Tom’s Week in Review March 21-25, 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.

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:

I’d like to start the beginning of the show just with a summary of what I saw happening in the market this week. And so really important week, actually. And that’ll be the first focus of what I want to talk about today is why this week was important. And then the next piece that I really want to focus on today’s just really what we need to watch for, as earnings start to be reported now that we’re in earnings season. So first of all, last week, if you recall, we had a 6% run up in the S&P 500, in really just four days for updates, unbelievable motion for a very short period of time. But if you look back to very late January, very early February, we had the same thing for big updates. And so this week was really more important, in my opinion. And even last week, in the sense that did we just fall back down, which is what happened back in, you know, late January? Or do we continue to at least hold up or go higher, we went higher. And we’ve had a couple of big days actually manufacture up higher a little bit today, even which is kind of amazing. So really, really big motion, followed up by this week, and this week is I think, really puts a stamp on it that we’re starting to change direction and trying to change direction, I would say very cautiously here that we’ve had a phenomenal run from the bottom last Monday to today, close to 9% motion in the S&P 500. And just really a few days, the S&P 500 averages around 11% A little bit over that, but per year, so 9% rate of return in a short period of time is really stretching the rubber band. So that’s my analogy, you know, so you stretching, stretching, stretching, stretching, it’s bound to snapback here, we’re kind of hitting a bunch of resistance points right now, where the market is.

So I wouldn’t be surprised over the next week or two to see some softening sideways motion, some drop back down. That’s very, very normal. And in fact, I would say that’s probably a good thing. Because oftentimes, in order to get kind of that next big leg upward, we need to see some bargain shopping happen. And that usually happens because there’s some kind of a dip, people come in. And I think the other thing that’s really important here, just had this big run up, but it hasn’t happened on really big volume, which to me means that the institutions are still sitting on the sidelines, a lot of this has been driven by individual investors. And so I think if we can get this little dip, when we get another run, and we get another leg upward, I bet you that brings in the institutional investors at that point, you know, because they’re all competing against some benchmark, like the S&P 500. And they can’t sit on the sidelines, when there’s these huge runs happening, just you know, eventually they have to get in. Otherwise, they’re going to get too far behind their benchmark. And it can be very, very difficult to catch up as far as that goes. So, you know, if you thought the market was going down, and all of a sudden it’s up nine, comes down a little bit and then jumps again. You know, that’s what I’m kind of looking at here. As far as that goes. Now, there are lots of different things happening in this world right now, that could reverse this pretty quickly. Specifically, I think one of the biggest threats is just the sanctions that are being put on to Russia. And how does Russia respond to that economically? Are there defaults to this defaults have some other contagion that might happen throughout the rest of the financial, you know, system within the world? So I think that that’s that’s the issue, we’ll see what happens there, there’s always some possibility at any point in time, there’s something coming in. But this market is really strong right now. It’s a very powerful move. Very, important.

So the next thing I want to talk about is just earnings and what we need to look for in earnings, there’s really two main things. Are companies continuing to be able to increase their revenues? Yes or no. Number two is, are companies continuing to be able to hold or increase their profit margins? Yes or No, these are really important points in a high inflationary environment. Because when inflation continues to go up, and up and up and up, eventually it gets to a point where people say, Okay, I can’t buy that anymore. I don’t want to buy as much of that anymore. They call it demand destruction. And so you can see that in earn in the revenues of these companies. So if they’re able to continue to increase their revenues, then you’re not seeing demand destruction, right. So for example, Nike Darden industries, which is a restaurant conglomerate with lots of different restaurants, and General Mills reported this week, all three were able to increase their revenues. And Nikes a great example because it’s a consumer product for the most part, and it’s kind of seen as a bellwether, and they increase their revenues more than expected, which is fantastic. So the other thing that happens in a higher inflationary environment, is that the cost for these companies are going up if they’re not able to push up the price of their product, and they’re only having an increase in costs. Obviously, what happens is profit margins drop. And so that’s another thing we watch for. And so far, for example, with Nike, they increase their profit margins by 100 basis points, Darden was able to increase their profit margins. General Mills was the only one of the three, where the profit margins shrunk a little bit.

The CEO of Darden said that he felt that even though prices were higher, consumers were in a better place, they had more money and less debt. And they have a tremendous amount of demand to kind of get out there and really, you know, do these purchases as far as that goes. So I think that’s the key issues there. As we start to see reported earnings. If you remember back to the summer, last year, oh, everybody was worried inflation is going to affect earnings, it’s going to affect the revenues and earnings jumped 36% year over year. And then they concerned about the fourth quarter. And earnings jumped 29% in the fourth quarter. So I think earnings are going to be the main story this year, I believe that earnings will continue to do well here. And we’ll just have to see, you know, what happens with the consumer, and all of these other situations with higher oil prices, gas prices, and all these different types of things. But things are looking decent right now. And that’s partly why the market might be going up. There’s other reasons, mainly because a lot of people that we’re going to get out, got out and left, the people that are still buying in the markets run pretty well. And eventually you get to a spot where there’s a fear of missing out that really does drive this thing. So I wouldn’t expect it to continue to go, you know, eight 9% Every nine days. So again, I would expect some type of a pullback here or at least sideways motion for a little while before we might see another bigger leg up even than we saw now. So really interesting market as usual, and look forward to seeing what’s going to happen next week.

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.