July 24, 2024 • 25 mins
In this episode of Your Financial Advocate, Greg DuPont, founder of Advocate Wealth Solutions, presents the first part of a mid-year market report for 2024. He unpacks what happened in the market during the first half of the year, including the key trends and events. Tune into Episode 52 and you will learn: Why the … Continue reading 2024 Mid-Year Report – Part 1 (Ep 52)
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome to your financial advocate with Greg Dupont
from Dupont Wealth Solutions
as a practicing advisor and attorney. Greg teaches
pre retirees how to reduce debt and taxes
and save with less risk, so they have
more spend income and plan their way to
a better life
Join us for this journey where Greg draws
on years of experience and guest experts to
(00:23):
help listeners achieve more spend income for retirement.
Hello, and welcome to the your financial Have
a good podcast. Today, I'd like to share
with you part 1 of of 2 parts
that were a recent webinar I provided to
my clients,
kind of a state of the union, mid
year report of the market.
Today, we're gonna talk about
(00:44):
how we got to where we are this
year, What's what's happened in the market gets
to this point in the midway point.
The second episode is going to talk about
what we see looking forward.
So hopefully, you'll find this in be constructive
and informative and help you make some good
decisions. If you wanna see the slides that
we reference in this presentation, please reach out
to my team.
Check us on our Youtube channel. You see
(01:05):
the real presentation.
But, you know, some people prefer to listen
to this in the car, and you shouldn't
be watching Tv when you're doing that. So
Take care of be well. Look forward to
sharing this information with you. Bye. Hello, and
welcome to our presentation halftime time report 20
24.
Yeah. This year is halfway down? Where did
the time go?
Well,
(01:25):
it went behind it what's going. Right? So
let's look forward. Where are we going to
head?
Now as we roll into tonight, I don't
want just take a moment and share with
you, the important things like disclosures,
Yes. We're gonna talk about some
market information. You're we talk about the way
it might apply in general to your world.
(01:46):
But
understand, this is not a 1 on 1
conversation. Most of you know who I am.
We've talked before. And, you know the deer...
You know the drill. Want something gets most
specific to your situation. And by all means
if your clients give me a call at
the end of this. But if you're just...
Someone else out there familiar with us and
the information we're giving, please, you You want
more, please give us a holler.
So I'd like to welcome you. Those of
(02:08):
you that have been with us before.
Those that you had not been with us
before. Just a moment introduce who I am,
Greg Dupont. I am the founder of ad
advocate wealth solutions and the Wealth Solutions network.
And,
to combine what we're trying to do is
protect people like you from
unnecessary risk and loss. And 1 of the
ways that we're doing that is through providing
(02:30):
information and guidance.
And so now we're gonna talk about information
guides as it pertains to 2004
and we're gonna review the first half of
the year. How do we get to where
we are? We're gonna take a look at
what is the future? Yeah. The crystal ball
is not working, but we're gonna get a
try anyways. We're gonna show you and we're
gonna talk to you about
(02:52):
historical trends.
What are reasonable expectations for the future? Now
if you've been within inside of my voice
last called it 18 months, you know that
I have some
troubled expectations about what is on the horizon,
but so far it's not manifesting,
and we gotta get all the git good.
And so the next thing I we talk
(03:12):
about was happened second half of the year?
You know, again, where are we now? Where
where are we in this global cycle that
we're dealing with? What's it look like? Where
the ramifications of it to you into your
family.
And what's ahead for the second half of
20 20? For. As we deal with the
election season.
Yeah. That's a fun thing to talk about,
(03:33):
Isn't.
So let's get started,
with context as to the first half of
the year. What happened in the Us market
so far this year.
Well,
first of all,
I'm gonna talk in terms the S and
P 500 because that's what the market media
does,
but you have to understand and I always
(03:53):
want of people to to reflect.
That the S and p 500 is nothing,
but a reflection of what people believe is
a representation of the Us stock market overall.
And as we're gonna... As we're gonna dive
into our conversation today, you'll understand
why that really is not representative of what's
going on perhaps in your
(04:14):
portfolio
unless you're using an S and P 500
fund, which many of you have defaulted into.
But it's not reality folks. It's a little
bit skewed from what's going on in terms
of the health of the economy and the
health of the
market.
So what happened in 20 24 so far.
Well, the S and p 500 has it
(04:35):
it's gone up. But let's
understand
how it has been affected
by
what's going on in the economic situation. You
see in April 15, well, it drops. Well,
it's because we started getting some...
Shall we say disconcerting information about where
inflation was going. And starting to pull back
(04:57):
the opium
of the drop of interest rates. Well, guess
what? Now the hop is back in play,
because people starting to think, hey, a in
an interest rate or a reduction is back
on the table.
And
market fundamentally
is driven by
(05:17):
emotion. At least when it comes to most
investors.
Now, there are some institutional investors that have
algorithms and things like that to try to
take the emotion out. But there are enough
of us out here.
That trade based bon motion that affects the
market.
And how do we how do we figure
this stuff out you know, there there are
(05:39):
these people out here they're calling themselves experts.
I don't call myself an expert. I try
to figure out the trends.
The experts of the market so to speak.
If we look at their forecast coming into
20 24.
Well, they were just about a spot on
as they were in 20 23, which means
not at all.
Coming into 20 24,
(05:59):
Morgan Stanley, Jp jpmorgan, Rbc,
Bo, Deutsche Bank, Goldman Sachs. All these big
names
at group average
projection for the Sp 500
of 4817.
Well, on May 31, it's closed the 52
77.
Now,
still have plenty of time for the market
(06:20):
to give back that upside.
And it may happen,
we've seen some trends that way.
We see the effect of market forces.
So how are these gonna affect us going
forward?
So at this point in time, we've been
on the ride? We have been fueled still
(06:41):
by
excess capital out there. All the money that
the Fed has printed, it's still sla around
and it was going into the market. And
that's what drove things
initially as we came out of Covid.
The massive infusion of of of of money
into the system by the fed.
(07:01):
Now we've now seen some cycling on that
we've seen a lot of money that's now
moving to sidelines. And why is that?
Well, as we're gonna see later, and, india,
as you may have experienced and seen,
It's not too unattractive to put money into
cash right now.
To money market accounts, paying 4 percent.
(07:22):
So a lot of money has moved off
into a non risk position.
What's gonna happen in the future? That's that's
the great question. That we're facing right now
as we are in the summer of 24
and looking forward.
What will happen with all the money on
the sidelines
when we start having less
return
(07:42):
on capital in the form of interest rate.
So
perspective here. When we look back in 01/20/2201
of our sources here
that provides us these
projections every year. And 1 of the interesting
thing is when we look at January of
20 22.
When we look at 20 different
(08:04):
economic indicators. From monetary policy to the Us
economic outlook
to the yield curve, customer sentiment, etcetera, etcetera.
In 20... January 20 22,
17 of those 20 were all way positive.
And 3 of them, political environment, geopolitical risk,
the equity market valuation itself an historical perspective,
(08:27):
Those were the only ones that were neutral,
not not negative, particularly. Just showing caution warning
signs what the future looks like.
And then we roll around a few years
later,
January 24 coming into this year.
And we see at that point in time,
most things were neutral.
(08:50):
The international economic outlook,
equity market valuation, geopolitical risk, those were downright
negative,
just 6 few months ago.
And as we moved into the summer,
what we were seeing is
more positive,
we're seeing that at least where it pertains
(09:11):
to the consumer sentiment,
the labor market, housing and mortgages,
consumer spending,
corporate profits,
credit availability inflation, all those has started to
trend
positive now.
While equity market valuations geopolitical applicable risk are
further into the negative.
And and this is reflective of
(09:33):
the...
Mass of
the...
Well, as we'll talk about in a moment,
the economic
minds of the world.
Okay? We're gonna show you some
information here from the
the Fed, the 500 different economist. What are
they thinking?
(09:53):
All of these
factors
are coming from
a cool
of leaning
financial minds.
Some would say perhaps a group think is
there.
And I want you to take everything I
say tonight with regards to
a positive or negative view of what's gonna
happen in the economy
(10:15):
and the market
with
a grain of salt,
with your own perspective, because it does really
depend upon where you are in your personal
journey as we'll talk about a little while.
So as we move on, right now, we've
got some serious negative
factors in play at the equity market valuation
(10:35):
as we'll share in just a moment. And
the geopolitical risk,
most notably,
China,
Russia, Ukraine, and
well, some people say right here in River
city.
But those are factors that effect at this
macro scale.
And what we need to look at is,
(10:57):
okay, at the market scale. What's what's going
on here?
What is really driving this
S and P 500
that again is used as the proxy for
your market investments?
And, you know, understand that the the value
of a stock and the value of the
market in general,
(11:17):
it is thought of as a forward looking
indicator.
Essentially, what it's what they say is
what the stock value
now with the market valuations now,
is a reflection of what the
group think that is in the market tends
thinks that a company will be worth in
(11:37):
6 to 9 months
with the comm economy will be like in
6 to 9 months.
And
we see here in this slide that it
typically does
trend very closely.
In a moment we'll see that we're diver
from that significantly now.
And there are some reasons for that potentially.
(11:59):
And we look at the overall economy where
we are right now. Part of the reason
for some of those green indicators those positive
signs that we are going where we need
to go from a market perspective
is in fact, the
manner in which the Fed has
gained a level of control from over inflation,
(12:20):
which many people didn't think was be possible
this quickly,
this successfully.
Now there are many reasons to be a
doubt and a skeptic on that.
I know many of you out there are,
I tend to agree with some of you
on some of the odds,
but
the number driving the decisions.
(12:42):
And the numbers are whether of driving
the market. So we
don't pay attention to those numbers at our
own risk.
So what we see is year over year,
the inflation numbers have gone down.
In the month over month, inflation numbers have
gone down as well.
Today, we had another downward
cycle. So it's trending in the right direction.
(13:04):
We're getting very close to the Fed's target
rate.
That they feel is a supportive of their
mandate to promote full employment and growth.
Now, we'll talk about a minute here. We
got the big fed meetings coming up real
quickly here and who knows what's gonna happen
from that. Could be a lot of excitement
could be a lot of disappointment.
We don't know.
(13:25):
We know where things are heading.
Part of what's driving the Fed's decision is
their
interpretation of the strength of the labor market.
And
their
interpretation
of whether or not
it is an overheated labor market, which is
now gonna give cause for concern about
(13:47):
a
inflation like we had in the seventies where
it was wage based inflation where wages are
are pushing
the inflation rate more than trailing it as
it has been now.
And
they see from their numbers
that
we've got low unemployment,
(14:07):
and we see we have...
A good number of current job openings
for that unemployment. So they're seeing a very
stable labor market right now,
which is good for the prospects of them,
believing that they're on the right path
is good for the prospect of them,
going ahead and reducing
interest
(14:29):
as opposed to increasing or maintaining even longer,
And
part of what is this
really delicate dance
of
what is the economy?
What is market growth
and what is the Fed's mandate on this
comes from
you, folks,
(14:50):
your
consumer sentiment.
This is 1 of the things that we
showed in the earlier slide that is that
is positive
by the numbers that they've used.
By the studies that they have used, which
is based upon the study the of the...
Out of University of Michigan
that said samples about 500 households and
(15:11):
based upon this
ongoing analysis of consumer sentiment,
it's trending upward,
we're feeling better about things.
You may not be, your may... Neighbor may
not be, but they think it's happening.
Who knows what's reality and who knows viral
change?
But these are, again, the factors that the
Fed is paying attention to, and this is
(15:32):
gonna gonna be what's driving the market's reaction.
Going forward. So from a global level right
now from the structure of our economy, we
have the reduction
of the growth of inflation, which is good.
We have the good consumer sentiment. We have
strong labor market, and these are all signs
that will potentially lead the Fed to
(15:52):
stop what they're doing.
Open up the flood gates a little bit
and allow some more money back in the
system in in terms of reducing interest rates.
And so on top of that global picture,
from the from the political scene as it
were,
what's happening right now in the market is
this
(16:15):
incorporation
of
the concept
of artificial intelligence.
And as I said, looking forward as the
market tend to do,
starting to project what will be the impact
on various companies
from Ai, they're incorporation of Ai,
(16:36):
and
what's how soon will that be adopted?
So now as this chart is showing us
how many times our visual artificial intelligence has
been mentioned on their quarterly earnings calls for
publicly traded companies and you can see that
it's moved up tremendously
since last year.
As it's now becoming
(16:57):
adopted. It's now becoming to the point where
you know, comp... Major companies are going to
have, you know, the chief Ai officer or
and those type of things to try to
develop the strategies for implementing Ai in the
businesses.
Now,
again, if you've listened to me for the
last 18 months, you know where I feel
(17:18):
about a major transitional change in the economy,
and part of it being driven by
the
effect in the impact of Ai upon white
collar
and
intellectual,
horsepower,
us,
the distract the the displacement that will happen
with that.
(17:39):
But from a market,
earning
and a
valuation of the businesses,
stock value,
perspective,
we're seeing now
that that is starting to be reflected now
more broadly.
I'm gonna talk in a little while about
the impact of the magnificent 7 and what
(17:59):
it's been like and how things are changing
a little bit on that as this all
evolves.
So
where are we now?
As we head into
the second half of the year?
We know it's gonna get crazy out there.
Right?
It's politically, it's gonna get nuts.
(18:20):
We've already seen some of that,
and
there's no reason to expect it to get
any better.
And
what I wanna dispel right now
is that
many people believe that there is a
correlation between their party and performance and market.
And and that really does not hold true.
(18:43):
You know, we're talking about this those bigger
factors that we spoke of just a moment
ago that what drives it, And we think
about
historically.
What has happened with in elections in markets.
If we look back to 19 08:19 44,
Since then, there have been 20 presidential elections.
(19:04):
In 16 of those, the S and P
500 experienced a positive return for the year.
And many of them had had a combined
had a medium return about 10.7
percent.
Of the 4 elections that saw a negative
return. Well, 2 of them did occur in
recent past
4008.
(19:26):
But on both those occasions, we had problems
bigger than
what was going on with the parties.
And then if you if you think that,
okay. 1 party is more prone to having
better growth in the subsequent years and the
other.
That doesn't stand the test of time either.
It basically cuts both ways. These are just
(19:47):
partisan thoughts.
You, we if we look
and
historically,
there will be, there has been increased volatility
from now through the election.
So if you're concerned about volatility,
if you can't stand that, then
you need to take some action because they're...
Because the chances are... It will get rocky
(20:09):
between now and that.
Historically if we look at that,
the s sp 500
between the the period of
summer to the end of the election is
about 5 percent lower than it is throughout
the rest of the year. Okay? So
there is some effect
whether it's long term effect
(20:32):
that remains be seen.
And for this year, in particular, as we
are dealing with
Ne fed,
there is
talk concern, and we'll see whether or not,
this is true in the upcoming weeks,
whether or not there's going to be
appearance
of gaming the system for better return
(20:53):
so that there's a better economy.
We'll see.
But here's what I want you to understand
it. Outside of this macro problem, and these
g generations
there is
a fundamental
market problem
(21:14):
that is
brewing,
or it is a fundamental change in the
market. Only time will tell. And here's what
I mean by that.
These are numbers that we look at on
a regular basis
to help guide
our clients.
To try to understand what's going in on
in the market right now. We look at,
(21:34):
you know, what's going on with bank Cd
yields.
And right now, we can pull up bank
rate dot com, get a 2 year Cd
for just under 5 percent.
3 year, about 4 and half percent, 4
5 year about 4 percent.
Now, those numbers
have been coming down steadily throughout the course
of the year.
(21:55):
K? It's a trend that we need to
be aware of.
If we look at the S and P
500 average dividend now that 1.27.
Again, that has been a trend that's been
dropping
throughout the year.
And the 1 that I really wanna point
out to you is this chiller
Pe ratio.
K. If you've listened to me before. You're
(22:16):
probably get tired of me pointed out to
you. But maybe if you've made note about
this You will note that it has been
increasing this year.
It's now 36.37.
Historically the median of of the sc Pe
ratio, which is a measure of the value
of the companies,
versus what their earnings are. And I told
(22:37):
you that the market's is supposed to be
looking at what the earnings are down the
road and I'm using that as approximation for
what the value is
So now it's 36.37.
The median is 15
and change.
The highest it's ever been is with 44.19.
So, you know, we could be moving into
(22:57):
a new era where these type of
multiples are
the the norm.
I don't know.
But when you also look at things like
market capitalization versus Gdp.
Which is a number that
warren Buffett famous for paying attention to as
1 of his load stones.
At 1 97,
again, this number has been going up all
(23:18):
year.
And this is a measure of the value
of the market versus the gross domestic product
of the country.
And historically,
anything above 01:35
is over valued.
So all of these signs continue to tell
us
that it's time to proceed with caution.
(23:40):
Are we at a point where we have
hit the high point, where people should sell
high?
Or
do we have a lot of he go?
No crystal ball here folks. Not even got
a hazard to guess.
So separate out the noise
or do as I do. Stay away from
(24:01):
the news, enjoy your life a little bit
more.
So until next time, I hope you found
your time spent with us here today to
give you some important perspective on where we
are and where we're heading.
And as always, if you are a client
of ours, please pick on the phone. If
you got any questions.
If there's just a friend of ours that's
receiving our information and need these couple questions
(24:22):
answered, please feel free to reach out to
us.
Take care. Be well.
Goodbye.
Thank you for listening to your financial advocate.
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(24:44):
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Always seek advice of your financial advisor or
other qualified financial service provider with any questions
you may have regarding your investment planning.
Welcome to your financial advocate with Greg Dupont
from Dupont Wealth Solutions
as a practicing advisor and attorney. Greg teaches
pre retirees how to reduce debt and taxes
and save with less risk, so they have
more spend income and plan their way to
a better life
Join us for this journey where Greg draws
on years of experience and guest experts to
(00:23):
help listeners achieve more spend income for retirement.
Hello, and welcome to the your financial Have
a good podcast. Today, I'd like to share
with you part 1 of of 2 parts
that were a recent webinar I provided to
my clients,
kind of a state of the union, mid
year report of the market.
Today, we're gonna talk about
(00:44):
how we got to where we are this
year, What's what's happened in the market gets
to this point in the midway point.
The second episode is going to talk about
what we see looking forward.
So hopefully, you'll find this in be constructive
and informative and help you make some good
decisions. If you wanna see the slides that
we reference in this presentation, please reach out
to my team.
Check us on our Youtube channel. You see
(01:05):
the real presentation.
But, you know, some people prefer to listen
to this in the car, and you shouldn't
be watching Tv when you're doing that. So
Take care of be well. Look forward to
sharing this information with you. Bye. Hello, and
welcome to our presentation halftime time report 20
24.
Yeah. This year is halfway down? Where did
the time go?
Well,
(01:25):
it went behind it what's going. Right? So
let's look forward. Where are we going to
head?
Now as we roll into tonight, I don't
want just take a moment and share with
you, the important things like disclosures,
Yes. We're gonna talk about some
market information. You're we talk about the way
it might apply in general to your world.
(01:46):
But
understand, this is not a 1 on 1
conversation. Most of you know who I am.
We've talked before. And, you know the deer...
You know the drill. Want something gets most
specific to your situation. And by all means
if your clients give me a call at
the end of this. But if you're just...
Someone else out there familiar with us and
the information we're giving, please, you You want
more, please give us a holler.
So I'd like to welcome you. Those of
(02:08):
you that have been with us before.
Those that you had not been with us
before. Just a moment introduce who I am,
Greg Dupont. I am the founder of ad
advocate wealth solutions and the Wealth Solutions network.
And,
to combine what we're trying to do is
protect people like you from
unnecessary risk and loss. And 1 of the
ways that we're doing that is through providing
(02:30):
information and guidance.
And so now we're gonna talk about information
guides as it pertains to 2004
and we're gonna review the first half of
the year. How do we get to where
we are? We're gonna take a look at
what is the future? Yeah. The crystal ball
is not working, but we're gonna get a
try anyways. We're gonna show you and we're
gonna talk to you about
(02:52):
historical trends.
What are reasonable expectations for the future? Now
if you've been within inside of my voice
last called it 18 months, you know that
I have some
troubled expectations about what is on the horizon,
but so far it's not manifesting,
and we gotta get all the git good.
And so the next thing I we talk
(03:12):
about was happened second half of the year?
You know, again, where are we now? Where
where are we in this global cycle that
we're dealing with? What's it look like? Where
the ramifications of it to you into your
family.
And what's ahead for the second half of
20 20? For. As we deal with the
election season.
Yeah. That's a fun thing to talk about,
(03:33):
Isn't.
So let's get started,
with context as to the first half of
the year. What happened in the Us market
so far this year.
Well,
first of all,
I'm gonna talk in terms the S and
P 500 because that's what the market media
does,
but you have to understand and I always
(03:53):
want of people to to reflect.
That the S and p 500 is nothing,
but a reflection of what people believe is
a representation of the Us stock market overall.
And as we're gonna... As we're gonna dive
into our conversation today, you'll understand
why that really is not representative of what's
going on perhaps in your
(04:14):
portfolio
unless you're using an S and P 500
fund, which many of you have defaulted into.
But it's not reality folks. It's a little
bit skewed from what's going on in terms
of the health of the economy and the
health of the
market.
So what happened in 20 24 so far.
Well, the S and p 500 has it
(04:35):
it's gone up. But let's
understand
how it has been affected
by
what's going on in the economic situation. You
see in April 15, well, it drops. Well,
it's because we started getting some...
Shall we say disconcerting information about where
inflation was going. And starting to pull back
(04:57):
the opium
of the drop of interest rates. Well, guess
what? Now the hop is back in play,
because people starting to think, hey, a in
an interest rate or a reduction is back
on the table.
And
market fundamentally
is driven by
(05:17):
emotion. At least when it comes to most
investors.
Now, there are some institutional investors that have
algorithms and things like that to try to
take the emotion out. But there are enough
of us out here.
That trade based bon motion that affects the
market.
And how do we how do we figure
this stuff out you know, there there are
(05:39):
these people out here they're calling themselves experts.
I don't call myself an expert. I try
to figure out the trends.
The experts of the market so to speak.
If we look at their forecast coming into
20 24.
Well, they were just about a spot on
as they were in 20 23, which means
not at all.
Coming into 20 24,
(05:59):
Morgan Stanley, Jp jpmorgan, Rbc,
Bo, Deutsche Bank, Goldman Sachs. All these big
names
at group average
projection for the Sp 500
of 4817.
Well, on May 31, it's closed the 52
77.
Now,
still have plenty of time for the market
(06:20):
to give back that upside.
And it may happen,
we've seen some trends that way.
We see the effect of market forces.
So how are these gonna affect us going
forward?
So at this point in time, we've been
on the ride? We have been fueled still
(06:41):
by
excess capital out there. All the money that
the Fed has printed, it's still sla around
and it was going into the market. And
that's what drove things
initially as we came out of Covid.
The massive infusion of of of of money
into the system by the fed.
(07:01):
Now we've now seen some cycling on that
we've seen a lot of money that's now
moving to sidelines. And why is that?
Well, as we're gonna see later, and, india,
as you may have experienced and seen,
It's not too unattractive to put money into
cash right now.
To money market accounts, paying 4 percent.
(07:22):
So a lot of money has moved off
into a non risk position.
What's gonna happen in the future? That's that's
the great question. That we're facing right now
as we are in the summer of 24
and looking forward.
What will happen with all the money on
the sidelines
when we start having less
return
(07:42):
on capital in the form of interest rate.
So
perspective here. When we look back in 01/20/2201
of our sources here
that provides us these
projections every year. And 1 of the interesting
thing is when we look at January of
20 22.
When we look at 20 different
(08:04):
economic indicators. From monetary policy to the Us
economic outlook
to the yield curve, customer sentiment, etcetera, etcetera.
In 20... January 20 22,
17 of those 20 were all way positive.
And 3 of them, political environment, geopolitical risk,
the equity market valuation itself an historical perspective,
(08:27):
Those were the only ones that were neutral,
not not negative, particularly. Just showing caution warning
signs what the future looks like.
And then we roll around a few years
later,
January 24 coming into this year.
And we see at that point in time,
most things were neutral.
(08:50):
The international economic outlook,
equity market valuation, geopolitical risk, those were downright
negative,
just 6 few months ago.
And as we moved into the summer,
what we were seeing is
more positive,
we're seeing that at least where it pertains
(09:11):
to the consumer sentiment,
the labor market, housing and mortgages,
consumer spending,
corporate profits,
credit availability inflation, all those has started to
trend
positive now.
While equity market valuations geopolitical applicable risk are
further into the negative.
And and this is reflective of
(09:33):
the...
Mass of
the...
Well, as we'll talk about in a moment,
the economic
minds of the world.
Okay? We're gonna show you some
information here from the
the Fed, the 500 different economist. What are
they thinking?
(09:53):
All of these
factors
are coming from
a cool
of leaning
financial minds.
Some would say perhaps a group think is
there.
And I want you to take everything I
say tonight with regards to
a positive or negative view of what's gonna
happen in the economy
(10:15):
and the market
with
a grain of salt,
with your own perspective, because it does really
depend upon where you are in your personal
journey as we'll talk about a little while.
So as we move on, right now, we've
got some serious negative
factors in play at the equity market valuation
(10:35):
as we'll share in just a moment. And
the geopolitical risk,
most notably,
China,
Russia, Ukraine, and
well, some people say right here in River
city.
But those are factors that effect at this
macro scale.
And what we need to look at is,
(10:57):
okay, at the market scale. What's what's going
on here?
What is really driving this
S and P 500
that again is used as the proxy for
your market investments?
And, you know, understand that the the value
of a stock and the value of the
market in general,
(11:17):
it is thought of as a forward looking
indicator.
Essentially, what it's what they say is
what the stock value
now with the market valuations now,
is a reflection of what the
group think that is in the market tends
thinks that a company will be worth in
(11:37):
6 to 9 months
with the comm economy will be like in
6 to 9 months.
And
we see here in this slide that it
typically does
trend very closely.
In a moment we'll see that we're diver
from that significantly now.
And there are some reasons for that potentially.
(11:59):
And we look at the overall economy where
we are right now. Part of the reason
for some of those green indicators those positive
signs that we are going where we need
to go from a market perspective
is in fact, the
manner in which the Fed has
gained a level of control from over inflation,
(12:20):
which many people didn't think was be possible
this quickly,
this successfully.
Now there are many reasons to be a
doubt and a skeptic on that.
I know many of you out there are,
I tend to agree with some of you
on some of the odds,
but
the number driving the decisions.
(12:42):
And the numbers are whether of driving
the market. So we
don't pay attention to those numbers at our
own risk.
So what we see is year over year,
the inflation numbers have gone down.
In the month over month, inflation numbers have
gone down as well.
Today, we had another downward
cycle. So it's trending in the right direction.
(13:04):
We're getting very close to the Fed's target
rate.
That they feel is a supportive of their
mandate to promote full employment and growth.
Now, we'll talk about a minute here. We
got the big fed meetings coming up real
quickly here and who knows what's gonna happen
from that. Could be a lot of excitement
could be a lot of disappointment.
We don't know.
(13:25):
We know where things are heading.
Part of what's driving the Fed's decision is
their
interpretation of the strength of the labor market.
And
their
interpretation
of whether or not
it is an overheated labor market, which is
now gonna give cause for concern about
(13:47):
a
inflation like we had in the seventies where
it was wage based inflation where wages are
are pushing
the inflation rate more than trailing it as
it has been now.
And
they see from their numbers
that
we've got low unemployment,
(14:07):
and we see we have...
A good number of current job openings
for that unemployment. So they're seeing a very
stable labor market right now,
which is good for the prospects of them,
believing that they're on the right path
is good for the prospect of them,
going ahead and reducing
interest
(14:29):
as opposed to increasing or maintaining even longer,
And
part of what is this
really delicate dance
of
what is the economy?
What is market growth
and what is the Fed's mandate on this
comes from
you, folks,
(14:50):
your
consumer sentiment.
This is 1 of the things that we
showed in the earlier slide that is that
is positive
by the numbers that they've used.
By the studies that they have used, which
is based upon the study the of the...
Out of University of Michigan
that said samples about 500 households and
(15:11):
based upon this
ongoing analysis of consumer sentiment,
it's trending upward,
we're feeling better about things.
You may not be, your may... Neighbor may
not be, but they think it's happening.
Who knows what's reality and who knows viral
change?
But these are, again, the factors that the
Fed is paying attention to, and this is
(15:32):
gonna gonna be what's driving the market's reaction.
Going forward. So from a global level right
now from the structure of our economy, we
have the reduction
of the growth of inflation, which is good.
We have the good consumer sentiment. We have
strong labor market, and these are all signs
that will potentially lead the Fed to
(15:52):
stop what they're doing.
Open up the flood gates a little bit
and allow some more money back in the
system in in terms of reducing interest rates.
And so on top of that global picture,
from the from the political scene as it
were,
what's happening right now in the market is
this
(16:15):
incorporation
of
the concept
of artificial intelligence.
And as I said, looking forward as the
market tend to do,
starting to project what will be the impact
on various companies
from Ai, they're incorporation of Ai,
(16:36):
and
what's how soon will that be adopted?
So now as this chart is showing us
how many times our visual artificial intelligence has
been mentioned on their quarterly earnings calls for
publicly traded companies and you can see that
it's moved up tremendously
since last year.
As it's now becoming
(16:57):
adopted. It's now becoming to the point where
you know, comp... Major companies are going to
have, you know, the chief Ai officer or
and those type of things to try to
develop the strategies for implementing Ai in the
businesses.
Now,
again, if you've listened to me for the
last 18 months, you know where I feel
(17:18):
about a major transitional change in the economy,
and part of it being driven by
the
effect in the impact of Ai upon white
collar
and
intellectual,
horsepower,
us,
the distract the the displacement that will happen
with that.
(17:39):
But from a market,
earning
and a
valuation of the businesses,
stock value,
perspective,
we're seeing now
that that is starting to be reflected now
more broadly.
I'm gonna talk in a little while about
the impact of the magnificent 7 and what
(17:59):
it's been like and how things are changing
a little bit on that as this all
evolves.
So
where are we now?
As we head into
the second half of the year?
We know it's gonna get crazy out there.
Right?
It's politically, it's gonna get nuts.
(18:20):
We've already seen some of that,
and
there's no reason to expect it to get
any better.
And
what I wanna dispel right now
is that
many people believe that there is a
correlation between their party and performance and market.
And and that really does not hold true.
(18:43):
You know, we're talking about this those bigger
factors that we spoke of just a moment
ago that what drives it, And we think
about
historically.
What has happened with in elections in markets.
If we look back to 19 08:19 44,
Since then, there have been 20 presidential elections.
(19:04):
In 16 of those, the S and P
500 experienced a positive return for the year.
And many of them had had a combined
had a medium return about 10.7
percent.
Of the 4 elections that saw a negative
return. Well, 2 of them did occur in
recent past
4008.
(19:26):
But on both those occasions, we had problems
bigger than
what was going on with the parties.
And then if you if you think that,
okay. 1 party is more prone to having
better growth in the subsequent years and the
other.
That doesn't stand the test of time either.
It basically cuts both ways. These are just
(19:47):
partisan thoughts.
You, we if we look
and
historically,
there will be, there has been increased volatility
from now through the election.
So if you're concerned about volatility,
if you can't stand that, then
you need to take some action because they're...
Because the chances are... It will get rocky
(20:09):
between now and that.
Historically if we look at that,
the s sp 500
between the the period of
summer to the end of the election is
about 5 percent lower than it is throughout
the rest of the year. Okay? So
there is some effect
whether it's long term effect
(20:32):
that remains be seen.
And for this year, in particular, as we
are dealing with
Ne fed,
there is
talk concern, and we'll see whether or not,
this is true in the upcoming weeks,
whether or not there's going to be
appearance
of gaming the system for better return
(20:53):
so that there's a better economy.
We'll see.
But here's what I want you to understand
it. Outside of this macro problem, and these
g generations
there is
a fundamental
market problem
(21:14):
that is
brewing,
or it is a fundamental change in the
market. Only time will tell. And here's what
I mean by that.
These are numbers that we look at on
a regular basis
to help guide
our clients.
To try to understand what's going in on
in the market right now. We look at,
(21:34):
you know, what's going on with bank Cd
yields.
And right now, we can pull up bank
rate dot com, get a 2 year Cd
for just under 5 percent.
3 year, about 4 and half percent, 4
5 year about 4 percent.
Now, those numbers
have been coming down steadily throughout the course
of the year.
(21:55):
K? It's a trend that we need to
be aware of.
If we look at the S and P
500 average dividend now that 1.27.
Again, that has been a trend that's been
dropping
throughout the year.
And the 1 that I really wanna point
out to you is this chiller
Pe ratio.
K. If you've listened to me before. You're
(22:16):
probably get tired of me pointed out to
you. But maybe if you've made note about
this You will note that it has been
increasing this year.
It's now 36.37.
Historically the median of of the sc Pe
ratio, which is a measure of the value
of the companies,
versus what their earnings are. And I told
(22:37):
you that the market's is supposed to be
looking at what the earnings are down the
road and I'm using that as approximation for
what the value is
So now it's 36.37.
The median is 15
and change.
The highest it's ever been is with 44.19.
So, you know, we could be moving into
(22:57):
a new era where these type of
multiples are
the the norm.
I don't know.
But when you also look at things like
market capitalization versus Gdp.
Which is a number that
warren Buffett famous for paying attention to as
1 of his load stones.
At 1 97,
again, this number has been going up all
(23:18):
year.
And this is a measure of the value
of the market versus the gross domestic product
of the country.
And historically,
anything above 01:35
is over valued.
So all of these signs continue to tell
us
that it's time to proceed with caution.
(23:40):
Are we at a point where we have
hit the high point, where people should sell
high?
Or
do we have a lot of he go?
No crystal ball here folks. Not even got
a hazard to guess.
So separate out the noise
or do as I do. Stay away from
(24:01):
the news, enjoy your life a little bit
more.
So until next time, I hope you found
your time spent with us here today to
give you some important perspective on where we
are and where we're heading.
And as always, if you are a client
of ours, please pick on the phone. If
you got any questions.
If there's just a friend of ours that's
receiving our information and need these couple questions
(24:22):
answered, please feel free to reach out to
us.
Take care. Be well.
Goodbye.
Thank you for listening to your financial advocate.
Click the subscribe button below to be notified
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The information covered and posted represents views and
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represent the views or opinions of Dupont Wealth
(24:44):
solutions. The content has been made available for
informational and educational purposes only. The content is
not intended to be a substitute for professional
investing advice.
Always seek advice of your financial advisor or
other qualified financial service provider with any questions
you may have regarding your investment planning.
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