Transcript:
Tom Vaughan:
Hello, everybody, welcome to Friday, the S&P 500 was up about .2% today, but it was a really good day, actually lots of green on the charts, lots of breadth. Yesterday, the market was actually up more if you looked at the indexes, but that wasn’t as strong today, it was very strong, really good movement all together. And so I just want to talk about why the market is doing so much better. You know, we’ve had this big period of time where we’ve been going sideways, a little bit down, and now we’re hitting new all time highs. And really, there’s been some things kind of hanging over the market that have seemed to have alleviated themselves, at least for the moment.
And so, of course, the first one is this whole thought of inflation. The market doesn’t care about like normal inflation, that’s kind of happens all the time. And I give you a little story, just something that happened in my life, that’s kind of interesting. My grandparents built the house in 1936, in Willow Glen. Spent about $3,000, for the lot and everything, which is crazy. But they we found in the basement, we found the original bids for a couple of subcontractors. So the painting inside now the painting was $20, that was the bid, the plumbing, complete $18. Now I built a house in Willow Glen in 1997, a few years later, I didn’t have one single fixture that I could buy, I think that was less than $18. So things do increase in price, but the markets, okay with that. What the market really struggles with is really fast moving inflation, because it creates all kinds of problems for earnings, companies are either having to absorb those cost increases. And having less earnings because of that, or try to pass those on to the consumer. And the more prices move up, the less people generally buy, which can also affect the earnings.
So, in a higher inflationary environment, that’s what’s happening. So right now, what we’re seeing is that I think the market is finally figuring out that the inflation that we’re seeing now is temporary. We’re gonna see these scenarios kind of work their way out, we’ve got this situation where the labor market is still, there’s still a lot of unemployed people. And some of them aren’t coming out to work yet, but they will. And when you have that big group of unemployed, it’s really hard to get really big inflation, that would be quite, quite permanent as far as that goes. So I think it’s, it’s really interesting to see, it’s fascinating to see where that’s going to go.
But the 10 year Treasury market has come down in terms of yield, and we’re starting to see broad based movement, grow stocks, value stocks, some of the stuff that did well, last year is now starting to move quite well this year. And I think that’s going to give us a much broader array of things to be in and see some significant gains coming from the market. You got low interest rate environment, all the different things that should be there pent up demand, lots of cash, lots of cash in consumer hands, lots of cash and money managers hands also. So both of those should be good things for the economy.
The other thing that has seems to have lessened itself, is this thought process of increasing the taxation on corporations. The latest scenarios for negotiation, have revolved around not increasing taxes for companies and so that again, whether you agree with that or not, that’s sort of a different story. But as far as the market is concerned, obviously what happens, that just means that there’s more earnings that they can make. And again, that is the main driver of the stock market. And so those two things have kind of reduced themselves. And we’re starting to see stocks come around. And honestly, we’re starting to see some good movement.
I guess one other thing that’s out there, it’ll be interesting to see how this plays out, but cryptocurrency was just a rage for a while, especially when the market was kind of struggling. And now that’s cryptocurrency has really started to kind of struggle itself when we’ve seen Bitcoin, and some of these things kind of sell off, we’re starting to see the markets come back around. I think those are probably related, I think, especially those things like clean energy and innovative technology, genomics, and what have you that were doing well, last year, are starting to do well again, and we’re seeing cryptocurrencies coming down, so we’ll see how that plays out. I think that those might be a little bit related. So all together, good day, good week, it’s a good time to be an investor right now.
So I want to thank everybody that came to go live with Tom, really appreciate that. And again, we’re going to be putting out I think, some really interesting in depth videos coming. So if you want to see those and make sure you see them, subscribe to the channel and hit the little bell to get the email as far as that goes. So thank you very much for joining me today and I look forward to talking to you on Monday. Have a great weekend. Thank you.