPC. Advisory services offered through Cetera Investment Advisers LLC. Cetera firms are under separate ownership from any other named entity.
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John Olerio:Hello everyone, and welcome to this episode of the BISA Portfolio Podcast. I'm John Olerio BISA, president and vice president of wealth management at Lighthouse Wealth Advisors. I'm here today with Gene Goldman, chief investment officer at Cetera. We'll talk about his three primary investment themes right now, according to his brilliantly strategic mind, which I must say, is a real benefit to our industry. The research he does is incredibly valuable, and it's also always extremely entertaining, which is a tremendous combo. Personally, I love to quote Gene because it even makes me sound smart, which is not easy. Quick story: about six months ago at our annual BISA Conference in Hollywood, Florida, Gene was our closing keynote speaker, and he was awesome. As usual, I left the conference straight to an Uber to catch a flight, and I always try to avoid Uber conversations because they always go down the wrong path. But the driver did engage me and wanted to know why I was at the hotel, and I did say for a financial services conference. So we went into his life story about what a phenomenal investor he was, and how he's made millions investing, and then lost it all just last week. He wanted my advice on how to start his comeback. So I said, 'Well, I did just hear Gene.' I looked at the notes I had taken on my phone, and I said, 'go international.' And I gave him three brilliant points from Gene as to why. He looked at me in the rearview mirror with quite an unfulfilled look on his face. And he said, 'yeah, but what about Tesla?' So I just said, yeah, definitely, that too. So he really just wanted to hear about some individual hot stocks, which I wasn't going to give him. That's not what you're going to hear from Gene today; you are going to hear about his themes. So welcome, Gene. We would love to dive in to your three themes. But first, could you give a quick introduction of yourself before we start that?
Gene Goldman:First of all, John, thank you so much for the introduction. Thanks. I'm glad that you were able to leverage some of our advice. And keep in mind, I have a team. I have a team under Cetera Investment Management. We are about 21 people and growing. I think daily our team is growing. Our average investment experience is about 20, 21 years, 22 years. A little bit about my background. So I've been with Cetera, now I'm our chief investment officer, I've been with Cetera now for about 14 years. Before that, I was at one of our competitors for about 16 years, covering a variety of research roles. And then before that, I spent a couple years at another broker-dealer. My entire career has been really on the research for broker-dealer side. And then before that, I went to grad school at Northeastern and before that, engineering school, so I wasn't an engineer, but, you know, I had a career change because I wasn't a big fan of short-sleeve dress shirts and pocket protectors, although I know you can't see me right now, I am in a short-sleeve dress shirt right now. So I guess that's ironic.
John Olerio:It is great to have you here, Gene. And before we get started, I truly want to thank Cetera for sponsoring this podcast episode and lining up this opportunity to have all of you here here and spend time with Gene. So let's dive right in. I always look forward to your themes at the start of the year. So can you right now start your review with the audience, what your themes were at the beginning of 2025, and how do those look right now, now with the halfway point, and are these themes still valid for the rest of the year?
Gene Goldman:Sure and thank you. And just as a reminder for our audience, so every year, my team and I, we create three investment themes that we feel will drive the economy and the financial markets going into that year. So late in November, early December, last year, we said, 'okay, what are the three biggest themes?' The biggest, ginormous things are going to drive the economy in the market. And with that in mind, our three
themes are simply this:Number one, we call it the 'Great Moderation.' Everything is moderating. The labor market, the economy, inflation, the stock market, the bond market. You know, everything is slowing down. Given the post COVID stimulus and surge in our economy, things are starting to slow down. We're not saying recession. We're just saying things are slowing down. You take it all together. That's the Great Moderation. Our second theme relates to one of our key themes for 2024. In 2024, we said simply this: the Fed goes from being a foe to a friend. They go from raising to cutting interest rates. And basically what we saw last year, the Fed cut rates in September, of course, but this year, we take that theme a step further. The Fed is a friend. They're not going to raise rates, but they're not going to be a good friend. They're not going to cut rates as much as they said they would. Right now, the markets are priced in two rate cuts. The Fed said, two rate cuts for this year. We just think, given some concerns we can talk about later, we do think the Fed will not cut rates as much as they said, because, long story short, spoiler alert, inflation. Inflation is going to pick up, especially caused by tariffs. And their third theme is simply
this:diversification is back. As you know, the more you as a financial advisor allocated prudently away from tech, from artificial intelligence, from large-cap growth, the more you struggled over the last couple of years, because basically the mag seven and just the narrowness of the market really made diversification tough. This year is a different story. You look at market returns, you look at the fact that fed likely cuts rates, though not as much as they said they would, that tends to drive market breadth. Take all this together, we do think diversification is back. So the key thing, if you think about those three themes, the Great Moderation, so things are slowing. The Fed doesn't cut rates as much as they said they would, and diversification is back. Those themes have a little bit of a cautious tone to them, and that's why the correction that we had earlier this year, the one that started, you know, mid February, all the way through, you know, post Liberation Day, when President Trump raised tariffs, we had a correction and almost a bear market, but we had a correction. So we weren't surprised by the correction, given our cautiousness on the markets. We were more surprised that the correction took so long to occur, because if you think about January, in January of this year, we had extreme market optimism. We had high valuations. We also had concerns about a potential recession. Remember, January was the coldest January since 1988 and it had the longest flu season in some time. This put pressure on economically sensitive and weather-sensitive sectors of our economy, leisure and construction. So you take all this together, we were cautious on the market anyways. We expected a correction. We were just surprised. The correction took so long, and then, lo and behold, we did have a correction. So that turns us to where we are right now, things we think are still valid, and I know we'll dive into these a little bit more. We do think, given the the strong recovery, the 28% recovery, bounce back off of market lows in the S&P 500, which, by the way, is the fastest market recovery in over 50 years. It's putting a little different dynamic in the market, because now we have extreme optimism. We have all this stuff saying everything looks perfect. This creates some uncertainty. This sort of says everything needs to be exactly perfect. But the good news is that even if we have a pullback, we still view these pullbacks as buying opportunities, because let's face it, we have a lot of cash on the sideline. And also, if you look at tariff negotiations, are likely going to reduce some trade barriers. And if you think about the run rate on tariffs right now, it's about three $50 billion a year that's being recycled back into the economy through the Big Beautiful Bill through tax cuts. So long story short, we play the scenario out. We do think pullback, volatility, some near-term uncertainty, but any pullback is a buying opportunity. So long answer to a very short question,
John Olerio:That's great. I want to stay on that correction for a second. Obviously, you said you weren't surprised by it, but you know it happens, and you don't have a crystal ball, so you could never sit exactly what day it happens. Can you share with the audience what happens, you know, with your group and with you the day the correction happens? What's the first thing that you do? I just think it's fascinating, because you're not surprised, but then you got to regroup on it. But when it's happening, what do you and your team do when all of a sudden it's happening?
Gene Goldman:Sure, I think so. Let's take a broad perspective. So when there's a negative, bad, when a market dislocation happens, what do we do? First of all, the key thing is, advisors and our clients, our job is to understand: 'okay, one of the questions our clients are going to be asking our advisors right away. Let's try to address those questions in advance. So what caused it? What do you do? Does this change our long term investment thesis? Do you change your investment strategy so we over communicate?' So if you look at, say, I'll use
Liberation Day as an example:Stocks sold off dramatically. We had a almost immediately within that day, that morning, a bunch of market commentaries saying, here's what's going on, here's what you should do. At the same time, though, as part of that communication process, you also want to communicate to our advisors. Here's more detailed information. Let's face it, clients just want to know the key points our financial advisors. They want to dive in and say, 'okay, what does this specifically mean?; So going back to Liberation Day, we did a few market commentaries. We also did an advisor only webinar, and then on top of that, we did a client facing webinar recorded so that our advisors could send to their clients. So that's the outward facing, of course. Then we're looking at economic data. We're looking at what the ramifications are? What are some of the points? And you know, the hard point with data is that data tends to be very delayed. So you look at GDP, for example, which comes out 30 days after quarter end. You look at the payroll reports, you know, they come out like usually, the first Friday of each month, but they're only through the prior 15th of the month, so data tends to be a little old. So what we tend to do is we tend to look at a lot of the real time indicators of, you know, very high-frequency data. So looking at copper prices. Copper is a great way to look at what the economy is doing right now. I know I talked to you about copper before, at a conference the Cetera conference we were at last week, and your comment about copper was, 'hey, copper is only used for pennies and for Moscow Mules.' Really, John, as you know, copper is more than that. The average American car has about 50 pounds of copper. The average American home has about 400 pounds of copper. Average American car has about 50 pounds of copper. Copper is a real time indicator of our economy, so we always watch copper prices, and it's a great indicator how China is doing. So we watch copper, we watch oil prices. That's a good sign of the economic situation we're in. We also watch bond yields, of course, and watch carefully. Are the 10 year, the standards just 10 year, because it's such a pivot point, and the two year, because the two year is a great proxy of where the Fed funds rate could be one year from now. So we like to look at those data points. Of course, you can look at gold relative to silver. So if market risk is increasing. Gold should rise more than silver, because silver has some economic activity. So we'll look at all that. So what we'll do is, again, over communicate to our advisors and their clients, look at what the data is saying, is looking at a bunch of other analytical data that we can get. And then third of all, which I think is just as important, is what goes on behind the scenes, behind the scenes we're looking at and saying, Okay, let's reach out to all of our investment recommendations. What are you doing? You like stocks when they were, say, 5% higher? Do you love them today? What are you doing? How are you changing your portfolios? So we're doing a bunch of calls with our recommendations to say, what's going on, what's new, what's changed? Has this changed your process? Has this changed your philosophy? Are you pivoting in your investment so that we can relate to our advisors, who relate to their clients, and then secondarily, we also look at, are there investment opportunities from an asset allocation or from a portfolio standpoint? Case in point was we go back to around Liberation Day, obviously, stocks sold off. We saw almost a bear market. And bear market is when stocks fall 20% or more, we got into a bear market, but we didn't close. So we didn't have an official bear market. You know, tomatoes, tomatoes, let's say so it's so close. But at that point, you know, we came out and we were telling our advisor, it's a buying opportunity. And actually, in our portfolios, what we did is we pivoted away from in some of our portfolios and moved into sort of high opportunity areas, mid caps, small caps, some large cap equity exposure. So really moving away from until some global equity and into some domestic equity. So again, that's sort of, I know you went through a lot of perspectives, but that's what you have with an investment team, with an investment team with 21 people, we sort of have a three pronged approach. First of all, communicate, second of all, reach out to our underlying investment recommendations, just to make sure there's still good recommendations. And third of all, where can we find opportunities?
John Olerio:Wow, that is just fascinating to kind of be in your mind while that's happening. Thank you. That was a very thorough answer. Really enjoyed that. Can we dive into tariffs? Going from Liberation Day now it's been a busy, you know, week, again, with the happenings in Europe, just kind of give us, you know, where we are right now with tariffs. And can you talk a little bit? I know the audience is interested, who's winning in this whole tariff situation right now and who's losing?
Gene Goldman:That's a, that's a politically charged question, who's winning or who's losing. But I'll come back to that in a second. So let to me, I'm a big fan of let's level set. Let's start from the beginning. What happened? So back on April 2, so-called Liberation Day, President Trump announced some of the most aggressive terror. And I say, President Trump, I'm not a Republican, I'm not a Democrat, I'm very independent. But my job is to say, 'Okay, here's what's going on in Washington. How does this affect our economy the market?' So please keep that in mind. So President Trump and the Trump administration announced tariffs on April 2, Liberation Day. If you look at the rate that was announced, it was an effective tariff rate of about 27% and I like to put that in perspective that suggests that that's the highest since 1906 if you kind of think through that, that even exceeds what we saw at the ... 1930 Tariff Act. If you go back to 1930, tariffs were raised to protect American farmers and businesses, but then other countries retaliated. And most historians believe this is one of the greatest factors that worsened, or at least started the Great Depression. So if you think about a tariff today, and it's, I know your audience knows tariffs well, but let's make sure we're on the same page. In the United States, we import a good tariff gets applied to that. Then what happens if the company who pays that tariff, the importing company, raises the price, so you and I as consumers pay that additional cost. So now you have higher prices, higher inflation, because prices are now goods are more expensive. This also creates demand destruction and reduces the demand for other goods. And then you throw in some supply chain certainty. So that's how tariffs work. The big question we always get is, 'what is the potential impact of tariffs on our economy?' And simply put, like a good rule of thumb is that about 10% of a tariff affects inflation and affects economic growth. So if you look at our tariff rate today, I know that tariffs have changed, and there it's a it's a moving target, but it's about 15% right now. So if you kind of think about 10% of that 15%, you would expect inflation to rise by about 1% and you would expect economic growth to decline by about 1% that's sort of the playbook. And if you look at some of the data right now, you're not seeing hard data. Hard data is your usual stuff, like CPI, ppi, GDP reports, for example. You're not seeing tariff impacts there. You're seeing soft data. And soft data is that high-frequency data that's on that's really survey data that's very forward looking. That's survey data of you and I as a consumer, of businesses, of purchasing managers, and you're seeing, for example, prices paid, price expectations, economic growth, economic new orders. All of these are falling pretty fast, pretty quickly. And one point that your listeners may say to me is and you is that, hey, tariffs have come out since April 2, and inflation is not not moving higher. CPI and PPI are pretty flat. That's true, but tariffs are deflationary at first, so when they first come out, they're very deflationary. It seems counterintuitive, but it's true, because what happens is that a price goes higher of a good then you buy less other stuff. Then because the economy starts to weaken a bit, you see economically sensitive commodities start to oil, copper, aluminum, for example, all start to decrease in price. This puts downward pressure on inflation. But rest assured, we are starting to see the impact of tariffs. The Fed talked about this at their July meeting, for example, that they're unsure about the tariff effect even the June meeting. Every when you look at the meeting minutes, every fed member in the meeting said we are uncertain about the effects of tariffs and what's going to happen. So basically, long story short, we do expect inflation to rise. We got a PCE report. You know, that's the Fed's preferred measure of inflation. This came in a little higher than expected. And what you're seeing, if you parse out the data, we're seeing goods inflation rise. So those washing machines and those dryers, those cars, goods prices are rising pretty fast, pretty quickly. In fact, if you it's at a three year high right now, okay, for goods inflation, but that doesn't make sense. That doesn't matter, because you still have got the tariff. You've got the tariff. The COVID-related surge in buying but if you actually look back in terms of, if you exclude the COVID time period, it's like the highest surge in good prices since the mid 1980s. That just says a lot where inflation and prices are going. Why we haven't seen it yet in sort of this, like surge in other inflation readings, is because, again, deep tariffs are deflationary. Second of all, you're seeing services inflation and housing inflation are starting to decline pretty quickly and are starting to slow down pretty fast. So net effect is that you're seeing tariffs inflation not surging yet, but it will be surging.
John Olerio:Wow. So when wdo you see that kind of shifting? Is it going to be soon, or is it going to take a couple months?
Gene Goldman:I see it happening already. So first of all, if you look at, so we mentioned, the prices paid component is that is an indicator within the kind of the SIM and manufacturing and services you're seeing prices paid indicators are at like, extreme levels. So if you think about this, you think about the SIM manufacturing and services index. It's a survey of purchasing managers. These people are on the front lines, and they're asked a bunch of qualitative questions, how's business, how's hiring, house prices, house competition. What happens is that SIM takes this data, squeezes it together, and what it does, it says, 'Okay, if the data is above 50, it's expansionary.' Below 50 is contractionary. Underlying components, like prices paid, are at the 65 to 70 level that is surging. That's going to work its way into inflation pretty soon. And even the data points, you know, ppi and CPI have been okay. They've been kind of trending. They've been not really surging. The components that flow into the Fed's preferred measure of inflation are starting to pick up a little bit. So to your answer, I certainly see inflation picking up. We're seeing a little bit already. I think we'll see more pretty soon. Oh, and here's the other point. Here's the other key thing is that, prior to tariffs, a lot of companies built up inventory in advance of this of these tariffs, and they've been working down the inventory so they haven't had to raise prices as much. That inventory is coming down pretty quickly, so we expect companies will start to raise price. Oh, and here's an extra I keep saying, an, but there's more bonuses. Think about the Fed did a survey of CFOs and the survey. It's a quarterly survey, and asks a bunch of questions, a lot of qualitative questions, like business and so on. One of the questions I thought was pretty interesting that they asked, and they asked a simple question. They said, 'What actions, if any, have or will you take in 2025 in response to Tariffs and Trade?' So again, this is the Fed asking hundreds of CFOs, cross section of business, large cap, mid cap, small cap companies, all types of companies. 41% of companies of CFOs said they plan to raise prices. 29%, which is interesting too, said they plan to eat the prices and let it impact profit margin. So you think about 41% are raising prices 29% are saying we're going to let this impact our profit margin and try to find other ways to absorb those costs. So you're either going to get more inflation or impact on corporate earnings. Either way, that's not good for the stock market near term, again, goes back to our cautious tone.
John Olerio:Great stuff. Very interesting. So let's stay then on this inflation theme, and go to your theme of the Fed not being as good of a friend. Let's close out on the Fed. And where do you think we are from now through the end of the year with our friends, or not as good as friends at the Fed between now and the end of the day?
Gene Goldman:Sure. Okay, so the good news, let's take a step back. The Fed has a dual mandate. And remember, the dual
mandate is simply this:They want to make sure, first of all, that we all have jobs and second of all, they want to make sure that inflation is kept in check. I know there's other potential mandates that people always talk about, economic growth and so on so forth. That's not a Fed mandate. The Fed mandates are simply number one, make sure we all have jobs and second of all, keep inflation in check. So I know, if you look at the job picture, the job picture is definitely slowing down. You can definitely see it. You look at monthly job growth. For example, you know, post covid, we were at 900 800 700,000 jobs. You look, for example, in 2024 we average 168,000 new jobs per month. This year, we're averaging about, you know, 80,000 new jobs given the revisions that we saw in the in the July payroll report and August payroll report. So long story short, the job market is slowing down. So there's enough reason the Fed should cut rates. But if you listen to Jay Powell in his last press conference, he said something important. He said, I'm going to find this exact quote. He said, 'Labor market, job openings and the unemployment rate are more or less where they were a year ago.' And he said, in particular, watch the unemployment rate. He said, 'The unemployment rate is the key data point to look at.' It's a good point because basically, again, the labor market. What he's trying to say is the labor market is not doing great, but it's doing okay, and it's more or less where it was compared to it was a year ago, and the unemployment rate is a great indicator in terms of what the balance is between the unemployed and the employed. And so, long story short, there's enough data for the Fed to say, Okay, we should cut rates on the employment picture. But the reason they really can't cut rates is just the tariff and the inflation side. You know the Fed, because the employment picture is okay. The Fed has time to wait on the sidelines and say, let's see how the tariff story was playing out. If, on the other hand, that the labor market, we are seeing negative job growth, we are seeing the unemployment rate hit four and a half or 5% then that's a different story. But the unemployment rate around 4.2% it's okay. It's not great. It was a 3.4 a little while ago, but it's not that bad. So the Fed can stay in the sideline. So what this means is that it's basically, we do think the Fed will stay data dependent, and we did get some data today that said that the employment picture, while not great, it is starting to slow down pretty fast, pretty quickly. So that's one data point. Then we get another payroll report, and then we get two more inflation reports before the Fed's next meeting. So long answer to your short question is, what do we think about the Fed? The Fed said they would cut rates twice in 2025 but if you look at sort of the 19 Fed members that contribute to the dot plot the summary of economic projections of those 19 who in total, said cut rates by twice in 2025 seven of them said, don't cut rates at all. So there's a lot of dissension amongst the Fed right now in terms of which way are things are going to go. I do, personally believe, I know the markets have surged pretty quickly just in the last couple hours. This is the timing of this podcast. Is phenomenal that if you think about yesterday, there was, you know, the markets were pricing in maybe one rate cut in 2025 now they're back down to two rate cuts in 2025 because the employment report showed the uncertainty. So now there's talks that may be cutting rates in September and October. I still think we're a little premature, because I still think we need to understand the impact of tariffs. I mean, tariffs are going to impact inflation and the Fed as a dual mandate. And on one side, they're okay, the picture is fine. The other perspective, the inflation they're not sure about. And I do think you know, Jay Powell wants to protect his legacy, and he wants to get out of this role when he when it expires at the end of next year to at the middle of. Sheer to say I was able to reduce inflation So, long story short, I still think the Fed cuts rates, maybe once, maybe twice, but definitely less than the markets expect.
John Olerio:Wow. Great answer, and this has been a tremendous discussion. Gene and truly appreciate you being here with us. And once again, thanks to satera for making this great episode possible. If you enjoyed this episode, please share it with your network, and remember you can access wherever you get your podcasts. Please follow us on your favorite app. Join us next time, and we'll once again be graced with jeans insights to talk about the White Lotus financial markets. Sounds like an exciting theme, and fortunately, I'm all caught up in the show For our next podcast. Thank you. Thanks, everyone.
Cetera:Lighthouse Wealth Advisors is a marketing name of Cetera investment services securities and insurance offered through Cetera Investment Services LLC, Member FINRA SIPC advisory services offered through Cetera Investment Advisors LLC, Cetera firms are under separate ownership from any other named entity. 100 lighthouse, drive Dover New Hampshire, 03820, investments are not FDIC and see us, if insured, may lose value. Are not financial institution guaranteed. Are not a deposit and are not insured by any federal government agency.