Transcript:
Tom Vaughan:
Hello, everybody, welcome to Thursday. The S&P 500 was down .3%, today. And really we saw kind of a really soft market altogether, nothing dramatic. But, kind of across the board to the Total Stock Market Index with Vanguard that I follow: VTI was down, roughly .42%. So nothing spectacularly bad, but it was soft today, all together across the board. It’s a great chance for me to again, emphasize some of the things that I think are going on that are quite good, that even have happened just this week.
So number one, the Chairman of the Federal Reserve, Chairman Powell has been meeting with Congress, they reiterated that they thought inflation was going to be temporary, that they’re going to continue to buy bonds and keep rates low, as long as they need to, to make sure that the economy is really doing well. So this is a different stance than they’ve taken in the past. I think it’s a really good thing for the stock market, and so that has been happened.
And the other thing that happened that’s really kind of interesting, is he talked about the possibility of creating a Digital Dollar: US-backed Digital Dollar, to compete with the cryptocurrencies, and his quote was, “we probably won’t need cryptocurrencies, once this happens.” So, there’s lots of reasons people have cryptocurrencies outside of just that, but it is a competitive situation. And so again, the more the cryptocurrencies continue to fall, and they’ve come down quite a bit, the less people are selling. Somebody who’s going to sell their Apple to buy some cryptocurrency, because it was going up so much; now that it’s down 50%, maybe they won’t.
And so, again, that’s a stimulative situation to the stock market. I think that’s good. And then the other part is interesting: Last year, Americans saved trillions of extra dollars, that versus what they normally do. And what happened was that, that all went into the banking system. Ideally, it goes into the economy, and they spend it. And that might still be happening here coming forward, once people really get going in. Or they buy stocks with it, that would be good, too.
But even in the banking system, it’s still helping out because they’re going in, and they’re purchasing these treasuries: The banks themselves. So they were awash in cash with all these deposits that are coming in. So, when they have a demand for treasuries that drives up the price, which brings down the yield, and the yield’s gone from 1.75%, on the 10 Year for example, down to 1.3%, a little bit below that today, actually. And so again, that’s just a situation where the stock market looks better when your guaranteed rate is so low, right? And so people are willing to take the risk.
And also often, especially the 10 Year Treasury kind of relates to the mortgage rates, which have come down a bit here, and so that allows housing industries to continue to do well. So many industries are involved in housing, and when people refinance, they maybe have more cash in their pocket. So these are all things that are just happening right now. And there’s lots of positives there going on. Again, I wouldn’t ignore the negatives but this is worth looking at.
I look forward to seeing you tomorrow if you get a chance at talkmoneywithtom.com, and that’s just from 12:15pm to 1:00pm, pacific time. And please send in any questions at asktom@talkmoneywithtom.com, and I’ll be able to answer those, and I look forward to seeing you then. So thank you very much, and have a good evening.