Transcript:
Tom Vaughan:
Hello, everybody, welcome to Friday. There is no Talk Money with Tom show today. But this is just such an epic week, I still wanted to do this summary. As you can see I’m wearing green shirt today for those of you that are new to the show, a green shirt means the S&P was up more than one and a half percent red shirt means that it was down more than one and a half percent. And actually all the colors have some significance. But this is our second green shirt today in the row, we have a 2.24% rate of return today on the S&P 500, which is just fantastic. And so really Green Day today, too, we saw great movement out of the Dow and of the Small Cap indexes and what have you, lots of green on the chart today very broad motion. Two days up is a very significant sign to me that things might be reversing course here. So we’ll see how that plays out. But earlier this week, of course, we had Tuesday and Wednesday, the stock market coming down fears about Ukraine invasion, they do do the invasion, stock market really drops. But then Thursday, it turns around from basically example with the NASDAQ was down more than 3% Thursday morning, ended up more than 3% by by the close on Thursday, which is a historic turnaround, actually, we use that opportunity on Thursday morning to rebound support folios. That worked out fantastic. I’m really excited about that. When we rebalance, we basically go back to the model that we originally have assigned to that particular account. And essentially what happens we end up selling you know a little bit of what’s higher in that model and buying what’s lower. So for example, a bond and stock mixture, I might have sold some bond and bought some stock within that portfolio. So we’re not going any higher with the overall mixture. If it’s a 60% target, for example, on the stock side, we’re just moving it back to that.
But these are great opportunities. You want to be kind of cognizant of why you do that. And when you do that, and what you’re doing with so for example, I like the rebalancing concept, but we caught what I call opportunistic rebalancing. When the stock market is in a sideways motion, which is my my definition, this is a sideways moving market, and the economy students still doing well, that’s incredibly important. Is it the economy still doing? Well, it’ll generally drag the stock market back up, eventually, it’s when the economy starts to fall, that we’ve got really big problems. And that’s what we have to watch out for. You can have downturns in the middle of a great economy. And to me, those are buying opportunities. So the other thing we have to be careful of when you’re rebalancing, you want to be rebalancing into high quality issues, okay, because just because something’s down doesn’t mean that you should be buying it, there are things that went up so much in 2020, that are still coming down and coming down and coming down and did Okay, the last few days, but I would be a little cautious of buying those things. So, you know, for us, we like the S&P 500. We like the total stock market index, we like, you know, Microsoft and Apple, for example. We like the semiconductor, you know, indexes and those types of things. I think all of those have great stories, great staying power, what have you just got to be careful to not buy the dips on some of these things, you know, that can still fall and fall and fall because they’re already overpriced. This is a market that I think is looking for quality. And generally, quality means high cash flow, decent dividends, decent, you know, price earnings ratios, as far as that goes. So some of these other areas that did really well in the past, in the kind of the gogo time of 2020, what have you are doing so well, because they don’t meet those measurements. And so that’s, that’s an important component.
So really fascinating what’s going on, again, focus on what’s happening to the economy, the situation Ukraine is scary, it’s a it’s could be a big disaster. And, you know, unfortunately for the stock market, you know, it looks at the economy all the time, you and I might look at what’s happening there and have other thoughts about what we’re really concerned with happening in Ukraine. But it has to have some type of economic impact, eventually have some type of major motion against the stock market. And most of these invasions Do not you do see them drop quite a bit, obviously at the beginning, as they’re kind of the build up and the fear. And then oftentimes, once there is an invasion, you’ll see the stock market come back up, again, until there’s some economic impact. I don’t think we’ll see the market have huge problems was what’s happening in Ukraine. I believe that the bigger issue really is inflation and what the Federal Reserve is going to do about that inflation this year. Because again, the Federal Reserve has the ability to make the economy go down if they raise rates too much. And so that is going to be somewhat complicated now for the Federal Reserve, because of this invasion of Ukraine, how much does that impact the economy going forward?
I’m hoping that they take a very measured approach until they find out how much impact the situation and crane does have. And I do think that’s partly why the stock market might be doing well here is because There’s some expectations that there’ll be a little bit less of rate increases, because the economy might naturally slow down because of what’s happening in Ukraine. So we’ll see what happens. That’s going to be the big story coming up. You know, this is basically the end of February, the Federal Reserve meets on March 10. Next, so we’ll be able to hear about what they’re going to do and what rate increase they might be doing, you know, after that, and so lots of interesting things coming up as far as that goes. But very important to stay, you know, calm right now, the stock market is still, you know, down for the year, the S&P 500 is down, you know, almost 8%, which is significant, but not unusual. And really, you know, things are okay, as far as the economy goes, and as long as that’s true, I think things will be okay as far as the stock market goes, especially as we get through the full year here as far as that goes. So, anyway, look forward to being able to see what’s going to happen next week, and I’ll certainly be talking to you then. Thank you very much.