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Payne Points of Wealth Podcast

Markets are Moved by Surprises Ep#118

By April 19, 2023No Comments

It’s Episode 118 and inflation is coming down. We had the Consumer Price Index (CPI) and the Producer Price Index (PPI) come down more than expected last week. Meanwhile, the labor market remains hot. Our vantage point of a soft landing is becoming more real by the moment. Recessionary fears are continuing to dwindle as investors are starting to put money back in the market.

Markets are moved by surprises

It’s what we don’t know and can’t factor in that markets react to. If we’re talking about it we already know about it.

  • The unexpected drop in the PPI sent the market up 400 points on Thursday. It fell to 2.7% from 11% earlier in the year. That’s a huge drop.
  • The banking crisis was another complete surprise. Four weeks ago we weren’t talking about the insurance levels on deposits at banks.

If we're talking about it, it doesn't mean much..

Ryan Payne

European markets at an all-time record high

  • You heard nothing but bad news about Europe last year; war, energy crisis, strikes in France
  • Europe is outperforming the US with France leading the way

I didn't hear any strategists.. talking about how great the French market was going to be this year.

Ryan Payne

The job market is not cooling down

  • They made a big fuss about the fact that now there are 9 million job openings as opposed to 10 million job openings. But that’s 1.7 jobs for every 1 person looking. It’s still one of the hottest job markets ever in history.

Earnings growth into next year looking strong – 12%

  • While earnings are not going to be great this quarter, by end of this year and early next year we’re going to see really big earnings growth
  • Bank earnings have surprised to the upside recently
  • Markets look to the future and it’s looking pretty good

[the market] .. it's looking at 2024 and 2025. And that's why it's so difficult to react to what's happening now. You have to anticipate what's going to happen. And the market does it better than anybody..

Bob Payne

The Tipping Point

Financial Planning Shortcuts

That you shouldn’t take

Payne Points:

When it comes to financial planning, you really don’t want to take shortcuts to reach your goals.

Shortcut 1: Trying to make up for not saving enough by taking too much risk.

  • Risk management is everything. It’s not what you make on the upside, it’s protecting on the downside.
  • Some overspend in retirement and take more risks to make up for it.
  • Or, they listen to the insurance salesman who wants to sell them a phony deal.
  • You’ve got to control your emotions when it comes to investing and spending.
  • Don’t make the mistake of buying when things are going up. You want to buy when the market is down.
  • A good financial advisor is like your personal trainer keeping you on track.

.. you see somebody who's down at the tables and they double down on their investments and keep doubling down. But invariably.. they end up losing all their money.

Chris Payne

Shortcut 2: Not taking the time to review legal documents, or, not having any legal documents.

  • It could be devastating for your heirs if you don’t stay on top of that
  • Titling your assets for beneficiaries
  • Make sure you’ve updated your guardians and trustees in your will
  • Planning for end-of-life healthcare costs

It's actually shocking how many people haven't done anything in that regard.

Bob Payne

Shortcut 3: Not taking the time to know everything you own and why you own it

  • Over the years you may have accumulated a collection of investments that were sold to you by financial salespeople
  • It’s critical to understand the fee structure of your investments. They add up over time and can have a huge impact.

[we] worked on a review the other day.. [the individual said] "I'm going to look at the investments that this advisor sold me" and realized on one he was being charged almost 4%.

Ryan Payne

Hidden Facts of Finance

Saudi Arabia is constructing a new 500 billion-dollar city in the desert that’s 33 times bigger than NYC and building a ritzy resort the size of Belgium. Saudi Arabia could be in line for world-class demographic dividends with a median age of 30. The US is closer to 38.5. The surge of women heading into the workforce following bin Salman’s reform provides an extra economic charge.

Just 17% of new vehicles sold last month were under $30,000 vs. 44% five years ago. US new vehicle inventory hit 1.38 million units last month, up some 73% from a year ago. But pre-pandemic inventory was still roughly 3.5 million units.

The US is over-banked compared with the rest of the world. We lead with 4,135 banking institutions, according to the Federal Deposit Insurance Corp. The UK comes in a distant 2nd with only 311 different banks. Even on a per capita basis, the US stands near the top with 12.8 banks per million people. While US banking consolidation has been going on for decades, we used to have something like 14,434 banks back in 1980.

In the most recent period, the end of 2010-2022, the S&P 500 was up 355%. Compare that to the emerging markets which were only up 26%. In the period right before that, 1999-2010 however, emerging markets were up 392% and the S&P 500 was only up 10%.