Shelter-in-Place Stock Market Update 3.17.2021 – How the Federal Reserve comments could affect your money.

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

Everyone, welcome to Wednesday, the S&P 500 was up almost .3%. Today, it was a very wild ride, we basically see the same wild ride every time the Federal Reserve Chairman speaks. And you can tell how important the Fed is to the market by how much it reacts to, you know, the things he says. So a couple of key takeaways from what they talked about, no interest rate increases till 2023. One of the problems is that the market essentially thinks that they’re going to have to raise rates at some point in time. And that’s why you’re seeing this, like 10 year Treasury continue to increase in yield. So we’ll see how that plays out. But that’s a very unusual statement to make in my history of watching the Federal Reserve, they usually don’t make predictions past maybe the next quarter.

So you know, telling us that they’re not going to raise rate for a couple of years, is really interesting. From that standpoint, this Federal Reserve has done some things that never seen before. And that’s one of them. One of the other pieces that they’ve been talking about is letting inflation run at a higher rate, and making full employment a higher priority than they used to, used to be inflation was the priority. And of course, over the last couple of decades here, they’ve killed, you know, a couple of huge markets by raising rates so many times, and I think they’re finally starting to realize that that’s not really working, and they’re gonna let the economy’s get a little bit hotter. So their expectation for inflation for this year is 2.4%. They’re expecting 2% next year. And the reason being is because this year, you know, we got this shortage of supply, because we know these companies have cut back and then all of a sudden got this huge demand. And then eventually, those companies kind of add their supply back as they hire back. And full employment is, you know, they’re usually talking around 3, 4%. You know, unemployment rates is what they consider full employment.

Right now, it’s at about 6.9. But if you count the people that are off the employment roles that want to work, and those people that are part time that want to work full time, it’s actually an 11.1%. And that’s why I don’t think we’re gonna see big inflation, even, you know, in 2022, we’re gonna see this temporary spike. So how does this play out for the stock market in the bond market? The bond market, let’s talk about that first. So if they’re expecting 2.4% inflation, right now, we could see the Treasury yields go up quite a bit, which of course means that the prices are going to go down quite a bit. We saw some of that today. So the way to play the bond market right now, in my opinion, is to have very short term bonds, because they don’t fall as much if they’re going to fall. And or some type of an inverse. So we have, you know, one short term government piece, one short term TIPS, right, with Treasury, Inflation, Protection, Security, one short term, high yield. And then we have two inverses, one on the seven to 10 year Treasury and one on the 20 plus year Treasury. Those two inverses did really well today, actually, you know, because again, the comments that they’re making are inflationary comments, they’re going to let this inflation run, I know, they wouldn’t let it run completely. If it got really out of hand, they do something, but they’re okay with what they see right now.

And so that’s what you saw today, kind of reaction from the market. On the stock market side, this inflation is happening because the economy is going to be hot. Okay, so ultimately, that plays very well for stocks and stocks are a great hedge against inflation. But stocks, like a slower rate of inflation, to be honest, because when prices go up a lot like on commodities or those types of things, it’s very hard it can it can hit the earnings for companies in the short term. So again, that’s why we’re gonna see this volatility, I have said before value should do better in that environment than growth. But, you know, we’ll see how that plays out.

So very interesting comments today, I think it’s really fascinating what they’re trying to do that I’ve never seen anything like this, the Fed, you know, projecting out in advance like this, talking about full employment to set of inflation, really, really different. I think it’s an improvement, it’s going to be, you know, a bit of a problem for us, in terms of things that we want to buy might be costing more, you know, over a period of time, but maybe we make it up on the other side, with stocks that are doing well, and unemployment that’s better, which then can maybe keep, you know, the economy rolling better, too. So I think that’s a better solution than just hammering inflation, and ending up with a whole bunch of unemployed or, you know, we’ve had these big giant crashes that have come after, you know, so many interest rate increases.

So, you know, let’s see what happens here. But very interesting. I would expect things to settle down a bit for the rest of this week. Oftentimes, we’ve seen even actually down markets after the chairman of the Federal Reserve is spoke today made it up a little bit. But then oftentimes, we’ve also seen pretty good days right after that, as things kind of settle in, and people have an idea for, you know, at least what the Fed is thinking. So that’s what happened today. I look forward to talking to you tomorrow. 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.