Kersten Wealth Management Group - Money Sense 8-09-25

Episode Transcript

Speaker 1 (00:00):
Hello, and welcome to Money Centra're listening to the advisors
of Kirsten Wealth Management Group, Kevin Kirsten and Brad Kirsten.
Happy to be with you today, Brad. As the market
is working its way through the month of August, we
did have a little we had some volatility last week,
and then it really was only one day of volatility.
So we're gonna talk a little bit about some of
the headlines that came about that at the end.

Speaker 2 (00:21):
Of the week.

Speaker 1 (00:22):
It was Friday, it was after we taped the show,
so it might have been the reason behind some of
the volatility that occurred. And then of course the jobs
report was part of the reason. There was some more
tariff talk back and forth. So we're gonna we'll get
into that. It still would not be unexpected. Everyone wants
to look at a particular headline and say that's the
reason we went down. The market's been up significantly over

(00:44):
the last four or five months. We need to maybe
just take a breather at some point too. It's looking
at some of the levels on the s and P
five hundred and what would be the logical sort of
pullback level. Certainly, you look at the highs so we
started going down on February nineteenth. February nineteenth down till
April eighth was the low point, and really, to me,

(01:09):
as we've broken through now those February highs, that's the
logical support. If we start to pull back here in
August in September, that also matches up pretty closely with
the two hundred day and the fifty day moving average,
which if we do have a little bit of consolidation
here in August and September, we'll probably converge on one another.

(01:32):
So to me, the logical level is somewhere between six
thousand and sixty two hundred. Anywhere in there, I think
is where the buyers will come in, and anywhere in
there if you're someone on the sidelines or dollar cost averaging,
would be the level at which you would want to
start nibbling and coming in. So to me, we went
down pretty dramatically on Friday and got to just above

(01:56):
sixty two hundred, so that it happened that fast and
then the market rallied. But if we get to that level,
which was which coincides with the February peak, it gets
pretty close to about a five percent correction, and look
a look at the day of Friday too. I think
this it's a little bit of a lesson. It was
just one day, but if we get a one week
or a one month sell off, I think if left

(02:18):
on their own, a lot of people would say that
is working. I don't want to sell it. Well, the
thing that's working the most is the most vulnerable, and
Friday gave you the perfect example of that. There was
a couple sectors actually positive on Friday. They were generally
the more defensive sectors, and the sectors that are the
up the most since April were the ones beaten up
the most. The position that we lightened up on was

(02:42):
the one in our portfolio that was up the most,
and it was It was down even though we didn't
own it anymore. I'm still watching it. It's something we
might even add back to. It was down three point
four to six percent on a single day. And that's
the reason why if you're if you're looking at your
portfolio and want to trim back risk, want to rebalance,
you can't get too emotional about what I'm air quoting here.

(03:05):
The things you think are working, they're not working, or
not working. They've maybe gotten a little ahead of themselves
and other things have been left behind. Is a better
way to look at it, because the thing that is
working might also have you wanted it to be a
five percent piece of the portfolio, and now because it's
working so well, it's seven and a half. Well, that's
probably time to at least trim back to where you

(03:27):
started and what you intended. I think the market we
always say we're going to backfill the story on why
the market's sold off. I think we're getting close enough
to a couple certain events, and it would not surprise
me at all if we if we go a little
further on the market, maybe get to SMP sixty five
or sixty six hundred leading up to these two events.

(03:48):
And I hate an earnings event, but everyone is always
hanging on Nvidia anymore. I think the Nvidia earnings event
would be one if somebody were to say, I'll lighten
up risk when Nvidia finally reports, whether they're good or bad,
I think it is a market mover. And the other
is the Fed September rate cut, which is a little
bit more priced in above fifty percent now, and so

(04:09):
here you have those both coming up in the next
four weeks, and I think that one isn't in I
think ten days, and the other is in about thirty days,
and both of those might be a point where the
market finally gets its pause. And we've had a couple
years in the last three or four where the selloff

(04:30):
didn't come until mid September and lasted for about a
month and October then legend to the rest of the year.
You never know if it's going to be today, tomorrow,
or if we're going to wait another month, and sometimes
you don't get them at all. Look at last year,
the election year typically gets that sell off closer to
the election. All we got was a couple of weeks

(04:50):
sell off right at the end of July and really
never looked back from there. So you can't make two
large of adjustments. You just trim back risk a little bit,
wait for a couple inflection points if you get those
selloffs to put dollars back to work. But we're long
term bullish, and so you can't wait too long. If
the market doesn't give you the sell off that you thought,

(05:12):
you do have to kind of put those new dollars
to work or make a more long term decision on
where you're going to allocate. But really, all we were
doing is putting the allocations back to where we started
the year after this huge run up since April. Yeah,
and I think that there's two things I'm always looking for,
and that's time with price, and it could be one.

Speaker 2 (05:33):
Or the other.

Speaker 1 (05:34):
Yeah, you could trade sideways for two months and that's
enough to be, in my opinion, a correction or a
corrective phase or a consolidating phase. Or you could have
the market go down five or six percent even in
a couple of days, and that would also be enough.
But I definitely don't think one day of one and
a half percent down on the SMP is enough to

(05:55):
be considered a corrective phase or a phase, a period
of time where we've worked off some excess, So it
would be one or the other. We could stay right
here till the end of September, and that's a nut's
a correction, that's correction. I mean, earnings are going up
for a whole quarter and your prices didn't. You got cheaper.
And I think there's a few things that we haven't
touched in the portfolio. It's fairly light when we look

(06:17):
at small companies, but if there's any psychological impact to
small companies if the FED cuts, I think there is
this lower interest rates help small and midsized companies more
than large because large they don't really use much leverage
and they're so flushed with cash anyway, I think there
might be a little bit of a defense there with
small companies if the FED is in now their rate

(06:39):
cutting mode. And the other is international because when you
still look at the five and ten year numbers on international,
it is a fraction of what the US is, so
the evaluations there are extremely cheap and not something that
we have touched the entire year, big winning year for
diversification this year, in twenty twenty five, the sixty forty
benchmark is up seven point four percent on the year

(07:01):
if your sixty includes international Europe even more international stocks.
In fact, on a lot of these down days that
we're talking about, on a lot of these down days
where international stocks are up, today's one of them. Today
the SMP has kind of been bouncing around a little bit,
but it is down to half a percent, and here
we have the broad international markets up point five and

(07:21):
emerging market's up point six on a day where the
SMP is down a half a percent. So to me,
that international story continues and doing it quietly. You don't
hear a lot of headlines. There's not a lot of chasing.
There's not you don't hear anybody come on TV and
say this is what we're loading up on. It's maybe
a little disbelief. We've had a few headfakes over the
last three four years, but it has remained steady the

(07:44):
entire year, never negative in April, and just keeps chugging along.
Some of these indices when you look at individual countries
are up over twenty percent on the year and the
broader inducees seventeen to nineteen on the year. Pretty strong year.
Be hard to believe that they're going to give up
the momentum before the end of the year. So let's
talk about some of the takeaways from from last week,

(08:05):
because we had a market that rallied up really significantly
to did we get to sixty four hundred on the
SMP a little over and so we looked at what
we saw last week, and let's look at some of
the takeaways. I'm reading from our market commentary, which can
be found on our website Kirstenwell dot com. You know,
we look at the number of data points and things

(08:27):
that we got feder Reserve, Federal Reserve meeting, We had
a monthly jobs report with huge revisions, and then Trump
went and fired I don't know who he fired.

Speaker 2 (08:38):
Was it the BLS secretary? Yeah, okay, euro of Flabor.

Speaker 1 (08:41):
I thought, unless it was somebody who just worked there,
or it was it was a name I had never
heard of. Yeah, but we had peak earning season last
week as well, the most number of S and P
five hundred companies reporting last week. We had US China
trade negotiations. We had the August first tariff deadline, which
Trump's been coming out almost daily with new updates there.

(09:03):
The Treasury Department had a quarterly refunding announcement in terms
of how many treasuries are going to have to issue
to pay our bills in the government. And we had
the Fed's Preferred Inflation metric, the PCEE that came out
last week as well, probably the one that maybe fell
by the wayside no one really paid much attention to. Yeah,
there was so much talk at the end of the
week of really two things, what the Fed did on Wednesday,

(09:26):
what they're talking about on Thursday, and then this revision
of the job's number that was extremely low, and that's
what led to the firing, because they're basing it all
off of surveys, bad technology, out of date systems that
don't allow them to really predict what the job's numbers
are or any of these numbers are in a timely fashion,
and then every revision is to an extreme. I heard

(09:48):
somebody say that that forty five out of the forty
eight under Biden were also lower revisions. Why they can't
get their act together and improve these systems so that
the Fed could actually do their job is beyond me.
But the biggest portion of these labor statistics that are
are wrong month after month or quarter after quarter are

(10:09):
they are the government job numbers. So the private sector
is fine with giving their their reports. The government doesn't
know how many people they they have, how many they've hired,
and how many job openings there are. They don't know
their own stats, and so that's the problem here. Well,
and I think the other thing is how it affects
something like the Federal Reserve. So just to kind of recap,

(10:32):
the job's number came in weaker than expected, and then
there were huge revisions for the prior months where we
didn't have as many job gains as we thought. Okay, well,
the FED has been having meetings and citing strong job
numbers as the reason that they're not cutting. Yeah, and
as it turns out, the last three months were much

(10:52):
weaker than That's why it's a problem. In my effect,
we were probably cut in June had they had these numbers.
That's that's part of the reason why I think it's
a major problem. We had two members of the FED
descent or disagree with the majority they wanted to cut,
and first time since the early nineties that would happened,
and so the single descent is much more common over

(11:12):
the years. The committee members were Christopher Waller and Michelle Bowman.
Interestingly enough, I think Waller is the one that they
know is they said it was the two Kevins or
is it Christopher Waller that's also in the mix for
Federal Reserve. I thought he was, but then I keep
cut hearing over the weekend they were talking about the
two Kevin's.

Speaker 2 (11:32):
Was it worsh And I don't know who's Kevin Haskett Hasket?

Speaker 1 (11:35):
Yeah, Well, I think Chris Waller's name popped up this
morning as maybe being in the lead as well, and
he was one of the dissenters. The committee did pivot
to a slightly more dubish position, with the view expressed
in the fed's accompanying statement that economic conditions moderated in
the first half of the year. Keep in mind, this
is before the job's number for the job's number, so

(11:56):
this certainly pays the way for a cut at the
next meeting in September. Even though the message from the
press conference was more nuanced, FED chair's rome pile mixed
in some hawkish statements which pushed the probability of the
September rate cut to forty percent, down from fifty eight
percent a week prior. But then when that job's number
came out, I think it went up to seventy or
eighty percent, absolutely so, And that's exactly what our report

(12:18):
here says. The commentary talks about that number spiking back
up after the latest job report. So takeaway number two
from last week. The US economy has been showing signs
of slowing down.

Speaker 2 (12:33):
Okay, if we look at.

Speaker 1 (12:36):
There was a rebound in the second quarter, as businesses
imported less in the second quarter than in the first.
There was this pull forward effect. There was a three
percent increase in GDP in the second quarter, but that
was primarily because of the drop in imports, so there
was you almost have to just average the first two
quarters together to get anything significant. Real final sales to

(12:58):
private domestic purchasers.

Speaker 2 (13:00):
This is all.

Speaker 1 (13:01):
Consumer spending increased one point two percent in the second quarter,
and that was one point nine percent in the first quarter,
So you're seeing a little bit of a slow down
there on the consumer side of things. So the consumer
is seventy percent of the economy, so if that if
there is a slowdown there, that will slow things down
for the overall economy. The soft July jobs report including

(13:22):
significant downward revision, so that's another sign that things are
slowing down. Have youve been seeing a lot of stats
about new college grads are struggling a little bit because
of job opening, job opening is not being there, and
AI replacing a lot of those starter level positions. So
if you look at the unemployment or the employment in

(13:43):
May and June, two hundred and fifty eight thousand jobs
less than was originally reported, Brad two hundred and fifty
eight thousand jobs less. So what are the encouraging signs?
Unemployment rate is still right up four percent, which is
historically low. You certainly, you know, we saw periods of
time during the financial crisis where it was almost ten percent.

(14:06):
Average hourly earnings are still increasing three point nine percent
from a year ago, so that's that's pretty good outpacing
inflation as well.

Speaker 2 (14:14):
So takeaway number three.

Speaker 1 (14:16):
S and P five hundred earnings are better than expected,
so that's certainly on the more positive side of things.
When earning season began, the S and P five hundred
earnings per share estimate called for a four percent increase.
We thought it would be a little bit higher. We're
looking at ten brad ten percent compared to the four
percent estimate, and even those low estimates went even lower.

(14:38):
During the tariff talk, everyone said that we're gonna have
negative earnings, we're gonna have a negative GDP because of it,
and it also didn't happen, and prices have not gone
up because of it.

Speaker 2 (14:46):
So what's it tell you?

Speaker 1 (14:47):
There's only one explanation if if your prices aren't going
up and your earnings are still going up, it means
that if you're impoorting from a foreign country with a tariff,
you're negotiating better prices. If you have one hundred good
and you get a ten percent tariff on it where
you had none or had two, you're telling the person
importing it you eat it. I'm buying it for ninety,

(15:09):
not one hundred, or I'm gonna find it in the US.
That's what's happening. So as everyone is saying that the
consumer is paying it, they weren't. If everyone was worried
that profit margins were going to go down for US companies,
they aren't. And the only other answer is that the
person importing it too, that the US company is having
to sell it at a lower price and negotiate and

(15:31):
split it with the with the the person importing, or
just eat it all together. So none of the fears
of what terrifts we're gonna do have played out, and
earnings are the latest to prove that. So in addition
to the ten percent earnings increase, which surprise once again
the estimate was four, they're also increasing their outlooks and

(15:51):
most companies are increasing their outlooks as well, and the
SEP five hundred earnings for next year based on that
outlook is now over three hundred dollars a share, so
twenty times earnings at three hundred dollars a share put
you right at six thous which it right at six thousand.
And I'm just throwing that round number out because people
have talked about the market being overvalued, but earnings are

(16:12):
growing their way into that valuation.

Speaker 2 (16:14):
Take Away number.

Speaker 1 (16:15):
That's happening most in tech, where everyone has said that
the market's overvalued. We don't think it is. Even for tech.
It's maybe gotten very short term ahead of itself, but
that's it. Those the earnings are proving. The growth of
earnings are proving that all of the increases in.

Speaker 2 (16:30):
Prices are justified.

Speaker 1 (16:32):
Take Away number four from last week, The AI dream
is alive. If you looked at some of the companies
that reported, Facebook, Meta, Microsoft, and the big thing coming
out of these earnings reports bread is how much money
they're investing. You know, I think back to two thousand
and eight financial crisis, when we had the Tart Package
to bail out the country and the market jumped whatever percent.

(16:57):
It jumped ten percent in a day when our government
said we were going to stimulate by eight hundred and
fifty billion dollars. I believe was the Tart Package. Listen
to some of these notes that was eight hundred and
fifty billion dollars and that was the government. This is
much better because it's coming from the private sector, and
a lot of this is just coming from the cash
on the balance sheet. It's not companies getting loans or

(17:18):
doing anything other than just spending their own cash. And
that is going to do one hundred billion of investment
in AI. In twenty twenty six, Microsoft's Azure cloud business
unexpectedly experienced accelerating growth growth, a thirty nine percent year
on year increase versus thirty five percent in the prior quarter,
primarily due to the AI tail when the company noted

(17:38):
that data center demand outstriped supply, reported solid growth in
its Copilot AI tool, and guided to thirty billion for
the current quarter in capital expenditures, meaning they're investing thirty
billion in the quarter. So you have Facebook doing one
hundred billion, Microsoft running at one hundred and twenty billion

(17:59):
dollars pace. That's two hundred and twenty billion from two companies.
Amazon noted a ramp up in capital expenditures thirty one
billion in the second quarter and expects one twenty. Okay,
so one twenty for Microsoft, one twenty for Amazon, and
one hundred for Facebook three forty. Yeah, you don't have
to go too far down the list, and you're the

(18:21):
size of the tart package from five or six company.
Keep in mind spending that was government spending, which is
no there's no free lunch there that comes out of
the American people's pocket. These are companies investing. It's much more.
I think it has much more of a stimulative effect. Okay,
So where are we at three hundred and forty billion? Yeah, okay.
Google rais its capex guidance for twenty twenty five from

(18:42):
seventy five billion to eighty five billion. Okay, so we're
at four to twenty five. Not only is Big AI
investment getting bigger potentially north of three hundred and seventy
five billion and twenty twenty five just from the Magnificent seven,
we're also starting to hear about payoff from in the
investments and the earnings tailwind that it provides. So you're

(19:02):
almost half, if not more than the whole tart package
from four companies, and those aren't the only companies investing
in it now when they're investing that many dollars. Is
why I've been telling a lot of clients I'm talking
to you really have to look at the current build
from industrial companies and suppliers of the equipment that will
build out new electrical grids, and then down the road

(19:23):
longer legs for the utility electric utility companies and some
of the alternative energy companies that are going to be
powering these data centers. You're not going to put a
trillion dollars into data centers and not keep them running.
So the longer legs there are not just a chip
company or a tech company. It's all these other industries
that will benefit. And it doesn't even have to be

(19:45):
tech related to benefit. And it's going to happen in
a relatively short time frame. And then it'll be all
the companies that become more profitable because they're using AI.
A couple other takeaways from last week, but let's take
our first pause. You're listening to money Signs. Kevin and
Bradhurston will be right back and welcome back to the show.
Listening to the advisors of Kirsten Wealth Management Group. Kevin
Kirsten and Brad Kirsten happy to be with you today.

(20:05):
As a reminder, we are professional financial advisors and our
offices are in Perrysburg. Give us a call throughout the
week if you want to set up a consultation or
view your financial plan. Whether you're just getting started, well
on your way to retirement, or already in retirement, we'd
be happy to sit down and look things over with
you four one nine eight seven to two zero zero
sixty seven, or check us out online at kirstenwealth dot com.

(20:27):
We post a weekly market commentary. We're talking about that
this week. There was tons of news last week with
the Fed meeting, Brad, the jobs report, tariff talk, the
biggest earnings week of the second quarter. So moving forward,
trade and tariff risk lingers, there's there's still the headline,
you know, whatever you want to say two things about

(20:49):
trade and tariffs. I agree that I don't think it's
going to be as dramatic of an effect to inflation
to earnings as people say it's going to be. Second
thing is it has It's had a diminishing effect in
terms of the announcements. Trump coming out and saying I'm
gonna do this, I'm gonna do that. It has had
a diminishing effect sometimes ours and kind of the same
announcements we had in March and April. Yet we're not

(21:11):
seeing the market movement, so that's a good thing as well.
But you just don't know. You just don't know with Trump,
you don't know what he's gonna come out and just
be mad about and say so. But if you look
the August first tariff risk, we can't totally dismiss it.
Several countries failed to reach their agreements, and so when
we looked at it, the original base ten percent reciprocal

(21:33):
rate and now there's a new base rate of fifteen
because for the countries that didn't come to the table.
So yeah, I think you're gonna have higher rates for
some of these countries, and he's going to make an
example of him. It's what's happening with Canada and Mexico.
Mexico came to the negotiating table and Canada tries to
play hardball. Fine, we'll just increase the terraffs. Same thing's

(21:55):
happening with some of the things that Trump wanted with India,
and now they're raising the terrafts and come back down
to the negotiating table and the tariffs will be lower.
But I think the thing that people aren't really I
think these tariffs are here once once we get to
this ten or fifteen percent baseline, I don't care who
comes into office, They're not taking it away. You're gonna

(22:17):
have said that last week. You're gonna have this big
pile of money coming in.

Speaker 2 (22:20):
They're here. These are not.

Speaker 1 (22:22):
Going ever in the history of politics a Republican or
a Democrat who saw money coming in the door and
said no, thanks, right ever, so you know, and no,
you're right. They will never go away once Trump puts
them in place. So that's if that's Trump's legacy that
he wants to leave, it'll be there. Yeah, it'll be there,

(22:43):
and other countries get to do it, and it's more protecting.
You know, they're talking about one hundred percent tariffs on
our cars going into India, and everyone says, oh, that's
just them protecting their own industries. So it's okay for them,
but it's not okay for us. Trump's talking about one
hundred percent tariff on chips coming into the United States
because he wants to protect our chip industries or have

(23:04):
your company build a new plant here and build them here.
That should be You can't have it one way and
have it not be okay for us. That's all they
we're trying to do, and I think we get about
six months out, we're gonna have all this kind of
worked out and whatever is in place is going to remain.
Last takeaway from last week, let's look at the technical

(23:25):
analysis again. We touched on it briefly at the beginning
of the show, but we had a little bit of
volatility come back last week. SMP fell close to two
percent on Friday. That was a thirty two trading day
streak without a one percent decline, got close to two.
Selling pressure was widespread, dragged the index back below. It's
more shorter term moving averages that area that has been

(23:46):
a consistent level of support over the past few months.
So we're looking as I mentioned, sixty two hundred sixty
one forty four is the February high prior to the
market starting to correct surrounding all the tariff talk and
the Liberation Day, So we look for those levels to
more than likely hold in outside of overbought conditions last

(24:08):
month and trade uncertainty. Seasonal trend suggests volatility heats up
in August in September. Since nineteen fifty, the SMP has
traded near the flatline in August and is slightly lower
in September on average, so two worse months and kind
of we always talk about five and ten percent sell offs.
Here we are at just below sixty four hundred. If
you get got to sixty five to fifty five percent

(24:29):
solif we'll put you right at those February highs. So
pretty logical of a maybe a stopping point on the
up and a stopping point on the down to kind
of get repositioned for the end of the year or
even just the next six months. Yeah, August is not
a great month. September is even worse. Historically, when August
is negative, it's not huge. The average is three point

(24:51):
eight and when August is positive it's three point two
on average, about a coin.

Speaker 2 (24:56):
Flip for about a coin flip.

Speaker 1 (24:58):
That's where we come in with the lat level for
the month of August since nineteen fifty Since nineteen ninety,
the volatility index has increased during the month of August
fifty seven percent of the time, with an average gain
of eight point four percent. So you know, you can
look look at that chart, Brad, and you can see
right there where that level of support's gonna kick in.

(25:20):
It more than likely will be at those February highs.
Barring some unexpected event or unexpected announcement, we've The good
news about this year is is we've gradually checked the
boxes of what we were concerned about. Okay, and so
we were concerned about the Fed cutting rates. They've been dragged,
kicking and screaming, but their event, they're they're gonna.

Speaker 2 (25:42):
Cut rates finally in scepte.

Speaker 1 (25:43):
Okay, we were concerned about the tax cuts being extended
that happened, Certainly concerned about tariffs. They're still ongoing negotiations,
but they're like, the deals that are done are good ones,
are good ones, and so really the only thing would
be an unexpected economic surprise like the jobs report that
we had where we see a lot more layoffs than expected. Yeah,

(26:05):
and we did tick up even earlier this week on
the unemployment claims. It was just a couple thousand higher
than expected. But looking out, if we did get that
sell off, I think what you're going to hear is, oh,
the market's still overvalued. Look how far it movesince April,
look at three years in a row above average. You
really have to look at the longer term. It has
to be a short to intermediate term concern, not a

(26:28):
long term not a long term concern. So we get
to that point, we'll be talking a lot about what
the history of the market is. But I just want
to share again something that we always look at, which
is rolling five year, ten year, fifteen and twenty here
to make the point that longer term you do have
to be bullish because the inflection points on a rolling
five year at the peaks are much higher than where

(26:49):
we sit today. The prior peaks on five year before
you had to sell off the five year average annual
I'm going to go in reverse order here. Most recent
one that ended in two thousand and twelve sort of
been the five year that ended in twenty twelve, nineteen
point seven percent. Going back another five years, you had
one that was twenty five percent average annual return that

(27:11):
ended in sorry, twenty.

Speaker 2 (27:12):
And twenty two, you made not twenty twelve.

Speaker 1 (27:14):
The twenty twenty two got up to about fifteen. The
twenty and twelve through five years prior or thirteen through
five years prior was nineteen point seven. Okay, well you're
you can say you said thirteen because twelve I'm like, well,
if I take twelve back, that's two thousand and seven.

Speaker 2 (27:29):
There's no way that must be.

Speaker 1 (27:30):
It must have been the end of eight through the
end of twelve, and that was night So twenty I
call it the one before that, twenty five one before
that in the nineties, twenty five and a half. Going back,
you have to go back to the fifties, and you
had one at twenty four. This is the average annual
return of a five year so the low points are negative.

(27:50):
The low point five years, including the two thousand and
eight financial crisis, was negative eight. The early eighties had
one that was negative nine. Many negative points, a lot
of them just kind of flatlined for a while. But
where we sit today is kind of smackdam in the middle.
The average annual for the last five years is eleven percent,
not at one of these over twenty percent inflection points.

(28:13):
The ten years a little bit more telling. You do
get a few negatives, just slightly negatives, but the high
points are sixteen percent eighteen perce would be when you
have a ten year period where the S and P
five hundred has averaged sixteen seventeen eighteen percent. Yeah, typically
the next ten years are going to be below average.

(28:36):
When you ended the two thousands with sixteen point one
seven the next ten year average, Annuel gave you a negative.
And so where do we sit today on this ten
year it's ten percent, kind of smackdam in the middle.
Most of these are between zero and fifteen percent. We're
at ten. The peaks are sixteen, eighteen, twenty percent.

Speaker 2 (28:55):
You don't even start to get nervous till it's over fifteen, right,
that's right.

Speaker 1 (28:58):
So a lot of people are saying that the last
five year, years of the last ten years have been
unusually good. They've been average. We're right in the middle,
but we've had a lot of different cells that people
quickly forget about. We had really four different twenty percent
sell offs in a six year period. It's very unusual.
We ever had four bear markets. I mean it's a
bear market. Yeah, I don't care what anybody says. Four
bear markets in six years, and the end of eighteen

(29:21):
eighteen was nineteen point nine percent. COVID was thirty five
COVID the ten months of twenty twenty two was twenty
six point two percent, and this most recent one was
nineteen point two on a closing basis in twenty from
high to low, that's four in six years. Anyone telling
you that we haven't had a cell off in a
while doesn't know their history. Anyone saying that we're right

(29:42):
for a bear market won't know their history. And you're
gonna hear all on right for a correction and right
for a bear market. We're saying right for a correction.
It's two very very different things.

Speaker 2 (29:51):
Let's take one. Look at one more and that's the
fifteen three two bear markets in one year. Yeah, that'd
be pretty rare too.

Speaker 1 (29:57):
Yeah, right, I mean we've I mean, in in so
the people are calling for a bigger correction, right, We've
never I don't know that we've ever had tuber market.
I mean what we'd have to look maybe the Nasdaq
in twenty twenty had some had a huge rally and
then another sell off, that would probably be the only time.
But the broader market maybe out of twenty percent rebounded
ten and then sold off another probably fifteen, and they

(30:19):
never had a market.

Speaker 2 (30:20):
That made a new high.

Speaker 1 (30:22):
Yeah, in the same year. I don't think you'd have
to dig I don't think so.

Speaker 2 (30:27):
I don't think so either.

Speaker 1 (30:28):
Look at one more and that's the rolling fifteen year.
We're sitting today at eleven and a half percent barely
ever negative. If you're negative, you're negative for months on
a rolling fifteen year. And the peaks here are pretty consistent,
right at fifteen fifteen and a half percent what's our word,
eleven and a half and the rolling fifteen year peaks
are over fifteen. Take quite a lot to get your

(30:49):
rolling fifteen year to go from eleven and a half
to fifteen. It would probably take the next fifteen years
to be more like twenty percent average annuals. Well, we're
was it at the you know, two thousand and eight,
so that would take you fifteen years, would take you
to the end of twenty twenty three.

Speaker 2 (31:06):
Was that the.

Speaker 1 (31:06):
Recent peak the two thousand and eight is twenty eight
to twenty twenty three? That fifteen year, No, no, it
was what was the highest level that fifteen years been.
It was at the end of a nineteen ninety nine,
early two thousand.

Speaker 2 (31:20):
It was fifteen and I'm sorry, in recent recent history,
in the last and last couple of years.

Speaker 1 (31:23):
Yeah, So after that it went all the way down
almost in a straight line to twenty ten, and that
would incorporate that peak of year two thousand through two
thousand and what was the rolling fifteen year period from
the end of eight to the end of twenty three. Yeah,
it's it's it's a steady increase. It remained at about

(31:43):
five percent from two thousand and uh.

Speaker 2 (31:49):
Sorry sorry, we're going back and forth here.

Speaker 1 (31:51):
So yeah, the peak, the peak right there is at
the fifteen Well you're looking at one hundred year chart,
so it's hard to see. Yeah, but you can see
that peak right there on that chart just recently happened
has been coming down because you're sure you're taking out
oh eight, I mean that peak is right there. It
probably will. It's hard to see it on the chart.

(32:12):
You maybe got up to thirteen twelve and a half, Yeah,
thirteen or something like that from the eight period to
very very recently. If anything, If you think about the
years you're kicking off, yeah, you know right now we're
twenty ten to today.

Speaker 2 (32:26):
Yeah, okay, you're kicking off big years.

Speaker 1 (32:28):
Yeah. I mean if you well, maybe one more year,
this will trend higher because you're kicking off twenty eleven,
which was a down year, but then after that you're
kicking off twenty twelve and twenty thirteen. This number is
gonna come toway you think about it, like the CPI,
you'd have to get a bigger number right when you're
kicking off a twenty right right, Otherwise that number is
going down. So when you look at long term, they're

(32:49):
all signs point to were fairly valued, especially when you're
in a period of time where earnings are growing at
a faster pace. Profit monitors are higher, and AI is
not going to change that. If anything, somebody's going to
do more with less. Profit margins are going up, and
that they are justified to have a higher average in
your return and a higher price to earnings ratio. So

(33:11):
longer term, when we get there, if we get any
kind of sell off or move flat for the next
couple of months, do not be afraid to kind of
get fully arrested again.

Speaker 2 (33:20):
You look at your risk tolerance and your time rising.

Speaker 1 (33:23):
If your time rising is long enough, own equities, you'll
do just find you don't have to get too cute.
Just saw today Trump sign an executive order. Now they're
going to put private equity in crypto, and it's just
shaking my head. It's a idea unnecessary. You don't need it.
Buy the S and P when it dips five percent,
buy more. Yes, buy the Global index, buy the international index.

(33:46):
Look at this fifteen your return eleven and a half percent.
Most people would say, I'll sign me up. Well, then
why are we getting cute with individual stocks and private equity.
That's just buying the market, And we talked about it
last week. Really, the tech sectors thirty five percent of
the SMP, but really, if you include some of the
tech names that are in other sectors, it's probably more
than fifty percent. If you want tech exposure, you don't

(34:08):
need to get cute. You already own Nvidia. Not a
recommendation to buy yourself that name, but you already own
the mag seven. You don't need to get too cute.
It's already in your portfolio. What you're trying to point
out is the talk that this is somehow some historic overvaluation. No,
it's also not an historically cheap market either, your right,

(34:28):
smack dab right, smack dab in the middle.

Speaker 2 (34:30):
That's right.

Speaker 1 (34:30):
Let's take our next pause. You're listening to Money Sense,
Kevin and Brad Kurston. We'll be right back and welcome back.
You're listening to the advisors of Kristen Wealth Management Group,
Brad and Kevin here this morning Kevin talking about the
market and if you want tech, you just own the
overall market. You'd done pretty well this year, and you
would have done pretty well since the election. We're nine
months since the election, so we'll take a little look

(34:53):
at all eleven sectors and how they've done since the election,
kind of in order here top to bottom. Tech is
the biggest sector of the S and P five hundred.
It's number one, seventeen point three percent since the election.
Number two is communication services, so it's where the Internet
companies are, It's where Google is, is where Meta is, it's tech.
So when we look at that plus the communication services sector,

(35:16):
now you're up to forty three percent of your total
in the S and P five hundred, and that's up
seventeen point one percent since the election. Number three is industrials,
a little bit of the AI build out helping those companies.
It's up twelve point sixty five percent. Then number three,
I'm sorry that was number three. Number four is financials

(35:37):
twelve point two five percent. When the market moves up,
financial companies do well. I think there would have been
a lot of people who said, well, I want to
avoid that because interest rates are high and loans are
going to be low. Financial companies do well when the
stock market does well. They do well when the economy
is doing well, and that's the case here. And number
four and that was number four. Number five is utilities.

(36:00):
And again this is of the last six months as
everyone has started to realize that maybe the ancillary AI
play is the utility companies, especially the electric utilities and
alternative companies that are benefiting from all this AI build
out eleven point four to four percent in the last
nine months since the election. So if you tried to

(36:20):
get too cute and you said to yourself, oh, I
think I have an idea.

Speaker 2 (36:24):
I think it'll be this, or it'll.

Speaker 1 (36:26):
Be that, you could look no further than say energy,
and somebody would have said, well, Trump loves energy, I'll
buy energy. He loves the energy cove. He's going to
let him drill. Well, you'd be negative four point six percent,
and a few others, not surprisingly, real estate's negative three
and a half percent, materials companies six point two percent,
and the only other one would be Healthcare has had
a tough time after a big peak about a year

(36:49):
and a half ago, with all of the earnings from
weight loss drugs. The generics are kind of eating away
at that. The largest companies are pulling this sector down
in the s and P five hundred negative ten point
seven seven percent over the last nine months. That's the
worst sector in the S and P five hundred. You
own it all, you're doing well, You get too cute
and do too big of overweights and underweights. You might

(37:10):
pick wrong. And that's what we're talking about, is just
owning it all. Even if you're going to make an
allocation to international or allocation to small companies, you really
have to be mindful of your sector waiting compared to
the overall market, so that you're not making a sector bet.
You're making a call to say I want to have
a little bit more international or small companies. It's one

(37:31):
of the things we do every time we're making a
portfolio adjustment is then overlay that with the SMP waiting
and see if we're two to three percent, that's okay.
If it ends up being any more. We don't want
to make these huge bets in any one sector because
there could be events that you're not prepared for that
could have something like healthcare be negative ten point seven

(37:53):
to seven percent and drag your performance down.

Speaker 2 (37:55):
Yeah, that's right.

Speaker 1 (37:56):
I saw healthcare is one of the smallest to the
S and P.

Speaker 2 (38:01):
In like forty years.

Speaker 1 (38:03):
That's how poorly that has done, really since since Trump
took office, so really quick, Brad. We talked about it
right at the end of the last segment, so I
just want to touch on it again. Trump Trump signed
an executive order that allowed direct the Department later to
consult with Treasury and the SEC to determine what changes
need to be made to facilitate the goal of expanding

(38:24):
private market investments to four one ks private debt, private equity.
I just can you think of a worse investment for
a four one cay? Well, you know this is the problem,
and this is probably why no one ever wants to
let the government privatize social security and let you invest,
because this is the kind of stuff the government does.
They're just chasing. I mean, Trump's being lobbied clearly, Yes,

(38:47):
by the black Rocks of the world. Yes, and the
black Stones or whoever else. Look how good the performance
has been in let the little guy in. No, you're
going to layer fees on, never going to get the
performance in the last ten years eight there's eight trillion
dollars in four oh one k's and they're like, well, jess,
if we can just get five or ten percent piece
of that pie. And by the way, the fees are

(39:07):
two to three percent on these private private equity private
debt deals. I think you're setting yourself up for disaster.
You do not need this, right, I'm talking to the
investor out there. You do not need this. You do
not need this private stuff in your portfolio and your
four oh one k to reach your goals. And employers
don't need it. If you're an employer, you're the fiduciary

(39:29):
for the plan. You put something like this in and
it doesn't work.

Speaker 2 (39:32):
You're just set yourself up to get sued. Why would
you do it? Well, here, here's the other crazy thing
about it.

Speaker 1 (39:37):
We've gone the last decade talking about how active managers
out can't outperform, and the numbers aren't great in most
sectors for active You're a little bit better in international,
a little bit better in emerging markets, slightly better in
small caps, but they're terrible in large cap, a little
bit better in value than growth. The value ma tend

(40:00):
to do a little bit better, but it's on the margin.
But we're already talking about for the last decade, how
buy the index, get the cost down, asset allocate that way.
And yet now we're going to mix in active private
equity private debt managers. So my point is now you're
right back to not only do you got to pick

(40:21):
the area of the market right and this would be
private debt, private equity, but you also have to pick
the manager who's going to invest the right way. How
is any four O ONEK going to do that right?
You got to get two decisions right, allocate the money,
and then also put the right manager in there, because
you're going to see an enormous difference in performance from

(40:41):
one manager to the next. Oh yeah, in private equity,
you know, whether people like it or not. In large
cap growth, the dispersion of performance is just not market's
up ten. Good one is gonna be up twelve. The
bad one's gonna be up nine point five. It's in
this private equity private debt space. You might have some zeros.
There's gonna be a good one. Now I'm talking zero percent.
I'm saying you're gonna have some that literally go belly

(41:04):
up because of the leverage. Yes, you're gonna have, you're
gonna make an investment and you'll never get your money out. Yeah,
and you're gonna be just by bad luck for who
you worked for and what your employer chose to be
in your four oh one K plan, yours lost money
or went completely under. And then Joe Smith at the
other company and he's your friend. Oh he's in one

(41:25):
that doubled. It's not worth it. It's a total. You're gambling. Yeah,
you're completely gambling. If in nineteen ninety nine the sign
of the top of the Internet bubble was that they
were putting them under net net fund in your four
to one K, this is the sign of the private
equity bubble or top, is that they're putting this in
your four one Yes, you don't need it. Keep it simple,

(41:45):
keep it simple, keep it simple, stupid. The kiss method
is the best way to invest. And if you see
it in there, or you get a letter or you
get a notice, oh, brand new offering.

Speaker 2 (41:58):
Oh here's what they're.

Speaker 1 (42:00):
Going to close it soon, you've got to get in
now or you'll never be able to get right ron. Yeah,
you don't need that in your portfolio to be successful.
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 advisors of Churse and Wealth Manage for
a group. Brad and Kevin here with you. Kevin, let's
talk about a few things that are out there in
the news and a few things that have been out

(42:20):
in the news for a long time that I think
are confusing to investors. First, one the more recent is
the Big Beautiful Bill Act. I think a lot of
people are thinking this is some sort of rewrite of everything.
Ninety nine percent of what affects individuals is exactly the
same as it was, and what.

Speaker 2 (42:38):
A tax cut.

Speaker 1 (42:39):
It was an extension of the twenty seventeen Tax and
Jobs Act Bill. So for most people, one hundred percent
of what you had is exactly the way you had it.
In fact, if you're under the age of sixty five,
you unless you change something in your life. Nothing is
changing with the tech, with the tax plan the way
it was. You have these slight increases for the levels

(43:02):
of each bracket. The brackets are staying the same. There's
they've introduced almost nothing new that will affect anything that
you're doing. If you're under the age of sixty five.
If you're over the age of sixty five, the only
real change is that you're gonna have less of your
money taxed. They're gonna give you this little boost for
the next few years on your standard deduction, so your
standard reduction goes up temporarily, and that's the only change.

(43:26):
For ninety nine percent of people over the age of
sixty five, a little a little bit less taxed. Under
the age of sixty five virtually exactly the same. And
I think there's a lot of confusion about we've passed
a new bill. Somebody has to tell me what's new. Well,
there isn't anything new. It's just an extension. And had
they not done it, there would have been a lot new,
everything would have changed, and now almost nothing changes.

Speaker 2 (43:49):
That's right.

Speaker 1 (43:50):
There's like you said, there's a couple of things on
the margin. There's a couple things that are in there
that are very very short term, just because they're kind
of campaign promises, like the tax on tips and overtime.
But even that is that really changing for most people.
I mean, if you were getting tips, were you were
you claiming them all? And if you are, if you
were you weren't claiming everything. So okay, you get a

(44:11):
little bit less taxed. But I don't know who would
have would be in a situation where they'd have higher taxes.
You'd have to have a real change to your life.
But the bill itself is not increasing anyone's taxes. Yeah,
these a lot of them have big limitations in terms
of income too.

Speaker 2 (44:29):
If you're over a certain amount of income, you don't
for the specials. Yeah, for the specials.

Speaker 1 (44:35):
The sixty five hundred dollars additional write off because Trump
couldn't get through no tax on Social Security for sixty
five and older is also temporary.

Speaker 2 (44:45):
I believe it's The standard deduction was permanent. So you
look at the permanent things.

Speaker 1 (44:50):
Standard deduction thirty one to five joint thirty five hundred
point adjusted for inflation in subsequent years.

Speaker 2 (44:56):
So that's good.

Speaker 1 (44:57):
Increased child tax credit twenty two hundred per child with
future inflation adjustments. That was permanent. Mortgage interests seven or
fifty thousand max on the home loan permanently, eliminates clean
vehicle energy credits for individuals in businesses after twenty twenty
five as well. So beyond that, capital gains didn't change
tax on dividends, and from an investment standpoint, right, tax

(45:20):
on dividends didn't change. So we'll continue to talk because
there are a couple of little wrinkles in the OBBA.
But you don't have to go out and have a
special meeting with your tax person. And you know what else,
you know, if anything, most stuff is status quol. You
know what else you don't have to do. Remember they
were talking about a year ago, they were talking about

(45:42):
converting your roth IRA. Well, if you did that, things
are going to change for you because you're going to
be in a high bracket. And they were talking about
doing it because they said, oh, this is gonna be
the last year you're gonna have low taxes. Well, as
it turned out, no, most of the stuff has been
made permanent, and everything every attorney was telling you to
do with this dumb planning for IRA conversions, all of

(46:02):
that fear ended up not happening. No, I mean, and
it's with the increased standard deduction, especially over age sixty five.
I have had a couple of people take that up
to the twelve percent bracket especially, I mean, I had
a client just recently Brad says, well, I'm getting an
extra thirteen thousand dollars write off, So I'm going to
convert thirteen thousand. Yeah, if you're trying to maximize a
twelve bracket, sure, that's that's probably never going to be lower.

(46:25):
Is the amount you can make and still be in
the twelve bracket. You should not have any income left
on the table in the twelve bract But the next
jump is to twenty two, so that you don't need
to do anything beyond that. I would say, let's talk
about one more thing. It's got about a minute left,
but so quick. We're coming up to people paying tuitions
for college or knowing that they have a year left,
and I'm getting this question a couple times. People hear

(46:46):
that the five twenty nine, if they haven't done one,
the college savings plan gets a tax deduction, and they're
thinking it's on the federal and they're thinking, Eh, if
I have to pay twenty five thousand next year, let
me take twenty five thousand off my income. I'm going
to take it out next year anyway. And if I
use it for college, why wouldn't I want that deduction? Well,
it's not that. For one, it's federally tax free. When
it comes out your earnings, but you don't get a

(47:08):
federal deduction. If you use your in state plan, you
get a state tax deduction. That's true, but it's limited.
I think it's four thousand per beneficiary. So if you
had a couple kids and your white you and your
wife are doing it, you're gonna get a little bit more.
But it's only on the state. There is no federal
tax deduction by dumping a bunch of money in, and
even if there were, you'd be limited to how much

(47:29):
you could do. But you can't do it anyway. The
only people, for the most part, who benefited from a
federal tax standpoint for a college five twenty nine plans
are the ones who opened them up right when the
child was born. And you put in ten or twenty thousand,
that grew to fifty or one hundred, and now you
have eighty thousand of tax deferred earnings that became tax

(47:52):
free earnings.

Speaker 2 (47:53):
That's it.

Speaker 1 (47:53):
I hate to say, if your kid's already fifteen, sixteen,
seventeen years old, do not do a five. There's cost
involved to even owning the fun because it's the old school.
Either upfront commission or a commissionable mutual fund and most Keen.

Speaker 2 (48:07):
Twenty nine prices. Costs have come down.

Speaker 1 (48:09):
But if your child is already a sophomore, a junior,
or a senior, there's no tax planning here that they're
thought of.

Speaker 2 (48:16):
There's not enough time.

Speaker 1 (48:17):
Yeah, so I think it is one of the more
misunderstood investment products, So we probably should touch on that.

Speaker 2 (48:23):
Brad.

Speaker 1 (48:23):
Yeah, it's just I think there's this thought that it's
some panacea of saving on taxes in the last minute.

Speaker 2 (48:28):
It is not. It is not. So thanks for listening everyone.
We'll talk to you next week.

Speaker 1 (48:36):
You've been listening to Money since brought to you each
week by Kristen 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 Kristen Wealth
at LPO dot com and their website is Kristenwealth dot com.

(48:57):
Opinions voiced in this show are for general information only
and are not intended to provide specific advice or recommendations
for any individual.

Speaker 2 (49:04):
To determine which investments may.

Speaker 1 (49:05):
Be appropriate for you, consult with your financial advisor.

Speaker 2 (49:08):
Prior to investing.

Speaker 1 (49:09):
Securities are offered through LPL Financial member Finra SIPC