[ MUSIC ] John, thank you so much for joining us to talk about how the Coronavirus pandemic is impacting the pensions and 401 K's and, savings of Americans as as you know this is a really scary time for people Not just because of their health but also because of their investment. So what are you telling Northwestern Mutual policyholders to do right now ?>> I'd say it really comes down to two things. One is stay the course. Whatever your investment strategy was, this would be the worst time to. Sell stocks, pull out of risk assets. Just because the market is down is no reason to flee them. Equities will go up. We don't know when. I would say stay the course. And then the second is to build cash. We are all living at home now, we are all quarantined. We are not spending money the way we used to and the extent where people can Build cash little bit. I think cash is a great asset when you're in times of either volatility, uncertainty, economic stress and so to the extent that people can build cash a little bit in their portfolios, I think is a huge, it creates confidence and it also creates the ability to Take advantage of things if and when the time comes. So those would be the two pieces of advice we would give. At Northwestern Mutual, you have more than $ 450 billion of assets under management. Are you following that same advice? I mean, you've been through bull markets and bear markets, what are you doing now? Two things. One is we, for whatever reason, in January this year well before the virus became an issue, we started to get nervous about valuations. And we took our liquidity up about 60 % in our daily opening cash balances So we were following that advice, so to speak. And then as the market has come down, we've actually been buyers of equities and risk assets. So we went from a slightly underweight position in equities in mid to late February to overweight now and we actually increased our allocation equity. So as an institutional investor. Triple A rated strongest company in the industry. We're actually being aggressive in this environment and acquiring equities. I think for the average individual investor that message is fine if you have the risk tolerance or we clearly do at Northwestern Mutual Former Chairman of the Federal Reserve, Janet Yellen is saying that she is anticipating that the US economy so growth will fall off by 30 %. There are 10 million Americans who have filed for unemployment in just the past two weeks, and also the CEO of JP Morgan has been saying that we're in for a bad recession. So You're still buying, you're not scared off from those warning signs? Two things, one is to our long- term investors. So I agree with the general consensus, the second quarter GDP number is gonna be a disaster. I don't have a crystal ball, but anywhere from 30 to 50 percent down, that's a horrific decline in economic growth. You know, a recession, technically speaking is two quarters in a row. And I don't know exactly how the third quarter is gonna come out. But as a long term investor, I'm not we're not really worried about what's going on right now. We're looking at the economy long term and I think by 2021 we'll be back to GDP growth that's positive and we may even get to a point where we expect earnings in 2021. To be at or about where they were in 2019. And if we get that the markets going to be backward was so I'm actually an agreement that the economy's weak right now but if you're a long term investor you can see through this and I believe human ingenuity, the American engineer, we're going to get there. I think the equity markets will rebound at some point nine eight times soon but over the as we get through this thing, What about right now people are soon going to be receiving their stimulus checks in the mail, what should they do with those $ 1, 200 checks? Should they use it to pay bills or save it? You got to pay for food and rent and all the things that are required. But going back to what I said earlier, to the extent that people can accumulate cash, so cut out all non essentials, We're all eating more at home. We're not going out. We're not having the same entertainment. Everything that we used to spend discretionary income on, has been more or less taken away from us because of these quarantines and I would say stockpile that cash and have it ready for when we start getting on the other side of this. I know Johnny g don't the company doesn't manage 401 K's but wonder if you can still give us a little bit of guidance here. When does it make sense to take advantage of this new no penalty withdrawals for 401 Ks because of the COVID- 19 prices. I would say almost never. So my answer to people would be unless it's the last dollars that you have access to to pay some bill that you can't avoid paying. I would not touch your 401k though that money is for the way into the future. The stock market, as I said is going to be higher than it is now. And I would say. I would encourage everyone not to touch that money unless you're absolutely desperate. I understand that Northwestern Mutual is in solid financial shape. You have a cash surplus of more than $ 30 billion, which is a record If called upon if necessary, you're in a position to pay out every single life insurance policy. You haven't laid off a single employee. So , how did you make all that happen and what can other companies learn about what you've done over the past year or so? I've been at Northwestern Mutual 32 years. This is the sixth time or fifth time I guess I've seen this kind of market Disruption and what I'd noticed is that people tend to minimize things that have low probability, even though they have high consequences and so the kind of thing that's happening now, very low probability, nobody saw that coming even as recently as February And yet the the notion of a stock market going down 30, 40 or 50 % is hardly a surprise, it's as I said the fifth time it's happened in the last 32 years, so what we do at Northwestern Mutual's we know bad things are gonna happen. We just don't know when and if you do that and you believe it, you prepare in advance, you can't prepare for it while you're in it. And so we enter the year record, balance sheet, record liquidity, records. Strength, a highly rated company and what that gave us is the ability to, as I said, be aggressive when this happened and we're actually on the offensive. Now we're trying to both be offensive in terms of our investment strategy, buying discounted securities, but also with our clients and getting out and meeting with them and getting them to do the things they need to do. Well, your company has a long history 100 more than 160 years that it's gone through a lot of crises going back to the Spanish flu pandemic back to 1918. The Great Depression Couple of World Wars, many financial crises that you referred to just a moment ago from your perspective, how how does this COVID- 19 crisis pandemic compare with all those other crises? So far, I would say it is very terrible, but not at the level of some of the other things we've seen. So that cultural relevance that you talked about that ability to look into our past and see the Spanish flu pandemic or the depression, and the economic consequences of that make, what I think we're in now see much less acute the Spanish flu pandemic Was more lethal to younger people it we didn't have the same ability to self quarantine that we do today. The current called Coronavirus seems to attack older people more So I think net, we're ready for this pandemic. And my guess is that it's not going to be as bad as other things that we've seen in our past and we'll get through this. [ BLANK_AUDIO ]

Northwestern Mutual CEO: Financial advice during COVID-19 crisis

Finance

John Schlifske has been at the helm since 2010.

Northwestern Mutual's COVID-19 financial advice

John Schlifske has been at the helm since 2010.

