fbpx Skip to main content
Payne Points of Wealth Podcast

Last year’s decline was really about wringing out excess speculation. Ep#112

By February 15, 2023No Comments

We’re in the midst of earnings season and 70% of companies have beat expectations, and that seems to be the theme this year. Whatever the economists and strategists told you was going to happen is not happening. Things are better than expected, just like we told you on this podcast. We’re going to tell you why everything is going better in the economy than everyone anticipated.

On the Tipping Point with Aaron Dessen, CFP® we’re talking about what you need to be doing right now with your money. Also, we go over reasons why some investors choose to DIY their financial plan rather than have a professional financial adviser.

Soft landing? Hard landing? Or, no recession.

Despite every Wall Street professional saying we’re definitely going to have an economic slowdown this year, all the economic data is showing no slowdown. But the media’s constant drumbeat of pessimism has affected investors’ perception of the market.

The last two days, I did eight meetings with our clients down in Florida and every single one of them was shocked to find that their portfolio was actually up for the year.

Chris Payne

The markets are forward-looking

The market’s have been going up since last fall, yet the economic data is just getting better now.

The market's way ahead of what's actually going to happen.

Ryan Payne

For those hanging on every word the Fed says – who cares

What will the Fed do? At this point who cares. The bond market is already telling you – interest rates have been going down for months. The 10-year treasury is down almost 17%

Jay Powell said "disinflation" 11 times. He's signaling to the markets that he's done raising rates.

Bob Payne

The January Barometer

We’re off to a spectacular year. We had a Santa Claus rally end of December, and the first five days of January were up. We had the month of January up. That’s called the January Barometer, according to Stock Market’s Almanac. And whenever you have the market up for January, after a negative year and all those other criteria are met, the market goes up that year 100% of the time. 100% of the time. So if you’re sitting there waiting for somebody to ring the bell, you’re going to be waiting a long time.

New highs for the S&P 500 “value” portion of the market

One of our favorite “Bobism” is “Time Passes and Markets Operate”. While most have been wringing their hands and sweating out the negative news, the market has been hitting new highs – both the S&P 500 and in Europe.

I really do feel sorry for the permabears and pessimists because when you're on the wrong side of a bull market, it is the worst place in the world you can be. It just tortures you every day.

Bob Payne

Last year’s decline was about wringing out excess speculation

Big tech has had a rebound – but is it a trend? We don’t think so.

It doesn’t matter if their news is even good, if you look at the big five technology companies, their revenue growth was only 1% last quarter. Yet all the stocks have had huge rebounds here. You just never really know what’s going to happen in the short term. This is why you need to be diversified.

An interesting article in the Wall Street Journal describes a new millennial investor who ran his portfolio up to $1.5 million and he lost it all. Now he thinks the 3-month Treasury Bill is a great way to invest. So it’s really that we’re wringing out the speculation. Those types of stocks aren’t going to come back. You’re not going to make a fortune in cryptocurrency going forward. But there’s so much opportunity in every other financial asset – you just have to know where to look for them.

The Tipping Point

with Aaron Dessen, CFP®

Reasons people try to DIY their financial plan.

Reason #1

“It’s not that hard. I can do it on my own.”

Payne Point:

Unless you have a strategy, with the discipline to stay invested, something’s going to happen that’s going to cause you to make a mistake. After the pandemic, some people thought “It’s easy. I just get in, I write up all these hot stocks and I can make a ton of money.” But last year we saw some of these meme stocks and some of these disruptive technology stocks drop like 70, 80%.

It's like you're cruising down the mountain, you think you're awesome, and then all of a sudden there's a mogul field...

Ryan Payne

Reason #2

“It’s way more expensive to work with a financial professional.”

Payne Point:

When you factor in all of the hidden fees, risks, and lost opportunities, it can end up costing much more to work on your own.  In the last ten years, markets went straight up, but it was the most underinvested bull market of all time. After the great financial crisis, people were too scared to invest so they were sitting in cash.

I feel like every time we have a downturn in the market, you get those inevitable phone calls from people that want to go to cash and sell out.

Aaron Dessen, CFP®

Reason #3

“I’m still a few years away from retirement, so I don’t really need advice at this point.”

Payne Point:

The sooner you start planning the better your life is financially. The wind is at your back when you make those decisions earlier and not just wait until you’re retired.  It’s all about planning because if you do a wealth projection without factoring in inflation, you’re going to run out of money.

When you retire, chances are you’re probably going to live for another 25, 30, even 40 years. That’s a lot of longevity for that money and still needs to be appropriately managed.

Chris Payne

Reason #4

“The financial world is too confusing and complex for me. I’ll just keep my head down and put money into my 401k and I’m sure I’ll be fine.”

Payne Point:

There’s so much more that goes into a financial plan beyond your 401k. What it really comes down to is holistic planning. Make sure you’re working with a fiduciary doing true financial planning and not just selling you investments.

Secure Act 2.0 is a perfect example. They just made all these sweeping changes in the legislation and tax laws at the end of last year, and a lot of clients aren't even aware of that.

Aaron Dessen, CFP®

Hidden Facts of Finance

The Federal Reserve has raised interest rates to their highest level since early 2008. Yet the big five banks, that’s Bank of America, Citigroup, J.P. Morgan, U.S. Bancorp, and Wells Fargo only paid an average of .4% interest on consumer deposits and, saving and money market accounts during the last quarter.

Activist investors in general don’t appear to add much value to the companies they target. They tend to earn uninspiring returns for their own investors after paying hefty fees. The Bloomberg Activist Hedge Fund Index only returned 132% over the nine years through the end of 2022 versus the S&P 500 ETF returning 145%.

The average individual investor portfolio has declined 27% since peaking in December 2021, according to estimates from Vanda Research, compared with the S&P 500, it’s roughly 13% decline over the same time period. Monthly active users at online brokerage app Robinhood, which helped make trading cool among newbies, recently fell to their lowest level since the company went public.

Sign Up to Never Miss an Episode!

Get Payne Points of Wealth directly to your inbox each week.