From Downtown Milwaukee, welcome to Money talk with Bob. Each week, professional advisors from Land and company investments discuss the latest financial developments. Offering timely insight and long term perspective. This is money talk for 07/19/2024. Let's check the calendar. The brewers hit the road after the el break they're on the road all next week first in Minnesota then down to Chicago for the cubs. The Aaron water show takes place at our lake front this weekend.
And if saving dams in the stresses is more your speed, the Bristol Renaissance fair, up and running through September second. And for country music fans, it's country thunder over in twin likes this weekend. Okay. Let's start with some silliness. It's from Korea. A South Korean robot committed suicide by throwing itself down a flight of stairs That's right, the robot killed itself.
Apparently, the robot was this pun after a year on the job doing, document delivery, advertising, and information dis in. Our underappreciated little robots spun around 6 times and threw itself downstairs in I don't make this stuff up, but why is lester holt, not telling us about this. Milwaukee is getting cooler every day, but not the weather. But in style. We're getting a floating sauna with, of course, cold water immersion, which in this case is like Michigan.
The son will be docked, at the lake front right next to the discovery world, and they hope to be up and sweating by this fall. It even gets better. You can bring up to 9 of your closest naked friends. You wanna have a birthday coming up. A man working on the railroad in India was suddenly attacked by a snake. He caught the snake in mid attack, and he bit the snake twice before it could bite him And that ladies and gentlemen, it's how you kill a snake? 1 quick question. Who is this guy's dentist?
On the podcast today we have, Dave Sands, 2 3 saying. Tom Pap Fo and wrapping up the week. Here's Kyle Ted. Well, Thanks, Max. A bit of an interesting week and certainly an interesting finish to the week. The Nasdaq down pretty meaningfully down 3.6 percent closing at the bell on Friday at 17 07:27. S and P 500 down 2 percent, closing at 50 505. Still above that 5500 Mark.
However, the dow up 7 tenths of a percent this week, despite a 378 point give back on Friday, still up 2 2 87 for the week, closing it for 42 87 for the year, dow up, we'll call it 8 percent, including dividends, 16.3 percent gain for the S and P this year so far. 40 And then Nasdaq up 18.6. In a day, I mentioned interesting finish to the week in the overnight on Thursday end of Friday, we got some news that there was some pretty meaningful technology issues out there.
We've spent. I don't know how many months quarters years now talking about, how a lot of the... I think best opportunity for investors is gonna come from it's many of these technological shifts that are out there. And then we got a pretty good reminder today that every once in a while, things go wrong, many, many, many flights canceled, a lot of folks trying to place trades, access money having issues. We didn't have those issues fortunately with our partners.
Our systems up and running as we ended the week, knock on wood, we keep it that way. But certainly, I think a reminder that it isn't it isn't always perfect when it comes to these technological shifts. You know, Kyle, it's technology is a wonderful thing until it isn't.
And I think that, you know, recently, it's been more about a lot of things where we've seen where we've had hacks, and you know, we've had some of the, you know, companies held hostage by, you know, bad actors locking down their systems. It appears that that's not the case where what we're seeing today.
It just is simply a a failure on on, on technologies part, especially on, I think it was some micro software software on in in that particular, situation of crowds might have been a little bit different.
But I think it's a great reminder, especially when the conversation that we're all been having the last you know, year or so has been all about artificial intelligence, and the wonderful things that it's going to bring, And while we certainly believe that that thesis is accurate and and will provide us with some fantastic advancements. You also cannot turn a blind eye to
the fact that, yeah. This is all new stuff, New technology and and potentially there will be some issues and bad things can can happen along the way. Hey, Tom, we were joking before, we started recording, maybe not all new technology, Some of the stuff that seems to be functioning today is
some of the the really old technology. My... I pointed to Southwest and a headline I saw that they were using computer systems 19 92, which may have allowed them to avoid some of the hiccups that some of the airlines saw. But I think it's a reminder that, you know, for investment or it isn't just about picking that 1 grade idea. You've gotta cast a little bit wider net? Yeah. I mean, it's...
We have started to start you know, see a little bit of rotation here in markets of late, and and I think, I guess maybe this is the signal. Knock on wood that we do need to continue to look at other opportunities explore other options out there. And then maybe it is time for the rest of these under under law underappreciated companies to start kinda rising to the top. You know, we saw as, you know, we kinda started this off with the performance of the week, you know, the
you know, S 500 has been down. The Nasdaq has been down, but the same time that Dow has done fairly well and kept up, we've started to see small caps, Mid caps do much, much better, I believe, you know, about from about 8, 9 days ago, small caps are now up about 11 percent on the year. Made it caps up about 9 percent in just the last 10 days or so.
And again, that is, you know, it's really interesting that coming out of the bear market, what is typically leads us out of bear markets is, you know, kind of a resurgence to, or an expectation of better market or economic growth and typically, you know, who who benefits the most in those cycles. It's it's usually small mid cap. So we haven't seen that. That's can... That's the kind of the 1 unique thing about
this bear... Or I should say bull market rally we've seen over the last, you know, now year and a half since the the bear market and thing you know, I think maybe this is the time. Maybe we start to see a little bit of resurgence there and you know, as investors start to, you know, kind of balance out their portfolios a little bit more. You know, Dave, certainly with the richer valuations
we've seen, especially in the tech sector. It's not surprising perhaps that, you know, we're seeing some of that broadening. I think you add in those some concerns about the strength of the economy. You add in some some general slowness, and maybe that speaks to why again, maybe we cast that wider or not. And alright, Kyle, I think you've quoted many times on this show, you know, trees don't grow to the sky. And so it doesn't mean that stocks will go on in perpetuity without a hiccup along
the way. And when you think about... The the, you know, the basic fundamentals of what what do we look for to give us optimism for stocks and stock price going higher. You look at things like increasing earnings estimates. You look at increasing consumer spending numbers. You look at increasing Gdp numbers. Some of those big things that you, you know, we have been watching and have provided us with the, impetus for these higher market prices.
It's harder and harder to continue to make cases for those things going higher and higher and higher. And as you pointed out, We've seen a little weakness on on some of those fronts recently. And and maybe that's what's adding to this increased volatility as of late. You know, there are concerns out there that we're starting to kinda see some of those things decline. And certainly, I think those would correspond with some of the the late market of, you know, kind cycle
descriptors that you you kinda see. You know, as you get to the that ends, you know, of bull markets are are slowdown and some of that growth is, you know, we're starting to see some of those things being indicated in in some of these, numbers. You know, I started seeing conversations again from market pro is economist talking about the soft landing again. And we had probably spent a better part of the last year, a year and a half, kinda ignoring the idea that a landing was even coming.
I think it is encouraging that we've done as well as we have since the Fed started raising rates so long ago now. But it is also a reminder that, what they've been trying to negotiate this slowdown on economic growth, we are seeing in a lot of areas. And then fast forward to now what much of the fed is talking about for September later into this year and into spring. What the market largely now assumes is going to happen in the form of interest rate cuts.
Starting as early as this fall, Well, okay, perhaps this kind of period of a little bit weaker economic activity, certainly not bad economic activity, just not as good as what we've seen. Perhaps that's the very cover the Fed was waiting for to lead into those cuts, but Maybe unfortunately, dave that might add to some of the volatility on the bond side near term, even if it still tells the opportunity of of what's to come in in fixed income.
Yeah, Colin, and I think what, you know, what we have to really pay attention to is, you know, because we've been anticipating rate cuts for so long though. This has been, you know, the better part of almost a year that we've had an expectation for some future rate cuts. Certainly coming into 2024, there was significant expectations for multiple rate cuts this year. None of which have occurred. So I I think you saw the bond market rally in anticipation rate cuts recently. We, you know, we...
Seen quite a bit of movement on the tenure years. So, you know, again, I think I'd be a little cautious to, you know, everybody's trying to get out and front of that with their bond portfolios to take advantage of those rate cuts and, you know, not be late to the party so to speak. Front But don't forget that you have... If you have current income needs and you have current spending needs. I don't don't give up on those short term, bond positions and even your money market positions just yet.
You know, the time, I look at the Chicago Merchant tele Exchange which puts out. The Fo Fed tool. It's a really complicated way to kind of factor in? What's the market think is gonna happen here? The you know, I'd really just maybe spend a good 30 or 40 minutes if you could walking us through the specifics of how all those calculations are made. No. Really? I think the the tool itself is useful. Right? It's a a way to say, what do investors think is going to happen.
It looks at the futures market to get a gauge. But what it's telling us is that perhaps the fed is more willing or at least the market believes the fed is more willing to do these things than maybe what I had thought or hoped are necessary. I've been saying for a while that my hope is the economy remains strong enough
to support higher rates. That it wouldn't be the end of the world if 5 and a quarter on the overnight was where we are for a while because it indicates that Well, the the Fed believes the economy can support that. I do think there's a reminder out there though for investors that a couple of cuts, doesn't overnight change policy from being restrictive to all of a sudden being acc. And so there is a difference between 5 and a quarter and 0 where we
were. And maybe investors need to remember that you know, just because you make a cut or 2, it doesn't mean that all of a sudden the fed is worried that the economy is falling apart. Yeah. I think the market is astute enough to know what... What's what's the reasoning behind the movements, and that's more important than anything. As you know, It it really comes down to... Not you know, not going to... Not flipping the switch to accommodate, but just less restrictive that as you note,
the... This economy can handle higher rates. And, you know, it's it's, you know, as our retirees and clients, know, higher yielding, higher interest rate world is not a bad thing. It's kind of kind of nice. Safe money is is valuable. You know, And and it I think they're enjoying the benefits of that to some effect. And so, yeah. My my my guess, my belief is that... We're we're gonna see some cuts, but it's more or less getting... Trying to find that, you know, what they call terminal
level of rates. Where is that gonna end up being? You know, we hear talked about it throwing thrown around. Maybe that's an overnight rate somewhere between 3, 3 and a half percent or maybe perhaps higher, but, I I think the consensus amongst most economists is that it it really isn't about 5 5 and a 5 and a quarter or 5 and a half where we are now.
That maybe for this kind of economic environment for the type of growth that we believe we we can forecast and foresee that it is at least a little bit lower than where we are now. And and really, I think the... The the next big guessing game is just not when are we gonna lower boat at what pace you know, when when do we start this off and at what pace are
we going to do this? I I think it's, you know, just important to kinda of kinda set the tone, you know, put the markets from stop to stop worrying about it so much and and causing so much volatility as that, you know, economic data continues to be, you know, fairly mixed you know, as... You know, and and that could start changing soon here, but it it's been very hard to really put a pin and say, okay. Well, this is a a trend and that trend is continuing with us here.
From now and until the end of the year. So III think it would be... You know, it'll that'll be the the thing that I'm kinda paying it's test into is just, you know, what what ultimately may be the pace of of of cuts and and where the tenure goes from here. Which No. I think that's that's still the right thing to be watching, Joel, maybe the perfect time to bring you in just for a little bit of update on the economic news itself.
Obviously, the big 1 at, kind of the front end of the week was the retail sales data for June. A little more positive in May than we thought. And potentially, June showing more of that weakness that we were talking about. Hey, Kyle, the economic analyst actually... Figured that, May was gonna be a downturn in consumer spending as it's represented in the the retail sales numbers, and it was a standstill. There were as much spending in in June... I'm sorry we're talking about June.
There was as much spending then as there was in May. And a couple a couple of things might have affected that too. 1 of the the categories, the retail categories where sales went down, was gas stations, and the price of gas was going down so that affects their revenue. These aren't adjusted for you know, for for prices. The other thing that happened was another category
was car dealers. And remember, in June, there was some, software, again, technical problems, that affected software used by a lot of card dealers. So that might have affected their their
their sales as well. But, you know, the the the retail sales work were kind of representative of what I've been seeing kinda bigger pictures is that it's a slower economy that, you know, we're we're taking catching our breath, and you know, things are slowing down, and that's what the fed has been shooting for by raising those rates 2 years ago, hoping that there's less spending that the the economy slows down to keep inflation down. And then we got some housing data later
in the week. And, you know, I think, again, a very similar story on the housing front. Prices continue to be an issue, and that'll be something that's talked about. I think ad nausea and has been talked At Nausea, But, the the flip side of that is, you know, construction and how quickly we can build houses, and we got some data on that. Right. Yeah. And 1 of the things that I've been... Following is that, since mid 20 22, we've had a record number of houses under construction.
So that's good news, because having more supply out there is going to help keep prices down or at least slow down. How much prices are going up, but that's now slowing down too. The the housing numbers from the commerce department on housing starts and building permits, both showed a slight uptick in June, but they were mostly because of the construction of larger unit, multi family unit for for families of 5 or more or 5 or more families.
So the single family housing units continue to to be affected by those higher interest rates. And that has been a little weaker. The the the interesting number that I found this week was from the Beige book, which is from, the Federal Reserve, they they look at this a few times a year, and it it's anecdotal evidence of what's going on in the economy in the 12
economic regions in the in the country. It's And they found that 5 of the 12 districts in the latest reading showed flat or declining economies. And that was up from the last reading when it was 3 of 12 were flatter declining. So there's a sense that you get there as we're getting from a lot of other indicators that the economy slowing down. And again, that might feed into the fed's ultimate decision on when and how much to cut interest rates.
I think there's also a reminder in that Facebook survey that kinda tells you how regional and industrial or industry specific some of these trends have been you know, we've gone through stretches where part of the country or part of our economy, maybe feel some of the pain and then recovers and then something else, tends to fall into that same trap. And so, you know, I think I'm okay with the fact that
things are slowing. I'm okay with the fact that it's not everywhere all at once, that's the kind of slowdown you hope for, especially in a country as large and diverse ours that when 1 part isn't maybe hitting on all cylinders, something else is, Yeah. Again, I think the intention is, slow the growth down a little bit, get inflation under control. And then start to figure out what's the right place
for rates? What's the right place for for policy more broadly as we look at how the economy is actually doing now without either the support, of low interest rates or the restriction of what has now been those higher rates. With that We enjoy doing the program for you. We will talk to you again next week. Thank you for listening to money talk with Bob Land. If you have a financial question you want answered on next week's show, email it to money talk, dot com.
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