Episode 111 | Recession risks, tariffs, and market disparities: a candid view from behind the scenes

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Kevin Headland   0:03

Welcome back to Investors Unplugged. I'm your host, Kevin Headlin, Co Chief Investor Strategist at Manly Investments. And with me, as always, is my other co-host, Maka Nia. Welcome, Maka.

Macan Nia   0:14
Thanks, Kev. How are you doing?

Kevin Headland   0:16
I'm great, thanks. How are you doing?

Macan Nia   0:18
Yeah, not too bad. No complaints.

Kevin Headland   0:20
We've got a special episode, I'd say today. We have a special guest, Nate Thooft our Chief Investment Officer for Multi Assets and Equities and perhaps more importantly, our big boss. So welcome Nate. Thanks for joining us today.

Nathan William Thooft   0:34
Great to be here, chaps. Looking forward to it.

Macan Nia   0:37
Nate, is this your first time on the podcast?

Kevin Headland   0:37
Yeah, I think.

Nathan William Thooft   0:40
It is my first time on the podcast. I feel privileged to finally be invited.

Kevin Headland   0:41
Wow. I I feel sorry that we didn't invite you earlier. Yeah, I I feel bad we didn't invite you earlier, but it's awesome. So Nate, you know, with your role, of course, we're going to get right into it. We got lots of talk about what's going on the market today, of course, you know, record highs and.

Macan Nia   0:45
Privilege is a loose word in this context.

Kevin Headland   0:59
A lot of uncertainty regarding economic data. So we're going to dig right into this right away. We, you know, over the last couple of years talking about perhaps the risk of US recession, then rebounding and and some softening data. We're in the period of getting some more soft data, but things seem resilient with consumers.
Where do you see the US economy right now? What are the likelihood that we could get a recession coming forward?

Nathan William Thooft   1:22
It's not our base case for a recession. I mean, we certainly do worry a little bit about some of the slowing growth dynamics and concerns, particularly with the labor market recently. But I would argue there is a little bit of a weird nuance going on, particularly with the labor market. There's a lot of uncertainty, partly driven by some policy uncertainty earlier this year. And so we are seeing some of.
That flow through from a paralysis perspective with company decision making. And so I'm actually more optimistic that we're going through a soft patch in economic data, particularly on the labor front and we actually might see some improvement as we're getting some more clarity around policy over the course of the summer and into the fall. So we may have a few more months of weaker data on the.
But we actually might see this as an exception to the rule. The rule is normally when you start seeing weakening data that ultimately the probability of recession is actually pretty high. So this time and there are examples in history where you can have periods of weakening job data and still avoid a recession. And I think the base case for us is still.
In that camp that this is not a self-fulfilling prophecy that just because we're seeing some data points in the labor front that we automatically will see outright recessionary conditions in the United States or globally for that matter.

Kevin Headland   2:35
And Susan, you said paralysis and I think one of the messages that Mark and I have been saying especially with the manufacturing data, the PMI purchasing matters index is you've seen this kind of slow down and softening a lot of it because the uncertainty you said because of legislature or the the tariffs, so we say that were the uncertainty on and again, off again.
And of course, the labor data coming through, as you mentioned, it has been uncertain. We got big revisions going back and now it's a matter of what's the data going forward. Can we fully trust the data? What kind of transparency we have? So definitely a lot of issues with that, but it's important to see again as you said that nuance where.
Slow down does not mean off the Cliff recession. It could be below trend growth, shall we say, for quite a little while before we perhaps see a bit of a acceleration of the economic growth. Marco.

Macan Nia   3:24
Yeah, Nate, it seems like one thing a lot of strategists, economists have got wrong really post COVID is this recession that is always 6 to 9 months away that has really not materialized. And as you mentioned, is a recession in the US possible? Yes, it's possible. It's a probable, probably pretty low likely event.
What have a lot of strategists, CIOs, PMS? What have what has everyone got wrong about the US economy?

Nathan William Thooft   3:53
I think the challenge that people have with the US economy is they underestimate how balanced it really is. So other economies around the globe have much stronger biases towards certain drivers of their economy, right? Where the US, what we've historically have seen is that the service economy and the more manufacturing.
Inside the economy, they used to be fairly In Sync. Historically, they're less In Sync these days as particularly post COVID or even during COVID. And I think that continues. But the balance between manufacturing and services and the yin and Yang of that is we have had periods of time in the last five years where parts of the US economy have been in a recession. It's just that it's.
It's masked by the fact that other parts of the economy are not in the recession. And so this balancing act and the diversification of the US market in particular does have the benefit of hiding or washing out the more weak parts of the economy because other things are offsetting it. And then there's cycles to that. So what was once strong then becomes weak, right?

Macan Nia   4:36
E.

Nathan William Thooft   4:53
So that dynamic I think is particularly beneficial for the US to to actually post it's it's a high bar to post an overall recession in the US these days because of that broader balance within the economy.

Kevin Headland   5:06
Essentially, we could be in a new paradigm where we don't get those typical cycles we've seen before, right?

Nathan William Thooft   5:12
I.
I don't think the severity of the cycles will be as dramatic as before. We will eventually get a recession in the United States again from a technical perspective, but the severity of them I think are going to be a bit more watered down. I mean, there's always a risk of a Black Swan event that we don't know about that could cause a more broad-based severe recession, but I think your garden variety.

Macan Nia   5:16
Mm.

Kevin Headland   5:17
Right.

Nathan William Thooft   5:33
Recessions in the US are going to be more muted because of the balancing and the offsetting that happens throughout the US economy.

Macan Nia   5:40
Um.

Kevin Headland   5:40
One thing you said regarding services and against consumption and and which is a big driver of the US economy, of course it leads to inflation and the surprising we've seen a slow down inflation are inflation coming down of course from extreme heights after COVID.
We have the stickier types of inflation, but yet we haven't really seen perhaps the impact of tariffs impact the inflation yet. Do you think we're going to see that? Is it just a, is it going to be a year from now before we actually see the material impacts of that to the US data?

Nathan William Thooft   6:12
Well, the scare tactics have been very much there, right? That, you know, tariffs are going to lead to much higher or stickier inflation. And it hasn't come true as of yet. And I do say yet because I do think it's still premature to assess the full outcome of this. If you there's been studies done this, several central bank branches have done some work on this. It takes usually a full year.
For tariffs to really flow through to inflation data. So we're far from a year at this stage. The other thing I think people underestimated about the severity of the inflation is we haven't got the highest tariff numbers. What we were talking about in early part of this year were numbers that are actually bigger than what got put into place and so those numbers if they were to be.
Place we'd have seen larger inflation adjustments, the exemptions of the tariffs. There are some exemptions and postponements that have happened that people have underestimated. There's actually from some countries, upwards of 50% of the materials or items that are imported are actually exempt from the tariffs that have been announced. So that actually plays a big role.
We are seeing companies sometimes eat the tariffs and accept lower margins, at least in the near term. But you have to question how sustainable is that. So that questions, you know, it does take some time for it to flow through. And the other thing I would say is there's always a substitution effect. We have seen an increase of imports from countries that have lower tariffs and a decrease in countries that have higher tariffs.
And so there is already some substitution happening and that will continue to happen going forward. So we never expected a one for one flow through, but I would say even the most optimistic flow through have been overestimated. And so the flow through to inflation has been lower from tariffs, but we do still have another 6 to 8 months.
To truly assess what the ultimate impact is from terrorists.

Macan Nia   7:55
That's interesting. I've never heard that. We've all heard the how long does it take for monetary policy to flow through the broader economy, one year to basically 18 months. Never heard about, never heard about it from a tariff perspective. So that's something we'll all be watching, especially the Fed as they.
You know, highlight their monetary policy moving forward. So you know what, let's rally that. I think Nate, you're unique guests in the sense that you oversee equities across the world. So you are not only seeing the dynamic in Canada, in the US, but you also have a very keen eye to what's happening in Europe, what's happening in Asia.

Nathan William Thooft   8:15
Yeah.

Macan Nia   8:31
And Europe has been of.
An interesting discussion this year because there's been no discussion from our perspective over the last couple of years because of its underperformance and you know generally weaker economic environment, lower earnings profile that has all changed this year at the margin. You have Europe, I'm just random numbers as of today we're recording.
This middle of September, the EUR 50 is up 11%, the DAX, the German index up 20, Spanish index is I think high 20s across the board and we're getting questions from advisors today. Is this outperformance likely to continue over the next year or is it likely going to become more of that?
Historical relationship where it's under under, you know, versus the US, the performance isn't as much.

Nathan William Thooft   9:21
It's, it's a very heavily debated topic even within our team still at this stage. And I would say that a lot of people have been surprised by the strength of the European markets year to date. And you can even set aside the currency impact and most of the local experiences on those exchanges have been better than the rest of the world as well. So you actually do have broad.

Macan Nia   9:26
Mhm.

Nathan William Thooft   9:41
Based outperformance throughout Europe versus most other stock markets. I think why people have been surprised is because Europe has had episodes of outperformance. They've been very short lived for much of the last decade.
People have been arguing until they're blue in their face that Europe has been a good value for a long time. I'll be the first to say that value is not a good timing tool. It never has been, never will be. And but at the same time, a rubber band did get stretched pretty far. I think the catalyst this time actually was a very simple catalyst. The simple catalyst was that.

Macan Nia   10:01
Mhm.

Nathan William Thooft   10:15
Most of the geopolitical issues that have arisen over the last couple decades have not been from the United States. But the geopolitical issue this year, when it comes to tariff dynamics and policy dynamics, did source from the United States. And so it created a little bit of a sentiment shift as it pertains to where do people across the globe.

Macan Nia   10:28
Hmm.

Nathan William Thooft   10:35
Want to put dollars to work and that was basically in areas outside the US and so Europe finally had a flow of capital benefit on top of a valuation benefit. Now is it structural or secular or is it opportunistic? We are still in the opportunistic camp. We are not convinced that this is the new secular theme that for the.
10.
Years Europe is going to be a relative outperformer versus the United States or even versus the rest of the world. And why is that? Because the underlying fundamentals of Europe hasn't shifted a lot. There's been a few things that have changed, notably on fiscal spending or the willingness to fiscal spend, particularly from some of the economies, because they're no longer going to get that.

Macan Nia   11:06
Mhm.

Nathan William Thooft   11:16
Support from outside of their economy. So they have to pick up defense spending, they have to support. And just like the US is trying to bring things home, they're going to try to bring things home as well. So there is some structural things that are changing. But when it comes to profit margins, when it comes to ROE, when it comes to quality of companies, when it comes to the secular cyclical nature of companies.
Europe is still at a disadvantage and demographically I would argue they're also at a disadvantage. So we are not in the camp that this is some new secular 10 year theme, but could this continue for another 6/12/18 months? Absolutely. And we are in line with participating in that because we are no longer underweight Europe, but again.
We're not massively overweight, but we are participating in this rebound of European assets.

Macan Nia   12:01
And it seems that sorry, Kev, I cut you off.

Kevin Headland   12:04
I was just going to say in terms of that, is it almost now prove the point why active management is so important? So looking at geographic mix is one thing, but identifying companies that could be more opportunistic than others or even more that haven't been looked at for a while because people just ignored certain areas of the world because the US has done so well.

Nathan William Thooft   12:24
I do think active management plays a very important role in certain asset classes more than other asset classes. You know, we're we're not in the I'm not as dogmatic, even though I always see active equity teams to say that active equity is always the way to go. There are instances where passive equity does make a lot of sense.
But I think particularly in parts of the world where there is either undercoverage or under enthusiasm from investors, et cetera, there are ways to use active management to uncover and find real opportunities to add value. And I think Europe is a case of that. I think a lot of the Asian economies are the case of that.
Passive in the US might make more sense because you know they are big large companies that dominate that are high quality in the top of the index. And so pick and choose your battles on active versus passive. This is not a one winner takes all argument I think.

Macan Nia   13:12
And that's what we've been saying to our clients is with the focus on fees, there's areas that you can reduce that fee within the your asset allocation, do it in the S&P 500. It's very hard for general active managers to outperform. So reduce your fee there, whereas the rest of the world they're much more likely active managers to outperform.
So when it comes to Europe, yeah, like you said, you know the backdrop for you, European economy, when measuring PMI services, they're improving. That has helped the tailwinds there. But that being said, like earnings growth there is lackluster still, but there's been this desire. So we're all on the same page on.
Now let's go even further east and this is one thing that I don't quite understand. I guess it goes for the General Dynamic. But when we go to Asia, when we go to China specifically, you see the Shanghai Stock Exchange is up 15%, Shenzhen is up 30%.
And there's been a lot of optimism clearly around Chinese equities on the backdrop, you know, the Chinese economy, the manufacturing sector has held up pretty well despite constant attacks from the Trump administration.
They're loosening up restriction on home prices. Household are finally moving all those savings slowly into stocks, and Chinese companies have announced $10 billion of buyback. So there's a lot of positives coming from the equity perspective.
But on the flip side of that, the fundamentals in China still seem to be quite weak. So you have consumer spending down, industrial production down, fixed asset investment going through the list. Now Minot has a very material and real presence in China and Asia.
How does the how does the team look at China trying to look at the equity performance and matching that with the fundamentals of China?

Nathan William Thooft   15:05
I think the first thing to say is that no economy in the world do I think the economy always, always rhymes with the market, right? And people sometimes think, well, when the economy does well, it means the market does well or vice versa. That's not the case. The economy is different than markets and people need to understand that really very early on in their investing careers.

Macan Nia   15:13
Yep.

Nathan William Thooft   15:23
I think China in particular is even more challenging. In some ways there's some similarities with the US. There are a lot of pieces to the China economy and they don't always rhyme. And I would say China in particular has done a decent job when it comes to supporting 2 aspects of their economy, notably infrastructure and manufacture, I mean.
They've done less good, particularly in recent years on supporting consumer consumption or the willingness to consumer behavior and on the real estate front. And so it's an unbalanced policy dynamic right now where they're getting, you know, some good fiscal and monetary impulse, but it's skewed towards manufacturing infrastructure and not towards where I think there's actually great.

Macan Nia   15:48
Hmm.

Nathan William Thooft   16:03
Issues, which is consumer behavior, consumer sentiment and the real estate situation there. And so that has created this aura of uncertainty and kind of this fits and starts that we've seen over the last several years with the Chinese economy where I think this time might be a little bit different and I hate saying that and I'm a bit more optimistic on China than some of the colleagues I think within the team.
Because I think there's some secular themes that are happening in China that are just further behind than they are, let's say in the rest of the world. One of them is on their positioning and their spending on A I and some of the technology things. As we know what's driven the US market in the US, a lot of it is technology, productivity and A I related, right. And those are the big names that are winning.

Macan Nia   16:30
Mm.

Nathan William Thooft   16:43
In the index and China has those types of names, but they have not done nearly as well, nor has the Cap X in AI been as strong in China as it has been in the US. But guess what? A world where we're now basically bifurcating with the Western aligned and the Eastern aligned, there is going to be a catch up in China and those that are aligned with China.
On technology and AI and the ecosystem basically split now between East and West, there's going to be a massive spending opportunity and CapEx opportunity and opportunity for those names that can participate on the winning side of that to benefit in the Chinese market.
And I think that's a positive for Chinese markets and and that's that's one of the reasons why we like it. But two, I think you're going to continue to see further stimulus, both monetary and fiscal coming from China. It will not be consistent and nor nor do I think we're going to get to what we call the bazooka. But at the same time, I think it's going to be sufficient enough to create.
A bit of a more positive sentiment. And then last but not least, we're finally seeing investment sentiment start to improve a bit there. And I traveled to Asia on a pretty regular cadence. And 10 years ago when I went to Asia, they were the most optimistic people in the world when it came to their markets, their economy. They had great growth rates. Everyone was excited.

Kevin Headland   17:55
Hmm.

Nathan William Thooft   17:58
To investor in the economy. But over the last five years, they've had much worse sentiment than the rest of the world. And now more recently, you're starting to see people start to come back and say, you know what, it's not as bad. And the growth deceleration we've seen has started to kind of bottom out and we actually see some upside and some potential. So sentiment matters a lot in.

Macan Nia   18:03
Yeah.

Nathan William Thooft   18:18
Asian economies, especially China. I'm not saying that fundamentals don't matter. They do matter. But sentiment and technicals are very strong behavioral drivers of how markets perform in part of Asia, notably China.

Kevin Headland   18:32
Hmm.
Now Nate, when we look over the asset allocation perspective and and your team of course manages a lot of different products, equity's done so well. Perhaps some portfolios are have ridden that wave higher looking at reducing equities to add a fixed income. What are we looking at right now in terms of overweight, underweight equity, fixed income in terms of asset class, you know balance?
Type of master.

Nathan William Thooft   18:54
This might some surprise some people given some of the headline risk and the and the uncertainties in the world. We have been steadfast and immodest overweight to equities in our portfolios year to date, even through some of the turmoil earlier this year. And the reason for that is partly that we do think the fundamentals for equities is still pretty good despite valuations being stretched in parts of the world.

Kevin Headland   18:59
S. S.

Nathan William Thooft   19:14
World, but two, we haven't been as convicted in the potential for fixed income, particularly as you go further out on the yield curve. And so as we go further out on the yield curve, we have greater worries about the efficacy of fixed income. I'm not saying fixed income is broken. There are going to be plenty of instances where you want to use fixed income and downside.

Kevin Headland   19:32
Yeah.

Nathan William Thooft   19:34
Risk off environments, but the episodes where we see a correlation breakdown between equity and fixed income like a 2022, the frequency of that in my opinion will likely be higher looking forward than it has been over the last 30 years. And so as you go further out on the yield curve, I get more worried. I think the belly of the yield curve to end, you still have a lot of great opportunities in fixed.

Kevin Headland   19:44
Oh.

Nathan William Thooft   19:54
Income, but we're underweight fixed income partly because we think the fundamentals on the equity side are better on top of that structural dynamic that I just discussed where not all fixed income is going to be as effective as it has been over the last 30 years.

Macan Nia   20:08
Why do you think that?
Hey.

Nathan William Thooft   20:11
Well, I think the biggest issue is the debt is coming home to roost to some extent, right? I'm not saying the bond vigilantes are at our doorstep, but I do think the under pricing of term premium has been real and pervasive and we're starting to see term premium be repriced a little bit, but I think there's more to go. So when we get into.

Macan Nia   20:15
Yeah.

Nathan William Thooft   20:30
Into the next slowdown, maybe we're in it right now. We are going to see yields come down across the yield curve in my view, but it's not going to be a parallel shift. So a steepening yield curve where you keep pricing in more term premium while the shorter the yield curve goes down, I think makes a lot of sense.

Kevin Headland   20:48
It's interesting how everyone's, sorry, everyone's talking about when the Fed cuts rates and the, you know, the longer the yield curve comes down, that's not necessarily, you know, that's that's a historical bias. It's not necessarily the way perhaps things might work. And I think people don't understand that and perhaps not just, you know, bet the farm, shall we say on on this long duration narrative that oh, when that comes down, it'll be great.
So.

Nathan William Thooft   21:06
Right.

Kevin Headland   21:08
I think that's a lot of what investors probably have played, probably mistakenly, and This is why they might be a little bit hesitant in terms of things that come.

Nathan William Thooft   21:17
We've been very clear that, you know, while the efficacy of long duration fixed income is not completely broken, as I said, the episodes of it not behaving as you might expect are going to likely be higher. But this is also exactly why we're advocating for other types of diversifies and diversifiers and portfolios to help when there's a downside type of dynamic or risk.
In the market environment is beyond just long duration fixed income now to truly be able to protect our clients.

Macan Nia   21:43
That that's a good transition in terms of the diversification of the typical 6040 portfolio and I thought was it two weeks now there was a basically a deal between T Rowe Price and Goldman Sachs for those that are not aware with it, a partnership between these two firms.
They will team up. They're gonna offer wealth and retirement funds that give access. This is the key private markets for individuals, financial advisors, and we're seeing a lot of that interest at Manulife as CIO. How are you viewing when you see these deal flows? Why are they happening? They're likely going to continue.
But as the top dog, when you look at this news flow, what's the first stop that come to your mind?

Nathan William Thooft   22:28
Well, this is a part of a broader theme. All asset managers, I think, or at least most, are trying to participate in what we call the democratization of private assets, making them more widely available to a broader universe of investors beyond just the largest institutions in the world. And I buy into that and I believe in that thesis that we should be able to figure out ways to allow.
Others to participate in the benefits of some of these asset classes that have historically been closed off to them. So that the Goldman T Rowe deal was very much predicated on them partnering to be able to create more public, private, hybrid type of products and allow a broader universe of clients to access private assets.
But.
And also equally complimentary for Goldman Sachs because now they get access to T Rowe's large retirement universe of clientele, given T Rowe has been very successful in the retirement space. And so there are synergies and benefits for both sides. And I think other firms, including Manulife, we're trying to capture that same type of dynamic where.

Macan Nia   23:26
Yep.

Nathan William Thooft   23:28
We believe strongly that privates do deserve a spot in portfolios and there are particularly areas of privates like infrastructure, private credit, real estate that we feel very strongly about. There are broader private assets as well that play a role, but we are trying to figure out ways that we can incorporate them into multi asset products, income solutions.
Target date funds, different types of retirement products where we can bring those exposures and diversifiers to clients and use it as a tool. In addition to what we talked about earlier, when fixed income isn't going to be as strong as a diversifier as there has been, we're having some of these other instruments to allow us to help protect clients and also allow.
To participate in some of these asset classes that they historically have had not had access to.

Macan Nia   24:15
Yeah, those seems to be. So one keyword of 20 Twenty-five has been private assets, it seems. The other one has been a I artificial intelligence, obviously. And I think everyone's concerned about and I have my own views was was saving for another time in terms of A I's impacts on everyone's jobs.
Right. So how do you look at AI not impacting Kevin and I's job? We don't wanna hear that from our boss, but how AI is going to impact the asset management industry as a whole? Are PMS jobs going to be, are they gonna be replaced by?
An AI bot that just, you know, scans all this data, puts it together. And how do you see the industry changing over the next, let's just say 5 to 10 years as a result?

Nathan William Thooft   24:59
I think everyone's job is going to be impacted in some way, shape or form, in many cases in a positive way, in some cases in a more negative way, because certain jobs may not need to exist in the quantity that they exist today. I think for jobs that require particular levels of intellectual capital and or creativity and innovation, those jobs are pretty safe.
Things that are much more task management and or could benefit from scale and efficiency are more questionable, right. And so where do I think AI benefits asset management? I would say it's probably in three broad categories. One is just a simple efficiency, so for all of us to be able to use.

Macan Nia   25:39
Yeah.

Nathan William Thooft   25:39
Use AI tools to summarize things quickly, to write things quickly, to basically evaluate a very large data set very quickly to come up with some key takeaways. I do that today using various tools to be able to summarize an academic research piece to the two key takeaways is very.

Kevin Headland   25:52
Yeah.
Yeah.

Nathan William Thooft   25:59
Easy now. So efficiency is 1 speed, the quickness that we can do things versus the past. Someone writing the commentary, they can listen to a call like this and basically write our commentary for the quarters, say, hey, what are we talking about from which asset classes do we prefer versus we don't prefer versus me having to write it or a writer to write it, me review it, etc.
Et cetera. So I think speed of getting things done is another key area where AI will benefit our industry and others. And then last but not least is just research in general. The the quantity of research and the amount of data that's now available in the marketplace is overwhelming. You can't have a staff of 1000 research analysts reading every piece of data point.
You need AI tools and technology to improve productivity and to be able to assess the level of research and the quantity of research that's now being provided. And so that is another area where I think it's very important. Do I think it's gonna replace PMS? No. Do I think there are tools that will allow for better systematic and types of?
Factor investing that can be incorporated into active management, yes. But again, you're still going to have roles and jobs for those that have true intellectual capital and true innovation and creativity skills that come to the table.

Kevin Headland   27:13
That's really good to know. I'd say as Mohit said, we've got to keep adding that creativity and and thought leadership, of course. Now, Nate, you mentioned earlier briefly about alternatives. Lata, of course, is cryptocurrency as an alternative, as perhaps a risk hedge against equities.
What are your thoughts on cryptocurrency? Are we going to see even in portfolios? You talk about democratization? Is this a asset class that is viable as a long-term solution to alternative equities and fixed income?

Nathan William Thooft   27:45
I'll be the first to say, and I've said this publicly before, I do think crypto is a legitimate asset class. And so there is still debate about that and there are plenty of people that would take the other side of that argument. But I think the legitimacy and the qualification of it as an asset class has met that threshold at this stage.
Do I think we'll see it in client portfolios? We will. We are willing to do it in client directed strategies at this stage. In particular, I think the challenge with crypto is there is still some uncertainties and some challenges with the asset class. One of those challenges is volatility, even if you think it is a legitimate asset class and you're trying.
Incorporated in the portfolio, given the current volatility levels of the asset class, it would be a fairly small exposure because you would start to change the profile of the risk tolerance that you're investing in for clients that are comfortable with that and are willing to accept that higher risk profile.
Then it's fine, but there's a lot of clients that aren't. They are very looking. They're very much looking for a very specific risk profile and starting to add crypto would change that outcome. So that's one challenge. The other challenge is regulatory. Still, there are still uncertainties, even though I'd say a majority of economies are moving in the direction of broader acceptance.
And I think that trend will continue. It's very hard, as you probably all know, when a consumer, when consumers want it and when your citizens want something, it's it's very hard to say no. I use the example of people trying to ban Uber in different cities, right? It doesn't fly for very long, generally speaking, because if you're.

Macan Nia   29:11
Yeah.

Nathan William Thooft   29:17
Citizens want it. Generally speaking, policy is going to move in the direction of accepting that as well as legal and compliance types of challenges. And I think crypto is well on the path that the trajectory of policy is going to move in favor of figuring out ways to incorporate crypto from a policy perspective versus the opposite.
In most geographies across the globe.

Macan Nia   29:40
Yeah, that's interesting. If if the constituents want it, they'll get it. And that's why I kind of think of A I with job losses is let's say there are all these job losses because of A I and the unemployment rate goes to high single digits, low teens. I think governments are going to be very quick to regulate it.
Won't get as much job losses because of AI, but anyways, um.

Nathan William Thooft   30:03
That that is probably true. But let's be honest, AI is AI is not the first major innovation. We've had electricity. We've had, yeah, all sorts of things, yeah.
Thanks.

Macan Nia   30:05
Right, like.

Kevin Headland   30:06
Yeah.
Exactly, yeah.

Macan Nia   30:10
No, look at the Internet like.

Kevin Headland   30:12
Yeah, yeah.

Macan Nia   30:12
Like the I I was reading a book about the Industrial Revolution and at that time agrarian based economies and people were worried about their jobs and it was net net beneficial and Internet same thing. And I think this will be also along. It will be more positive than negative because to your point that people want that, they don't want the negatives of it.

Kevin Headland   30:17
Yeah.

Macan Nia   30:31
You know what? Let's, I think let's transition to the last part, last five minutes.
And it's.
We always get this question. I would love to hear yours. You've obviously had done an extremely, uh, great job with your career and your advancement. What advice, Nate, would you give to someone in high school or maybe even in college or university about?
A career in portfolio management and then also add on top of that, what was the best piece of advice you got early in your career that allowed you to keep? You know, I think young people have a tendency of being like they want everything now. That's not how it works out. So what's the best piece of advice that you received early in your career?

Kevin Headland   31:08
Yeah.

Nathan William Thooft   31:13
Well, the best piece of advice I received, I would say is don't wait too long to make decisions. And what do I mean by that is I think our industry oftentimes steps on ourselves by trying to collect every possible piece of information in order to make a decision. And by the time you take that effort and that time that takes.
To do that, the opportunity typically passes you up. And so either the opportunity from a job perspective passes you up, or the opportunity from a stock selection passes you up or some of that. You have to be comfortable making the decision, a decisive decision with, let's say, 60% of the information, 70% of the information, 80% of the information. It's not 100. That I could tell you.

Macan Nia   31:35
Yeah.

Nathan William Thooft   31:53
I don't have, there's not a magical number, but I think we do run a lot of challenges with data paralysis when it comes to decision making across our industry, but also other industries. And biggest word of advice is you need to be comfortable making decisions without having all the information.
As it pertains to like wanting a job in this industry, I think you have to be unapologically passionate about wanting to be part of this industry. At the same time, you also have to be unemotional, and that's a very interesting, difficult pairing. You can't be passionate about something and then also be unemotional about it. And I think it's a very rare breed to combine those two things.

Kevin Headland   32:21
Hmm.
Yeah.

Nathan William Thooft   32:29
Things, but that's necessary in our industry because you want to be passionate about investing and curious and be able to want to live and breathe it. But you also need to be able to take a step back and say I'm not always going to be right. Sometimes the market knows things that I don't need, don't know. And you need to be able to cut your losses and be unemotional about the fact that you might love something, but it's not working.

Kevin Headland   32:50
Yeah, I really want to thank you for that great advice. And I I think myself, macan is one of our benefits. And you know what they always say, if you do something you love, you don't work at all. And being passionate with the industry is something that is probably in one of the biggest things that we've been told about when we present to advisors or whatnot is we're always passionate about what we're saying to them. I know you're very passionate about it.
Came through in this podcast. I want to thank you very much for taking the time today on your busy schedule to join us today. Hopefully it won't be too long until we have you on again. I'm shocked that it's the first time you're on it, but we'll definitely have you on again because this was a great, great segment. I think our listeners are going to really enjoy us. So for myself and Malcolm, thanks very much and to our listeners.

Macan Nia   33:30
Thank you, Nate.

Kevin Headland   33:30
Thanks for listening and we will talk to you soon. Have a great day, everyone. Take care.

Nathan William Thooft   33:34
Thanks for having me.