Transcript

Hello, and welcome to our market alert video for today, which is July 22, 2022. We have a lot to report. But before I get to get into it, I hope you are doing well. I hope you’re staying cool with all the heat waves we are having everywhere. And I hope your summer is going great. And that all is well with you. So, let’s dive into what’s going on.

And our topic this week is: Is the bear market over? And of course, we’re getting a lot of questions about that, given that the S&P and the Dow, the stock market has been up for the last month. So, wow, it’s a whole month must be over. Right? Well, let’s look at what’s driving that sentiment, what’s happening there? Well, first of all, the Federal Reserve is engaged. And they’ve been behind the curve, they’ve been forecasting incorrectly telling us inflation was transitory, all that kind of stuff. And so finally, now it looks like they are actively engaged, they’re going to go after it. And so, people are feeling better about that.

The other thing is, we got retail sales numbers this week, and they look pretty good. So, it appears that the consumer is still engaged. And since the consumer represents 70% of the economy, then all must be well, right? Well, let’s peel the onion and look a little deeper. Yes, the Fed is engaged. But you know what, inflation is being a lot more determined than at first thought. So now what’s happening is the Fed is going to have to be very aggressive. And that could cause us to go into a recession. And so, recessions are not a good thing, though, as we’ve talked about on our videos in the past, are better than inflation. So, the other thing also is that real estate has slowed down dramatically, and real estate represents 25% of our economy. And if you look at the numbers of construction permits and mortgage applications, month to month, the reductions are historic, we’ve not seen this kind of a reduction from month to month, since they’ve been recording these numbers. And that’s a lot of jobs. Those are construction jobs, people who put in carpets, people who make appliances and sell them, the title companies, the banks, all hundreds of thousands of jobs are involved in that.

The other thing also is that companies, you may have noticed the big banks are freezing on their hiring, they’re saying we’re not hiring any more people, we’re freezing that. And many companies are starting even to lay off employees. And a survey of small businesses said that 47% of small businesses are afraid they won’t even be in business a year from now. And that’s a lot of jobs and a lot of business. And so those are not good signs.

The other thing also is that the consumer is staying engaged. But how are they doing that, with all this inflation? Well, they’re spending the stimulus money that they got during the pandemic. So, the government gave everybody too much money during the pandemic, which created all this inflation that we have. And now people are spending that money, and they’re staying afloat on that. How long can that go on? We don’t think the consumer is going to be able to continue spending at these levels, given how high expenses and costs are, for much longer. But this recession, and this inflation will outlast the consumer. And since the consumer represents 70% of our economy, we see that as a potential dark cloud on the horizon.

The other thing also is that, you know, periods of market rising the way we’ve seen are kind of normal when it comes to bear markets. If you look at Y2K and 2008. In Y2K, we actually had a four-month period where the stock market, the S&P, and the Dow rose significantly, and there was a lot of talk about, “Wow, the bear market’s over.” Well, it was followed by a severe drop that came after that. And 2008 had the same thing. We had a period of three or four months where market went up, it appeared all was well. And then of course, Lehman and all the rest of it happened and the whole thing came crashing down. So, our view now is that we still see a significant risk on the downside. The consumer we don’t think is going to be able to continue to stay afloat.

Real estate is going to be hurt badly and continue to do so. We’re seeing across the economies around the world where they’re all going into recessions, potentially Europe especially. And they’re our biggest trading partner. So, a lot of dark clouds on the horizon, as I’ve said, and so we still think that with the Dow we could see another 20-25% drop in the markets here going forward.

So, the question for you is what should you be doing? And as you know, we have our Invest & Protect Strategy, which told us a few months ago to get out of all equities, all stocks, all bonds. And so, we’ve been in cash for quite a while now. And we continue to believe that cash is king. And the reason why we think cash is king is because if there’s this big downside that we see, you won’t be engaged in that. But then also, as the Fed raises interest rates, the earnings on money market funds and cash instruments goes up right with it.

So, the Fed is going to reward us for sitting in cash going forward here for the next few months as we see it. So, if you’re over 50, if you are retired or retiring soon, this could be a protracted bear market like Y2K, which lasted two and a half years, and 2008, which lasted a year and a half. But more importantly, how long did it take to get back to even Y2K took almost seven years? And 2008 took five years to get back to even. If you want to retire soon, can you wait that long? And if you are retired, can you go without touching your money for that long? We don’t think so.

So, visit with one of our retirement planners and let us help you to walk through the thoughts and the strategy, what you should be thinking about right now. No charge or obligation. You know, as we always say, if we can help you, that’s fantastic. And if not, that’s fine too. Either way, there’s no charge, there’s no obligation and we will part friends. As you know, our goal is for you to enjoy your second childhood without parental supervision and your retirement. And that’s very difficult if you’re having significant money worries. So go to our website rpoa.com and visit with one of our retirement planners. Thanks for watching this video and we’ll talk soon.