San Antonio Express-News (Sunday)
Argent Trust executives urge ‘steady hand’
Sam Boldrick and Tom Stringfellow have been working in finance for more than 40 years, seeing lots of highs and lows.
There was the robust growth of the late 1990s and the dot-com bubble of the early 2000s, which was followed later that decade by the housing crisis and the Great Recession, preceding an era of rock-bottom interest rates. Most recently, the economic disruption of the COVID-19 pandemic was followed by an uncertain recovery marked by inflation and interest rate hikes that the Federal Reserve implemented to curb it.
The pair works in the San Antonio office of Argent Trust, a wealth management division of Argent Financial Group, which has offices across the South. Boldrick is director of fixed income, helping clients manage portfolios of steady-return assets such as bonds. Stringfellow is chief investment strategist; before joining the firm in 2021, he was president and chief investment officer for Frost Investment Advisors, a subsidiary of Frost Bank.
In the worst days of the pandemic, with the experience of prior downturns behind them, they urged patience to their clients.
“Go back and think what happened in 9/11, during that period of time,” Stringfellow recalled thinking. “We may be heading into a recessionary period, but the knee-jerk reaction of pulling out of the market doesn’t make a lot of sense. There’s going to be opportunities. I would say a lot of our clients held the course.”
They recently sat with the Express-News to share how they stay on top of economic trends, whether political trends affect their decision-making and lessons they’ve learned over their careers. The following has been edited for brevity and clarity.
Q: Let’s start with a daunting question. How do you feel about today’s economy?
Stringfellow:
I’ve been optimistic for several months now. I think investors are starting to realize that what’s been in the headlines has been a little more dismal than what corporate America feels like. Earnings expectations have been beaten quarter over quarter. Some areas like technology are expensive now, which is worrying a lot of investors, but it’s really the only area that has the growth rates that you see in the market. That continues to get select companies like Nvidia bid up, but when you look at what’s happening, their sales and earnings are supporting the run-up, and that says a lot about the health of the underlying industries.
Boldrick: Fixed-income guys tend to look at the markets differently. We tend to be focused on the glass half-empty because we aren’t buying equity; we’re making a loan. We’re looking at very different components of the economy. What’s been driving fixed-income for the last 15 years or so has been an extraordinarily low interest rate environment. For a guy who’s been glass half-empty for a long time, frankly, I feel like a kid in a candy shop now where we actually have the capability of producing for our investors really sizable cash flows, which we have not seen for a long time. This most recent rate backup (from the Fed) is a real boon for us. It puts us back on the map in terms of being an actual option
for people that are trying to figure out where to put money.
Stringfellow: From an equity perspective, we need the fixed-income managers to constantly remind us that all things don’t go up at the same time, and sometimes it makes a whole lot of sense to have a more prudent perspective that’s worried about what the balance sheet looks like. Today, we’re in an environment where investors can make good returns on both sides of the major asset classes: stocks and bonds. We haven’t seen that in a while.
Q: How do you keep on top of trends? What do you watch and read?
Stringfellow: We read a lot of different chief economists. I don’t have a favorite because I like to look at all of the perspectives and then the near-daily economic data coming out — looking at what the surveys of manufacturers are trending, where the employment numbers are trending. The Bureau of Labor Statistics puts out more data than most know what to do with, but I’m the kind of guy that likes to look at a lot of numbers, put them in charts and see where the trends are.
Boldrick: What actually is going to happen is going to be somewhere in between the noise that we all look at. We look at a whole lot of data every single day. In a six-month period, one-year period, two-year perihave
od, there may be somebody that we look at who has been really right for a long time and completely goes wrong, and somebody who although we value their opinion, has been wrong constantly, but they make a lot of sense. We have to look at the data. We have to look at what opinions are and try to figure out where we think it’s gonna go. We don’t have a corner on gray matter, but we have a lot of experienced people and we have a lot of opinions.
Q: Going back in time to the height of the pandemic, what were you telling your clients?
Stringfellow:
The clients were obviously nervous. It required very proactively getting on the phone, calling clients and having that conversation: Here is the unknown element.
I can just remember working from the house and looking outside and watching Amazon trucks driving down the neighborhood throwing boxes kind of left and right like it was Christmastime. That started getting you to think, “The markets are changing. The industries are changing.” We’re gonna have to start looking at how to take advantage of that.
Boldrick: It frankly was a buying opportunity, in retrospect. The hard part for us on fixed income was that Treasurys basically went to zero. For a five-year, 10-year Treasury, you
were getting under 1%. We had to work double time just to try to get something a little bit above that. The only gratification was that we knew inflation was zero, so at least we made a slight positive return above inflation.
Q: Without getting into politics, do you factor the upcoming national elections into your decision-making?
Stringfellow:
It’s noise, for the most part. It’s irritating noise. I was going to say I don’t remember politics being this vicious, but I can think back to the ’60s. It wasn’t really better; it’s just the discourse was considerably different. And we have survived through that. You’ve seen over time, politics have mattered to some extent where you had some policies that were not market-friendly. But for the most part, in recent market cycles, presidential cycles, it’s never been a wise decision to invest on the basis of who you think is going to win an election.
Boldrick: There are exogenous shocks, like Ukraine, like the situation in the Middle East. Looking back over the last five or 10 years, I would say that these exogenous events like Ukraine, like the Middle East, have had really very little impact on the U.S. financial markets, much less than one would think — certainly much less than what happened in my earlier career, Tom’s earlier career.
Q: Are there any sectors you see as smart investments right now?
Stringfellow:
We’re going to preach broad diversification as kind of a starting point. That’s not to say a client doesn’t say, “I am all in the energy industry, because that is my background; stay out of anything energy related,” in which case that changes the structure. But it’s kind of hard to overlook sectors such as the consumer discretionary or technology because that’s where the returns have been. Again, they’re more expensive, but it’s where the growth is, so you can’t avoid those sectors if you want to be where the growth is. It’s just a matter of how much exposure you want in those names. At these price levels, do I want to go in and own a Microsoft and
it be 12% of my portfolio? Well, maybe not at these all-time levels; maybe I want something less than that. But I don’t want to ignore the fact that it’s one of the economic technology drivers, as is Amazon, as is Nvidia.
Boldrick: From a fixed-income standpoint, money markets and treasury bills are paying more than anything else in the Treasury yield curve. Although I think we all pretty much accept that the Federal Open Market Committee would like to avoid raising rates further than they have, the big question is going to be, are they going to lower rates, and how quickly are they going to lower rates? It’s an interesting conversation to have with a client. We’ve been really pretty heavy in cash for quite some time because of, obviously, the cloudy outlook and other circumstances, but the fact is that cash has been paying such nice yields.
Q: It sounds like one of the most important lessons is just to tune out the noise and keep an even keel.
Stringfellow:
Absolutely. I go home and watch the nightly news. There’s certain channels I won’t watch because I find my adrenaline rising. I tend to watch the national news, and I’ll watch market news, but I leave the sound off; otherwise, I might get caught up in what’s red or green that day. What’s happening in the day doesn’t really matter because it’s emotional noise. The market is emotional and short term, but there’s fundamental reason over the long term. You look for opportunities because the emotions bring those opportunities to you. It’s been said, you know, that you buy when there’s blood in the street, and we’ve had a lot of bloodied streets at times to really go through and pick out great opportunities. You can’t ignore the news because it could lead to opportunistic events, but you have to have a steady hand.
Boldrick: We have to be reactive at times, but normally it’s more of a steadying situation than anything knee-jerk. I have found that knee-jerk reactions tend not to be the right thing at the right time.