Greg Davis: You know when we entered the year, Joe, we had spent a lot of time talking about just valuations in the marketplace in general. We were looking at the equity markets talking about how the valuations look stretched. I know you guys have recently re-run the Vanguard Capital Markets Model®. What are you guys seeing now given that we've had, you know, we've entered a bear market and valuations have to some degree corrected a bit?
Joe Davis: Yeah, and as you know you've talked publicly Greg for over a year that, you know, let's have lower return expectations because of valuations, particularly in the equity market. The unfortunate nature of the bear market is the profound rapid drop we've seen in equity prices, actually the fastest bear market to date in calendar time. The one silver lining, and perhaps the only silver lining, is the fact that longer run expected returns are improving for the first time since I've actually been running the capital markets model in over 10 years, right? And why that is is that prices have fallen so quickly that relative to the earnings in the fundamentals. The corporate earnings will fall. But what tends to happen historically during dramatic bear markets is that the prices fall more than the fundamentals over the long haul. And so the PE ratios or valuations are actually below what we would call fair value, which means the further the prices fall, the higher long-run expected returns will be. We do not, we cannot tell you what day or month or even the year, if that will happen. But I do have a high degree of confidence that the expected returns that we're showing to investors now on a 10-year basis have a decent probability being in the ballpark as being in that range because of our methodology, so they've risen roughly 200 basis points or two percentage points on the average return over the next 10 years, right? So you know, we don't know the path along the way, so the first time in in a number of years our expected returns are going up. They are actually starting to approach close to 7%, haven't been in the low 3 or 4%. This bear market is almost in, you know, is now the one of the reasons why we actually realize that return environment. So going forward, I think it’s an important perspective for clients to have. This is a really painful environment to experience. I've seen it in my own portfolio. But if you have a forward orientation, I can tell you that the expected outlook is improving given recent events.
Greg: I mean, yeah, there's a lot for investors to digest, you know, but it also reiterates the importance of what we tell investors all the time: the importance of diversification, making sure they rebalance on a regular basis, and stick to their long-term plan.
Joe: And again, I'm continuing to invest in the markets. I have confidence in the long run of the global economy and in U.S. financial markets. I don't enjoy seeing the volatility and I look at these charts every day. But I know I'm sticking to my personal plan and continuing to put our hard-earned assets to work.
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