September 19, 2025 • 32 mins
From Highs to Headwinds: Navigating the Economy’s Crosscurrents
In this episode of Something More with Chris Boyd, Chris and co-host Jeff Perry sit down
with Senior Portfolio Manager Brian Regan to unpack the economic “headwinds” that
could challenge today’s market highs. From the ripple effects of tariffs and their $800B
impact on consumers, to the economic consequences of shifting immigration patterns,
student loan repayments, and rising wages, the conversation dives deep into the data, the
Fed’s balancing act, and the looming question of recession risk. Whether you’re an
investor, business owner, or simply curious about where the economy is headed, this
episode offers a grounded, data-driven look at the forces shaping our financial future.
#Economy #Markets #Investing #Tariffs #Inflation #RecessionRisk #FederalReserve
#EconomicOutlook #PortfolioManagement #FinancePodcast #MarketAnalysis
#InterestRates #EconomicHeadwinds #Headwinds #WallofWorry #FinancialPlanning
#Investing
For more information or to reach TEAM AMR, click the following link:
https://www.wealthenhancement.com/s/advisor-teams/amr
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome to Something More with Chris Boyd.
Chris Boyd is a certified financial planner, practitioner,
and senior vice president and financial advisor at
Wealth Enhancement Group, one of the nation's largest
registered investment advisors.
We call it Something More because we'd like
to talk not only about those important dollar
and cents issues, but also the quality of
life issues that make the money matters matter.
(00:22):
Here he is, your fulfillment facilitator, your partner
in prosperity, advising clients on Cape Cod and
across the country.
Here's your host, Jay Christopher Boyd.
Welcome.
This is Something More with Chris Boyd.
I'm Chris Boyd here with Jeff Perry.
We are joined this week by Brian Regan,
our team's senior portfolio manager, and we are
(00:45):
all of the AMR team at Wealth Enhancement
and glad to have you with us.
We want to talk about some of the
kinds of things that I think clients are
coming to us with regularly, this sense of,
gee, it's great that markets are at highs,
like they're feeling pleased, but a little bit
anxious.
(01:05):
When's the other shoe going to drop?
Is there something coming?
What to expect?
With that in mind, we're going to talk
with Brian about the topic of headwinds.
What are the headwinds?
Is there more opportunity than risk or more
risk than opportunity?
Well, I guess that's what makes a market
move, right?
(01:26):
Yes, the answer is yes.
Yes, right.
And of course, none of us has a
crystal ball with any of this stuff, but
Brian, you spend a lot of attention watching
the data.
We started to see the feds signaling, what's
your take right now as to how's this
(01:46):
affecting the way you think about outlook and
positioning?
So the market's up, that's good news.
So bear with me while I give you
a bunch of bad news, but the topic
is headwinds, so it's kind of natural, right?
Yeah, you might expect it.
Here are the headwinds that I want to
talk about, tariffs, immigration, and student loan repayments.
(02:09):
We're really starting to see the effects of
the tariff policy.
And unfortunately, it hasn't been good.
It's been five months, let's say, quote unquote,
liberation day, where things got crazy.
We settled down to a spot that's much
higher than it has been historically, actually, maybe
higher than it's ever been in the country's
(02:30):
history.
We're around 18% tax compared to income
taxes for Americans right now, bringing in around
$350 billion over the last five months.
If you annualize that, we're looking at $800,
$900 billion worth of taxes on the American
consumer.
What are we seeing?
(02:50):
We're seeing inflation in goods rise, and we
were seeing some disinflation from services.
We're starting to see that level off and
actually start to rise a little bit.
The parts of the economy that are heavily
inflicted by tariffs, basically anything that's imported, has
seen a dramatic either price increase or demand
(03:13):
just has disappeared.
Think apparel, think furniture, things like that.
But we're also starting to see some lightening
up on things like going out to eat,
hotel and accommodations.
We're starting to see some price increases there.
When you look at our $800 billion tax,
we're expected to take down about 70 basis
(03:35):
points of GDP growth.
If potential GDP is 2% and you
take around 70 basis points, you're at 1
.3%. Your margin of error gets a little
tighter.
At the same time, we've seen employment growth
stagnate to close to zero within a margin
(03:56):
of error that could be negative, could be
positive.
In my mind, that means that, hey, look,
we might be in a recession.
If you have a Bloomberg machine and you
were to pull it up right now, it
would say that there's an expectation of a
30% chance of a recession.
That's tariffs.
It hasn't been good.
Prices have been increasing.
The expected inflation is 3% for the
(04:18):
next 12 months.
The price on a one-year inflation swap,
which basically means what the market thinks is
willing to pay for inflation protection over the
next one year, is 3.5%. Keep in
mind that the target for the Federal Reserve
is 2%, but I'll get to that in
a minute because it seems like the Reserve
has abandoned that as a target, whether that's
(04:40):
political or whether or not they're prioritizing the
unemployment situation is debatable, and I actually think
it's both.
I think this Lisa Cooke thing is about
being in control of the Federal Reserve so
that they can change it and really stop
thinking about- Drive monetary policy the way
(05:04):
they want.
Among other things.
They could change Fed presidents in every city
if they wanted to, if they had four
board governors rather than the three dissents right
now.
The makeup of the board governors on the
Federal Open Market Committee are important, and so
(05:25):
that's a different topic.
I think we're on a good show though,
maybe.
That's a good topic further, but anyway, come
back to it.
Yeah.
As you guys know, I have a lot
on my mind right now.
So that's tariffs, right?
What are we seeing?
We're seeing a slowdown in GDP to the
tune of around 70 basis points.
That's from the Yale Budget Office, that estimate,
(05:48):
and we're seeing inflation expectations to be three
for at least the next 12 months.
Why the next 12 months?
Because you're probably going to start seeing it
roll over and the CPI growth on a
higher base.
Unless tariffs go up again, we'll roll out,
which is the other reason why the Fed
is probably looking at it as a, I
(06:08):
don't want to say transitory, because 12 months...
People in the world these days can't think
of 12 months as a short amount of
time.
Before you go on to other things like
student loans and other things, I want to
just come back to this.
So $800 billion, that's very interesting as an
estimate for where revenue generated by tariff taxation
(06:34):
for the federal government.
We were running about a $2 trillion, $1
.8, $1.9 trillion deficit last fiscal year.
That might help at least the debt direction
of things, if not the economy because of
(06:55):
money that people don't have to use in
other ways.
0.7% GDP, that's taking out 0
.7% you said from the tariff, that's
about what that represents.
And you said our GDP growth was about
1.3% forecasted right now?
(07:15):
No, the estimate for potential is 2%.
You take out that 70 basis points, you
get to 1.3%. Over the last 12
months, I believe it's been 1.75%. So
you're getting on the hairy edge, right?
We're far from being settled on these issues.
Your point about recession, this risk of recession.
(07:40):
I've said this before, but it's been a
long time since we had a recession, really.
We had the pandemic where we had a
recession, but there was all this stimulus thrown
at it that was very short-lived and
arguably government policy driven and resolved in both
(08:02):
cases.
So it's been a long time since we
had a recession otherwise.
So it seems to me that it'd be
surprising that we didn't have a recession in
this administration.
Before we knew the outcome of the election,
(08:22):
that was kind of my expectation that whoever
won, you'd probably likely to have a recession
just because it's been so long since we
had one.
But the Fed seems to have found this
a sweet spot of moving monetary policy, helping
to navigate that seemingly effectively.
(08:42):
This question of inflation on the one hand,
saying rising to 3%, 3.5% on
the one hand, and a zero growth perhaps
on the employment end of things, just the
minimal employment, that does seem to speak to,
(09:03):
hey, we're slowing down.
On the one hand, which would say, hey,
let's lower interest rates on the other hand,
the rising inflation seems to be like, oh,
maybe we don't want to.
But you're saying because of the tariffs being
a big component of that, maybe that'll just
work itself out because it's a one-time,
(09:26):
not an ongoing, growing endeavor.
My guess is when the Federal Reserve cuts
rates tomorrow and they have a press conference,
that's what Jay Powell's going to say, that
he expects it to be transitory.
And that's going to be his excuse.
We're recording this on September 15th for our
listeners.
Yeah, I think that's going to be his
excuse.
And that the unemployment concerns outweigh the inflation
(09:47):
concerns because of that.
Okay.
All right.
So you were starting to tell us what
these headwinds are.
And part of it, you were talking about
tariffs as the setup.
We got cut off here because I interrupted.
Well, I think I was done with tariffs,
so it was a good time to interrupt.
(10:07):
We mentioned the employment situation there a couple
of times.
Part of the reason why folks think the
employment situation is worsening is because of deportations.
So we're on track for about a million
deportations here in 2025.
You take that from a year ago, we
(10:28):
were having about a million or more people
coming into the country.
Let's call it a 2 million person swing.
Let's say that those people were making $30
,000 a year.
And you start to get some very big
numbers that are taken out of the economy
on top of that.
I have not done the math.
I haven't done accurate estimates, but basically-
(10:50):
Theoretically, you get the point.
Right.
The supply has come down.
And what would you expect in certain industries
like agriculture, construction, leisure and hospitality, restaurant service,
you're going to see wages go higher.
And I mentioned briefly on the tariff conversation,
(11:12):
how we were having tariffs go up pretty
obviously in goods directly related to tariffs.
But we were also seeing inflation go up
in some services.
And I think that's partly because, if not
largely because of this change in immigration situation.
So again, this is kind of a stagflation
(11:32):
type of policy, right?
We have less labor supply, we have higher
wages, which means more inflation, less economic growth,
which is not great.
Again, that's why you're seeing inflation be around
3% and economic growth expectations to be
around 1%.
(11:52):
And these aren't my numbers.
These are the consensus estimate numbers for the
next 12 months.
So if you want to disagree with them,
fine.
Just know that you're disagreeing with the 60
economists or market participants who get interviewed by
Bloomberg to build their index of expectations for
this.
I saw last week, or maybe the week
(12:13):
before when one of the unemployment numbers were
coming out, a really interesting conversation on CNBC
about the credibility of these numbers when you're
talking about deportations and all the related issues,
because so much of this part of this
economy is underground, right?
It's not like people are working.
(12:35):
Many of them are, many of them are
authorized to work, but many are not.
And so the dynamic of the data with
so many of those people being not in,
not officially in the wage pool and not
officially paying taxes, and I know they pay
taxes for all the things that they do
in the economy, and that has an impact
on it.
(12:56):
But as far as payroll data and unemployment
rates, et cetera.
Do you have any thoughts on that, Brian?
Sure.
So I have, I think that it's a
little misleading.
I mean, I hear your point.
It's hard to know exactly in this data,
but I do have- What was misleading?
It's a question.
Whatever you said, I do think we have
some data on this, I guess, is what
(13:17):
I think is misleading.
And I'm just going to quote it.
From the US Bureau of Labor Statistics, industries
that make up unauthorized labor as a percentage
of total nonfarm payrolls, so total nonfarm payrolls
is the survey that happens, and you get
the data once every month, and it gets,
(13:37):
they do revisions for two months prior, and
then they do a big annual revision, which
we just got, which is one of the
biggest ever from the March period, 12 months
prior.
But this is- Talking about reliability of
data.
Well, the data is trending negative, and it's
kind of not really debatable.
(13:59):
But yeah, you're right.
I mean, it was a big revision, and
the surveys are maybe not completely reliable, but
certainly trending negative.
But anyways, the US Bureau of Labor Statistics,
the same people who put out that annual
report that we put a lot of stock
into, has 4% in unauthorized labor and
wholesale trade, 4% in transportation and warehousing,
(14:21):
5% in construction, 10% in retail
trade, and 10% leisure and hospitality.
So those are the industries that are likely
going to be more impacted by this than
others.
So we do have some data on it.
And I think it's undeniably a negative on
(14:41):
the economy on both the inflation and employment
and growth front.
That answer your question, Jeff?
You good with that?
Sure.
Yeah.
I mean, I think that's a fair point.
We may not have comprehensive data, but I
think the point Brian's driving at is we
(15:01):
may not have it comprehensively, but we know
directionally, this is where it's going to be
most challenged.
I was making the question of, isn't this
maybe even a bigger issue because so many
people are not counted.
Might not even realize, capture the extent to
which.
And if they need to be replaced by
(15:22):
people who are counted, just to throw the
generalities out there, that might even drive up
wages more.
Inflation.
Inflation and so forth.
Because you're taking part of the underground, which
is part of the goal, is taking part
of the underground economy and making it legal
and above ground.
And so the magnitude of these predictions might
(15:44):
be understated.
That was my question.
It wasn't really a statement, but it was
a very interesting discussion anyway that I saw.
Well, maybe I misunderstood the question, but my
point was just that we do have some
data on it.
Whether it's accurate or not, I assume it
is as best as any other government statistic,
(16:05):
I guess.
The third one was student loan repayments.
So with student loan, we have 45 million
Americans that have a student loan.
That's about 20% of the adult population.
And they're paying anywhere between 5% and
10% on interest rates.
(16:26):
And they recently had to start paying after
a long reprieve from not having to pay
them following COVID.
And what we're seeing is delinquencies are skyrocketing.
I believe the number is around 11 million
people are either defaulted or between 60 and
90 days delinquent.
(16:46):
So that's not a small amount of money
in the economy either.
Now, I have not worked up an estimate.
And I asked Torsten Slack of Apollo this
today, he did not have an estimate on
how much immigration and student loan payments are
going to be a drag on the economy.
But if we're already at one to 1
.3, because of tariffs, and you layer these
(17:09):
on top of it, you start getting into
a scary territory, I guess is all my
point is.
And then the 30% estimate of recession
on Bloomberg, that's the expectation over the next
12 months.
I would say, I think there's a 30
% chance that we're in a recession today.
And how does that impact your portfolio is
(17:31):
an interesting question too, because we all have
this data.
I'm not the only person that has access
to this data, right?
And the market has gone up.
And I think this is a function of
the makeup of the stock market.
We have very, very profitable, very, very high
(17:53):
margin companies, very much not leveraged to the
consumer, but leveraged to B2B enterprise customers.
If you think NVIDIA, they do sell some
to gamers and things like that.
But basically, they've been selling chips that will
(18:14):
go in the big data centers that will
end up in cloud computing.
Microsoft has Windows, it's a big enterprise product.
Azure is a big cloud computing company.
Google has exposure, of course, to the consumer
economy because they do a lot of advertising,
but they are the advertising platform.
(18:34):
Facebook, well, Meta and Google, they're dominant, right?
Where we are seeing other media do very,
very poorly.
If you want to think of typical TV
cable providers and their media, they're not doing
well.
So when you think about building out your
portfolio on the equity side, I think you
(18:56):
really want to think about what is levered
to this AI theme.
And that can actually get you pretty diversified.
It's not just the cloud names.
It's not just the semiconductor names.
It can also be industrials that are building
out data centers, the Eatons of the world.
It can also be utilities, which I've touted
(19:20):
a lot.
It can also be, I think you need
to dig deeper into individual companies and individual
sectors that might benefit.
And then when you think about the equities,
(19:40):
so we're going to have we're going to
have slowing growth and we're going to have
cuts in the short-term interest rates, right?
But we're going to have rising inflation.
And what that's done is it created like
this swoosh in the yield curve, right?
Basically saying, over the next couple of years,
we're going to have low interest rates, but
then in the outer years, because of inflation
(20:01):
and growth, we're going to have more positive
interest rates.
So you have the steepening of the yield
curve.
What companies benefit from a steepening yield curve?
The answer is financials, financials, financials, right?
Specifically, banks that lend because they're going to
borrow and pay you deposits on the short
end.
And that borrowing amount is going to go
(20:22):
lower and they're going to lend on the
longer end.
And that's probably going to be a fixed
rate and that leverage and that dynamic is
going to do well too.
So between banks, utilities, some industrials, some technology,
I think you could still do well and
get diversified despite this very, very challenging situation
(20:45):
I think we're having from a consumer standpoint.
And I think that's why the market continues
to do well.
So on the alternatives and fixed income side,
that's where I think things get really interesting,
right?
I think you need to be careful to
go too long in duration because if the
longer part of the curve rises due to
(21:07):
inflation, you're going to get burned similar to
how you might've gotten burned in 2022 as
inflation reared its ugly head.
You also don't want to be too short
because growth is changing.
So what I think you might want is
inflation protected assets, which are expensive.
You might want to consider some other types
(21:28):
of alternatives that might do well on the
up and the down, but they're not going
to set the world on fire.
And you might want to at least look
at certain other types of commodities that might
benefit your portfolio.
And that's not a recommendation.
That's just something that I'm thinking about right
(21:49):
now.
Really interesting.
That's great stuff.
I wanted to go back to something.
We can come back and talk about the
portfolio construction concept, the industries, and you did
a nice job addressing some thoughts on both
equities and fixed income.
I wanted to go back for a second
(22:09):
on when you were talking about student loans
and the concern about delinquencies rising.
Are we seeing that on other forms of
consumer credit with credit cards and the like?
Are we seeing pressure there too?
We are seeing a little bit of pressure,
particularly on auto loans, not on mortgages, a
(22:33):
little bit in consumer revolving loans like credit
cards.
But you're not seeing on mortgages, which is
good.
A lot of people have a fixed rate,
low interest loan still.
But it's very obvious when you look at
(22:53):
student loans.
First of all, in the New York Fed
report, which is where I get this data,
it has a chart and it doesn't help
that the student loans is a red line.
So it's very obvious to see.
It shows that delinquencies and the defaults and
it's a straight line up in recent months.
(23:14):
I guess another way to think about the
student loans is since they were artificially paused,
they were actually stimulating the economy because people
should have been paying at the same time.
Maybe that was part of the reason for
that high level of inflation.
It's another thing people, they didn't get the
(23:36):
money, they got checked, but they didn't get
money for their loans, but they didn't have
to meet their obligations.
So that was just even more of a
stimulus.
Excuse me.
Well, I think there's another thing that I
just want to throw into this.
And then let's circle back to making sense
of this a little bit, because this was
(23:59):
a great structure and a great setup, Brian,
in terms of thinking about as we go
into the back end of the quarter and
the end of the year, the last quarter
of the year, sort of how do we
think about positioning and so forth.
But I also hesitate to mention, because I
(24:21):
know it's not something Brian's going to pay
attention to really, but a lot of times
people talk about seasonality of the market.
And I know it's anecdotal, it's correlation, not
causation.
But there is that notion that September, October
tend to be more volatile months of the
market.
(24:42):
And here we are at or near highs.
And seasonally, we're still in that sell and
may go away period before traditionally you relook
at it as November as the time when
the market is more poised to do well
the next six months.
(25:04):
I just mentioned that just because I do
think it's worth thinking about, not because of
the credibility of this entirely, but just the
notion of risk.
If we look at things and say, oh,
things are at a high, Brian, you've laid
out a fundamentals picture for a variety of
(25:24):
reasons why we might see markets begin to
reassess their willingness for maybe the pricing they're
paying.
If things are going to slow, and that
might imply profitability could slow.
If we have a slowing economy, that might
affect prices of the market.
So as a consumer, not only do you
(25:48):
want to be thinking about the issues Brian's
laid out in terms of positioning in your
portfolio, but you may want to be thinking
about, am I structured well?
Am I tolerant as I look ahead for
the risks that can come with the market?
Inevitably, that's just the nature of investing.
There's volatility.
(26:10):
Do I have an allocation that fits my
tolerance for that kind of positioning longer term?
If not, now's a great time to re
-examine, how much do I want to have
in equities versus fixed income?
Maybe how much liquidity do I retain for
the unforeseen?
(26:31):
Think in terms of our buckets conversations that
we have routinely.
Jeff, you look like you're ready to add
onto that theme.
I was thinking about the time horizon in
all this.
When do you think you're going to need
liquidities for these funds?
Is it soon?
Is it 20 years out?
It's really individual.
Right.
(26:51):
And it makes a difference for how you
think about, am I tolerant of these kinds
of changes?
And Brian, just one maybe change in direction,
throw a last thing or two at you
here.
You know, people tend to invest through index
funds very commonly today.
(27:13):
I think if you were to ask people
over the last 10 years, indexed or managed,
it's like, oh, I thought this was all
solved.
Didn't we decide indexing is the way to
go?
That kind of mindset.
Right.
This may be the kind of setup that
speaks more to managed than indexed.
(27:35):
Is that your thought as you look at
this, given the notion that not every industry
is going to be positioned the same way
and how it's going to be affected by
labor, interest rates, et cetera, AI changing dynamics?
(27:55):
I mean, that's a loaded question, and I
could go on forever.
I think good active management can add value.
And I believe that because I've seen it.
But I think that there are structural problems
in the investment management industry that hold back
(28:17):
many managers' performance.
And I also think that there's nothing wrong
with passive.
I utilize both personally.
I have about half of my money is
actively managed, about half of my money is
passively managed.
And why?
Because the passively managed money is in the
(28:39):
401k.
It's a rollover for my wife's 401k.
And when you add it up, it's about
half.
But yeah, I think good active management can
help and add a little bit of value,
whether it's from good asset allocation or good
stock selection.
I think those are both opportunities to add
(28:59):
value.
I think when you look at managers that
maybe aren't adding value, I think sometimes they're
handcuffed.
They have to a certain amount in each
sector.
They can't drift at all.
They have to have a certain amount of
names.
So even if they have high conviction names
that do really, really well, if they have
(29:20):
300 names, it's like a minuscule portion of
their portfolio.
The alpha is non-existent.
And then after the fee, you might be
stuck behind.
And that's only one example.
Some small cap managers, for example, once they
get to a certain market cap, they have
to sell them.
By definition, they have to sell their winners.
(29:40):
There's a litany of problems like this that
I think we as a group, as a
team have actively tried to avoid.
If we think it's a smart decision that
can help make money under a reasonable amount
of risk.
I personally never felt too handcuffed doing anything.
So I do think under the right circumstances,
(30:04):
active is great.
And I'm happy that we're going to be
able to be nimble throughout this scenario.
But every scenario that we've done since I've
been here for the last eight years, we've
been fairly nimble.
And I think that's been a good thing
for us and our clients.
And we can talk more about some of
(30:24):
these issues in future episodes.
Let's wrap it up here.
So to recap some of those takeaways for
investors, Brian, you were talking about inequities, things
somehow connected to that AI theme can make
a lot of sense.
That's not only technology, but perhaps industrials, perhaps
(30:45):
utilities, perhaps financials because of the interest rate
dynamics.
Be careful of duration, but take advantage of
that, as you call it, the swoosh and
try to find that sweet spot, maybe some
inflation protection and some alternatives, which could be
(31:07):
a variety of things, long, short or commodities
or whatever we might want to look into
there.
So really interesting takeaways.
Thanks for being on with us for this
episode.
And if we can be a resource to
you in the execution of your financial planning
or portfolio management, don't hesitate to reach out
(31:27):
to our team.
Until next time, keep striving for something more.
(31:51):
866-771-8901.
Or send us your questions to amr-info
at wealthenhancement.com.
You're listening to something more with Chris Boyd
Financial Talk Show, Wealth Enhancement Advisory Services and
Jay Christopher Boyd provide investment advice on an
individual basis to clients only.
Proper advice depends on a complete analysis of
all facts and circumstances.
(32:12):
The information given on this program is general
financial comments and cannot be relied upon as
pertaining to your specific situation.
Wealth Enhancement Group cannot guarantee that using the
information from this show will generate profits or
ensure freedom from loss.
Listeners should consult their own financial advisors or
conduct their own due diligence before making any
financial decisions.
Welcome to Something More with Chris Boyd.
Chris Boyd is a certified financial planner, practitioner,
and senior vice president and financial advisor at
Wealth Enhancement Group, one of the nation's largest
registered investment advisors.
We call it Something More because we'd like
to talk not only about those important dollar
and cents issues, but also the quality of
life issues that make the money matters matter.
(00:22):
Here he is, your fulfillment facilitator, your partner
in prosperity, advising clients on Cape Cod and
across the country.
Here's your host, Jay Christopher Boyd.
Welcome.
This is Something More with Chris Boyd.
I'm Chris Boyd here with Jeff Perry.
We are joined this week by Brian Regan,
our team's senior portfolio manager, and we are
(00:45):
all of the AMR team at Wealth Enhancement
and glad to have you with us.
We want to talk about some of the
kinds of things that I think clients are
coming to us with regularly, this sense of,
gee, it's great that markets are at highs,
like they're feeling pleased, but a little bit
anxious.
(01:05):
When's the other shoe going to drop?
Is there something coming?
What to expect?
With that in mind, we're going to talk
with Brian about the topic of headwinds.
What are the headwinds?
Is there more opportunity than risk or more
risk than opportunity?
Well, I guess that's what makes a market
move, right?
(01:26):
Yes, the answer is yes.
Yes, right.
And of course, none of us has a
crystal ball with any of this stuff, but
Brian, you spend a lot of attention watching
the data.
We started to see the feds signaling, what's
your take right now as to how's this
(01:46):
affecting the way you think about outlook and
positioning?
So the market's up, that's good news.
So bear with me while I give you
a bunch of bad news, but the topic
is headwinds, so it's kind of natural, right?
Yeah, you might expect it.
Here are the headwinds that I want to
talk about, tariffs, immigration, and student loan repayments.
(02:09):
We're really starting to see the effects of
the tariff policy.
And unfortunately, it hasn't been good.
It's been five months, let's say, quote unquote,
liberation day, where things got crazy.
We settled down to a spot that's much
higher than it has been historically, actually, maybe
higher than it's ever been in the country's
(02:30):
history.
We're around 18% tax compared to income
taxes for Americans right now, bringing in around
$350 billion over the last five months.
If you annualize that, we're looking at $800,
$900 billion worth of taxes on the American
consumer.
What are we seeing?
(02:50):
We're seeing inflation in goods rise, and we
were seeing some disinflation from services.
We're starting to see that level off and
actually start to rise a little bit.
The parts of the economy that are heavily
inflicted by tariffs, basically anything that's imported, has
seen a dramatic either price increase or demand
(03:13):
just has disappeared.
Think apparel, think furniture, things like that.
But we're also starting to see some lightening
up on things like going out to eat,
hotel and accommodations.
We're starting to see some price increases there.
When you look at our $800 billion tax,
we're expected to take down about 70 basis
(03:35):
points of GDP growth.
If potential GDP is 2% and you
take around 70 basis points, you're at 1
.3%. Your margin of error gets a little
tighter.
At the same time, we've seen employment growth
stagnate to close to zero within a margin
(03:56):
of error that could be negative, could be
positive.
In my mind, that means that, hey, look,
we might be in a recession.
If you have a Bloomberg machine and you
were to pull it up right now, it
would say that there's an expectation of a
30% chance of a recession.
That's tariffs.
It hasn't been good.
Prices have been increasing.
The expected inflation is 3% for the
(04:18):
next 12 months.
The price on a one-year inflation swap,
which basically means what the market thinks is
willing to pay for inflation protection over the
next one year, is 3.5%. Keep in
mind that the target for the Federal Reserve
is 2%, but I'll get to that in
a minute because it seems like the Reserve
has abandoned that as a target, whether that's
(04:40):
political or whether or not they're prioritizing the
unemployment situation is debatable, and I actually think
it's both.
I think this Lisa Cooke thing is about
being in control of the Federal Reserve so
that they can change it and really stop
thinking about- Drive monetary policy the way
(05:04):
they want.
Among other things.
They could change Fed presidents in every city
if they wanted to, if they had four
board governors rather than the three dissents right
now.
The makeup of the board governors on the
Federal Open Market Committee are important, and so
(05:25):
that's a different topic.
I think we're on a good show though,
maybe.
That's a good topic further, but anyway, come
back to it.
Yeah.
As you guys know, I have a lot
on my mind right now.
So that's tariffs, right?
What are we seeing?
We're seeing a slowdown in GDP to the
tune of around 70 basis points.
That's from the Yale Budget Office, that estimate,
(05:48):
and we're seeing inflation expectations to be three
for at least the next 12 months.
Why the next 12 months?
Because you're probably going to start seeing it
roll over and the CPI growth on a
higher base.
Unless tariffs go up again, we'll roll out,
which is the other reason why the Fed
is probably looking at it as a, I
(06:08):
don't want to say transitory, because 12 months...
People in the world these days can't think
of 12 months as a short amount of
time.
Before you go on to other things like
student loans and other things, I want to
just come back to this.
So $800 billion, that's very interesting as an
estimate for where revenue generated by tariff taxation
(06:34):
for the federal government.
We were running about a $2 trillion, $1
.8, $1.9 trillion deficit last fiscal year.
That might help at least the debt direction
of things, if not the economy because of
(06:55):
money that people don't have to use in
other ways.
0.7% GDP, that's taking out 0
.7% you said from the tariff, that's
about what that represents.
And you said our GDP growth was about
1.3% forecasted right now?
(07:15):
No, the estimate for potential is 2%.
You take out that 70 basis points, you
get to 1.3%. Over the last 12
months, I believe it's been 1.75%. So
you're getting on the hairy edge, right?
We're far from being settled on these issues.
Your point about recession, this risk of recession.
(07:40):
I've said this before, but it's been a
long time since we had a recession, really.
We had the pandemic where we had a
recession, but there was all this stimulus thrown
at it that was very short-lived and
arguably government policy driven and resolved in both
(08:02):
cases.
So it's been a long time since we
had a recession otherwise.
So it seems to me that it'd be
surprising that we didn't have a recession in
this administration.
Before we knew the outcome of the election,
(08:22):
that was kind of my expectation that whoever
won, you'd probably likely to have a recession
just because it's been so long since we
had one.
But the Fed seems to have found this
a sweet spot of moving monetary policy, helping
to navigate that seemingly effectively.
(08:42):
This question of inflation on the one hand,
saying rising to 3%, 3.5% on
the one hand, and a zero growth perhaps
on the employment end of things, just the
minimal employment, that does seem to speak to,
(09:03):
hey, we're slowing down.
On the one hand, which would say, hey,
let's lower interest rates on the other hand,
the rising inflation seems to be like, oh,
maybe we don't want to.
But you're saying because of the tariffs being
a big component of that, maybe that'll just
work itself out because it's a one-time,
(09:26):
not an ongoing, growing endeavor.
My guess is when the Federal Reserve cuts
rates tomorrow and they have a press conference,
that's what Jay Powell's going to say, that
he expects it to be transitory.
And that's going to be his excuse.
We're recording this on September 15th for our
listeners.
Yeah, I think that's going to be his
excuse.
And that the unemployment concerns outweigh the inflation
(09:47):
concerns because of that.
Okay.
All right.
So you were starting to tell us what
these headwinds are.
And part of it, you were talking about
tariffs as the setup.
We got cut off here because I interrupted.
Well, I think I was done with tariffs,
so it was a good time to interrupt.
(10:07):
We mentioned the employment situation there a couple
of times.
Part of the reason why folks think the
employment situation is worsening is because of deportations.
So we're on track for about a million
deportations here in 2025.
You take that from a year ago, we
(10:28):
were having about a million or more people
coming into the country.
Let's call it a 2 million person swing.
Let's say that those people were making $30
,000 a year.
And you start to get some very big
numbers that are taken out of the economy
on top of that.
I have not done the math.
I haven't done accurate estimates, but basically-
(10:50):
Theoretically, you get the point.
Right.
The supply has come down.
And what would you expect in certain industries
like agriculture, construction, leisure and hospitality, restaurant service,
you're going to see wages go higher.
And I mentioned briefly on the tariff conversation,
(11:12):
how we were having tariffs go up pretty
obviously in goods directly related to tariffs.
But we were also seeing inflation go up
in some services.
And I think that's partly because, if not
largely because of this change in immigration situation.
So again, this is kind of a stagflation
(11:32):
type of policy, right?
We have less labor supply, we have higher
wages, which means more inflation, less economic growth,
which is not great.
Again, that's why you're seeing inflation be around
3% and economic growth expectations to be
around 1%.
(11:52):
And these aren't my numbers.
These are the consensus estimate numbers for the
next 12 months.
So if you want to disagree with them,
fine.
Just know that you're disagreeing with the 60
economists or market participants who get interviewed by
Bloomberg to build their index of expectations for
this.
I saw last week, or maybe the week
(12:13):
before when one of the unemployment numbers were
coming out, a really interesting conversation on CNBC
about the credibility of these numbers when you're
talking about deportations and all the related issues,
because so much of this part of this
economy is underground, right?
It's not like people are working.
(12:35):
Many of them are, many of them are
authorized to work, but many are not.
And so the dynamic of the data with
so many of those people being not in,
not officially in the wage pool and not
officially paying taxes, and I know they pay
taxes for all the things that they do
in the economy, and that has an impact
on it.
(12:56):
But as far as payroll data and unemployment
rates, et cetera.
Do you have any thoughts on that, Brian?
Sure.
So I have, I think that it's a
little misleading.
I mean, I hear your point.
It's hard to know exactly in this data,
but I do have- What was misleading?
It's a question.
Whatever you said, I do think we have
some data on this, I guess, is what
(13:17):
I think is misleading.
And I'm just going to quote it.
From the US Bureau of Labor Statistics, industries
that make up unauthorized labor as a percentage
of total nonfarm payrolls, so total nonfarm payrolls
is the survey that happens, and you get
the data once every month, and it gets,
(13:37):
they do revisions for two months prior, and
then they do a big annual revision, which
we just got, which is one of the
biggest ever from the March period, 12 months
prior.
But this is- Talking about reliability of
data.
Well, the data is trending negative, and it's
kind of not really debatable.
(13:59):
But yeah, you're right.
I mean, it was a big revision, and
the surveys are maybe not completely reliable, but
certainly trending negative.
But anyways, the US Bureau of Labor Statistics,
the same people who put out that annual
report that we put a lot of stock
into, has 4% in unauthorized labor and
wholesale trade, 4% in transportation and warehousing,
(14:21):
5% in construction, 10% in retail
trade, and 10% leisure and hospitality.
So those are the industries that are likely
going to be more impacted by this than
others.
So we do have some data on it.
And I think it's undeniably a negative on
(14:41):
the economy on both the inflation and employment
and growth front.
That answer your question, Jeff?
You good with that?
Sure.
Yeah.
I mean, I think that's a fair point.
We may not have comprehensive data, but I
think the point Brian's driving at is we
(15:01):
may not have it comprehensively, but we know
directionally, this is where it's going to be
most challenged.
I was making the question of, isn't this
maybe even a bigger issue because so many
people are not counted.
Might not even realize, capture the extent to
which.
And if they need to be replaced by
(15:22):
people who are counted, just to throw the
generalities out there, that might even drive up
wages more.
Inflation.
Inflation and so forth.
Because you're taking part of the underground, which
is part of the goal, is taking part
of the underground economy and making it legal
and above ground.
And so the magnitude of these predictions might
(15:44):
be understated.
That was my question.
It wasn't really a statement, but it was
a very interesting discussion anyway that I saw.
Well, maybe I misunderstood the question, but my
point was just that we do have some
data on it.
Whether it's accurate or not, I assume it
is as best as any other government statistic,
(16:05):
I guess.
The third one was student loan repayments.
So with student loan, we have 45 million
Americans that have a student loan.
That's about 20% of the adult population.
And they're paying anywhere between 5% and
10% on interest rates.
(16:26):
And they recently had to start paying after
a long reprieve from not having to pay
them following COVID.
And what we're seeing is delinquencies are skyrocketing.
I believe the number is around 11 million
people are either defaulted or between 60 and
90 days delinquent.
(16:46):
So that's not a small amount of money
in the economy either.
Now, I have not worked up an estimate.
And I asked Torsten Slack of Apollo this
today, he did not have an estimate on
how much immigration and student loan payments are
going to be a drag on the economy.
But if we're already at one to 1
.3, because of tariffs, and you layer these
(17:09):
on top of it, you start getting into
a scary territory, I guess is all my
point is.
And then the 30% estimate of recession
on Bloomberg, that's the expectation over the next
12 months.
I would say, I think there's a 30
% chance that we're in a recession today.
And how does that impact your portfolio is
(17:31):
an interesting question too, because we all have
this data.
I'm not the only person that has access
to this data, right?
And the market has gone up.
And I think this is a function of
the makeup of the stock market.
We have very, very profitable, very, very high
(17:53):
margin companies, very much not leveraged to the
consumer, but leveraged to B2B enterprise customers.
If you think NVIDIA, they do sell some
to gamers and things like that.
But basically, they've been selling chips that will
(18:14):
go in the big data centers that will
end up in cloud computing.
Microsoft has Windows, it's a big enterprise product.
Azure is a big cloud computing company.
Google has exposure, of course, to the consumer
economy because they do a lot of advertising,
but they are the advertising platform.
(18:34):
Facebook, well, Meta and Google, they're dominant, right?
Where we are seeing other media do very,
very poorly.
If you want to think of typical TV
cable providers and their media, they're not doing
well.
So when you think about building out your
portfolio on the equity side, I think you
(18:56):
really want to think about what is levered
to this AI theme.
And that can actually get you pretty diversified.
It's not just the cloud names.
It's not just the semiconductor names.
It can also be industrials that are building
out data centers, the Eatons of the world.
It can also be utilities, which I've touted
(19:20):
a lot.
It can also be, I think you need
to dig deeper into individual companies and individual
sectors that might benefit.
And then when you think about the equities,
(19:40):
so we're going to have we're going to
have slowing growth and we're going to have
cuts in the short-term interest rates, right?
But we're going to have rising inflation.
And what that's done is it created like
this swoosh in the yield curve, right?
Basically saying, over the next couple of years,
we're going to have low interest rates, but
then in the outer years, because of inflation
(20:01):
and growth, we're going to have more positive
interest rates.
So you have the steepening of the yield
curve.
What companies benefit from a steepening yield curve?
The answer is financials, financials, financials, right?
Specifically, banks that lend because they're going to
borrow and pay you deposits on the short
end.
And that borrowing amount is going to go
(20:22):
lower and they're going to lend on the
longer end.
And that's probably going to be a fixed
rate and that leverage and that dynamic is
going to do well too.
So between banks, utilities, some industrials, some technology,
I think you could still do well and
get diversified despite this very, very challenging situation
(20:45):
I think we're having from a consumer standpoint.
And I think that's why the market continues
to do well.
So on the alternatives and fixed income side,
that's where I think things get really interesting,
right?
I think you need to be careful to
go too long in duration because if the
longer part of the curve rises due to
(21:07):
inflation, you're going to get burned similar to
how you might've gotten burned in 2022 as
inflation reared its ugly head.
You also don't want to be too short
because growth is changing.
So what I think you might want is
inflation protected assets, which are expensive.
You might want to consider some other types
(21:28):
of alternatives that might do well on the
up and the down, but they're not going
to set the world on fire.
And you might want to at least look
at certain other types of commodities that might
benefit your portfolio.
And that's not a recommendation.
That's just something that I'm thinking about right
(21:49):
now.
Really interesting.
That's great stuff.
I wanted to go back to something.
We can come back and talk about the
portfolio construction concept, the industries, and you did
a nice job addressing some thoughts on both
equities and fixed income.
I wanted to go back for a second
(22:09):
on when you were talking about student loans
and the concern about delinquencies rising.
Are we seeing that on other forms of
consumer credit with credit cards and the like?
Are we seeing pressure there too?
We are seeing a little bit of pressure,
particularly on auto loans, not on mortgages, a
(22:33):
little bit in consumer revolving loans like credit
cards.
But you're not seeing on mortgages, which is
good.
A lot of people have a fixed rate,
low interest loan still.
But it's very obvious when you look at
(22:53):
student loans.
First of all, in the New York Fed
report, which is where I get this data,
it has a chart and it doesn't help
that the student loans is a red line.
So it's very obvious to see.
It shows that delinquencies and the defaults and
it's a straight line up in recent months.
(23:14):
I guess another way to think about the
student loans is since they were artificially paused,
they were actually stimulating the economy because people
should have been paying at the same time.
Maybe that was part of the reason for
that high level of inflation.
It's another thing people, they didn't get the
(23:36):
money, they got checked, but they didn't get
money for their loans, but they didn't have
to meet their obligations.
So that was just even more of a
stimulus.
Excuse me.
Well, I think there's another thing that I
just want to throw into this.
And then let's circle back to making sense
of this a little bit, because this was
(23:59):
a great structure and a great setup, Brian,
in terms of thinking about as we go
into the back end of the quarter and
the end of the year, the last quarter
of the year, sort of how do we
think about positioning and so forth.
But I also hesitate to mention, because I
(24:21):
know it's not something Brian's going to pay
attention to really, but a lot of times
people talk about seasonality of the market.
And I know it's anecdotal, it's correlation, not
causation.
But there is that notion that September, October
tend to be more volatile months of the
market.
(24:42):
And here we are at or near highs.
And seasonally, we're still in that sell and
may go away period before traditionally you relook
at it as November as the time when
the market is more poised to do well
the next six months.
(25:04):
I just mentioned that just because I do
think it's worth thinking about, not because of
the credibility of this entirely, but just the
notion of risk.
If we look at things and say, oh,
things are at a high, Brian, you've laid
out a fundamentals picture for a variety of
(25:24):
reasons why we might see markets begin to
reassess their willingness for maybe the pricing they're
paying.
If things are going to slow, and that
might imply profitability could slow.
If we have a slowing economy, that might
affect prices of the market.
So as a consumer, not only do you
(25:48):
want to be thinking about the issues Brian's
laid out in terms of positioning in your
portfolio, but you may want to be thinking
about, am I structured well?
Am I tolerant as I look ahead for
the risks that can come with the market?
Inevitably, that's just the nature of investing.
There's volatility.
(26:10):
Do I have an allocation that fits my
tolerance for that kind of positioning longer term?
If not, now's a great time to re
-examine, how much do I want to have
in equities versus fixed income?
Maybe how much liquidity do I retain for
the unforeseen?
(26:31):
Think in terms of our buckets conversations that
we have routinely.
Jeff, you look like you're ready to add
onto that theme.
I was thinking about the time horizon in
all this.
When do you think you're going to need
liquidities for these funds?
Is it soon?
Is it 20 years out?
It's really individual.
Right.
(26:51):
And it makes a difference for how you
think about, am I tolerant of these kinds
of changes?
And Brian, just one maybe change in direction,
throw a last thing or two at you
here.
You know, people tend to invest through index
funds very commonly today.
(27:13):
I think if you were to ask people
over the last 10 years, indexed or managed,
it's like, oh, I thought this was all
solved.
Didn't we decide indexing is the way to
go?
That kind of mindset.
Right.
This may be the kind of setup that
speaks more to managed than indexed.
(27:35):
Is that your thought as you look at
this, given the notion that not every industry
is going to be positioned the same way
and how it's going to be affected by
labor, interest rates, et cetera, AI changing dynamics?
(27:55):
I mean, that's a loaded question, and I
could go on forever.
I think good active management can add value.
And I believe that because I've seen it.
But I think that there are structural problems
in the investment management industry that hold back
(28:17):
many managers' performance.
And I also think that there's nothing wrong
with passive.
I utilize both personally.
I have about half of my money is
actively managed, about half of my money is
passively managed.
And why?
Because the passively managed money is in the
(28:39):
401k.
It's a rollover for my wife's 401k.
And when you add it up, it's about
half.
But yeah, I think good active management can
help and add a little bit of value,
whether it's from good asset allocation or good
stock selection.
I think those are both opportunities to add
(28:59):
value.
I think when you look at managers that
maybe aren't adding value, I think sometimes they're
handcuffed.
They have to a certain amount in each
sector.
They can't drift at all.
They have to have a certain amount of
names.
So even if they have high conviction names
that do really, really well, if they have
(29:20):
300 names, it's like a minuscule portion of
their portfolio.
The alpha is non-existent.
And then after the fee, you might be
stuck behind.
And that's only one example.
Some small cap managers, for example, once they
get to a certain market cap, they have
to sell them.
By definition, they have to sell their winners.
(29:40):
There's a litany of problems like this that
I think we as a group, as a
team have actively tried to avoid.
If we think it's a smart decision that
can help make money under a reasonable amount
of risk.
I personally never felt too handcuffed doing anything.
So I do think under the right circumstances,
(30:04):
active is great.
And I'm happy that we're going to be
able to be nimble throughout this scenario.
But every scenario that we've done since I've
been here for the last eight years, we've
been fairly nimble.
And I think that's been a good thing
for us and our clients.
And we can talk more about some of
(30:24):
these issues in future episodes.
Let's wrap it up here.
So to recap some of those takeaways for
investors, Brian, you were talking about inequities, things
somehow connected to that AI theme can make
a lot of sense.
That's not only technology, but perhaps industrials, perhaps
(30:45):
utilities, perhaps financials because of the interest rate
dynamics.
Be careful of duration, but take advantage of
that, as you call it, the swoosh and
try to find that sweet spot, maybe some
inflation protection and some alternatives, which could be
(31:07):
a variety of things, long, short or commodities
or whatever we might want to look into
there.
So really interesting takeaways.
Thanks for being on with us for this
episode.
And if we can be a resource to
you in the execution of your financial planning
or portfolio management, don't hesitate to reach out
(31:27):
to our team.
Until next time, keep striving for something more.
(31:51):
866-771-8901.
Or send us your questions to amr-info
at wealthenhancement.com.
You're listening to something more with Chris Boyd
Financial Talk Show, Wealth Enhancement Advisory Services and
Jay Christopher Boyd provide investment advice on an
individual basis to clients only.
Proper advice depends on a complete analysis of
all facts and circumstances.
(32:12):
The information given on this program is general
financial comments and cannot be relied upon as
pertaining to your specific situation.
Wealth Enhancement Group cannot guarantee that using the
information from this show will generate profits or
ensure freedom from loss.
Listeners should consult their own financial advisors or
conduct their own due diligence before making any
financial decisions.
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Ding dong! Join your culture consultants, Matt Rogers and Bowen Yang, on an unforgettable journey into the beating heart of CULTURE. Alongside sizzling special guests, they GET INTO the hottest pop-culture moments of the day and the formative cultural experiences that turned them into Culturistas. Produced by the Big Money Players Network and iHeartRadio.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
The Charlie Kirk Show
Charlie is America's hardest working grassroots activist who has your inside scoop on the biggest news of the day and what's really going on behind the headlines. The founder of Turning Point USA and one of social media's most engaged personalities, Charlie is on the front lines of America’s culture war, mobilizing hundreds of thousands of students on over 3,500 college and high school campuses across the country, bringing you your daily dose of clarity in a sea of chaos all from his signature no-holds-barred, unapologetically conservative, freedom-loving point of view. You can also watch Charlie Kirk on Salem News Channel