Economic data is limited and sending mixed signals, making the outlook uncertain. Our Co-Chief Investment Strategists Emily R. Roland, CIMA, and Matthew D. Miskin, CFA, share their views on the economy, rate-cut expectations, and how they’re positioning portfolios in today’s environment.
As the economic landscape grows more complex, investors and advisors are facing new questions about growth, inflation, and what the U.S. Federal Reserve (Fed) may do next. In this episode, host John P. Bryson is joined by Matt and Emily, who discuss the strength of the
ongoing market rally, recent volatility in the banking sector, the bond market, and rate-cut expectations. They emphasize thoughtful allocation, diversification, and a focus on quality as advisors position portfolios in a momentum-driven environment.
Below are a few highlights from the episode:
1 How is U.S. economic data shaping up currently?
Emily: Economic data is complicated right now. The latest small business survey by the National Federation of Independent Business showed a deterioration in sentiment. Manufacturing data is split, the Fed showed mixed messages, and job openings are decelerating. It's difficult to get a read right now given the lack of economic data due to the government shutdown. Overall, the U.S. economy is continuing to see a slow deceleration.
2 What is the bond market telling us about possible Fed rate cuts?
Emily: Credit markets are stable, with high-yield spreads below 3.0%, suggesting no broad stress. The two-year Treasury yield, which has broken below 3.5%, indicates the Fed may need to cut rates more than previously expected. Inflation is also likely to slow more than official data suggests. Labor market softness and real-time housing data showing falling prices are leading us to expect the Fed to cut a bit more, we think potentially four or five cuts into 2026.
3 What are your conversations with advisors and investors focused on right now?
Matt: While the recent rally has been remarkable, the question is if it’s sustainable. Our focus is on how to continue allocating capital for appreciation for clients, but in a thoughtful way, which is why we’re discussing diversification. We’ve talked about alternatives like infrastructure-related equities and multi-alternative strategies, as well as mid-cap equities to reduce concentration risk in large-cap U.S. stocks. On the bond side, you can still get good income for clients where you can liability match and use this income for spending needs over the coming years—so it makes sense to take advantage while it lasts.
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Speaker 1
Hello and welcome to the Portfolio Intelligence Podcast. I'm your host, John Bryson, at an investment consulting and education savings at Manulife, John Hancock Investments. Today is October 20th, 2025, and I've invited back Matt Miskin and Emily Roland, our co chief investment strategist here at Manulife, John Hancock Investments, to talk about what's happening in economies in markets around the world.
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Speaker 1
Matt, Emily, welcome.
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Speaker 2
Hey, John.
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Speaker 3
Thanks for having us.
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Speaker 1
You got it. Hey, Emily. I'm going to jump right in with you. I want to talk about the economy. How are the numbers coming in? So far?
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Speaker 2
Yeah. So, you know that Facebook relationship status button that says it's complicated? That's basically the way that we're thinking about the economic data right now. It's really all over the place. You just look back to to recent data. Last week, the NFIB Small Business Survey,
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Speaker 2
showed a deterioration in sentiment on that front.
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Speaker 2
But then you look at some of the manufacturing data
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Speaker 2
closely.
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Speaker 2
One that we watch is the Empire Manufacturing Index, which beat. But then its brother, the Philly Manufacturing Index fell. We look at things like the Fed Beige Book
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Speaker 2
that showed mixed messages across consumers and businesses.
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Speaker 2
So we're seeing really some chop. It's really difficult to get a read right now given the government shutdown and the lack of economic data that we're getting.
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Speaker 2
We've been using some more timely or kind of alternative sources of labor market data.
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Speaker 2
That's obviously really important to us in order to gauge the health of the economy today. So things like indeed. And a,
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Speaker 2
piece of data from link up.
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Speaker 2
And those are both showing that job openings are decelerating. So when you put it all together, we are seeing some weakness in the, the macro picture,
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Speaker 2
not certainly falling off a cliff, but continuing to see a slow deceleration right now in the U.S. economy.
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Speaker 2
It's happening globally as well.
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Speaker 2
Probably, you know, are not probably, but we are holding up the best in the United States on a relative basis.
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Speaker 2
Things like the German Zu sentiment index, industrial production in Europe all falling.
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Speaker 2
But it's certainly hasn't been reflected in the markets. And I know that's something that we'll get to hear as we move through the podcast.
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Speaker 1
Yeah. Thanks, Emily. Hey, Matt.
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Speaker 1
Emily has her economic Facebook status as complicated.
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Speaker 1
I don't think you're a big Facebook person, but maybe on LinkedIn, how would you have the earnings situation so far?
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Speaker 3
Well, earnings. You'd be the most popular person on LinkedIn right now. It is. Earnings are just coming in awesome.
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Speaker 3
So the estimates at the beginning of the quarter are about 7%. We're coming in more like 9 to 10%, 85% beat rate. And financials just came in last week with a string of beats. And they came in with earnings growth of about 20% reported thus far.
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Speaker 3
So it is you know stocks follow profits in our view.
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Speaker 3
I know there's an old saying the it's the economy stupid. I grew up in the 90s. That was something that really I heard a lot of. And now it's the earnings we insert in much nicer word here at the Miskin household.
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Speaker 3
But it's about earnings.
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Speaker 3
And even though stocks are heavily, you know, richly valued, we're not looking for much more multiple expansion. The dividend yield is low. Earnings growth is the driver of returns. And we're seeing unlocking of stocks actually that were having great earnings. That performance wasn't even that great this year. A lot of times it's been the stocks that haven't had good earnings this year that have done better.
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Speaker 3
But there's been a bit more of a shift to recognizing these good companies that are growing earnings. And that's where we're seeing the best opportunities today.
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Speaker 1
All right that's great. I mean we've been talking about can earnings keep up with the multiple. And so far that's been the case. Hey I want to dig in a little bit deeper Matt. Specifically around the bank sector. Bank earnings have been strong like we've seen across a lot of the parts of the market. But there's been some volatility in the sector.
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Speaker 1
Help us understand what's happening there.
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Speaker 3
Yeah. So last week in some of the reporting
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Speaker 3
earnings, there was a bank that did have a loan that,
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Speaker 3
you know, basically they weren't paying. They were able to get the money back.
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Speaker 3
And that bad loan write off did send through a bit volatility across the the market. Otherwise though we're seeing nearly 20% earnings growth in mid to small cap
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Speaker 3
banks
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Speaker 3
and and banks in general are seeing great earnings growth.
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Speaker 3
So is you know one of these things where overall the businesses are good. The wealth management sides good. Investment banking is getting better. The yield curve is steepened year over year. But the knock is well there are there are companies or consumers that are, you know, weakening under the hood in terms of loans. And they had to kind of put across some,
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Speaker 3
you know, basically write offs or charges to represent that.
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Speaker 3
Overall, though, was not seeing a liquidity event in markets. We keep looking at high yield spreads. So if banks are having issues with loans, you look to the biggest lower quality loan market to see. Is there a liquidity issue there, high yield spreads, which is in essence a measurement of a junk bond yield relative to Treasury bond yield to say, okay, how much am I getting compensated for that lower credit quality I'm getting access to that spread is still like 2.8%, 280 basis points.
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Speaker 3
That's near the of the lowest in history. I mean, the lowest ever is like 2.3% in 2007. So still showing a lot of liquidity on the front of,
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Speaker 3
the high yield space. And then the fed is likely to cut rates in what we saw last week to the two year yield dipped beneath support. So 3.5% was support.
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Speaker 3
The two year yield is starting to sniff out that the fed would likely intervene. Cut rates, do what they had to do if they needed to support the bank system. Banks have already rallied coming into this week off of some of the weakness last week. We're keeping an eye on it, but in general we're seeing ample liquidity in the high yield market in a fed that could very well step in if they needed to.
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Speaker 1
Thanks, Matt. Emily, I want to dig into this a little bit more. We hear comments about there might be cockroaches,
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Speaker 1
in the hotel. And if you see one, you see many. How have the broader how has the broader bond market reacted to this situation in credit? And when you go back to your comments about economic,
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Speaker 1
you know, inconsistency, if you will, how does that,
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Speaker 1
impact things?
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Speaker 1
And where do you think the fed goes from here?
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Speaker 2
Yeah, John. So, you know, the most important thing we're watching to see if there's something more sinister going on here are high yield bond spreads. Matt mentioned that, you know, sitting well below 3%. That is the credit market telling you that everything is fine for now and that this does appear to be more of an idiosyncratic situation.
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Speaker 2
You know, we look at the yield curve as well.
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Speaker 2
And what we're seeing right now is that the ten year Treasury yields at a really important level, just hovering right around 4%, having broken below 4%, topping around here. The two year Treasury yield has broken below 3.5%.
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Speaker 2
We're talking about 90s references. There was another one like remember talk to the hand. So if you think about, you know, if you want to know what the fed policy is going to be from here, talk to the two year Treasury yield.
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Speaker 2
And right now it's telling you that the fed may need to cut a bit more than markets had anticipated.
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Speaker 2
Prior to some of these,
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Speaker 2
some of these developments taking place. You know, of course, there's other factors that are impacting the
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Speaker 2
yield on bonds. Certainly some of the slower economic growth data, some concerns around geopolitical risk,
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Speaker 2
but we're seeing some pretty significant moves there.
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Speaker 2
And in fact, we think that's right.
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Speaker 2
We think that the fed may be underestimating a couple of things.
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Speaker 2
One is the softness in the labor market. Again, it's tough to get a read on this right now because we're not getting things like the nonfarm payrolls report, but some of that more timely data that we're watching is indicating that cracks are widening.
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Speaker 2
And, you know, if you do look at the non-farm payrolls data that we have gotten, there wasn't,
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Speaker 2
a very you know, there was a negative print over the course of this summer that rarely happens outside of recessions. And then we think that inflation,
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Speaker 2
is going to be slowing a lot more than some of the official data suggest as well.
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Speaker 2
So we look really closely at the the services component of inflation, shelter or housing represents 35% of that. And if you look at again the real time measures of housing,
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Speaker 2
we've actually seen five months in a row of home prices nationally falling. That's per the Case-Shiller National home price index. We're seeing supply coming online. It's up about 17% year over year, albeit off of low levels.
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Speaker 2
But supply is picking up at the same time. That demand is slowing.
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Speaker 2
And affordability is still a major issue even with rates coming down a bit.
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Speaker 2
We're seeing folks that are concerned about their jobs, fewer job openings. That's resulting in a bit of a lack of confidence,
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Speaker 2
on the demand side as well. So big changes on the inflation front as it relates to housing that are not being picked up by the BLS.
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Speaker 2
Just kind of given the way that they conduct their surveys on shelter. So I think that's something that's important, that's leading us to to expect the fed to cut a bit more.
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Speaker 2
Right now, the bond market's pricing in two cuts for this year.
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Speaker 2
A total of three for next year. That's up from two.
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Speaker 2
We think it may be, you know, something like 4 or 5 cuts into 2026.
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Speaker 1
Okay. All right. Really helpful. I feel like you and Matt want me to have a 70s throwback podcast at some point in the future, so keep keep dropping them, I love it.
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Speaker 1
All right. Hey, Matt.
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Speaker 1
I want to broaden the conversation. You and Emily are out talking with advisors and other investors all the time. What other topics are coming up in the conversations that you're having?
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Speaker 3
Just really the move, you know, the last six months has been one of the tremendous bull market rallies in history. Frankly. And, you know, is it sustainable?
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Speaker 3
And just also, I mean, there's there's markets all over the world that are going up parabolic right now. And I think it's it's rightfully difficult as an asset allocator to look at equities.
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Speaker 3
And, you know, just think of it as, hey, you know, I mean we're just, you know, continuing to add to this allocation when valuations are much richer, the earnings growth is good. And you know that's what our focus on. But it's these this rally is is something usually you only see out of a recession. Only we didn't have a recession.
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Speaker 3
And so you know it's like how do I keep allocating capital for appreciation for my clients, but doing so in a thoughtful way. And we've talked about alternatives like infrastructure related equities,
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Speaker 3
multi alternative strategies. We've also talked about using Mid-caps to diversify your equity allocation. Because U.S. large cap is really concentrated in ten stocks right now.
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Speaker 3
The most concentrated in history. And so we're trying to diversify away from that AI exposure that's now so dominant in global equities using mid-cap mid-cap value.
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Speaker 3
And you know, on the international side it's hard I think also after such a massive run. But we are seeing more of a growth tilt kick into gear for us because the earnings growth in Asia is really starting to do better than Europe.
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Speaker 3
And then on the bond side, we're still seeing you're saying, look you can allocate and get nice income for your clients where you can liability match. Meaning you can use this income as spending for the clients for years to come. And let's take advantage of that while we have it. Because the other thing that investors are grappling with is if if Emily is right, in our view, is right that the the short end of the curve, the fed funds rate goes down money market and cash interest is going to be,
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Speaker 3
cut down significantly, and it's going to make it harder to meet those distributions that you had the years before.
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Speaker 3
So we're trying to manage that. But really it's being risk conscious in a world where it is so risk on and such a momentum freight train.
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Speaker 3
How do we thoughtfully allocate capital today?
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Speaker 1
Okay. I like that risk aware and a risk on environment. Hey, Emily, any final thoughts that you'd want to share with the audience before we go?
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Speaker 2
Yeah, I think just building on what Matt said. You know, you wake up every morning and there's just this
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Speaker 2
just technical,
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Speaker 2
you know, momentum driven, unprofitable companies, meme stocks, crypto.
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Speaker 2
You know, it's just like it's unstoppable. And for us, it's really about drafting,
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Speaker 2
this is, you know, it's always a risk when I try a sports analogy.
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Speaker 2
This one's around race cars. And, you know, you think about kind of not being that lead car, but being right behind, meaning, you know, we're fully invested. We're just not chasing risk here. We're looking for higher quality stocks. We don't want to, you know, sort of risk a crash or an accident by like loading up on too much beta here.
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Speaker 2
You know, you look across markets, not only in the US but also there's, you know, Europe. There's
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Speaker 2
you know, areas within Europe that are up 30% on no earnings growth. So we just want to be careful. There are owning high quality companies in the US.
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Speaker 2
We're looking at, you know, not overpaying for earnings growth. We want to own companies with good return on equity.
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Speaker 2
Great balance sheets, lots of cash.
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Speaker 2
It's sectors like tech and com services, you know, sprinkled in with a little you know industrials and utilities
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Speaker 2
that are all seeing positive earnings trends and higher quality,
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Speaker 2
higher quality balance sheets in companies. You know, as a whole. So drafting instead of trying to pull away, I think, from the rest of the crowd is the way we'd be thinking about portfolio positioning.
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Speaker 1
Excellent stuff as always from both you, Matt and Emily. My only complaint is you missed an awesome Days of Thunder reference. We could have.
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Speaker 2
I know I.
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Speaker 1
Would, I think I would have gotten it, it would have been awesome. It would have been awesome. But you know what? Maybe we save that for next time. Hey, folks.
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Speaker 3
That's good.
00;14;45;07 - 00;14;50;10
Speaker 1
Yep. If you want to hear more, as always, please subscribe to Portfolio Intelligence.
00;14;50;10 - 00;15;04;23
Speaker 1
On iTunes or our website or wherever you find your favorite podcasts. And also check out our website for viewpoints on investing, great business building ideas, and much, much more. As always, thanks for listening.
00;15;06;26 - 00;15;36;09
Speaker 1
This podcast is being brought to you by John Hancock Investment Management Distributors, LLC member, Finra, CPC. The views and opinions expressed in this podcast are those of the speaker are subject to change. As market and other conditions warrant and do not constitute investment advice or a recommendation regarding any specific product or security, there's no guarantee that any investment strategy discussed will be successful or achieve any particular level of results.
00;15;36;12 - 00;15;48;14
Speaker 1
Any economic or market performance information is historical and is not indicative of future results, and no forecasts are guaranteed. Investing involves risks including the potential loss of principal.
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Speaker 1
Beta measures the sensitivity of the fund to its benchmark. The beta of the market, as represented by the benchmark, is one
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Speaker 1
of fun, with a beta of 1.1 is expected to have 10% more volatility than the market.