Well, good morning, and thank you for tuning in to Let's Talk Money on eight ten wg Y. I'm John Mulay and I'm going to be your host for the next hour. I'm a certified public accountant, I'm a wealth advisor at Bouchet Financial Group and also the firm's chief financial officer and chief operating officer. So I want to thank you for tuning in this morning, on this mid August Sunday, rainy morning.
You know, as my.
Colleague Harmony Wagger, who hosted yesterday's show, said, there's not many weekends left in the summer, and you know, you got to make the most of these, even if it's rainy, finding things, some good indoor activities to do. But because
before we know it, summer will be over. And personally, my youngest daughter is still home from college, so enjoying all the time I can with Sarah, and well, next couple of weeks we'll have to bring her back to school, and you know, definitely going to be sad to have her go, but also excited to see her continue her journey in college. I know she's ready to get back. You know, Mom and dad can only provide so much excitement and so she's she's excited to get back. So
appreciate you all tuning in on this Sunday morning. You know, for those of you who are regular listeners to the show, you know you've had the pleasure of hearing our founder and leader, Steven Bouchet back on.
The radio over the last few weeks.
You know, as many of you as you know, Steve was away for almost four months, and you know during that time, you know, our thoughts and prayers were with Steve and his family. But Steve's back, and I know our radio listeners were glad to hear Steve's voice back on the air. You know, I've been with Steve for almost fifteen years, and you know I consider Steve a mentor,
a copt and the most importantly, a friend. And you know, I know I speak for our entire team at Bouchet Financial Group and I say, we're glad to have him back with all his optimism, his energy and his passion for excellence. And you know, during those four months, you know, you got a chance to hear many of our.
Colleagues on the show.
And Steve has built an amazing team and he talks about it, and he's built an amazing team and firm, and he's very proud of it, and quite frankly, we're proud. You know, we're twenty professionals and we manage over one point three billion dollars for our clients and that's a staggering number. And you know, we're proud of our accomplishments. We're proud of our team. And you know, as Steve mentions, you know, we've got a number of cfps almost eight
almost nine cfps. We got you know, Katie who passed the exam just waiting to get her final designation for CPAs we certified divorce Financial Analysts, a certified Private Wealth Analyst, Equity Compensation enrolled tax agent. You know, we've got a great team with a lot of expertise, a lot of designations, and Steve's very proud of our team, and we're proud to be part of this and you know, proud to
share our collective knowledge with the listening audience. And you know you're gonna continue to hear Steve on the radio and you're also gonna hear our associates. It is a huge commitment. You know, Steve has you know, shouldered this for many years on his own. Certainly Marty and Ryan and others have helped out, but certainly the role is to have Steve on the radio as well as other associates helping to fill that up. So appreciate you tuning in,
Appreciate you listening. I also want to mention on our website we've added something new in bouchet dot com and we've got a lot of great information. We have blogs, we post there, webinars, but one of the new things we've added is a way to sign up register for upcoming webinars. So I encourage listeners, you know, go to our site and you know, this week we've got a
you know, I think an exciting webinar. A topic that frequently comes up during our financial planning process, and that's about, you know, does it make sense to stay in.
New York or leave?
And you know, certainly as clients retire, you know, many times it was their job that kept them in New York, and you know, maybe their family moved away, maybe their grand kids are in another state, and they contemplate moving, whether full time or part time, and it's a big decision.
And quite frankly, there's a lot of information and misinformation out there you know, there's certainly some perception that New York is not a great state to retire, and you know, there's definitely some untruth to that, and so I think i'd highly recommend if anyone's interested in that topic, go to our website Bouche dot com. Up in the upper left hand corner, you'll see a tag to sign up
for our latest webinar. Register for that webinar. Two of our tax colleagues, Nicole Globel and Scott Strohecker, who actually are much more than tax but they're they're both you know, Nicole's a CPA, Scott's a CFP and enrolled agent, but they're both members of our tax team and they're gonna be holding this webinar. So I think it's been covering some great content. Highly recommend individuals if you can, you know, go register for it on our website. But also, you know,
go to our website. We also post our webinars and blogs there after the fact. So if you can't tune in live for whatever reason, certainly recordings of the webinar are added to our website and you can you can tune in at any time. So highly recommend that some great content you know, Steve being you know, great communicator's built a culture in our firm of Great Communications, and so we go a long way to make sure we're putting good content information out there on a timely relevant manner.
So again, and we've got blogs that are posted there, webinars and other contents, so highly highly recommend.
You check that out.
And if again, if you are contemplating moving, and I think this webinar will be timely and provide some great information on really you know, how to cut through all the noise and really evaluate, you know, the impacts of moving to another state. And again, as I said, you know, cutting through some of the misconceptions as well. So I'm sure Nicole and Scott will do a phenomenal job with that. So why I recommend you tune into that. So I appreciate you tuning into the show this morning, and I
hope you enjoy the next sixty minutes. I encourage any listeners to call in with questions. You know, you can reach me at eight hundred talk WGY. That's eight hundred eight two five five nine four nine.
You know, this morning we are going to cover.
Excuse me, a little allergy suffer here, So just said to take a quick break there, but we're gonna cover this morning to cover a number of topics, you know, including the markets, investing, some financial planning topics, and whatever questions you call with.
So we'll start off, you know with a market update.
You know, on Friday, the S and P five hundred, you know, posted its best week of the year, and that's as it's recovered from the you know, the violent
route that occurred earlier in the month. You know, in early August, I was on vacation, you know, and the markets up to that point had been you know, doing well, slowly climbing, just all positive, and then you know, you go on vacation and then you have a day like we had in early August, where you know, the markets quite frankly, we're in a state of high alert right all of a sudden, you know, recession seemed to be
on the horizon. You know, had a bad you know, jobs report that that was not positive, and then there was this complex currency trade, the yen carry trade, that sent Japanese stocks tumbling to the worst a in eighty seven, and jitters were there, you know, the VICS was you know peeking out over sixty close to sixty five, So concerns did did had the Fed? You know, all the language at that time. The headlines in early August were
did the Fed way too long? You know, you know they got it wrong on the first part of the equation. You know, they were too long to start increasing, you know, with their whole transitory inflation. Now the headlines were, Oh, the Feds, they're late, They're too late to the game. Now, ever since that point, the markets have been inching back. And but now the recovery feels like a sprint, doesn't it. You know, we had a series of rallies last week that really sent the our indexes to the best week
of the year. And you know, so the S and P up three point nine percent for the week, nowack up five point three percent for the week, you know, both snapping.
Four week losing streaks.
And you know, the the optimism in the markets, you know, came from a combination of factors. Some cooling inflation data, strong retail sales, and you know, solid job data. So and obviously all that leading to the expectation that the fans may be ready to do something. And you know, but what we saw was a nice broadening of the rally. Right, So not only were the SMP and the NASDAC up, you know, you had the Dow up close to three percent and the Russell two thousand up a little under
six percent five point six seven percent. So you know, what we've been waiting to see, and we've been seeing signs of it quite frankly over the last six weeks, is you know, that broadening of the rally. And you know, we've heard so much about the Magnificent seven. Well now we're going to start hearing about the magnificent others. And uh, you know, certainly that is healthy for our equity markets, right, not have too much concentration in just the high tech
stocks and have more broadened rally. And we definitely are seeing that, and you know, hopefully we'll continue to see that as the year continues. And certainly the expectation is as the FED starts to reduce rates. And I think at this point, I think it's not a matter of if, it's a matter of when.
And at what degree.
You know, how fast they start cutting rates, you know, whether it's slow twenty five basis points over time, or whether they start to take some bigger chunks. But I think belief is that happens, You're going to see you know, certainly impact, positive impact really across a broadened spectrum of companies, which will help that rally continue on a more broad basis. So you know, recap for the week, you know, S and P up three point nine. I'm up almost sixteen
and a half percent year to date. So here as we sit, you know, mid August, you know, S and P up almost seventeen percent.
That's uh.
I think if we started January one and said, you know, that's the crystal ball, we'd say that's a that's a good that's a good year. So far, NASDAK up a little over five so it's five point three percent for the week and year to date seventeen and a half percent. Dow up three percent, almost eight percent year to date, and the Russell as I said, three almost up.
Three percent, two point nine three percent for the week.
And almost five point seven percent year to date. So nice year to date results really across all the indexes, which is, you know, great to see. And you know, as bonds, you know, we're seeing the treasury yields start to come down. The ten year treasury fell to three point eight eight percent and I'm gonna talk a little bit about that, you know, a little bit later. You know, that's as we're seeing yields start to come down, and we certainly know as the Fed starts to cut rates,
what's gonna happen with the yields? And you know, we're still seeing some individuals and get questions and we're sitting in a lot of cash and you know cash maybe now money mark bank money markets, but really short term yields.
Where where they're going to react.
You know, as the Fed starts to reduce rates, you know, those those yields on those money market rates are gonna come down accordingly. So certainly we'll have some more discussion about that. But so positive signs there in the market.
And you know, as we look, you know, what were some of the drivers of the show this past week was a you know, a lot of economic data came out right, and so big picture, the signs of all that data, right is inflation is retracting and we're seeing a continuation of that.
So that's great.
You know, the labor market certainly cooling down, but it seems to be okay. You know, there's no question unemployment going up, job creation coming down.
We are seeing wage.
Growth, but there's no question we're seeing you cooling. But it doesn't seem to be problematic. You know, we're not off the charge. We're not you know, things are not terrible. So they are slowing down and we expect that. And then economy, yes, it is slowing down, but it's not you know, heading off a cliff. And those are those are signs, you know, data that the FED has been saying, you know, they've said they want data to riven decisions.
So we've certainly set the backdrop for FED policy makers. And so you know, as we look at that in total, consumer prices have increased to their slowest pace in three years.
Wholesale prices barely.
Increased in July, and you know consumer you know, retail spending you know, was more resilient than expected.
And you know, those those are.
All factors that Chairman Powell and the FED they're going to look at and and factor in as they make their decisions. So certainly, you know, from a data perspective, did this week some some great economic data in the markets reacted? And you know what we saw two weeks ago, as I mentioned, you know, about eleven days ago from Friday. Is you know the market is in this you know, I'm gonna say hyper reactive state right now, and and uh, because of that, we're gonna we may see some overreaction.
And I think this is a time as an investor, you know, you've got to decide really what your investment time horizon is.
Right.
So if if you've uh, you know, we always say you should be a long term investor, Well that's great, and there's times you can be. But there's times where maybe where you have to have a shorter time horizon, you know, and maybe you've got some money set aside, you're investing for your child's education or buying a home, or buying a vacation property, right and so and some of that may be a shorter time horizon.
So with some of this volatility, you know, it's important to take stop that, right It's it's it's okay, is it? You know?
And this is you know, typical part of our financial planning process, right as we try to you know, work with the client, so I anticipate cash flow needs, and I would say as an everyday investor, you should do the same thing. Right, And again, we are big believers in being long term investors.
But again, you have to look at what your cash flow needs and if you do have a need.
For cash and you need to pull money out of the markets at some point, you really have to look at that time horizon and make sure that you know you're investing.
Smart with that in mind.
So you know, if you've got to pull cash out, you know within you know, eighteen months and maybe as far as two years, you know, is that smart to let it ride entirely in the markets. You know, you may want to put more of it in fixed income, And again we're still very as a firm, very bullish in the US equity markets. But again, you have to
invest with what your time horizon is. And if you have a long time horizon, if this is money you're putting away for retirement or you know horizon that's you know, five ten years out, you know, we're we're Our approach would be a diversified portfolio, heavily weighted, if not entirely weighted toward US equities. You know, fixed income plays a role, and he's certainly based on your risk tolerance, right, you would put you in the appropriate allocation. But in terms
of horizon, if you had short term needs. You know,
we might put more of that into fixed income. And what's important there is you know, I've kind of talked about what's going to happen is the FED starts to reduce rates, which you know, I think at this point it's not a matter of if it's when we know, you know, clients who've had or you know, investors who have money sitting in bank money market funds, you know, you know that those rates are those are short term rates, and as the FED starts to reduce rates.
The yield on that is going to come down.
And how quickly is going to be dependent on how aggressive the Fed is and cutting rates.
And so if you're still sitting with.
Significant cash, you know, we've certainly been advising to you know, take that money invest into treasuries, do treasury ladders. Certainly, when yields were over five five and a half percent, uh, it was a great opportunity to lock in those yields for a longer period of time. You know, knowing that you know, money is sitting in a bank account is you know, you're you know as CD you may be.
You know, obviously you.
Can lock in a yield for a certain period of time. But if you're just sitting in a money market account, and let's face it, you know, you you could put you know, over the last you know, eighteen months, you could have money sitting in a money market you know, yielding you know, five and a quarter percent, and that feels good, right, It's like that's a that's a good yield.
But I think what's.
Happened is some investors got lolled into this complacency that you know, it's been yielding that right, but remember that was all driven by what the Fed has done with the race, if they've increased rates, and now that rates are going to be coming down, you know, we've already
seen you know, obviously treasury yields are coming down. You know, the two years just over four percent, h five years less than four percent, and as I said, the ten years to three point eight eight, you know, those were all north of five percent, you know, not too long ago.
And so.
But I will say, you know, you may have missed the opportunity of locking into some of those yields.
But still, you know, you.
You know, on the twelve month you can get four almost four and a half percent, and six months almost five percent. So I would say if you do have short term horizons, and and even if it's not short term horizon, but it's it's maybe you've taken the fixed income part of your portfolio and let it really float in short term money markets. You know there's still is
time to lock in some yield. That highly recommend you look at treasuries, maybe do some treasury ladders to lock in some yels while you can so, because we certainly expects as rates go.
Down, you're gonna get a decrease.
Rate on those on those money market funds as well. So we're gonna take a quick commercial break, so please stay tuned and we'll be right back with Let's Talk Money on eight ten WGI.
Well, thank you for staying with us do that quick break.
This is John Malay and I am a wealth advisor, chief operating officer, chief financial officer at Bouchet Financial Group and hosting the show this morning.
So I appreciate you tuning in.
I hope you enjoy this show really started off with a market recap, but certainly encourage listeners to call in with questions. You can reach me at eight hundred talk WGY. That's eight hundred eight two five five nine four nine. Hopefully the rain has kept some individuals inside and you're near your phone, and although we all have mobile phones now, so actually you can be anywhere and still call in, but encourage you to call in with questions. We certainly
appreciate call ins. And you know a lot of what we do. You know, Steve will tell you. You know, our primary job is investing and managing our clients' money, but you know, financial planning and financial advice advisory serves us a huge part of what we do. So not only
financial planning, tax planning. And you know a lot of the content that I mentioned about our webinars and blogs really are things that have come up in client meetings, right and so you know, we certainly as we touch on certain subjects more frequent with clients, you know, we let them bubble up to where we think it's content that we were we feel as worth putting a blog out or webinar are so so I would say if you're if you don't check out our website, please check
it out regularly. You know, we have a great content out there. Every quarter, Ryan Bouchet, our chief investment officer, puts a market update out there with market commentary also not only a blog but also a webinar, so it's great content and kind of what we're thinking about the markets. And you know, I will say I started off by talking about the volatility in early August, how things, uh, you know, very slowly started recovering this past week with
some you know, great pops of some economic data. We had some you know, really finished it all time best week of the year. So we're in the stage of of of you know, highlights and getting sometimes an overreaction to data. So I would say one of the things I will say about our firm is, you know, when you read a Ryan's bo Ryan Bouchet's blog about market updates, it's a much more measured you know, we're not we're
not just playing off of sound bites. It's really giving I think, some deep insight on what's happening with the markets, what we're thinking about as we're managing our clients' money, because it's easy to get caught up in the headlines, right and as we talk about as investors, you know, to be long term, not knee jerk reaction to what's happening. And so certainly we advise our clients to don't overreact
to the markets. That's why we spend so much time really communicating through all the different channels we do to make sure our clients are informed. They know what we're thinking about, and they know how we're digesting the data.
So I can't believe it.
We are halfway through today's show and we're going to be taking a break. I want to thank you for tuning in with me today and hope you enjoying the show so far. We encourage listeners after the break to call in with questions. You can reach me at eight hundred talk wg Y. That's eight hundred eight two five five nine four nine. You are listening to Let's Talk Money, brought to you by Bouchet Financial Group, where we help our clients prioritize their health why we manage their wealth for life.
Thank you for tuning in.
So far, and I hope you stay with us through the break and please call in with questions any question you have.
Thank you very much.
Well, good morning, and thank you for staying with me through that commercial break.
I'm John Malay. I'm am your.
Host for this morning's edition of the show. I am a certified public accountant, I'm a wealth advisor and I'm the chief operating officer, chief financial officer at Bouchet Financial Group. I appreciate you being with me this morning and encourage listeners to call in with questions. You can reach me at eight hundred talk WGY. That's eight hundred eight two
five five nine four nine. One of the things I mentioned at the top of the show really was, you know, at our website bluche dot com, we've added a new feature that you can register for our upcoming webinar, so highly recommend you check out our website. Not only do we have that capability that's new, we also have just great content and information there. So we have a webinar coming up this week by two members of our advisory team who are also really important members of our tech team.
We'll be doing a webinar on.
You know, relocating in retirement and that's, as I mentioned earlier,
becomes an important topic. And you know, many times as clients retire, they may have grandchildren who have moved with their parents to another state, or they just from a climate or other perspective, are thinking about moving and it's one where you know, quite frankly, there's a lot consider and uh, you know in the factor into that, so certainly tune into that webinar and if you can't tune in live, a recording of that will be posted to
the website so you can check that out. So, you know, one of the things, you know, we're just kind of giving a market update and uh, just a positive week in the markets.
You know. One of the questions we get a lot about.
Is you know, with the election, how that's going to impact markets, And you know, we will say and we've we've done some extensive analysis and Ryan Boussett has done some great slides on this is that long term, you know, whether it's Republican or Democrat in the House, UH as president, it's really has no impact. You know that long term markets figured out, companies how to figure it, figure out how to operate under under whatever playing field the administration sets.
And some some times it's counterintuitive. You know, some some industries that you think would not do well under a certain administration do well. So long term, we feel that that investors should not be concerned. Now short term, they're always you know, depending on how the election goes and how smooth it goes, there's always could be some disruption.
But long term. You know, we're not concerned. You know, it is interesting personally, you know, one of the things I'm more concerned about and wish there was more conversation is really, you know, our national debt. And to be honest, at this point, it doesn't matter whether it's Republican or Democrat.
In the White House.
That debt is just rising and rising at a increased pace. And you know, at the end of July, we surpassed thirty five trillion dollars in national debt for the first time ever. And you know, that's where it's really starting to impact. You know, now, interest payments are they've ballooned to be our largest expenditure except for sold security. So we spend more on interest costs on our national debt than we do on defense and medicare.
And and I.
Will say, if you look at the charts of how that national debt has increased, it's not like a nice smooth chart. I mean, the last you know, seven years, there's some dramatic increases in that in that debt. And you know, I don't hear any of our candidates talking
about tackling our debt as an issue. And I do feel long term, you know, we just can't keep kicking that can down the road, right that those I mean, we if we pay a staggering amount of our national budget is in debt, there are you know, interest on that debt, and we've got to deal with that at some point. So to me, that's from a political point of view. I want to hear somebody talking about that. I want to hear somebody addressing that issue, and I'm not hearing that from from anybody right now.
And uh, you know, it's uh.
It's gonna be an important issue. We just can't keep keep kicking that down the road.
So hopefully, uh, you know, we'll get a candidate or one of the you know, whoever's in in the White House, will start to focus on that because long term, you know, we have to. It's uh, you know, no different than any one of our households, right you just you just cannot keep leveraging to the point where your interest payments are.
Are are burdening you.
And I think you know, as a nation, we're getting to that point, and so it's gonna be important to really you know, focus in on that. So you know, early in the show, I mentioned, you know, highlight some of the economic data that came out, and uh, you know it was strong.
This this past week.
A lot of data came out and and uh it was some very good economic data for the FED to be seeing. And so you know, the July cp I was released and you know show that was slowing to rate a two point nine percent in July, which is the lowest since twenty twenty one. And you know that is that's exactly what Chairman Powell and the FED want to see. So you know that news came out this
past week, great news there. You know, the core CPI which excludes food, food and energy, came in out of one point two percent monthly increase and a three point two percent annually increase, so meeting expectations. And again we're in this scenario right now where I think the most important thing is no surprises. You know, we're meeting expectations.
So headlining and core CPI came in really nice and really, you know, from an inflation point of view, really seem to have you know, removed any obstacles that the Fed, uh FED would have to see for inflation. And you know, remember if FED has two mandates and that's not only keeping inflation under control, but it's also uh managing employment,
you know, getting max employment. And so certainly on the inflation side, it seems like things are moving in a sustainable fashion, in the right direction for the Fed to do what we all think they should be doing. And you know, it is interesting on the CPI front. You know, shelter costs have been stubborn and they you know, so zero point four percent of the increase was in shelter and it's represented ninety percent of the all items inflation increase.
So you know, it's interesting.
You know, we've been a lot of discussion about housing and shelter costs, and it is it's being stubborn, no question. You know, certainly we're seeing slow down and housing starts and certainly from the housing market perspective, seems to slow down, but costs are still increasing and so that that is this just you know, that's proving to be a stubborn part of inflation. But you know, overall, CPI moving in
the right direction. The other inflation ever that came out this week was PPI and and so that's that's the Producer Price Index. So think of that is like a downstream inflation measure. You know, this is what producers are experienced, and you think about it, if producers are manufacturing goods, those increases that they're encountering are if they're sharp increases, you know, down the road, they're going to come in the way of either increased prices to consumers, right or
margin compression, which could result in decrease earnings. But you know, thankfully, the PPI which came out last Tuesday, you know, really showed that that wholesale inflation you know, came in in July lower than expected. There, came in at point one percent, and so you know, year over year PPI rows two point two percent, and that's you know, June we had a sharp uptick up to two point seven so it's
nice to see that come back down. So two really important readings on the inflation front this week, both showing very positive news. And then retail sales came out on Thursday and basically, you know, showing came in above expectations. So some of the concerns that we saw with the jobs report early in August, you know, now seem to be waiting a bit, right, We're seeing good inflation numbers.
And then retail sales still strong and actually increased one percent in July and well above what economists we're expecting. And remember, consumer spending is still you know, represents two thirds of GDP. So the consumer is a key driver of the economy. And you know, the consumers out there spending and so that's that's good to see.
And so.
Again, you know, three really important economic data factors coming out this week. And you know, looking at the week ahead, you know, the FED does not have a f m C meeting, but there is a a meeting in you know, Jackson Hole, Wyoming, and FED Chairman Powell will be speaking next Friday, and uh, you know it's Kansas City Fed's Economic Policy Symposium, which is held in Jackson Hole, Wyoming. So that tiny little town is going to get a lot of attention next week because all ears are going
to be on at the conclusion of that symposium. Chairman Powell will speak on Friday, and you know it's widely expected that he'll give you know, kind of an outline of what they're thinking.
Now I think what will I.
Think most think what we'll see is you know, really notes in pencil versus pet you know, things that he can erase and change.
You know, he's looking for that flexibility because.
I think they are still data driven and there are there is still some important data that's going to come out between next week and then the fed's next meeting in September the seventeenth and eighteenth. So but'll it'll you know, it'll be some an important event and certainly all years will be on Chairman Powell next Friday, and I think, you know what we at that point we should have, you know, a good indication of the course ahead for
the FED. And you know, again it's not as I mentioned earlier, it's not just about if they are going to cut, right, I think at this point, you know, the heavy bed is that rates will be cut in September. It's going to be about how aggressive and not only that initial cut, but then subsequent cuts from there. You know, we all remember, you know, the last two years the rate increases that occurred meeting after meeting. Are we in that type of a pattern on rate decreases?
You know?
Will they are we looking at a twenty five bases point or fifty basis point decrease in September, And what's gonna happen from that point? And so the market is definitely gonna be looking for signs of that, you know coming out of Jackson holl that you know when they hear fed Chairman Powell speak on Friday, So important week ahead on that and you know, certainly a signal to what we're gonna see in September.
We're gonna take.
A quick commercial break, so please stay tuned and we'll be right back with Let's Talk Money on eight ten WGY. Well, thank you for stay with me through that quick commercial break. Just needed to wet my whistle there. And again I am John Mlay. I am your host for this morning show, and we are coming close to the end of the show, so I do encourage any listeners to call in with questions. You can reach me at eight hundred Talk WGY.
That's a one.
Hundred and eight two five, five, nine four nine. So we've been talking markets, the economy, a little bit of politics, but not much. And again my big political concern is I mentioned earlier, is really national debt and uh, you know, hope we get some uh some concentration on that, you know, with as we're seeing some of the overreaction I will say of markets to some of the data. You know, one of the things that you know can be asked by clients, is you know, should I employ DCA.
Dollar cost averaging versus lumps?
I'm investing and you know, I know Harmony talked a little bit about yesterday. I had a conversation with a client last week and you know, really, you know, if you as investment advisors, and Steve says this over and over, we have to advise clients to think with their mind, not their heart. And that's something that certainly gets to DCA. But we have a caller on the line. We have Robert and Rexford. Robert, thank you for listening this morning. And what can I help you with?
Yeah, I wanted to ask you a question. Can you hear me? Okay, yeah, I can hear you, find Robert, yep, yep. Great.
The question I have is, against the backdrop of increasing said FOMC interest rate increases thirteen.
Eleven consecutive ones.
Consecutive meeting increases, the market seem to hold up pretty well against the increases.
Well, why is that? I mean, I don't quite understand how that was a negative for the market.
Yeah, Robert, that's a great question, because I think a lot of individuals would have said if that not only that those increases happened, but those stayed as high as they were for so long. They thought there's gonna be some significant impacts in the markets. And I think the reason the markets have held up well is really based on market fundamentals.
You know, the.
Earnings have been strong, the outlook has been strong. You know, initially it was and I apologize, Robert, you must be in the car hearing a lot of background noise, but yeah, so so so great question. You know, with that backdrop of rising rates, and not only rising, but then the rates were held at that point for so long, why didn't the markets react negatively? And and again it was it was the fundamentals of the market. You know, the company earnings were there, you had some massive buybacks of
stocks by Apple and other companies. So and you know, also the consumer, right so one, as I mentioned, you know, consumer makes up two thirds of our GDP. The consumer has been resilient through this time period. So even though rates have increased and stayed high, consumer has been spending. You know, their balance sheets were strong going into this. Some of that by you know, certainly balance sheets were strengthened during the pandemic. You know, some of that because
of people just weren't spending. Some of it was you know, money they were getting from the government quite frankly, but balance sheets, balance sheets were stronger than ever, and so the consumer during this time period kept spending and interest
rates being high didn't have a huge impact on that. Now, certainly, as rates stayed longer higher for longer, you know, we're starting to see some slow down, but nothing dramatic, and so, you know, so it is looking more and more like the FED is going to achieve this soft landing, which.
You know is a great feat.
And again we don't want to celebrate too early, but I would say that the some of the major factors that have allowed that to occur has been the strength of the consumer and the fact that you know, the fundamentals of the equity markets have been strong. You know, company earnings have been strong, buybacks. You know, certainly the Magnificent Seven led along, uh, you know, that strength for a long period of time. So they carried the water for a long period. But certainly, as I mentioned earlier,
we're now seeing a broadening of that. So so great question, Robert, and uh, you know again, you know, and this is where.
You know, nobody has that crystal ball. Right.
If we all did, then you know, we'd be uh, we'd be retired at age twenty five with with huge fortunes. And and you know, you had a lot of really smart economists who who thought that you know, increases staying higher for longer was going to have a dramatically negative impact on markets, and it didn't.
You know, markets were resilient.
And you know, hey, we saw a correction in August and that certainly was you know, I think as we see you know.
As much driven as much driven.
By the unwinding of the Enkerry trade as it was some concerns about the recent jobs market. So overall, you know, markets resilient and the consumer extremely resilient, which has certainly helped that.
So Robert appreciate that question.
And so again up John Bealay, advisor with Bouchet Financial Group, a CPA, chief operating officer, chief financial officer. And we have a few minutes left to the show. Encourage any listeners to call in with questions. You can reach me at eight hundred talk WGY. That's eight hundred eight two
five five nine four nine. So before we just got that caller, you know, I was talking a little bit about DCA dollar cost averaging, and certainly as there's some volatility, you know, certainly, you know in long term investors, you know, there's been a number of analysis that shows over the long term DCA does not provide an advantage, that it better to get that money.
To work as as quickly as possible.
But certainly there's a motion with investing, right, and the lasting anybody likes to feel is I put money in the market, markets go down ten percent now, even though I may not need that money for twenty years, fifteen years, so there's plenty of time to recover, it's still that regret when that happened. So you know, certainly, if you've got money sitting on the sideline, you're doing some DCA, you know, you got to have to be disciplined look
for times to get that money invested in. And one, you know, it's a time where we can't overreact to corrections because you know.
In any average year, you know, you're got to see.
A fourteen to fifteen percent sell off, you know, so fourteen and fifty percent drop from the high of the market to the low, and that's just that's average, right, And so being an equity investor, You've got to expect that and you know, and not overreact to that. So certainly, you know, we certainly you know, with our disciplined investment approach.
Are we have an investment committee led by Ryan Bouchet, and we certainly you know, don't react that way and advise our client say, hey, although you may see headlines like we did two weeks ago, right that, oh no, we're you know, we're going to head into a massive recession. The Fed missed the boat. Now what are the headlines this week? Headlines this week is you know, great economic news on the inflation front, on the retail sales front. Looks like the Fed's gonna do an awesome job, you know,
navigating this soft landing. So you just cannot overreact to headlines and so in the same things as you see market to react and you know they can, you know, be interesting to see this week what comes out of FED Chairman Powell's mouth on Friday and how markets react
to that. Markets certainly are pricing in decreases, but again I think what the unknown is is, as a last caller said, you know, we had eleven consecutive rate increases, is that the type of approach, we're going to see to bringing rates back down or is it going to be in heftier chunks, you know, set a twenty five
bases point decreases, fifty bases point decreases or more. And you know, certainly the FED has not signaled they're going to be that aggressive, but you know, once they start cutting, you know, it'll be interesting to see how things react. So certainly, again as a long term investor, you've got to expect folatility. It's part of being in the equity markets.
It's a part.
It's the reason that the equities long term deliver a higher return than you're gonna get in cash or in bonds. So certainly have to have some of that discipline. And you know, so week ahead, you know that's going to be the big news, and then we're you know, we'll certainly get jobs report out, and then we'll be mid September and you know, FED will be back meeting and that's when we're gonna find out you know.
Where they where they go from there.
And you know, one of the questions I had from actually a friend this week was, you know about the S and P five hundred and you know the difference between you know, market weighted S and P five hundred ETFs and equal weight, and uh, you know it's one where you know, sometimes as investment professionals, we just assume
everybody knows based on the terminology. But you know, so difference with the market S and P five hundred market weight, right, so the larger company it's it's waited by the company's market capitalization, So you're larger companies right like Apple, have a much bigger impact on the S and P and the equal weight. Basically all of those five hundred companies
all have the same impact. You know, basically that that percent equal percentage of each company is so certainly with if you're trying to capture a broader uh rebound and uh,
then the equal weight can be good. But both investments and even though you're investing in the same companies, you can expect different returns for different things, and and so certainly, uh, you know, we're coming up to the end of the show, so really don't have a lot more time again spend on that, but a subject maybe I'll cover more on the next radio show, because both uh valid investments and but but different different even though different companies, same companies
expect different returns. So while we are at the end of the show, I hope you enjoyed. I certainly did, uh. I hope you enjoy the rest of the weekend. Also, be sure of tuned in next week and check out Bouchet dot com. As I mentioned earlier, you have been listening to Let's Talk Money, brought to you by Bouchet Financial Group, where we help our clients prioritize their health while we manage their wealth for life. Thank you again
for tuning in. I hope you enjoy the rest of your g I hope you have an amazing week ahead. Thank you and tune in next week.