Market Update: March 3, 3022 Why We Have Largely Avoided International Stocks

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:

Everybody, welcome to Thursday, the S&P 500 was down point five 3%. Today, still kind of going sideways really, for this week, we’ve had some big moves, but nothing substantial overall, when you kind of look at the whole picture, I probably spent this time talking about a question that’s come up a few times, especially recently, which is specifically, you know, have you invested in international stocks? Do you have exposure to Russia, and those types of things. And I’ll say, thankfully, really, very, very little exposure to international stocks at all. That’s unusual for me actually, if you look back in a long term, at my career, I’ve always had a pretty good exposure to international stocks, emerging markets, those types of things, just because I feel like that’s part of the diversification process. And the pandemic kind of change that actually, when the pandemic happened, and we rebalance the portfolios and reset them up for what was happening, International was getting hit a lot harder than the US market. And so we really didn’t go back into the international markets since then. It’s been justified it worked out, I like to use the Vanguard, you know, total stock market index, which is a US, you know, ETF VTI is the ticker symbol has over 4000 stocks in it right now, all American stocks, it’s a majority of the US stock market. And I also like to use VX us, which is the Vanguard Total international stock market has over 7000 international stocks outside the US, I use those as two proxies as indexes to see what’s happening, you know, in those two markets, and if you look at what has happened since March of 2020, the beginning of March to now, you’re looking at a 21% rate of return per year for the US stocks, and only 9% a year for the international stocks inside of those two indexes.

So, you know, obviously better off in US stocks. But at the beginning of this year, I was re establishing my thought process and thinking that maybe it was time to take a look at what was going on with the international market, just from diversification standpoint, and did not put money into international like I normally had prior to the pandemic starting. And that’s because of the fact that here in the US we have inflation that’s happening at a higher rate than most of the other domestic countries that are out there. And what that means is that we’re probably going to be raising our rates faster, means our Treasury securities will pay more maybe on a relative terms compared to the other developed countries. And when that happens, you ended up with international money coming in to buy those bonds because they’re paying more and people like US Treasuries anyway, because the safe haven as far as that goes. And when they do that they’re selling their currency and buying dollars essentially, when they’re buying our treasuries, and the dollar goes up. So when the dollar goes up, and you have an international investment, so you can make money in that stock, you can go up. But if the dollar goes up faster, when you convert it back to your currency, which is dollar here, you can actually lose money or not make as much unfortunately, I was wrong for first part of this year, actually, even though the our treasury yields are going up and those types of things International was outperforming and year to date, the total stock market index here in the US is down 8%. And the total stock market, international stock market is down 6%.

But one of the other reasons to have money here in the US on a majority basis is just because of what can happen outside the US on a geopolitical basis. So when Ukraine was invaded, if we look back to last Thursday, the total stock market index here is up about 4%. That’s pretty good. The total international stock market is down 1%. So 5% differential just in in one week. And so what we’re seeing here is a flight to quality, you’re seeing a flight to quality coming into the treasury market here. Treasuries are being purchased. I was driving down the yields. And I think we’re seeing a flight to quality here at buying US stocks, the US doesn’t have a significant amount of exposure to Russia, Russian companies and those types of things, which I think is a good thing. Our indexes don’t have Russian stocks on them, which again, I think is a good thing. And so altogether, that has created a situation where the dollar has strengthened. And, you know, I think the US market looks better as far as that goes. We do have exposure to energy, just like any other company country out there. And so that’s going to be the interesting part that will play out here. With Russia does energy prices continue to come up? oil price did come down a little bit today. So we’ll see if that helps at all, as far as that goes because that creates an inflationary pressure causes other problems as far as that goes. But anyway, that’s why, you know, again, to kind of answering the question, we don’t have a lot of international exposure right now. It just hasn’t been performing that well, up until this year, it really hadn’t outperformed the US market. And I still have a big belief that because the dollar could be stronger here, as the Federal Reserve comes in and starts to raise rates, probably something to kind of avoid for a while here and see what happens. Now we’ve got Ukraine makes it even more sense to be much more cautious in that area. So anyway, that’s why we don’t have exposure there to a large degree and probably keep it that way for a while. So I look forward to seeing what’s gonna happen tomorrow. Of course, we have our show tomorrow, and we’ll be able to do that talk money with Tom I do my summary at the beginning. 1215 go to YouTube, type in talk money with Tom and you can join us you can put in your own questions if you want, and see what we have to talk about and such to. So look forward to seeing you then. 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.