The Wealth Equation Podcast by Maurice l Wilson reveals how to accelerate your wealth and secure more money, time and freedom by leveraging the investment powers of real estate. Entrepreneurship, the stock market, and more. Tune in as host Maurice l Wilson, an engineer turn financial advisor offers you a step-by-step formula to solve your wealth equation once and for all. Here's Maurice. Hello and welcome back to the Wealth Equation Podcast. I'm your host, Maurice l Wilson.
Thank you again for joining me on Wealth Wednesday. And today is exciting because today coincides with an announcement from the Federal Reserve, otherwise known as the Fed. And what the Fed does is meet quarterly and announce if they're gonna increase rates, hold rates, steady or lower rates. What does that all mean?
All of your interest rates that you pay on your loans, your mortgage, student loans, credit cards, most importantly, credit cards car loans, pretty much any debt you have that's not locked in. Is determining, determined, or based somewhat on what's called the federal reserve rate. And so as this rate goes up, your cost of debt goes up. As it goes down, the cost of your debt goes down. And so today, the Federal Reserve met and announce that they're gonna leave rates steady.
And the reason being is they want to see how the tariffs that have been implemented are going to impact the economy. For further clarification, what happens is the Fed's job is to keep inflation low and to keep unemployment, I think at 5%. And so when we have things that impact the economic cycle, and an economic cycle is simply re you're receding or receding a recession, you're expanding like a bull market. And so if we enter a recession.
The Federal Reserve has tools to help make the recession shorter, and one of those tools is the Federal Reserve can lower rates. If we are growing to quickly, the Fed will lower rates now low increasing rates will, or I'm sorry, if we're growing to quickly, the Fed will raise rates. The reason they do that is if you have a recession, you wanna make access to money really cheap so people can go in, buy stuff. Get the economy back on track.
If the economy's growing too fast and we have inflation, then they raise rates to make things more expensive to bring that under control. So as it stands tariffs which are a tax on the consumer which may lead to people buying less goods and services. Particularly less goods may put us in a recession. So if that happens, the Fed wants enough ammunition to lower rates right now, they're standing packed. And I think it, excuse me, I think it's a good decision because we just don't know enough.
It's been a very tumultuous. First quarter of the year in terms of lots of economic news, if you will flooding the markets. And we're trying to see how this is going to shake out in the economy. So the Fed is doing the same. The Fed is saying, Hey we don't have enough information to see the impact of everything that's happened. And the Fed's not in a rush to do anything that will interrupt the cycle. So they're just gonna hold back and wait.
I think it's a good decision and I think we will know more as the months go on and we move through the second quarter. So what I wanted to do today was just react to that. And I think the best way to do it is go to one of our one of the websites I like to go to Yahoo Finance. And so what I want to do here is just go through that, yeah, I don't have my, my drawing tool, if you will. So follow my cursor if you can. I just wanna start with the first headline here the fed holds rates steady.
We aren't really here to have political conversations, but let's at least talk about why. They are calling for cuts. As I said in the open, they want to cut the interest rates, at least the administration wants to cut the interest rates to offset. The tariffs. Tariffs are acute word for taxes, right? There are taxes on goods from another country, right? And the taxes are paid by the consumer. So to help spur the buying, that would be reduced.
If I go to you and say, Hey, that house you wanted to buy, or let's just say that car you wanted to buy, that movie you wanted to watch from overseas, that T-shirt you wanted to buy, it's now gonna be a hundred percent more expensive. Because there's a hundred percent tax on it, right? You would buy less. So what the administration wants to do is make access to capital cheaper through lowering interest rates. So that they can offset some of that reduced demand and keep us out of a recession.
What the Fed wants to do is say we understand that, but let's see if we're actually going to head into a recession now. Why would they want to wait and see? That's a good question. So let's look at the headlines here. And I saw something here. If you see my cursor right here, it says, it's hard to see how the US avoids a recession. There's so much change. I'll skip the word damage.
There's so much change that has happened in the first quarter and one month of this year that tourism's gonna be down. We were looking at buying a car and dealership was like, look, we can only get what's in our network. We're not shipping in any more cars. They just so happened to have the car we wanted, so we bought it. But if they didn't, we would've sat on our hands and waited. When people make these trade-offs because of changes to the supply chain, it has a multiplying effect.
You've heard of the wealth effect. What is the wealth effect? The wealth effect is when, Hey, my investment portfolio's doing good. I feel good about my retirement. I feel good about my, my, my pockets. So I'm gonna go out and splurge a little bit. The reverse is true if people hear that things are not available, right? If they hear that things are gonna be more expensive.
Initially, they'll do some hoarding for the food items and little things like that, but the big ticket items are going to push off to the side and take a wait and see approach. As a business owner, the last thing you want is people pushing, buying decisions off to the side, because that means inventory is not moving off the shelf.
If enough inventory doesn't move off the shelf, your household's doing it and my household's doing it, and they we're on the social media channels and we're hearing this and hearing that. It culminates in a contraction in the economic cycle. And so there's a lot of buzz on Wall Street and in the economic econom economist environment or circles that yeah we're pretty much a guarantee that we're going to hit a recession.
For added context, a recession is when we have two consecutive contractions. In the gross domestic product, the GDP the GDP, some people don't like it, but it's a way that we man, we measure the output of our economy. And if that output is lower, two quarters in a row, that's how they deem a recession. So the first quarter we had a contraction. People didn't make a big deal about it, but it did happen. So we only have to have another quarter of contraction to have a recession.
Now recession is a big, bad word what does it mean? It could mean rising unemployment. We are already seeing you see here Google's cut about 200 staff. That's not 2000, but it's 200. It's chip. I've seen a number of layoffs at a lot of wall Street firms. I think FedEx or UPS they closed down or laid off a significant number of people. Big tech in general has been laying off.
Their workers getting rid of some low performers, but it's layoffs fact factor in that the Federal Reserve laid off, I'm sorry, the federal government laid off a lot of people as well, just flat out firing them. And you've got a lot of layoffs luckily the job number was not too bad we were okay. But that jobs number factors in a lot of. Change happening in the middle of the quarter. IEA lot of the job cuts happen around February. The quarter ends in March.
So this second quarter when we go through this quarter, we'll get the full brunt of all these layoffs and it could result in a higher unemployment number. So let's look at the market. When we get into all this, let's look at a chart because. There are many of you out there that are investing in the stock market somewhat reluctantly, most likely. And so this is Yahoo Finance, they've gotten a lot better. I am not compensated by Yahoo, but Yahoo has gotten a lot better with their charts.
It's not as buggy and so I really like that. So what I wanna do here is just take you through this is just basic. Technical analysis. There are a lot of you out there who are very into the charts and tech. I'm not trying to impress the smartest of you out there. I'm trying to just provide some general guidance here. So if it's too basic definitely I have some people you can talk to before the mom and pop investor out there. Let's go through it. So this is a chart of the s and p 500.
If you see my cursor highlighting on the upper left. That's the broadest stock market index that we follow. It's comprised of 500, actually slightly more than 500 US companies representing some of the biggest companies in the market. It's what they use the benchmark performance of the market. A lot of people hear about something called the Dow Jones, that was the former granddaddy of them all, but because it's easier to relay. How the market moves through the Dow Jones.
You still hear a lot about it. Maurice, what do you mean relay? If I told you the market was up 24 points, it doesn't mean anything. But if I tell you the market's up 500 points, it means something. And so that's why you still hear from the Dow. But the s and p is the one people follow. So you have this chart here, it means largely nothing to anyone, right? But this is a one year chart.
On the bottom right here, you'll see my cursor circling around the one y. So how do we break down the charts? What first thing we want to do is we want to find out some type of trend line or average in the market. Think of it like your grades, right? I give you a bunch of grades, you see some letters or some numbers depending on how, what's, where your kids are in the school system, they don't mean anything. So what you do is you get A-G-P-A-A grade point average.
So what we wanna do is get a grade point average for this market. So this red line, I'm just gonna slide my chart to the left here. This red line is a 50 day moving average. Don't worry about the 50 part, just know that it's a short term average for the market. And how it literally work literally works is it takes the last 50 days of the market's prices. And just divides by 50. So 50 prices divided by 50, and you'll get this here. This coincides. We'll just go here.
Right now it's coinciding with about 55, 61 here on the right side. So that means that the average price over the last 50 days is 55 61. What does that mean for the market? The index, the s and p 500 in the blue here is above that. So that means the market is above average. Don't over complicate. That's simply what it means. It's above average. What the market wants to do is stay above that average. Everything in the market is trying to go higher, right?
So it's good that over the last 50 days, the market has gone over the average price. That's a good sign if you're looking to put more money in. But of course, it's not gonna be that simple. So what we're gonna do is add a long-term average. So this black line is the 200 day average, so over the last 200 days. Average price is 57 47. So you'll see here the blue line, which is our market, the SP 500 is between or it's under the long-term average, but above the short-term average.
So when you're under your long-term average, think of it like this. You know somebody, and they usually do a thing, oh Susie's usually here on time. Susie usually does good work. Susie usually does fill in the blank. Okay. That's her long term average. Now, she may have some good or bad days.
Those are gonna be a short term average, but over time, let's say over a series of weeks, if they're below what they're normally do, that's always bad, so right now the market is below, it's a long term average. That is bad. So what does that mean for people who are trying to see where we are in the market? Yeah, we're getting better, but we're still. Basically bad, and so people who are wondering, Hey, are we going to avoid a recession? Hey, is the market going to go back down?
If you look at this, you would say, yeah we're still not out of the woods yet. We're not out of the woods. We're getting better, but we're not out of the woods. So if you wanted to know, Maurice, what's another sign that we are getting better? It would be this right here. So I'm gonna come back over here. I. I'm gonna draw a line, right? Let me slide my chart over here. I'm gonna draw a line right here. There we go. Okay. And let's make this line, let's see if I can change the color.
Give us something here. Yeah. All right. Let's make this, and let's make this and see here. Okay. All right. So it's green, but it probably doesn't look green. This line right here is important. So this line is coming off of the last highest point of the market in recent history. Okay? And so we need the blue line here. To eclipse this line, to really provide some confirmation that we are getting substantially better in the market.
That line coincides with 57, 77 on the market is slightly above the market's long term average, right? And so that line can be resistance where the market hits it and goes back down. It can eventually be support. So when the fed comes in and holds rates steady and he says, Hey we're, we want to keep an eye out for recession. When economists are thinking, Hey, we still think we're gonna hit a recession.
Those are things that you take into account and then you come look at your chart and you say, okay, yeah, the market's been up a lot since April 4th or April 8th here. It's done a lot of work getting back. But it's still not higher than where it was at in late in March. It's still not higher. It's done a lot of work, but it's still not higher.
So we still may have some downward action in the market especially after having about nine consecutive days of growth in the market as we closed out or opened up May. So that's your market. Lemme pivot back here to some headlines. Let's see what else is going on here. So there's an investment theme. Before all this broke out, everybody was in the ai, right? Ai. And with AI you needed semiconductors. A semiconductors are those little square chips.
They put in all this stuff to make these devices go. And so Nvidia and a MD are some of the biggest providers. There was some regulation around those companies and how much they could export when the last administration was in office. So there's been news that they're going to, they're gonna scrap that regulation. Now the problem with all of this is you still have supply chain problems 'cause there's also tariffs on bringing chips manufactured outside of the US to be sold.
And so there's some conflict there. But in looking at these headlines, you can see where. Nvidia and a MD, they're up because the administration is looking to scrap AI chip regulation. And then you've got Microsoft urging senators to hurry up re regulations so that they can do more with AI to boost government access. So if you're a Microsoft investor Nvidia investor, a MD investor those are potentially good signs that AI story.
It's still going along Nvidia a MD. They're powering the ai, Microsoft through chat GPT is organizing and using it and applying it. And so those are two parts of the AI story. So that's another thing going on in the headlines right now. Then you got Moody's right here. Moody's is a rating agency. Their warning of risk posts by retail exposure to private credit. So what that means is there's a lot of private kind of credit going on, private lending, private backing going on.
And they're just saying they may have too much exposure to that. Basically, if you get all your money from one source right, and something happens to that source of money, you could be out of business quick. We saw that during the great recession. A lot of theme parks just their funding dried up their credit dried up, so they couldn't even open during the great recession because they had all their money coming from one place.
It's no different than companies that are built off of one contract. If that contract goes bad, hey you're out of business. So they're just warning on that. Things like that could portend the story of a recession. So those are some of the things we're seeing going on with the market and with the Fed headlines. Scroll down here, see if there's anything else. It's a good story here. Do mortgage rates go down in a recession? Really, it just depends, right? The Fed is gonna lower rates.
In a recession, but mortgage rates don't always immediately go down. Sometimes it takes a little bit more to get those down. So like I said before, when I open up, everything is affected by these federal reserve rates. So today was a big day with them holding 'em steady. All all right. We have to be careful about giving like general advice, right? In, or just specific advice I should say in the markets.
But one thing I do want to highlight here, I'm just gonna go back to my chart because it's where we live. These charts they look like squiggly lines and like nothing's happening. But I do want to point out, I'm gonna simplify it a little bit. For those of you who like the running high when the markets are going down remember, markets work both ways, right? So if you see here this is where things got absolutely the worst back on April 8th, and then we did the fed pause, right?
And then since then, I'm gonna put a comparison here just to show you. So since that pause, you can see here if you follow my cursor to the far right, the market's up about 11% since then, that's just if you had your money in the general market. Now, if you leaned into some of these really bad names that got beat up like in Nvidia, I'm gonna throw Nvidia up here. You can see the Nvidia since that pause. Let's just click a one month here is up about 20%, right?
Let's add on, let's say Microsoft with the AI story. And again, Microsoft on the far right here is up 24%. I'm sorry, 20%. And then Nvidia is up 24. And let's add something. What else is beat up pretty bad? Tesla, and I know Tesla is a firebrand here. About 15%. So when news gets really bad, you do want to do something that Warren Buffett talks about, which is you wanna be greedy when others are fearful, right? And so speaking of that how do you know when people are fearful in the markets?
This is one of my tried and true charts. It's the Fear Greed Index. So this index, every day you can come here and they're gonna update it. They updated it at 7 59 right here, right now, because we've had such a big runup. Those charts I showed you earlier, we're inching that to that greed set up where, okay, typically PE people get all in and everybody gets greedy. The market tends to go down.
So we were here very fearful, extreme fear on April 8th, and in less than a month it'll be May 8th, tomorrow we've gone all the way back up to greed. Now typically we don't stay too far above this 50, this midpoint, this neutral zone. So if you go back and look here, this is around the election we have the election, we shoot up. Actually, this is before the election. The election's right here. So we shoot up going into the election and then we come back down.
So we get around the 75 mark here the greed mark, and then we come back down, reset, and go sideways. So here, back in August of oh four, I think we had a scare. I forget exactly what it was, but extreme fear get back to neutral and then sideways. So just be mindful. We've had a big run up in the markets. We had basically a relief rally where the jobs number was good tech earnings were good. And so the fear has come out of the market and now we're back over into the greed side.
Doesn't mean we're gonna go down tomorrow, but just be aware that, okay, the sentiment is like, Hey, we're done with all of the tariff stuff. We're gonna work it out. There's all these talks going on. Now people are starting to get greedy. And so just be mindful that when we're in this greed and extreme greed territory, markets may do a reversal. So that's not to be scared, that's just to know that you may get some better prices if you miss the runup coming off of April 8th.
And that's the beautiful thing about the market. Everybody knows about an area of their city or a place they've lived where. Real estate that was I gotta add here. Real estate that was depressed for a very long time suddenly gets gentrified and it's worth millions and everybody wishes they would've gotten in the market does that all the time. The market gives you the opportunity to you miss a rally, you miss a buying opportunity. The market will give you opportunities to get back in.
In a pretty frequent manner. I'm gonna pull up a chart here and just show what I'm talking about. Let's get rid of some of our friends here, get rid of that, and that. And then we'll just hide you. So I'm gonna hit a one year on this and this kind of let's see here. And let's get rid of my chart here. See if I can delete. There we go. Alright. And high. So let's go back to 2022. Let's do 2020 with the pandemic.
So this big drop right here, this is going into the pandemic and then we fall all the way down here. That was a great buying opportunity because when you zoom out and use the pandemic on the far left, you can see from the bottom in about March of 2020, all the way through just 2021, you almost had a hundred percent gain, right? So let's say you missed that, right? And it was like, wow I really, I blew it, right? Don't fear, because in 2022, the market fell.
You see here it started falling on January of the upper left. It fell all the way through October, and if you look on the far right, it fell 25%. That was another buying opportunity. When you come off that again, you get about a 40. Let's zoom this out a little bit more. Yeah, right before we have all of the stuff we've had recently, you get a nice, I try to get my chart for it here. Excuse me. Let's just say through here.
You get about a 40% actually more than that, about a 60% gain buying at that 2022 low. And that's just the overall market. When you look at just stocks in general. So people. Always say, I wish I would've bought Nvidia at a certain price point. In 2022, again, this is our kind of October bottom in 2022. If you look at that far right, Nvidia coming off that 2022 market, just 20% decline before we get into 2025, Nvidia goes up a thousand percent. So what does that mean?
For every thousand you put in, it went up 10 x. So 10 times a thousand is 10,000. You put a hundred thousand in, it's a million. So now people say, ah, I missed that. Let's look at Nvidia over the last year. Okay. What you'll see here is that blue line Nvidia went down about 30%. It's another buying opportunity potentially, right? They're not the only ones though. If I come here and. Let's add, who else got here? Let's go with Microsoft. And let's just do a year to date and let's come out.
Go. It's probably not coming through on the chart very well, so I might wanna pull that one off. Let's go with Apple. There we go. Okay, so Apple right here is down this green line, 24% through April. That's a really good buying opportunity and since then it's really rallied up, right? So the thing is, when these stocks take off and get away from you. Keep an eye on, right? This is where charting comes in. I typically like three different price points for buying a stock.
I've gone over that in prior podcasts. So if you check out my page the Wealthy Equation Podcast on YouTube or listen to me on Pod Bean we have previous episodes where we talk about different buying points. So I'm gonna roll back to the headlines. And just start to close us out. What's the takeaway? Okay. The Federal Reserve has held rates steady. Okay. And so that means that they aren't gonna raise 'em, they aren't gonna lower 'em.
They don't want to make any decisions until they have more information. Now, I think if they could come out and just say, Hey, this is what we think the Fed thinks we're going to have a recession. What they want to do is they wanna lower rates to simulate the economy. When that recession shows up, that's what they really think, right? If they thought we were expanding, if they thought everything was good, they'd make a different decision.
They're looking at all the damage that's happening and they're saying, Hey, if you can fix it, good. We can do something, but we're thinking you can't fix it. And so we're holding our our tools until we have to actually pull 'em out. Economists agree with that position. Economists are largely saying, Hey, there's almost no way we can avoid a recession just given what's happened.
There are people out there who have jokes about economists predicting recessions, and they've been trying to predict one for a while now, but this time they really have something. The supply chain has been disrupted a lot. You had one story where Apple was. Airlifting phones into the country to get around tariffs, right? When you got Apple airlifting phones versus doing 'em the normal way, your supply chain is pretty messed up. So at some point that has to have an impact on the consumer.
I've already told you about when we went to buy a car and we couldn't necessarily get the car we may have wanted. A lot. Luckily it was on the lot, but if they had to order it, they wouldn't have been able to get it. Somebody drew the short straw in that situation and they weren't able to get the car that they wanted. So those are gonna have impacts on our gross domestic product, which is how we measure recessions.
Recessions are merit measured by how by the gross domestic product contracting two consecutive quarters it contracted in the first quarter. So we're up for the second quarter. If it contracts again, we'll have a, an official recession. So there's a lot leaning in that recession camp. And we'll see. We're, this quarter started in April. We're into the middle of the quarter in May. You got tourism season coming up. A lot of people are not traveling due to a lot of different reasons.
So we've got a lot to digest to see if we can make it out of this quarter without a recession. What does that mean for you as an investor? Hey, you may get some more buying opportunities. One thing I should note is that markets do bottom before recessions end. And you don't know you're in a recession until after it's happened, right? So you could argue that where we were in April was the bottom of the stock market, and we just gotta work our way through. Time will tell.
But for investors, keep your eyes peeled for some unique buying opportunities in your favorite stocks. A lot of the tech stocks that we know and love, the Magnificent Seven as they're called are still lower than where they were in late 2024. So something to consider, but also look at things that may be what we call tariff proof, things that are made in the us.
They're gonna be boring, but boring may be the way that we go in this new economy where we're onshoring a lot of production and maybe getting away from tech stocks purely as the main investment. So that's all I have for tonight. I do thank you for joining me today on the wealth equation, we are looking to add another another, segment to the podcast on Sundays.
You don't know this, but I was trying to do it this Sunday and things fell through, but we're looking to add strategic Sundays to our podcast where we sit down and talk about the week that's coming up, and some moves you may want to make or consider before the week gets going. Trying to give you something right before the start of the week, something in the middle of the week, and then leave you alone on Friday and Saturday. So keep an eye out for that.
YouTube you can find us on YouTube at the Wealth Equation Podcast. You can find us@wilsonwealth.com and of course on Instagram at Wilson Wealth. And you can also find us on Facebook at Wilson Wealth. My name is Maurice Wilson. It has been a pleasure talking to you this evening. Have a great week. It is a pleasure to have you join us for this episode of The Wealth Equation. Be sure to visit wilson wealth.com for more information about building wealth.
We look forward to helping you next time on the Wealth Equation.