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US stocks are back to trading around pre-tariff levels, and according to my next guest, this could be a good time to evaluate whether you are invested at the right risk level. Joining me now on set is Kristen Bitterly, head of City Global Wealth at Work. And Kristen, the recent pullback was a bit of a shock to the system for many investors out there. What are some lessons that we can take from the latest drawdown?

It was. So, it's very interesting. I think when you look back on any market pullback, you're going to have the same type of investor psychology and the same type of heuristic biases. We are, we have a massive aversion to losses. We want clarity in terms of what is the policy outlook, what's going to happen with tariffs. And so, I think that, you know, now that the market has rallied back, this is a great moment to actually ensure that does my financial plan make sense? Does my asset allocation make sense? How did I feel over the past couple of weeks? Was I someone who was really ready to make a change? You don't want to make those changes in the spike of volatility or in a sell-off. You want to take a moment right now when volatility has come in substantially, when the market has recovered those losses to say, am I positioned in the way that makes sense for my own risk budget, no one else's?

We've been hearing a lot of market buzzwords these days, from diversification to rebalancing to hedging. What does this all mean for the average investor, and how could they utilize those strategies in their own portfolios?

Sure. I think on the major thing is to take a look at what is your time horizon, what are your goals in terms of your overall wealth. And so, taking a big step back and saying, again, it's not your goals, it's my goals. How is it preservation of wealth? Is it growth of wealth? Is it actually seeing appreciation of these assets? And so, when we look at these buzzwords, what do they mean? So, hedging strategies. What do hedging strategies do for you? It's like insurance, but on your portfolio. So if you're someone who says, I want to be invested because this market could grind higher, I saw what happened, I don't want to market time, but I want to dial back the risk and have some downside protection, that's exactly what hedging strategies do for you. They add downside protection to your portfolio so you can confidently stay invested. The other things you mentioned, like diversification, you want uncorrelated assets. If you have certain assets in your portfolio that do well when other assets are doing poorly, you want that in terms of mitigating some of this, this downside risk.

And given the Moody's US credit rating downgrade, how are we looking at fixed income opportunities? And should you reallocate given that downgrade?

So the downgrade, I think is basically telling us what the market already was telling us in terms of some of the risks on the horizon. So I don't necessarily think that in and of itself is that significant. But I do think that combined with what we're looking in terms of the bill going through Congress as we speak, looking at some of the inflationary forces, how the US is actually going to be able to finance this. So when we look at the spending bill and say net net from a deficit standpoint, what does this mean for our overall budget deficit? And what is that going to do to fixed income assets, particularly when you're seeing the movement 10 years, 30 years? I think it's important to actually, you can have fixed income, but you want to lean into quality, and you want to lean into shorter and intermediate duration as opposed to being exposed to some of that volatility longer end on the curve.

Let's talk about big tech because we saw big tech lead a lot of the gains, but it also led a lot of the losses in this latest drawdown. So, how confident are you in the future trajectory of Big Tech? Do you think this sector can continue to be a leader here?

Yeah. I think any company that has a very strong balance sheet and is able to withstand some of this volatility is going to be a leader. So what are we looking for? We're looking for strong companies with strong free cash flow generation that can actually fund and finance their own growth. So, looking at Q1 earnings, what were some of the benefits and some of the green shoots out of Q1 earnings was the fact that a lot of these companies came out and they said we are going to continue capex. We have plans to not back down on a lot of these things. Are we prioritizing? Yes, but we're going to continue to spend. We're going to continue to invest. And so I think the idea that when you look at these companies with large balance sheets that are really well managed balance sheets that continue to generate that free cash flow, there are some interesting opportunities there. And remember, tech does also provide a little bit of a defensive if we think of like utilities. What are some of those things in a recessionary environment that you are not giving up? There is an element that you're going to still have your smartphone. You are still going to make sure you're connected to the internet. You're still going to make sure that you are engaged in all of the devices that you need to be able to do your job, be able to go to school, etc.

Netflix has been a big tech story that's cited as a defensive play. Shares are up over 30% at this point. But there's also been a recent focus on opportunities beyond the US. Are there certain regions, sectors that you think investors should be looking at internationally?

Yeah. So international for us is something where it's definitely an active management and also something where it's idiosyncratic in nature. So you don't want to go into a market where you could actually have be overexposed to value. You could be overexposed to certain sectors without knowing it. So sometimes just going in and buying the ETF or doing something that's index based is not going to get you the exposure that you want. So I would say international diversification, it certainly has worked year to date. We can see a lot of those capital flows, particularly for international investors who are pulling money out of the US and going into markets like Asia and Europe. We've seen the benefit from that standpoint. But what I would say is I would say for US investors diversifying internationally can make sense, but just make sure that you're in the sectors that you want exposure to that are some of those long-term secular growth trends instead of being exposed to parts of the market that don't make sense.

As we were talking about in the break, it's been a pretty wild time, but some great advice to sort of keep everyone level-headed during this time. Kristen, thank you so much. Appreciate it.

I know. Thank you.