Transcript

Hello, this is our weekly market alert video for the week ending October 23, 2020. And before we get going, I just want to let you know that yesterday, the 22nd of October, was a very important day. I know what you’re thinking – that’s probably because that was the presidential debate. If you thought that, no, that’s not it. The actual reason why that is such a monumentally important day is because it was my birthday. And I know what you’re thinking now. Oh my gosh, I missed Ken’s birthday. I need to get him a present, a belated present, and you’re wondering what can you get me? What would I want? Well, I’ll give you a hint. It’s little, it’s red, and it fits in my garage. That would be a Ferrari! Okay, so if you want to get me a Ferrari, feel free. I would be happy to take that, and I would be actually very pleased with that gift.

So anyway, let’s talk about what’s going on in the markets and especially after the debate and all of that. Now one of the things that it appears has happened is that the debate was – there was no knock-out punch. There was no grand winner. Both sides can claim they won, so usually that means that they both made the points they were trying to make and they’re going to run with it the remainder of the days before the election. One of the things that I’ve always found very interesting about investors and the behavior of the stock market that investors drive is the fact that people are forward looking. Investors are forward looking.

What I mean by that is when you invest, you’re investing because of something you think is going to happen in the future. Now you may use information about what’s happened in the past as part of your thinking in terms of what you’re going to do for your investment in the future, but the point is that when you invest, you’re investing looking into the future. And historically, the S&P 500 index, the stock market, starts to go down about 6 months ahead of when the recession actually is officially in full bloom, and then the reverse is also true. It starts to go up, usually about 6 months ahead of when the recession is over.

Why? Because investors see it coming and they start getting out. They start selling ahead of that. They don’t wait for the recession to get out, and they don’t wait for the recession to be over to get in. Once they start seeing signs, they think, “Oh, okay, time to buy or time to sell.” So that dynamic, that future looking, that is where you may have heard the term baked in. That’s baked in, or it’s priced in. What that means is investors have already taken that into account. It’s already in the price of the market at that time. And so right now, we haven’t seen any major fluctuations in the market during the election period. The debate didn’t move the needle dramatically, so what that tells us is that the market has already priced in the Trump victory, or the Biden victory, and it is not the most important thing for us to be looking at.

Now I’m not discounting how important the president is. I’m not saying that, but what I’m saying is what do investors look at? What they’re looking at is profits, for the most part. They want to invest in companies that are going to grow, make profits, and so what they look at is that 70 percent of our economy is driven by consumer spending. And so, if consumers spend, then companies get profits. If companies get profits, their stock price should go up because investors will put money into that, and so it’s that assembly line, if you will, that whole process. So as long as the consumer has spending power, companies will show profits, and if companies show profits, their stock prices will stay where they are.

So, for us, yes, the election’s important and yes, the debate last night was important, and yes, all of that. But what’s most important in our view – what’s going to drive the stock markets, the S&P and the Dow and even the foreign markets – is what kind of a stimulus package do we get, and when will we get it? Because the longer we go, the more destruction to the economy is going to happen, the more people are going to be unemployed, the more companies will become bankrupt, etc.

So, when is the most important thing, and then how much is the other. So, our view is there will be a package. It’s just how they do the political calculus to determine should we do it before the elections, after the elections, all of that. That’s beyond my capability to understand, but my hope is that we will have a package soon, and we believe there will be one soon, and when that happens, we should see a rise in the market after that. Therefore, that’s what we’re keeping our eye on. Not necessarily who the president is. That’s not our biggest concern at this point.

So, the other thing is that I want to be sure to relay to you is that we could be wrong, right? COVID could come back strongly. The package is not big enough to compensate for that. The Fed could do something to mess it up. They’ve done it in the past. This time they seem to be handling it well, but they could. There’s all kinds of things that could happen, that could go wrong, and that’s why we have our Invest and ProtectTM strategy. So, I want you to have the peace of mind knowing that if things turn south and they go badly and we get to our sell signal, we’ll get out. We’ll protect again. So, we want to worry about this so that you don’t have to, okay?

I’m kind of giving you all the things that we’re seeing, but for the most part, what we believe is there will be a package. It will be well received even at the level that’s – the Republican level right now is $1.8 trillion. That’s a lot of money, okay? That’s a big package, so that should make the market happy. If the Democrat version, which is higher than that, is passed, we think the market will be even happier. But either way, the market, we believe, will be happy, and in that case, the stock market should not crash or turn into a bear market.

So, for now, let us do the worrying for you. You may have noticed how gray my beard is. I’m actually shocked at that. Look at that thing. Oh my gosh. I’m actually going to grow this until I have to take this sling off, so I’ve got 4 more weeks. We’ll see how it goes. It’s pretty itchy right now, but I’m going to shave it off when I take off the sling.

But anyway, thank you for watching this video. Thank you for letting us worry about this so that you don’t have to. Your job is to go out, enjoy your second childhood without parental supervision, even though I know that you’re kind of grounded with COVID, but still. Enjoy, and we’ll look forward to talking to you again soon, so thank you.

MMWKM Advisors, LLC (d/b/a Retirement Planners of America ) (“Retirement Planners of America”) is an SEC registered investment adviser with a primary business location in Plano, Texas. Past performance may not be indicative of future results. All investment strategies have the potential for profit or loss. References to the “invest and protect strategy” (the “Strategy”) and recommendations made under the Strategy from 2007 through 2009 refer to strategies collectively employed and recommendations collectively made by Retirement Planners of America’s principals while employed at Eagle Strategies, LLC., and also at Cambridge Investment Research Advisors, Inc. Four of the five principals remain as principals today, including the Retirement Planners of America’s founder, Ken Moraif, and Chief Investment Officer, Eli Dragon. Retirement Planners of America has been employing the Strategy since its inception in 2011. Therefore, any references to Retirement Planners of America’s performance or its investment advisory recommendations predating 2011 generally refer to recommendations made by Retirement Planners of America’s principals at the respective other firms described above. Like all investment strategies, the Strategy is not guaranteed. It is possible that it can incorrectly predict a bear market (generally accepted as a 20% drop in a market index), which has, in-fact, happened before at Retirement Planners of America and affected its clients accordingly. When the sell / “protect” portion of the Strategy is implemented, affected investors will incur transaction costs and taxable accounts will incur tax consequences. However, when implementing that portion of the Strategy, Retirement Planners of America generally believes that the benefit of avoiding bear markets outweighs the burden of these transaction costs and tax consequences.