Morgan Stanley's Mike Wilson Talks Gold, Markets

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, podcasts, radio, news.

**Tom Keene** (0:11)
Bloomberg Money from New York City, Scarlet Fu and Tom Keene. Thank you so much for being with us today. I mean, this is what it's about, folks. We get somebody in really, really quite good Scarlet, and they write a seven-page, really, really detailed paper. But what's it mean about my non-retirement?

**Scarlet Fu** (0:29)
What does it mean for the stocks that you have in your portfolio? Forget the fixed income.

**Tom Keene** (0:33)
Or the Bitcoin in my portfolio.

**Scarlet Fu** (0:35)
Oh, the Bitcoin.

**Tom Keene** (0:35)
No, there's none in my portfolio.

**Scarlet Fu** (0:36)
Fractional Bitcoin.

**Tom Keene** (0:37)
I'm in triple Lover's Dog Cash. That's a different story. We are honored to bring you Mike Wilson, Pride of University of Michigan, Chief US Equity Strategist and Investment Officer at a small shop, Morgan Stanley, this morning. How are you doing? How's your year been?

**Mike Wilson** (0:52)
Doing great. Been at the bull market. You know, summer's been pretty good to me.

**Tom Keene** (0:55)
And do you feel like the market, you've gotten the market right? Have you underestimated its durability?

**Mike Wilson** (1:03)
No, I think we probably were the first ones to talk about this earnings recovery. And even we underestimated the strength of it. So yes, we did underestimate the power of it, but directionally, I think we were right on that. I think what we've been surprised is probably the durability of the AI CapEx, just how much that has accelerated, and how much, quite frankly, how much the market has been willing to absorb on the issuance of those credit necklaces.

**Tom Keene** (1:27)
Well, the reason you've been good at that is Jim Caron. It's got nothing to do with the equity side of the shot. Bring up the chart right now. This is the emotion. Many of you have forgotten this. Stocks, you can go down in stocks. It's a shock. Now, this chart ends in 2022, but there's XPS. It's wonderful, great, wonderful, COVID and all that. And then there's a big rollover in 2021-22, where are you brave enough to catch the falling knife? When the market rolls over like that and my personal finance is troubled, how do I get back into the market? How at the margin do you buy when you see the sweat of that chart?

**Mike Wilson** (2:03)
Well, the really challenging thing of 2022, as you know for retirees, was that stocks and bonds went down for the first time in really our lifetime. And so there was no head. So even though the decline in equities wasn't as severe as it was in 2008, or in 2001 or 2002, your 60-40 portfolio was down the same. So that was a change. And I think that was one of the things that made investors apprehensive to step in. It was like, holy smokes, I'm getting hit on both my defensive stuff and my offensive part of my portfolio. So I think people froze up. Now our job is to remind people that there's value at some point. And I would say we navigated the 2021 top extremely well and the 22 downturn. We probably overstayed our welcome a bit in 23 and got back on board in 24 under the story that we're telling now. But I mean, as a person who has their money in the market for retirement or long term investor, you really should avoid being shaken out on both the top and the bottom. So in other words, chasing stocks is as damaging as selling stocks at the bottom in my view. So that's why we like dollar-cost averaging. That's why we do still like diversified portfolios. 22 is a challenge on that. It ended up working out for folks who stayed fully invested.

**Scarlet Fu** (3:16)
And for those who stayed fully invested, their faith in equities has been restored, maybe for bonds not as much given that the performance has not been as great. Is there a way to get all your defense of your bond-like exposure within equities? I've heard some people talk about the idea of swearing off fixed income completely and perhaps owning insurance companies as proxies for bonds. You get the price appreciation, you get the dividend, it's kind of like a win-win.

**Mike Wilson** (3:39)
Yeah. Well, what I would say is that these asset classes are now more closely correlated. So they're just not going to offer that natural diversification benefit that they have historically. So that means you need to do other things. So there are other types of investments. You were mentioning earlier like gold or maybe even Bitcoin or some of these things that can defend against inflation. So we've been a very big advocate of gold, not so much as a yielding instrument, but as a defensive asset. That doesn't mean you abandon fixed income, but it does mean you reduce your duration. So there are things you can do within your fixed income portfolio to make it more valuable. It still provides some diversification benefit without taking too much risk on the duration side.