Recent Market Volatility & the Role of Fixed Income

KATHY JONES: I'm Kathy Jones.

LIZ ANN SONDERS: And I'm Liz Ann Sonders.

KATHY: And the is On Investing, an original podcast from Charles Schwab. Each week, we analyze what's happening in the markets and discuss how it might affect your investments.

LIZ ANN: Well, Kathy, it has been an eventful couple of weeks since our last episode of the podcast. I don't know whether it was my terrible timing—or my great timing—to have been on vacation for that. I think the first week of my vacation was somewhat benign in terms of market action, but most definitely not the second week where we had a huge drop in the equity market on Monday and then a big rally on Thursday. It was actually one of those weeks where if you were on vacation, and unlike me, paid no attention to what was going on in the market, you might think it was a boring week. You just had to be there on a day-to-day basis. But that's the nature of volatility in markets. Sometimes it can stay fairly complacent for an extended period of time, and then bam. And that's one of the things that we always remind investors of—or warn investors of—about not getting complacent when you go through an historically long period of calm, which we had in the case of the Volatility Index, which measures volatility in the equity market. We had a six-plus year span of incredibly calm markets, and that obviously turned on a dime last week. And this is shaping up to be another eventful week. I'm back in the saddle again. I think you're taking some vacation, so I hope you have an easier time of avoiding things.

I also want to mention—we are blissfully not a politics podcast. You can get plenty of that elsewhere. And in particular, our own colleague, Mike Townsend and his WashingtonWise podcast.

But there has also been a lot of economic news and, you know, the aforementioned big changes in the market. So Kathy, I wanted to turn to you. It sounds like your expectations around the Fed's next move might have changed. So why don't you give our listeners an explanation of that and how it relates to the Fed's dual mandate in particular?

KATHY: Yeah, Liz Ann, it certainly has been an eventful time when you were off gallivanting wherever it is that you gallivant in the summer. But it was really kind of unique, but not unique. In other words, sometimes you get these cross currents in markets. It's been quiet and then suddenly the market sort of wakes up to these cross currents. And that's what it felt like, you know, that Hemingway line from The Sun Also Rises—"gradually, then suddenly." And that's the way it was.

But when it comes to the Fed, I would say my expectation is that they'll probably cut 25 basis points in September. I think what they should do is cut 50 and get moving. But my gut feeling is—just from the comments that we're getting from various Fed officials—is they don't want to move that quickly.

And so I sit here and I look at the kind of combination of factors that the Fed should be looking at—I'm sure they are looking at. Inflation's coming down. It's very, very close to their 2% target now by most measures—three months rate of change. However you want to look at it—the core PCE, the core CPI—all of that's very, very close to their target of 2%. At the same time, we've seen deterioration in the labor market. And that's worrying, you know, with the increase in the unemployment rate. I've heard various people talk about, "Well, you know, we've got new people coming into the labor market. We've got all these special circumstances. Maybe it's different this time." But the bottom line is if you're in the labor force, and you're looking for work and you can't find it, and you're unemployed, that's not a good thing. So when I look at that and I look at where the Fed has its policy rate now—at the upper bound of the fed funds rate of 5.5%—I just sit there and I say, "Why? Where is this inflation coming from that they're so fearful of?" Certainly not in the wholesale numbers—wholesale inflation numbers. It looks like demand is slowing down. It looks like unemployment is set to rise somewhat further. So I asked myself, "Why sit here, wait until September, go slowly?" It seems like they're setting us up for a real economic problem down the road for no reason.

So that's my expectation—is that I don't think they're going to listen to me. But I do think that if we're giving them advice, I'd say, "You know, go ahead and do 50 in September. Do another 25. And let's get the fed funds rate down into a reasonable range, considering we're pretty close to 2% inflation.” And we're in the midst of not only a downturn or a deterioration in the U.S. employment situation, but we're seeing very slow global growth. And that is worrying as well. So why sit and wait? I guess that's my latest view. 

So Liz Ann, what are you thinking about that?

LIZ ANN: Well, I agree with you that I think the Fed will do 25 basis points. I think it would—the surprise factor perhaps, if there isn't some telegraphing of going more and doing 50—might not be something the Fed is looking for. But I agree with you. I think at this point, given inflation having come down, the target range is on the high side.

The one thing I would say, though, as it relates to the equity market is if you're wishing for a Fed that approaches this cutting cycle in a way that would be historically really aggressive, you know, multiple moves of more than 25 basis points—what is sometimes called a fast cycle where they really have to be aggressive, it's probably because they're combating something more nefarious in terms of the economic backdrop than maybe what we have right now. And as a reminder, in the past, when the Fed has sort of put forth a slow cutting cycle—although you do tend to get some weakness in the equity market, it is much more benign than what tends to happen when the Fed is moving really quickly and more aggressively in cutting rates. Again, because in most cases, it's probably because they're combating either a recession or a financial crisis or some combination thereof. So even if they come out of the blocks with a bigger cut, I certainly would rather see them adopt a more methodical approach, assuming the backdrop does not warrant something more aggressive just based on the history of how the market has performed.

You know, the other thing I wanted to mention is, you know, the volatility last week I think had lots of components to it—the aftermath of the weaker-than-expected jobs report. We already touched on that in terms of the change expectation for the Fed. The fact that it triggered the Sahm Rule—which we've had Claudia Sahm on this podcast, and you interviewed her.

The so-called unwinding of the yen carry trade—the ability for investors to borrow at very, very low interest rates in Japan. And then Japan recently gave a surprise hike and promised more, and that started to see an unwinding of that. And that had ripple effects into other asset classes.

And then I think the last culprit—which is something to be mindful of as we head into the third quarter—is just some concerns throughout earnings season expressed by companies in and around the world of AI and the realization that there is a big expense side of AI and capital spending side. And maybe the revenue component of that is not commensurate from a time perspective as they spend.

So I think it was a swirl of events—including what we already talked about, which is the Fed—and it wouldn't be surprising to see a bit more volatility, certainly between now and either the Fed meeting, if that's your marking point, or the election.

Today on this episode, we are focusing on fixed income. So tell us about our guest—who you will be sitting down with, Kathy.

KATHY: Yeah, so today our guest is Matt Hastings. He's a managing director and head of Bond Index Strategies for Schwab Asset Management. I've known Matt for a number of years since I've been here at Schwab. He's a very lively and smart guy and knows all the ins and outs of this market.

He leads the portfolio management team for the Schwab taxable bond mutual funds and Schwab fixed income ETFs. He also has overall responsibility for all aspects of the management of the funds. Prior to joining Schwab in 1999, he worked in fixed income sales and trading at Lehman Brothers. And he's worked in fixed income securities industry since 1996.

Matt earned a bachelor of arts in economics from the University of San Diego. He's a CFA® charterholder and is a member of the CFA Society of Dallas/Fort Worth and the CFA Institute.

Matt, thanks for being here today.

MATT HASTINGS: Thanks again, Kathy. I'm honored to be your guest today. As the—I think the old radio line, "longtime listener, first time caller." Can you say that for podcasts?

KATHY: Yeah, I don't know, but it sounds good to me. Well, let's just jump into it. Matt, I wanted our audience to know a little bit more about you. We've chatted for several years, but let's just start with you talking about how you got into this business and ended up in your current role.

MATT: Sure, thank you. So I started in a sales and trading role focused on mortgage-backed securities at Lehman Brothers in San Francisco. That was a fantastic place to learn. These types of firms do a great job with training and offering exposure to lots of different types of security types and market environments. It was, like I said, a fantastic place to learn. It helps me to understand in this role, the role of capital markets, trading desks, and how all of those interplay together. I also learned a little bit about transaction costs, and I could see how all of those transaction costs have contributed to those wonderful buildings that are all in Manhattan.

But after working there for a handful of years, a colleague of mine left and asked me to consider joining him a few years later at Schwab. And I've been at Schwab nearly 25 years, all within the investment management area of the company. And I've always managed fixed income strategies.

KATHY: Great. Yeah, having spent time on those trading desks in Manhattan, I know what you mean about transaction costs.

MATT: Yep. Haha.

KATHY: Haha. But also the learning that takes place. I mean, there's just nothing that can replace, I think, the education you get in a trading environment because decisions have to be made, and they have to be made quickly. And so it's a great environment to learn.

MATT: Decisions are made. There's also lots of learning from osmosis—the conversations that happen organically back and forth as we all have been through this pandemic period and this work from home. There is something that's missed from being in person and hearing the organic conversations.

KATHY: Yeah, I agree 100%. I don't know how you replace that with pinging people on whatever app that you use. Let's talk a little bit more about your day to day. You do manage fixed income for Schwab. What is that like? What are your goals? How do you achieve them? What's your team like?

MATT: Well, I think it starts with a very clear understanding of what we're trying to do. And I often say to my team, "We only make one thing." We don't make widgets. We don't make phones. We don't make pencils and pens. We make investment performance. And for my team, we manage index strategies. And for us, the performance that we make is to match an index's return. And specifically, it's a bond index.

So how do we manage a mutual fund or an ETF? The way that I think about our investment process can be distilled into three simple steps—What does a portfolio need, what can we trade, and what does it cost?

And regarding number two—what can we trade?—I think it helps to understand and to have a perspective about the stock market versus the bond market. We know there's a stock exchange, but there is no bond exchange. Most bonds trade over the counter, which is to say that they generally trade between two counterparties instead of on organized exchange. And what that does is that creates uneven liquidity and availability of securities. Think about an equity manager for a second. She can buy all the stocks in all the mainstream equity indices—whether it's the Dow Jones, the S&P 500®, the Nasdaq,—they're all readily available to be bought and sold. However, for certain parts of the bond market, there are uneven liquidity characteristics and it's a challenge to find the securities that we're looking for. Having said that, there are certain elements of the bond market, certain sectors of the bond market, where there are liquidity characteristics that are somewhat similar to equities. And I can speak to that in just a second.

With this as a background, Kathy, there are two common approaches to portfolio construction that we follow. One is called sampling—and that involves buying a representative sample of issuers and issues designed to track an index. And the other one is replication—which is buying all of the securities in an index.

So replication strategies might be appropriate for highly liquid asset classes. Domestic stocks would definitely be one of them. It's very easy, like I said, to buy all the stocks in these mainstream indices. And U.S. Treasuries are also an asset class where that might be appropriate.

Sampling strategies are often employed for asset classes with lower liquidity characteristics. I'm thinking about corporate bonds, mortgage-backed securities, muni bonds—where there's not readily available securities to be bought and sold. They might be readily available, but it might not be what you want to buy and sell. So a big part of the process that we employ is considering those tradeoffs. I can buy X, but I really want Y. What are the implications for the portfolio if I do that?

KATHY: Let me just break that down a little bit before you go on so that our listeners get a pretty clear idea.

MATT: Sure.

KATHY: So you're trying to replicate an index and, say—let's talk about the Aggregate Bond Index, which is a combination of various investment grade bonds, right, taxable investment-grade bonds, including Treasuries, mortgage-backed securities, corporate bonds, etc.—and as you say, some of those trade all the time. They're very liquid. It's easy to find them and get them at a good cost. But others are more difficult to find, and that costs you more money, right? There's execution costs. There's liquidity costs because you can't get ahold of them. And I think about some of these big corporate bonds—some of them trade very often. But even in a big company that issues bonds, they might issue one stock and 120 different bonds outstanding. You know, and they have different coupons. They have different call features. They have different maturities. Some are subordinated. Some are senior. So you're really trying—with those cases—to kind of find something that's going to track the index as closely as you can without giving up too much in terms of cost. Do I have that right?

MATT: Yeah, you do. That's exactly right. It is about those tradeoffs. If I want to buy Coke, for example—Coca-Cola Company bonds—but only Pepsi is available. That might not be the best example because they're both pretty similar, but if you think about that example and extend that to other companies and other industries, I think that's a pretty good way to think about it. How does the portfolio look different if I wanted Coke but I can only get Pepsi? Or if I wanted a technology company—IBM—but I can only buy Apple or Dell or Cisco.

KATHY: Yeah, very different characteristics. You know, much different kind of story there. So that's probably one of your bigger challenges then, right?

MATT: Definitely, that is a big one. The fact that we have uneven liquidity in the bond market. There's a stock exchange, like I said, but there is no bond exchange. So a big part of the of the exercise for us is to set that table with what we can buy.

Another part that's important to think about is the composition of the index. It's clearly a very important factor to the portfolio construction process. And I like to think about something that's topical and current. We all know about the Mag Seven inequities. So say, for example, that I was managing an equity portfolio and I was sampling. Let's say that the available securities were all 493 of the S&P 500, but not that Mag Seven. Through one lens, that's great. I've got very good coverage of what's available in the S&P 500. That should do very well. But if I did that—and we all know how the Mag Seven have done of late—that would be a terrible portfolio. Those seven stocks have been the driver of performance for quite some time. And in the same way, I think it's important for us to think about what are the drivers of performance in fixed income? Not often do we have Mag Seven issuers like that—although they do issue debt, some of them—but it's really the yield curve, the level of interest rates, these top issuers, and things of that nature.

KATHY: So speaking of the yield curve and some of the changes in the market that take place, we've had a fair amount of turmoil lately in the bond market. We had a lot of volatility, a big spike in volatility when we got some unwinding of that carry trade involving the Japanese yen and riskier U.S. stocks. And that gave us a big rally—short-lived, but big rally in the Treasury market. What's your take on all this? What is going on? Should we look for more of this to happen, or was that a one-off?

MATT: Well, I think that you talked about the Bank of Japan and their hawkish pivot. That certainly was one of the things that got things going. I did read in one of your commentaries, "gradually, then suddenly." And that certainly seems like what's happened. Markets have been kind of moving in this gradual phase for some time, but things moved very, very quickly. And it could be a factor of, obviously, that Bank of Japan move. Could be late summer, could be also the fact that we know that monetary policy works with long and variable lags. The Fed's been on hold for about a year, and stocks have been near all-time highs. There's a lot of concentration in the equity market. The economy's performed pretty well. It's not perfect, but it's done pretty well from a macro perspective. But there've been some emerging cracks. Inflation has declined, but will it continue? Jobs missed expectations a few weeks ago. Will that continue? I think that's the one thing that has been really spooking the markets. There have been these undercurrents of weakness, but the headline numbers haven't really shown it that much.

You and I spoke about the jobs report. I like to think about level versus change. The level of the jobs report—the miss last … a couple of weeks ago was still a good number. It wasn't terrible. The sign wasn't negative. It wasn't a number that one would look at and say, "Oh, there's an imminent recession or something worse," but it's the change. And in finance, I think change typically matters more than level. People had built in an expectation for a certain number, and the resulting number was a change versus what they thought. That certainly seemed to kick things off. And it also coincided with maybe a change in Fed policy.

As we've talked about, the Fed has a dual mandate, but it's kind of been one sided for some time now. They've been really focused more on the inflation side of that mandate and less on the labor market side. Labor's been pretty good for some time, and inflation's been too high as we all know, but it's been coming down. So I think moving to a more balanced perspective makes a lot of sense. That was on July 31st. Two days later, the jobs report seemed to give that fuel to those that were looking for something bigger to happen.

KATHY: You know, when I think about this whole incident, two things stand out to me. I think the catalyst was really the decline in the stock market because you think about these trades. People borrow in Japanese yen at a very, very low yield and invest in assets that have higher returns. And recently, of course, that's been the technology sector in the U.S. And that has been a fabulous trade for a long time—until it wasn't—and then those tech stocks started coming down. And then you throw in, oh, maybe monetary policy is diverging between the U.S. and Japan. They're hiking. We're likely to ease—and all of a sudden, the Japanese yen goes up, and your stocks maybe that you bought are going down, and suddenly the whole script has been flipped, right? And if it's leveraged, you know, you get the tap on the shoulder saying, "You can't do this anymore. Have a margin call or two," right? So we've all seen these from time to time in the past.

But the second thing that stood out to me was that the Treasury market rallied so sharply.

MATT: Sharply.

KATHY: Yeah, it really played that role as a safe haven during that turmoil, which I think is something that we haven't seen for a while or we haven't experienced for a while. And it was reassuring to say, "Yeah, they're still fulfilling that role in the global economy." When everything goes nuts, people buy Treasuries for safety and liquidity. So I thought it was an interesting couple of days there.

MATT: It certainly was. I made a note to folks on my team immediately after that jobs report, and within seconds or minutes, there had been a 20-, 25-basis-point move in Treasury yields—about a quarter of a percent. And I commented that this is a career day. You don't often see moves that big in one day. And of course, a couple of days later, I think there was the VIX index—which is a measure of short-term equity volatility—I think that experienced its largest inter-day move dating back to the mid-1980s. So I think that that phrase that you used in one of your pieces—"gradually, then suddenly"—so that's a pretty good way of thinking about things. Markets have been moving gradually, perhaps on edge. All they needed was a spark, and it could have been the Fed. It could have been the Japanese issue that you talked about. It could have been the jobs report, but all these things I think conspired to cause a pretty good risk-off environment. To your point, Treasuries did provide that ballast to the portfolio. And the fact that we're starting with Treasury yields at a decently high level actually gave them some room to perform that ballast function.

KATHY: Yeah, well, I will give credit to Ernest Hemingway for that sentence.

MATT: Haha. Yes.

KATHY: I wish I had written it originally, but it's from The Sun Also Rises. So if you haven't read that book—listeners, it's an American classic, really good one to read.

You know, that brings up another question. So we were just talking about big surprises and moves in the markets. What's been—besides this move—has there been any big surprise in the markets recently for you, or have things gone kind of as anticipated?

MATT: I think the surprise, again, is the speed that things have happened. I think the topics that we've talked about have been out there for some time. It's not a surprise that there's been equity market concentration. It's not a surprise that Treasury yields have been attractive still—that the Fed's in a pivot point. So nothing there has been surprising.

But the all-in move that we saw a couple days ago that's since continued, I think, has been the surprise. I feel like it's a—when we were kids, we would swim at the local pools, and they would call adult swim. It feels like we've been in an adult swim environment where things are getting very volatile, very tricky. It's, "OK, it's time to get out of the pool, kids. This is for the professionals and for the adults."

KATHY: Haha. I love that expression. I haven't heard that in a number of years, but that one and the tourists, right? You know, if you're just a tourist in some of these trades, it's time for you to go back home.

MATT: Certainly.

KATHY: How about, sort of stepping back—do you have a view on Fed policy? I've been pretty open about my views of that I think they ought to start cutting sooner rather than later. But do you have a view on what you think they'll actually do?

MATT: Yeah, I think it's certainly the view starts with listening to what they're saying. And I think the statement certainly started to give them a door to open if they so choose to start to ease policy. So that was the statement. We had the press conference after that with Chairman Powell where I think he supported that. Of course, in a few more weeks, we've got the annual Jackson Hole event—Jackson Hole, Wyoming, hosted by the Kansas City Fed—where sometimes there are statements and comments that prelude moves to come by the Fed. So we'll be watching that. But I think a 25-basis-point move coming up in September makes sense, and I wouldn't be surprised if they did 25 at each meeting for the rest of the year. I think there's maybe four cuts priced into the market, thereabouts, which if there were four cuts, that implies that they'd move 50 at one of the three meetings. Of course they could move inter-meeting. I don't think that would be a very good signal, nor do I think moving 50 at one meeting would be a good signal. It might cause people to ask, "What do you know that we don't know?" So unless something changes—and of course, that Fed does have that optionality—I think they're going to go at 25 at the next meeting.

And the one more point, Kathy. I do think that they do have options now. With fed funds where they are, they actually can cut rates and potentially get some bang for that buck.

KATHY: Yeah, I would agree with you. I think that's where we're landing right now. But you know, we're all data dependent these days, so we'll have to see how things go.

Does that create a challenge for you, the uncertainty about Fed policy? Or when you're trying to manage these portfolios and stay in line with these indices, is Fed policy a big challenge for you? Or is there something—you mentioned liquidity—are there other factors that are challenges in what you're trying to do?

MATT: Fed policy itself doesn't necessarily create challenges for us. Again, as I mentioned earlier, we're trying to track the market, not beat the market. But in order to track the market, we rely on the good functioning of the markets. We rely on liquidity, we rely on availability, and some degree of predictability of transaction costs. It's when markets go sideways, when there's lots of volatility and uncertainty that it becomes more difficult to manage.

I think that the idea of a transaction cost is more a barometer of confidence. If I'm a market maker and I have confidence that if I buy a security from you that I can sell it quickly and turn it over very quickly, I might have a narrow transaction cost—so I could do that a bunch of times. But if that confidence starts to erode, I don't know if I could buy and sell as quickly. I'm going to apply a wider bid-ask spread to account for that uncertainty. That makes it more difficult for us, not just us, but everybody operating in the financial markets. Now, certainly there are some strategies that try to profit from that. But from what we're trying to do, that liquidity and that stability is of utmost importance.

KATHY: Yeah, OK, it's good to know—because I think a lot of times when investors are looking at these index funds, they're not really taking into consideration or understanding some of the challenges … that it seems like a very simple thing to do, but there's a lot more complication there, particularly in the fixed income world, than one would think.

And on that topic—and I will finish up on this one—what should an investor know about buying a bond fund or ETF?

MATT: I think the most obvious answer would be that with a mutual fund or an ETF, you get the benefits of professional management, liquidity for certain strategies, low costs. I think those are pretty easy ones. 

One other thing that I sometimes talk about—what's an ETF? I always say the F in ETF is the same F as in mutual fund. An ETF is a fund, very similar to a mutual fund in many respects. The obvious big difference is that ETFs trade on exchanges. But if you're going to be a long-term, buy-and-hold investor, it's a marathon, not a sprint. That was a nod there to the Olympics. But if you're a long-term, buy-and-hold, there are very few differences. ETFs are great for tactical positioning. They have a great track record of low tracking error. And tracking error is a measurement of a fund's performance relative to its benchmark.

I think it's also important to understand what you're buying. Not all bond funds are the same. Is it a sector fund? Is it Treasury? Is it corporates? Is it high yield? Is it active or passive? So I'd say the only dumb question is the one that you don't ask. It's really important to understand what it is you're buying.

KATHY: We always talk about, "know what you own." And I think with bonds, bond funds, ETFs—it's a little more complicated than it might be in other parts of the markets where people know what their stocks are or tend to have at least a good idea of what their stocks are. But in the bond market, it can be a little bit more opaque, a little bit more difficult to understand exactly what's going on. But I think that "know what you own" is probably the best advice in investing that you can get—is to dive in a little bit and understand before you buy something.

Well, this has been great. I really appreciate your time today getting some insight into bond market and bond ETFs and how they trade. And really thank you for your time today.

MATT: Thank you, Kathy. It's been a pleasure.

LIZ ANN: Thanks for that, Kathy. That was fabulous. So now it's time to look ahead to next week. What do you think people should be watching? What's on your radar?

KATHY: Well, as usual, we've got the aftermath of the inflation data. So that's usually, you know, kind of the big entertaining information that we get at this stage of the game between now and the employment report. So those are the big reports. We'll get the weekly jobless claims, which have, as you know, become more and more important to the marketplace.

Bunch of housing data, something I know you follow very, very carefully. And then there's something that I follow. It's what they call the Treasury net flows, the in and out. And given all the disruptions last week in the market and the kind of big volatility spike, that a lot of people speculated we're seeing inflows and outflows, particularly outflows from U.S. markets. So I'm going to be looking at that data pretty carefully to see if there were Treasury outflows or whether it really wasn't the catalyst that people thought it was. I'm guessing that we had such a big rally in the Treasury market that those net outflows might turn out to be net inflows. We're watching that carefully because this whole business about, you know, who's buying and who's selling in the international markets has now become obviously front and center for identifying these pockets of volatility.

What about you, Liz Ann?

LIZ ANN: Well, before I say what's on my radar—correct me if I'm wrong—do we also get Fed minutes, FOMC minutes next week?

KATHY: You're right. FOMC minutes are coming out, so I'm glad you pointed that out to me. It's summertime, and I'm losing track of my calendar before my vacation.

LIZ ANN: We also get the Leading Economic Index, the LEI, which has been in a declining mode for a couple of years now. And it obviously has not led to a formal recession, but I don't think we're past the expiration date of the so-called long and variable lags between things like monetary policy, leading indicators, the yield curve. So that's something I'm going to watch.

And then we'll get a few regional Fed reports—Philly Fed, Chicago Fed, and Kansas City Fed—and sometimes those can have interesting tidbits.

And then finally, we get the S&P Global version of the PMIs. Not quite as widely watched as the ISM version, but it's sometimes interesting if they either corroborate what the ISM recently showed or maybe provide a conflicting message. So that's on my radar.

Well, I ended up having a wonderful vacation. And by the way, where I gallivanted this summer was Italy, which was, you know, beautiful. And I ate a lot and drank great wine. So I guess I'm still a little bit in re-entry mode. But where are you gallivanting if you're willing to say?

KATHY: Well, we had originally thought about gallivanting to Europe, but things didn't work out. So we're going to be in the upper Great Lakes, on Lake Superior …

LIZ ANN: Oh, so beautiful.

KATHY: … in a very quiet spot where you—to get good internet service, you actually have to go to the bar in town. So I will be …

LIZ ANN: Well, that's fun.

KATHY: I will be out of touch. Haha.

LIZ ANN: Or you just multi-task and drink a little and be in touch.

KATHY: Yeah, I'll be drinking beer and logging on the internet with all the other folks up in the … the Nort Woods, as we call it.

LIZ ANN: Well, have a fabulous vacation.

KATHY: Thank you.

LIZ ANN: And that's it for us. As always, we very much appreciate you tuning in and listening.

You can always keep up with us in real time on social media. I'm @LizAnnSonders on X and LinkedIn. Make sure you are not following any of my dozens and dozens of imposter accounts. I am not active on Instagram or Facebook or WhatsApp. So that's my public service announcement for today.

KATHY: I'm @KathyJones. That's Kathy with a K on X and LinkedIn. And if you've enjoyed the show, we'd be really grateful if you'd leave us a review on Apple Podcasts, a rating on Spotify, or feedback wherever you listen. You can also follow us for free in your favorite podcasting app.

We'll be back with a new episode next week, so stay with us.

For important disclosures, see the show notes or schwab.com/OnInvesting.