It’s Episode 126 and the concentration of stocks in the S&P 500 continues to climb. In fact, 7 stocks account for 27% of the index. Which begs the question, how diversified are you if you own the S&P 500? We’re going to talk about that today. We’re going to talk about this fantastic economy that just won’t fall off a cliff no matter what they tell you. We’re going to talk about some of the economic data that’s come out, and what it means for the rest of the year.
On The Tipping Point, we have a very special guest, our colleague Frankie Lagrotteria. We’re going to discuss a lot of different questions you may have right now about how your investment portfolio is positioned. We have some pro tips.
7 stocks account for almost 30% of the S&P 500
It’s almost like false advertising, something called the S&P 500 makes you feel like, “Well, I’ve got 500 stocks. That’s great diversification.” But because it’s capitalization-weighted and you have seven mega-cap stocks that account for almost 30% of the index, driving everything in that index.
To ensure you’re diversified, it’s a good time to broaden out your exposure and not just buy the S&P 500 blindly as a lot of investors like to do. People want to follow the trend.
”..as one strategist who used to work for Merrill Lynch, an old friend of mine said.. I just can't believe there's only 7 companies in the world that have opportunity for growth. When you have 10-12,000 publicly traded companies I think maybe you might be missing something..
Bob Payne
The rally has broadened
If you look at June we had:
- material stocks up over 11%
- industrial stocks over 11%
- Consumer discretionary stocks over 12%
- Energy stocks up almost 7%
- Financials up over 6%
”..you're starting to see a lot of other sectors move and they trade so much cheaper than those big mega-cap names that everyone wants to talk about on TV all day.
Ryan Payne
The Tipping Point
Issues people are asking about
Payne Points
We have our colleague and financial advisor, Frankie Lagrotteria. Here at Payne Capital Management, we advise people on what they should be doing with their money, and how to allocate it for what we call financial independence. We’ve heard every concern under the sun and today we’re going to talk about what is top of mind for our clients, for our listeners, and address some of the issues that everybody is thinking about today.
Issue 1: Inflation
Should you adjust your portfolio in light of higher inflation?
Depending on how your portfolio is positioned, you might want to think about:
Your cash: Do you have cash sitting in an account earning nothing right now? If your bank isn’t paying you, consider moving it somewhere that does.
”Does your bank literally tell you they're not paying you anything? Move it somewhere that does.
Frankie Lagrotteria
Issue 2: Taxes
What should I be doing to lower my taxes?
With this huge deficit, it’s logical that eventually, your taxes have to go higher. Any tax benefit you can exploit, you have to do it. Some things to consider:
- Are you and your spouse both contributing to a retirement plan? Even if one is retired, they may be able to still contribute.
- You have the option with most of your 401k and retirement plans to do a Roth contribution as opposed to a traditional 401k contribution, which may make a lot of sense. You don’t get a deduction upfront, but a lot of us are in historically low tax brackets.
- If you do a Roth 401k, that money is tax-free for life. You take out all those gains tax-free later, which can be a much bigger benefit and most of us don’t address that.
”..you may have $1,000,000 in a 401k or a traditional IRA.. And I always have to remind my clients, yes, I might be $1,000,000, but realistically that's $800,000.. maybe even less, depending on what tax bracket you're in.. if you have $1,000,000 in a Roth..that's $1,000,000. It's a big difference.
Frankie Lagrotteria
”.. if you really believe that taxes are going up in the future, you can get some of that money out at a big discount, convert it to something that now grows tax free for life.
Ryan Payne
”.. that pretax account is actually a joint account with the federal government.
Chris Payne
Issue 3: Biden Bucks
Did you hear about Biden Bucks?
Some are concerned about videos they’ve seen online about Biden Bucks and how the government is going to confiscate all of our IRAs and 401ks. We believe they are just trying to sell their newsletter.
”..every politician wants to get reelected, most of us have a retirement plan. So for them to confiscate our retirement plans would be like political suicide.
Ryan Payne
”Well, never in my career have I seen a big dire forecast ever come true.
Bob Payne
Hidden Facts of Finance
The Bureau of Labor Statistics found that Americans working full time from home 33% in 2022, up from 25% in 2019, putting two and a half hours fewer a day than their colleagues at the office. It’s no wonder labor force productivity has been negative for the past five straight quarters amid office occupancy that remains at a 50% in the largest U.S. cities.
If workers fill up offices at the 2019 rate and work 8.2 hours a day instead of at home at 5.7 hours, the economy will add roughly 800 million weeks of work, an 8% bump.
There are 23 streaming services that offer versions of the Bob Ross channel generating 15 million viewers a month, according to American Public Television, which handles syndication of the show. That’s more than quadruple the audience of the finale of Succession.
