Kersten Wealth Management Group - Money Sense 6-28-25

Episode Transcript

Speaker 1 (00:00):
Hello, and welcome to money sentence. You're listening to the
advisors of Kirsten Wealth Manager Group, Kevin Kirsten and Brad Kirsten.
Happy to be with you today, Brad. As the market
continues its climb towards all time highs, I saw I
saw someone posting, and obviously this was someone who's bearish.
Marko Kolanovic is that JP Morgan. I believe Marko Kolanovic

(00:23):
is JP Morgan. And he was talking about how much
the market was up. I think it was the Nasdaq
and he was referencing thirty five percent move from the
April ninth low, and in the comments section, everyone was
ripping on the guy because he's just like completely ignoring
what happened before. Okay, thirty five percent from the lows

(00:49):
is at a big move. No, well, let's go back
one more month, let's go ahead two or onnths. And
with the Nasik, you could go all the way back
to December, so you could say it's a six full
month's sideway, six and a half months sideways. So it's
just the context. It's the story you want to tell.
You come on TV and say the market's moved too
far as thirty five percent for the nastak off the bottom.

(01:10):
Who's going to disagree, but the other person should have said,
it's also zero percent for six and a half months.
That doesn't sound so bad. And so as the market
is getting to these all time highs again, you do
have to ask yourself. I think there's this sense of
thinking about the market the opposite.

Speaker 2 (01:32):
You should.

Speaker 1 (01:32):
You should almost be patient when the market is getting
to all time highs and impatient when the market is
giving in corrections. Not not impatient to get out, impatient
to say, do I have enough risks? The market has
given me a buying opportunity, the market is on sale?
Do I have enough risk? Do I need to move
things that are more conservative into things that are more aggressive?

(01:52):
Do I need to rebalance to where I started the year?
Be impatient because the market doesn't spend very much time
down it twenty percent down doesn't happen very often, and
the market spends very little time twenty percent down this year.
We did get a twenty percent down intra day the
day that Trump announced the pause, but we only spend

(02:14):
about three hours twenty percent down. And so you need
to be very impatient with the looking at your allocation
determine if you want to add any risk or don't
add any risk. But you just didn't have that much
time even ten percent down. You only spend about two
weeks more than ten percent down on the way down
before you needed to buy, and about one more week

(02:37):
before we rallied all the way back. But the market
spends a lot of time at or near all time highs,
and it spends a lot of time making all time
high So now's the time to be patient. As the
market is climbing back. It takes it spends a lot
of time moving up, doesn't spend a lot of time
moving down, So be impatient on the way down to

(02:58):
add risk, be very pay now on the way back up. Well,
I was referencing this post I finally found it here.
Whatever your market view is, the Nasdaq rally of thirty
percent thirty six percent in two months is not normal
and not healthy, so you immediately go to the comments
here to see you know what people are saying. The
NASDAK is also only up twelve percent over the last

(03:21):
twelve months, so is that that's well below it's low
it's five year and ten year average, so it's calming
down if you will, or it's right in line with
long term expectations for a gross sector. It's up less
than six percent year to date, so you know, you
could cherry pick your starting point, yeah, and talk about
thirty six percent off the low, or you can also

(03:43):
say year to date, we're up less than six percent.
I mean the comments here, the guy is getting completely
ripped on. Uh, So I'm talking about is it normal?
Is it healthy?

Speaker 2 (03:54):
Uh?

Speaker 1 (03:55):
Looking at these different levels that I was just talking about.
But then you go to the person and this just
you get one of the things you should look at
when looking at any of these so called experts. This
is a JP Morgan person, Brad. When you go to
the person, you go to their political biases. Now you
and I have talked about it on this show. A
lot of these people who are the experts that are

(04:18):
saying where the s and P is going to go
for the year, they're based out of California, Los Angeles,
San Francisco, or New York. Okay, So they're automatically going
to have a negative bias to anything Trump or any
Republican is going to do, and they're going to be
negative on that. And so this is why you see
when Biden's in office or Obama's in office, I feel

(04:39):
like the general tone of the strategists is much more positive. Yeah,
it's because it's where they went to school or where
they're currently living and all the people that they're hanging
out with you. And I noticed this after the first
Trump uh Trump election conference call. After conference call, there
was all this negativity. Even though we knew we were
going to have a tax bill that would be stimulative,

(05:01):
it was constantly negative. And then occasionally you would get
a positive viewpoint, and this is this is negative viewpoints
even from stock investors and stock and economists that are
generally bullish. And then you'd see where they went to school,
and you'd see where their main office is. And then
if you got a bullish one, it'd be Midwest and

(05:23):
somebody that went to Iowa instead of somebody that went
to Yale. And so you do have to kind of
hear where it's coming from to know that it's that
bias is just gonna leak its way into the viewpoint.
And the bias that needs to leak its way in
is what history will tell you, which is you just
need to stay invested no matter who's in office. Well,
I'm hearing a lot of people referencing a new term

(05:43):
for Trump. They're calling it taco, which is they say
Trump always chickens out. This is what all the Democrats
are saying right now. So this particular strategist taco doesn't work.
At all time highs and tariff deadline is nearing on
July ninth, uh, Tariff's Iranian nukes, the real estate market,
restrictive rates, unemployment. Common to these problems is that they

(06:06):
are not yet resolved, and the market is acting like
it's all clear. You think this person is anti the
current administration. Of course, of course anything is possible. For instance,
the indexes at all time highs was the strong strongest
rally just after I ran attack. I think it would
be bizarre to forecast more all time highs. Uh So,

(06:30):
just on and on you that doesn't One of the
most bullish things the market can tell you is that
it is at an all time high. It's that is bullish,
that you're at an all time high. And somebody who
gets on TV and says that the market at all
time high is a danger point doesn't know the history
the market at all time high, the average one year

(06:50):
out from from an all time high. When you're sitting
at an all time high is eleven point two percent,
The three year average average annual is ten point nine percent,
and the five year average is ze point three percent.
So one and three year are better than the long
term average. And the five year return at any day
that you're in an all time high is basically right
in line with the all time So the basically in

(07:14):
line with the long term performance of the market. So
one in three year are better and five years the same.
I mean, that's that's the reality. I'm sorry to keep
going back to this person, but it's unbelievable given what
happened in the last couple of days too. When was
this post? That original post was a day ago. Oh okay,
on that Asdak, but here's four days ago. Trump will
say anything to cheer up markets. It's Iran's turn. If

(07:34):
they closed the straight of horror moves, the market will collapse. Okay,
how about this one on the weekend before we did
the attack. Okay, on the weekend before we did the attack.
If there is an attack on our Iran this weekend,
it would be prudent to d risk And.

Speaker 2 (07:52):
We didn't even have a single day down.

Speaker 1 (07:54):
The market was up on Monday after we attack, So
he was saying you should de risk going into the weekend,
and it went up. Now, I'm not saying I knew
that it was going to go up.

Speaker 2 (08:04):
I didn't. I'm saying neither did he. See here's the difference.

Speaker 1 (08:08):
When you talk about these strategists, they talk in certainty
about things they can't be certain about. I have no
idea if the market was going to be up on
the Monday following the army, But I do know that
geopolitical events of the past. We're buying opportunities, not selling opportunities,
because they are so free, they are so brief. Even
if you were to say it's a selling opportunity, you

(08:29):
better buy right away, because typically it's a day or
two of down. If we get down at all. Most times,
the market shrugs it off, and in recent history it
shrugs it off even more on on oil, which used
to be more volatile, and you might have a day
or two, but it is a non event, one that
you can't even pick out on the oil chart. When
you have these one off events like we had last weekend.

(08:52):
Let's keep going into the stats since we are approaching
that all time brat hy brad another we might be
there before the end of the show. By the way,
we are only ten points away. Well, another bullish thing
here on the S and P five hundred. This is
no guarantee, but the S and P five hundred is
up ten years in a row in July, for the
month of July, ten years in a row. Fascinating to

(09:13):
see how positive the returns are when you look at
the new highs potentially coming here this month or in July.
Certainly that is good news. July is the best month
of the year in a post election year in the
last twenty years, so we're in a post election year.
July is the best month of the year in those
post election years, and it's the second best overall month

(09:35):
in the last decade. So there's a lot of wins
that you're back on the historical metrics for the month
of July. Well, another one for the whole year is
that we are in the first year of a presidential term,
and recent history is the returns have been gangbusters. Biden's
first year was twenty six point nine. Trump's first year
was nineteen point four. Obama's first first year of each

(09:59):
term is twenty nine point six and twenty three point five,
and even Bush and oh five, not a great year,
had a positive year in his first term. So recent
history would tell you that that first year is typically
a good one. You have a little bit of shake
up here, you have some things getting done, and and
this one's no different. You know, a month from now,

(10:20):
we'll have a few more trade deals and the market
will be able to see that we're going to be
making some trade deals. I think it still needs to
see a few big ones get done in the next
couple of weeks and hopefully we have more progress. We're
making progress every week on the on the tax bill.
You know, their goal of July fourth. I'm not sure
that the market needs to see July fourth as as

(10:40):
the you know, the deal is done date, but I
think it would be it would be good to go
into the July fourth weekend without with a deal done. Yeah,
I mean, it's uh, there's not a lot of there's
not a lot of working days left and to that point,
and they have a lot of they have a lot
of items that they're that they're looking at that there

(11:01):
I think are pretty big sticking points. I mean what
they're going to do on salt is a huge sticking
point on both sides of the aisle. Who's going to
the state and local tax deduction is going to be
a big sticking point in terms of where they settle.

Speaker 2 (11:14):
On that too.

Speaker 1 (11:15):
Don't look now, Brad, but the emerging markets indexes are
now breaking out to a three year high, not anywhere
near an all time high either, so that's another thing
to look at too. We talked about international all year
on this show, looking at a three year high there,
and we'll see if other areas of the market follow
the S and P five hundred. If we do get

(11:37):
to an all time high, you're do need some confirmation
with some other areas like small caps or emerging markets
or certainly other areas hitting all time highs would be
would be continued to be bullish. But we you know,
we mentioned and just reiterate it because you touched on
it already. The all time high shouldn't scare you, especially
an all time high after a twenty percent selloff. Yeah, yeah,

(12:01):
this is not an all time high where we went
past a prior all time high and then we went
up another twenty percent and now we're talking about all
time highs. This is an all time high that we
had in the middle of February. We corrected twenty percent
and we've rallied back to get to that all time high.
Rallying back to it and getting to it and passed
it is bullish historically, more bullish than the average period

(12:24):
of time for the market. And so at this point
now though, I think you need to look at one
and three year trends, and even for corrections, you could
still have a little correction sometime between now and the end.

Speaker 2 (12:35):
Of the year.

Speaker 1 (12:36):
But what people are worried about is are we going
to be lower a year from now? An history would
tell you that getting all time high points to one
year later are actually down less than long term averages.
As you know, any given year could be down twenty
eight percent of the time could be down, But when
you're at an all time high to one year later,
being down is only nine percent of the time. So

(12:58):
it's less than the average. So investing at all time
high or staying invested at all time high is fine.
You can be patient at this point, right and the
when it maybe you could say when is when is
investing in an all time high make you a little
bit nervous. Well, it certainly isn't right now coming off

(13:19):
of a twenty percent sell off in March in April.

Speaker 2 (13:21):
Where it would get you.

Speaker 1 (13:22):
Nervous if is if it's sustained where the market has
hit multiple hundreds of all time highs in a row,
more similar to what we saw in uh in February,
right before the correction that we had in March and April,
where the market had gone a sustained period of time
hitting all time highs for a year straight. Okay, if

(13:43):
you've hit an all time high for a year straight, yes,
you could probably say, all right, we've hit all time
high after all time high.

Speaker 2 (13:50):
For a year straight.

Speaker 1 (13:51):
Maybe the markets due for a little bit of a pullback,
But when you're coming off a twenty percent sell off
just two months ago, historically, that's not when you want
to get it tremendously bearish. I think the twenty twenty
COVID corollary still really looks very good, Brad. And the
only thing that you'd look for is, yes, would you

(14:11):
have a kind of a pause or a breathing period
for the overall market, And certainly Covid did have that
right before the market hit its all time high in
the month of July. It suffered about a five to
seven percent pullback in the summer before going on to
going smashing right through those levels and getting to an
all time high in September. So certainly that COVID corollary.

(14:36):
Also the twenty eighteen sell off we've talked about previously
on this show. That's another one to maybe pay attention to.
But they were all pretty modest setbacks and really just
gave investors who were out an opportunity to finally get
back in. See that's the issue. This is where any pullback,
more than likely at this point will be bought. Because

(14:57):
you have all the people who listen to everybody on
TV saying mass their portfolios in March and April made
a huge mistake. What are they saying now, Well, the
first chance I get for a while it was out. Well,
now I see where the bottom is. I'll wait till
we retest that and you don't. Okay, give me a
ten percent pull back and I'll get back in. Okay,

(15:17):
give me, give me a month of down and I'll
get back in. Give me a week of down. Now,
it's give me a couple of days down and I'll
get back in. And that's why you're gonna just see
any big day is probably gonna get bought the next day.
You might have some down mornings that get bought if
they're big enough.

Speaker 2 (15:31):
And that's kind of.

Speaker 1 (15:32):
What we saw with the news over the weekend. And
then I don't I think we did start down on Monday,
but it was immediately bought. And you're just gonna have
all these investors that missed out on the rally being
the future buyers of this market. You can hear it
in the negativity on TV. If everyone's getting on TV
and they're all bullish, there's no one left to buy.

(15:53):
And that's not what we have right now. We have
a lot of negativity out there. Financial advisors are getting
on TV, Economists for major broker dealers are getting on TV,
and all of them are still talking this bearished tone
because they're talking their prior opinion of the market. And
that's what rubs me the wrong way. Even in Congress,
when we're talking, they're talking about opinions of people who

(16:16):
have gotten it wrong. Why are we valuing the opinions
of people who have gotten it wrong? They're doing it
with Pole every time he talks. He's gotten it wrong repeatedly,
and yet he's the expert we're going to rely on
with GDP expectations or inflation expectations. They just raised their
inflation expectation for the end of the year, and Elizabeth
Warren is on TV this morning on CNBC saying, look,

(16:36):
we're gonna have three percent inflation for the end of
the year. That's what the Fed share told us. It
is their opinion, and their opinion has been wrong. We
could just look at the actual numbers with all of
this stuff, and all of it is looking better. I
it would be great if we had lower interest rates
for a little lift off of the housing The one
weak part of the market is housing, and so that

(16:59):
would also a little bit with inflation because the owner's
equivalent rent would go down. You know, we've gotten addicted
to the fact that we feel like, first of all,
that our house prices should go up, especially in other
parts of the country, our house price should go up
ten percent a year forever.

Speaker 2 (17:16):
And we've gotten addicted to that.

Speaker 1 (17:17):
And we also have this completely false notion that the
stock market can't go up if the housing market is weak.
It was not a good investment for most of the
eighties and nineties. Okay, you were breaking even on housing.
It was a good investment from the standpoint of it
was better than renting, but you were breaking even. In

(17:38):
most of the eighties and nineties. No one even talked
about housing as an investment. It wasn't talk It was
talked about as you want to own a home. Okay,
you want to own a home. That's it. It wasn't
talked about like it is now with buy this, fix
it up, do a flip, you know do We didn't
talk like that for most of the eighties, nineties, and

(18:02):
even a lot of the two thousands. Okay, maybe for
part of the two thousands, right before the crash, and
then it all came right back. The stock market can
do well if housing doesn't do well, it's it has
And so this idea that we have to have the
slow rate for housing or everything's gonna crash is nonsense.

(18:23):
It is nonsense. So we'll see. I mean rates are down.
I mean it don't look right now the US aggregate
bond in next brad is up three point six percent
on the year. Well, I mean a lot of that's yield,
but rates are down. So your bond investments are doing
pretty well. Yeah, you got a little bit of price
appreciation there, because I don't know where we started the
year on yield, but it wasn't six percent. And if

(18:44):
we're price, if we're three right now in the year,
if it's all yielded, be six and it was not
said no, it's a little under five. So there's definitely
some appreciation there with rates coming down a little bit.

Speaker 2 (18:54):
So I mean, we'll see.

Speaker 1 (18:56):
I mean, I'll be one hundred percent honest. I'm as
guilty as everyone when the market drops a little bit.
We all have this like, oh, Powell cut rates, like
I feel it, and I'm guilty of it too to
say that'll be the thing that stops this thing from
going down. But now the market's at an all time high,

(19:17):
and I know Trump's out there pounding the table on rates.
First of all, it's not going to help the deficit
if Pole cuts rates, because the long term rates would
have to come down, So that's not gonna help. But
number two, you know, you look at and we're more
market oriented people anyway, because it's the business that we're in.
But if the market can still perform and go higher,

(19:42):
I would probably prefer the FED to hold off because
I don't want them to shoot their ammunition when we
don't really need it. Well, although do you need ammunition
in case we have inflation? And the ammunition would be
we can raise rates later, like we talked about last week. True, ye,
lower so you can raise, you know, but I also

(20:03):
think you need a little lower to get some people
who are still comfortable with four to four and a
half sitting on the sidelines to move into the stock wort.
And it goes away when you when you get below
four and we're not there yet. Even one cut would
have money market rates and CDs renewing at a level
where you'd say, I think I can do better well.
And also it's just right now you want to be restrictive.

(20:27):
I mean, yes, you want to be restrictive if you
have inflation, But right now they're still restrictive. What would
be sort of a level of equilibrium, So they say, okay,
we're gonna have a cut. We're not cutting to stimulate,
we're cutting to get to a level of equilibrium, and
we're not there right now. We're not at neutral. It's restrictive.
What is the current FED funds?

Speaker 2 (20:47):
Right? Is it four and a quarter four and a half,
it's four and a quarter.

Speaker 1 (20:51):
I mean certainly the two year treasury, which is right
around three and three quarters right now, would tell you
they have to take it down. It's it's a range
of four and a quarter to four and a half.
So I mean right now, I think if you plugged
it in, it probably shows up at like four three five.
That means they can cut what three times before they're

(21:11):
neutral to be neutral? Yeah, and I think that there's
a possibility that we get one done and then is
poalle done in October?

Speaker 2 (21:19):
No, No, it's May of next year.

Speaker 1 (21:21):
Oh jeez, I thought they Well, I think Trump's already
talking about announcing who he's gonna name. He wants to
announce who he's gonna name, So hopefully that person comes
out and says that.

Speaker 2 (21:30):
So I don't think that person would do that, whoever
it might be.

Speaker 1 (21:33):
Yeah, uh so we'll see, because then Trump will say, well,
I talked to so and so and he's gonna cut Yeah, yeah, exactly.
So let's take our first pause. You're listening to Money Cents.
Kevin and Brad Kurston will be right back. Welcome back
to the show. You're listening to the advisors of Kirsten
Wealth Manager Group, Kevin Kirsten and Brad Kirsten. As a reminder,
we are professional financial advisors and our offices are in Perrysburg.

(21:55):
Give us a call throughout the week if you want
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Speaker 2 (22:10):
Brad.

Speaker 1 (22:11):
This week we were kind of reviewing portfolios and we've
talked about this on this show, but I want to reiterate.
You know, one of the things I don't think very
many people look at, which is their sectors. What sectors
are you looking at? How are you overweight or underweight?
Different areas of the overall market? Do if you want

(22:32):
to add something, maybe you've been in large caps. Maybe
you've been in large caps and you've done great, you know,
like you know what, I'm gonna start adding some international.
Let's use that as an example. I'm gonna start adding
some international. I've been all large caps. I want to
at international. So when you make that statement. You're saying
you want to add international. But what you didn't say
was you didn't say I want to add international and

(22:56):
I want to underweight tech and overweight financials. You didn't
say that, No, but you're doing that. When you're making
a call to add two things, in particular international and
small companies, you are adjusting the sector makeup of your portfolio.
And if you weren't wanting to make a sector call,
you have to go in and do something else. You
have to go in and add tech sectors. You have

(23:17):
to go in and add sectors that are going to
be underweight those particular areas. So let's take a look
at two of them in particular. If we're going to
measure the International index by the SPDWS, I'm looking at you. Yeah, yeah,
that's the broadest State Street index for it. Your sector
makeup is Financials are twenty three percent, industrials are eighteen,

(23:39):
consumer discretionaries ten, and healthcare is ten. So let's just
nobody would do it this extreme. But for the show, Brad,
it's easy math. So let's look at the S and
P five hundred and let's say you said, you know what,
I'm going to go half international, and I'm going to
go half US market. Okay, right out of the gate.

(24:01):
When you do that, Okay, what is the tech exposure?
Tech exposure in the SPWDW is nine point two, okay,
and it's thirty percent in the S and P as
of the end of March. It's a little higher than
that now, but I'm looking at the fact sheet. It's
thirty percent as of the end of the march. In March,
so let's call so fifteen and four and a half.

Speaker 2 (24:21):
Okay.

Speaker 1 (24:21):
So now you're at your below twenty in tech. If
you went fifty to fifty and you weren't thinking you
were making a call, but you were to underweight technology,
you went from thirty to twenty, and all you by
making that adjustment, all you did was ad international, and
your technology exposure went from thirty to twenty. How about

(24:42):
your financial exposure? Okay, you're fourteen percent financials in the
S and P five hundred, yeah, and you added the
international index.

Speaker 2 (24:50):
You went fifty to fifty. You went fifty to fifty.

Speaker 1 (24:53):
So now it's twenty three percent financials in the international index.
So you went from fourteen to eighteen or nineteen as
an overweight as an overweight. Yeah, so now you just
overweighted financials by five percent compared to the S and P.
You just underweighted tech by ten percent compared to the
S and P. What is the healthcare exposure? Well, industrials

(25:16):
is number two, and you're also gonna get industrials if
you add midcaps quite a bit, and that's eighteen percent
here versus the SMP is eight and a half eight
and a half yees, so it's a call it a double
and healthcare is similar. It's it's just under ten and
I think it's simile eleven.

Speaker 2 (25:32):
Yeah, it's eleven the SMP. So no change to healthcare.

Speaker 1 (25:34):
It's really those top two sectors financials in industrials and
the top sector for the S and P tech where
you're going to get this overweighting and underweighting. So if
all you really have to do is add a little
bit of tech as a standalone sector, and then if
you're going to add anything else, just know that you
want to underweight financials in order to if you're going

(25:56):
to add any other sectors, it's just not going to
be financials that you're going to add. Otherwise, when you're
adding international in general, you're going to be adding financials.
Now you're also going to be adding financials if you're
doing small companies, not so much mid But if you're
adding small you're going to be about twenty percent in financials,
and the same thing. Industrials are about a double it's

(26:17):
eighteen percent. And so those top two sectors you're going
to find in small companies and in international. And if
you don't want to overweight financials and industrials, you have
to go in and layer something else. So we were
talking earlier segment about being impatient at the bottom or
wanting to think.

Speaker 2 (26:36):
About the start of the year. Okay, tech's had a
great run.

Speaker 1 (26:39):
If I just want to if I want to underweight technology,
how do I do it? Do I sell my portfolio
to go to bonds or do I just add to
some of these things like international that have underperformed. And
by doing that on underweighting technology, Now, let's go in
when the markets at are low. Okay, Tex sold off more,
what do I do well? International rallied and so one
of the things you could do is just rebound. You

(27:00):
could also go in and now add a standalone sector
of technology to add to the thing that's sold off.
The most, like you would have expected. The thing that
ran up the most sold off the most. Now let's
go in and at a tech sector. Are we changing
our stock to bond? You don't have to do. But
I think when someone wants to underweight tech, their thought
is not as extreme as their result. And what I

(27:22):
mean by that is say, well, technology is thirty percent.
That's why thirty two percent of the S and P
right now I want to underweight And in their mind
they're thinking, I'll go to twenty eight percent. But in
the example we gave, that's not what is happening to people.
So you almost are forced. And I know that it's like, well,
what do you add as a standalone The moment you

(27:45):
start diversifying, which we believe in, you have to start
adding standalone technology indexes to your portfolio, even if you
still want to be underweight, which you probably still will
be underweight, just to get your underweight to two to
four percent as opposed to ten percent. I mean, I
always you always tell the story about the person you

(28:05):
sat down with that was lamenting their underperformance and their
portfolio was all value. Yeah, so it was like eight
or nine percent technology. Yeah, And the first thing I asked,
is did we mean to be extremely underweight technology? And
they had no idea that they were extremely underweight technology,
And so the performance, the underperformance didn't come from having

(28:26):
small and international. It came from being underweight technology because
you had small and Internet. And it frustrates me when
people talk about international. Oh, it's the terrible area. It's terrible.
It's terrible. It's terrible. It was only terrible if you
didn't understand the sector makeup of it. It's terrible because
financials have been terrible. If if I wait, if I

(28:48):
weighed the S and P five hundred the same way,
the same as as the international index, the performance is
almost identical. It If I on the downside too, If
I on the downside, tive hundered, that was ten percent
of the S and P five hundred waiting is technology
and financials and industrials are are forty percent, then we're

(29:09):
gonna have the same performance. It is only a sector
call you're making that changes that performance.

Speaker 2 (29:14):
Right, same thing.

Speaker 1 (29:15):
If you bought all US companies and you put twenty
three percent of your money in financials, you would have
not liked your performance over the last decade, just like international.
So people lament International, but one of the number one
and it's not a recommendation to buy your sell, but
one of the number one tech stocks. International is a
company on the Netherlands. It's a semiconductor company called ASMLU

(29:38):
in eight, Brad. Now, since eight the international index is
relatively flat since prior to eight, okay, ASML Brad prior
to the crash in eight. Now the msci EFA International
Index just got above it's seven levels. Okay, But ASML

(29:59):
was at thirty four dos a share at the peak
in seven, today it's at eight hundred.

Speaker 2 (30:05):
Oh.

Speaker 1 (30:05):
International is terrible if you own the right international and
I could do the same thing with Taiwan Semiconductor as well.
So the point is you either need to find an
international portfolio that overweights technology so that you can be
similar to the S and P, or just go in
there and buy some standals. So what I would do
and what we do for clients, Brad, is if I

(30:28):
want to make a call internationally, okay, I would look
for an index that has some international tech in it
as an overweight, and that could be there's a bunch
of ETFs out there that are global tech. You could
do Chinese tech if you wanted to overweight that kind
of tech that hasn't done as well as some of

(30:50):
the European technology stocks that hasn't done as well, but
that gives you that international technology exposure, or you could
do it. I was just looking at a one of
the I'm not going to name names, one of the
big ETF firms out there. They have a Global Technology
index which has ASML. Of course it has the American
tech companies too, but it has Taiwan Semiconductor that gives

(31:10):
you that global technology overall.

Speaker 2 (31:12):
You can pair.

Speaker 1 (31:13):
It with the traditional low cost ETF and the only
other thing you have to do, but you have to
continually look at this is you have to use an
actual manager for it. For that and I think you
could do that. Yeah, you could use an active manageer.
They did in most of our IRA models. Was it
was tough to find the right makeup and we wanted

(31:35):
managers that had the similar tech exposure in international and
so late or early last year, so a year and
a half ago, when we were starting to add international,
we wanted tech to be the number one holding and
it's very hard to find and it's very hard to
find a diversified portfolio where tech is your number one
holding in international, so we had to use managers for that, right.

(31:59):
And then on the other side of it, if I
was going to overweight small and MidCap, say okay, let's
this is underperform. I want to diversify. I want to
start adding small and MidCap. What I would suggest looking
at is some kind of equally weighted as an offset.
So you're gonna say, all right, I'm gonna go as
small and MidCap. So that's going to lower my technology exposure.

(32:19):
But maybe I want to underweight the big boys, the
big megacap tech names. Well, if you go to an
equally weighted tech portfolio, you automatically shift your size.

Speaker 2 (32:30):
Down to midcaps yep. Okay.

Speaker 1 (32:33):
And so when you think about the NASDAQ one hundred,
there's really only about ten names that are big. The
rest of that one hundred, ninety of those names are
mid and small, and so just by equally weighting that index,
you end up with much more in the other ninety.
So that one exposure. The median market cap of the

(32:54):
technology equal weight sector is one hundred and six billion, Okay,
So that doesn't sound small, but that's that's midcaps in
the current world we're living in that is MidCap. Now
you still have the big boys in there, but it's
equally weighted as opposed to and let me just get
to the market cap weighted seq QQQS or XLK technology

(33:19):
market cap weighted and see what the average market cap
is of that. But if you're going to go to
small and mid, you're gonna end up with a lot
of industrials. Like you said, you're gonna end up with
a lot of financials.

Speaker 2 (33:29):
Yes, this is a too big one.

Speaker 1 (33:29):
So yeah, I just want to describe what you're So,
say you're making a call to say I want twenty
percent of my portfolio in mid and small, then you
would take ten of it and use the traditional indexes
that are weighted the way they're weighted, right, and you
take the other ten and do something like you're describing,
which is equally weighted cues or equally weighted tech indexes,
so that you're getting the mid and small exposure and

(33:50):
getting your overall to look similar to the S and
B five hundred. So we're not making that sector called.
What equally weighted means is you take every company in
there and you give it an equal weight, whereas the
normal tech sector index is what's called market cap weighted,
so that just like the regular S and P five hundred,
bigger the company, the NASDAK or the NASDAQ one hundred

(34:11):
or any of those sector indexes that you look at
or are almost all unless they have the word equally righted,
the makeup of them is market cap weighted. So the
bigger the look at the difference here, so on xl K,
which is the tech sector index. I don't know, not
a recommendation by yoursel, do I have to say that.

Speaker 2 (34:28):
I'm not sure?

Speaker 1 (34:29):
But one point six trillion is the median market cap
of what you own, whereas if you do the equally
weighted tech you're one hundred and six billion on the
average company size that you're buying. The other is not
even just large cap, it's megacap you if you market
cap weighted. And so the way to get those mids

(34:49):
and smalls in there is just is just to make
that choice. And you can still have a very cheap
portfolio doing it that way.

Speaker 2 (34:55):
That's right.

Speaker 1 (34:55):
And so you know, I think that you mentioned industrials.
It's actually the number one sector in the S and
P five hundred year to date Part of the reason
is because the defense stocks are in there and Trump's
going over there and basically getting all the countries to
finally invest in their military. But you know, industrials certainly,
but you just don't want to make a huge call.
That's the point. And people have I've had people come

(35:19):
in here and say, I looked at my four to
one K and those international investments, I don't They're terrible.
I never want to own it. Well, yes, and no.
What we're trying to say is they're terrible. Not because
the rest of the world's a terrible investment, as I
mentioned with the company ASML, they're terrible because the leader
over here has been tech and that's where the that's

(35:39):
the biggest sector in the United States.

Speaker 2 (35:41):
So you're skewed in terms.

Speaker 1 (35:44):
Of you're right that international is underperform, but you're wrong
as to why.

Speaker 2 (35:49):
And I hear this. I heard the Josh Brown podcast.

Speaker 1 (35:52):
They were talking about how bad international was, and nobody
brought up the fact that it was nine percent tech.

Speaker 2 (35:57):
Yeah. Right, And that's the main reason. That's the reason.

Speaker 1 (35:59):
I mean, not where they're domicile. No, it has nothing
to do with the address. There are definitely some companies
around the world that have done very well in the
tech space. It's just because there's not that many of them.
So the waiting's not thing. Let's take our next pause,
we come back. Let's talk a little bit about how
tech in the US is going to be changing. A
couple a couple of things are changing with the with
the indexes, and probably not going to make a lot

(36:20):
of headlines, but you're gonna end up with a little
bit more tech exposure than you realize. Coming up, you're
listening to Money Cents Brad and Kevin. Kirsten will be
right back and welcome back. You're listening to the advisors
of the Kristen Wealth Management Group. Brad and Kevin here
with you. A couple segments here left. Kevin, I as
mentioned before the break, that that you get this from
time to time and it makes makes headlines. More on
the on the large company is when stocks get added

(36:43):
to the S and P five hundred or get added
to the Russell one thousand growth or one thousand value
had a little bit at this week and I didn't
hear any mention of it.

Speaker 2 (36:52):
And it's a.

Speaker 1 (36:53):
Little bit of this bouncing back and forth for the
Russell in particular, so Russell one thousand value. So we
always talk about the growth side and the value side,
and typically we talk about it in terms of sectors
like we were talking about before, where the growth sectors
and the undervalued or dividend paying sectors. But the Russell
looks at it a little bit differently. When it's choosing,
it's looking at price to earnings ratios and price to

(37:16):
book and growth and determining is it undervalued compared to
its historic norm or the sector's historic norm, And so
addition coming up probably I think it's the twenty seven
So I think it's Monday additions into the Russell one
thousand value. Alphabet, Google, Amazon, and Meta so so interesting.

(37:38):
So they we had this before. After twenty twenty two,
the twenty twenty two sell off, Meta and Netflix got
added to the Russell one thousand value because they were undervalue.
They were making money and trading at a low multiple,
and so they were added.

Speaker 2 (37:54):
Then they got dropped.

Speaker 1 (37:56):
All of the Netflix I think didn't stay in very long,
but Meta got opt in twenty three when it kind
of shot up had some good performance. But now you've
had earnings exceed the growth of the of the stock
and so they're actually sort of undervalued. And so here
they are back in the value index, and you have
a little bit of this crossover where the growth side

(38:18):
will just be looking at the growth of earnings. Are
they outpacing the rest of the market, and then they're
in the growth index. That's the major metric, and value
the major metric is is it undervalued? For the Rustle
one thousand index.

Speaker 2 (38:31):
And so.

Speaker 1 (38:33):
You have all these people that are saying that things
are overvalued, but the very thing they're saying are overvalued
are the things that are getting added to the value index,
these mega growth names and so all this talk of
the mag seven and it's performance, but if it's if
they're earning more than they're growing, they're going to end
up in the value index. And so it doesn't go

(38:55):
along with the narrative that everyone on TV is telling you,
which is they can't keep the stock prices can't keep
going up. Well they can if they're earnings go up
the same or more, then their stock prices are going up.
And that's what we've had with these three names over
the last twelve months. Yeah, and I think that just
like you have stock splits that are sort of forced

(39:16):
upon companies, especially in the Dow, because the Dow has
this strange thing where price weighted, just the price weighted,
and you know, you're not gonna no company that's one
thousand dollars a share. Pirture have Away is never gonna be.
It will never be in the Dow. It can't, it can't.
It would it would be the stock, it'd be the
only stock. Well, I think the sector breakdown and also

(39:39):
the value to growth metrics for technology need to change,
and the thought process needs to change. You know, it
always used to be utilities would hold up better in
a recession because the idea was, no matter what, no
matter how bad things get, you're not gonna cut your
electric and gas and all. And that's why they they

(39:59):
hold up better. Well, I would argue that there's quite
a few tech companies that are in that mode now,
especially with Netflix now offering a ad base service with
somebody downgrade from the no ads at twenty dollars a
month or whatever that is to the ads at seven
ninety nine eight. Maybe that Netflix here they make more

(40:21):
money on that, They make more money on the ad
base service. So to me, you know, Netflix is a
perfect example where that's a tech utility. Yeah, that is
a utility company. Apple is a utility company for individuals.
Microsoft for businesses is a utility utility. So we to me,

(40:43):
we're at thirty plus percent on tech. The next biggest
sector is financials. Am I right on that on S
and P?

Speaker 2 (40:50):
Yeah? I think so at fourteen or fifteen we just
went over and I already forgot it at ten. Yeah. Yeah,
So to me, the tech sector needs to be split
into two or three areas. Mm hmm, well, well we already.

Speaker 1 (41:03):
Uh, communication services is where we've we've thrown a lot
of the Internet companies and we pulled that out of tech.

Speaker 2 (41:10):
Need to go further and uh and so I.

Speaker 1 (41:13):
Certainly think you could start with just looking at the
ones that are in the value the value asset class.
Who's in the value asset class? Those are more than
likely going to be your tech utilities. Google's a utility.
You use it every day? Yeah, it's a utility.

Speaker 2 (41:27):
Yeah.

Speaker 1 (41:28):
So when you talk, we have a recession or you
gonna google less? No, probably might be googling more, right,
trying to find a job, Yeah, exactly exactly.

Speaker 2 (41:36):
So you know you need to.

Speaker 1 (41:40):
You know, whoever does was s and P Global, which
does the S and B sectors. You know, we was
the last big change the services, the communication service that
was real estate got pulled out.

Speaker 2 (41:51):
It was just kind of a nothing. I mean, we
didn't need to do the real estate.

Speaker 1 (41:54):
Was it two percent? Or was real estate before? It
was much higher? But yeah, and it's it's strong. I
don't know what sector. No, No, it wasn't even a
sector of the S and P.

Speaker 2 (42:03):
Where would they have put it industrial?

Speaker 1 (42:05):
I'm not even sure where it was, but it wasn't
a sector of the S and P. I do not believe.
But in any event, with tech being over thirty percent,
I think that that is well overdue for a rebalance.
And like you just mentioned, some of these are already
value names anyway, They're already seen as being more boring,

(42:26):
you know, cash flow type businesses as opposed to the
high growth. You know, no one's going to say Apple's
high growth anymore. Apple's not high growth. It just isn't.

Speaker 2 (42:36):
It might be something somebody want to own, but it
is not high growth anymore. It's paying dividends.

Speaker 1 (42:41):
They buy back there, they get they backstock. They act
more like a utility than they act like a tech company. Okay,
prior to communication services getting broken out, the real estate
sector was twenty sixteen. Half of them were in financials,
half of more industrial. So both financials and du ustrial
shrink when you pulled real estate out, same thing needs

(43:04):
to happen, and just give us a twelve sector and
that way we don't have to talk any more about
tech being said, you mentioned portion of the SMP. You
mentioned the Russell one thousand, and these are just two
different companies creating these indexes. Russell one thousand Value is
done by russell S and P five hundred Value already
has Microsoft and Apple as its.

Speaker 2 (43:24):
Top two holdings.

Speaker 1 (43:25):
Brad, let me see here what other tech companies are
in their Cisco Systems is in the SMP value index
as well.

Speaker 2 (43:36):
So that would be the argument.

Speaker 1 (43:38):
If somebody's gonna get on TV and tell me that
all these tech companies are overvalued, then why are they
in the value index. Texas Instruments in the value index.
Qualcom not a recommendtion of buyers sell any of these names,
Qualcomm in the value index, Micron Technologies in the values
It's a lot of tech in the value index. Yeah,
so this is kind of interesting to see to see that,

(44:00):
and I think it would warrant a change that SP
hasn't done in quite some time. Let's take our last pause.
You're listening to money Sents. Kevin and Brad Kurston will
be right back and welcome back. You're listening to the
advisors of Christonal Wealth Management Group. A couple of minutes
left here in the show, Kevin and we were looking
at the break at the indexes for value. So we
have these growth of earnings and value traditionally undervalued, and

(44:24):
the tech waiting at the end of the quarter was
twenty two percent. And so with this huge rally in tech,
you're probably looking at the value index holding twenty five
percent tech. Now, the interesting thing about that is here
you have basically you've set rules. If it's undervalue, we
put it in. We don't have any biases you think

(44:45):
about that versus you doing it on your own and
saying I want to be conservative, I want value. And
what would you do if left on your own you
just say I can't have technology in there. I hear
on TV that technologies a overvalued. I hear that the
megacab names are too much of the of the market.

(45:05):
The megacab names have gone up too much. And if
left on your own, would you have put in Microsoft
and Apple and Google into your value holdings? Would managers
do it?

Speaker 2 (45:15):
No?

Speaker 1 (45:15):
Managers have the same biases. I'm sorry, but a lot
of managers are just individuals like you and I, and
they have their own biases of what they think should
be in a value portfolio. And that's why you don't
see them. And you don't see them in international portfolios
unless you're looking. And you don't see them in traditional
value portfolios unless they're disciplined with rules. And the indexes
are disciplined with rules, and that's why it's gone from

(45:37):
probably two years ago half of what it is today
at roughly twenty five percent of the value index and technology,
So you have to pay attention to what you're owning
and look at We're talking a lot about sectors here
because I think it's important, and the values is no
different when you're when you're looking at the makeup of it.
Let's close out with some stats, Brad, and some buy
the numbers S and P five hundred and it's seventh

(46:00):
near bear market. We see a near bear market because
you don't get quite to a twenty percent loss. They
consider it on a closing basis, and we never got
that for this current selloff. So the previous six times
we're all higher. A year later, thirty two point nine
percent is the average return. How about this, Brad, don't
look now. IBM is currently the best performing stocks in

(46:21):
the Dow Jones. Twenty eight percent game for IBM this year.
I didn't even remember that IBM was still in the
Dow Jones. Not a recommendation to buy er sell IBM.
But the next close to stock is Microsoft, Visa and Boeing,
which are up thirteen percent. A lot of that has
to do with quantum computing. A lot of people asking me,
is quantum computing going to be the next AI?

Speaker 2 (46:43):
How do I play it?

Speaker 1 (46:44):
Well, the largest person spending the most on it, the
company spending the most is IBM.

Speaker 2 (46:49):
There have been cuts here.

Speaker 1 (46:50):
According to the employment data provider Live Data Technologies, US
public companies have cut their total number of white collar
employees by three and a half percent over the last
three years. During that period, the number of managers at
US public companies has shrunk by six point one So
we're just getting rid of the managers. People probably had
three or four managers, and maybe that was a good thing.

(47:12):
Housing markets, US housing starts, we talked about it struggling
a little bit, and building permits fell to the lowest
level since twenty twenty. Home Miller sentiment in the South
and West hit thirteen year lows. So interesting to see
that the S and P five hundred is approaching at
all time high and yet the housing market is struggling
right now. Part of that is certainly the interest rate

(47:33):
side of things. How about this one, brad global warming?
I thought this was interesting. Temperatures are going to go
over one hundred in New York City this week. This
hasn't happened since July of twenty twelve. July of twenty twelve,
in the nineteen nineties, there were eight one hundred plus
degree days in New York City. There have only been

(47:56):
six since two thousand in the last twenty five years.
So we're told there's global warming.

Speaker 2 (48:03):
I don't know. We haven't had much that we haven't
had much as very hot here right now.

Speaker 1 (48:06):
I saw somebody pointing out that there was this two
decade ice age worry from the from the seventies, and
so in just forty years we went from an ice
age too global warming that we have to worry about.

Speaker 2 (48:17):
That's right. Thanks for listening everyone. We'll talk to you
next week.

Speaker 3 (48:24):
You've been listening to Money since, brought to you each
week by Kirsten Wealth Management Group. To contact Dennis Brad
or Kevin professionally called four one nine eight seven to
two zero zero six seven or eight hundred eight seven
five seventeen eighty six. Their email address is Kirstenwealth at
LPL dot com and their website is Kirstenwealth dot com.

(48:44):
Opinions voiced in this show are for general information only
and are not intended to provide specific advice or recommendations
for any individual. To determine which investments may be appropriate
for you, consult with your financial advisor prior to investing.
Securities are offered through LPL Financial Member finrap s I
p c

Speaker 2 (49:09):
MM HMM