Shelter-in-Place Stock Market Update 1.13.2021 – All the reasons 2021 might not be like 2000.

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

Hello, everybody, welcome to Wednesday, historic day today. The house is considering a second impeachment, as I record this, at the moment, looks like it’s going to pass. I already talked in a previous video that I don’t think an impeachment is going to have a significant impact on the stock market. You know, we’ll see how that plays out. But the S&P 500 was up .27% today, and really was kind of a flat day all together, I think there’s some waiting that’s happening. But also, I think last week was just such a big jump, there, there needs to be a period of time where the market just kind of goes sideways. And that’s what we’re seeing so far this week, in my opinion. But I’d like to take this chance to answer some questions that have come up. And one of which is, you know, keep getting articles and different things that people are seeing about how this is just like 2000, and how the market is, you know, going to maybe burst like it did in 2000.

So let me give you kind of my opinion on that. And some of the things that I think that maybe are missing from that calculation. Please keep in mind that all the people that thought the market was gonna fall apart last year, we’re dead wrong. So we have to consider that there’s still a bunch of people thinks the market are gonna fall. They’re the ones that are prominent, they’re the ones that we see. And this whole thing is about the positive side.

So let me give you the counter argument. I’m not sure if it’s gonna fall or not, I try not to make predictions, I try to react to what’s happening. But I do think it’s important to be able to have some counteraction. And I have that information. I know the other side of the argument. So let me give you that. And maybe that’ll help. And so first of all, let’s just go with one of their arguments here. And if we go back to 2000, and I’ve showed this chart before, you know, this is the Macro Trends, this is the Fed Funds Rate. So this is the you know, the rate that essentially sets all other rates for all intents and purposes.

And so again, really important to see here, number one prior to 2000, interest rates going up, and then the market fell. Prior to 2008, interest rates went up a lot, and then the market fell prior to our downturn here that just happened in 2020, interest rates went up a lot, and then the market fell. And none of the timeframes where the interest rates were low, did the market fall now I’m talking big fall, you know, 10%, that 20% falls happen on a regular basis. But these big 30 plus percent downturns had never had not happened here in this 25 year period when interest rates are low. So this appointment already made. But here’s why.

If you go back to the beginning of 2000, CDs, One-Year CD, according to bankrate.com, averages about 5%. According to bankrate.com, right now, when your CD average is about .5%. And so if CDs are at 5%, there’s a lot more people interested in putting money in a CD that’s FDIC insured, instead of going into the market that average is 11%. But when CDs are at .5%, like they are here, a lot more people willing to go out and try to get into the stock market. And so that’s one of the key drivers, it’s always been a driver, it will always be a driver as far as I can tell. So that’s that’s important. The other thing they talked about in some of these articles, is what I call stretch. And what we’re looking at here, this is the S&P 500 as represented by Vanguard’s, you know, Exchange Traded Fund, and this is the last year. And this blue line is what they usually talk about this is the 200-day moving average. And so what they’re talking about is the distance between where the 200-day moving average is now, and where the price is now. And that’s a stretch. And that is that’s a historical stretch, it’s a bigger stretch than we saw at the top of 2000. But prior to 2000, we didn’t have a pandemic. So that’s a really big deal. Part of the 200-day moving average being where it is, is because we dropped 35% that did not happen prior to the 2000 downturn.

The other thing that they talk about his earnings. And so you know, the S&P 500 had an average price-to-earnings ratio of 29 at the beginning of 2000. And so, and that’s pretty expensive. Certainly, the average is around 18. So it was stretched out in terms of the price versus the earnings. And right now we’re at 37.7. And they’re, wow, really stretched out. But again, prior to the 2000 downturn, we didn’t have a pandemic. One of the reasons that the price earnings ratio is fairly low is because we’ve had a lot of hits to earnings because of the pandemic. Now, you know and so what we’re seeing here is some expectation that those earnings are going to increase and the projections are that 2021 and 2022 are going to be a lot lot better in turn of earnings. And so, still fairly expensive versus earnings.

But this environment is very unique, there’s nothing like it, because we just put out this huge amount of trillions and trillions of dollars of stimulus in 2020, we did not have that happen in the run up to the 2000 downturn. So huge drip stimulus. We also have this scenario where we’ve got a vaccine, that seems to be, you know, going fairly well so far. And we have this pent up demand. So it might go back to 1918. And look at what happened there. Once that all started to, you know, unroll, we ended up with the roaring 20s. And we did end up with a market that was very overpriced, but it was 11 years after the beginning of the pandemic.

So, you know, if this goes on till 2031, and we keep running up, I’ll be happy with that. So we’ll have to wait and see what happens, we don’t know for sure where things are going to go. But when you take a situation like we have here, and you throw all of this money in from these stimulus programs, and you’re gonna end up with explosive growth, that may not make sense for a while, because it’s just the way it is. And you combine that with these low interest rates. So I think things are not at where we were, I don’t think 2021 is like 2020, you know, I could be wrong. And I’ll respond to that, because I don’t like to do predictions. But that’s, you know, my feel at the moment is that we’re in a different position than we were at that point in time when you really dig in and look at kind of what happened, and what’s happened in these run ups in the previous periods. And you know, how that impacts to what’s happening now.

So altogether, that’s my outlook on, you know, the comparison between 2021 and the year 2000. As a starter, has been a fantastic start to the year. I hope it continues. I think it has some potential. I’ve said that this year could be good. So far, it’s been spectacular. And, you know, again, keep in mind that the people that were saying was going down have been, you know, wrong so far. Eventually, they’ll be right, but you keep some balance in your information. And I think that would help tremendously. So look forward to talk to you tomorrow. And let’s see what’s going to happen then. Thank you very much.

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.