Hello, and welcome to our market alert video for today, which is May 6, 2022. I’m titling this video “Are you scared?” I want to go over five reasons why, if you’re over 50 or if you are retired or retiring soon, you need to really be looking, in my opinion, at your risk profile and looking at protecting what you have—especially given what’s going on with the economy and everything else. As we see it right now, there are five major threats to the economy, to the stock market, and potentially, therefore, your retirement as well. I want to kind of go through all of those with you. Again, this is not to try to scare you or overly stress you out. But you know, there’s an old expression that the French have, which says, “Un homme averti en vaut deux”. What that means is that a person that is forewarned is worth two. So, I want you to be worth two people by forewarning you of the potentials that are out there, and hopefully stop and consider what you will do to protect your retirement
First of all, one of the biggest problems that we have right now is that China is determined, even if it impacts our economy negatively, to have zero COVID. On Friday morning, President Xi, the president of China came out and said, “Stop talking, we’re not listening. We are going to lock down everything that’s necessary to bring COVID to zero.” Well, what they’re doing. By doing that, they’re essentially affecting our supply chain because many of the parts and the products and all the things that our companies here use to make and sell to consumers are made in China. If all those people are locked down, then the products and the parts to machines and all the rest of it is unavailable. If it’s not available, then the companies in this country are going to have a difficult time making profits if they can’t sell anything, because it’s all made in China, and they don’t have it. So we think that’s a huge headwind as they call it.
The second thing, of course, is the war in Ukraine. And with this war, I’ve learned more about Ukraine than I ever wanted to know. Ukraine is one of the largest wheat producers in the world. Right now, from what I’ve read, the Russians are attacking their wheat fields. Of course, the farmers have other things to do besides farming right now they have more important things to worry about. So, the ability for Ukraine to produce wheat is being impaired. That could create food shortages, it could create hyperinflation in food prices, if we haven’t already seen that, and it could deteriorate. The other thing that Ukraine produces is phosphorus. And I did not know this, I was talking to a client, he’s a farmer, and he raises cattle, which is you know, where we get our meat from. He said that the price of phosphorus has gone up so much. What I didn’t know is that fertilizer uses phosphorus. So, he’s looking at his fertilizer price and it’s going so high, that he’s saying, “I can’t make any money, it’s not worth it.” If that’s the case, we could see food prices skyrocket in the United States, even though they already have, we may have not seen anything yet.
Of course, the war in Ukraine is now causing Europe, which is the third thing to very likely go into recession. The European Central Bank said, the likelihood they’re going to have a recession is high. They’re our biggest trading partner. And if Europe goes into recession, then our ability to sell to these people who are in recession is impaired. That could hurt profits in this country for companies that are exporting their products to Europe, which is our number one trading partner. If that were to happen, then profits would come down here in the United States. As we’ve always said, what drives the price of stocks, for the most part is profits. If profits are down, stock prices go down with it.
Okay, if you haven’t had enough, let me go to number four, which is the Fed. So, the Fed has a mandate to oversee two things. One is inflation and the other is jobs and growth of the economy. Well, they prioritize it, they made it very clear, their number one priority is controlling inflation, because if they don’t control inflation, there won’t be any jobs and there won’t be any growth. So, they got to take care of that beast first. If there’s going to be the other. Well, they announced this week that, “Oh, goody, we’re not going to raise 75 basis points we are only going to raise 50!” Well, that’s still bad news in our view, which is why we saw the big sell off on Thursday. Wait a second, 50? That’s still bad. Oh, no! So, the people that bought on Wednesday because, “Yay, it’s not 75.” Well, those people got punished severely on Thursday. Be that as it may, the antidote to inflation is to reduce growth, and reduced demand. So, they’re going to raise interest rates to do that, if you reduce growth, you reduce profits for companies. If you reduce profits for companies, it affects the stock market. So again, you’ve got that headwind.
Then there’s another one that I haven’t heard very much talked about, but I think we’ll see headlines about, and that is the dollar has become very, very strong. Now many people worry about that, you know, “Is the dollar going to collapse? Is it going to get weak in times of adversity and times of fear?” The world brings their money to the United States, because even though it may not feel like it, we are one of the most stable economies and governments in the world. So, they bring their money over here, essentially buying dollars. When they do that, they drive the price of the dollar up. Well, that may sound like a good thing. It makes our ability to buy foreign goods cheaply because the dollar is stronger. So, we’ve seen bookings to go to Europe increase because you can go to Europe cheaply. The reverse is that foreigners buying stuff from US has gone up a lot, versus the euro, it’s almost 20%. So, the cost of our services, our goods to sell overseas, has become 20% more expensive. And if things are more expensive, people buy less. And if that happens, then our companies that export are also going to be impaired by all of this. So, there are a lot of headwinds.
In our view, right now, the risk on the downside is significantly greater than the potential on the upside. When you have that kind of an equation, it is in our view incumbent upon you as an investor as a person who’s contemplating retirement, or who is already retired to consider whether you should be in this market or not, whether you should take your marbles and protect yourself. Now, as you know, we have a strategy we call the Invest and Protect Strategy™, it told us back in November of 2007 to get our clients out of all stocks, all equities. We told people to stay out for a year and a half until June of 2009 during the credit crisis. Our strategy is designed to help people over 50, who are retired or retiring soon to have their money last as long as they do. We want that for you. So, the only way we can help you is if you get in contact with us and we talk with you. What I encourage you to do is to visit with one of our Retirement Planners and have them go over with you how much risk you’re taking, our Invest and Protect Strategy™, and what we think you should do. We’ll do all that with you at no charge or obligation. Our goal is to help as many people as we possibly can. And if we can do that we think we’ve done a good thing. Again, we can’t help you if you don’t let us. Go to our website, RPOA.com, click on “Meet with an Advisor” and sign up to visit with one of our people and avail yourself of our content. Thank you for watching this video.