Kersten Wealth Management Group - Money Sense 3-23-24

Episode Transcript

(00:00):
Good morning and welcome to Money cent. You're listening to the advisors of Kirsten
Wealth Management Group, Kevin Kirsten andBrad Kirston. Happy to be with you
this morning as we are into MarchMadness. Brad, we got the bracket,
We got the brackets out this weekand we're we're following along closely with
the games and certainly got a coupledifferent I know you have the March Badness
brackets as it pertains to what eachschool costs tuition wise, but certainly something

(00:26):
we're following along closely as well,and certainly in the month of March.
The markets are doing very well.On top of that, SMP five hundred
hit at all time high first closedAby five th two hundred, so we
got a lot of talk, alot to talk about putting markets in perspective
as well. So we have thes and P five hundred right now crossing

(00:47):
double digits year to date, upnine point nine before today. It will
be double digits after today on agood day for markets as well, and
we're seeing some breakouts. In myopinion, the small camp index is breaking
out of a range, not atan all time high. In fact,
still twenty percent from an all timehigh on the small camp indexes. So

(01:08):
you know, good all around.I think there's you look at large cap
stocks as measured by the S andP breaking out, and you say,
Okay, maybe this is the end. We don't necessarily think definitely. Don't
think it's a long term, secularend to the bull market. Maybe a
short to intermediate term pause. Andthat's something that we always have to weigh

(01:30):
as advisors back and forth, isis when you're looking for that pause or
that correction. People get very binarywith markets and they say this in all
out, this is an up market. Yeah, this is a down market,
and it's really not that way.So we're going to go back through
history and kind of demonstrate to peoplethat there are fifteen to twenty percent sell

(01:51):
offs in five year periods where themarket's going straight up. And so you
have to look to say, youknow, when someone is on TV talking
about I'm negative on the market,it's like over what timeframe? Right?
Yeah, Because if in nineteen ninetynine, at the peak of the dot
com bubble, you were negative,it was smart to be negative for the

(02:12):
better part of three years. Butyou might be negative and be negative from
the standpoint of like we are inthe short to intermediate term, we're sort
of overdue for a five to tenpercent correction, but I still feel the
market will be higher in five years. So we're gonna look at all of
that and kind of put it inperspective in terms of what people should be
looking at, Because, as we'vesaid in previous shows, if in October

(02:34):
of twenty two, when the Sand P five hundred from hi to low
is down twenty seven percent, youfelt horrible about the market, and now
the S and P five hundred isone thousand, seven hundred points higher and
you feel good, that is thewrong mindset. Yeah, you have a
recip for disaster, yet you're nota You're not a good investor. If

(02:58):
that is your mindset. The notonly do you need to be contrarian and
need to change that mindset, butyou need to think about what we're talking
about. Well, how about themarkets up and you like it? The
market's down, and you don't thinkabout how that would work over time if
every time the market was down youwere selling it, and every time the
market was up you were buying it. Yeah, and I and I also

(03:21):
equated Brad to I like I likethe analogies with the markets and your health.
And just like when you start aweight loss program, okay, just
like when you start exercising, justwhen you start eating right, the first
whatever pounds come off quickly and easily, okay. So if you're investing based

(03:42):
on that, you would say,I'm gonna I'm gonna I'm gonna vet invest
or bet that I'm gonna lose thefirst ten percent really quickly. The same
is true with investing. And soif you're looking at at the end of
your journey, if you're trying toget healthier, the last couple of pounds
are very tough. The last tenor twenty percent of a bull market is

(04:05):
slower and more difficult. And sowhen you look at what you're doing and
you say to yourself, okay,from thirty five hundred on the SMP in
October of twenty two to fifty twohundred, that was easy. That's almost
a fifty percent gain, and nowyou're feeling better. I'm gonna tell you
right now, the next fifty percent, just like the last five pounds,

(04:29):
are not going to be easier rightas easy. And that's why we're even
rotating, because there are other thingsto use your same analogy that have only
started their weight loss journey and haveonly started to break out to new levels,
and they're not back to all timehigh yet. So well, look
at the Russell two thousand Small CampIndex. It trades at eleven times earnings,

(04:50):
so it can go up fifty percentand be at sixteen times earnings.
That's not expensive right by historical measures. Yet the SMP is over twenty times.
It could go up fifty percent tobe at thirty times earnings. Now
we're talking dot com bubble right.The S and P is the large cap
index. So when you're looking atit, if you're if you're saying to

(05:10):
yourself, you feel better now,like I said, you got to go
into like a program or something.Yeah, it's like alcoholics anonymous. You
need to well, you need towrite down rules. You need to write
down rules and say this is whatwould work over time and stick to those
rules. And what if it's theopposite person. Though, there are these
people Kevin that say, I thinkI think that the market's overvalued. You're

(05:30):
right, there are parts of themarket that are historically overvalued, but there's
big parts of the market eighty ninetypercent of the market that's not overvalued historically
and not overvalued currently compared to thathistoric norm. If it's if it's megacap
and megacap growth, you're right,it's getting a little frothy. But if
it's international, if it's mid andsmall, if it's any sector that is

(05:55):
that is unrelated to technology, itdoesn't look very expensive. And that could
be the catalyst of your portfolio forthe next six to nine months if we
need to digest the big moves we'veseen in technology. Now that said technology
could keep moving. That's why wehaven't removed it from the portfolio. It's
still the biggest part of our portfolioover what time frame? Right over what

(06:18):
time frame? And if the Sand P was at thirty five hundred,
when the Dow was almost under thirtythousand a year and a half ago,
and you were saying to yourself,what's more likely Dow twenty thousand or Dow
forty thousand, and you were inthe twenty thousand camp, you know you
have an issue now because now theDow's almost at forty thousand, and what

(06:39):
are you saying, Well, itmight go waiting for twenty Yeah, I
mean it's you. Well, ofcourse the people who bailed out, if
they unfortunately bailed out, and youknow, we talked a lot of people
out of doing that, but ifyou did, you're between a rock and
a hard place, and you shouldn'tbe jumping in right now, especially with
treasury yields over five percent at themoment. But let me take you back
to the Wall Street Journal at thatlow brad in October of twenty twenty two.

(07:02):
So yeah, just eighteen months ago, Nasdaq falls into second bear market
of the last twelve months is theheadline falls into bear market after volaid all
day. The S and P fivehundred was at three thousand, five hundred
and seventy seven. It's at fivethy two hundred today. If you look
at some of the quotes that they'retalking about, the Nasdaq was at ten

(07:24):
four hundred and twenty six. What'sat almost sixteen thousand right now. It
was only a year and a halfago. So when you look at some
of the quotes, no one wantsto hold a position overnight if they think
it's going to open up weaker thenext day. That's one of the quotes.
Some traders make money by betting stocksare headed lower. To do so,
they borrow shares and sell them.This is talking about short selling,

(07:46):
hoping to profit by buying these sharesback at a lower price at a later
date when it starts stocks cart toclimb. Those gains can be accelerated by
short sellers covering their bets. Butthey're looking at the opposite of that right
now, where people can't even holdtheir positions overnight because they think it's going
to go lower the next day.Investors have been grappling throughout the year,
by the way, this is Octoberof twenty two. Throughout the year with

(08:07):
the effects of decades high inflation andthe Federal reserves attempt to tame it with
higher interest rates. For many,the concerns have grown deeper in recent weeks.
Now, at that time, ourconcerns were not growing deeper, our
concerns, our excitement was growing.We can buy this, Look how cheap
everything, look at the Wall StreetJournal. The concerns have grown deeper in
recent weeks as inflation remained stubbornly highand traders worry that the Fed will cool

(08:31):
the economy. And this is wherethe bad news is so bad it's good
and I'm talking to people at thistime in October of twenty two and say,
how can you be positive? Everything'sbad? Everything I read, everything
I hear, and even on tallpoint at the end of last year,
everyone was saying at the beginning oftwenty three, nobody predicted what we had.
I don't know what you're talking though. Look at this quote from Steifel

(08:54):
Nicholas Brad. The question now isnot if there will be a recession,
it's when and how bad? Right? Could you be more wrong? Right?
Right? Stocks have fallen steadily sincethen. The Dow and the SMP
remain in bear markets. Investors arebracing for the first wave of major corporate
earnings reports due this week. Thisis once again October of twenty two,

(09:16):
that will show companies struggling with highrates and weakening consumer demand that did not
pan out by none of that occurred. They go on to say they're surprised
because in twenty twenty two first andsecond quarter earnings came in remarkably well.
The third quarter may be the pivotpoint at which we see earnings cannot keep
growing to the sky, and companiesare subject to the economic headwinds we are

(09:37):
facing in all kinds of directions saidCIBC Private Wealth goes on and on about
the negativity. Another headline from fromthat data here, let me see,
bad news isn't good news for stocks, despite what people tell you. That's
exactly, it's an opposite, theexact opposite. October eleven. There's exactly

(10:01):
what we're taking. If the newsis bad enough, it becomes good.
How does this make sense? Thebig hope is that the FED will pivot.
Guess what happened. The Fed didn'tpivot. No, they kept going
until banks were failing, and thenthey kept going further. Yeah, they
did not pivot, and pivot wouldmean they lowered rates. They did not
pivot. They kept going. Andthey're saying that that's the big hope right

(10:22):
here. And so in this articlefrom October of twenty two, Brad,
the so called experts were pointing outthat if the FED doesn't pivot, we
have big problems. Well, theFed didn't pivot. They raised five more
times, five more times. Atpresent, they talk about the there is
no alternative playbook, the Tina playbookas they call it, and they say

(10:43):
that trade is running out. Therewas a time period where people were investing
in stocks and they said there isno alternative. You have to invest in
stocks because interest rates were zero,And they're saying in October of twenty two
here in the Wall Street Journal,they're saying, that has now changed,
right, because now you have analternative. Well, guess what people did
that member our Outlook consensus for twentytwenty three, people said, why would

(11:07):
you buy anything but the two yeartreasure? That was the narrative. Why
do you need anything else? Becausethere's gonna be a recession, So why
wouldn't you just do the two yeartreasury? Well, that turned out to
be one of the worst trades youcould do, and in fact, any
stock category would have beaten it.Since that date, the two year treasury
is up about five and a halfpercent total return including interest, and the
SMP is up over thirty So whywouldn't you because you could get six years

(11:31):
worth of return? Right now,I might be coming a little bit closer
to that, not all the way, but certainly closer. That is,
any treasure is anyone saying one andto your treasuries are a goodbye? Now?
No, they were saying it atthe worst time, right, So
here's another one from October of twentytwo, the recession is not fully priced
in Marco was down twenty seven percentof that point. Yeah, analysts forecast

(11:52):
a mild economic contraction. Investors aren'tcompletely buying what analysts say because the SMP
is factory in futuring future factoring infuture downgrades. So it's just it's unbelievable
how negative they are at the worstpossible time in terms of the pundits that
you see. But yet these samepeople and we probably should record some of

(12:13):
the CNBC stuff. You have togo back and listen to them. I
guarantee if you listen to Fast Moneyon October twelve. Yeah, there weren't
a lot of positive voices. Well, there's two things that I wish they
would do. I wish they wouldcall people on their past predictions when they're
so bold. And the other thingis when you're saying something that either can't

(12:33):
be known or has a track recordof about fifty percent, why do we
not have newscasters that know enough tosay, you just said that that is
a consistent predictor and it's a coinflip. Why do you think it's consistent?
And we're starting to hear that nowwith all the people who we are
saying you can't buy the market whenthe Fed's raising rates, And now they're
saying you can't buy the market becausethe Fed's gonna cut rates, And they're

(12:54):
saying if the FED cuts rates,it always is a sign of weakness in
the economy because the FED needs tocut to boost the economy. You got
to bail on stocks. Well,same people are saying you got to bail
on stocks when they're raising, andthe same people are saying, got to
bail on when they're they're cutting.So when can I invest them when the
Fed's doing nothing. That's a prettyshort period of time. They're in some

(13:16):
cycle usually and they're talking all thetime about entering or exiting cycles. So
those people would have you never buythe market. Now, I want to
talk about how there is almost nocorrelation because sometimes the FED is reacting and
sometimes the FED is just trying tonormalize. And what matters more is why
they're doing what they're doing. Andif they're reacting to a panic, it's

(13:39):
one thing. But if if allthey're doing is what they're talking about right
now, which is is leading youdown the path that we're going to try
to normalize rates. The track recordhas not been very good that it's a
predictor of either way that the marketwill. I'll add one thing to that,
Brad. What matters more is yourown personal situation. What when you
need the money, your goals,when you're retiring, when you need the

(14:01):
money, what the FED is doingis irrelevant. The FED was cutting rates
for most of the nineteen eighties,okay, from eighty two on after Vulcar
raised rates. Most of the nineteeneighties. The eighties were a great time
to invest. Okay, the FEDwas raising rates from two thousand and two

(14:22):
to two thousand and seven. Youwanted to buy, So your personal situation
should be what dictates it, notwhat these outside forces are doing. But
we still have to discuss it becausetwo things. Number One, people say
things definitively on TV that don't beknown that and don't back it up right,
things that either can't be known thataren't backed up by the stats and

(14:45):
the narrative. In the last twoyears, it switched for one. FED
raises is going to raise interest rates, and it's if they keep as long
as they're raising interest rates, isgonna be a problem for the market.
Okay, Well, they started raisingrates and it was a problem for the
markets. They kept raising rates andit wasn't a buzz for the market.
Yeah, okay, So then everyonechanged their tune and it says, well,

(15:07):
now when they lower rates, it'sgoing to be a problem for the
markets. Okay, So we're goingto go back throughout history and look at
some periods of time. And actually, it's funny that you have what you
have getting ready for this show,because I put it out something from LPL
that said, looks more like we'repartying like it's nineteen ninety five, and
we have said this on this showtoo, that everyone was saying that raising

(15:30):
rates and rising interest rates is aproblem for markets, and they forgot about
a couple of different periods of time, not just one. We're going to
talk about the nineties next when weget back from the break, but that
is one correlation that is starting tolook closer and closer to what we have
going on right now. You're listeningto Money Sens. Brad and Kevin Kirsten
will be right back and welcome backto the show. You're listening to the

(15:52):
advisors of Kirsten Wealth Management Group,Kevin Kirsten and Brad Kirsten as a reminder.
We are professional financial advisors and ouroffices are in Peri's. Give us
a call throughout the week if youwant to set up a consultation to review
your plan. Whether you're just gettingstarted, well on your way, or
already in retirement, be happy tosit down and go over your future four
one nine eight seven to two zerozero sixty seven or check us out online

(16:14):
at Kirstenwealth dot com. Got alot of good information on the website,
Brad, including our weekly market commentarywhich talks about the Federal Reserve meeting.
This week a busy and historic weekfor central banks. It wasn't just the
US. We saw the Bank ofJapan actually raise rates for the first time
and what I don't even know,thirty years probably they were raise rates significant.

(16:37):
Raise rates is a relative term becausethey had rates negative, so they
did raise rates. Australia, Bankof England, Bank of Japan, all
all looking at having meetings are fedconcluding its two day meeting, leaving rates
alone, five point three percent isthe effective rate at the moment, so
that's unchanged since July, so nochanges since July. We're kind of recapping

(17:02):
that. In the previous segment aboutall the way through twenty twenty three.
The first half of twenty twe theywere raising rates in the market. Liked
it, kind of to the dismayof many people who didn't agree with it.
And you're going to talk about someother periods of time where it sort
of refutes a lot of what theexperts are saying here right now. The

(17:22):
FRED has preached patients recently, andpersonally, I think it's a good thing.
You know, I maybe was alittle bit hesitant initially, but when
you really look throughout history, andthat's really where we've kind of had our
eyes opened a little bit, alittle bit more being a little bit nervous
when the FED is raising rates,saying, oh, we need zero rates

(17:44):
now, I think for the country, it's like a drug we have.
I gotta have a zero percent carloan. I gotta have a three percent
mortgage. And when you really realizewhat you give up on the other side,
Okay, maybe we want rates tobe a little bit higher. And
if you look at other periods oftime in the eighties and nineties, we
did just fine as an economy andas a stock mark out zero rate without
zero rate. So what the FEDbasically said yesterday, and I think we

(18:11):
went into the year or people thinkingmaybe six rate cuts. The Fed really
never said that, but they're sayingthree this year. They were very definitive
yesterday. So that's that's a goodthing. Market's like certainty. Okay,
they were very definitive about the three. The three will probably be June or
July one in the summer, yep, and then all wait and then I
think it'll be November December. Yeah, but it'll be good. Want up

(18:33):
beating the day after the election.They don't want to be around the election
one before two after the election.That's kind of what they're plotting out.
And really the biggest benefit that yousee. It's not it's not certain.
Of course. In two thousand andeight when they were lowering rates in a
panic, the market did very poorlyfor the next six months. But there
is a certain amount of massive amountof people in money markets at five plus

(18:56):
percent interest. When the Fed lowersrates, that's an instant drop in money
markets. Instant. Yeah, okay, But those people were in the money
markets to start this year, andthey said, why wouldn't I just take
five and a quarter money market?Why? Because you missed out on ten
in the market you missed out ontwo years with the return in three months,
but that will immediately by the endof the year, you'll be seeing
those money market rates in the lowfours and into twenty twenty five probably high

(19:23):
threes and then a leveling off.And so as with anything with investing,
there's a trade off. You know, if you felt really good about five
and a quarter, which you should, when it starts getting down to three
and the market's doing pretty well,maybe you rebalance a little bit. So
that's certainly some dry powder for marketsand could push get a dollar amount in
money markets and cash instruments has neverbeen higher, and even as a percentage

(19:47):
of investable assets, it's approaching thenever higher level. So there is certainly
some dry powder for any small selloff to come back into the market.
So that's what our commentary is about, is kind of looking at the FED
meeting and look at the implications formarkets. But I think that's they've been
very clear, which is good aboutthe three rate hike rate cuts and where
you'll notice it this year immediately.I don't know necessarily five ten twenty year

(20:12):
bonds, they're not going to dropin yields as a result of that,
if the economy is good, sothat the longer bonds are more sensitive to
the economy, they're either going tostay put or go up. Because the
Fed has now predicted that where longrates are is probably accurate or even too
low compared to where they're saying they'regoing to hold. The movements on the

(20:33):
ten year treasury and beyond are muchmore about the direction of the economy,
and the movements on the one yeartreasury are all about the Fed. Okay.
So if the Fed cuts rate doesn'tmean that ten year treasury is going
from four to three, okay,if the economy's on solid footing at that
point later on this year, tenyear treasury is not going down, no,

(20:55):
okay. So you know, lookingat that, that's what we see
for the rest of this year.Brad on interest rates, and I think
the big news will be those moneymarket people saying, yeah, you know,
where's the breaking point where stocks startlooking more attractive to those folks.
And I think that may may ormay not be a mistake for those people

(21:15):
because they missed out on the firstthirty percent or forty percent, right,
But so and those people that missedout are now you know, the advisors,
let's put it that way, theadvisors, the economists, all of
the air quote experts that got itwrong that the Fed raising rates was going
to cause a recession, and itdid not. It didn't occur last year,

(21:36):
and the Fed continuing to go toofar. I even feel like they
went too far. But we weren'tsaying it was going to be a recession
after a downturn. I mean,we already had the downturn, and then
everyone's predicting a downturn because of arecession. So twenty six percent down and
then we're gonna go what another someother percent down? We already priced in
a recession that didn't even happen,and so why did we get a recovery

(21:57):
Because it didn't happen and things itlooked better. But now those same people
that missed it are saying the Fedraises rates, it's going to cause a
recession. The rate Fed cuts rates, and now they're saying the Fed cuts
rates, it leads to downturns.Well, let's just look and see is
that true. Is it true thatevery time that the Fed cuts rates it

(22:19):
leads to downturns in the market.Sometimes it's true. Sometimes it's not.
Sometimes the fed's being reactive, andif we zoom in close enough to see
the actual dates, we can seethat they're reacting to a sell it that
already occurred. But if we zoomout on the chart, it looks like
FED cut market down. If wezoom in, we can see that it's
market down. FED cuts to savethe market down, and the market takes

(22:41):
off. But the further out youzoom it doesn't. You can't tell what
is what. But let's go backto the nineties, because there are a
lot of comparisons to the nineties inthat large caps are were up for five
straight years, the best performing assetclass, in that technology is your leading
sector for almost the entire period oftime. There's a lot of similarities.

(23:03):
Even with the FED raising from nineteenninety four February of ninety four, we
had seven raises, including several ofthem that were fifty basis point raises,
one that was a seventy five basispoint rais, and the final one in
February of nineteen ninety five was ahalf a percent raise. We went from
three and a quarter to six,a very similar raise, right, And

(23:23):
what did it do? We raisedrates, and it led us out of
a recession from the night for thenineteen ninety four year into the start of
the biggest bull market we've or thebiggest five year run we've ever had in
the market. So raising rates didn'tdo anything other than shift us out of
a period of time. And thenwe had the FED raise rates for that

(23:48):
year and a half. Then yougo halfway through nineteen ninety five and were
cutting rates. We cut three timesJuly of ninety five, December of ninety
five, January of ninety six.Okay, mark was still pretty good.
Then they just tapped the brakes alittle bit. They raised rates a year
later in nineteen ninety seven. Okay, mark's still fine. Nineteen ninety eight,

(24:08):
they cut three times. They wentfrom five and a quarter to four
point seventy five mark. That inresponse to a twenty percent correction in the
markets. Too, Yeah, itwas. It was. The market corrected
twenty percent, and in nineteen ninetyeight it had to do with a global
currency crisis, normal market correction ina bowl market. The FED reacts to

(24:30):
that sell off by cutting rates threetimes. So here we are. People
are telling me that FED rate cutslead to selloffs. In this occurrence,
it was a sell off that ledto the FED boosting the economy with rate
cuts. And then you go fromJuly I'm sorry, June of nineteen ninety
nine all the way through just pastthe sell off of the market June thirtieth

(24:55):
of nineteen ninety nine to May sixteenthof two thousand, FED raises from five
to six and a half, andthen they realized maybe this sell off is
a little bigger and they stop.So here we have call it a fifty
to fifty coin flip because we raisedsometimes, we lowered sometimes throughout an entire
five year cycle of a pretty goodperiod of time in the market, and
the only times they were cutting iswhen they were reacting to brief sell offs

(25:21):
in global currency. In we hadthe Asian financial crisis, We had some
Asian we had Japan selling off.You had Hong Kong slashing rates because they
had some big banks that were failing. You had George Soros breaking the Bank
of England. You had all thesethings that were happening in the nineties and

(25:42):
the market was doing just fine.If we look if we zoom out to
the calendar years, but if wezoom in, we see that there's these
cell offs occurring and the FED isreacting to them, cutting rates to keep
things going, not cutting rates tocause a sell off. But we zoom
into the actual and that's what wesee and the same thing. Why does
so many people act as if becauseI think, I think it's a mixed

(26:06):
bag on what the market does whenthe FED is either raising rates or cutting
rates, it's a mixed bag.At best, it's a mixed bag.
But why do so many people actas if there was no market history priory
they could call them before two thousandand eight. I know, it's like
every it's like it's like BC andAD like everything started in right, right?

(26:26):
I mean, either they're too youngand they don't know that market history
goes back further. Why is itthat we ignore everything that happened? Or
what I thought you were going tosay is why does everyone who goes on
TV act like we can't look upwhat you're saying to prove that it's not
true? Right? The people thatare now saying cutting rates leads to selloffs

(26:48):
doesn't even they don't even look atrecent history. The two thousand and at
twenty twenty two, we were raisingrace, the entire year. We started
earlier and we went further okay,raising in the markets off, So what
you're saying now about market selloffs wouldnot hold true. We raised rates five
times that led to a twenty sixpercent sell off, and we raised raised
five more times after that, soboth were okay. Market raise rates,

(27:12):
market went down, raise rates,the market went up. So what you're
saying is not a complete wash.That's a complete wash. COVID. We
cut rates twice. On the lowwas March twenty third. We cut rates
on March sixteenth and March first,I believe for the two dates the market
was already sold off. Marco wassold off twenty percent and twenty six percent.

(27:33):
On the two Fed rate cuts.It went ended up selling off thirty
five So again call it a wash. The market was already down the Fed
cut rates, and the final timethey cut rates they cut by a full
percent, and two trading days laterthe market hit its bottom and took off.
Okay, So it's it's more correlatedmaybe to stimulus for the market because
they cut rates all the way tozero at that point, but it's not.

(27:55):
It doesn't hold true with the currentnarrative. Twenty nineteen was one of
our best years of all time.The FED cut rates three times, trying
to do what I don't know.You know, well, you're coming out
of the twenty eighteen twenty percent inthe fourth courts, exactly right, And
so they cut They raised too farinto twenty eighteen and it led to a

(28:15):
sell off that stopped on Christmas Eve. But the last raise they did was
on December twentieth. So the currentnarrative of cutting rates would lead to sell
offs that again they're raising rates andit led to a sell off, and
then they cut rates and the markettook off. It's the exact opposite in
the most four recent calendar cycles wherewe were raising or lowering. The opposite

(28:37):
is true. And yet they're gettingon TV and saying FED cuts lead to
sell offs and it's just not true. Okay, could it the same people
are doing that were on TV sayingFED hikes lead to sell off? That's
my point. That's my point isyou're the same person that said the opposite,
and now you're just getting on andsaying that there's an oppositing thing because
they just want to be bearish.Okay, it's fine if you want to

(28:59):
be bearish. And I want topick a narrative, but let's pick one
that's actually true or at least isbetter than a coin flip. Well,
I think the parallels to the nineties. I mean, I certainly I'm not
going to come on here and predictperformance like the late nineteen nineties for the
stock market, but I think theparallels to what the FED was doing in
nineteen ninety four prior to twenty twentytwo. The total bond index worst year

(29:21):
ever was nineteen ninety four. Okay, twenty twenty two is a lot worse.
The FED was responding to creeping inflation, not as extreme as it was
in twenty one and twenty two,but that's what the FED was responding to
it, and at that time itwasn't as bad as the seventies. It
ended up being not as volatile ayear as we had in twenty two,
but it was a flat to slightlynegative year for the stock market in nineteen

(29:42):
ninety four. And then when theFED signaled that they were done in nineteen
ninety five, the market took off. It just took off. And you
really saw that very similar in twentytwenty three exactly. And so when you
look at those parallels to nineteen ninetyfive. It's, you know, should

(30:03):
make you feel pretty good. It'snot a slam dunk, obviously, But
also I think maybe the second partof this discussion should be bad in terms
of and this is why there's somany mixed messages and cross currents in the
market, is that I think peoplealso need to be reminded of the pain
that happened in the nineties, inthe late nineties, because there was a

(30:26):
lot of major sell offs, andit's it's like a lot of good things
in life, right, a lotof good things in life that we go
through. We forget that there's anythingbad that happened in the middle, Like
how I remember that that was great? Yeah, and that we forget,
you know, whether it's nostalgia ofthe nineteen eighties or nostalgia of our high
school years. Yes, we forgetthat anything bad happened. Well, the

(30:48):
same is true with investing. Everyonethinks that from ninety five to ninety nine,
everything was perfect. Yeah, everythingwas perfect. Who wouldn't have wanted
to be an investor in nineteen ninetynine. And we're getting a pause here,
and I want to talk about howsome of those sell us they get
worse the further along you go.And there's a reason why, well,
the market being overvalued can lead tomore violent selloffs, and so the need

(31:11):
to sell rallies and have dry powderto buy those dips is even more important
after you get a year and ahalf, two and a half, three
and a half years of a bullmarket in because they do and as you
do that, what I'd like todo as well is just for people in
people's heads to think about, becausepercentages are just don't mean anything to do
people. We're gonna quate those percentagesto the current market and what that would

(31:33):
look like in terms of how manypoints the SMP and the Dow would drop
if we were like the nineteen nineties. And my point is, you can,
at the same time, just likewe said at the beginning of the
show, be short to intermediate termcautious, but yet feel really good about
the US and the US economy andthe US markets over the next five years
and say to yourself, I'm gonnabuy if the market's down five, I'm

(31:53):
gonna buy if the market's down ten, if it's down twenty. I'm a
long term investor. I'm fully inYep. We're going to take our next
pause. You're listening to Money CentsKevin and Brad Kirsten. We'll be right
back and welcome back to the show. You're listening to the advisors of Kirsten
Wealth Management Group, Kevin Kirsten andBrad Kirsten talking markets. Brad trying to
keep it in perspective as the Sand P five hundred is making all time

(32:15):
high after all time high, andalso putting in perspective with the feder Reserve
and what they're doing with interest rates. Certainly, the Fed, maybe more
than ever, is something that peopletalk about pay attention to. Certainly started
probably with Alan Greenspan, but reallyfor most of the fifties, sixties and
seventies, people didn't even know whothe Federal Reserve chairman was. But we

(32:37):
want to go back to the correlationto the nineteen nineties for a couple reasons.
Not because we're trying to say,oh wow, look the market could
just go straight up, but itwas a period of time that I think
almost every investor forgot about when theFed started raising rates and they kept saying,
well, the Fed's going to raiserate, that's going to ruin everything.
The Fed's going to cut rates,that's going to ruin everything. In
the nineteen nineties were a period thatwas marked by especially the early nineties,

(33:01):
coming out of a recession in theearly nineteen nineties and then in the mid
nineties were sort of having this liftoff, but there was a little bit
of inflation that was creeping in,so the FED started raising rates and it
caused some concern In nineteen ninety four, so a very similar period of time,
we have a pretty healthy economy nowhad a fairly healthy economy in the

(33:23):
mid nineties, had to raise ratesfor some creeping inflation, had to raise
rates for creeping inflation, and theinterest rate increases did not send us a
new a recession in the mid nineties, did not send us a new a
recession in twenty twenty two. Intwenty twenty three, so after stumbling to
start the year with the rate heightsin ninety four, the SMP regained its

(33:45):
footing and starting with the fourth quarterof ninety four, just like in the
fourth quarter of twenty two, wentstraight up. In nineteen ninety five,
seventy seven record high along the way, the largest number of new highs in
a calendar year at the time.This equates to a market generating a new
high every three days in nineteen ninetyfive, little leaving little room for downside

(34:07):
volatility. Largest draw down in nineteenninety five was two point five for the
whole year. There was a coupleof pieces written at the time that were
scoffed at brad Ralph Akampora was atechnical research analyst at Crudential at the time.
He called for the dowt he getsseven thousand, and people laughed.

(34:28):
There was a bold call. Theindex was trading in nineteen ninety five at
four thousand, five hundred, Solook at where we are. And by
the way, if you want totake everything we're talking about and just ignore
it because you say, well,wait a minute. In ninety five,
the Dow is at four thousand,five hundred. Now it's at forty thousand.
So if I fell asleep for thosetwenty five years, thirty years,

(34:49):
I'd be doing great. So whydoes it matter? And I that'd be
fine. Yeah, I agree thosebut the nineties were no different. There
were people saying the market's going togo down, and people saying that was
the market is going to go up, and the ones who said the market
was going to go down, werethe thoughtful, concerned economic economist and advisor
right, And the ones that saidthat the market is going to go straight
up were foolish. So to thesurprise of many, after Ralph Akmpora made

(35:10):
the prediction of the now getting toseven thousand, it cleared eight thousand in
July of ninety seven. So whenyou look at that, even some of
the most bullish predictions were even brokenin the nineteen nineties. Another catalyst for
his bullish forecast stem from the degreeof skepticism following what many considered a stealth
bear market in nineteen ninety four.Sound familiar, a lot of skepticism in

(35:31):
two thousand and two. Fast forwardto twenty twenty four, and many things
are very similar. In that thirtyyear period of time, stocks are printing
record highs right now aboard a bullmarket upon fear and skepticism. SMPS seventeen
new highs in twenty twenty four.That's a new high every three trading days.

(35:52):
Sound familiar. In nineteen ninety fivewas three new high every three point
three trading days, So very similarto nineteen ninety five in that light.
Equally as impressive as the market's rateof change is the lack of downside volatility
this year very similar to nineteen ninetyfive. Similarities in price action between the
two periods is one thing, butsimilarities in economic conditions are another, and

(36:14):
they all align very similar to thefour ninety five the Fed doubled interest rates
to six percent, as you mentioned, in nineteen ninety four, the bond
market suffered sizable losses. We hadthat in twenty twenty two, and stocks
stumbled to the tail end at thetail end of the rate hiking cycle like
it did in twenty twenty two,not as extreme in ninety four, but
stocks certainly did not have a goodyear. But in all of that,

(36:37):
even though everyone was predicting recession amidyou know, when inflation stabilized, it
didn't happen. It didn't happen innineteen ninety four, just like it didn't
happen in twenty twenty three. TheFed ended up cutting rates, as you
mentioned in the summer of ninety five. That added fuel to the bowl market,
which is kind of right where wesit today, Brad. But all
they did, as I mentioned,was they just tapped the brakes. They

(37:00):
brought them back down to a normallevel that they thought the market could handle,
and then they just vacillated at thatlevel, a little raise, little
lower, little rays, a littlelower for five full years. If the
market needed it, they lowered.If the market didn't need it, they
creeped them back up. This isthe period of time that the FED is
telling us we're in. We're notgoing back down. They're saying, we're

(37:21):
going to bring them down to amore normal level. We don't need to
be this tight. And in thatninety five to two thousand time period,
the Dow went from four thousand,five hundred at the low to over ten
thousand. I think I got toalmost twelve thousand, Okay, but it
wasn't perfect. People think all thatninety five to two thousand period was perfect.
Let's look at those years just inthe broad strokes of what were the

(37:44):
sell offs, Like we mentioned,you said it was two and a half
was the biggest sell off in nineteenninety five. It's pretty common as you
come out of a sell off,as you come out of a period of
time like that, the market movesup, and people who miss out say,
if it just goes down for aweek, I'll buy, If it
just goes down to two percent,out buy any down day albuy what happens
the whole year, Every dip getsbought, even intra day dips get bought.

(38:07):
And that's what happened last year.We had a couple sell offs last
year, but in this last sixmonths we haven't seen anything other than a
few days down. Why people whomissed out for an entire year give up
on a ten percent sell off.So just like in nineteen ninety five when
you had this initial thrust, justlike we did in twenty twenty three,
this initial thrust of the market,let's talk about what happened in ninety six

(38:28):
and beyond, because they were goodyears, but not without risk, and
you get sell offs that start tobe a little bit larger because people become
more fully invested and there are lesspeople that are in to buy those dips.
So ninety six saw a sell offof eight percent, ninety seven saw
us sell off of eleven percent,intra year eleven percent, but the market
still finishes up twenty seven. Andthen nineteen ninety eight we saw a nineteen

(38:52):
percent sell off, but the marketstill finished up twenty and then into in
nineteen ninety nine, biggest s allwas twelve. So all of those last
years eight eleven, nine, nineteen, and twelve our intry year sell offs
in the midst of a twenty percentyear every year plus the year's were thirty

(39:13):
four, twenty thirty one, twentyseven, and twenty. But what would
that feel like? What would aten percent? What of a nineteen percent
sell off feel like? What woulda four thousand point Dow sell off feel
like? Yes, you have tobe ready for that because if you're if
you're d an eight thousand point,that's twenty percent, twenty percent. If
you're de risking now you're saying,I think the market's a little frothy,
that's fine, But remember if anineteen percent sell off occurs, there will

(39:37):
be nobody who rings a bell onTV and says this is a great buy.
They will all be saying this isthe next big one. That's what
they're saying, or this is theend. Everybody says they don't ring a
bell at the bottom. They do. You just don't know what the bell
sounds like. The bell sounds likecomplete negativity. The bell is everyone hates
the market, and the bell atthe top is everyone loves the market.

(40:00):
The bell is there. You justdon't know what it sounds like. You
think the bell is going to soundlike somebody telling you news, negative news,
this is a bye of a lifetime. It doesn't sound like that.
It's the opposite. So let's talkabout what those were in nineteen ninety six.
July of ninety six, the WallStreet Journal article stock stocks plunge,
Dow loses one hundred and sixty onepoints, its biggest losses nineteen eighty seven

(40:22):
two point nine percent sell off.The Dow was at five, So that's
that's equivalent to about a twelve hundredpoint sell off today. Yep. And
what what sold off more? Thethings that were up the most. The
NASDEK sold off three point nine percent. Tech stocks led the sell off.
The Dow didn't sell off as muchbecause it wasn't as tech heavy, and
the worst year for the worst dayfor the NASTEK in five with its selling

(40:46):
off nearly four percent. That wasthe nineteen ninety six sell off. It
was just a little bit of techselloff that led to nineteen ninety six,
giving us an eight percent sell offthat happened right in the middle of the
year in July ninety seven was inalmost a whole year of that culmulated in
July with the Asian financial crisis,Asian banks falling, certain Asian markets having

(41:09):
days where they were down ten percent. October twenty third, nineteen ninety seven,
the Hong Kong stock market fell tenpoint four percent in a single day,
and because banks were getting wiped outbecause of bad loans, a little
exuberance with the banks. What wehad happened in two thousand and seven in
two thousand and eight was happening inAsia in the in the mid to late

(41:30):
nineties, and it led to selloffs there, and it led to sell
offs a little spillover in our markets. On October twenty seventh of ninety seven,
because of that Asian financial crisis,the Dow fell five hundred and fifty
four points, its largest points selloff ever. So in the middle of
a year where the Dow fin orthe S and P five hundred is up

(41:51):
thirty one percent, the Dow hasits worst day ever, and the market
in nineteen ninety seven gave us aneleven percent hide to lowe sell off that
stopped right after that. Uh forthe final two months of the year,
we rallied and finished up thirty onepercent in that year. So in the
middle of these huge years, you'rehaving these sell offs. It's all we're

(42:13):
talking about now. A normal marketgives you intra year sell offs, and
you have to be prepared for thefor that by giving yourself a little dry
powder, so when the sell offsoccur, you can buy those dips or
even just shift risk out of thingsthat seem overpriced into areas of the stock
market that aren't so overpriced. Youknow, you look at the levels of

(42:35):
the Dow too. Before COVID hit. That was the first time the Dow
had basically gotten to thirty thousand.It was just under thirty thousand right before
COVID hit. And you know whateveryone was saying then, Brad can't believe
the Dow is at thirty thousand.Yeah, looks great. And strangely enough,
when we hit our lows in twentytwenty two, guess where the Dow
went down to twenty thine the samelevel thirty thousand, oh thirty oh,

(43:00):
okay, flash forward to it.Yeah, so you flash forward to so
on the they're saying the same thing, I can't believe it's at thirty thousand.
What they mean is I can't believeit got up to thirty. And
I can't believe it got down tothirty and we're only two years different.
I can't believe it's it. Ican't believe it's at thirty thousand. Two
years later, I can't believe it'sat thirty thousand. So my point is

(43:22):
we're at forty thousand now. Yeah, Okay, there will be a day.
I've already taken a call this week. I can't believe that that is
always at forty thousand. There willbe a day where forty thousand feels bad,
forty thousand will be the bottom,and somebody will call and be like,
I can't believe it's at forty.Probably after it gets to fifty,
who knows. But the point iskeeping all of this in perspective, reminding
yourself of history. Okay. Oneof the things I laugh about with clients

(43:46):
a lot is a comment that thatpeople will say is can you believe this
crazy market? And you know whatmy answer always is, yes, I
can always believe because it's not crazy. No, it is exactly what it
should be at all times, pricedexactly right. Yeah, So we're gonna
take our last pause. You're listeningto money Set. It's Kevin and Bradchurst.
It will be right back and welcomeback. You're listening to Advisor to

(44:08):
Churston Wealth Manager Group Brand and Vinhere with you. If you're tuning in
to the radio, don't forget weare. We do put this show out
as a podcast. Just go toyour wherever you listen to your podcast type
Curson Wealth and you can find allof our shows in case you're out of
town or just want to listen toit a little different way, or if
you want to speed it up toone and a half speed if we're not
talking fast enough for you. Yeah, So we're kind of wrapped up that

(44:30):
last segment and basically poking holes inall the narratives that say follow the Fed
one way or another. There's reallyno correlation. And we actually think that
the Fed's doing a pretty good jobof calming inflation down, getting it to
a certain level, and now goingto drop rates a little bit because the
job is done. But there's someother places where inflation has not slowed down.

(44:51):
One of those is college cost.And I've got the bracket here for
all thirty two are all sixty fourteams or sixty eight teams that are in
the bracket and look no further thanthe four year combined tuition tuition, room
and board. For these schools,there's only a few. There's only one
that the four year tuition is belowone hundred thousand. That's BYU at ninety

(45:12):
one thousand. The other low onesMoreheads State at one hundred and eight,
South Dakota State at one hundred andthirteen, McNeice at one eleven, and
Akron at one thirty two combined fouryear tuition, room and board the five
highest. All the ivs and IVYlights are the highest Northwestern three hundred and
sixty five thousand for four years oftuition, room and board, Yale at

(45:36):
three hundred and fifty three thousand,Saint Mary's at three eleven, Colgate at
three forty eight, and Duke atthree forty eight. So yeah, inflation
has not slowed down for college tuition, and all the more reason to prepare
ahead of time if you're a parentor grandparent for the future generations. Because

(45:59):
I think we've averaged. Inflation hasaveraged even in the short the short run,
the last twenty years, maybe underthree percent. College tuition is north
of five and not slowing down.You have to open up those five to
twenty nine plans because the power ofcompound interest and time. Getting those going
right when a child or a grandchildis born is so important. Plus there's

(46:21):
some new provisions that give some moreflexibility to five twenty nine plans with that
roth Ira provision that they added aswell, So it's it's just very important
to do briefly on that. Thegoal is that it's it's tax free earnings,
so get your money in early.If you're contributing when they're eighteen,
you're not going to get any taxfree earings, so kind of overfund them
early and then wait. Thanks forlistening everyone, we'll talk to you next

(46:43):
week. You've been listening to Moneysince brought to you each week by Kirsten
Wealth Management Group. To contact Dennisbrad or Kevin professionally called four one nine
eight seven to two zero zero sixseven or eight hundred eight seven fives seventeen
eighty six. Their email address isKirstenwealth at LPL dot com and their website

(47:06):
is Kirstenwealth dot com. Opinions voicedin this show are for general information only
and are not intended to provide specificadvice or recommendations for any individual. To
determine which investments may be appropriate foryou, consult with your financial advisor prior
to investing. Securities are offered throughLPL Financial member FINRA SIPC