Transcript:
Tom Vaughan:
Well, hello, everybody, welcome to Wednesday, the S&P 500 was down about .2%. Today. And I think what was really important about today was just kind of how things unfolded the market was up and doing okay. Most of the indexes were doing okay. And then right at the end, almost every single index sold off the last hour or so. And I suspect it has something to do with tomorrow. And tomorrow is the report on the consumer price index.
So, the last time they reported the consumer price index, in May was for April, and we ended up with a 4.2% year over year gain in prices on inflationary prices for April, and a .9% gain from March to April. Those are both big numbers. I mean, those are huge. And so the market is really kind of turning around that. And I think a lot of people just took money off the table today, at the end of the day, in anticipation of what might happen tomorrow, because it’s really not that clear what might happen. I do think it’s very interesting to see what happened today to the 10 year Treasury Market. It actually dropped in yield below one and a half percent, which it hasn’t been since January. And it fell fair amount today, actually. And normally, if there was an expectation for much higher inflation, you would actually see that yield going up. And so the fact that the yields going down the bond market is thinking that tomorrow’s number might not be that bad, especially compared to expectation.
So, I do think it’s going to be very fascinating, see how that plays out. Because again, the structure of your portfolio and where you put the money and where you’re going to make money for the next 12 months, and where you’re going to lose money for the next 12 months, or at least make less money has almost everything right now to do with inflation, and what’s going to happen there and whether we really do have inflation or not. And again, we’ve had a lot of false things happen with inflation. I mean, if you look at the history of the 10 year Treasury, it’s fascinating. From about 1962, went from about 8%, all the way up to almost 16%, which is unbelievable. That’s back when we had mortgages at 15 to 18%. CDs, that you could get at 10 to 15%. And then and then we’ve basically had a decreasing yield on that Treasury since 1982. That’s forever, a really long time, bottoming out for the lowest point going back to the 60s, last summer, when the Treasury got to half percent. And now it’s kind of bouncing back up.
And so really interesting, though, to understand and watch what’s happening with the bond market, because again, the big focus will be on inflation going forward here. Are we really having inflation is a temporary, is it permanent? Or is there nothing? Is it controllable or not, those types of things, those are what the market will be looking at. So I think you know, we made a couple changes today to the traditional model and one change to the ESG model, going in on some clean energy pieces that seem to be moving really well again, that kind of bottomed out and a little bit of real estate in the traditional model also, which seems to be doing quite well.
I think people are kind of chasing yield and dividends and such too because the rates are so low you know in other places go to the bank and you don’t get a lot of money you know for a CD anymore so that’s those a couple changes. We made very happy with that. I think that should work out really well for us but be very interesting to see what happens tomorrow. You know, in the face of these new numbers and our report that to you then thank you very much.