Kersten Wealth Management Group - Money Sense 8-23-25

Episode Transcript

Speaker 1 (00:00):
Hello, and welcome to Money cent. You're listening to the
advisors of Kirsten Wealth Management Group, Kevin Kirsten and Brad Kirstin.

Speaker 2 (00:05):
Happy to be with you today.

Speaker 1 (00:06):
Brad, we are working our way through the through the
month of August and getting into and we're gonna talk
about this in a little bit. We're getting into seasonally
one of the weaker periods of the year.

Speaker 2 (00:18):
It's not perfect.

Speaker 1 (00:18):
Last year we would have been on this show talking
about the seasonality and of course the sell off that
kind of already happened, and September was a positive month,
and historically September has a negative return, so you got
to be a little bit careful with the seasonality. But
we're hitting a little bit of a slow patch. It's
kind of interesting what's gone on in the last week, Brad.

(00:40):
We have in the last week, certainly the growth names
selling off much much more.

Speaker 2 (00:46):
Many of the value names.

Speaker 1 (00:47):
In fact, if we look at the value names are
actually positive, they're not selling off at all in the
last week, and international is up in the last week.
You see in the last week energy, financials, healthcare, which
has been terrible. So that's really not saying very much
coming off the bottom and real estate are all positive,

(01:08):
but tech is down three point three and a little
bit more from the absolute peak. Now the S and
P five hundred, which is made up of I think
you could argue over fifty percent tech. If you include
communication services and a lot of tech names and consumer
discretionary more than fifty percent tech, you're gonna get a
little bit of that sell off in the S and

(01:28):
P five hundred, which is down I believe one and
a half percent from the highs. We were kind of
studying the charts before we did the show, looking at
various levels where we would see a logical support point,
because we've been talking a lot on this show about
being a little bit short term negative on the overall market,
and you kind of look at and say, well, what
does that mean? And a lot of people have asked

(01:49):
me that when I'm having meetings, well, certainly doesn't mean
twenty percent sell off like what we saw in March
and April. I would find that very hard to believe.
There's not much precedent for giving up the games once
you've recovered off of a twenty percent sell off like
we've had. But you look at the various levels of
support and there's a lot really the chart I think
sets up there's some logical areas, the first one being

(02:14):
the highs or the market highs before all the tariff
talk started in February March really two different points. That's
the mid December when the NASTAQ was making its all
time high. The SMP had a relative peak just over
six thousand, six thousand and fifty yep. And that was
also a point after tech started to sell off.

Speaker 2 (02:33):
The overall market did.

Speaker 1 (02:34):
Rally through the first six weeks of the year and
got right back to that same point, just to touch
higher six thousand and seventy six thousand eighty before that
February nineteenth high that led to the selloff going all
the way till April eighth. So those former high points
are now your floor because there's so many people that
probably got in then and and it just creates a

(02:56):
little bit of supports just how the charting works, and
that that gives you quite a bit more downside on
the NASDAK. Now on the S and P, that would
work out to about a six and a quarter percent
sell off if we went to the December highs, which
people remember. The euphoria after Trump one that was the
December highs, that was that three or four week euphoria

(03:18):
after Trump won, and then also the February highs right
converged right at that exact same level. But if you
look at the Nasdaq, it could mean a little bit
more pain on the downside for those particular names, and
that's already really started as you're looking that up. Remember
as we talked about what we were trimming, it was
the most aggressive names in tech because they were up

(03:41):
so much. Those are ones. You have individual names that
were off twenty percent in the last two weeks, and
the Nasdaq is down a little bit more than double
with the S and P five hundreds down about three
and a half from high to low just in the
last week. So this five days has kind of done
a typical correction and we're just at the start of
if it's going to be a correct. You only one
and a half off on the SMP. But the thing

(04:02):
that's up the most sells off the most, and the
thing that was up the least, small cap value is
actually up over this period. You take a look even
at the first two weeks of the year, or the
first two weeks of August, small cap value beating the
S and P five hundred by five full percentage points,
so not surprising. The things that are in the sectors

(04:24):
that are a little bit more conservative and the areas
that didn't move up as much, they don't need to
sell off, and sometimes they go up in the market.
And this is another reason why I think you could
see that. So I just looked at the Nasdaq, which
is at twenty one thousand right now. Twenty thousand would
be the December highs and the February highs. Okay, so
that's another eleven hundred points from high to low. That
would mean the Nasdaq would have dropped ten percent. So

(04:47):
six and a quarter on the S and P ten
percent on the Nasdaq is what we would be looking for.
But let's look at the Russell two thousand, the small
cap index. It's already, even though it's had a great
recovery off those lows, it's a below the February highs.
So if you're looking at something to get to the
February highs, the Russell would have to go up.

Speaker 2 (05:05):
It's yeah, it's already starting to happen.

Speaker 1 (05:07):
It's pretty well, you could say below it's basically right
where it was before the tariff talk started with Trump,
and so that that particular market is already there.

Speaker 2 (05:17):
Even the Dow Jones. Brad.

Speaker 1 (05:18):
If you go and look at the Dow Jones, which
has lagged because it has more industrials and financials and
it is more of a value tilt the Dow Jones,
and there's a little bit of a sell off going
on today, guess what it's not. The Russell two thousand
small cap index is a little bit below the Dow
Jones is right at the February highs. So not surprisingly

(05:40):
on these sell off days, it's holding up. You've already had,
it's already had its correction and it's holding up.

Speaker 2 (05:45):
It's got a fair amount of healthcare in it too.

Speaker 1 (05:46):
Some of the individual names are having days where they're
up when the market's going down.

Speaker 2 (05:50):
It's holding the Dow up.

Speaker 1 (05:51):
So it's not perfect. We always like to look and
try to look at it and handicap it the best
you can. In terms of these short term levels are
to impossible, Yes, but why do we do it? Number One,
If we have people on the sidelines that are dollar
cost averaging into the market, we need to have levels
in mind that we want to put put money to.

Speaker 2 (06:10):
Work timon price.

Speaker 1 (06:11):
If I have people that maybe you could do dollar
cost averaging in one to two ways. Sometimes we're dollar
cost averaging from a cash position. Sometimes we're dollar cost
averaging from all right, the goal is to be eighty
stock twenty bond and we started forty sixty, and that's
how we're going to dollar cost average. And so we
look for those levels as those opportunity points. Or if

(06:32):
you're just talking to people that have money on the
sidelines that they periodically put to work, same thing, where's
the level to put put the money to work on
a little bit of a selloff? So if you're looking
at it from today's levels, that's about another five percent
on the s and P five hundred and a little
bit more on the NASDAC. And I think that that's
that would be healthy. That would be healthy if we

(06:54):
got through that. Now, the biggest thing would be the FED.
Right now, we've kind of we've gotten through earning season,
which we're going to talk about a little bit later
in the show, So we've kind of checked that box.
We've we've gotten beyond tariffs being the big headline. I mean,
any news coming out of tariffs is all good news.
We had a European deal happen on Thursday.

Speaker 2 (07:12):
You're always in the bad news is having less of
an effect on the market.

Speaker 1 (07:16):
Well, the good news is too because it was a
pretty good We've had a lot of really good trade deals.
Market barely moves, that's right. So so we're really left
with the Fed. Okay, and the Fed and the economy
kind of go hand in hand in terms of what
are the economic numbers that are gonna come through and
how's the Fed going to react? But I think that
Jerome pall and this show is gonna run and we're
taping it on Thursday, but he's gonna have a speech tomorrow.

(07:38):
Does he throw a monkey wrench in the equation and
act as if he doesn't want to cut rates in September?
I think they're in a corner they're gonna have to cut.
But will they continue to cut? The market is expecting
what six rate cuts between now and the end of
next year?

Speaker 2 (07:55):
Is that? Is that where we are right? And will
that and three this year? So?

Speaker 1 (07:59):
But I you said it last week. The Fed doesn't
want to disappoint what the market expects, and the market
certainly expects it. Now look at it a couple of
different ways. Polymarket right now, which as you can bet
on anything, currently has it at eighty two percent. It
was actually as high as ninety but has it at
eighty two percent. I'm sorry, I'm looking at the wrong thing.
That's the eighty two percent for the New York mayor race.

(08:22):
It's actually it's actually gone from ninety nine point nine
a couple of weeks ago to eighty eight for the
fed will cut September seventeenth. So so as I mentioned it,
eighty two percent that that Zorhan, even how you pronounced
his last name, Mundani, Oh yeah, eighty two percent that
he's gonna win the mayoral race on Pollymarket. So I'm

(08:44):
going to retrace one more thing here that I had.
For the small caps. It's not just that they're small
versus large. It's the makeup of those sectors, and we
always talk about it. The reason that they weren't up
as much is there's very little tech there, and the
reason that they're holding up is the cup of it
and how those sectors are actually reacting. If we looked
at the same thing for large caps, just like you

(09:05):
mentioned with the Dow or some of these other value
value allocation funds or indices, you'd get the same performance
over the last couple of weeks. The small cap Value Index,
the waiting of it is industrials twenty three percent, financials
twenty one, consumer discretionary fourteen, real estate nine, utility six.
It's just not the S and P. It's a different

(09:26):
sector makeup. Yes, those are smaller companies, but that's that's
the makeup of the small small company index.

Speaker 2 (09:33):
It's one of the reasons that the.

Speaker 1 (09:34):
Pe of that is so small compared to where it
was twenty thirty years ago is you only have inflated
pees in tech because that's where all the growth is.

Speaker 2 (09:44):
And so we're going to talk later in the show.

Speaker 1 (09:47):
You bought small cap tech in the last decade, you
did just fine.

Speaker 2 (09:50):
You did just fine.

Speaker 1 (09:51):
You're you're a fraction of the underperformance of the of
the Russell or any of the other small cap indexes.
So we look at this fed rate cut coming up
where where we had ninety percent is the you said
that alright at eighty eight, it's going between ninety nine
and eighty eight. So we're at eighty eight today and
it's it's a little bit more rare for the FED
to cut rates when the stock market is at an

(10:11):
all time high. Usually they're cutting rates in response to something,
whether it's the pandemic or the financial crisis. Let's get
rates down to stimulate the economy. But there is some
precedent for them cutting when the market is an all
time at Here's the good news. When the Fed cuts
rates and the market is near an all time high
and the level we looked at is within two percent

(10:32):
of an all time high. By the way, this happened
last year September, November and December. The Fed cut rates
and the market was within two percent of an all
time high.

Speaker 2 (10:40):
Guess what, We're.

Speaker 1 (10:41):
Higher than where we were a year ago, twenty out
of twenty The market has been higher a year later
when the Fed cuts within two percent of an all
time high. Certainly, if we get to the anniversary of September, November, December,
we might end up being twenty out of twenty three.
So you always try to find similarity and periods of

(11:01):
time where you say, okay, you know, why is the
FED cutting and does it rhyme with what's going on
right now? This goes This particular chart goes back to
nineteen eighty, and we looked at how close the FED
was to in all time high. Less than two percent
is the number we're looking at. The three and six
months numbers are sort of benign, right, kind of right

(11:25):
down the middle, about seventy five percent if you blend
the two together, with somewhere between a two and a
three percent gain. So maybe a little underperformance if you
look at the FED cutting at an all time high
in the short to intermediate term. Okay, but the one
year numbers are great, fourteen percent returns and twenty out
of twenty. Let's just talk about as you said, normally

(11:47):
they're cutting in response to a crisis, and so does
the FED cut and the bottom of the market coincide. Not.
Usually they just have to keep going and throw a
little more gas on the fire. And unless they're cutting
by a full percent or they're already at zero, sometimes
it's not enough and they have to keep going. That's
what happened throughout the two thousands, or even in two
thousand and eight. I mean, I think you could look
at nineteen ninety five and ninety six, the FED cut

(12:09):
when the market was at an all time high. I
think there's some similarities there. We had the internet boom
at that time, and then we also have the AI
boom right now, and at that point in time they cut,
and a year later, both in July of ninety five
and January ninety six, the market was up over twenty percent.

(12:30):
I think the other period of time that you could
look at is not the initial rate cuts that happened
in the early nineteen eighties. In the early nineteen eighties,
we had runaway inflation much worse than we had here recently,
but still and rates that they took up much higher
because of it, right right, But there's it's sort of
a mini version of what happened in the early nineteen eighties,

(12:51):
and we ended up getting inflation under control by the
mid eighties. So if you look at some of these
mid eighties numbers, they're also really really good. Two cuts
in eighty five, three cuts in eighty six, one cut
in eighty nine, and the respective returns twenty one point nine,
twenty four point five, twenty eight point nine, sixteen point

(13:12):
nine positive, and thirty three point two, so really kind
of bodes well. But the particular article I'm reading also
talks about having a little bit of more short to
intermediate term caution. The number of stocks in the SMP
that are above their twenty and fifty day hot level
average levels is lower than it was a month ago,

(13:32):
even though the SMP has moved higher, so the market
has moved higher, but the number of stocks above their
moving averages is lower. So that's, you know, a little
that gets you to that short term negativity that we're
talking about. That negative diversions could be a clue that
there's weakness underneath the surface. Other negative divergences we're seeing.

(13:52):
Bitcoin is another one that's sold off pretty significantly as
well in the short to intermediate term. So taking a
look at that, putting it all together, I think you
just got to be a little bit more cautious between
now and the end of September. Brad, I think that
from now until then, I think the sentiment's going to change.
And it is what I think we should talk about
here in the next segment is what to expect when

(14:15):
you get this little bit of correction. What to expect
even if you haven't made an adjustment to sell a
little bit of the rally and buy and buy the dip.
What is it going to sound like a month from
now if we're another three percent lower, and the nasseks
and another five percent lower, and we're leading into the
FED meeting and or the FED cuts and changes in

(14:35):
the language, it says we're really concerned, that's why we
have to cut. What's it going to sound like out there?
What are the so called experts.

Speaker 2 (14:42):
Going to say?

Speaker 1 (14:43):
What are the economists going to be saying that already
have very low expectations for the economy for S and
P earnings, They already have lowered their expectations and have
not reacted to the first two quarters of the year,
and how good the S and P five hundred earnings
already were. And so in a month, that's what we're
gonna have, is we're gonna have even We're gonna have

(15:05):
all this talk that is gonna convince you that you
either need to be selling because this five is gonna
turn into twenty five, or you shouldn't buy because five
is gonna turn into something worse. Because I went to
I an Ivy League school, and I'm on TV and
I know.

Speaker 2 (15:24):
Better because I'm cautious.

Speaker 1 (15:25):
The narrative is going to change to the negative as
the market moves down, and that is normal for what
the narrative is, because it always happens that way. A
week ago, everybody was getting a little too euphoric. Can
you turn on the TV and everybody's telling you a
reason that it's going to keep going. And now that
narrative is starting to change, it's gonna get worse over
the next two weeks. So just be ready for it

(15:45):
and don't be nervous enough to make the wrong choice,
which is to get out and wait, and that's the wrong.

Speaker 2 (15:54):
Thing to do.

Speaker 1 (15:54):
Doing nothing's okay, and just being prepared for what we're
talking about is also okay. But yeah, have to be
ready to make a move to get a little bit
more aggressive. We'll take our first break, we come back.
We're going to talk about earnings and about expectations. You're
listening to Money Sens, the advisors of Cherson Wealth Management Group.

Speaker 2 (16:11):
We'll be right back. Welcome back to the show.

Speaker 1 (16:14):
You're listening to the advisors of Kirsten Wealth Management Group,
Kevin Kirsten and Brad Kirsten.

Speaker 2 (16:19):
Brad.

Speaker 1 (16:20):
As a reminder, we're going to talk about a few
things today. In fact, we get to the further segments,
we're gonna get into a little bit more planning ideas,
specifically retirement savings checkpoints. Are you on the right track
or not? And sometimes that's a good thing. Sometimes it
shows you you can feel good about it, you are
on the right track. Sometimes it shows you that you're behind.

(16:41):
And we can talk about some of the psychology around
that too when we get to that. But first, first off,
here we're going to talk about earning season. Earning season
did deliver in the second quarter. We had great numbers,
and we were just talking before. I think there's a
lot that goes into coming up with those estimates. I mean,

(17:01):
certainly after earning season happens, those are real numbers, yes, okay,
But before earning season happens, those are estimates.

Speaker 2 (17:09):
They're a guess.

Speaker 1 (17:10):
And sometimes those estimates are getting skewed because companies are
guiding down because they want to beat and then all
the chief economists and all these experts are looking at
and says, well, if the company says they're only going
to make this, I bet it's going to be the same.
Not thinking about the psychology of a company trying to
guide your expectations down so they can leap over it.
And I we talked don't take politics out of the equation. Now,

(17:34):
most of these analysts who come up with these estimates
are in giant blue states. Yeah, well you asked me
to look it up. I mean, Powell himself was talking
about all the people that are around him tell him
that tariffs are going to hurt the economy. We haven't
seen it yet. But all the analysts who come up
with the earnings estimates also are in a bubble. They're

(17:56):
all in an echo chamber, usually in the East Coast.
All of them that reacted in April to the tariff
news and took their guidance down by twenty percent and
then had to retrace and take it back up by
twenty percent are all sitting in the same offices in
New York. And incidentally, you said, I wonder where the

(18:18):
economists are there in Nashville or anywhere else in the
country that is not New York, Charlotte, North Carolina. Well
so it's the three that are the highest on the
street and never changed during the tariff talk are in Nashville, Tennessee,
Saint Louis, Missouri, and Frankfurt, Germany.

Speaker 2 (18:35):
Okay, I don't even need to say that.

Speaker 1 (18:37):
I don't even need to say the names those are
the highest and they didn't change during the tariff talk. Well,
that proved to be the right thing. The highest one
is in Frankfurt, Germany. Okay, highest one on the street.
Now why would that be? Why would it be that
where your office is and where you went to college
influences what you think about something that should have nothing

(18:58):
to do with politics. What the S and P five
hundred earnings are going to be before the end of
the year, or the S and P five hundred level
at the end of the year. When we talk about pees,
it's two things. It's the it's the current price, which
has nothing to do with politics. It's what the price
of stocks are. And the E is the future expectations
of earnings. And that is a guess. So we have

(19:19):
one thing we know and one thing that's a guess,
and those two things combined make up a guess. I'd
love to see a study that was done Brad to say,
what are the analysts earnings estimates under a Republican presidency
and a Democrat presidency? And I guarantee you, if you
looked under the hood, you would see more optimism under

(19:42):
Democrats and less optimism under Republicans. Even though it should
have nothing to do with it. If anything, lower taxes
should increase because they did say if the tax cuts,
all of them agreed, if the tax cuts go away,
it's going to lead to a higher likelihood of a
recession and lower growth rates. Well, then what we just
got should raise those expectations. But they did not. When

(20:03):
the tax cuts passed, nobody changed their expectation before the
end of the year, even though they already admitted that
lower taxes would increase the likelihood of a growing economy,
and so it shouldn't matter. Here's the other thing I
always tell people. Now, we don't have currently a democratic present,
but some point we're going to guess what. You don't
have the wind in your face anymore. All the media
and all the economists will be telling you how great

(20:25):
everything is, so you at least have that going for you.
Even if the economy is not great, you're gonna turn
on the TV and they're.

Speaker 2 (20:30):
Gonna tell you it is. You have a lot of cheerleaders,
that's right.

Speaker 1 (20:32):
So check out our weekly market commentary earning season, delivered
at kirstenwealth dot com. This goes into some of the
actual numbers for the second quarter and if you want
to be a little bit of noteed caution. Certainly, if
you look at what Trump hopes to bring in from
tariffs and what is actually coming in, it would appear
that we're only about halfway there. Trump has put out

(20:54):
the numbers in terms of what he wants to bring in,
but even so, we are halfway there. So that means
we should have seen the reductions in terms of earnings
show up in some way, shape or form. So let's
look at the second quarter earnings per share growth. Is
it twelve percent double the five percent increase that was estimated? Okay,

(21:16):
and that was the second quarter. Okay, while we're on
this subject, let me give you what the experts thought.
They thought the S and P earnings were going to
be sixty two point four to nine, and they were
sixty six point four to three, so four full dollars
higher or four percent higher than the then experts expected.
What did they do with the third and fourth quarter
actually lowered it? Did they take it up? No, they

(21:38):
met their estimate was sixty two point four to nine.
They went down into the sixty ones for what they
think for the next quarter. So not only do they
think that the pace won't continue at a four percent beat,
but they think it'll actually contract. Now, one thing you're
always worried about when you when you see an earnings
beat is where's it coming from. Is it cost cutting
because you can increase your earnings by cutting costs, or
is it read well, it wasn't. Revenue grew at six

(22:01):
point three percent for the second quarter versus two percent
according to the analyst estimates going into the quarter. Average
earnings upside surprise of eight point four percent is better
than anticipated, even if it is slightly below the five
year average. So the five year average in terms of
beating is nine point one, but pretty much right there.
The ten year average is six point nine. Eighty one

(22:23):
percent of companies beat their earnings. That's the five year
average is seventy eight. So still a really good quarter
by by almost any metric. Fastest earnings growth was generated
by the communications services sector, followed by technology and financials. Technology, healthcare,
and communications services delivered the strongest revenue growth, So those

(22:43):
are the areas that saw the biggest boost. So you know,
you could you could maybe argue that the and I'd
have to go look where we were at the beginning
of the year because these analysts estimates have been coming
down all year, so you beat a lowered bar by
the analyst community. That's where the second quarter earnings beat
was a bar that had already been lowered. Yeah, but uh,

(23:06):
well after the first quarter, So the first quarter was
a beat. Let me give it to you so that
I'm doing it on a dollar amount, not percentage increase.
But the first quarter to start the year was fifty
nine point nine four For the SMB five hundred earnings,
it came in at sixty three point five to five. Okay,
so they did raise it from fifty nine to nine
to four to sixty two to four to nine. They
did raise it, but they didn't raise it even enough

(23:28):
to have earnings from the actual earnings for the first
quarter be the same for the second quarter.

Speaker 2 (23:33):
So they're still so pessimistic.

Speaker 1 (23:35):
Well, and it looks pretty good for the next two
quarters as well, because the earnings estimates are only eight
and seven and a half percent, respectively. So that's a
that's a pretty low number. Now you get into next
year twenty twenty six, the earnings estimates are eleven point
three eleven point six. These are percent quarter on quarter
fifteen point four I'm sorry, not annualized quarter on quarter

(24:00):
fifteen point four and fourteen point two. It's a much
higher bar next year, but that probably goes with our outlook,
which is the midterm election years might be a little
bit more difficult. Yeah, so with a higher bar, it's
harder to beat. You do have the tax cuts and
some of these things that textcuts are just basically a
status quo for most people, but for businesses, you do

(24:22):
have some cuts and some expensing that will maybe improve earnings.
So you need to look at that. But if if
we're as I mentioned in the prior segment, you look
out a month and the negativity starts to creep in.
You do have to keep in mind that if you
or your advisor are using the expert's opinions and thinking
that they know what is unknown, and it's something that

(24:46):
they typically don't know. It's a lot of knowns, but
they mostly get it wrong. And if you think they
mostly get it right, you're listening to the wrong thing.
They are consistently wrong on estimates, earnings, estimates for growth,
and it is just it's just nonsense. It's something that
they can't know. And if stock prices are looking at

(25:08):
our future expectations, and when these expectations are low, it's
easier to beat. And that's where we are right now,
and it's not where we are like you mentioned for
twenty twenty six. Yeah, and if you kind of bottom
line it, you know, we even in a worst case scenario,
if you add up all the tariffs, we're coming up
with about two percent hit at worst, and the forecast

(25:32):
for seven percent earnings growth for twenty twenty six still
might be a little bit low. So you look at
some of these numbers that are that are coming in
and the average beats, you're really not at a point
where you're starting to see earnings roll over, which is
what you'd need to see to have another prolonged bear

(25:52):
market like twenty twenty two or twenty eleven, or even
twenty fifteen and sixteen.

Speaker 2 (25:58):
Which was a little bit more prole.

Speaker 1 (25:59):
And the other unknown that's not in anyone's expectations, not
in anyone's estimate, is if you're opening up markets like
all of Europe for something like auto sales that had
a huge tariff and now has a zero same thing
with the Asian countries, where you're going to start to
sell into these markets same thing with even tech and
being able to sell chips into some of these markets.

(26:22):
A little bit of tariff hit here is more than
going to get offset by the increased sales overseas that
was either nothing or very little because of how hi
the teriffs were for the exports, and so it should
more than offset it. But we can't know. We can't
know what it's going to be, and it could be higher,
it could be lower. But it's something that no one
is talking about factoring it well. And I think just

(26:44):
to sum it up, and I think, if who's the
Caroline Levitt, if she was gonna have somebody put in
front of her something she could read to the American
people talking about earnings, I think our conclusion in this
market commentary is perfect, which is, here's the message from
corporate America about tariffs. I don't care what all the

(27:05):
doomsdayers would say. Corporate America is remarkably resilient in the
face of the trade uncertainty. Despite the anticipated drag from tariffs,
Companies not only exceeded expectations but also raise guidance, driving
up driving upward revisions to earnings estimates for both the
end of twenty five and twenty twenty six. Certainly we
had a standout performance from the Magnificent seven companies and

(27:27):
that continues to anchor overall earnings with their AI driven
capital investment. While margin pressures from tariffs could intensify in
the coming months, many companies have proven of depth at
offsetting those costs through operational efficiencies, supplier negotiations, AI capabilities,
big tailwind from AI which is pushing earnings growth up,

(27:48):
and price adjustments. So going forward, the combination of AI
driven productivity, supportive fiscal policy from the passing the OBBA
and easing trade under certainty in coming months could push
earnings growth even farther. So you can't say it really
any better than that. I mean, that's the part of
this is the tariff pain to earnings at this point

(28:13):
has been exaggerated to a great extent. We have one
of the biggest booms in capital investment we've ever seen
through AI, which is tremendously supportive.

Speaker 2 (28:23):
And companies, report after report have said they're not going
to slow down.

Speaker 1 (28:26):
Yeah, and so to me, we still look for that
short to intermediate term correction to kind of reset the market.
I would still look for a fourth quarter rally and
then going into twenty six, maybe have a bit more caution.
Doesn't mean twenty twenty six will be negative, but we
may have a little bit more volatility in that midterm year,

(28:47):
which we historically do with with bookend returns right early
and late, just like we've had we had in twenty two,
we had eighteen. We had it early, we didn't have
it late. And you go back to the other mitron
or election year fourteen, the middle of fourteen team was
the time to not be invested. It was a selid
Man go away a year. And so I think that's
what we're gonna be talking about. It get early gains,

(29:09):
even though things are gonna be euphoric and everybody's gonna
be saying AI is changing everything, it'll be the time
to be skeptical. But that's we're talking nine months from now.
That kind of mini bear market we saw in twenty
twenty fifteen that ended in early twenty sixteen really started
in the summer of fourteen. That was really the peak
in the summer of fourteen. So even though the midterm
election year historically is the most volatile, it still has

(29:31):
a positive return. So if you get some kind of
larger sell off in a midterm year. It's not one
you want to shy away from. You want to buy
into it. Let's take our next pause. You're listening to
Money Sens Kevin and Brad Kirsten will be right back.
Welcome back to the show. You're listening to the advisors
of Kirsten Wealth Management Group, Kevin Kirsten and Brad Kirsten.
As a reminder, we are professional financial advisors and our

(29:51):
offices are in Perrysburg. Give us a call throughout the
week if you like to set up a consultation to
review your plan. Whether you're just getting started, we're going
to talk about that in a second. Well on your
way or already safely in retirement, we'd be happy to
sit down and go over things with you four one
nine eight seven to two zero zero sixty seven or
check us out online at Kirstenwealth dot com. Or you

(30:13):
don't know where you stand, and that's what we're going
to talk about, is you don't know where you stand.
You don't know if you're well on your way cause
you don't.

Speaker 2 (30:19):
You maybe around.

Speaker 1 (30:20):
People that have say they have this much saved or
don't have this much saved, or maybe you're in a
household that doesn't talk about it.

Speaker 2 (30:27):
Well.

Speaker 1 (30:27):
You know, I always love the comparisons to health and
financial health and wellness and financial wellness, and I equate
it to you know, you need to do something. You
know you need to maybe go sign up for a class,
or you know, you maybe need to maybe take a

(30:48):
couple of personal training sessions. But a lot of times
I think what people say is, well, let me let
me lose a few pounds first. Yeah, okay, let me
let me work out a little bit on my own,
and then I'll do that, Yeah, to get me over
the hump, or because I'd be embarrassed to go in here.
I know I'm fifty pounds over, but that's embarrassing. Let

(31:09):
me be twenty five over and then I'll let them
see me.

Speaker 2 (31:12):
And then yes.

Speaker 1 (31:13):
And I think when you're saving for retirement or trying
to figure out where you stand, I think it's the
same thing. I don't want to call the financial advisor
because maybe I feel like I'm behind. You might not
be behind. Once we look at everything. Well, I know
he's just gonna tell me to max out my four
to one K. I better start maxing out my four
to one K. I'll call him in a year after
I've done it. There's no time like the present. But
I think sometimes and we've seen this mentality in our office.

(31:36):
We've seen people come in who I think are doing
pretty well, who are like, oh, yes, I feel like
I'm behind, Like, no, you're not. And I've also seen
people who think they're way ahead of the game. Yeah,
and they or they already retired and call us and
they and they think they have a lot of money,
and I look and I think, well, it depends depends
how much you're living on. Yes, And so no matter
what your situation, you have to sit down with the

(31:57):
financial advisor and assess it. If it's bad, good, or
and different, don't worry about it, sit down and see
where you stand.

Speaker 2 (32:05):
Well.

Speaker 1 (32:06):
JP Morgan puts out a chart called the Retirement Savings Checkpoints.
It's not perfect, no no chart is, but it gives
you a starting point to say where are you? And
it looks at household income at different ages and where
you should be. It's saying, are you on track for
retirement if we use age sixty five as retirement, if
we use a pre retirement portfolio of sixty forty In

(32:27):
my opinion, that's a little too conservative. Five percent savings.
So five percent of your income your saving and are
you on track?

Speaker 2 (32:37):
Okay?

Speaker 1 (32:37):
So if you make one hundred thousand dollars a year,
this is a household income, okay, and you are forty
years old, you should have You hope to have at
least two hundred thousand dollars saved at that point, or retire.
Do the forty year old going out a little bit
more on the income and then we'll do it.

Speaker 2 (32:57):
Yeah, so that's all you should have.

Speaker 1 (32:59):
So say it again, forty years old, one hundred thousand
household income, you should have two hundred thousand and I
in your four to oh one k or in some
sort of brokerage account investment assets. Yes, exactly, you're not.
Here's another thing that your house does not count. I
can't tell me how many times people do a spreadsheet
and say I've saved great for retirement, and I look

(33:21):
and it's got the house value in there. You cannot
retire on your house. Where are you going to live? Well,
I'm going to sell that house. Where are you going
to live, Well, I'm going to downsize. Downsizing is easier
said than done. Most people downside downsize. Oh, I'm going
to go from five hundred thousand to three hundred thousand.

(33:42):
But then I'm going to spend one hundred thousand on furniture,
fifteen thousand on a mover.

Speaker 2 (33:47):
You know, it's not.

Speaker 1 (33:49):
All you end up when your downsize is a smaller
house unless to do That's it.

Speaker 2 (33:52):
That's it. You've reduced your chores. H that's it.

Speaker 1 (33:55):
Okay, I haven't really put any money in your pocket.
I don't believe in I don't believe I believe in downsizing.
I just don't believe it adds to your bottom line.

Speaker 2 (34:01):
Okay.

Speaker 1 (34:02):
And so your house doesn't count. Your kid's college funds
do not count. Your emergency savings in the bank does
not count. If you want to have one hundred grand
in the bank as a cushion, that does not count
towards saving for retirement. So this is it's always going
to sit in the bank and earn hardly anything. Great
last two years you earn something. Most times you don't

(34:24):
really earn anything that doesn't count. That doesn't count. So
this is your four to one k, your four oh
three B, your wroth four oh one k, this is
your your after retirement non retirement after tax dollars ament
whether it's a joint account or a trust account. Okay,
one hundred thousand, h forty one hundred thousand of income,
you should have two hundred thousand saved. One hundred and
fifty thousand income. You should have two hundred and seventy

(34:46):
five thousand saved for retirement, two hundred thousand of household income.
You should have three forty three hundred thousand of household income.
You better have six hundred thousand saved to make sure
you're on track. Okay, let's look at a fifty year old.
Fifty year old household in making one hundred grand a year.
You should have four hundred and fifteen thousand to hit
the checkpoint four and fifteen thousand saved. Like I said,

(35:09):
we eliminate a lot of things. Four hundred and fifteen
thousand saved, one hundred and fifty thousand of income. Age fifty,
you should have six hundred thousand saved, two hundred thousand
of household income joint income. If you're married, you should
have seven hundred and fifty thousand saved. Three hundred thousand
of household income. You should have a million two fifty saved.

Speaker 2 (35:30):
Now we get a couple of caveats.

Speaker 1 (35:32):
So if you're fifty years old and you are two
hundred thousand household income, you know, if you're living like
three hundred or you're living like one hundred, you know,
you know, okay, you know, if you're living on a
two hundred thousand, you're saving what you should save and
you're not going into debt, or you're saving what you
should save and you're actually building up and you're building
up a non retirement account.

Speaker 2 (35:51):
You're doing all sorts of things.

Speaker 1 (35:53):
You know, you're living like one hundred thousand even though
you're saving two hundred or at the very least, you're
ahead of the game because of that. So, because of
what you're spending and what your needs are in retirement,
you kind of know where you are on those gauges.

Speaker 2 (36:05):
That's right. Yeah.

Speaker 1 (36:06):
And the other thing I would think is a sort
of an asterisk on this is if you have two
hundred thousand of household income or one hundred thousand household
in k whatever you have, and one person is a
teacher or one person is a public employee with a pension,
you gotta have to adjust those numbers. There's a present
value to that future pension, and we can help calculate
that too to help you determine if you're on the

(36:27):
right trust. So let's say you're sixty and you're five
years to retirement, you have one hundred thousand of household income,
you should have seven twenty five saved, seven hundred twenty
five thousand saved. If you have one hundred and fifty
thousand of household income, you should have a million dollars save.
At age sixty two hundred thousand, you should have one
point three three million saved. If you are aged sixty
and have two hundred thousand of household income, three hundred

(36:47):
thousand of household income at age sixty trying to retire
at sixty five and five years, you should have two
point two million saved at that point in accounts that
will be used for retirement. And then here's the assumption,
because obviously this assumption is aged sixty five and what
would work. And by the way, we're not social security

(37:08):
is factored into this. So don't say, well, yeah, I
have social security on top of that. No, that's what
we're assuming. You have social security. Everybody has social security, sorry,
or the or the pitch at one or the other,
so to retire at sixty five. This particular model assumes
if you had one hundred thousand of household income at
sixty five, you'd need nine hundred thousand to retire. If

(37:29):
you had one hundred and fifty thousand of household income,
you would need a million three to retire. If you
had two hundred thousand of household income, you'd need a
million seven to retire. And if you had three hundred
thousand of household income right before you retired at age
sixty five, you'd need two point seven million to retire.
Now here's the issue. Yes, but Kevin, you just ran

(37:49):
through those numbers. And by the way, you can send
this to anybody if anybody wants. I was just gonna
say to us, we can. I can send this to
this and the other charge. Just email us or get
on our website and find either any of our emails
but the the Kerson Wealth at LPL dot com email
or either one of our our emails that you can
find on our website Kurstonwealth dot com, and we'll send
you both this and the other pages that go with it,

(38:10):
so you can see all the assumptions.

Speaker 2 (38:11):
But mostly I'm not sure where you were going to go.

Speaker 1 (38:13):
Most people on this chart will be at one hundred
thousand income at forty one hundred and fifty thousand at
forty five two hundred and if you look, it's actually
an increased amount of savings that you have to get to.
So it's it's a very much an accelerated path that
you have to get to. So that at age sixty
five and two hundred and fifty thousand of income, is
there two fifty there? Yeah, so you're you're if I'm

(38:35):
looking upside down here, you need to get to two million,
and at age forty it said you know you only
needed two hundred thousand. Well, think about the the the
if you're charting yourself out and saying, if I need
to get there at forty five and there at fifty,
I'm not on the path of just one hundred thousand
for the rest of my career.

Speaker 2 (38:56):
I'm on the path of.

Speaker 1 (38:57):
Increased income, increased needs, and increase for retirement needs. And
therefore you got to map yourself from A to Z
and not just assume that your income's gonna stay the
same and your needs are gonna stay the same. That's right,
The other thing I was gonna say, Brad, is based
on these numbers. If you looked at it and said, oh,

(39:18):
I'm way behind, call us now, okay, because we'll help
try to figure out how to get you on the
right track. Do not sit there and say, okay, I
gotta catch up, and I once I get a little closer,
I'll call these guys yea right, yeah, right. Like your example,
you don't need to lose the first twenty five pounds
before you go join the gym. Okay, you gotta just

(39:40):
do it right away. It day is just like it.
If somebody were to call us to say I'm retiring
in twenty years, when should I start investing today? The
second you have the money, and if you're getting the money,
my market's at an all time high, Brad. Today, Today
it's your first investing. You don't need the money until retirement. Today,
we're talking about all these things and the minutia of
a five percent sell off. If you if it's for

(40:02):
your your money that you need in ten plus years today,
fully invested is the answer.

Speaker 2 (40:07):
That's right.

Speaker 1 (40:08):
So any questions about that, like Brad said, if you
want to see the chart to see if you're hitting
the retirement savings checkpoints. Just call us at the office
at four nine eight seven two zero zero six seven,
mention it to our assistant, or reach out to us
to our email. You can find our emails on our
website at Kirstenwealth dot com. Let's take our last pause. Brad,
you're listening to money Cents, Kevin and Brad. Kirsten will

(40:29):
be right back and welcome back. You're listening to advisors
of Kristen Wealth manager recruit Briend Kevin. Here, Kevin, hear
a lot of talk about AI replacing jobs and I
saw some interesting stats here with Microsoft listing it's forty
occupations that are going to be replaced by AI. So
I did a little research on ones that you know.

(40:49):
Their estimate is that eight and a half million workers,
or over five percent of the American workforce. So we replaced,
and I think it's over really short periods. I think
it was over like the last over the next five years.
But I looked at their list and a lot of
them makes sense. But then I also found another list
of ones that wouldn't get replaced, and so it's it's interesting,

(41:13):
but it's also not surprising.

Speaker 2 (41:14):
Some of them are already getting replaced.

Speaker 1 (41:16):
So some of their top ones that are getting replaced,
and this this is one that even this week as
you're watching TV, you're.

Speaker 2 (41:21):
Like, yeah, why are why are why does this still
a job?

Speaker 1 (41:24):
Number one on their list was interpreters and translators And
here here Putin is walking down and so is Trump
with two extra people. Can't they just have an earpiece
in that immediately translates everything and we're talking in real time.
It makes no sense that we still have that on top.
On the tops on their list are writers and authors,
data analysts. We see this in a lot of industries,

(41:46):
admin and customer service people. I mean, if you ask me,
I'd almost rather talk to an AI over the phone
than talk to somebody in Bangladesh. If I have to
talk to somebody that doesn't understand my language, I'd rather
talk to an AI.

Speaker 2 (42:00):
It does.

Speaker 1 (42:00):
So hopefully that'll be something they have DJ on their list.
Is that really a if all the DJs in the
world were replaced, would that move the needle? I can't
believe they put that on the list, but it's on there.
And then ticket agents and things like travel agents, things
like that are a slow one that probably already is
getting replaced.

Speaker 2 (42:20):
I don't know that AI is.

Speaker 1 (42:21):
Going to significantly move the needle more than just all
technologies have over the last ten years. But those are
some of the ones that when I look at the list,
I say, yeah, not surprising, and I don't think anybody
in those industries would be surprised either. But some of
the top ones I'm surprised haven't.

Speaker 2 (42:36):
Already been completely replaced.

Speaker 1 (42:37):
The other thing I thought was interesting is look at
another list of ones where AI will not replace at
any point. They said, so, top one on the list, phlebotomist,
you want an AI drawing your blood?

Speaker 2 (42:50):
I don't think so. I'll take a real person doing it.

Speaker 1 (42:52):
I don't think any robot, even if they could do
it better, if given the choice, you'd probably take the
real person. Same thing with a lot of medical profession
was what most people said. They'd rather have a nurse,
a nurse assistant being the person that walks into the room,
and not an autonomous robot walking in the room to
do your medicine. This one was surprising to me. Roofers,
they say, are not an AI replaceable job. I completely

(43:14):
disagree with that. That seems like a very dangerous job
that if we can figure out how to put on
a roof with a robot, you should be doing it.

Speaker 2 (43:22):
Robot falls off the house. Pretty far from that. Okay,
that's what they're saying.

Speaker 1 (43:28):
Yeah, I suppose that's what they're saying, is that we're
a long way away from being not being able to
have a real person doing it. And then the last
one that I thought was probably one that AI won't
replace is massage therapist. If you have to get a
massage I don't think you want a robot doing it
for you. I think the biggest thing, and that will
be long term, especially with robotics, is anything to do

(43:49):
with your body. You're gonna be like, what if it
could go wrong? And you mentioned that massage therapy, it's
like it could break me. Wanted too so too much. Yeah,
And there's been a lot of sci fi that have
have delved into that. So hey, Brad. We talked earlier
in the show about tariffs. US tariff revenues over twenty

(44:12):
seven billion in July, going up every single month, and
I know a lot of it's been made about the
negative and so far, so good. Right, we've gotten through
the tariff halfway through the tariffs in terms of what
Trump's goals were, and we haven't seen much dip in earnings.
The only change we've seen is the deficit. The current
annual definition, this is what half half of what the

(44:35):
expected is going to be, and it's starting to accelerate
even Yeah, so look at these numbers and see how
this could help. If current rates hold through twenty thirty four,
that's just the current rates. Trump is hoping for double
this estimated two point eight trillion in the next ten
years would be brought in. If he gets to the
double level, it'd be obviously five point six trillion. That

(44:56):
would be the same amount of deficit offset that that
you would gain from adding one percent to the social
security tax, twenty five percent carbon tax whatever whoever pays that,
and seventeen percent cut to military personnel. So if you
did those three things, a one percent increased your solid
security tax, twenty five percent carbon tax, and a seventeen

(45:19):
percent cut to military personnel, you get to the same
as what this is already produced. Is what the current
TEARFF levels are. So Scott Bessel was just asked about
it this week because someone floated around a dividend check
back to the US citizens, but they're not doing that.
And he was asked, well, this is starting to go up,
and what are we doing with all this? He just

(45:41):
straight faced, we're paying down the debt. It's the only
thing we're doing with it. And they said, what about
that thing you floated out? He says, we are only
paying down debt with it. That's I don't think people
even want the checks to know, and because the problem
will be you'll only pay it to people who are
actually paying taxes, and then a bunch of people say,
where's my check even though you didn't pay any taxes.

Speaker 2 (45:58):
Brand we're seeing some.

Speaker 1 (45:59):
Softening in the housing market, and I think some of
the new technology that we're seeing in housing, things like
Zillo and people knowing what their house is worth. You know,
twenty five years ago, no one knew what their house
was worth until they wanted to sell it. You think
about that, you had no clue what your house was worth.

Speaker 2 (46:17):
You know what you paid.

Speaker 1 (46:18):
You had a clue, but not within fifteen percent, right right,
and now with Zillo and other things. But here's what's interesting.
Twenty five percent of all properties listed on Zillo had
a price cut in June. That's up from twenty three
percent from June of a year ago and eleven from
four from four years ago. Denver, Phoenix, and Raleigh had

(46:38):
the highest percentage of price cuts, while Milwaukee, Hartford, and
New York were the lowest. So it's just interesting to
see the stubbornness of the sellers finally maybe starting to
cut prices after many, many years. And I think the
other thing is I think you might see another round
of this, And it's very encouraging, by the way, to
see that the stock market is now rolling over as

(47:02):
the housing market is cooling off, and that certainly was
what we saw in most of the nineteen eighties and nineties,
so you don't have to have a big financial crisis
associated with it. And given how much equity people have
in homes compared to what happened in eight, be hard
to see another eight happening. But what I would say is,
I think there's gonna be another round of sort of

(47:22):
waving the white flag after this fall, because the Fed's
gonna cut raids and mortgages aren't gonna come down. You
and I disagree, Okay, Okay, I think they're gonna come
down on the first cut, But I think that's it.
The ten Your treasury is not coming down. If mortgages
come down, it's gonna because the spread comes in. That's
where I think we get it is they're gonna cut
and now we're gonna be on this next while brief

(47:45):
sort of a fed cutting cycle, and banks will move
mortgages a little bit on this first one. That's where
I think we're gonna get it. Well, we'll we'll find
out in a couple of months, that's for sure. Thanks
for listening everyone. We'll talk to you next week.

Speaker 2 (48:00):
You've been listening to Money since brought to you each
week by Kirsten Wealth Management Group. To contact Dennis Brad
or Kevin professionally, call four one nine eight seven two
zero zero six seven or eight hundred eight seven five
seventeen eighty six.

Speaker 1 (48:13):
Their email address is Kirstenwealth at LPL dot com and
their website is Kirstenwealth dot com.

Speaker 2 (48:20):
Opinions voiced in this show are for general information only
and are not intended to provide specific advice or recommendations
for any individual.

Speaker 1 (48:27):
To determine which investments may be appropriate for you, consult
with your financial advisor prior to investing. Securities are offered
through LPL financial member Finra SIPC