Watch Andy Sieg on Fox Business

Maria Bartiromo:

Joining me right now is the president of Merrill Wealth Management, Andy Sieg is here. Andy, it's great to have you.

Andy Sieg:

Maria, great to be here.

Maria Bartiromo:

Thank you so much. You're not surprised that the Federal Reserve raised interest rates?

Andy Sieg:

No, this is very much what we were expecting and we think there'll be another 50 basis point and then 25 basis point move in February and March. I mean, the good news for investors, the Fed is much closer to the end of this tightening cycle than the beginning and so we expect rates to begin flattening out, and then behind that, to see markets rally.

Maria Bartiromo:

We're waiting on retail sales, it'll be another indicator for the strength of the consumer. And I wonder how you're feeling about that right now, given that there are reports that the consumer's now tapping into their savings.

Andy Sieg:

Yeah. If you take a step back, consumer savings are in a better position than they were pre-pandemic, but we're beginning to see levels of saving beginning to come down. Consumer was a little slow here in terms of going into the holiday season, those numbers are picking up a bit. But overall, I think that some of the travails of the consumer have been overstated. We think the consumer's fairly resilient at this point and has continued to be a force behind the US economy.

Maria Bartiromo:

And you would know, I mean, you're talking about so much data at Bank of America and Merrill Lynch. Let me get your take on the long term portfolio of the average person out there, because your clients are long term, they're not looking to get rich overnight. So what does a long-term portfolio look like or should look like? As we approach year end, what's important for investors to understand right now?

Andy Sieg:

Well, I think as we've experienced this year, which has been a wild ride in the market, bonds haven't worked, stocks haven't worked. One of the dangers for investors is that they think the 60/40 allocation is dead, it is not dead.

Maria Bartiromo:

60% stocks, 40% bonds?

Andy Sieg:

Right. It's being resurrected. We actually think 60/40 is going to be the place to be in 2023 because we think bonds will outperform in the first part of the year and stocks will outperform after that. So the danger always for retail investors is to overreact to short-term information in the markets. Most of our clients are looking at 10-year goals, 20-year goals, and therefore thinking hard about asset allocation, that's very important for them. And 60/40 is a pretty good place to start.

Maria Bartiromo:

When you look long term, you know that over the long term history, the best place, the best way to create wealth long term is invested in equities.

Andy Sieg:

Correct. Well, it's investing in equities, and hey, at Merrill Lynch, we are bullish on America. We've felt that way for a long time. When you look around the world, there's no economy in the world that has the combination of democratic political institutions and market-oriented economic arrangements at the core. So that underpins a great deal of optimism around the US economy. Now, don't get me wrong, you've been talking about sentiment all morning, the sentiment is beaten down by the pandemic, beaten down further by inflation. But again, we can't lose sight. Being invested in equities and in the US economy, that has proven to be a powerful place to have money invested for decades, it's going to be that way into the future.

Maria Bartiromo:

What are you telling clients about year end? Because I know that being tax aware is also something that you've talked about in the past, and I want our viewers to understand the tips and the tricks of the trade when it comes to your taxes. What should we be doing after the year that was?

Andy Sieg:

I mean, one of the things about this year, the equity market's been so tough. We have seen more tax lost harvesting earlier in the year, but there's still time here between now and the end of the year. If you have opportunities in your portfolio to take some losses and use those to offset gains, that's something you should be talking to your advisor about here at the end of the year. For many of our clients, thinking about philanthropy, if you have a donor advised fund, this is a time that if you're not sure exactly the philanthropy you want to support, people are moving some money to a donor advised fund, being able to take the tax deduction this year and then make the contributions over the months and years ahead. That's a very popular way to plan around year end for clients.

Maria Bartiromo:

All right, so what about 2023, Andy? Because we still have these predictions that we're going to see a recession, that things are weakening. I mean, we've had all of these rate hikes, it's got to take effect. We've already seen demand destruction in some areas, but the tight labor market has kept things pretty steady. What do you look for 2023?

Andy Sieg:

It has. I mean, I think the good news here is we feel like we're trending towards something much closer to a soft landing. We do think there'll be a recession, but we think it's going to be shallow. And as we said, inflation is likely to be a story that surprises to the positive next year. We saw some good numbers early in the week. When we look to the end of 2023, we think the inflation rate's going to be backed down in the neighborhood of 3%, at the end of '24, back down closer to 2%. And I think that shows this, when you throw the brakes on a hundred trillion global economy, as we did in 2020, and then you press the accelerator, it becomes very difficult to make forecasts and predictions. And I think, to a certain extent, many have overplayed the inflation story. Now, the proof of the pudding will be in the eating, but we're very optimistic next year that inflation's coming back down into the range that it should be, and we applaud the fact the Fed has been strong.

Maria Bartiromo:

And the consumer two-thirds of economic growth, I want to get the retail sales number, estimates were down. Let's get right to Cheryl Casone with the numbers. Cheryl?

Cheryl Casone:

Worse than expected, Maria, here for retail sales for the month of November, and remember this includes Cyber Monday and Black Friday. The expectation was down 0.1, we came in down 0.6% month-to-month on retail sales, down 0.1%. Similar story for if you strip out autos, that component, down 0.2%, the street was looking for a gain of 0.2%. So again, these are rough numbers and not what we thought we were actually going to see.

Now, getting down to the labor market for claims, a little bit better than expected, we were expecting 230,000, we only got 211,000. And then as far as continuing, 1.67 million, a little more than expected, the estimate was 1.671 million. And remember Fed Chairman Powell talked about that, Maria, yesterday. As for New York, Fed manufacturing, that December read, a rough one, -11.2, -11.2, the expectation was it was only going to be -1, Maria. So again, that's a little bit of a rough number.

So going through, 6.5 is the year-over-year number for... Okay, so the annual rate for retail sales up 6.5%, up 6.5%. And to be clear, we do not get an estimate from the government. There's also some revisions, really quick, I want to give to you. Jobless claims were revised up a little bit higher for last week, and then also we saw some slight revisions to October retail sales, revised to 1.3% month to month, ex auto's revised to 1.2%. And I know we got to go, but I just really quick want to tell you, I want to compare that to what we saw for the month of October, and that is actually a little bit less than expected. So October a little bit weaker than we thought. And again, November retail sales, Maria, not looking good. But this manufacturing data, the Philly Fed, that came in -13.8, the estimate was -.10. All of these are not good numbers, not good numbers. Maria, back to you.

Maria Bartiromo:

No they're not, Cheryl. Thanks very much. But I think there's a reason you're not seeing much movement in the market, the Dow was down 300 plus when this started, when you first started talking, and we're down 349 now. This is what the Fed wants. And so maybe, I'm with Andy Sieg from Merrill Wealth Management, down six-tenths of a percent on retail sales, much worse than expected. But is this actually the news that the markets wanted to see to give the Fed enough confidence that it could be done soon?

Andy Sieg:

Well, I think Maria, it's consistent with the slowing. It's also consistent with what we talked about earlier, a bit of a slow beginning to the holiday season. We also need to remember when we're looking at these numbers, these retail sales numbers, thinking overall about the strength of the consumer, consumer spending patterns have shifted a lot, very heavily towards services, experiences, travel. And so I think we're seeing some of that in the numbers. Again, for most of our clients, we're trying to say don't over read today's numbers, and we think there is some underlying strength that's there.

Maria Bartiromo:

All right, we'll leave it there. Andy, it's great to have you this morning.

Andy Sieg:

Great to see you. Thank you.

Maria Bartiromo:

Thanks so much.