Capitalizing on today's market opportunities to meet your financial goals.

BILL NORTHEY: Hello, I'm Bill Northey, Senior Investment Director with the Asset Management Group at U.S. Bank Wealth Management. I'd like to thank you for joining us today and welcome you to our 2024 Spring Investment Outlook Webinar. 
Market dynamics are changing rapidly. Inflation has receded from multiyear highs, the market continues to anticipate lower interest rates from the Federal Reserve this year, and equities remain near all-time highs. Today's goal is to update you on current capital market dynamics and to talk through important considerations that can help you gain confidence that your financial plan is on track. 
More than ever, it's critical for you to focus on your goals and priorities, and it helps to have a financial plan to guide you so you can stay a step ahead. As always, our Wealth Management teams are here if you have any questions or want to talk through your specific considerations. 
Before we get started on our topic today, I would like to help you familiarize yourself with the webinar platform we're using. You can customize any of the screens that you see on the webinar. You can make any of the windows bigger or smaller by dragging on the corner of a box or relocate one of the boxes by grabbing the blue bar at the top and moving it around. 
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Also, and importantly, along the bottom of your screen is what we'd like to draw your attention to, and that is a tab labeled Questions. If you click on that tab, you'll be able to submit any questions you may have during the course of our conversation today. And if your question is not addressed by the formal content, we will follow up with a response afterward, and we encourage you to submit your questions. 
With that, I'd like to welcome in our guest today. Today, we are joined by Eric Freedman, Chief Investment Officer at U.S. Bank Wealth Management, and Paul Springmeyer, Regional Investment Director for U.S. Bank Private Wealth Management. Welcome, Eric and Paul. Thanks for being here on the program today. 
ERIC FREEDMAN: Great to be here, Bill. Thank you. 
BILL NORTHEY: I know you've both been speaking with clients in recent weeks about current events and impacts on the market, so we're very eager to have a dialogue and to hear from you today in terms of, what are the areas of focus, and what are the messages that we're sharing with clients during this time? So with that, we're going to kick it off with our agenda here today. 
We want to have you walk away with some practical insights and guidance that you can use in the current environment to help you mitigate risk in portfolios or capitalize on opportunities, and we'll hear about both of those. To start, Eric is going to walk us through the views of the capital markets and the investment outlook for the balance of 2024. 
Then we'll bring Paul back in and have him talk about a range of investment strategies that can be useful in the current market environment. And then, finally, we'll come back with a rapid-fire session of questions that I've prepared in advance for these two gentlemen to respond to that we hope will bring a little bit more detail and content to our conversation. So with that, Eric, I'd like to invite you in and have us kick off this conversation with an outlook on the capital markets in the investment arena. 
ERIC FREEDMAN: That's great, Bill. And again, it's great to be with you. I think we picked an awfully good day to have this session considering what's happening in capital markets, given some of the discussion around inflation, which I know we're going to hit later on. There's some very thoughtful questions around that topic, so we'll make sure we get there. 
But before I start, let me just say, look, this is a tremendous team. I'm really proud to represent our Asset Management Group team. And this is a collective team effort in terms of the work that we're going to share. So I think, if I really started on the current slide, this image, if you will, which has been helpful to contextualize the current capital market backdrop, which is a runner on a treadmill. 
And so, if you'll stick with me with this analogy for a bit, the runner is effectively businesses and consumers that are, again, trotting down the path, if you will, and doing so at a fairly brisk pace. That's what we've seen, which has been not just the coming out of COVID, a shorter term type of phenomenon, but actually a very durable one. We've been seeing a really strong basis of both business and consumer activity, and that really persists. 
And so what you also notice on this image is that they're on a treadmill, which has a ramp that's elevated. That elevation, if you will, is a metaphor for interest rates. Again, interest rates are the cornerstone of finance. They are what mortgages are priced off of, obviously. They're what is the basis behind credit card debt, et cetera. 
And so what we've been persistently watching is, will this runner slow down, given that the ramp, as represented figuratively with higher interest rates-- as that ramp remains elevated? And in fact, the data points we got today with respect to the consumer price index or consumer inflation, it really suggests that the Federal Reserve may actually keep that ramp higher for longer. 
And some of the agita that we're seeing in capital markets this very day is really a reflection of the idea that, hey, that runner's been doing a lot. It's been running at a very brisk pace. And the hope is that interest rates will come down, Bill, as you said in your opening comments. But data points like today suggest that maybe that relief, if you will, from the personal trainer that is the Federal Reserve may not happen as quickly as markets would like. 
So how do we digest all this information? If you go to the next slide, I'll give you a little bit of a snapshot of some of the factors we look at across our Capital Markets Research team. And so this is an amalgamation of lots of different things. I won't get into all the details just to, again, keep the conversation moving. 
But we look at everything from monetary and fiscal policy, what's happening with taxes and spending, to liquidity, again how much capital is flowing in the system, as well as things like valuation and considerations like market movements and market technicals. So we actually have a fairly mixed picture right now. Even though asset prices have been really strong, some of our indicators suggest that, you know what, there's still some considerations that markets have to digest. 
And again, we've been really promoting more of a balanced perspective. We've been saying that, look, you should own more than just stocks and bonds in a very diversified portfolio, and we still have that viewpoint right now. We do think that the glass is still half full. We do think there is the opportunity for diversified portfolios to still do quite well despite, again, a really strong fourth quarter of 2023 and a really strong start to this year. So our indicators suggest that the glass is still, again, tipped half full, if you will. But we have to be very vigilant and paying attention to what happens with consumers. 
A great segue into the next slide, which gives you a dashboard, if you will, on some of the factors we look at to gauge just how our consumer's doing. Our analysis really bifurcates consumers into lots of different cohorts. I think the media tends to group consumers into one big entity, if you will. That's not really the way that we look at it. 
We think that there's differences across geographies, across income levels, across age, across worker skill. And those are things we all try to pick up in our data analysis. And so what we're seeing is at-the-margin consumers are slowing down a little bit, especially at the lower income range. But again, paying attention to that treadmill and the fact that we still have really elevated interest rates, that interplay will be very important to pay attention to as we get deeper. 
One of the things that's been interesting to us, over the past couple of months anyway, is what we're seeing on the next slide, which is really indicative of a broadening trend in the capital markets. If you go back to 2022 when it seemed like nothing worked, the only sector that really worked in 2022 was the energy space. 2023 was really dominated by what we saw on the technology front and communication technology. That was really where most of the capital market gains stemmed in. 
And what we're seeing so far this year despite, again, a bit of a sell off today is a more broad-based rally that consists of every sector from energy to financials to cyclicals in addition to a really still strong technology environment. Last slide before I kick it back to Bill is on this notion of the deficit, which is an important issue again. 
I'm sure you've heard that there's an election coming up. There's actually a lot of fanfare coming. And one of the things-- again, doesn't matter if you're a Republican or Democrat-- that markets are paying close attention to is what happens with indebtedness. This is not a Republican issue. This is not a Democrat issue. It's a collective issue. 
And one of the things we're paying attention to, alongside inflation, is what might deeper indebtedness mean for interest rates and that factor of the let's call it the proverbial interest rate ramp to remain elevated. So those are just a slice, if you will, Bill, of things we're paying attention to. Again, still think the glass is half full. But there are important variables for us to gauge if that runner is, in fact, slowing down. We have lots of tools to use to discern what that might mean for portfolios. So Bill, with that, I'll pass it back to you. And looking forward to future Q&A. 
BILL NORTHEY: Eric, thank you. Appreciate that. And I know the concept of the treadmill and interest rates serving as the ramp on that treadmill has certainly been something that's resonated with a lot of people who aren't steeped in economic studies. So I appreciate bringing that to a level that is very applicable for all of us to understand. And we appreciate the additional context on the capital markets and the investment outlook. We'll get into more in the Q&A. 
But with that, I'd like to bring in Paul now to discuss some of the investment strategies that he's talking to clients about and that our firm is talking to clients about in today's current market environment. So Paul, over to you, sir. Thanks for being here. 
PAUL SPRINGMEYER: Perfect. Thank you, Bill. As Eric has described, I think there are a multitude of factors which we're constantly evaluating, and we're trying to figure out what is exactly happening with both markets and the economy. It's a very fluid dynamic. And we've been looking in this business-- I mean, both Eric and I have been in this a long time. 
So from that standpoint, we've seen the ups, we've seen the downs. But I think the one thing that we can clearly state is that there's never going to be a period where we're going to get consistent linear returns year after year after year. So from that standpoint, if we look at this slide, I mean, it's a perfect example of that because if you look over the last handful of years, what you're really finding out, for instance, is in 2021, markets were divided. 
I mean, you were able to see equities providing sizable positive returns. Bonds were facing some modest pressure. And frankly, cash was earning nearly nothing. And then we saw what happened in some of the banking aspects in 2022, and you pivot to a new environment where, frankly, every single asset class was basically meaningfully moving lower. And during that same period of time, there were just not a lot of places to hide. 
And then fast forward to last year, in 2023, we saw a significant snapback. Rates jumped. Stocks rebounded. Bonds were producing income once again. And frankly, for the first time in a long time, we saw cash being actually a meaningful contributor. Now, 2024, we're going to have to wait and see where this ends up. But kind of what Eric was describing before, kind of a glass half full approach, the landscape that we're seeing from our perspective of this nature is normalizing a bit. And frankly, we see some opportunity in front of us. 
But while I look at all the performance volatility that takes place-- and you can see that in this example, it is, again, not linear-- when we look at it from a team perspective, from an investment perspective, everything that we're looking at really comes down to, how can we creatively adapt to the changing market environment that we're in? And with that, that becomes a new type of investment landscape. Sometimes it's even legislative changes that create opportunities or, frankly, force action. 
So as we go to the next slide, I think one of the things you're going to see is, from a strategy perspective, having the capability of working with all facets of a client's level of wealth and their profile affords us the ability to really implement meaningful recommendations to clients. And if I were to try and pinpoint some of the things that collectively our clients are facing as a whole, I'd say it really kind of summarizes into four main topics. 
The first, I'd say, is clients are certainly looking for ways to reduce the risk within their portfolios. Second, individuals are focused on how to be as tax efficient as possible, and especially as we near the tax season here next week. Third, I would say clients are also excited about the potential for growth. I mean, we've seen a lot of it in a number of these past slides, and we're talking about some of the significant equity returns we've seen over a couple of the last sessions. Clients want to learn how to capitalize on that specific desire. 
And then, lastly, I would say individuals and families are looking for ways to pass as much of their possible wealth on to future generations or philanthropic entities. So while we're not going to have time to jump into all of these, what I'd like to do is just spend maybe a few moments on each topic and give you at least a sense of some of the types of strategies that we're putting into client portfolios. 
So I guess first in terms of reducing risk, having frequent and ongoing conversations regarding one's proper investment objective is clearly one of the most important concepts that clients can do when they're working with their wealth teams. And making decisions by tying that information back to a very detailed financial plan is one of the best ways to avoid succumbing to the emotional and the behavioral changes of trying to invest-- frankly, adding risk or pulling off risk at inopportune times. 
Now, planning is an evolution, and it's important for you to update your plan because, as you notice, as you go through and monitor it, you're going to find out that inputs change. Maybe the amount that you're earning, maybe the amount that you're saving, perhaps there's a loss of employment. Any types of things, that can be remedied by putting it into the plan and at least seeing what the outcome would be. 
Similarly, client goals change all the time. There are periods of time where you're going to be more focused on things that are more immediate in nature. There are going to be times you're going to be focused more into the future. But also, I'd say, as we encounter clients with very sizable concentrations of equities or potentially any individual holding, that's another bucket that we'd look to minimize risk. That's a good example of ways that we look to try and figure out ways to be creative about this but also minimize risk. 
So managing position sizes in general or reducing concentrations is a great way of reducing risk. But I would also say there are other ways to do it. So for instance, we have access to exchange funds, whereby you can swap selected concentrated positions for a basket of diversified securities, hence reducing your concentration risk. Also, we often implement managed option strategies to try and reduce risk by simply limiting potential of downside price movement in that particular name. So again, these are just a couple of examples of what we're digging into with individual scenarios that our clients face each and every day. 
Second, I would say, on the tax efficiency side of the equation, I think one of the things that we're looking at these days are simply some of the products that you have the ability to access. And I look at this. I mean, one of the things that I think we often focus on is just the process of actively managing taxes. I'd say one of the things that we're very, very structured about in terms of our work with our clientele is that capital gains and income tax are all things that can be controlled to a certain extent. 
And sometimes, those changes aren't material in any one given year. But over the lifetime of a client, those can really, really mitigate some of the effects that taxes can potentially have on the future of portfolios. And secondly, I'll say this, in an especially in much higher rate environment that we find ourselves in right now certainly, there's much to be said about having good access to, for instance, effective municipal bond strategies, which can significantly improve a client's taxable efficiency. Providing income streams where you, frankly, are going to be able to be free of income tax to a large extent is a fantastic tool. 
Third, I think this is probably the most fun for an investment person, is looking at, what are the potential growth strategies that are out there that would excite clients? And I think I look towards Eric's team in particular as his research and his product teams have really afforded us a lot of flexibility to find incredible strategies that are both in the public but also in the private marketplaces to try and capitalize exactly on that topic. So for instance, we have a number of services which we provide, both in the equity and the bond spectrum, that allow us to target specific investment strategies that are out there, but we do it without the embedded cost that we would also find in similar products in the marketplace. 
And secondly, I would just say we also have a robust platform of very highly effective managed investment solutions where, through deep research and due diligence, we're able to keep identifying strategies that just have a tendency to outperform the broad market and really try to do a better job than their like peers. 
And then, lastly, I would say this is obviously only available to a subset of individuals, but having the capability and the access to some of the very best private capital offerings that exist in the marketplace is something that helps set us apart from many other players in the space. Having that access to, I'd say, our meaningfully higher returns than often found in the public space is a great way to obviously try and boost that growth. 
And then, lastly, I would say this one maybe goes a little bit beyond the scope of normal investments, but I think one of the biggest opportunities in front of investors today, especially wealthy investors, is to formulate strategies to try and contend with the upcoming 2025 sunset of the federal estate tax exemptions. There's a limited window of time for clients to lock in currently high exemption amounts before they revert back to significantly lower levels at the end of 2025. 
So frankly, for a lot of our clients, these types of meaningful strategies that we can implement for them are going to have even more impact than what happens with the markets from a return perspective in the next couple of years. But our wealth teams are working through implementing various specific trust formats and various insurance strategies to try and help capitalize on this opportunity. So in concert with the client's attorney, their accountant, our wealth team can really help to explore and recommend strategies which we feel will allow for many of those assets to be passed along to future generations. 
And I will just say this at the end. Each client is unique, and we customize strategies for each and every individual. So in a matter of minutes, I just hope that we've been able to scratch the surface on a couple of these high-level items. But again, I'd be more than happy to talk about this in the Q&A. So maybe, Bill, I'll turn it back to you now. 
BILL NORTHEY: Well, Paul, fantastic. Thank you. And great insights from a practitioner's perspective here. And one of the things I'd like to underscore that you mentioned at the outset, the importance of the financial plan, having that map in front of you and being able to tack back to true north as we move through time and face different circumstances. So let's go ahead and start some of the questions here. 
And Eric, I'm going to bring you back to a topic that you raised about the narrowness of the market through-- the equity market through 2023. And it was really led by three sectors-- information technology, communication services, and consumer discretionary. As the market-- you alluded to it broadening out. Broadening out. What does that mean? And where are you seeing additional opportunity as we move through the first quarter into the second quarter of 2024? 
ERIC FREEDMAN: Yeah, it's an important consideration, Bill, is just that notion of broadening out. So maybe from a definition standpoint, within the US equity market, there are so many subsets of the stock market. There are differences across sectors. As Bill mentioned, technology, communication services, financials, real estate, across market capitalizations, big companies, medium sized companies, small companies, and even other dichotomies, if you will, that we can make. 
And so one of the things that's been a very persistent consideration, especially from 2023 and so far this year, has been the prevalence of technology-- not just things like generative artificial intelligence or generative AI but also large internet service providers, really large advertising-based companies as well. They've really been the companies that have seen their share prices go up appreciably and also drive a lot of the domestic equity market returns. 
So typically, if you look at the business cycle, if you will, one of the thoughts heading into calendar year 2023 and even 2024 has been, look, this economy is starting to slow. And so some of the more consumer-oriented gains may dissipate. One of the things that we're really paying attention to is if, in fact, that will be the case. 
So really important to consider what happens with retail, for example. Think about whether it's grocery stores or department stores or big box retailers, brands that you may shop with some frequency, understanding what we call the microeconomics of those brands is really important. So as we mentioned, one of the things that we're thinking about is that as that elevated interest rate environment, that ramp on treadmill remains as high as it is, that will likely have a slowing effect. It just hasn't really happened yet in earnest. 
And so what that means to us, anyway, is the risk, if you will, of that slowdown happening is that it starts to show up in corporate earnings. And as earnings go down, typically stock prices go down as well. So what we're looking for is really evidence that the consumer has more strength, if you will, that they're going to keep running or that the Federal Reserve is going to lower interest rates probably in a more measured fashion and there will be a more glide path slowdown, if you will, as opposed to an abrupt one. 
So I think that some of the tells that we're paying attention to, especially in this upcoming earnings season, will be what we're seeing in leisure and transportation, what we may see across the broader retail space, but then also what we're seeing in what's called more cyclical industries. So think about industrials, entities that are very tied to the economy. Those will be very important for us to gauge. 
Again, our perspective is that you want to own technology. It's a space that we are, again, very favorable of. We get that it's certainly run pretty far, but that's a space that we think over time clients should have a solid footing in. And again, evidence of the consumer's activities will be very important. We're just starting earnings season right now, Bill. So we'll have plenty of stuff to read and certainly share with our clients. 
BILL NORTHEY: Fantastic, Eric. Thank you. Now, Paul, one for you. So we've been in this bull market, and we find ourselves with higher interest rates. I'm just curious about what sort of questions that's prompting from your client conversations and maybe what sort of guidance that you're offering beyond what you've already shared with us today. 
PAUL SPRINGMEYER: No, that's a good question, Bill. I mean, I think one of the things that we're finding with clients in this current economic and market environment right now is that clients are probably in two camps. One, what I would say is the first group, is primarily focused on, how do they basically reduce risk in one's portfolio? We talked a little bit about that in the strategy session before. 
The second group, again, is kind of looking at that volatility or the landscape that is out there and saying, all right, how does this present this palliative opportunity for us to execute on in the future? So two very disparate ways of looking at it. But I think it's fairly common that those are coming up. Sometimes it's even, frankly, coming up even amongst the same couples that we're dealing with. 
But one of the things that I would say is we look at this from a risk mitigation perspective, especially for that first tranche of people. This higher interest rate environment that we've encountered since central banks, and specifically the Federal Reserve here in the United States, started significantly hiking rates in 2022, has presented investors an opportunity not afforded to them probably in the last 20 years. 
So for much of the last two decades, income generation in one's portfolio came largely from stock dividends or by intentionally taking on higher degrees of credit risk to boost that yield that they were seeking. And as such, investors had some specific mandates that made them take on more risk than perhaps they preferred to do. Well, the other option was they kept the risk in check, but you probably had to invade a little bit more principal than they chose. 
So now, with rates jumping up, I'd say I've seen a lot more investors taking this opportunity to really look at gauging the amount of risk that they actually want to take. They can migrate back maybe to a little bit less of aggressive of a portfolio. And yet they're allowing that fixed income, which traditionally was an income producer, to do its original intent. They're able to both provide that income as well as some stability that's out there. 
And I'd say a perfect example that we're seeing right now, just to put this in context, is just to look at the investment grade municipal market. I mean, you're able to see right now, for our top tier clients that have high tax rates, I mean, they're paying north of 6% on a tax-adjusted basis. So that's a very attractive piece for somebody to say, all right, I'm finally starting to get paid. 
Now, these rates obviously aren't going to stick around forever. So I think we're being meaningful about how we're having those conversations and how much risk do we want to take on in terms of how far out in the future do we want to invest in the bond space. 
I'd say the second subset, those that are really trying to seek more growth, is probably more squarely focused on, again, private markets. I think that is probably one of the most untapped spaces within the investment area right now. Now, only a subset of the investment community can participate in that. You have to be qualified to participate. But at the same time, I would say this is a very exciting landscape that you're looking at. 
As you're looking now, that outperformance that you're seeing versus traditional markets is very pronounced. And not to say it's guaranteed by any stretch. But at the same time, what we're seeing is that that performance and the number of issuances that are coming out in the private space are frankly really starting to ramp up. 
Now, they're still considerably smaller than that of the traditional spaces that are out there in the public markets. But at the same time, what I would say is that what we're finding is that you're actually seeing a degradation or a shrinking in terms of the number of publicly traded companies that exist in that space. What we're finding often is the case, you're starting to capture some of that return potential way before investors would even ever be able to access it on the public markets. 
So to me, that's a really exciting piece, and private capital falls into a lot of different terms. We think about it in the asset classes in which we invest. So for instance, private equity would fall into our equity category, or private debt into our fixed income, or even private real estate into our real assets categories. So there's a lot of breadth in which to invest. But I think, to me, that's one of the greatest areas that people can at least be exploring, and there are just more and more opportunities each and every day. 
BILL NORTHEY: Great insights, Paul. I appreciate that. So Eric, we're going to come back to you. And you're often a spokesperson for our company in the media, both internally and externally. And so a couple of quotes that have been attributed to you through time I'd like to maybe just have you address. 
So "be prepared to take what capital markets offer given the current environment's realities." And then, related to some of the recent strength that we've seen, from November of last year through the present day, is "now it's time to let your winners run." And maybe we can have you talk a little bit about what you mean by that in the context of the environment we're in today and how that translates to the balance of 2024. 
ERIC FREEDMAN: Yeah. I think it's an important definition, Bill. I think, on the first point regarding really to be prepared with what the markets are offering you and just that concept, is that it's a little bit like-- I guess the analogy I'd give, it's a little bit like skiing. For those who ski, it's like, don't pick the trail difficulty based on the skier you want to be. Pick the trail difficulty based on the skier that you are. 
And the same thing is true for capital markets. And I think that in an environment like this where, as Paul elucidated very clearly, you do have some income, you do have some yield, there are many clients who really enjoy going through their portfolio statements and seeing how much current income they're generating. We have other clients that say, you know what? I want to just grow my capital over time through more price appreciation. 
And really understanding what is going to keep people involved in the capital markets, we think, is really important. So right now, as Paul mentioned, look, we've got some various sources of yield and income. Stocks are paying some decent dividends to keep up with bonds. And not just within the public markets but also the private markets, there are some income-generating spaces, if you will, that we think clients should visit. 
So traditionally, the thought has been, look, I want to own investment-grade municipal bonds or investment-grade corporate or treasury bonds. We think there's a really wide spectrum of areas to pay attention to and to invest in. That could be everything from nuances like reinsurance to things like non-agency mortgage bonds. Some of the stuff is a little investment speak, I know, but that's our job, is to try to find things that are going to produce diversified sources of return for clients. And again, there's a lot of things out there right now that we think are worth taking a look at. 
The idea of really letting your winners run, if you will, is one where we think that, look, this is a momentum-based environment, not just because we want to grab on and just ride the horse until it doesn't run anymore, but really with the mindset that there is some validation that we're seeing in the market around things like technology spending. The concepts of artificial intelligence. There's a lot of corporate capital expenditures happening to chase and really to catch up with a very enduring technology. 
So we do think that while you have to pay attention to valuation and, not to keep mixing metaphors but trees don't grow to the sky, that there are some opportunities for people to, again, be involved in sectors that have some momentum. We think that's a good place to be. 
So I think that the other item, Bill, that's worth throwing out there is just in this environment, where there's such a consistent news cycle and the idea of what's called FOMO, the Fear Of Missing Out, that can be a really dangerous engagement, if you will. Sometimes, people are very risk-averse investors, but they see markets keep going higher. And so they want to get involved, and they diverge from their plan. 
As you and Paul have really emphasized, having a plan is our best advice. Those are mission critical, if you will, with respect to getting a programmatic approach to investing. That takes a lot of the emotion out of it. That takes a lot of the behavioral influences, if you will, where we are hardwired, generally, to make bad decisions. We tend to buy when prices go way up, and we tend to sell when prices go way down. 
And in fact, doing the exact opposite tends to be the right approach for most investors over time. So those are a couple of concepts we think are important, especially in markets like this that, again, have seen some really strong gains but also have days like today with some meaningful pullbacks as well. 
BILL NORTHEY: Sometimes we can be our own worst enemies. And that reminds me of my golf game. So thank you for that, Eric. So Paul, back to you in the game of ping pong questions. You mentioned during your strategies the sunsetting of the Tax Cut and Jobs Act tax provisions that could impact estates and estate planning. Can you maybe talk a little bit more about that and how important it is to get action underway in 2024? 
PAUL SPRINGMEYER: No, absolutely. I mean, as we look at that, I mean, I think it's going to create one of the most tremendous planning opportunities, frankly, for wealthy individuals that we've seen for quite some time. I mean, really, the root of this stems from the act that you said back in 2017, which basically what it did is it doubled the lifetime federal estate tax exemption. 
It moved it from an individual being roughly $5.6 million or a couple being $11.8 million up to where it stands today at a little north of $13.6 million for an individual and a little north of $27 million for a married couple in 2024. That's a very, very substantial portion of one's wealth that you can shelter from estate tax. And as we all know, I mean, estate tax is an onerous tax from a percentage standpoint. 
Now, with that legislation set and poised to sunset at the end of 2025, unless Congress acts before them, those exemption levels are going to go back, or they're going to revert back to the levels that essentially they were back in 2017, simply just adjusted for inflation. So what does that mean for a family right now? Well, it means if you're an individual, that number will probably go back in the neighborhood of around $7 million. For a couple, it's going to be $14 million. 
I mean, I'm not going to be naive here. That's still a lot of money. But at the end of the day, when you start looking at that 40% tax, that tax cost potentially could cost an individual north of about $2.6 million or a couple about $5.3 million at the federal level alone. And we're not even talking about what potential individual states might be. 
So one of the things that I will say is we can't predict what Congress is going to do. But investors right now, they have this ability to do a bunch of creative things to try and maximize that current high level. So what we're seeing is from that perspective-- again, we can do things today before the sunset takes place at the end of 2025, use up that full exemption amount potentially for one's future. And from that standpoint, they can take those and, again, carry those higher exemption amounts even once the bill sunsets. 
So from that standpoint, I'd say one of the things that's going to be out there is this is a huge opportunity. It's a huge opportunity for a lot of people too. So just from a volume perspective that is out there, again, this is going to involve your attorneys, it's going to involve your accountants, and it's going to involve your wealth teams. That's going to create a lot of backlog. 
So I guess my recommendation for all people here is that you get on this horse a little bit sooner. Start having those conversations. See what's really possible. And at that juncture, start to take some potential action before everything is last minute and, frankly, we just might run out of time. 
BILL NORTHEY: Yeah. That's a good call to action and tying it back to the financial plan and optimizing what you can do within the context of your financial plan. So Eric, back to you again. 
We've had a spate of recent economic data-- strong jobs market, a little hot inflation, the equity markets are up, yields are up in the fixed income markets, and it's all about, what is the reaction function, or what is viewed through the lens of the Federal Reserve balancing full employment, price stability, stable long-term interest rates, and handicapping? What is the path forward? So if we had to put you on the spot, and we are doing that, what would be your view forward on what's happening with the Federal Reserve? 
ERIC FREEDMAN: Yeah, absolutely. In fact, Bill and I were on an investment meeting earlier today. And I said that Jay Powell, who's the chair of the Federal Reserve, he has an unenviable job right now in terms of the complexities he has to deal with. And back to our analogy of the treadmill ramp. And think of the Federal Reserve as that proverbial personal trainer really seeing how the runner is doing. 
And I think the observations from the Federal Reserve are that, hey, look, this runner is actually doing pretty well. And so I think most personal trainers are not going to the lower the ramp until there's some signs of meaningful fatigue. And I think that, really, where we find ourselves, Bill, is the idea of, look, how long can the ramp remain this elevated? 
Not to get into a lot of technical shtick here, but right now, the effective interest rate the Federal Reserve controls is at 5.33%. That is, from a historical standards, a very, very high level to that treadmill ramp, if you will. And so the Federal Reserve, we think, understands that that is not a sustainable level. But until inflation comes down, until they start to see some evidence, they're in a tough spot. 
And again, there's some concerns around, hey, can the Federal Reserve take action around the election? Will that be viewed as a political move or what have you? Again, that stuff, we look at these things very apolitically. Our viewpoint is that the Federal Reserve is in a tough spot because the longer that inflation hangs around, the tougher it is, if you will, for them to lower interest rates. 
So we do think that our base case is the Federal Reserve will get this timing correct, that their bias will be to move interest rates lower but probably in a more gradual basis. And that's actually OK because we're still seeing, again based on the data that we showed earlier, that there is evidence that the consumer is hanging in there. Again, the lower income consumer is in a tougher spot. 
There's a little more credit card delinquencies happening. There's a little more gradualness, if you will, to cutting consumption trends. But there still is, again, a lot of capital that's been built up over the past couple of years. And so that gradualness, if you will, that incremental slowdown, we think, is probably the most likely outcome. 
So again, we would not be surprised to see more bobs and weaves like today. In other words, where there is some reconciliation of, hey, interest rates are still doing-- are still high because inflation is still hanging around. So it's almost like a good byproduct of a strong economy is inflation. But the Federal Reserve also can't let inflation run indefinitely. 
So to what you said earlier, Bill, we have seen a meaningful pullback. Consumer inflation was north of 9% two summers ago. So we're certainly seeing some improvement. But the Fed has really been targeting that 2% number as their target. We're still well above that 2% number. And again, today's data suggests that we still have some room to go before the personal trainer will be a little bit easier on the runner. 
BILL NORTHEY: Eric, we're going to keep you on the mic here in a subtle effort here on my part to mix a commercial message with some data insights. We publish views on usbank.com/marketnews, and we also have the opportunity then to see what traffic is driven to certain types of articles. 
And there's been a lot of traffic around things like prospects for a recession, potential capital market correction, suggesting that there may be some investor anxiety out there. And from your perspective, is this something around the general population's view around the Fed being able to navigate to a soft landing, or is there something else at play here? 
ERIC FREEDMAN: Yeah, I think it's a great observation, Bill. And to your point, we pay a lot of attention to what people are asking and what people are reading. And to tie-in Paul's thoughtful comments from earlier, if you think about that first cohort of people who are looking to reduce risk, that tends to be the group that understands that, hey, look, I should probably rebalance my portfolio back. 
And so I think most of it, Bill, is just the recognition that, hey, there's been a really strong tailwind to capital market activity. Asset prices are up. And so, hey, is this a chance for us to trim or rebalance? I think there's another cohort who's saying, you know what? This movement in higher-end asset prices is really the anticipation of a Fed that's going to cut interest rates and cut interest rates aggressively. And if they don't do it, then we can't justify current prices. 
That tends to be, Bill, the group that oftentimes either does not have a financial plan or has that fear of missing out, or FOMO syndrome, if you will, and maybe is a little bit late to being involved in some of the more recent gains. So I think that, at least by our data and some of the things we're paying attention to, there are some decent fund flows across different diversified baskets of securities. Again, across a number of different asset classes. 
We're not seeing a significant shift into all sides piling into technology or piling into US large cap equities. So I think there is a more balanced response, even though asset prices are high. And I think that one of the things that is also out there is that people get that there are some sectors that are very sensitive to interest rates. Think about real estate, think about utilities, consumer staples. 
These tend to be environments where, again, with rocky interest rates come more volatility in some of those categories. And so that's why you're seeing, like a day like today, real estate falling by 3 and 1/2% or 4%, or you're seeing staples or other parts of the utility space, if you will, reflecting some of those concerns. 
So I think those are some of the dynamics that we're seeing. I think there's always going to be a concern from investors about, hey, have prices gotten ahead of us? That's why we think tying it back to a rebalancing policy, as well as a thoughtful financial plan, helps to take some of the emotion out of those decisions. 
BILL NORTHEY: Yeah. Appreciate coming back to that common theme of the financial plan. So as leaders of our investment organization and client facing organization, I'd like maybe both of you to give us a little bit of an elevator pitch on why U.S. Bank Wealth Management and what we can do from your chairs to help clients achieve their goals and what matters most to them. Paul, let's start with you, and then Eric, I'll have you conclude with a brief comment as well. 
PAUL SPRINGMEYER: Yeah. And I'll keep this short. I mean, I think realistically, what we believe sets us apart is just our remarkably driven focus on creating a pathway for our clients to achieve the unique goals that they have. We want to surround each client with a full suite of resources. 
And we start that with a single point of contact, and then we invite in dedicated specialists to really provide all the aspects of the type of services that we provide, excluding-- you know, it'd be things like wealth planning, investment management, trust and estate services, and private banking. All of those are pieces of the puzzle. 
And I think, by marrying the strength and the capabilities of U.S. Bank as a whole with a local team that knows you and your individual objectives, I mean, that's how we can help deliver this comprehensive solution to you and really make those goals a reality. So the wealth landscape is inherently complex. 
And I think the other thing that we try to do-- I mean, there are a lot of things-- markets, economies, legislative changes, tax law changes. We just simply try to make this-- simplify the entire process for you as a client because we just want to be able to make the recommendations that we think are the best for you and your family for the long term. 
BILL NORTHEY: Thanks, Paul. 
ERIC FREEDMAN: Yeah, Bill. It's tough to follow that thoughtful remarks. You know, look, I would just say, from our perspective, one, we're a team, and we approach things as a team. We all have-- the three of us have the privilege of representing so many people that are just dedicated and hardworking towards our clients' goals. 
Two is that we're a very broad resource organization. Again, we're a big bank, but we have a local feel. And we have all the resources that we need to do the job concurrently. I think it's really important that we have outreach to clients, that we are accessible, and that's what keeps the lights on for us. So those are things that, again, we're very happy and privileged to have the chance to have the resources that we have. Making sure we're delivering that in a thoughtful way to clients is what gets us out of bed every morning. 
BILL NORTHEY: Fantastic. Thanks, gentlemen. And if we could bring our slide deck back up. One of the very consistent messages you heard throughout our conversation here today is the importance of having a plan, having a true north, keeping it appropriate and realistic and making the necessary adjustments to make it useful and meaningful for you in making decisions around your family's wealth. That's why this integrated wealth planning approach is so important as you focus on your unique situation and goals. 
So if we can go to the next page, to help support this planning experience, there's tools that have very interactive capabilities that allow you to create and collaborate with your wealth teams. And it gives you a lot more transparency and confidence in your plan. You can stress test, you can see real-time progress against your financial picture, and it's really an important opportunity for you to make the application of financial planning real to you. So we would encourage you, as we end our time today, think about some of the resources and next steps that might be applicable for you with the topics that we learned about from both Eric and Paul today. 
So if you're interested in a recap of today's conversation, within the next day you'll be able to access a replay of this webinar at usbank.com. And in the meantime, if you go to the Resources tab, again, at the bottom of your screen, you can find links to many insights, analysis, and guidance on the markets, or you can, also as previously referenced, go to usbank.com/marketnews. Please bookmark that site. Very useful information that you can find there that's continually updated. 
So if you're not a current Wealth Management client but are interested in knowing how to apply some of the insights to your personal financial situation or just want a second opinion, we'd love to have a conversation with you with one of our Wealth Management teams. You can reach out to any of the-- to our teams in one of three different manners-- the phone number on your screen, 844-233-5836, you can go to usbank.com/advisor to find a banker or advisor closest to you, or if you'd like to have someone contact you proactively, you can use the Contact Me tab at the bottom of your screen, and we'll have someone reach out to you following this webinar. 
So as we reach the end of our time together, I want to again thank Eric Freedman and Paul Springmeyer for their great insights that they've shared today and, most importantly, thank all of you who took the time out of your day to join our webinar. Please look forward to the next webinar in this series, which should be coming in approximately 90 days. We want to thank you again. Have a great day.