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  • June 10, 2021

Market Update: June 10, 2021 High Inflation Numbers Leads To Surprising Result

Disclaimer - Read More

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:

Hello, everybody, welcome to Thursday, the S&P 500 was up almost a half percent today. And the big news today was the release of the Consumer Price Index, it’s a major index that is used to look at how much inflation we might be having. And today it was up 5% higher than it was last May. And that’s a big number actually have to go back to 2008. To see that kind of jump, you know, in one year, but last May was in the middle of the pandemic, and prices were actually going down. So year over year comparisons right now aren’t as accurate as normal. But month over month, two comparisons are probably still worth looking at. So if you look at, you know, the movement from March to April, which was the last report point 9% growth, that’s pretty high. This time, from April to May, when the report that came out today was that point 6%. So that’s better, maybe things are slowing down a little bit, but it’s still very high. If you had kept going at point 6%, for a full year, you’d be at 7.2% for the year. And the Federal Reserve has a target at around 2%. And they’re willing to let the market and the economy run hot before they start to make adjustments to their bond buying or their interest rates. But that’s one of the fears. And so normally, you see the market kind of reacting negatively to that. But not today. And let me show you something here, I think is very fascinating. I talked a little bit about this yesterday.

So this is the 10 year Treasury market, okay. And that’s the current yield 1.46%. And here’s the chart of the yield or the interest over the last three months. And you can see here at the beginning of the year, boy, things just really took off. And we really, really went up a lot and hit a high here, you know, at the end of March. Well, but we look at what’s happened right now, these highs are getting lower and lower and lower. And then we kind of set a low down here that we broke through yesterday. And we continue down today. So what the bond market is saying is that it’s not worried about inflation, even though we just had the report and it was fairly high. And you know, even on historical basis was fairly high, the bond market yield is going down. And so the bond market is signaling that it is looking at inflation as possibly temporary, or at least with what we know so far, not as bad as everybody thought it might be. And so that’s very fascinating. So that if you see what happened to the market, here’s today, the pieces that did the best were the growth portion. So again, in a high inflationary environment, these actually should do fairly poorly. But the bond market is signaling that doesn’t feel like inflation is going to be a big threat here, at least in the short term. And we saw a pretty good move here and a kind of a selling off of the value, which has been doing quite well, if you look back over the last three months, these are two of the bigger areas that today’s sold off. And again, these areas, this kind of mid cap and small cap value, are the more economically sensitive.

So if the economy grows quickly, and if there’s fire inflation, you’ll generally see these areas doing better in a higher inflationary environment. And also a lot of the reopening stocks that we talk about all the time happen to be in this category also. So really fascinating to see, you know, what has happened here, were my numbers on the CPI, bond market is okay with that starts to actually lower the interest rates, which would mean that it’s not as frayed of inflation. And we start to see the growth things do well. So what we saw today, within our accounts, for example, the taxable accounts, we have still have a lot of those growth pieces, we’ve got Apple and Microsoft, and all of those pieces that were quite green today, those did quite well, our models are more geared towards the reopening and inflation sensitive area, we did make a couple of changes to those, you know, we’re always making changes to kind of balance that out. But but they didn’t do as well today. So you don’t have to wait and see how this plays out. But these are really important pieces. And again, I’ll mention like I said yesterday, keep an eye on that 10 year Treasury yield kind of gives you a really good idea, you know, for what might be coming in terms of inflation.

So I think one of the things that they saw on the inflation numbers that made him feel better was that roughly a third of the increase in inflation had to do with car prices and us car prices. And there’s a big demand, you know, big shortage due to, you know, the chip shortage that’s happening. And so, you know, once that works, its way out. You know, I suppose the market is looking at that and say, okay, that’s going to be temporary. There is one big plant that burned down in Japan that’s supposed to be coming back on in July. So I think these are things that you know, they’re anticipating as far as that goes. So, very interesting day, you know, something to watch for and continue to watch and see what happens and look forward to seeing you tomorrow. Thank you very much.

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Disclaimer - Read More

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.

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