Holland Financial, Inc.的动态

Transcript

Welcome to the planned stronger TV market update for Wednesday, October 16th. Let's dive right in. And I'm not going to the numbers. Like a lot of folks, our Internet has been affected, so we can't dig in and get into all the numbers the way we usually like to do. So we're just going to skip over that and we're going to roll right into a discussion of interest rates. Yes, I said it. Interest rates seem to be the elephant that just will not get out of the room. And Robert Mayer, our Chief Investment Officer, Welcome. Good morning, David. Roberts really, really anxious and ready to talk about interest rates again. Robert, you just go home at night and think about interest rates and just you dream about them I mean, what is it I do not dream about them, thank goodness. But no, they're they're on top of my mind usually at work. Yeah. OK, alright, so we'll take that so so what's happening that with interest rates, you know, we got our half a point A lot of people thought it was too much. Some people thought it was not enough. Some people thought it was just right, but the markets. Him to say, OK, good, we like that, thank you. But is there now more talk as it is it a question now of will the Federal Reserve lower rates anymore before the election or anymore this year? Where's the mindset now shifting? Well, I'm going to preempt you on one thing, David, before we even get to that which excellent question, but really why we're interest rates cut in the 1st place, everybody was fearful. Because of the August job numbers that came out August 5th. So was that a blimp or was that a court? So let's look at the job numbers that came out beginning of October, 2 weeks ago actually. So the Fed cut exactly 4 weeks ago from today on September 18th. And in the beginning of October we had the ADP employment change came in at 143 thousand, way above what was expected and way above the prior month. The government numbers, the non. Farm payroll and the non farm private payroll numbers, both of those came in above 220,000, again crushing what was expected. The unemployment rate went down from 4.2 to 4.1%. The job openings increase from 7.7 million to over 8 million. And then not one non employment statistic, the ISM services index, the Institute for Supply Management for services that was above the 50 mark. Which is the dividing line between contraction which is below 50 or above 50 is expansion. It was at 51.5 in the prior month expected 51.6. It went all the way up to 54.9 in September. So we see a lot of strong employment data. So which made people think why we're rates cut in the 1st place. That was a blimp in August, but the the labor market is still very strong and. According to the latest numbers, even stronger. So when you ask David, you know, where are rate cuts going? Well, there were probabilities for A50, another half percent cut right after the election in November. Those have disintegrated, evaporated completely. That makes sense, yeah. Will be one of those people Robert because as you're describing that my my reaction is well wait a minute I thought we badly needed these rate cuts to to head off what looked like economic data that was deteriorating and we got this half a percent cut which of course the market liked and it it's again it's good for the economy there's no question about that definitely going to have a nice strong impact on the housing market we talked about that on a previous report but. But this sounds like, well, if we had not, the Federal Reserve had not cut rates, would we have still seen these positive results? And the answer is probably yes, because that that aside from the stock market and maybe a little bit with housing, that rate hasn't been absorbed into the economy yet, correct, Especially with the employment numbers lagging index. Yeah, these numbers would have come out. I mean, the rate cut in and it was past the middle of September, yeah, though that those did not affect these numbers. These numbers were for the month of September during which the rate cuts happened. And add to that, the reason the Federal Reserve felt quote UN quote comfortable lowering rates was that inflation had eased, correct? OK. So is that still the case? Are we still see signs that inflation is cooling or is there we seeing any signs again with the labor market maybe be an indicator, do we see any signs of that may be heating back up? Exactly. So we did see some inflation metrics come out in the last two weeks come out with expectations and a couple like 110th of. Percent higher than expected. So the fear with cutting rates prematurely, and this has always been the case in history, is if the Fed cuts prematurely, then inflation can rear its ugly head again. So that's the primary risk, which most people say is a low probability, but that is still the most significant risk out there for the American economy. If the Fed cut too much with half a percentage or too early that inflation that demand. Will rise faster than supply and which means the increase in prices. So if the Federal Reserve gets ahead of itself, so to speak, then that that can mean that they've they've cut rates maybe where they don't need to, but but again, could be preemptively, you know, they're not just looking at one quarter. They're trying to really navigate this, you know, soft landing. They talk about. So what if they had, what if they had waited and not cut? If they had waited the stock market and bond market as well, they would have been disappointed. You would have seen more volatility, but. There's, there's another meeting in November, 2 months later. So it's not like it would have made a huge difference to the American economy, to the stock market short term because they expected a rate cut, but really not that much of a difference. So what we're looking at now is the markets are expecting now if a rate cut at all in November, it's only going to be 1/4 percent, .25%. But we look at the, the pace and the magnitude of rate cuts. You know, if we skip a rate cut that might make the markets. A little nervous if we skip November, skip December. So that's the pace, but also the magnitude. I think the magnitude with those strong employment numbers have come down from half a percent cut to to the usual quarter quarter point cuts. You know, the 1st I love analogies and the first one that popped into my mind, Robert was a baby expecting to be fed and they don't get that that noontime bottle. I mean, and then they start crying and that's, that's kind of, you know, there's a factor here to this when when is the. When were the rate cut occur in November? When would that be? Do you know the date? It's you, Yes, it's usually on Wednesday, but because of the election this on on in November, it's not going to be November 6th. The day after the election, it will be Thursday, November 7th. OK, so we can't ignore that. You know, there's an election and a big one. Every one of them is a big one. But you know, this is an election that everybody's got their eyes on. And so we can't ignore that, Robert, that there's an election right there that they could have waited. Until after the election and then decide. But that would have created a whole nother set of dynamics And and you know, I do feel for the Fed a little bit. It's a little bit of, you know, damned if you do, damned if you don't kind of situation. Do we cut before if we feel like we need to do we cut after because of the election? And there they I'm sure ultimately, hopefully, I'll put it that way, hopefully just simply ignored politics and made the cut when they felt it was best or most appropriate. So. What I think I'm hearing you say is there's not really a large cut priced in. Is maybe that quarter point priced into what we're seeing in the market for the most part, yes. And and I know this kind of seems like an outlier, but just just something I want to bring in. You know, S&P 500 and the Dow Jones in the last few days have reached new all time highs. So you have that FOMO, FOMO, fear of missing out. You, you still have over six trillion, I think it's $6. 6 trillion in money markets and you know when the Fed cut that. Aggressively and when they continue to cut, that's going to be feeding equity prices, pushing stock prices higher, which is great for once portfolio, but not so great when they get so high that the correction comes. So you know, like you said, the Fed is balancing, you know, very tricky act here well and not to be too predictable, but we'll say it anyway. Robert mentioned a correction, a correction as a 10% drop from whatever you were in terms of at the high of the market. So it's there's nothing wrong with saying, OK, let me look at where I'm at. Do I still have a plan for not using the money that's in the market stock market? Do I still have a plan for not using that for you know, 5 to 10 years out? OK. But again, if you're looking to maybe use that money sooner or you're considering other plans for that. Money now would be a good time to kind of reevaluate because we are at all time highs period and we can't give you the data because of the Internet, but we'll of course on our next show get into some of that and talk more about it. But that's a good time to kind of reevaluate and just take take stock of your stocks. Exactly. Real quick bond market, just real quick bond. Anything specific about the bond market? Obviously they're very, very related and impacted by the trade. Anything notable there? Just one real quick item yes, since the Fed cut. Rates, interest rates have been actually rising. Yields have been rising because of the strong market, strong economic data, stock market going up. So yields have actually increased, pushing bond prices a little lower. Ironic and interesting. OK, well, we will continue to monitor all that. We'll be back with some numbers next time. And we'll do all this, of course, to help you to continue to plan stronger.