Transcript:
Tom Vaughan:
Hello, everybody, welcome to Thursday, the S&P 500 was down 3.25%. Today, unfortunately, a very familiar pattern. On the day that the Federal Reserve comes out and speaks, the market goes up. And then the next day after we’ve had a chance to really digest all the things that were said, the market comes back down and takes those gains away, and then some. And so that’s happened again today. And so the main reason that the market seems to be falling, it’s just this disconnect between what the market sees happening, and what the Federal Reserve chairman was talking about yesterday. So for example, one of the things that he kept mentioning was how strong the economy was, and he’s right to a certain degree, but no acknowledgement whatsoever for all the different pieces that have been slowing, which is, I think, a good thing, you need to have some slowing in order to bring down inflation. But he didn’t mention them. And we’ve have quite a few I mean, new home start permits have dropped, new mortgage applications are at a 22 year low. We just saw Retail sales dropped a little bit in May, we saw job openings come down a bit in May, we saw the unemployment rate come up off of its bottom, you know, for first time unemployment claims and those types of things. So there are quite a few different things that are showing some slowing. And then the Federal Reserve kept talking about how strong everything was, in the fear, of course, is that, you know, the Fed might make a policy mistake, that’s how the market would look at it, they would say, hey, you know, they’re not seeing these things, they might over raise rates and create this recession. There were also some inconsistencies, as I pointed out yesterday with essentially saying that gas prices were something they could control. And then also essentially saying that they were going to raise rates until they could bring down the price of gas. And so they didn’t say exactly, but if you read the between the lines there, that’s pretty obvious. And I read that and a whole bunch of articles today also. So it wasn’t the only one that saw that inconsistency. And that’s a scary concept, because the Federal Reserve keeps pushing on, you know, rates on something they can’t control.
I think most of us feel like gas prices are still on the rise. And so there’s some concern there that the Fed is going to keep chasing this thing that they can’t control. So the other thing that I found interesting, and really, for the first time, the Federal Reserve was really ill chairman was really focused on top line inflation, which includes food and energy. Usually, we’re talking about Core inflation, which does not include food and energy. And if you look at core inflation on CPI, it peaked out in March has come down for two months. If you look at the Producer Price Index, which just came out on Tuesday, it peaked out in March has come down for two months. If you look at the Federal Reserve’s you know, preferred measure of inflation was personal consumption expense, PCE that came down in April, we haven’t gotten the main numbers yet. So we’ll see what happens there. But all of these are coming down no acknowledgement yesterday whatsoever about that, just this higher inflation. And the only thing that’s really been gaining, you know, over the last three months is that top line inflation, which includes gas and food, and of course, lots of talk about Ukraine situation exaggerating that scenario, which makes sense. But how does the Federal Reserve truly impact that so the market is worried that the Fed doesn’t see what it sees. Now, this can change very rapidly. The next meeting, we can have different conversations and what have you. But that’s why the market fell today. I would like to put today’s downturn and even this year’s downturn, a little bit of perspective here, I think it’s important, you know, if you needed the money tomorrow, than today was a bad day for you. Because the market fell, if you need the money, even, you know, out of your accounts, by the end of the year, today could have been a bad day, and this year has been a bad day that year for it, I can make a much stronger argument that you shouldn’t be in the stock market for those types of short term goals. So I think that’s the big perspective that we always have to keep in front of us is that we shouldn’t be invested in the stock market for short term goals, it should be for longer term goals.
If we look back for the last three to five years, there’s been some pretty healthy rates of return coming out of the stock market. If we look forward for the next three to five years, I would expect to see some decent returns in that timeframe. Also, we’ll see what happens. But nonetheless, if I’m just focused on kind of day by day here, it can get a little bit overwhelming. I do put out this video every day. My objective is not for you to take this and try to trade on it day by day. It is just educational, the more you can learn about how things connect, and what the market looks at, that’s important and what they look at, it’s not as important, the better you are. And by talking about this each day, I can connect the dots clearly with examples that are happening on that day. But the objective there is to increase the level of education so that when we do look three to five years ahead, we can say okay, you know, here’s the stats, here’s how this stuff really works. And here’s what we want to expect in that timeframe. So, I do think it’s important here to try to keep some perspective. You know, if you have a long enough perspective, you can make an argument that these types of downturns are, you know, maybe opportunity to buy more than to sell in a panic. So just keep looking at The overall picture in these timeframes look a little bit longer term in terms of that goes. So, nonetheless, look forward to see what’s gonna happen tomorrow. We do have the leading economic indicator coming out tomorrow, I will be discussing that on my show, which is from 1215 to one o’clock, you can go to YouTube and see our live stream talk money with Tom is the name of the show. And we’ll talk about that index. That’s a really important number that’ll be coming out. I look forward to seeing what’s going to be in there. So talk to you tomorrow. Thank you very much.