It’s Episode 128 and earnings season is upon us. Bank stocks came out with better-than-expected earnings which is good for stock prices. Tech stocks are still melting up. Is this melt-up going to continue? Can this rally sustain itself throughout the rest of the year? How should you position your portfolio? We’re going to answer all those questions. And the economy, everyone’s talking about it from hard landing to soft landing. Remarkable. They must have been listening to our podcast because we’ve talked about a soft landing for a long time. We’re going to get into the weeds when it comes to the economy, what you should be thinking about right now.
On The Tipping Point, we’re going to talk about the cookie-cutter approach. Wall Street loves to sell you a cookie-cutter financial plan. Do you have one? How do you fix it so you’re ready for your financial independence?
Inflation is down, stock prices are up
- GDP is up, and inflation is down. Things are getting better. That’s why the market loves it.
- Stocks are priced to inflation and interest rates.
- Interest rates are starting to come down – the 10-year is at 3.7%
- But inflation is not going away. It’s always there. That’s why you need to have a part of your portfolio in the stock market as a hedge against inflation.
”..part of your portfolio’s got to be in the stock market because it’s the only hedge against inflation
Bob Payne
The banks have benefitted from higher interest rates
Bank earnings have come in better than expected. If you look out into the future, earnings in general are starting to look pretty good. Next year we’re looking at double-digit earnings growth in the S&P 500.
”The banks are benefitting from making loans at those higher rates.
Chris Payne
Surprises in the positive for earnings
Analysts are always too pessimistic about their earnings expectations. They’re lowering their estimates for the future and they’re almost always wrong. But a lot of the experts we follow are looking at earnings growth ahead. Meanwhile, investors are still sitting on their hands trying to figure out what to do, paralysis by analysis.
”..bottom line is, look, it's all about earnings.
Ryan Payne
The rally is broadening
You’re starting to see small caps move. International is starting to break out, too, which is a really healthy sign of a bull market. Investors should be careful not to put all of their eggs in one basket with the 7 big tech stocks. So as an investor right now, you’ve got to look into the future optimistically, spread out your money, don’t concentrate in one area, and you should be rewarded over the long term.
”..20 years ago, I never heard of Amazon, Google or Meta. You want to be in the companies are going to be the next Meta.
Bob Payne
The Tipping Point
Cookie-cutter Portfolios
Payne Points
When it comes to all the families that we advise, we really find that you need unique, customized solutions to become financially free and to live off your portfolio. We want to talk today about how dangerous it is when you get cookie-cutter advice.
There is no cookie-cutter solution for when to take social security
Everyone’s timeline for taking social security is different. Some might benefit from taking it early, others later. But if your advisor isn’t looking at all of the pros and cons for your situation, it could cost you.
A goal-based financial plan can’t be cookie cutter
Every situation is different and that’s why your plan should be based on your goals. Your financial plan should be developed by working backward from where you want to go. And not a lot of people do that.
How can you optimize for taxes with a cookie-cutter approach
Everyone’s tax situation is different. Tax optimization and savings can have a huge impact on your wealth.
”.. especially important with things like Social Security where there's a million different ways to take it.
Chris Payne
We did a little test and got 5-6 proposals from competing firms
We wanted to see what they’re offering right now. What we saw was:
- They all looked alike
- None of them ran any sort of financial projections ahead of time
- Tax optimization was missing
- They’re just offering products, not a plan
- They ask about risk tolerance, but the answer could vary depending on a person’s current feelings about the market. We’re all more aggressive when the market’s going up. We think we can take on more risk. And we’re more timid when the market’s down.
”.. they were like, we're going to buy this large cap portfolio over here, another large cap portfolio over here. We're going to buy some taxable bonds over here.
Bob Payne
”The economy is in the gutter and everyone's feeling really gloomy. You're probably going to be more risk averse.
Ryan Payne
Hidden Facts of Finance
During the strong recovery following the great virus crisis, analysts scrambled to raise their forecast for six straight quarters from the second quarter of 2020 through the third quarter of 2021, but they still couldn’t come close to the actual earnings. The S&P 500 recorded an unusually high double digit percentage earnings beat for the first time since the aftermath of the great financial crisis.
A Powerball player in California hit the jackpot last week, winning 1.08 billion, the third largest take of its type in history. The prize is subject to a 37% federal income tax. However, California surprisingly doesn’t tax lottery winners, so there’s no state tax on that winning. Whereas if you’re in New York, by contrast, one of the worst places to be a lottery winner, you have a 10.9% tax plus if you live in the city, another 3.9%.
