Transcript:
Easan Arulanantham:
Right now we’re kind of in a market that’s not knowing which way to go on. So what are your signals to go back into the market? And you know, what are you going to invest in when you do return to the market?
Tom Vaughan:
Yeah, so that’s a great question. Right? So it’s two pieces. Number one, we’ve removed some of our exposure to the stock market in our models into this kind of ultra short term bond area. And so when do we get back in? You know, it’s a good question. And that’s the most difficult question to answer to be honest, when you’re trying to get in and out as far as that goes. So I guess the simple answer for me, as far as that goes, is when the debt ceiling situation is resolved, there are other issues that are happening. But there are also other positives that I think are offsetting that to a large degree, the one overhanging issue for me is the debt ceiling. So when that gets resolved, and that’s probably a great signal to kind of get back in, and hopefully, they push the debt ceiling up enough. So we’re gonna have to deal with this for a couple of years or in a perfect world, we would just get rid of it, because this is one of the dumbest things I’ve ever seen. I mean, you’re basically, Congress is asking the Treasury to fund all of these programs that they put into place over the last 50 years. And then they’re also saying, Hey, we’re not going to raise the debt limit so that you can actually pay for these, this is a dumb idea. So anyway, I hope that, you know, they essentially take care of this one way or another. And that would be the catalyst as far as to what to buy. That’s going to be really fascinating. So during the timeframes that we’ve had downturns, I often watch what does better during those downturns.
So I look very specifically, in this case, from the beginning of September, what did well what held up well, and so that’ll be part of the calculation is looking at that. But one of the things that has happened this year, that is really different than last year, is that there has been no defined trends that have lasted for very long. And so I mean, last year, a lot of things that I bought that held up well ended up running for nine months, this year, two weeks is not that uncommon for something to run and then stop and something else to run. So at the moment, if I had to decide today, it would be to go back into the broad market and just to buy the entire market, which seems to be doing really well that, you know, Vanguard has this total stock market index, which is doing fantastic this year. And that’s partly because the money is moving around so quickly. So I would be looking very heavily towards that. Because really, what we’re going to have is, I think, an explosive rally. And just if you’re just in the market with that money, you’re gonna make great money, it’d be great to pick the things that did even better. But I think that’s going to be an even harder time.
This is a pandemic, we’ve not been through this before. This is a reopening of a pandemic, the Federal Reserve is talking about their bonds, you know, tapering, and we’ve got the Federal Reserve talking about raising interest rates, and we have a confluence of events that you know, we as humans have not been exposed to during our lifetime. And so the outcome is super uncertain in this environment. And so, you know, you can make an argument for lots of different things, but I probably take a pretty balanced approach right here between large mid and Small Cap and between growth and value. Because, you know, looking at those as a whole, I don’t know that you’ll be able to tell for sure in this environment. We haven’t been able to so far this year. It’s why we have most of our money in the broad market and that’s been working quite well as far as that goes.