Market Update: June 15, 2022 Federal Reserve Rate Increase Analysis

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.

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Transcript:

Tom Vaughan:

Hello, everybody, welcome to Wednesday, the S&P 500 had a green shirt day today up one and a half percent. Today was the Federal Reserve meeting day, Chairman Powell came out, they announced that they’re raising rates three quarters of percent, the top line Fed Funds rates now one in three quarters, talked about some expectation for a three quarter to a half a point increase at the next meeting in July, market is expecting another half a point increase in September at this point, and we’ll see how that goes. I thought that was pretty interesting things to boil it down to some of the things that I was looking for, I’m always looking for, what does the Federal Reserve really looking at, in terms of trying to, you know, make an impact. And so the last meeting, a lot of attention was placed on number of job openings. And so essentially, there’s two open jobs for every one person looking for a job. And that creates problems because you end up with this increasing wage that causes you know, then eventually increasing prices, and you get the cycle that’s going. And we actually did see some decrease in the number of job openings, nothing substantial since the last meeting, this meeting knows a lot more conversations about really expectations for inflation looking forward from businesses and consumers and what have you, they obviously saw the increasing CPI number on Friday as as a big negative two things were going the right direction. But normally, the Federal Reserve is talking mostly about Core inflation, which is take the overall inflation number and take out food and energy. And because they feel they have more control over the core aspects of it. And he mentioned many times that they feel like they do not have control over say gas prices, for example. At the same time, they’re raising rates in a more aggressive pattern here, because they want to try to help consumers.

And especially looking at the consumer expectation survey that comes from the University of Michigan, which was also released on Friday of last week, that was that a record low had never been, you know, the expectations for future finances from consumers right now is lower than it’s ever been. They’re still spending money, we did see retail sales come down a little bit, though point 3%, which isn’t a bad thing, we need to see things slow in order to get lower inflation. But he talked about the fact that most likely that was a response to higher gas prices. And so he, you know, if you, if you kind of connect the dots there, they want to lower inflation overall, they want to get the consumer back into a better place. And one of the things that they can’t control is gas prices. And so if you think about it, if gas prices continue to go up and up and up, and they can work on all the other aspects, what we call the core inflation, they could push us into recession, trying to bring core inflation down far enough to make up for the inflation that’s happening on gas. So I would say the theme of the day for what to watch for, if you want to really see if we’re heading for recession, or how the Federal Reserve might react would be to watch the price of gas, it’s probably not getting better here in the short term. And he’s right, the Federal Reserve can’t do a lot to control the price. But we have seen things from the White House now, letters going out to the to the oil companies, we have a potential visit going to Saudi Arabia, trying to get them to replace some of the oil that might be lost in Russia, there is that’s the type of things that need to happen. We need to work on the supply side, we need to get the refineries going. Unfortunately, these aren’t going to happen overnight, and we’re heading into the higher drive period, which is the summer. So I suspect gas prices keep coming up. But you know, what are they doing? How’s that working? What type of progress that we make in the price of gas? How does it look in the fall, for example, and because you know, again, if price of gas continues to go up and kind of eats up the overall CPI, and they’re now concerned with that, they’re going to be raising rates to try to bring down core inflation, they do that enough, they can kick us into recession. So I do think that’ll be something interesting to watch and see how the price of gas plays out.

And whether or not you know, Congress or the White House or whoever can find a way to get that price to come back down. So we’ll see what happens there. But definitely the thing to watch going forward right now, in my opinion. Altogether. Market did great today, we hit that low, stretched way down, jumped up. We’ve jumped up in the past during these meetings just like we did today. It didn’t hold up. So we’ll see what happens like tomorrow or what have you. You know, there’s still the basics out there of trying to get through this, you know, situation. I do think it’s very interesting. If you look past some of this just a little bit, and you see where they finally get the Fed funds rate kind of into that three to 4% range, inflation drops into that two to 3% range, which they’re really expecting to happen in 2023. That’s a really healthy place for the market, especially one that has come down so much as it has here so the market does look forward. Doesn’t look always exactly at it. Everything that’s happening today, there is some adjustment for today, but the market will be looking forward at that point. And right now for the first time that I’ve seen the market expectation for where rates will be is now matching where the Fed is saying they think they will be, there has been a disparity that the market has been feeling the rates would be higher, and the Fed has been, you know, off of that, well, the market was actually right. They weren’t expecting to do a three quarter point increase at the last meeting said it was off the table, and then they did it anyway. So pay attention to what the market saying and now maybe that the Fed and the market are lined up, we’ll see some more stability in the stock market also from that too, so but the key thing I think right now is watch the price of gas and see what’s happening around that and that might control that and make that better or worse, depending on what’s going on. So anyway, look forward to seeing what’s going to happen tomorrow, and we’ll talk to you that Thank you.

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.