What do you love to do outside of work?
Hike the hills of Marin County with my husband and two children.
What do you love most about being part of Aspiriant?
Being the first female advisor listed on the Barron’s 2012 Top 100 Independent Advisors List.
What do you think is driving equity markets right now?
This is a great question because, like with the previous question, there is no per se right or wrong answer. Instead, your interviewer is merely looking for you to show an understanding of what things generally move the equity markets and what currently apply to todays market.
A good answer to this kind of question – irrespective of where equity markets are right now – will do the following things:
Lets take each of these in turn.
First, you should articulate that in a falling rates environment that lowers the discount rate on current and future free cash flows from a business. So everything else being the same, if rates fall then equity markets should rise.
Second, you should articulate what sectors are driving equity markets. In recent years it has been primarily tech stocks. This can somewhat contradict our first point – as many high-flying tech stocks dont have much free cash flow! – however, that doesnt make your answer poor. Rather, it shows you understand the market is nuanced and cant be viewed through any simplified framework.
Third, what we have observed this year is very low rates and very tight credit markets. One could make an argument that equities have paradoxically become an asset that people look to because there is so little yield to be had outside of equities. This can be observed through the large in-flows seen into the equity markets and lesser flow into rates and credit.
What an answer laid out in these three parts does is show you understand the fundamental drivers of equity prices, understand what sector is contributing the most to equity index gains, and how alternative asset classes are also perhaps contributing to this all.
For reference, here are some potential drivers of the S&P 500 if we take a look at the historical precedence of that index.
What would you be doing if you weren’t working for Aspiriant?
I would probably still be working somewhere in the financial services industry because I love it so much. I majored in Psychology in college and stumbled upon my interest in investing and the stock markets in my first real job out of college. My manager at the time read the Wall Street Journal every day and I started reading it and discovered I really liked it!
What’s the reason why the Fed – or anyone else – cares about having 30-year Treasury Notes lower in yield?
While you shouldnt expect to get questions about the nuances of quantitative easing, you can expect possible questions that indirectly get at that.
Thats because the Fed has taken a much more aggressive role in markets since the great financial crisis and as a result private wealth managers need to be able to communicate rates topics to clients.
A naive answer to this question may be that the Fed lowering yields of treasuries will result in lower future borrowing expenses by the federal government. While true, this isnt the rationale for why its done.
The rationale is that lowering the yield curve across the board – but in particular in the 10-year and 30-year range – will lower corporate borrowing costs, which are often benchmarked off of treasuries.
Note: The yield curve is currently inverted with the 10-year yield being above the 2-year yield significantly — its actually inverted the most since 1981.
Another argument is that by dampening down yields it makes treasuries less of a safe haven asset and pushes participants “further up the risk curve” into asset classes like credit, mortgage-backed securities, CLOs, and even equities in order to get some level of positive return.
Note: if youre looking for a brief run-down of QE in practice, the Peterson Institute for International Economics always has good primers such as this one.