Tim Holland: Strong Consumers Are Keeping the Economy on Track

**SPEAKER_1** (0:00)
Let's welcome in our next guest now, Tim Holland, CIO of Orion Advisor Solutions. Tim, good afternoon to you. Thanks so much for your time. We cleared a hurdle this week with this pair of inflation prints. Obviously, not a huge reaction because it came in mostly in line here, which was the good news, but the busy macro week isn't over just yet. Retail sales up, you miss tomorrow.
So then what happens next? I mean, particularly as we near the end of August, when it's gonna be a very big week with PCE, Nvidia and Jackson Hall.

**Tim Holland** (0:31)
Yeah, no, Jackson Hall, you're right. Kevin Warsh in the speech kind of hinted at that at the July meeting press conference. Sort of, he's gonna probably talk about more fed reform. Folks, I think in our business would rather hear a little bit more about monetary policy, but you hit all the right points. I think CPI, PPI, print, both pretty benign. I think lowest numbers since March, August very much on the front foot and typically not a great month for markets. The S&P had an all time high near 4% and they have the PCE. And you get another look at the CPI before the Fed meets again in September.
So at the risk of not having a lot of bad stuff to talk about, it seems like things are pretty good. Decent GDP expected from the Atlanta Fed and inflation sort of behaving itself and earnings just gangbusters. Sort of some of the same things you were talking about your prior guests.

**SPEAKER_3** (1:27)
Tim, the big question here now is the consumer holding up with the retail sales data that we're going to get tomorrow. What are you expecting from the retail sales number and for you, what would constitute a meaningful upside or downside surprise?

**Tim Holland** (1:41)
I think retail sales tend to come in pretty close to where the world thinks those numbers are going to land given the amount of time and attention given to them. There's obviously been this massive disconnect for some time now between sentiment and spending, right? What the consumer says and then what the consumer does. And then, as you noted earlier, you get the University of Michigan data tomorrow, which has bounced off sort of a multi-year low, but I'm not expecting much good news there.
So, I think the pattern persists, which is the consumer is going to be okay, going to continue to hang in there because the labor market's hanging in there. Wages are sort of kind of keeping up with inflation. But I think the sentiment numbers are going to be pretty bad. And not to sort of wait in the politics, you know, with the midterms coming up, though that's not that far away. You know, a lot of folks smarter than me have written about, you know, sort of sentiment and survey data in this particularly polarized world we're living in. And how much can you sort of lean on some of those surveys, not to take shots at any of the producers of those surveys, relative to what you used to be able to kind of put into those data sets that make sense. And I think there's probably some truth, some truth to that.

**SPEAKER_1** (2:56)
So given everything you're saying right now, Tim, it seems like the bull case for this market is fairly straightforward. I mean, the macro is hanging in there. The economy is okay. We're living with these higher yields, higher oil, and the fundamentals look great. So what are you telling clients right now?

**Tim Holland** (3:13)
Yeah, no, so at Orion Advisor Solutions, everything we do is with room for the advisor, you know, big, big believers in the value that the financial advisor creates in their clients' lives, especially over a full lifetime and through more difficult periods than we're living through right now.
So really the message is at a macro or asset allocation level is we're big believers in diversified portfolios. We think now is a particularly good time to stay broadly diversified. Stocks have done well, but there are some pockets of stretched valuation.
Bonds are sort of flat on the year, at least used in the indices, but maybe we're sort of at peak inflation, so don't give up on high quality fixed income. Even though the US has galloped ahead a little bit of late, there's still some pretty good returns overseas, so don't give up on international markets. Then finally, if inflation is a little higher, for longer and a little stickier than many folks would hope, real assets should continue to do okay. To your point, the price of West Texas at 80, 81, though markets hitting all time highs. At the risk of sounding silly, and I know not everyone has participated in the games, markets have delivered, sometimes it's good to just kind of sit back and appreciate what the economy has done, what markets have done, particularly in light of the incredible headwinds from a geopolitical point of view, both have faced this year. So sometimes it's okay, I think, to just kind of enjoy and appreciate what the economy and the markets tend to deliver, especially at a time like now.