Should You be Nervous About the Stock Market?

Episode Transcript

Speaker 1 (00:00):
This is straight talk from the House with certified financial
planner Tracy Aton right here at thirteen ten WI b A.
You get to know Tracy in the team at t
Anton Investment House on the website Tanton Investment House dot com.
That's t A N t O N Investment House dot com.
Tell phone number six oh eight five zero one, fifteen
forty nine. That's six oh eight five zero one fifteen

(00:21):
four nine. Of course, t Anton Investment House a fee
only fiduciary, and joining us this morning is certified financial
planner Tracy Anton. Tracy, how you doing this week?

Speaker 2 (00:30):
I'm doing well, Sean, how about you?

Speaker 1 (00:32):
I am doing absolutely fantastic. That snow, yeah, you know
what we're there. So I was going to complain about
the snow. Yeah, right, yeah. We deal with this stuff,
and you know, we've got a really great show. One
of the great things is I get to kind of
preview the show before we we talk each morning. It's
a really exciting program. What are we going to be
discussing this week, Tracy, Well, we're going to be.

Speaker 2 (00:51):
Talking about should you be nervous about the stock market?
So there was an article written by Martin Romo and
Will Robbins and they are with Group and they the
title of the program was should investors be nervous about
the stock market? And this article basically discusses the recent
market ups and downs caused by the tariffs and even

(01:12):
a recent ai breakthrough from a Chinese tech stock company.
And it's just kind of a reminder that even strong
markets can go down, especially when some stocks are priced
at very high expectations. So, you know, the question does
is does this sudden volatility mean investors should be more
cautious or can this strong market rally keep going? So

(01:35):
that's what they pose as a question in this article,
and they go on to say again, according to the
Capitol Groups chiefs chief investment officer Martin Romo, you know,
he answers the question by saying both, yes, you should
be more cautious. However, can this strong market keep going? Yes,
he believes so as well so the economy, he says,

(01:55):
and markets right now, you know, have mixed signals. And
he said, the US economy, however, is doing well, you know,
but obviously others are struggling. So again, tariffs, government policies,
and global tensions and add to uncertainty. And while stock
market returns have been strong and volatility low, expectations are

(02:17):
pretty high. So again, in this kind of environment, Romo says,
I am both optimistic and careful. And he says it's
really about balancing opportunity with risks and paying attention to
stock valuations. And so today I thought we could discuss
these four key things that investors should keep in mind

(02:38):
to stay optimistic while managing risk. Again, according to Martin
Rogo and Will Robbins, and both of these guys, one
of them manages more of a growthier type style and
another one's more value more conservative type style, both stock
both stock portfolio managers basically, and what you know, how
do they how do they look at it?

Speaker 1 (02:59):
It's good is as you kind of laid that out,
it's going to be a fantastic program. And as we
talk with certified financial planner Tracy Anton, don't forget speaking
of getting more information, you can always learn more online
the website Tanton investment House dot com. That's t A
N T O N investment House dot com. So, Tracy,
should investors expect a major downturn soon?

Speaker 2 (03:21):
Well, stocks have been on a very strong run, Shawn
since late twenty twenty two, so while many investors expected
a recession, the next sm P five hundred surge, climbing
twenty six point two percent in twenty twenty three, another
twenty five percent in twenty twenty four, and again this
marks the first time since nineteen ninety eight, the nineteen

(03:42):
ninety eight nineteen ninety nine dot com boom. Basically that
the index has posted back to back years of twenty
percent or you know, plus games per year, So you know,
could we do it a third year? Right? Is the question? However,
comparing today's market, that tech bubble of the late nineteen

(04:02):
nineties really isn't entirely fair or correct or however you
want to say it. Unlike then, today's leading tech stocks
are delivering real earnings growth. For example, they're talking about Navidia,
which makes the high end semiconductors that power artificial intelligence,
more than doubled its quarterly profits to nineteen point three

(04:25):
billion as of October thirty first. And again, this doesn't
mean that investors should basically be bracing for a major
downtown downturn. And again, again this is coming from American funds,
But I mean, I couldn't agree more as they're talking,
because they're pointing out that the overall economy remains strong,

(04:45):
supported by rising wages, stable interest rates, and pro growth
government policies. And then they went back and they said, like,
look at some historical trends. Obviously, the past doesn't guarantee
the future. We all know that. However, it's still in
context that the S and P five hundred has been
positive seventy three percent of the time since nineteen twenty eight,

(05:09):
which is about every three out of every four years
that you have a positive stock market return. So again,
the market only had negative and returns twenty seven percent
of those years, and that's about one hundred year timeframe
that we're looking at.

Speaker 1 (05:23):
That is a pretty that's a pretty eye opening statistic.
Pretty amazing too when you really put that into perspective
and you start breaking down those years. This morning, as
we talked with certified financial planner Tracy Anton right here
on thirteen ten WIBA, which the website earlier, and I
hope you get a chance to stop on PI. If
you don't have a chance now, definitely when you get
to the office or get home later today, head on
over to Tanton Investment House dot com. You can learn

(05:46):
more about Tracy and the team. You can also listen
back to this in previous shows podcasts. There's other great
information up there as well. The website Tanton investment House
dot com. That's t A N t O N Investment
House dot com. Telephone number for the office so eight
five zero one, fifteen forty nine. That's six So eight
five zero one fifteen four nine. Talking about investors, if

(06:06):
you should be nervous about the stock market and Tracy
as we talk about where we are as far as
meetian returns, Uh, what are the meeting returns in those
up years?

Speaker 2 (06:18):
Okay, again, Sean, looking back, you know we've had a
very strong stock market historically, and again the past is
not guarantee the future. I have to keep repeating myself.
But you know, with the S and P five hundred
posting positive and returns against seventy three percent of those
years since nineteen twenty eight, the median positive return was
about twenty one percent, and then only twenty seven percent

(06:41):
of those years of those hundred years have had negative performance,
averaging out to about a negative nine point five percent
for the negative years. So in the up years twenty
one percent meeting return, on the down years negative nine
point five percent of the nine point five return. So,
but what I also found really interesting was that of

(07:04):
those years where the markets were down, only six percent
of those years the negative return was more than twenty percent.
Because nobody wants to go through nine right, markets followed
close to fifty percent. I mean, nobody wants that experience.
You know, that's the one we worry about the most.
You know, however, that only happened six percent of the time,

(07:26):
which out of one hundred years, that's six six times, right,
that you had a negative return of more than twenty percent.
So I just think these stats really kind of help
us keep things in context and perspective.

Speaker 1 (07:38):
It's important as you talk about keeping things in perspective
and kind of getting that context out there is you know,
we always we always tend to and I think it's
probably very deep in our psyche. Look at like either
short term and we're always worried about tomorrow, tomorrow, and
when you kind of pull back and you look at
the history of this stuff, it's it's pretty amazing. What's
what's happened and where we where we are right now? Tracy,

(08:00):
I hear about you know, evaluation, does that matter when
it comes to stocks. What are folks need to think
about there?

Speaker 2 (08:07):
Yes, it does matter, but I just want to add
one thing. As I was thinking about this, you were
as you were talking, I was thinking, you know, it
is perspective and it's about context. However, you know, we
want to take our brain to investing. Right, people just
say say, you know, take your brain to work. Well,
you take your brain to investing. And so the idea
here is, you know, if you're planning on buying your

(08:28):
dream house and you want to get that accomplished in
year one or year two from now, then no, you
shouldn't be investing your money like that doesn't make sense.
So even though these bad markets only happen six percent
of the time, right, they're really bad, you don't want to.
You measure your risk. You measure your risk. So on average,
if you have a five to seven time year time horizon,

(08:50):
that is likely to be enough not no one knows,
but likely to be enough to be investing in the
stack market. And then, of course, you know, don't don't
just buy your growth fund. Make sure you buy the
value stocks, make sure you buy us, make sure you
buy international, you know, to be well diversified in that.
So I just want to add that little bit caveat
there that you know, you want to have a measured

(09:13):
amount of risk. You don't want to you know, you
can't fit the farm, right, I mean, if you need
the money, then I would not be investing it. Or
you know, some people have a really high risk tolerance,
they really do. Or there's things that you have to
think about that are paying attention, Like you know what,
my cash flow is extra every year by this amount. Well, okay,

(09:35):
and you don't need the money for two years, Okay,
how much is your cash bl likely to be? You know,
we talk about that except for planning and so then
that's okay. You know, maybe a hybrid approach. You can
invest a bit, right, you can invest some, but you know,
not everything that you need for that x period of time.

Speaker 1 (09:53):
So when we talked about valuation, Tracy, where do we
kind of put that as far as the importance of him.

Speaker 2 (09:59):
Yeah, it is a So expectations for today's market leaders
have driven have been high. You know, valuations are higher,
particularly Sean in the tech sector, but even the S
and P five hundred as of January thirty first, twenty
twenty five, their price to earnings ratio stood at twenty
seven point seven, and that's high. You know, on average,

(10:20):
it used to be fifteen to eighteen, you know, was
the average price prices relative to company earnings on the
SMP five hundred. So a twenty seven point seven is high. That,
you know, indicates that many stocks are priced at premium levels.
So again, valuation matters. And again Martin Romo, this portfolio

(10:41):
manager at American Funds, he said, valuation definitely matters, and
he said, well, he remains optimistic. He anticipates lower returns
moving forward, as many stocks are already priced what they
call for perfection. I liked the way they said that
price for protection perfection. But there's a lot of peace.

(11:02):
But you get the point that even him, he thinks,
you know, he's optimistic because the economy looks so good
and all the other things we just talked about. But also,
you know, you have to be aware that stocks are high,
and so it doesn't necessarily mean a direct you know,
bear market, or even a correction, although corrections are typical.

(11:24):
It could just mean that, you know, markets are they
are kind of just lower, you know, their returns are
more muted going forward for the next who knows could
be the next five years.

Speaker 1 (11:38):
Talking this morning with certified financial planner Tracy Anton right
here on thirteen ten wuib A. Talking about if you
should be nervous about the stock market. We're gonna get
some more details from Tracy. We'll talk about that tea
word that's been in the news, teariffs' to get to
that in just a moment. Also talk about the market
cycle and some other surprises that some folks say maybe inevitable.
We'll find out from Tracy if that's true. Do all

(12:00):
then so much more in just a moment. In the meantime,
if you haven't been to the website Tanton Investment House
dot com, I urge you to head on over there now.
That's t A N. T O N investment House dot com.
Great website and great resource telephone number six oh eight
five zero one, fifteen forty nine. That's six oh eight
five zero one, fifteen forty nine. We'll contend your conversation
with Tracy as straight Talk from the House continues right

(12:20):
here on thirteen ten wu I b A. This is
straight Talk from the House with certifine financial planner Tracy
Aton right here on thirteen ten wu I b A.
Missed any part of the show. Maybe you missed the
previous segment just jumping in your car right now, welcome
to the program. You can always get caught up by
heading on over to Tanton investment House dot com. That's
t A N t O N investment House dot com

(12:43):
and you can listen back to this previous shows podcast.
You can get to know Tracy and the team, and
of course you can also learn more about Tracy and
every everything that they're able to do for you at
t Anton Investment House all online Tanton investment House dot com.
That's t A N t O N investment House dot com.
Telph number six oh eight five zero one, fifteen forty nine.
That's six eight five zero one fifteen four to nine.

(13:04):
Talking this week with Tracy about should you be nervous
about the stock market? In Tracy market surprises? Are they
an inevitable part of investing or what's the what's the
takeaway there?

Speaker 2 (13:14):
Absolutely, they are so high stock valuations along with the
fact that most market gains are especially the very large
market gains are concentrated in just a few big US
tech companies, may be increasing the risk. So on January
twenty seventh, the market took a temporary hit after report
service that a Chinese startup company called deep Seek had

(13:37):
developed a chat bot but for a fraction of the
cost of top USAI tools. So again, this raised concerns
about whether the massive investment in AI infrastructure was justified.
As a result, Navidia and Broadcom saw their stock prices
drop about seventeen percent, and other companies involved in AI

(13:57):
related industries also experienced sharp lines. So this will Robbins,
He says, I grew up hearing that's saying that the
saying that trees don't grow to the sky, And he says, well,
I still believe that today's market is different, and he
explains that some leading tech companies operate in winner take
all industries where the strongest players could continue to grow. However,

(14:22):
not all are equally attractive, as some have very high
valuations or weak competitive advantage. So again, having someone picking
and choosing your stocks instead of just you know, a
passive investment strategy sounds like it's even more important today
than it had been with you know, because markets are

(14:43):
so high.

Speaker 1 (14:44):
I remember Deep Seek being in the news for a
couple of days. It was really white hot, and that's
it's interesting, interesting perspective there as we hear from Will
Will Robbins his perspective on that. Speaking of things of
the news, Tracy nowaday As goes by that we don't
hear about tariffs, what do we need to know there?

Speaker 2 (15:03):
Well, another market job followed news that Trump administration was
imposing tariffs on various goods, including produce, autoparts, and smartphones.
The fear of a trade war with Canada and Mexico
and China added to investor uncertainty. However, the tariffs on
Canada and Mexico have been temporary temporarily paused for thirty
days as of February fourth. So in both of these situations,

(15:26):
the tech company Deep pat Deep Seeks or the tariffs.
The long term effect of Deep Seek's innovation and the
tariffs remain uncertain. I mean, nobody knows, right, So they
highlight the important lesson that market surprises are a constant.
Stacks with high valuations can be especially vulnerable to even
small pieces of negative news.

Speaker 1 (15:46):
So but is that kind of part of the part
of the market cycle tracing.

Speaker 2 (15:49):
Exactly shown exactly? So you know, while market jobs can
be unsetting, it's really important to just keep perspective again
that volatility recently has been very low, in fact several years. Right,
but even as stocks hit record highs, the S and
P five hundred's biggest pullback in twenty twenty four was
only about eight percent. I mean we're almost like babies, right,

(16:10):
I mean, we're not used to anything big, you know.
And at that time, when the market fell in twenty
twenty four by eight percent, the market bounced back within days.
So again history shows, and not that it's a guarantee,
no one knows, but that downturns are a normal part
of investing. So market corrections, defined as a drop of
ten percent or more, happened about once every eighteen months,

(16:34):
while declines of five percent or more occur roughly twice
a year. So again, smart investors should be ready for
the possibility of a correction in twenty twenty five, says Romo.
And again, what is the market correction? We have to
keep these things in perspective. I mean a market correction.
Sometimes people don't even know markets corrected because you know,
they're busy living their lives and doing their job or

(16:55):
retired and hopefully having a blast, so you know, and
they didn't look at their for that quarter or even
that month or whatever. It's important that you give in
perspective that market corrections. That's not even a bear market.
A bear market is twenty percent or more. This is
just you know, every year I tell people expect a

(17:15):
correction of ten percent. You know, just kind of expect that,
and that way you won't be surprised. You know, it'll
make the bumps in the road a whole lot easier
if you just have that expectation.

Speaker 1 (17:27):
Really great, really great to insight this morning from certaifying
financial planner Tracy Anton right here on thirteen ten WUI
b A. Of course, Tracy comes to us from t
Anton Investment House, a fee only fiduciary. You can learn
more about Tracy and the team all on the website
Tanton investment House dot com. That's t A N t
O N investment House dot com. The tellph number six

(17:48):
SO eight five zero one, fifteen forty nine. That's six
O eight five zero one, fifteen forty nine. Talking about
if investors, if you should be nervous about the stock market,
and Tracy, as we kind of talk about market cycle
start things, what sd you investors be doing then don't
during those times?

Speaker 2 (18:05):
Yeah, So this. These perspectives that I'm quoting here are
going to come again from the American Funds, and again
I couldn't agree more so. One of them says investors
may want to find a balance between growing their capital
and protecting it, and it says, well, what does that mean? Right?
Nobody knows. Right, We're no longer in a market where
you can take you can have an attitude of you know,

(18:26):
an all or nothing approach. And this is coming from
Martin Romo again, who manages one of the funds at
American Funds. You can't just focus on one sector, one
type of asset, or one region. Now, It's important to
look for opportunities in both growth and value US and
international stocks and companies of all sizes. That's why Romo
is investing in both well known tech leaders and overlooked

(18:49):
areas like financials, industrials, and energy companies. And another perspective,
and again that he's more of a growthier guy. Right.
This other perspective here is coming from will Roe, and
he describes himself as a defensive investor. They getting a
portfolio manager there, and he says he always considers risk
alongside the opportunity. He pays close attention to stock valuations

(19:11):
and a company's competitive position. He says, I always try
to win with defense. Robin says, when the market is
hitting new highs every day, defensive investing might not seem exciting,
but it will prove valuable over time. Right now, he
sees strong opportunities and businesses like power generation and enterprise

(19:33):
consulting without the sky high evaluation scene in many tech stocks.
So I mean, another great perspective. And then and he
goes on to say bear markets will come and go.
Even one, even one he says, doesn't happen even if
oh okay, I know it's he's saying, even if one
doesn't happen in twenty twenty five, you know when they do,

(19:56):
that's when investors should truly appreciate the role of defensive
di and focused strategy. Yeah, and he said, the key
takeaway is markets go up and down there that's an
inevitable and they don't last forever. So when stocks are storing,
even small pieces of bad news can cause big reactions.
For patient investors who keep a balance portfolio and focus

(20:17):
on long term market uncertainty is just a background noise.
And I would add to that, if you take a
long term perspective. When you see market declines, it's actually
an opportunity to get that cash that you on the sidelines.
So you maybe it was paying five percent. Guess what
it's you know, it's it's the knocking at the door
in my opinion, opportunity. It's opportunity, right.

Speaker 1 (20:39):
That great great takeaway this week as we talk with
sort of find financial planner Tracy Anton, opportunities, as we
talk about what's been going on in the markets, and
of course as we talk with Tracy, a great opportunity
for you to start that conversation. All you gotta do
is head on over to Tanton investment House dot com.
That's t A N t o N investment House dot com.
You can learn more about you and the team right

(21:01):
on the website telephone number six oh eight five zero one,
fifteen forty nine. That's six oh eight five zero one,
fifteen forty nine. I really hope you get a chance
to stop by the website today again, that's Tanton Investment
House dot com. That's t A N t O N
investment House dot com. Tracy. It's always great chatting with you. You
enjoyed this beautiful day and We'll do it all again
real soon.

Speaker 2 (21:20):
Sounds good. Sean, take care,