Transcript:
Tom Vaughan:
Hello, everybody, welcome to Tuesday. The S&P 500 was down .35%, today. That’s exactly how much it was up yesterday, so it kind of took that back. But today was very fascinating, because in the morning, they reported the inflation numbers, and the Consumer Price Index was up 5.4%, compared to last June, over a 12 month period. And compared to last May, it was at .9%. Both of those are big numbers, and we haven’t seen those kind of jumps on a month to month, or from a year to year basis, since back in the recovery of the 2008 downturn.
And so again, that’s very important to consider, because we had high inflationary numbers coming out in that recovery, we’re having high inflationary numbers come out in this recovery. The inflation from 2008 until 2020, was really nothing, so it didn’t translate into permanent, high inflation, and I think that’s why the market didn’t react this morning. We actually hit an all time high on the S&P 500, then all of a sudden, we had this big drop.
And in exactly the same time, we had this big drop, one of the Fed governors here in San Francisco, Mary Daly was being interviewed, and they were asking, what’s the Federal Reserve going to do about this situation. And she says, they might have to cut back on buying bonds, which is one of their stimulus things that they’re doing at the end of the year or the beginning of next year. And that’s earlier than they’d said before, and the market dropped to based on that, because that’s one of the stimulus things that the Federal Reserve is doing, and they might have to cut that back earlier.
But let me discuss what’s been happening so far this year, with the Federal Reserve, they have a very succinct pattern, and we’ll see if it happens again. On the week, whether either having a Fed meeting or Chairman of the Federal Reserve, Powell, is going to be testifying in front of some Congressional Committee, which is what’s happening tomorrow, he’s testifying in front of the house, you see them start to say some negative things, at least as far as the market is concerned. They’re trying to get the market ready for the fact that they are going to start to cut back on these bond purchases and to eventually start to raise interest rates.
And then the market usually comes down in this timeframe, so don’t be surprised to see that happened this week, as these comments come out. They’re trying to get the investing public ready, but then they come out the next week. That would be next week in this case, and they start doing interviews, and they talk a lot more positives and start talking about how transitionary the inflation is. They really don’t see any real problems, and even though we might be raising the rates in 2023, who knows, maybe we won’t. And so that, then all of a sudden, you start seeing the market come back up. So let’s see if that happens. Again, I think that’d be kind of interesting. Certainly today fits the pattern.
I think these things aren’t just off the cuff. These are big market movement issues, that probably aren’t just randomly said, as far as that goes in these different interviews. So altogether, I think things are really good. Earnings reports are coming out: The banking system, is the first one coming out. We saw some very strong reports, although in a couple cases, some of those stocks still sold off. Oftentimes, the stock has already run up a lot, and the report is what’s happening. But there is a expectation for a lot of strong earnings reports coming out this quarter. So we’ll see how that plays out.
It is a bit more volatile around that time too, so just kind of have to deal with that. But altogether, I think things are are pretty good. And again, we’ve made some adjustments, you’ll see things coming through. We’ve made adjustments to the portfolios, where we’re going to have more than 70% in the broad market. Because again, like today: Growth was better; yesterday was value. Everything’s moving around so much. We’re buying all of it. And then we still have some targeted pieces, which did well today, actually, at least a couple of them. So that’s, that’s the object of what we’re trying to do here, you’ll see those come through. Anyway, very interesting time, as usual. We’re working our way through a reopening, and all these different areas, and look forward to seeing what’s going to happen tomorrow. Thank you very much.