60_40 rule is broken! Do this instead

Episode Transcript

Speaker 1 (00:00):
Welcome to the hidden world of wealth, where secrets of
the affluent become accessible to you. You are listening to
Your Money Matters, the most provocative financial radio show on
the airwaves. You are about to start your educational journey
here on Your Money Matters with your host, Drew Prescott,

(00:22):
President of Prescott Private Wealth and Chartered Retirement Planning Counselor.
Drew will unlock the complexities of the financial landscape with straightforward,
powerful insights. Whether you're planning for retirement, managing in a state,
or looking to grow your wealth. Consider this your exclusive invitation.
Turn up the volume, lean in closer. Let's navigate the

(00:45):
hidden paths of prosperity together. Your financial enlightenment begins now.
Securities off produce a Terror Financial Specialists LLC Member fin
the SIBC reservices offered through Setara Investment Advisors LLC SATERA
firms are under separate ownership from any other named entity.

(01:05):
Four five to one sixth Street, Troy, New York one
two one eight zero.

Speaker 2 (01:33):
Welcome back, everybody. You are listening to Your Money Matters
and I'm your host, Drew Prescott, Chartered Retirement Planning Counselor
and accredited wealth management advisor here at Prescott Private Wealth,
located at four fifty one Who's Ex Street in Troy,
New York. The phone we're here is five one eight
two zero three, nineteen eighty three. Good to be back

(01:54):
with you. I feel like I've been gone forever. I
hope you had a great Memorial Day weekend and had
some fun with the family, and you know, thankfully we
had a little bit of nice weather there. We had
some nice weather this week as well. But as I'm
sitting here recording in the studio on Saturday, well, our

(02:16):
old friend has showed its face again that rain, and
boy it's coming down awfully hard. Well, something that we're
used to. I don't know if you remember. I feel
like it was about five years ago. You remember we
had that summer where I feel like maybe it hit
ninety once or twice, but definitely, you know, eighty five eighties.

(02:37):
I think probably like maybe, like if it was twenty days,
it was probably a lot. But it was just a
not a great summer. And I'm hoping that that's not
where we're trending here. But we are officially into June,
and boy, time is really moving on quick isn't it.

(02:59):
So that said, I put together a really nice show
for you, and thank you for tuning in today. Who
remembers that theme song? I love that show, Sanford and
So what a hilarious show. I was just listening to
a clip of it the other night. I go on

(03:22):
Hulu and I watched the old shows. I've watched Cheers
countless times. Not really a huge Seinfeld guy. I do
enjoy it, but not something I'm completely crazy about. I
watched Mash. I watched some old movies too, like Trading Places, Brewsters,

(03:43):
Millions and Boy, just good old fashioned comedy and Red Fox.
He was the guy was a genius. He was so
great and he talked I'll never forget this one episode here,
which is hilarious where he's sitting there with his son,
and his son comes down and says, hey, Pop, how

(04:03):
come we don't have any breakfast going on? And he says, well,
because I'm retired. And he goes, what do you mean
you're retired? And he says, yep, just made a phone
call over to Social Security. He says, the kitchen's closed.
I'm going to be getting two hundred and thirteen dollars
a month and he says, Pop, you're crazy. There's no
way you're getting two hundred thirteen dollars a month. They

(04:26):
pay you according to what you made, and you haven't
even made two hundred and thirteen dollars. And he says, well,
I don't know. I already talked to him on the phone,
and that's what I'm gonna get. So he calls over
and when he's he said, uh, can you just confirm
what exactly I'm going to get every month? And he's

(04:46):
sitting there, the lady's talking to him, and he goes,
uh huh uh huh, yup, Okay, all right, oh wow, okay, yep,
And then he hangs up the phone and he says
to his son, say, son, what kind of eggs did
you want? I loved Red Fox. He was hilarious. And

(05:09):
the shows back then we're just so much better, weren't they.
I Mean, everything seemed better back then. Even the cereal
from when we were kids was just delicious. And I
don't know if you've had a bowl of cereal lately,
but boy, it's it's really not even enough to get
you to contemplate having another one. It's just the food
is just not nearly as good as it was when
we were younger. But anyways, here we are and we've

(05:33):
made it to the weekend. We've made it to the
end of May, and boys, it's really been just a
great may. I mean, really just a jaw dropping performance.
And I want to give you kind of a look
ahead to June and why that classic balanced portfolio maybe

(05:54):
falling short in today's wild financial landscape. So I want
you to buckle up, stay focused with me here because
I've got a packed show for you and you're going
to find a lot of value in here. So let's
start off with talking about twenty and twenty five so
far with stocks versus bonds and just kind of a

(06:15):
tale of two markets here. So let's let's just set
the stage here for twenty twenty five. As you know,
it has been a year of whipsaws, twists, turns for
investors and it people have lost their stomachs at time,
that's for sure. But picture this. You got stocks and bonds.

(06:36):
They're really kind of locked in this tuggle war and
they're each pulling in different directions, with bonds that are
quietly stealing the spotlight recently. But here's the scorecard as
of yesterday, which was May thirtieth, the S and P
five hundred was up a modest point five to one

(06:56):
percent year to date, and that's not exactly a barn burner. Now,
the Nasdaq is down about point seven percent, which that's
because tech has taken hit. The Dow Jones is off
by abouto point sixty four percent with the industrials, the

(07:16):
heavyweights here are they're barely keeping afloat to stay relevant
in this market. And then the Dow two thousand is
down huge, it's down a brutal seven point three five percent.
So we can see by this that small cap stocks
are really feeling the heat. So what's dragging stocks down? Well,

(07:39):
it's really kind of been a perfect storm of chaos
because we've had the trade wars that are flared up
big back in February and in March, and then with
the US slapping the twenty five percent tariffs on autos
and pharmaceuticals, that really sent the shock waves through the
global supply chain. So think price of your car and

(08:00):
prescription drugs, and the markets have been rattled. Well, the VIS,
which is the volatility index that's Wall Street's fear gauge,
has spiked twenty eight percent this year. Now that signals
to investors that they're the investors are a little bit
nervous and a little freight here. And when you add
in a first quarter GDP drop of negative point three percent,

(08:24):
and at the time there were some recession whispers and
they were kind of getting louder. We saw that stocks
were really kind of clinging to the edge here. But
now let's flip to the bond side for a second.
You see twenty twenty five surprise MVP. Here is the
Bloomberg US Aggregate bond Index, which is up two point

(08:48):
seventy six percent year to date, and so as you
can tell, that has really outpaced stocks. But what's driving this, Well,
you see the Federal Reserve cut rates to four point
two five to four and a half earlier this year,
which gave bonds a nice little rise. Meanwhile, we saw

(09:09):
the ten year treasury yield had climbed to four and
a half percent or higher, and that was fueled by
inflation worries and a staggering nine point two trillion US
debt pile that's due to refinance by twenty twenty six.
So with higher yields, well, that makes bonds a more

(09:31):
cozy haven, but it's still a tightrope. So this is
where I want you to listen up. You see, with
rising rates that could pressure bond prices if inflation really
keeps simmering here. So let's put this in context. Let's
go back to twenty and eighteen. We saw trade tensions

(09:52):
with China had tanked the SMP five hundred by four
point four percent, only for its rebound with a thirty
one and a half percent surge in twenty and nineteen.
So you see, today's trade mess is stickier because tariffs
have hit multiple industries, and that twenty eight percent VIX

(10:15):
that we were just talking about that echoes the twenty
and eighteen turbulence. But unlike that time, the Feds moving
cautiously with just one rate cut so far and really
kind of no clear roadmap ahead. See that, could you know,

(10:35):
make us think is it possible that we could see
a twenty and nineteen style comeback? And I would say
to that, maybe maybe we could, because it's it's a
long shot with so much uncertainty swirling because that nine
point two trillion debt monster is looming large. So if

(10:56):
you imagine refinancing your mortgage when rates are climbing, it's
a budgetbuster right now. In the seventies, soaring debt and
inflation really crushed bond returns and it left traditional portfolios
reeling well. Today, with inflation at three point three percent

(11:19):
and yields creeping up, we're kind of seeing echoes of
that error. Now investors can't just coast on autopilot anymore.
They've got to rethink their game plan. And here's where
it gets really interesting. So small caps, are you with me?
Small caps? Despite their seven point three percent drop, they

(11:43):
might be a hidden opportunity. Here's why. Now, the Russell
two thousands price to earnings ratio is lower than the
S and P five hundreds, so that suggests value if
the economy stabilizes. But with trade wars and GDP wobbles,

(12:05):
it's kind of a gamble. But on the flip side,
with bonds two point seven six percent gain. While it
isn't flashy, but it's steady. Think of it as the
tortoise outpacing the hair. Okay, so now what am I
saying here? Now I'm a big advocate for equities and

(12:31):
bonds are just having their moment. Does that mean that
you should just start rethinking everything you're doing and just
pile into bonds. No, that's that's not what I'm saying
at all. So let me let me see if I
can kind of bring this around here. All right, So

(12:53):
if we if we look at May of this year,
as I said, it's been an absolute block buster, and
that was after a brutal April. Now the markets soared
back in a way that we really have not seen
in decades. And I'm going to give you the highlight
reel here. The S and P five hundred is up
six point five percent for May. That's the best May

(13:17):
that we have seen since nineteen ninety. That's a thirty
five year record. It jumped from fifty five sixty nine
to fifty nine eleven. Now the NASDAC ready, that was
a stunning nine point one eight percent gain. Now that
was powered by the tech resurgence. Now, how about the

(13:39):
Dow Jones, Well that two is up respectably at three
point nine to four percent, and even small caps joined
the party because the Russell two thousand was up five
point two six percent. So what lit the fuse? That's
the question. Well, there's really two big catalysts here. President

(14:02):
Trump scaled back his tariff threats in which calm trade
warfares and corporate earnings, especially in the tech sector, and
then they smashed expectations. So May is usually a sleepy
month and averages about zero point three percent gains for

(14:22):
the S and P five hundred going all the way
back to nineteen fifty. But in May of twenty twenty five,
it was a full on fireworks display. Now you see,
tech was the star of the show. We saw a
Microsoft beating forecast by ten percent riding an AI innovation wave.

(14:44):
In Vidia's latest chip launch sent its stock soaring fifteen
percent in a month, and even Apple, although they're battling
supply chain snags, they climbed five percent. So this tech
boom feels like the ninety era and disrupting driving gains

(15:06):
here amidst the uncertainty. But here's the warning sign. The
Nasdaq's priced earnings ratio is at thirty five, so that's
well above the historical average of twenty five. Okay, perk
up your ears to what I'm gonna say here. I'm

(15:26):
gonna say this one more time. The nasdak's PE ratio
is at thirty five. That's well above its historical average
of twenty five folks, that's bubble territory. Okay, so proceed
with caution, and consumer discretionary stocks dazzled too. We saw

(15:48):
Amazon's drone delivery expansion has cut costs, which is boosting
its shares. We saw Tesla's new battery tech which extended
range by twenty percent, which is huge in that industry,
had investors buzzing as well. Now, these winds show consumer
resilience and innovation, but with inflation at three point three percent,

(16:12):
these rising costs could start to pinch profits down the road,
and bonds held their ground. So the Bloomberg US Aggregate
Bond Index likely saw a flat to slightly up May,
adding to its two point seven six percent you're to

(16:32):
date edge. Now, Historically May can be tricky for bonds
where yields rise and prices dip, and with the ten
year treasury at four and a half percent, bonds stayed stable,
but they did not steal the show. So I want
to zoom out here. Okay, let's look at this. Let's

(16:53):
say May nineteen nineties six percent SMP five hundred came
after a shaky spring, much like this year. Well back then,
it really signaled a broader recovery now, so could May
of twenty twenty five do the same? Possibly, But that

(17:18):
lofty nasdac pe that I just referred to and trade
war overhanging, they're keeping me a little bit skeptical might
be a strong word, but let's use that for the moment. Okay,
Now that being said, what's on tap for June of

(17:39):
twenty twenty five. Here's what I'll tell you right now.
Brace yourself because it could get choppy. And here's the lineup.
We know that on June eighteenth, the Fed's rate decision
is coming and markets are betting on two more cuts
this year. But with the core PCE and flame at

(18:00):
three point three, the feed is playing KOI here. Then
on June twentieth, we have some triple witching going on here,
and if you don't know what that means, it means
we've got stock options, index options, and futures options expire

(18:21):
at once and that will create volatility. Then if we
go to the end of June, we've got quarterly rebalancing,
so we're going to see big funds shift their portfolios,
shaking things up a bit. So June's usually tame, averaging
about one point two percent gain for the S and

(18:42):
P five hundred over the last thirty years, but in
post election years it's often flatter, with profit taking kicking in.
So after June six point one five percent surge, valuations
are stretched and headge thin, and analysts are a little

(19:02):
bit jittery that June could swing either way. So we're
gonna have to keep an eye on retail and the
industrial earnings. Keep an eye on Walmart Caterpillar. They'll give
us some clues into consumer and manufacturing vibes. And the
Fed's June eighteenth move is really pivotal here because a

(19:23):
rate cut could hint at a spark of a rally,
and an inflation warning could tank it, So triple witching
on June twentieth often spikes the vics. Protecting puts at
this point might be wise, and history says that big
May gains can fizzle in June, and if we go

(19:45):
back to the nineteen nineties, a six percent may gave
way to a one percent June dip. So after these
May twenty twenty five fireworks, June might cool off, So
you want to stay flexible and don't get caught chase
the highs here so if you're just joining us, you're
listening to your money matters. I'm your host, Drew Prescott,

(20:07):
chartered retirement Planning counselor, accredited wealth management advisor and President
of Prescott Private Wealth, located here in Troy, New York.
If you want to go on our website Prescott PW
dot com, we're filled with resources for you. Here the
phone numbers five one eight two zero three nineteen eighty three,
five one eight two zero three one nine eighty three.

(20:28):
And next we're going to start to talk about why
the old school balanced portfolio is not working anymore. And
when I say that, what I'm referring to is the
classic sixty forty portfolio, which is sixty percent stocks forty
percent bonds. That was once a golden ticket and stocks

(20:49):
they grew your nest egg and bonds softened the blows.
But when stocks crashed, bonds rallied and that kind of
cap things steady. But in twenty and twenty five, the
shine is coming off of that portfolio. And here's the deal.
Stocks are up just zero point five to one percent

(21:11):
year to date, bonds are up two point seventy six,
but both wobbled earlier from trade wars and tariffs. And
in twenty and twenty two we saw the SMP five
hundred plunged eighteen percent and the Bloomberg aggregate dropped thirteen percent.

(21:32):
Now that was a rare double hit. Okay, we saw
inflation surged, rate spiked, and bonds did not save the day.
And in April of twenty twenty five, tariff fear struck
again and bonds could not fully cushion the fall. And
in the eighties and nineties, sixty forty was the king,

(21:54):
make no doubt about that. It did amazing and during
the nineteen eighty seven crash, treasury swored as stocks tanked,
which bailed out portfolios. Now, with inflation at three point
three percent and the tenure yield at four point five percent,

(22:17):
bonds two are under pressure. So experts like Mohammed al
Aroan says that persistent inflation breaks the old rhythm and
bonds don't zig when stocks zag anymore. And the nineteen
seventies were a warning Stagflation hammered stocks and bonds, and

(22:38):
sixty forty barely kept up with inflation. So today, with
nine point two trillion in US debt and trade turmoil,
we're in a similar bind and that classic approach is outdated.
So what's the fix. Well, I would encourage you to
look beyond stocks and bond maybe you consider some gold.

(23:03):
All right, I'm not saying physical gold. I'm talking about
inside of your portfolio as an ETF or companies that
are around that real estate, some managed futures, or some
high dividend stocks. See, in this market, this is when

(23:25):
active management beats set it, and forget it, because adaptability
is everything. And today we'll start into the end of
the show by tackling a topic that's really a game
changer for anyone that's looking to protect and grow their
wealth in a wild market like twenty twenty five, which

(23:48):
is negatively correlated investments. So, if you're tired of watching
your portfolio swing like a pendulum every time that this
market hiccups, this is for you. We're going to break
that down, what they are, why they're your secret weapon,
and how to build a portfolio that uses them to

(24:09):
smooth out the ride. So for those of you who
are just joining us, you're listening to your money matters.
I'm your host, Drew Prescott, chartered retirement planning counselor and
a credited wealth management advisor here at Prescott Private Wealth
located in Troy, New York five one eight two zero
three one nine eight three. So in order to get
started with this, first off, what you need to understand

(24:31):
is what are negatively correlated investments? So picture two dancers
on a stage. When one twirls left, the other spins right.
When one leaps up, the other dips down. Well, that's
negative correlation. Assets that move in the opposite directions as

(24:53):
one another. And in financial terms, it's measured by the
correlation efficiency. Now that's a number between negative one and one.
So a correlation of negative one means that they are
perfectly opposed. When one zigs the other zags no exceptions.

(25:15):
A correlation of zero means that they're independent, and one
means that they move in lockstep with one another. So
hang with me here for portfolio building, what we're doing
here is we're hunting for assets that are closer to

(25:36):
negative one, or at least below zero, so that we
can find a little bit of a better balance. So
why does this matter, Because, as you know, markets are
not a straight lineup. In twenty twenty five, we've seen
stocks stumble, We've watched bonds flex, and we've watched this

(25:59):
march the volatility here spike, so negatively correlated investments ultimately
act like shock absorbers, So when one part of your
portfolio takes a hit, another might rise to help overall
cushion the fall here. And it's not really about avoiding

(26:21):
losses entirely, because good luck with that, you're not going
to find that. But it's really about reducing the stomach
churning ups and downs so that you can sleep at night.
So think of it like diversifying your wardrobe. You don't
wear flip flops in a snowstorm or a parka in July,
so you want to have different assets for different conditions

(26:45):
that keep you comfortable or in this case, financially secure.
See Historically, stocks and bonds have been the poster child
for negative correlation. But during the two thousand and Nights
financial crisis, the sm P five hundred plummeted thirty seven percent,

(27:06):
while long term US treasury soared by over twenty percent.
So same story. In the twenty twenty COVID crash, stocks tanked,
bonds rallied, and investors ran for safety. But here's the twist.
In twenty twenty five, that relationship is getting shaky. So

(27:31):
trade wars, inflation, and rising yields are muddying the waters.
So we're going to explore beyond stocks and bonds. I
want you to think gold, real estate, commodities, and I
want to show you how to weave them into your
portfolio that stands tall no matter what the market throws

(27:54):
at you. So let's set the scene here with a
look at twenty twenty five. So far, it's been a
roller coaster ride, as we've talked about. As of May thirtieth,
it's it's not really been the fun kind either, because
the S and P five hundred is up a measly
point five to one percent year to date, the Nasdaq

(28:15):
is down point seven percent, and the Dow joneses down
point sixty four percent. And as we already talked about this,
the small caps and the Russell two thousands have been crushed.
They're down seven point three five percent. So what's driving this.
Trade wars are back with a vengeance. And in February

(28:37):
and April we talked about the tariffs, the on auto,
on pharmaceutical, we saw the vics spiking. We use that
ferometer that we have here at Satara and the first
quarter GDP shrank, flashing some recession warning lights. But meanwhile,

(29:00):
as we talked about earlier, the bonds were quietly stealing
the show. So what what we know too, is that
in May we talked about this earlier in the show
as well, Microsoft at a ten percent earnings beat in
Nvidia went up fifteen percent, Apple was up five percent.

(29:25):
Bonds they stayed steady. They were likely flat in May,
but they were kind of building on that two point
seven six percent year to date gain. Well, that sets
the stage, Okay, So let's get into the meat and
potatoes of what I'm talking about, which is understanding negatively

(29:48):
correlated investments. At its core, negative correlation is simply about balance.
If your entire portfolio moves in the same direction, up
when the market's hot and down when it's not, you're
riding a single wave, and when that wave crashes, it

(30:09):
puts you in a pecurious situation. Negatively correlated assets can
give you a lifeline because they're the yin to your yang.
They're the peanut butter to your jelly, opposites that work together.
So take stocks and bonds again. When stocks crash, investors
often pile into bonds, driving bond prices up as stock

(30:34):
prices full. That's the seesaw effect. But correlations they're not static.
And in twenty twenty five, both stocks and bonds got
hammered as inflation sword and the rates spiked. Now correlation
flipped positive at that time, and the classic sixty forty

(30:55):
portfolio sixty percent bonds forty percent I'm sorry, sixty percent
stocks forty percent bonds. It lost its mojo. And in
twenty twenty five we're seeing some echoes of that. So
we want to be careful because trade war fears earlier
this year hit stocks and pressured bond prices as the

(31:16):
yields rose. But what was the takeaway? The takeaway was
really that we can't just lean on stocks and bonds anymore.
So what else fits the bill? Well, all my portfolios,
if someone is not just an equity investor and we're

(31:40):
using a diversified portfolio, I have gold in all of
my portfolios, and gold has been a standout. So when
stocks tank, like in two thousand and eight, when gold
rose five percent as the S and P five hundred crater,
it often shines. Now during the twenty and eleven debt

(32:03):
ceiling crisis, gold spiked twenty percent. Now how about real
estate via a real estate investment trust or direct ownership
that can also move independently. And in two thousand and eight,
while stocks bled, some real estate sectors held firm. So
commodities as well. Think about oil, agriculture or metal. Those

(32:27):
two can zig when stack when stocks zag, especially during
inflationary spikes like we saw in the seventies in the
stagflation era. So even manage futures, which is a strategy
that bets on price trends that can profit in up
or down markets, offering a counterweight. So you may be

(32:51):
asking the question, well, how do I spot these relationships? Well,
a correlation matrix is available on platforms like morning Star
or Yahoo Finance, and it will show you how assets
move relative to each other over time. So you want
to look at historical data and you want to see

(33:11):
if stocks fell ten percent in a month and gold
rose five percent, that's a negative correlation at work. So
don't over complicate it. Focus on the big picture. The
goal is a portfolio where not everything sinks at once.
So what should you do? Well when you're building your portfolio,

(33:34):
I'm going to help you out here. I want to
give you kind of a step by step guide, and
this is the fun part. The fun part is how
do you build a portfolio with negatively correlated holdings? So
you see, this isn't theory. It's a practical playbook that
you can start using today. And I'm going to give
you this step by step guide. So get yourself a

(33:57):
little coffee, get yourself a pen and page. If you're
driving and you've got a navigator with you, have them
take some notes. Give you a little bit of time
to get your phone open, get your paper and pen out. Okay,

(34:18):
So here we go. Step number one. I want you
to start with your core holdings, because every portfolio needs
a foundation, and for most people that's stocks and bonds.
Because stocks give you growth. I think the S and
P five hundred ETFs or tech giants like you know,

(34:42):
the microsaucy apples and so on and so forth. Okay,
and then bonds offer income and stability. So say a
broad bond fund like a Bloomberg aggregate, but given twenty
twenty five shaky stock bond correlation, this coral is not
going to cut it. That's what I've been leading up

(35:02):
to here. But I want you to use it as
your base, but we are going to go well beyond.
That's sixty forty balanced portfolio. Okay, So start with your
core holdings. That's step number one. Number two, I want
you to identify negatively correlated assets. So scout assets that

(35:27):
counterbalance your core. Okay. So here's a lineup gold a
hedge against inflation and stock crashes. So with twenty twenty
five's three point three percent inflation, a gold ETF like
let's say I won't I won't give you a ticker
because I don't want it to come across as potentially

(35:50):
giving you a recommendation. Okay, but look for a good
gold ETF. You can screen for those using sources like ZAX.
You can use morning Star. There's plenty of software that
you can use out there. Next, look at REATS. Okay,

(36:11):
So REATS, which is a real estate investment trust. They
often hold steady when stocks dip. Now, they also pay
dividends to around a three to a four percent annually.
Let's take it a step further. Commodities like oil or
agricultural funds. They can rise during supply shocks or inflation,

(36:37):
unlike stocks. Okay, I'm going to take it a little
bit further, some managed futures. Now these are alternative strategies,
so not everyone is going to qualify for these based
upon income and you're the size of your holdings, but
they are available through some fund families and they can

(36:59):
profit in any market direction. Okay. Also cash or treasury
inflation protected securities. Now we know cash isn't sexy, but
it is uncorrelated to stocks, and treasury inflation protected securities
help shield against inflation spikes. So again you want to

(37:24):
check their correlation against your stocks. And over the past decade,
Gold's correlation to the S and P five hundred has
averaged around negative point two percent. Real Estate investment trusts
uts have hovered around zero point five but they drop
lower during equity selloffs. And aim for a mix that

(37:48):
pulls in the opposite directions. Okay, So step three, you
want to set your allocation. Now here's where art meets science.
So I'm going to give you a sample allocation and
what it might look like. So it could look like
fifty percent equities, with which is going to be your

(38:10):
growth engine, like the S and P five hundred, the Nasdaq,
maybe some international stocks, twenty five percent fixed income, which
is your bonds for stability, some mixed treasuries and corporate bonds,
maybe ten percent gold which is inflation and crash protection,

(38:30):
ten percent real estate investment trust for your income and diversification.
Five percent commodities, which is really just kind of a
small bed on inflation or supply shocks. So that's one
hundred percent. Now, you younger investors, you may want to
think about bumping your stocks up to sixty percent and

(38:52):
cut bonds to twenty retirees. You may want to flip it.
Have forty percent stocks, thirty five percent bonds, fifteen percent
real assets. But the key is that at least fifteen
to twenty percent of your holdings are negatively correlated assets
to dampen your volatility. Now, the fourth step is this

(39:17):
test the waters. So I always say this, never go
headlong in any direction right out of the gate, Okay,
So before going all in, you should back test your mix.
So look at two thousand and eight. Stocks are down
thirty seven percent, bonds are up twenty percent. Gold is
up five percent. So a portfolio with fifty percent stocks,

(39:41):
thirty percent bonds, and twenty percent gold would have lost
less than a pure stock portfolio. In twenty twenty five,
May six point one percent stock surge might have outpaced
gold or bonds, but year to date bonds two points
seven to six percent gain shows that balance pays off.

(40:05):
So you can use free tools like Portfolio Visualizer to
simulate how your mix would hold up. It's a free tool,
you can find it right online. Step five. You want
to rebalance regularly because markets move and soda correlations. So
if stocks sore like May's rally that we just saw,
if you were holding fifty percent equity target, it may

(40:28):
have ballooned to about sixty percent at this point, So
sell some stocks, buy more gold or reads to reset,
and just rebalance quarterly or annually. In twenty twenty five,
with the trade wars and the rate cuts, staying nimble
is going to be crucial here. Okay. Step six negatively

(40:50):
correlated assets. They're not perfect, so keep this in mind.
Gold pays no dividend. It's ten percent. Allocation may drag
returns in a bull market because commodities can be volatile.
Oil crash thirty percent in twenty twenty before rebounding and

(41:15):
overdue alternatives, and you might want to cap your upside
here sticking to a fifteen to twenty five percent in
non traditional assets just kind of enough to buffer, not
enough to bog you down. And then the final step,

(41:37):
step number seven, adapt to twenty twenty five. You want
to tailor it to today inflation at three point three percent,
lean on gold or tips, trade wars, add defensive rates
or international bonds with low US correlation, tech driving may's
rally well balance with commodity. These are cash to hedge

(42:01):
a pullback because when you're putting it all together and
you put it all to work this June outlook, when
we look ahead to June, you should expect some turbulence.
See the Fed's rate decision on June eighteenth. This could

(42:22):
sway markets. So two cuts are priced in, but sticky
inflation might delay them. And that's important to remember. Remember
I shared this also June twentieth. That's a big date,
which is when the triple witching happens. Remember what that is.
That means that options and futures expire, sparking volatility. So

(42:48):
end of month rebalancing by big funds could also add
fuel to this fire. So historically, here's what I want
you to keep in mind. June average is abou zero
point two percent gains for the s and P five
hundred not that big, right, but after May six point

(43:09):
one five percent pop a breather is pretty likely. So
your portfolio is ready if you implement this. If stocks dip,
gold or rets could rise, if bonds falter with rising yields,
commodities might offset. So you're not betting on one outcome.

(43:34):
You're really built for all of them. And that's going
to take a little bit of work. But I want
you to know that I do believe that if you
look into this and you implement uh these types of
strategies into your portfolio, I think it could be a

(43:58):
good way to help you not feel the volatility as
much as you have in the past by having just
simply a sixty forty portfolio. Now here's the exciting thing
that I want to share with you. So when I

(44:19):
am telling you about this, I'm basing this on a
couple of let's say, political events here that I think
are kind of giving us the ability to read some

(44:41):
tea leaves. And here's what I mean by that. I
don't know how closely you follow news that is in
other countries here and and kind of take a look
around at how this could potentially help the States. So

(45:07):
I want to just draw your attention to a couple
of pieces here and should be able to help you
do some more research and make some better decisions about
rebalancing your portfolio based upon what I just shared with you. So,
if you're following Russia at all, the recent reports have

(45:31):
indicated that Russia is experiencing strains in the relationship with China.
Now that's because of frustration over the economic negotiations and
the geopolitical tensions, and they've led to a cooling of
ties between those two nations. So what does that mean.
It means that the shift opens the door for improved

(45:54):
relations between Russia and Western countries, potentially leading to the
easing of sanctions. Well, we know that the White House
is reportedly considering lifting certain sanctions on Russia's energy assets
as part of really kind of a broader diplomatic effort. Additionally,

(46:15):
we're seeing that India continues to solidify its position as
the world's fastest growing major economy, and in the January
through March twenty twenty five quarter, India's GDP grew by
a staggering seven point four percent surpassing all expectations, and

(46:38):
that really highlighted the country's robust economic momentum. Now, this growth,
it's driven by strong performances in the construction and manufacturing sectors,
as well as increased government spending. So India's got a
sustained economic expansion here, and it is really presenting new

(47:02):
opportunities for US businesses and investors who are looking for
some abilities to diversify and tap into emerging markets. So
remember not only should you consider international investing, but also

(47:24):
emerging markets. Now we're also seeing a couple of pieces
here which are strengthening US economic indicators. So despite these
global challenges, the US economy has really started to exhibit
resilience and a potential for growth. Specifically with the labor market,

(47:48):
we're seeing unemployment rates are remaining low and it's indicating
a strong a strong job market that supports consumer spending.
We're also seeing innovation and technology, where the US continues
to lead in technological advancements, particularly in sectors like artificial
intelligence and renewable energy. And then let's look at corporate earnings.

(48:14):
We're seeing that many American companies have reported solid earnings,
reflecting robust business fundamentals. So these factors alone, they contribute
to a positive outlook for the US stock market, and
that suggests that the current valuations may be justified by

(48:36):
some underlying economic strength. Now, some opportunities amidst the global
shifts here are areas such as we're seeing evolving geopolitical
landscapes which create new adventures for investment, which is the

(48:58):
energy sector. And here's why. Because potential easing of these
sanctions on Russia that could stabilize some global energy markets,
and that would stand to benefit the US energy companies
and help reduce some volatility. Then on the technology and
the manufacturing as we seek alternatives to the Chinese supply chain,

(49:24):
the US stands to really gain from reshoring efforts and
increase domestic manufacturing. And we've got the emerging markets as well.
So India's economy growth has really offered opportunities for US
investors to start to engage with a rapidly expanding market,

(49:46):
particularly in technology and infrastructure sectors. We are going to
see the country of India really start to blowed here.
They're going to step onto the global stage in a
major way financially and politically, and so this is a

(50:14):
good time to consider how would you want to have
some of your dollars allocated towards the opportunity there. Now,
we want to still navigate the risks here with some
strategic planning. And what I don't want to see you
do is to become overly optimistic, okay, because it's essential

(50:40):
that through this time you still remain vigilant. So don't
take what I'm saying and go out and say, oh man,
you know what Drew said is that's good stuff. It
makes a lot of sense. I think he's right on
the money. And you know what, I know he was
talking about having this much in gold, having this much

(51:01):
in stock, and so on and so forth. But you
know what I'm going to do. You know, I'm a
gambling guy. I'm going to go real heavy in emerging markets.
That's not don't do that, okay, I think that could
be a mistake. But I do think you could benefit
from having some of your money in emerging markets. And

(51:24):
remember that short term fluctuations are going to be inevitable,
and you want to maintain a long term perspective, and
that's crucial. And ongoing global conflicts and trade disputes, remember
they can impact markets so diversification helps mitigate these risks.

(51:46):
And also another thing that you want to keep in
mind is that with these inter rate changes here, the
federal reserve policies, they may influence these investment returns. So
stay informed and and if you're informed, it enables proactive
adjustments because by focusing on a diversified portfolio and staying

(52:09):
informed about global developments, you as an investor can position
yourself to capitalize on emerging opportunities. So that's a lot
that we covered today. It's incredibly valuable stuff, all right,
It's incredibly valuable stuff. I would hope that if you're

(52:32):
building your own portfolios that you would take what I
said today and put it into practice and let me.
In closing, I just I would like to thank a
couple of listeners that had sent me some incredibly encouraging
messages and I just want to say thank you. One

(52:55):
of them said, of all the people on WGUI, you
seem to be the best, and I just want to
say thank you so much. That means a tremendous amount
to me. You know, growing up in this industry. The
other fellas that are on the radio, they have been
on the radio for a very long time for decades,

(53:19):
and their individuals that I had looked up to, and
they do a wonderful job. So to have a compliment
like that, Paul, thank you very much. I appreciate it
more than I can tell you, so thank you very
much for that. Also had a listener write in and

(53:44):
say that they have implemented some of the strategies that
I've shared and it has smoothed out their portfolio from
a risk standard and they feel so much more comfortable
with the moves that they made and they feel more confident,
And thank you for sharing that. It makes me. The

(54:07):
reward here is to know that I'm making a difference,
So thank you for sharing these with me. But also
for those of you who do not have a financial plan,
please call me. I want to meet with you. I
want to do a financial plan for you. I want
to review your investment portfolio for you, and if it's
a good fit, I would love to make you a client.

(54:28):
That's what I'm here for. I'm here to educate, but
I'm also here to grow my business. Please call I
would love to meet with you. The phone number here
is five point eight two zero three nineteen eighty three.
Email me Drew at PRESCOTTPW dot com. Check us out
online PRESCOTTPW dot com and again, thank you so much

(54:48):
for listening. It's been a tremendous honor to spend this
hour with you and until next week, May God bless
you and God bless your family. Thank you so much
for the time that you can committed to me today
and I hope to have made a difference in your life.
God bless