Market Update: December 14, 2021 Why Does Higher Inflation Make The Stock Market Fall?

Tom Vaughan is a Certified Portfolio Manager and CEO of Retirement Capital Strategies. Retirement Capital Strategies is a registered investment advisor located in San Jose, California.

The opinions voiced in these presentations are for general information only and are not intended to provide specific advice or recommendations for any individual(s). The information provided herein is obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness. Statements and opinions are subject to change without notice. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Accordingly, you should not rely solely on the information contained in these materials in making any investment decision as the material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned in this presentation. Before acting on information discussed in this presentation, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment advisor. Prospectuses, investment objectives, risks, charges and expenses of any investment product should be reviewed carefully before investing. This platform is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Retirement Capital Strategies and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Tom Vaughan or Retirement Capital Strategies unless a client service agreement is in place. “Likes” are not intended to be endorsements of our firm, our advisors or our services. Please be aware that while we monitor comments and “likes” left on this page, we do not endorse or necessarily share the same opinions expressed by site users. While we appreciate your comments and feedback please be aware that any form of testimony from current or past clients about their experience with our firm is strictly forbidden under current securities laws. Please honor our request to limit your posts to industry-related educational information, comments and questions. Third-party rankings and recognitions are no guarantee of future investment success and do not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client nor are they representative of any one client’s evaluation. Investment positions mentioned in these videos may be held in some of our existing portfolios. Tom Vaughan and Retirement Capital Strategies are unaffiliated and separate from those companies whose investment positions are mentioned and is not liable for their products or services.

By participating in any of these live streams, you agree that any questions submitted by you might be used by us in the future on this YouTube channel. We will not share your personal information.

If you have questions, please write to us at: asktom@talkmoneywithtom.com.

  • MoneyGuidePro®
  • Advent Software/Black Diamond Reporting
  • Riskalyze, Inc.
  • thinkpipes®
  • Right Capital
  • YCharts, Inc.

Transcript:

Tom Vaughan:


Hello, everybody, welcome to Tuesday, the S&P 500 was down .75%. Today really was going okay, until we got the wholesale inflation number, which was at 9.6%, which is a pretty high number. And one of the questions that I got today was about, you know, question about why does the higher inflation numbers, you know, make the stock market go down. And there’s a couple different reasons. Number one, wholesale, inflation was expected to be lower, and it comes out higher, and so when something comes out at a different number than expectations, that there’s a reality adjustment, so that’s part of it.


The second part is really just the fear that higher inflation will affect company earnings. So if I have a product that I’m selling, and the things that I need to make that product, go up in price, and I can’t increase my price, because the consumer is, you know, kind of tapped out, we’ve had inflation for too long, then my earnings are going to fall. And that would affect the stock price, ultimately.


And so that’s one particular area, although the last one I think, is the most important. And that is these higher inflation numbers cause the Federal Reserve to start raising interest rates faster, cut back on their bond purchases faster. When the Federal Reserve is keeping rates low, and doing stimulus activities like this bond purchase -fantastic for the stock market -so I’ve had such good returns, we had interest rates coming down in 2019, 2020, and really, really low all the way through 2021. And we’ve had three fantastic years.
So as those rates start to come back up, it creates issues for the stock market in lots of different areas. But when you see a big number coming out for wholesale inflation, that makes the market think about the Federal Reserve, you know, might have to be more aggressive in their increases in rates. So we’ll find out some more about that tomorrow. When Chairman Powell does speak after they finish their meeting and see what he has to say. I would suspect that they’re going to be talking about cutting back on the bond purchases a lot faster and some of the other things but it’ll be interesting to see what the question and answer portion is like. So anyway, that’s the reason that the stock market adjusts to these types of numbers. And we’ll look forward to seeing what’s going to happen tomorrow. Thank you very much.

Tom Vaughan is a Certified Portfolio Manager and CEO of Retirement Capital Strategies. Retirement Capital Strategies is a registered investment advisor located in San Jose, California.

The opinions voiced in these presentations are for general information only and are not intended to provide specific advice or recommendations for any individual(s). The information provided herein is obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness. Statements and opinions are subject to change without notice. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Accordingly, you should not rely solely on the information contained in these materials in making any investment decision as the material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned in this presentation. Before acting on information discussed in this presentation, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment advisor. Prospectuses, investment objectives, risks, charges and expenses of any investment product should be reviewed carefully before investing. This platform is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Retirement Capital Strategies and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Tom Vaughan or Retirement Capital Strategies unless a client service agreement is in place. “Likes” are not intended to be endorsements of our firm, our advisors or our services. Please be aware that while we monitor comments and “likes” left on this page, we do not endorse or necessarily share the same opinions expressed by site users. While we appreciate your comments and feedback please be aware that any form of testimony from current or past clients about their experience with our firm is strictly forbidden under current securities laws. Please honor our request to limit your posts to industry-related educational information, comments and questions. Third-party rankings and recognitions are no guarantee of future investment success and do not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client nor are they representative of any one client’s evaluation. Investment positions mentioned in these videos may be held in some of our existing portfolios. Tom Vaughan and Retirement Capital Strategies are unaffiliated and separate from those companies whose investment positions are mentioned and is not liable for their products or services.

By participating in any of these live streams, you agree that any questions submitted by you might be used by us in the future on this YouTube channel. We will not share your personal information.

If you have questions, please write to us at: asktom@talkmoneywithtom.com.

  • MoneyGuidePro®
  • Advent Software/Black Diamond Reporting
  • Riskalyze, Inc.
  • thinkpipes®
  • Right Capital
  • YCharts, Inc.