Let's Stop Wishful Thinking About Interest Rates: Skip Schweiss

“I believe Chairman Powell is very conscious of the appearance of independence,” he said. “So, my view is that they’re not going to take dramatic action right ahead of the election. That’s the conventional wisdom. We also have to recognize that inflation is still substantially above target, and the economy is relatively strong.

“I would like to see us get back to the point where markets are moving less on the Fed and more on the real story of earnings and how the economy is doing,” Schweiss added.

Politics and Economics

There are many big issues at stake in November, Schweiss said, but from the perspective of financial advisors, perhaps the most important consideration is what will come with respect to the sunset of many provisions of the 2017 tax overhaul known as the Tax Cuts and Jobs Act.

“I think it’s fair to say that the election outcome will have a big influence on whether the TCJA provisions are extended or allowed to expire,” Schweiss said. “Looking out further, the biggest questions are about Social Security. … If you think the politics are contentious now, just wait until we get closer to the projected insolvency date beyond 2030.”

Congress has many levers to pull to “save” the program, Schweiss said, from tax increases or new means testing to increasing the retirement age or investing a portion of the waning Social Security trust funds in equities.

“At this point, there’s no easy button,” Schweiss said. “My pet solution is that we are going to have to extend the retirement age, among other changes. We’re going to need a broad-based solution and a grand compromise across tax increases on high earners, an extension of full retirement age, and maybe means testing of benefits for highest earning retirees.”

Up Next at Sierra: ETFs

Stepping back from the policy arena, Schweiss addressed the evolving investment management marketplace and how Sierra is growing its offerings to suit.

“When I came here to Sierra in 2021, we had four mutual funds, all focused on fixed income,” Schweiss said. “At the time, advisors were asking us about putting our risk management discipline into the equity space, so we came out with four more funds on that side. Now, the marketplace has evolved again and is asking us for ETF wrappers.”

To meet the demand, Sierra will be releasing four new exchange-traded funds this summer, pending SEC registration, and it will then move onto incorporating these funds into its model portfolio capabilities.

“ETFs are appealing to a lot of advisors today because they have lower costs and more tax efficiency,” Schweiss said. “For the most part, though, people are still happy to use mutual funds. I’d guess that about 80% of Americans are very well served in mutual funds, especially in the context of the 401(k).”

Pictured: Skip Schweiss