Transcript:
Tom Vaughan:
Hello, everybody, welcome to Wednesday, the S&P 500 was down 1%. Today, yesterday I talked about the Vanguard Total Stock Market Index being in a range. And that it was, you know, towards the bottom of that range, or today it fell through the bottom of that range. So that is somewhat significant. However, there’s only a 6.6% drop on that index so far from its high point that was established on January 4 to today. So that type of downturns pretty common. The last time we had that much of a downturn was actually just back in October, same kind of situation where people worried about inflation worried about what the Federal Reserve was going to do. And then it turned around when when earnings came out, and the big companies which are going to be reporting over the next few weeks, are, you know, the apples, the Microsoft’s the Googles, and such are the ones that really, are the big representations in these indexes that tend to drive them up or down, depending on how they’re going. And so they those indexes took off, you know, at the end of middle of October to the middle of November, just because of the earnings, you know, that came out that were actually really good. So we’ve had six quarters in a row or beat expectations on earnings. So hopefully this quarters the same, we might see some bounce there. So we’ve got to watch for that.
The other thing to keep in mind here is that, you know, in the early portion of a tightening cycle, like the Federal Reserve is dealing, you do get a lot of volatility, oftentimes, after the first rate cut, you get some downturn, but overall, within the six to 12 month period, you have a positive rate of return on average. And so there’s there’s a whole bunch of things that happen there, you got to remember, the reason that they’re raising interest rates is because of inflation. And the reason we have inflation is because the economy’s pretty hot. There’s a lot of demand that’s happening that’s being driven.
There’s some other reasons was supply chain constraints and labor issues and what have you. But you wouldn’t have inflation unless you had a lot of demand, which is what we have. And so oftentimes, you’ll see the market do quite well, overall, during these, you know, rate increase periods, and because the economy’s doing well, and that’s why they’re raising the rates. But you do get some volatility, I think we can take advantage of that volatility, do some rebalancing at appropriate times. Having said that, you also want to be careful of some other big type of a downturn. So I have my strategies in place on how to pare back on some of the pieces of the portfolio to reduce the risk if things start to deteriorate further. So you know, we’ll have to wait and see what happens, but overall, not too worried about what’s happening at this point in time, we’d love to see going up. But again, I’ve said this a lot of times before, sometimes you need to see some downturns to get some buying to come in kind of bargain shopping to get that momentum to get it to move up again. So you know, we’ll have to see how this plays out. But look forward to see what’s gonna happen tomorrow. Thank you very much.