Tom’s Week in Review January 24-28, 2022

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.

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Transcript:

Tom Vaughan:

As usual, I like to start off the show with kind of a summary of what I saw happened this week in the stock market. Very interesting week, as usual, this has been a fascinating timeframe since this pandemic started. And one of the things that I want to discuss today is just kind of my outlook for 2022. I’ve talked about this before, I want to reiterate that, and then give you kind of the news of what happened this week in relationship to that Outlook. So I always try to have an outlook for what I think will happen, and then try to identify all the things that can change that outlook and just be ready on how I might change, you know, my process based on what happens. But my Outlook right now is that inflation is going to moderate in the second half of this year. And it’s going to moderate because of to several different things. First of all, we’re going to get more supply, right. And so we’re going to have a better supply chain throughout the year, I’m a big believer that companies will figure out how to improve their supply chain, when they know demand is there, we saw that with Apple, Apple just had a $30 billion profit on 124 billion in sales in one quarter. And they’re a company that has to deal with supply chains, they had some trouble in the third quarter. But this fourth quarter report, they figured some of that out, and they actually think they’re going to be even better in the next quarter. So I think supply chains are going to get better and better and better throughout the year. And that will help inflation.

I believe employees are going to come back to work, you know, their costs are going up because of inflation. And we’re also seeing the drying up of the stimulus money to come out. And more and more people will need to get back to work. And of course, now, you know, it’s higher than the amount of money that they can make. And we got the report. This today, actually that wages grew by 1% in the fourth quarter 4% for the year. That’s the best we’ve seen since the 1980s. I think that brings people out. So those are the two things that are kind of really restricting the supply side. And then of course, on the demand side, we’ll probably see some slowing down under demand side, Federal Reserve, very aggressively looking at trying to tighten up monetary supply to shrink up some of that demand, we’re already seeing some of it. I mean, their talk is bringing down the stock market and making people think about, you know, spending less, it is increasing mortgage rates, which is going to make it harder for people to buy homes, which will slow down the economy. As far as that goes, borrowed costs are going up somewhat. So we see a 10 year Treasury go up just because of what they’re saying. And so that’s a big issue of probably part of the demand shrink. And I think also, of course, you know, without the stimulus money coming in, that’ll start to slow up some of the demand side, too. So those are the things that I think will create a scenario where by the end of the year inflation is better, and then earnings have been fantastic. And that’s part of what we’re reporting about for this week.

You know, the average earnings average company that’s reported 80% of them a beat analyst expectations, there’s an expectation right now that we’ll see a 25% increase in earnings for the fourth quarter over the fourth quarter of the year before. That’s fantastic. That’s a really good number. So all of this fear that’s been in the markets from September and October, what have you, these companies just keep coming out with better earnings numbers. And so you got to think about it right now, the fear that’s happening right now about whether earnings will be able to continue to grow, could be unfounded. Also, we have seven quarters in a row where companies are beating expectations, Wall Street is completely under estimating these companies abilities to operate in this environment. And so that’s kind of a scenario where, you know, originally my projection had to do with what happens on an average year. So in a year, like 2021, when you have more than 20%, return, on average, going back to the you know, 70 years, the average rate of return a year after that is 10.4 10.4%, I still think that’s a good number to look at and to kind of use as a guide. That’s about 18% higher than we are right now. And so, you know, what are some of the Incursions and some of the things that could come in and change that I’m gonna watch for those. So, you know, additional variants. So we have this new variant now, ba two, which is a variant of Omicron. You know, what happens with that?

We did see tremendous fourth quarter, gross domestic product growth 6.9%, which is really, really high, even though we had Omicron. So I’m not sure that it’s a huge issue, but it’s something to watch for, you know, you know, that’s certainly a big piece of what’s going on out there as the virus itself. That certainly impacts people coming back to work. So that’s another piece of that supply chain problem, potentially. So we’ll see how that plays out. The Russia Ukraine thing that’s happening obviously the potential tensions that are happening there, if that escalates we could have different situations that happen especially in the area of oil because the pressures a big oil producer, that could create some inflationary pressure just because the cost of energy goes up and those types of things so That’s, that’s what we’re seeing. You know, again, my outlook is that earnings do continue to do well, in this high demand environment. Demand does drop some, because we’re at too high of demand right now is essentially what’s happening and creating this inflation. But I think earnings continue to do quite well throughout this year. And ultimately, that will be the driving force. I still think that this is a kind of two part year, I think all of this digestion of the Federal Reserve’s, you know, motions and the things that they’re going to do are going to affect the first half of this year, we’ve certainly seen it here, we’ve had one of the worst January’s in history so far, as far as that goes. And so I think some of that continues, and then maybe the second half of the year, if inflation is moderating, the Federal Reserve has a chance to be more moderate and more flexible in their conversations. And they don’t have to talk down the market and talk up the interest rates and those types of things as much in that environment. And that could be a great environment for the stock market.

I’m still big believer that we should be in high conviction stocks. We have Microsoft, we’ve made a tremendous amount of money. This week on Microsoft great earnings report on Tuesday, we have Apple which is up, you know, five 6% Today, on spectacular earnings that they reported yesterday, semiconductors, which have not done as well, actually, they’re doing worse than the market so far this year. But I’d still like that category. I think their demand story is something that’s going to continue. I don’t believe that there’s going to be less semiconductor need, just because it’s starting to become part of everything in there in every aspect of our lives. As far as that goes. I still think that continues. And so you know, those are the categories that we’ve got that we really seem to be, you know, doing well with, and really like as far as that goes. So anyway, that’s what’s happened this week. Very interesting week, I think, you know, there’s, you know, the market is down a little might be up 1.2%. Now on the VTI. So maybe we get back to close to even for the week or something along those lines. So we’re kind of bottoming out. question will be, is that just a bottom? Or is that just a pause before we go down? We’ll see. There has been a lot of downside momentum wouldn’t be surprised to see some more downside here. But, again, this is an environment for the last 18 months where we’ve seen a lot of places where I thought we should go lower that we didn’t and demand started to come in as far as that goes. So we’ll see as far as that goes. But I still think that if we look at 2022 as a whole, it should work out. Okay. There are some possibilities that it doesn’t and we’ll make adjustments if that does happen. But that’s my outlook for the week and kind of my summary as far as that goes. So look forward again to seeing next week and we can talk about some more than Thank you

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.