Transcript: Hello, I am Ken Moraif, Senior Retirement Planner at Retirement Planners of America, and this is our market alert review of the last week ended August 30, but it’s also the end of the month so we’re going to do both, have a double whammy review.
So, first of all, we’ll talk about the month of August and certainly, as I think you know, this has been a really bad month. The stock market, the S&P, and the Dow and global markets have all pretty much been down for the month, and it hasn’t been very pretty. However, the week just ended was actually one of the best weeks we’ve had since June and so why, what’s causing all of that, and of course the volatility is the up and down part of volatility is generated by the tweets from our president and also the trade war in China and whether the rhetoric is positive or negative and, you know, what’s going on with all of that seems to be driving the market. However, as you guys know, we believe that to be just background noise because it is an issue that the president is going to use as an election issue. He already announced that he was going to do that. He said he was chosen to be the one to take on China so he’s going to keep that issue alive, in our view, and so it’ll be another year probably before that issue is resolved and miraculously it will be resolved just before the elections. How about that? That’s what we see happening, so the whole China thing is a lot of volatility creation but really nothing to worry about, in our view.
What you should keep your eye on is what the Federal Reserve is doing. That’s the most important thing because if you look at when they lower interest rates in periods that are non-recessionary which right now you could argue we are not in a recession but yet they lowered interest rates and are looking to do it again in September so when they’ve done that in the past what’s happened is a year later – that has happened six times since 1970 – and a year later the S&P, the stock market, has been up an average of 16 percent so a pretty strong move in that regard. So, we see that as potentially happening again.
The other thing that happened this month, just a couple weeks ago, was that the yield curve inverted, and basically what that means is that long-term interest rates are now lower than short-term interest rates, and when that happens every recession and bear market we’ve had over the last 50 years has been preceded by that inverted yield curve. So, that’s a very important indicator. However, you have to take it with a grain of salt because not every bear market – not every time that the yield curve has inverted have we had a bear market and a recession. So, it’s not 100 percent accurate but it does – it has been ahead of every one that has happened.
So, obviously something to look at but the gap between the time when the yield curve inverts and when the market has gone into recession or rather the market has gone into bear market territory, there’s been a year gap with a strong gains reset.
So we don’t see all of this going on to be anything to worry about. Certainly we work, as you may know, with people who are retired or retiring soon and what we do is we concern ourselves with whether we think a bear market is going to come and whether we should be defensive or not, and right now we don’t see that.
It looks like things are positive. Another data point: The Michigan Consumer Confidence Survey tells us that consumer confidence remains near an all-time high. It came down a little bit primarily due to concerns about the trade war but overall the consumer is confident and spending very nicely and so, since 70 percent of our economy is based on consumer spending and what the consumer does profits should continue to be good.
Overall, a lot of volatility, a bad month, but buying opportunity more than a reason to panic and get out or think that anything bad is coming in the near term.
So, as you know, we are retirement planners and so if you go to our website you will find videos and podcasts, articles on planning issues such as diversifying your 401k, when to take Social Security, and how to income during your retirement, where you should get it from, reducing your income taxes, estate planning, all kinds of things that I think will be of interest to you if you are over 50, retired or retiring soon. So if that’s you, rpoa.com is our website and we have lots of information that might help you. Thank you for watching this video, and we will talk soon.
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