Good afternoon, everyone. Welcome to our 2024 mid-year outlook webinar. We're already here reaching August, and amazingly, I hope everyone's been enjoying a very nice summer. But my name is Dana Vosburgh. I'm the Managing Director of Advisory Services here at Manning & Napier. I'm happy to be joined by two great colleagues today. First, Chris Petrosino is the Managing Director of our Investment Policy Group and a regular panelist when we do these outlook webinars. Chris Petrosino and his team are responsible for setting the firm's overview and our broad macroeconomic outlook, as well as on financial markets, both equities and fixed income, home and abroad, and on asset allocation decision-making. I'm also joined by Jordan Eich, a financial consultant in our Wealth Management Group covering the Rochester area for Manning & Napier. Jordan Eich works very closely with a broad range of clients, both individuals and institutions, to provide planning strategies and investment solutions across a full array of needs. Thank you, Chris Petrosino and Jordan Eich, for taking part in the webinar today. Thank you. It's great to be here. Good afternoon, everyone. Yeah, thanks, Dana Vosburgh. So as we get started, it would really be great to know where everyone is joining from today. We've done this in recent webinars, but it's nice to have these events be interactive. So please feel free to type in your location in the chat section. It's good to know who we're reaching and where attendees may be located. I already see one coming up, Boise and Nashville, so it's great to see it's across the country. Jordan Eich and I are in Fairport, New York, in our home headquarters here for Manning & Napier. Chris Petrosino is usually here, but you're in Maryland today, right, Chris Petrosino? Yeah, Eastern Maryland. Internet seems good, and it should be a good webinar today. That's right. Travel and do webinars. That's great. So it's good to see all the different locations coming in. Thank you. And speaking of interactive, we're going to have a few polls throughout the webinar that touch on some of the key topics, so you can also participate in those. And we encourage you to ask questions along the way. If a question comes to mind, please feel free to submit it using the Q&A function that you'll see on the screen. We'll spend time at the end of the webinar answering as many questions as possible. I'll note that sometimes certain questions can be a challenge to answer on a live webinar, either just because it's very specific to an individual's planning situation, which we'll often get planning questions, or maybe we prefer to do a little more research for you before answering and kind of really getting to the bottom of your question. So just know that we or someone on our team will be sure to follow up to answer your question if we don't answer it live here. And thank you for those who did submit a question already. All right. So we're going to have a good discussion today. Being a little over halfway through the year, we'll comment on some of the things we've seen so far and important things to consider as we're moving into the back half of 2024 and beyond. There's wealth management priorities and things that you should be thinking about from a longer-term perspective. And then there's the environment and the economy and markets and what we're seeing there. So Jordan Eich, please start us off here with some of the things that you're stressing when you meet with your clients right now. Yeah, well, thanks for the introduction, Dana Vosburgh. And I was going to say good morning to everyone, but it looks like we got a lot of time zones west of us. So good afternoon, good morning, wherever you're joining from. I know, especially here in Rochester, summer is a limited resource, so we appreciate you taking the time out of that schedule to spend it with us here today. Hopefully, you'll walk away with some interesting information. So like Dana Vosburgh said, I work with a lot of individuals and institutions on the planning side of things. And so I think it's unbelievable that today is August 1st, and we only have five months to go in the year. And so this is a great checkpoint from a planning perspective to just take a look at what's happened year to date and make sure your eye is on the ball as we go into the end of the year. I don't want to be dismissive of some bigger topics like taxes, estate planning, and even asset allocation. So we're going to touch on those in more detail later. But I think one of the big things, and maybe they're more monotonous in nature, but I think good places where you could take a step back and check yourself are things that you see listed here. Always circling back to the financial plan at hand, particularly at this point in the year, if you adhere to a budget, checking in on that, where things stand, it's possible that some additional expenses came up at the beginning of the year that you weren't anticipating, or maybe some expenses that you're targeting later in the year. So always circling back to that because financial plans are only as effective as the data that goes into them. And so having accurate spending and budget assumptions are really, really important. So a good chance to just take a step back and look at that. Obviously, evaluating your insurance and emergency fund capacity. We always recommend having somewhere from three months- six months of liquid emergency savings in case these expenses come up so you don't necessarily need or are forced to dip into your investments. And also, I like to highlight contributions at this point in the year. I said we're well past the halfway point in the year, so making sure you're staying on track in terms of contributing to 401(k)s, IRAs, 529 accounts, health savings accounts, whether you're trying to max those out for the year or just make contributions that are in line with your goals. I think it's easier to do that in increments throughout the year than for us to be having this conversation in December or right before you file your tax return next year and say, "Oh, I got to make a big lump sum contribution," and creates a cash flow crunch. So great time to just take a look at those things. Like I said, asset allocation, tax planning, things of that nature are really, really important. We'll touch on that in a little bit. Now that we have some general planning stuff out of the way, I know everyone's here to hear about the general state of the markets and economic outlook. So I'll pass it off to Mr. Chris Petrosino and have him share his thoughts on what's happened so far this year and maybe what we're anticipating going into the end of the year. Thanks, Jordan Eich. So I guess we can tackle the markets and then the economy in sequence. I mean, the markets, the big story year to date has, I think, largely been the extreme concentration that we've seen at the top end of the equity market with a handful of stocks, particularly associated with generative AI and all things chips, really have rocketed ahead and really gotten to some points where, as analysts in our sector teams, folks are getting pretty excited about a lot of things that have been left in the dust. And so I think one of the themes that we're going to touch on today is the importance of separating what is the S&P 500 or the stock market is sort of referenced generally from the idea of finding opportunities amongst individual companies. And so while we're a bit, I would say, cautious at this point for the broader market, we're also pretty optimistic with individual opportunities that we're seeing. The economy, the big story year to date, debate year to date is going to continue, are we going to be able to pull off the proverbial soft landing for this economic cycle, or is there a risk of, instead of a soft landing, you get a hard landing or a recession? And I think timing for today's webinar couldn't be better. We're really at, I think, a critical juncture there. If you use a metaphor of an airplane coming in for a landing, sort of the goal is to ease off on the throttle, slow things down so you can have a nice soft landing. But if you cut that throttle too much, you lose lift on the wings and you stall and bad things happen. And I think we're getting close there, right? We're at a point now where clearly the economy is slowing. But some of the data points that we've seen over the past couple of days, even this morning, the ISM Manufacturing Index, after eking into expansion territory a few months ago, is actually now down on its lows for the year, just south of 47, which, again, just we've got some cross currents now. We're seeing some of the unemployment measures, while not bad, moving in a direction that at some point, once they break higher, they keep going. So we're not there yet, but we think in this environment, it pays to sort of be close to home in terms of asset allocation, but being ready for individual opportunities that we're able to identify in the equity and bond markets. But then more broadly, if we do get some volatility from here, being ready to deploy capital and take advantage of that. Great. Okay, let's go into a little bit more detail then on a few of the areas you both just touched on. This gives us a chance to bring up our first poll. As I mentioned, we'll have a few of these that we call fact or fiction. We also did this during the webinar at the beginning of the year, and it's a fun way to address certain topics on a lot of people's minds. The first one we have is related to the presidential election, which you're aware that that's coming up here. And the poll question asks, "Fact or fiction, recent political events have pushed volatility to a five-year high?" Fact or fiction. Give you a second to vote on that, put in your answer, and then we'll give you our perspective there. What we say is fact or fiction. It's in the news nonstop here until election day. All right. Fiction then is the winner. About 3/4 of people attending here said fiction, and that is what we say as well. So Chris Petrosino, weigh in on this because it's something that obviously we get a ton of questions about the election and what that means when we have meetings with clients. No, absolutely. Elections and particularly concerns around volatility, wild swings in markets, favored industries, unfavored industries, things like that. Done a number of events the past couple of months, and every time reliably, that's generally the number one topic on folks' mind. And really, the past month has been a pretty good test of what sort of volatility can uncertainty around elections unleash. And volatility has picked up a little bit, but it barely moves the needle. Here we've got the VIX, the measure of S&P 500 options implied volatility going back to 2014, 10 years. And yeah, it jumped up a little bit, but we're still below the 10-year average, just a bit above the 10-year median. And this was a period of time where you saw odds change dramatically. We had one candidate withdrawn and assassination attempt on the other. The types of things that generally, I think if you share those types of prospective events with folks, you think, "Boy, that's going to really throw markets into a tailspin." But it's really shrugged it off. And I think what's great having this chart up is you can go back and look at what's happened in other election years. Go back to 2016, right? Certainly, the Republican victories was a surprise to many pundits, investors alike. And there, yeah, volatility spiked a little bit, but it's that second jump up in 2016, just getting a little bit above 20 on the VIX. And so again, even with some fairly surprising outcomes, generally, the markets have taken things in stride. And I think it's important to talk too about how we go about investing. Questions will get, "Are you doing something different in election years? Do you think about it differently?" And the answer is no. I mean, what we're doing is really looking for good investment opportunities. We're looking at a good example right now in many of our portfolios; we have exposure to housing. So whether that is lumber mills or some of the folks that produce some of the home furnishings and things like that. And it doesn't really matter whether you have a Republican sweep, a Democrat sweep, something in between. There's a very well-established housing shortage in the U.S. And so this is going to win regardless of who is in power or what policies may or may not be coming down the pipe. And so we're certainly ready to react if the market goes too far in one direction, punishing a particular area. We've historically found some great opportunities. When that happens, or other times, we may be able to take some gains if sentiment gets way over its skis on something that we already own. So that's really how we think about elections. Certainly, it can be a lot of noise, certainly a lot of concern and uncertainty for individuals. But like I said, we're just trying to find good investments and avoid trying to make one-way bets on the election. Good. I think another thing, I mean, obviously, the election is on everybody's mind. It's something that everybody follows. Another topic that I think is on everybody's mind, there has been for a period of time here, is inflation. And obviously, everybody can feel inflation in a certain way, and so everybody's experiencing it. So Chris Petrosino, why don't you give us kind of a status, I guess, of where inflation is and thoughts there and what that might mean as we look ahead? Sure. Your thoughts on inflation, I think, generally depend on, are you an economist measuring the rate of change in inflation, or are you a consumer that's experienced a sequence of inflationary events over a period of time? And that's really what we get at here. If you look at the CPI going back to 2021, we can look at it two ways. We can look at it cumulatively. So how much in aggregate have prices increased? Well, nearly 20% is measured by the CPI. And certainly, we know there are particular items that folks, consumers have increased by even more and some less. And that's really what the consumer experience is, right? Your frame of reference isn't usually well, are things incrementally more or less expensive than they were a month ago? It's more, I can remember last summer when I went to the grocery store, groceries only cost $100, now they're $125, or that's probably a week with my three kids in the house. But on the economist side, which is closer to what the Fed pays attention to, we look at rate of change. And there, I think the good news is it's slowed significantly, right? We went from nearly growing at a double-digit clip in 2022 to something right around 3% and change today. So that's been a positive. Certainly, some signs that the Fed's rate hike campaign has helped to slow activity. Going forward, we think it's going to be a lot of the low-hanging fruit's been picked. And the outlook for here is it's going to be tougher to achieve maybe that last 1% of inflation reduction that the Fed's targeting due in no small part to what's going on in the services side of the economy, right? You think about goods, that was where you had the demand surge, as the economy's opened up, as the pandemic started to fade, supply chain disruptions, all that stuff. And that's largely worked its way through. But services, particularly where labor is a material component, that's remained under pressure. And so the challenge is going to be going forward, can you bring that down without the traditional way that we relieve services inflation pressure, which is higher unemployment, lower price of labor? And so that's really a good representation of where the debate is. Can this number come down without the labor market falling apart? If it does, you get a soft landing. If it doesn't, we get lower inflation temporarily, but driven by a recession. So this is really the key question, like I said. If we make a T-table and look at positives and negatives, it's pretty evenly split, really. Maybe, like I said, the past few clues have been a little bit more negative, but there's been some positive ones. So we're not, I think we haven't seen a big change in our estimation of what the outcome is. Probably give recession a slight lead, but soft landing's still in the cards. We just have to watch things closely from here. Right. I think, Chris Petrosino, if we're looking ahead, especially in this landscape, we've got the election, as we touched on, and inflation is still something that we're monitoring. Can you speak to some of the opportunities then through all of that? I mean, there's always opportunities in some regard, no matter what the environment is showing us. So can you talk to some of those opportunities that we're seeing? Yeah. So maybe start with just setting the stage in terms of just how extreme the market has been with, like I said, with regard to a handful of stocks really propelling the market. In your experience as an investor in the market, it's more different than it's ever been, at least in 40+ years, in terms of whether you own the S&P 500 in its cap-weighted construct. Many ETFs out there can give you that. Or if you were just to own the average company in the market. And this is just the correlation between the S&P 500 cap-weighted and S&P 500 equally weighted. And historically, things are generally well-correlated, right? 100%, things are going to move in lockstep. Zero, completely random. And we've actually seen the lowest correlation going back, like I said, to 1970- 1971, which is really just to say that the experience of the market cap-weighted versus, again, the typical stock has become wildly different. And that has been a bit of a headwind for folks that just don't go and blindly put 7% of assets in one company or another just because that's the way the market's done it. And instead, looking more broadly for opportunities. But we think we've reached a point now where it's really getting exciting, where while the market as a whole is relatively richly valued versus history, we're finding good opportunities in things that have gotten left behind. I mentioned early on, really the big driver of the enthusiasm has been things related to AI, and particularly the supplying of the hardware, the chips that make that possible. But in the wake of that, we've seen things like software companies really get left in the dust, where these are companies that are selling very essential services into businesses that have seen folks pull back on spending in certain areas. So fairly weak market that's given us some good entry points there. And then again, you can't get much further away from semiconductors and generative AI than ideas like rails and chemicals, where these are portions of the economy that have really been in recession for an extended period of time if we're just looking at those particular industries. So again, it's a recurring theme that we talk about, just the importance of realizing that the market is really not a single thing. And if you crack it open, you look underneath, there's oftentimes many, many opportunities. In fact, we're seeing some of the highest levels of new idea generation that we've seen in many years from our analysts, which isn't to say that they're not working in other years, but just the number of names that we're finding that are coming through that are meeting both our investment strategies and pricing disciplines has been pretty encouraging. Great. And that's a good, I think, segue to our next we have another poll question coming up. And it's a fact or fiction again relating to market sentiment. So despite the strong market year to date, there are a few signs of investor speculation. So vote on that fact or fiction. And while you do that, I'll just mention that I've seen a couple of questions come in, so appreciate that. And we'll do our best to circle back to those here in the Q&A after we're through some of the other prepared portions here. But thanks for submitting those. So we'll see where we land with the votes. All right. So good. So kind of a lot of answers for both, 55% for fiction and 45% for fact. And from our perspective, we're saying fiction. Chris Petrosino, why don't you give us your perspective here and why that's fiction? Every market cycle, when we go looking for signs of speculation, it tends to show up in different places. 1999- 2000, it was the IPO market, right? Companies would go public and pop 30%, 40%, 100% in the day. That was certainly a great sign of speculation then. 2006- 2007, it was really what was going on in the derivatives market around all things attached to housing with some of the CLO structures and some of the crazy stuff that went on there. 2022- 2021, you had the meme stocks, GameStop and Friends, some of the wild stuff going on in certain corners of the crypto markets. And this time around, where one of the, I think, most interesting or intriguing things that we've seen has just been a surge in investor appetite for leveraged ETFs. And so most ETFs, you go out and buy, they give you sort of one-to-one exposure to the market. They own whatever. If you're owning the S&P 500, it holds all 500 stocks, and you get that return. But that might not be enough juice for some. And so there's this fairly large cohort of ETFs that, through derivatives or leverage, can give multiples of that experience. And today, in fact, there are 10 leveraged ETFs that would count amongst the top decile of ETFs in terms of assets under management. And the leader there is the ProShares UltraPro QQQ, which gives you 3x the daily return up or down of the Nasdaq, sitting at over $20 billion in assets. One of those behind that, worth pointing out, you have one that exists only to give you 2x, whatever NVIDIA does each day, NVDL. Again, $4 billion in assets, but it's right just under the 92nd percentile in terms of total. And so these are clearly, to us, I think, signs of pretty strong appetite to take risk. If we go back a year ago, there were only four ETFs that would have counted in the top decile. And assets total for levered ETFs now stand at an all-time high. And so, again, is this a systematic risk? No, it's not a systematic risk. But is it a sign of some excessive optimism? Yeah, I think so. Absolutely. You don't know when this stuff starts to crack, but if you have a trend that's going really well, it gets to a point where being up 100% in a stock isn't enough. You want to try and go punting for 2x or 3x that result. It tends to not end well. And so this was just an interesting example, I think, of some of the fever, if you will, that we're seeing in certain corners of the market. And again, it just gets back to this idea of there's lots of other things that you can own besides trying to get 3x long the Nasdaq or 2x long any individual stock. Yeah. Great. Thanks, Chris Petrosino. And I guess if we try to take a step back, I mean, here we're thinking about and looking at the most sort of we're talking about concentration and sort of areas of the market maybe that appear to be very specific areas that may appear overheated a little bit here. And if we take a step back, Jordan Eich, we'll kind of get your perspective here on this. But just about through all of this and some of the noise, and obviously, there's always concerns, but as you're talking with your clients, what's a good way to approach some of this as you're thinking about the second half of the year and just making sure everybody is kind of operating under a helpful perspective, right? Can you speak to that? Yeah. Well, I do think it's so interesting. I mean, you talk about the levered ETF products, right? And that would indicate to us that there's this exuberance and confidence among investors that they're willing to take significant amounts of risk. And then I also have plenty of conversations with clients where there's an uneasiness. And that's what we touched on prior, where inflation is up cumulatively 20% in the past couple of years. And there's concerns over the overall state of the economy and what the impact of the election is going to be, right? So you got to get these two camps. And then I'm sure there's plenty of people somewhere down the middle. But then you see a statistic like this one quoted from a Charles Schwab survey that only 18% of Americans think they're currently on top of their finances, which is, in my opinion, staggeringly low. And when you think about financial planning in general, right, investments are inherently emotional, right? So I think we have the tendency as human beings to make emotional decisions, potentially bad decisions, based purely on how we're feeling, right? And so when you have potentially 82% of Americans that are not necessarily on top of their finances and are maybe operating in the context of how they're feeling in that any given moment, I think that has the potential to create negative outcomes. And so that's why I always like to circle back to having a firm financial plan in place that allows you to stay grounded and kind of weed out some of this emotional noise that goes on in the markets. Because for a lot of investors right now, with how well the market has done, albeit in a very concentrated, top-heavy segment of the market, there's this feeling of wanting to chase after returns, right? I need to keep up with the market. I want to achieve these returns. And it doesn't necessarily align with what you need over the course of a long term to be successful. And on the flip side of the coin, if you're operating out of an abundance of fear, it's possible that you're not taking enough risk in general to keep up with even the rate of inflation, right? You're going to lose purchasing power in time. So there's detriments to that as well. Being super conservative is not always beneficial. But I will say each individual family person has unique needs, right? So there's not one uniform asset allocation that's appropriate for everybody. I think it's very important for everyone to sit down and analyze their individual goals in the context of what your personal tolerance for risk is, what your time horizon is. That's going to look different for everybody, right? When we talk about being halfway through the year and it being a really good time to revisit your financial plan, I think this is a really good place to start is just sitting down with a planner, taking a look at things, evaluating your goals, right? What's the time horizon surrounding those goals? Is the way your portfolio is positioned aligned with your tolerance for risk? In most cases, your asset allocation is going to differ across your investments, right? So it could make sense to take quite a bit more risk in a Roth IRA, assuming we have over 10 years until we're drawing on those assets versus the way you want to invest your emergency savings when interest rates are elevated. So there's some opportunities maybe to take advantage of that in the near term, but often a bucketed approach where we're managing asset allocation across the range of time horizons, goals, and objectives is the key to being successful. But ultimately, I think having a plan and being able to root yourself in that, kind of understand what you need to achieve to be successful will prevent you from potentially chasing after too much risk or maybe sitting on the sideline a little bit too long and kind of surrounding yourself with a team of professionals where you can make sound decisions in difficult times. And it's not a guarantee, but there's certainly, like Chris Petrosino mentioned, there's enough on the horizon where could volatility pick up? Sure. So you want to kind of have that in place before we get into those environments where the potential for some emotional decision-making takes place. Yeah. That's good. And Jordan Eich, yeah, it's great to always just, I think, reinforce that importance of revisiting. And if you have a plan, I mean, obviously, have a plan in the first place, but if you so you want that to start, and then going forward, you're revisiting that. And just a lot of it, a lot of it can be housekeeping and just making sure you're just on track, right? But then there's also part of it, part of the discussions that you're having and as a firm we're having is thinking about more how to execute on certain things, certain strategies. There's still opportunities there from a planning standpoint to make changes and to put yourself in a better spot. So can you speak to some of those? Yeah. Yeah. Taxes are a big deal. I am still yet to run into someone that was looking to pay more in taxes. The one caveat being one of the strategies we're going to talk about in Roth IRA conversions where you're actually maybe going to front-load some of your taxes. We'll get into this in the next slide, but the Tax Cuts and Jobs Act set to sunset at the end of 2025. And that's going to have some estate planning and tax implications that we'll talk about. But in general, the idea is the tax rates are going to go up in time, right? I think that's going to be a firm reality in 18 months or so. But in general, tax rates are going to go up over the long term and not down. And so how can we work with you now and in the future to make sure you're paying as little in taxes as possible? Ultimately, the less you pay in taxes, the more can remain invested, and it's going to set you ahead in the long run. So I referenced Roth IRA conversions. And so I guess I'll start with that because there's really two avenues of tax planning the way I think about it. It's, hey, the first being maybe paying a little bit more in taxes upfront to receive a benefit down the road. And then there's also some strategies that can potentially benefit you immediately depending on your circumstance. So from the Roth IRA conversion standpoint, and again, it's not going to be a great fit for everybody. So I would encourage you to work with your financial consultant and tax professional to make sure that this is a fit. But essentially, what you're doing is you're taking traditional IRA dollars, rolling that into a Roth IRA, and paying some of those income taxes upfront. Now, there's ways where you can structure it so that you fill up the existing tax bracket that you're in. And then the benefit being that you're paying these taxes now theoretically in a lower bracket than you would be potentially 20 years from now when tax rates are elevated, but you have the benefit of being able to pull those dollars out of the Roth IRA, having grown tax-free and can be withdrawn tax-free at that point. So potentially a great strategy and also a way that you could potentially lower the overall dollar value of your IRA portfolio because the total dollar value of your IRA portfolio ties into this next point, which is related to required minimum distributions. So required minimum distributions are set by the IRS at age 73. At that point, you need to start taking a portion of your IRA assets out so they can begin collecting their tax dollars that you've deferred on those. And so I would say point one is that if you are of RMD age, seven months into the year, make sure you have a plan for satisfying that if you haven't already this year. There's a bunch of different ways that you can go about doing that. I think in hindsight, if we had a crystal ball to say when the absolute top of the market is, that would be a great time to take your RMD out for the year. Unfortunately, we don't have that hindsight. What we do know is that the market has gone on a really good run this year. So there could be some opportunities to potentially get that in motion as opposed to waiting until the final hour on December 31st. And then also from a required minimum distribution perspective, there is a loophole potentially if you're of that age where you can take advantage of qualified charitable distributions. So you're eligible for up to $100,000 a year that you could contribute directly to a charity from your IRA that would satisfy your RMD requirement, and it would directly lower your taxable income by that amount. So the benefit of that is obviously a dollar-for-dollar deduction in taxable dollars, but that money is also not going to you. It's going to a charity, right? So if you're relying on those RMD dollars to meet the assumptions of your plan and pay your bills, maybe not a great solution. But if you're someone that has a large RMD balance, it could be meaningful to have some flexibility to reduce that amount that you have to take as taxable income. And then kind of last but not least on the tax management front, we have seen some opportunities to take advantage of gifting of highly appreciated securities, particularly some of these companies that have just accelerated dramatically and may have appreciated so much that they've created outsized positions in your portfolio. So rather than kind of selling these positions back to more appropriate weightings in the portfolio from a diversification standpoint, it could be an opportunity to gift some of those shares to a charity instead of selling those positions and realizing a gain to have a positive tax impact and also improve the overall diversification and balance of your portfolio. So again, these are just some ideas, some seeds to plant to bring up in conversation. Like I said, make sure you're looping in your tax professionals and financial consultants to see if these are a fit, but certainly some strategies out there to help you keep more of your wealth in your hands. Yeah. Yeah. And Jordan Eich, I think if we stay on sort of the tax planning side and even kind of bring in some of the estate planning, that's another important part of financial planning. The favorable Tax Cuts and Jobs Act tax laws, as many know, but if not, I mean, this is just important as a reminder that those favorable laws will be sunsetting at the end of next year. So that'll be 2025. So 2026 will be going back into the pre-Tax Cuts and Jobs Act tax laws. And one of the real noteworthy changes, I think the real, I think, major fallback to what we had before would be the estate and gift tax exemption. So it'll be cut in half. So that's a real noticeable change. Currently, it's $13.6 million per person. So it's set to be roughly $7 million per person, say, after 2025. It's still obviously a very sizable estate when you're at that level, particularly if you have a spouse as well with up to $14 million there as an exemption. But that cutting in half is going to expose a lot more people to the estate tax, and that tax rate is 40% of the amount above the exemption. So one of the things that I think is important to stress is that now's a time where you can be aggressive and do some aggressive planning and take advantage of those favorable gifting laws. It's really important not to wait. I think estate planning attorneys will be very busy next year. So start planning now rather than trying to hurry and sort of end the year maybe or running out of time basically to get something done. If you do something now under the favorable laws, the IRS has made clear that there won't be a clawback. You could take advantage of sheltering money using the higher exemption now. Then later when we're at a lower exemption level, it's still good planning. It's not going to be clawed back. It can be really helpful, I think, now to create some of those trusts, to make some of those gifts, move some of the assets out of an estate if you're at those levels, and it can be worthwhile. If you do that now, and then maybe just next year when you get closer to that time where we have some more clarity, then you can fund those trusts if necessary, and you can do some of those. It gives you the optionality that as we have more clarity about what may actually happen if it does indeed sunset or if there are some changes to the tax laws before then, you can make some decisions then when there is more clarity. Jordan Eich, I don't know if you have additional thoughts there with some of the conversations you've been having. No, I think you hit it right on the head. I think I would reiterate having those conversations sooner than later. I think incremental checkups with an estate planning attorney are not a bad thing, kind of similar to going to a doctor maybe every few years, I think, just to revisit, right? Are my beneficiary designations in line? Do I have a basic will, power of attorney, healthcare proxy, things of that nature, right? Making sure those are in place first and foremost, but then just taking a look at them every once in a while and seeing, hey, do I need to make any changes here? And then also weaving in this conversation about because I think the most time-intensive part of this is having the conversation and then potentially drafting of the trust documents. So I think getting, if it's a possibility for your situation and it's not going to apply to everyone, then at least getting the trust in place, not necessarily being forced to fund them, but at least the conduit has been established. And then if we get to a point where you need to fund them, that's really the easy part. But there is going to be a crunch toward the end of next year. Yeah. So So important to get ahead of it. Yeah. Absolutely. And so that's kind of a related note with taxes. We'll go to our final poll question. And again, fact or fiction, bring that up. And we've touched on maybe a little bit of this here already and give you a sense of what the answer is. But when the Tax Cuts and Jobs Act ends in 2020, well, it'd be 2025, your tax rate could jump 9%. So it ends in 2025, new laws go into place in 2026, your tax rate could jump 9%. So is that fact or fiction? Give you a second to ponder that and then put your vote in. The exciting times at the end of next year when everybody's ready for the assuming nothing happens, which it's hard to know. There hasn't been a big push necessarily with any clear sort of tax agenda from either party there to make a change. But right now, it is set to sunset. So the law is in place to go back to the pre-Tax Cuts and Jobs Act laws. So people are saying fact. Yeah. 73% here, at least the results say fact and 27% fiction. And that is what we say we say fact as well. You can see some charts there comparing sort of the pre, I guess, the current laws that will be in place next year in 2025 and then what, from a bracket standpoint, estimated brackets and those rates once we get into 2026. Jordan Eich, I don't know if you have a reaction to that. Yeah. So I mean, this is a great illustration, right? And the anticipated married filing jointly brackets on the left. And you can see, I mean, even in the bottom brackets, there's going to be a 3% increase pre-sunset and post-sunset. Where it gets really interesting is for folks in the upper end of that 24% bracket, so $300,000 to just shy of $400,000 in taxable income, you could be seeing upwards of a 9% jump year-over-year. So it's going to impact people assuming it takes place. And so I think, again, not shocking as we anticipate tax rates to go up over time, but I mean, some of these percentage jumps are sizable and they're right around the corner. So being mindful of this, we're certainly thinking about it and talking about it a lot, coming up with strategies and just something that should be coming up in your conversations as it approaches. Yeah. Yeah. And I think if possible, not everybody has the ability to do it, but if you can accelerate, so if you look next year, if you can accelerate some income into 2025 with the lower, with the brackets are more favorable there, that can help out certainly. And Jordan Eich, yeah, as you're saying, additional tax planning and we'll be working with clients to outline some of those. I think some of the things I think about beyond just the estate tax changes, it's the standard deduction will be cut in half from what it is now. That was increased significantly. The personal exemptions will be back. It's something that we haven't had during this period of time. That's another thing that larger families can take advantage of the personal exemptions. And so I think I would expect that a lot more people will be itemizing again. Standard deductions cut in half, and then you'll have the ability to take advantage of some more itemized deductions. In a way, if nothing does change and everything sunsets as scheduled, we'll just be going back in time to some of the ways that you may remember the way you did your taxes pre-2017. A lot more of kind of going back to that and some of those considerations, itemizing will play a bigger role. With that, just as a good way to, I think, conclude and quickly we can just touch on this and then we'll go to the Q&A. Had some good questions coming in, so we appreciate that. Both of you, I guess, if you could touch on maybe a key point or two here worth reinforcing after we kind of went through some of the messages. We'll start with you, Chris Petrosino, just on anything you think is worth highlighting here as we wrap up. Yeah. I mean, I think the biggest thing really for us is just that concentration in the market from a diversification standpoint, the idea that what is supposed to be a broadly diversified way of getting exposure to the entire U.S. economy is really concentrated in a small handful of businesses, and they're objectively good businesses. It's just from a diversification perspective, you can debate how much of any one individual company one wants in a portfolio. And so we, like I said, are finding opportunities sort of in the other 493 or so stocks in the S&P. And then certainly outside of that, both smaller companies domestically as well as there's a host of companies around the world that are out there too. So I think that's really important at a time when everything has become so laser-focused on just a very specific corner of the market. So I think that's good news. Then on the economic front, again, I think it's really we're in a sort of wait-and-see environment, and it's really going to be just what is the follow-through from the rate hikes that the Fed had conducted in 2022 and 2023? And And did they take the foot off the brake too late or just right? And I think stay tuned in that matter because we're going to find out in the next few months and quarters, we think. So just portfolio positioning, we're fairly close to home in terms of our equity ranges and portfolios where we have that discretion. Near midpoint, again, with the idea that we're finding names, companies that we want to own, we're going to own them, but making sure that we're also prepared if we do get better entry points to add to risk in our portfolios. Yeah. And I'll just chime in on the planning side of things. I mean, I think for the most part, people are probably in better shape than it may feel right now on the backs of how strongly the market has gone up the past couple of years. But I think it is important to remember how, in general, unpredictable the markets can be. And just singular events can cause dramatic changes. And so making sure that you are rooted in a financial plan, kind of staying in control of the things that you can control, right? Making sure you're setting a plan in place, working with a team of professionals that can help keep you grounded in that when uncertainty does occur. And again, focusing on the big picture, the long-term, your goals, objectives, risk tolerance, things like that, as opposed to maybe day-to-day volatility and near-term concerns as opposed to the big picture. So, and then again, encouraging you to start thinking about Tax Cuts and Jobs Act sunset. So halfway through the year, scheduling meetings with your financial consultants, tax professionals, estate planning attorneys as that gets closer. Great. Well, thanks, Jordan Eich and Chris Petrosino, for your insights and your remarks. And now we can move on to the Q&A. And some good questions come in. As I touched on earlier, we aim to select questions as we're going through this that are broadly applicable for the audience and not too specific because sometimes it's not always relevant. But please continue to submit questions and just know that we will answer any question that's been submitted, any and all. So if we don't answer it live again here, as I mentioned, we will absolutely follow up and make sure that we get an answer for you. So I saw a bunch of questions, like a flurry of questions came in, Chris Petrosino, when you were talking about some of the economic challenges maybe or just some of the considerations there. And likewise, Jordan Eich, with some of the tax questions and the tax comments seem to generate a fair number of questions. But the one that I think we can start with here is related to, say, asset allocation and some Manning & Napier's approach there. And so the question is, has Manning & Napier gotten more bullish on equity or still underweight versus a benchmark? So in most portfolios, we are right around benchmark weight to equities. We increased equity exposure earlier this year as we thought that the prospects for a softer landing in the economy were rising above where we had previously put them at. And so in response to that and in response to analysts finding good investment opportunities, that exposure has moved up right around sort of right around neutral. Also, earlier in the year, in many of the portfolios, we added to high yield, sort of similar ideas, another way to get some additional risk exposure in the portfolios. We've since exited that in a number of the strategies just driven by just how far credit spreads, that extra reward you get for taking the risk of high-yield bonds, narrowed. And so we're, like I said, right around mid-point. At this point, thinking about what do we want to own if we get an opportunity more broadly. Great. One here, that's good. I think a couple of questions, I think, touched on this general concern or issue is the size of the U.S. government deficit and debt large enough to motivate a fundamental change in Manning & Napier's investment strategy and portfolio composition considering a timeframe of, say, the next five to 10 years? Sure. So another, probably after politics questions and elections questions on the debt and the deficits, probably number two, if not one A, in popularity. And when we think about debts, you have to look at it on a global basis, right? The flow of capital, let's say, it's a relative concept, right? Your capital is generally trying to go where the returns are more favorable. And so broadly speaking, as you look at the other alternatives around the world, it's not necessarily clear to us that while objectively the numbers are startling when you compare to alternatives globally, the U.S. still is a, we'll call it, a good house on a bad block. And so sort of from a policy perspective and things like that, that's not necessarily reassuring. But on the investment side, we've got a real focus on sort of what is as opposed to what should be. And so one of the ways that we do try to address concerns like this is in most portfolios, we have discretion. We manage global portfolios, right? We're looking for companies around the world so that if you're in an environment where, let's say, the dollar is weak for an extended period of time, you can actually benefit from owning assets denominated in other currencies or in other cases, they can be domestic companies that sell internationally. So there's a number of ways that we think portfolios can benefit from fluctuations in currency up or down. But in terms of saying we've reached some clear tipping point where we must go the other way or do something dramatically different, we don't think that's necessarily the case. Japan's probably a good cautionary tale. In that vein, there's been certainly many, many bear cases made about the Japanese economy and debt and currency. You talk about levels of debt relative to us, it's significantly higher, some different structures, some different nuances. But yeah, I think the point is it's very difficult to predict when something like that breaks. And so this sort of gets at another maybe it's another way of getting back to that idea of the importance of diversification, right? Having a singular one-way bet in a portfolio can be very, very rewarding if it works. But most of the time, what you really want is diversification. And so having that mix of domestic and international securities helps to offset some of that trends that we may get in the dollar one way or another. Yeah. Good. I did see a question just came in, I think related to some of the taxes and the itemized deductions that I had mentioned after the sunsetting. But the question was, doesn't the $10,000 limit on state and real estate deductions also go away? So yes, I mean, I think so the SALT limitation does go away. And so you'll be able to itemize and deduct those local taxes, state and local taxes, obviously mortgage interest and continue to deduct that. So you're going to be able to deduct more, which is good. Like I said before, kind of going back in time to the way things were pre-2017, there will be still you'll also bring in some phase-outs again, though. Higher income levels will be limited on how much can be deducted on certain things. So that's kind of another complication and limitation for people with higher income levels. But yes, so the good news is that the SALT is going away and you can deduct more. One that might be good, Jordan Eich, I'm thinking just to have you answer a question here is basically the question was, how are you navigating through the recent environment of uncertainty in managing your client portfolios, your client's portfolios with differing goals? I guess there's a lot there that maybe you could take that, but I guess just your reaction to that. Yeah, I think it's a great question. It all comes down to building a relationship and building trust within individual relationships and then excellent communication, really kind of understanding everything that's going on in terms of that individual's goals and objectives. My primary job as a planner is to make sure the investments that are in place align with the goals and objectives of that individual, right? So we kind of narrow the target of what types of asset allocation ranges would be most appropriate given that individual situation. Then Chris Petrosino and his team do a great job managing what we're investing in within the context of those boundaries, right? Having that flexibility is really, really important because of all the things we've talked about, right? The ability to kind of move away from things that we think might carry a little bit of excess risk and also move towards things that we think are opportunities. That could look very different depending on where on the risk tolerance spectrum that individual falls, right? It could be us being willing to add a little more risk for that client than would ordinarily be appropriate. Or it could be saying, "Hey, this is a more conservative objective. We're going to stay away from this general theme and pursue something that has maybe a little bit of a higher floor and potentially lower volatility." It's all dependent upon the individual situation, but communication and flexibility are really important. Yep. Great. I'll just mention that we're nearing the top of the hour here. We're going to stay on and answer questions as long as we have people attending still and on with us. So we'll keep going. But if you do have to hop off, there will be a recording available. And we'll be sure to answer any questions if you did submit them and you can't be on live here. So a good one that might be good to cover next would be relating to fixed income. We had some questions that came in about just kind of our management of fixed income. So I guess, Chris Petrosino, yeah, just to paraphrase a bit here, but how are you managing your fixed income right now? Are you being tactical? Yes. So I think one of the unique elements of our fixed income team is, generally speaking, we're not buy and hold to maturity investors. Certainly, there are some issues where maybe that makes sense. But most of the time, or all the time, we're looking for what investments are out there in fixed income land that offer the best return relative to the risk that we're having to take. And so the team is quite active, not only in terms of duration, that interest rate sensitivity embedded in a portfolio, but also thinking across different segments of the fixed income market. So this can be an environment like today where I mentioned earlier, credit spreads, both in the high-yield part of the corporate market as well as the investment-grade portion, are quite narrow, right? So we're not getting paid a lot to take risk there. In the time being, in most of our multi-asset class strategies, we're underweight corporates relative to where we might otherwise be or certainly where the benchmark is. But if we get an environment where those spreads widen, you could see a portfolio that is significantly tilted towards corporates if we think that's a more favorable backdrop. Right now, a theme that the team likes is within the ABS or asset-backed security part of the market and very specific sort of issue-by-issue type of research. They found some fairly attractive opportunities and fairly niche areas, litigation finance, one example that they've found a few ideas. Definitely tactical with regard to where are we going. We're certainly not attempting to day trade the yield curve or anything like that. But what we will do is if we see rates moving higher, you're going to likely expect us to start nibbling and adding more duration as that occurs. And then conversely, when yields go lower, just looking to shed duration as we benefit from that tailwind of falling rates. Okay. Thanks, Chris Petrosino. There's a question, Jordan Eich, you touched on Roth conversions. And this question came in, how high of a tax bracket do you think is reasonable for Roth conversions? Is 24% reasonable now? So I mean, I guess just your thoughts on that. Yeah, I think that's a good question. I think it's hard to say for certain without more context of the specific situation. I think the idea would be, hey, if you think you can convert some dollars now at a lower tax rate than what you would pay in the future, then it probably makes sense from a math perspective to do it. Now, the anticipation is that rates move higher, but what is your individual income situation going to be down the road? Without knowing that, it's hard to say for certain. I will say, though, there are some benefits of Roth conversions even when the math doesn't necessarily make sense just from a personal standpoint. I know I've experienced clients that want to do Roth conversions just because a Roth is much more advantageous to inherit than a traditional IRA that's subject to the 10-year rule, right? So passing off a large IRA to heirs where they have 10 years to withdraw the principal and can be forced into some difficult tax situations versus a Roth that doesn't necessarily have the same tax implications could just be a nice strategy for helping out family members or heirs. But yeah, we certainly have some great tools and resources that can put together illustrations on Roth conversions and whether or not that makes sense, just kind of lay out the pros and cons for you. So we'll have someone follow up on that front. Great. There's one here that I guess we could kind of I could combine a couple of questions here into something that's somewhat similar, but maybe two parts. One is thoughts on using alternatives outside of more traditional portfolios, say, just stocks and bonds. So there's that. And there's also a question we've gotten these questions before, but related to crypto and Bitcoin and sort of investing there. So I guess you can take it a couple of different ways there. So Chris Petrosino, maybe where you want to start with that? Sure. We can start with crypto and all things Bitcoin related. Yeah. So we do not have any exposure in our portfolios today as it relates to Bitcoin or any other cryptocurrency. We've at varying points looked at some of the different brokers or trading platforms associated with them. So we've done work on those. So it would likely be if we're going to get exposure, it would probably be through companies that would benefit from additional trading related to around those. In terms of a role in a portfolio, I think there's a number of different assets out there, gold, crypto, again, sort of broadly speaking, maybe we speak specifically to Bitcoin, that could potentially have a role. I think the key is just how someone sizes it, right? Particularly if you think about Bitcoin, it's a fairly volatile asset, certainly relative to most other things that folks normally invest in. And so if that is something that someone is interested in having a bit of exposure to in a portfolio in a small amount, it will offer diversification, could be a source of some material gains in the long run. But with that embedded volatility, you just want to make sure that you size it correctly. And that's, I think, a theme that applies regardless of what we're talking about. And the case for using alternatives to traditional public market stocks and bonds, I think, very, very similar, right? There's a tendency to speak to alternatives as sort of this monolithic investment, just like you're going to go buy stocks or go buy bonds. We know not all stocks and not all bonds are equal. And I think it's very much the same thing when we're talking about alternatives, right? It's understanding what risks are you taking and how are you generating your returns. And there's lots of different ways that folks go about doing it and really having a good understanding of what the trade-offs are, what the skill set of the folks deploying those strategies are, and really how are you making the returns that you're looking to make. For us, with our parent company, Callodine, we've had certain discussions with folks around some of the private credit offerings that they brought that they have. And again, it's understanding liquidity tolerance for the investors, for folks that are making those allocations, what makes sense. I mean, one of the ways that you earn a premium is by willing to commit capital for an extended period of time that, unlike a mutual fund or an account consisting of publicly traded stocks, you can't necessarily get your money out the next day, next quarter, next year. So those types of considerations are important, but we think that it can make sense in portfolios. And we have some stuff in the works where we think you'll be hearing more from us on the topic in the coming months ahead. Great. And we'll take one more here. We'll just be respectful of people's time. One more, and one just came in, I think kind of semi-related, but just thinking about sort of other investments. Do you have a view on gold and silver right now? So certainly, gold's had quite a run over the last several years. Again, I think putting it within the camp of it can be held as a portfolio diversifier. Again, I think it's all about sizing. So as a firm at this particular juncture, like I said, we don't really have any exposure to it. Certainly, we work with a number of clients that have, again, maybe 2%, 3%, 4%, 5% of their portfolio allocated outside of us to that. And that's certainly, again, it's a reasonable allocation. It is a good diversifier. It's just, I think one of the things important with gold is to keep in mind that it's well regarded as an inflation hedge. I joke it's undefeated against all paper fiat currencies, but it is not a linear hedge, which is to say if inflation's up 7% next year, gold's probably not going to be up 7%. It could be down, right? It is a great long-term inflation hedge if we're looking out five, 10 years. But over any small, shorter period, there's a lot of other factors that can drive the price of gold, the silver as well. So like I said, we don't have direct exposure in the portfolios today. When we have had exposure in the past, it's usually been through the miners looking at it through our industry hurdle rate strategy. Great. Thanks, Chris Petrosino and Jordan Eich. Again, appreciate your insights and answering those questions. If we didn't answer your question live here, we'll absolutely—I think we hit on most of the main themes we saw come in, but if we didn't answer your specific question, we will absolutely be following up. And I want to thank everyone for taking time out of their days to be here with us. We greatly appreciate it if you also take just a few seconds to fill out the survey. You should see a link here and on the screen. And get some feedback on how we're doing with these webinars and any suggestions. Also, if you're interested in learning more about Manning & Napier, please visit the link that you see there on the screen to schedule a call. We're happy to provide a free consultation where you can outline your financial situation and talk about goals and what you have in mind for your finances. And we can prepare a financial plan that will serve as a great way to outline next steps for you and to ensure that you stay on track. So feel free to take advantage of that. And on behalf of my colleagues, Chris Petrosino and Jordan Eich and Manning & Napier, thank you again and have a great day. Thanks, everybody. Thank you.