Equity markets are exuberant, and credit spreads are tight, adding up to an economic soft landing

Gregg Greenberg 00:00:00

Welcome back to InvestmentNews Rising Stars 2024 where we spotlight financial professionals making waves in the industry today, we're honored to have Brandon Zurich with us, Managing Director, Portfolio Manager and principal at Johnson Asset Management. Since joining in 2011 Brandon has risen through the ranks, bringing a wealth of expertise to the firm's fixed income strategy team. Brandon, thank you for joining us. Your journey from a portfolio analyst to a principal at Johnson Asset Management is impressive. It shows dedication, not only to the firm but to your craft. Could you walk us through some of the milestones in your career that would have shaped your approach to managing portfolios?

Brandon Zureick 00:01:29

Yeah, sure. Thank you. It's hard to believe I've been in Johnson for almost 14 years now. And as you said, you started as an analyst, and it worked my way through, trader, analyst, Portfolio Manager, now principal and managing director. I think you know one of the one of the reasons I'm lucky enough to have had that progression as wonderful people around me, I had a boss early on, Michael Weisring, who really was a mentor to me in terms of understanding fixed income markets. He and I had a deep appreciation for the bond market that I think very few shares and together we had, you know, just a great time building our business and track record together. So, you know, you mentioned milestones. I think one of the proudest things and accomplishments that I've had is being named the principal of this firm. I am so proud to be not only an employee, but an owner of Johnson investment Council, and so excited to see what the next generation brings, not only in asset management, but the firm overall.

Gregg Greenberg 00:02:35

Now you're responsible for shaping fixed income strategy at Johnson Asset Management with the current landscape where markets are continually evolving, how do you and your team stay adaptable and ahead of trends?

Brandon Zureick 00:02:48

Yeah, it's not always easy. I think one of the one of the key successes is I have a tremendous team around me. But really the secret sauce, and the way that we're able to stay adaptable is fostering a culture of collaboration, open debate, disagreement, you know, respectful dialog. You know, I think one of the things we're lucky enough to do is have that opportunity pretty frequently, to put our heads together as a team in some of the most successful investment ideas or conclusions we've ever had have been born out of, you know, a healthy amount of disagreement. And so we find a lot of interest and excitement in in coming together as a team, and again, collaborating and debating and discussing together. And I think that's the way you're always staying one step ahead, is, you know, being resolute in your conclusions, but then also open-minded enough to listen to others and flexible enough to adapt when necessary. So now it’s the key, I think, is working together and building a nice collaborative team culture.

Gregg Greenberg 00:03:51

Well, you play a key role in Johnson asset management's macroeconomic strategy. How do you say, ahead of global economic trends and what current trends are you paying the closest attention to?

Brandon Zureick 00:04:02

Yeah, analyzing the economy. It's not always easy. Economic data is oftentimes brought with a number of issues, not these temperatures, it's very backward looking, and also, it's heavily revised, so somewhat counterintuitive, but some of the most sophisticated approaches with economic analysis attempt to simplify things, and, you know, really separate noise from signal. And I think the kind of key to figuring out where the economy is heading is really to understand those themes that are actually driving and impacting the future. So, you know, today, in terms of the themes and items that are on the top of my mind, you know, not the least of which is this tug of war between an idea of a soft landing and an economic recession. I think look at where markets are priced today. Equity markets are pretty exuberant, and credit spread very tight. And I think the odds, at least from a market’s perspective, is that very likely scenario would be an economic soft landing. I think we're not quite as convinced in that and paying attention to some really powerful historical predictors of economic downturns, like an inverted yield curve and falling eyes and, even more recently, labor market weakness. So acknowledging, however, that the economy has been a lot more resilient than maybe some have expected, and just kind of tempering those expectations a bit, but also acknowledging there's been underlying momentum, if you think about the things that could influence the economy in one direction, or you have to look at policy today, right that today, we have the pleasure of speaking with a Fed meeting here this afternoon, and so obviously the Federal Reserve has the ability to really kind of influence, particularly some of the areas that have had the Most weakness in the economy. You know, we're thinking about maybe the lower end income of consumers, which are struggling under inflation and high rates small businesses. You know, similar theme there. And so can the Fed ease policy quickly and meaningfully enough that we can kind of help those jump start those areas that have struggled. And you know, again, we're 24 hours or so away from a presidential and so thinking about, you know, what changes we might see in 2025 and now that we do have a clear picture of who will be in the White House, things like trade policy and immigration and tax reform are all on the top of our minds. So, these are probably big surprises, but definitely the kind of key themes that we're thinking and talking about a lot.

Gregg Greenberg 00: 06:41

Are there any strategies you find yourself relying on in times of uncertainty?

Brandon Zureick 00:06:35

Yeah, absolutely. So, two words that you're going to hear us say a lot here at Johnson asset management are discipline and quality. And so, to use an analogy, having an investment discipline is like having a road and having a quality approach is like having a compass. You know? What do I mean by that? So, having an investment discipline is so useful to manage not only the team's expectations and objectives, what are we trying to accomplish with our investment strategies? What are different environments where we anticipate performing well in? What are environments where maybe we won't? And I think secondarily, that is, is super useful when you know, clearly communicating expectations to clients, especially during environments that get relatively uncertain and turbulent. I mentioned quality, and that compass having a quality approach all the time, it really helps to build within that investment discipline and insurance policy against unforeseen events. You know, one example I'll use is, is the COVID crisis, you know, kind of very abrupt, sharp, very startling volatility event that many didn't predict, but having a quality approach baked in really allowed us across not only fixed income, but our equity strategies and asset allocation to deliver meaningful downside protection For clients during a period that was a very unexpected, but also, you know, B, very, very severe. So, we lean very heavily on strong investment discipline and quality is something that permeates everything that we do.

Gregg Greenberg 00:10:24

So, inflation is cooling off but may come at the expense of economic growth. How significant is this tradeoff for the market? And what indicators are you watching to assess the balance between inflation control and economic resilience?

Brandon Zureick 00:10:38

Yeah, I think this is the number one issue facing investors and economists today, is that balance between controlling inflation but not being so restrictive that we debt growth. I alluded to it a little bit earlier that almost two years ago, you started to see these really powerful leading economic indicators predicting a downturn in inverted yield curve falling leading economic indicators. More recently, it's been labor market moderation. I think you know, the war on inflation, at least from the Fed's perspective, is convincingly over again. You know the reason why they've now tiptoed into starting to ease monetary policy. Oftentimes, though, it does take a fairly long time for monetary policy to take hold and affect the economy, and so because we haven't had a recession yet doesn't mean that we won't. But again, you know, we're acknowledging there is a lot of momentum in the economy coming out of an extremely strong growth environment in the post COVID recovery, which has made this cycle far more resilient to tight monetary policy. So, it'll really kind of be interesting to see where we had, I think, at least a little bit more reassurance that the inflation we saw coming out of that post COVID recovery is mostly moderating for now. Growth looks pretty good, but, you know, not abandoning some of those telltale warning signs that have us maybe a little bit more conservative in our thinking these days.

Gregg Greenberg 00:10:10

And as a principal and Emerging Leader. What goals do you have for yourself and Johnson asset management in the next few years? How do you see your role evolving, and are there any resources or mentors that have particularly influenced your particular growth?

Brandon Zureick 00:10:24

Yeah, we have a painted picture. We have a vision of Johnson asset management. It really just states that we want to be a nationally known, nationally recognized asset manager across asset classes. And so, part of that is continuing to uphold our already strong reputation as a fixed income manager. You know, part of that, which is very exciting, I think, to me, is starting to share and tell the story of our capabilities in equity investment management. And so, you know, that's, that's a big piece of kind of how we view the fear of growth for Johnson asset management. You know me, personally, I am lucky enough to have worked side by side with Tim Johnson, our founder and even the first generation of portfolio managers that helped build Johnson investment Council. And so I think I have a unique connection to the culture and the principles that have made Johnson a very successful firm for almost 60 years, but also the energy and the excitement to kind of move Johnson into that next generation. And so whatever my role looks like, and whatever kind of leadership responsibilities that I might have, I'm very excited to take on and and look forward to when you ask about mentors. I think part of my success has been a really strong understanding of the analytical piece of our business, right fixed incomes, not always an easy or understandable area of the market. And again, I mentioned Michael lights ring earlier, having the ability to work side by side with Michael and learn the bond market and really kind of understand what some structural advantages are. Bacon versus a benchmark, how do you outperform? You know, what do bonds look like? Like? It's been so helpful for that. But also, it's the ability, I suppose, recently, for me to go out and clearly and simply communicate very complicated ideas, which was instilled in me from working side by side with a gentleman named Dale Coates. So I really like both of those individuals for very unique impacts and footprints that they've had on my career. And, you know, continue to kind of look forward to carrying that legacy forward.

Gregg Greenberg 00:12:31

Brandon, thank you for sharing your insights and taking us inside the world of fixed income and portfolio management. It's clear that your strategic approach and dedication are part of what sets you apart from this industry. Thank you again for joining us today, and congratulations on being named one of our investment news rising stars. 2024 we look forward to seeing where your career takes you next.

Brandon Zureick 00:12:48

Thank you.