Latest / Money Matters with Greg / Episode 193: July Volatility Survival Guide

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Episode 193: July Volatility Survival Guide · Money Matters with Greg

• 0:01
  SPEAKER_00: Welcome to Money Matters with Greg, where we dive into the money conversations shaping your life.
• 0:08
  SPEAKER_00: From investments to estate planning, insurance to taxes, we cover it all with a fresh perspective.
• 0:14
  SPEAKER_00: Join Greg and his guests each week to get inspired and take control of your financial future.
• 0:20
  SPEAKER_00: Let's get started.
• 0:22
  SPEAKER_00: Securities and investment advisory services offered through LPL Financial, a registered investment advisor, member FINRES IPC.
• 0:58
  SPEAKER_00: From investments to estate planning, insurance to taxes, we cover it all with a fresh perspective.
• 1:04
  SPEAKER_00: Join Greg and his guests each week to get inspired and take control of your financial future.
• 1:10
  SPEAKER_00: Let's get started.
• 1:11
  SPEAKER_00: Securities and investment advisory services offered through LPL Financial, a registered investment advisor, member FINRAS IPC.
• 1:46
  SPEAKER_01: It's a wealth management firm here locally in Valparaiso, Indiana, and broadcasting today on Money Matters of Greg, WVLP 103.1 FM, and also anywhere you pod, we turn this into a podcast as well.
• 1:58
  SPEAKER_01: We're going to talk about uh we usually talk about money on the show, anything to do with money, and how we can save some money for you and your families.
• 2:06
  SPEAKER_01: Have many different uh guests on this show that uh help you throughout the manage and navigate the waters that is you know, finance and making money, saving money, growing your money, protecting your money, distributing your money in life, and distributing your money after death.
• 2:21
  SPEAKER_01: So those are the four quadrants of the wealth management world that we talk about all the time on the show.
• 2:26
  SPEAKER_01: Mention that to you.
• 2:28
  SPEAKER_01: Uh hope you can listen, uh, follow, subscribe, and be a part of our Money Management Greg family.
• 2:33
  SPEAKER_01: We uh really enjoy having so many people uh as a part of this podcast.
• 2:38
  SPEAKER_01: Uh now we're on 193rd episode going on 200 and on our way uh to moving forward.
• 2:44
  SPEAKER_01: We again I say we uh part of WVLP 103.1 FM.
• 2:49
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• 2:50
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• 3:11
  SPEAKER_01: And uh it's a great community and glad to be a part of it.
• 3:14
  SPEAKER_01: I wouldn't be remiss uh to not include my disclaimer that I always like to be able to make sure that you hear uh that the opinions voiced in the show, Money Manager Greg, are for general information only and not intended to provide specific advice or recommendations uh for any individual to determine which strategies and investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
• 3:38
  SPEAKER_01: Third-party guests are not affiliated with LPL Financial or Farewell.
• 3:42
  SPEAKER_01: So that should make everybody in the compliance department happy.
• 3:46
  SPEAKER_01: I mentioned LPL.
• 3:47
  SPEAKER_01: LPL Financial is the broker dealer that we're a part of and that uh allows us to be able to do this, but also that helps us, helps guide us compliance-wise and in regards to the securities world, as we're licensed securities professionals, uh and obviously mandated or regulated by FINRA, SIPC.
• 4:05
  SPEAKER_01: And the the higher-ups that are all above my pay grade.
• 4:10
  SPEAKER_01: We like to talk money on the show.
• 4:12
  SPEAKER_01: We also manage the world.
• 4:14
  SPEAKER_01: I try to bring many of the conversations I have that I'm very privy to and very uh honored to have with many families as we talk money because this is an extremely emotional topic, and it can be very, very threatening to a family dynamic, if not managed correctly with all the different conversations we have.
• 4:33
  SPEAKER_01: Obviously, everything we talk about in our meetings is confidential, and that is a very strict regulation in regards to not only our our industry, but as well as morally and ethically.
• 4:45
  SPEAKER_01: Everything we talk about in our rooms is between us and us alone, and the the that's the way we're able to help many of these families.
• 4:53
  SPEAKER_01: We talk estate planning, we talk taxes, we talk investments, debt, or you name it, on this show.
• 4:59
  SPEAKER_01: And we typically like to be able to talk to about something that is present at this time.
• 5:04
  SPEAKER_01: It is the beginning of August.
• 5:06
  SPEAKER_01: July has just ended.
• 5:07
  SPEAKER_01: I would love to be able to talk about uh something other than the market in this situation, but uh because July was so awful, and I just finished uh a podcast a couple of weeks ago with talking about the volatility in the market and the turbulent times that we've had, I figured I had to follow it up just because so everybody knows how July ended.
• 5:27
  SPEAKER_01: And it was ugly, uh have to say, on the AI world, it was very ugly.
• 5:31
  SPEAKER_01: It was not as ugly as one might think, but pretty painful for many uh indices uh in many individual stocks, certainly in the AI industry, many stocks you saw down 20, even 30 percent in the month of July.
• 5:44
  SPEAKER_01: If you just push pause on June 30th and look back, uh it would have been nice to just stop there.
• 5:49
  SPEAKER_01: But that's just not the case.
• 5:51
  SPEAKER_01: It's not the way the market rolls.
• 5:52
  SPEAKER_01: We all know uh it's a living, breathing organism that's going to change things around and move things.
• 5:58
  SPEAKER_01: And the minute you think you think you've uh smarted, outsmarted the market, good luck uh with that, because it's gonna come back and get you.
• 6:05
  SPEAKER_01: But I wanted to talk about that today.
• 6:07
  SPEAKER_01: Markets experience this is a really challenging environment in July, and uh major indices into the month slightly lower, but that's only because of the last two days of July basically we rallied.
• 6:19
  SPEAKER_01: And just so you know, the first few days of August have been magnificent here.
• 6:23
  SPEAKER_01: We're having a great day today as we go into this this week and obviously broadcast a show on Thursdays at one o'clock, and then also uh replayed on Saturdays at three o'clock on WVLP 103.1 FM.
• 6:35
  SPEAKER_01: But this is the week of the first week of August.
• 6:38
  SPEAKER_01: And even though the major indices ended the month slightly lower, it felt much more painful than that because in the context of healthy year-to-date gains overall and the broad market that is not far from its all-time high, even here, um, there's just been a number of factors that drove this day-to-day market moves that would just were, you know, wake up.
• 6:59
  SPEAKER_01: And just as a reminder to everybody, the market doesn't go up every day.
• 7:02
  SPEAKER_01: And that's uh at times people have been very, very spoiled with that, uh, with the ability to be able to wake up every morning and know that your investments have gone up.
• 7:10
  SPEAKER_01: And will they continue to go up?
• 7:12
  SPEAKER_01: Certainly looks like that.
• 7:13
  SPEAKER_01: That's just not the case in in overall investments.
• 7:16
  SPEAKER_01: You have to be able to withstand the volatility and withstand a 10% drawdown, 20% drawdown, sometimes even a 30% drawdown in regards to the historical moves of the markets.
• 7:28
  SPEAKER_01: That's part of being an investor.
• 7:29
  SPEAKER_01: It is what it is.
• 7:30
  SPEAKER_01: You got to take with take the for all the rewards you get, you've got to be able to take the risk.
• 7:34
  SPEAKER_01: And with July, the number of day-to-day factors that really drove the market moves, these are new concerns about AI investments, for sure.
• 7:42
  SPEAKER_01: That was the biggest one right there.
• 7:43
  SPEAKER_01: Treasury yields climbed to multi-year highs.
• 7:46
  SPEAKER_01: Oil prices rose following the breakdown in the Middle East ceasefire, and the Federal Reserve kept rates unchanged.
• 7:53
  SPEAKER_01: So those are really the four things that that really affected this market in July.
• 7:58
  SPEAKER_01: And many of these events reflect the longer-term themes that really kind of continue to drive volatility in the in the coming months.
• 8:06
  SPEAKER_01: At the same time, you know, like for instance, in the last two days, we're up based on peace stocks are back on.
• 8:13
  SPEAKER_01: Looks like they are working well.
• 8:15
  SPEAKER_01: Oil just dropped below$80 a barrel here today, and it was just over$100.
• 8:19
  SPEAKER_01: So that's how volatile things have been here in the last 30 days.
• 8:22
  SPEAKER_01: 100 down to 80, 80 up to 90, 90 down to below 80 again.
• 8:28
  SPEAKER_01: And many of the many of the stocks obviously reflected that as well.
• 8:32
  SPEAKER_01: But these trends really have propelled markets this year for sure.
• 8:36
  SPEAKER_01: And highlighting the importance of really this balance that I've been talking about about your portfolios is mainly maintaining this longer-term perspective, investing wisely, investing in good investments, investing in asset classes that are going to perform and do well in an environment that is going to grow.
• 8:51
  SPEAKER_01: And with your growth investments that you have, want to make sure that you are on the cusp of that trend and in that trend or riding that trend ultimately to grow your assets.
• 9:02
  SPEAKER_01: And then ultimately, you know, if the if the trend starts to die, that's when you want to get out.
• 9:07
  SPEAKER_01: And it's suddenly the talk of the town.
• 9:09
  SPEAKER_01: And everybody is wanting to get in, is usually when you've already been there.
• 9:13
  SPEAKER_01: But what lessons can investors learn from this past month as they navigate this rest of the year?
• 9:19
  SPEAKER_01: So many economic drivers are happening in July.
• 9:21
  SPEAKER_01: So the SP 500, just to give you the data here to give you the numbers, the SP 500 and the NASDAQ both declined 0.1 and negative 3.2% of the Nasdaq, respectively.
• 9:32
  SPEAKER_01: Jones industrial average rose 0.3 in July.
• 9:35
  SPEAKER_01: And just so, you know, uh, again, a reminder, we don't look at the Dow.
• 9:39
  SPEAKER_01: Everyone talks about the Dow.
• 9:41
  SPEAKER_01: Everything in the markets, as far as you know, the the talking heads in the media, they still talk about the Dow.
• 9:46
  SPEAKER_01: I don't even know why.
• 9:48
  SPEAKER_01: It's only 30 stocks.
• 9:49
  SPEAKER_01: Nobody really pays attention to it in the in the real investment world.
• 9:52
  SPEAKER_01: And I highly recommend you back away from it too.
• 9:54
  SPEAKER_01: It's the SP 500, it's the NASDAQ, it's the s it's it's the Russell.
• 9:58
  SPEAKER_01: Uh, these are all really, really important indices that matter.
• 10:00
  SPEAKER_01: I top 30 stocks, it's it's old, no offense to many of those companies, but uh it is a big driver.
• 10:08
  SPEAKER_01: It is the talk of the town.
• 10:09
  SPEAKER_01: Dow Industrials moved 500 points.
• 10:12
  SPEAKER_01: Like it's 30 stocks.
• 10:13
  SPEAKER_01: It's not the majority of what you're investing in and overall is the asset classes.
• 10:18
  SPEAKER_01: When you talk about blanketing an asset class and owning an asset class, you're owning multiple different stocks inside of that, not just one.
• 10:25
  SPEAKER_01: So anyway, that's my rant on the Dow.
• 10:28
  SPEAKER_01: Volatility jumped in the middle of the month with the VIX index climbing as high as 21 out of nowhere.
• 10:34
  SPEAKER_01: It was just trading around 16.
• 10:36
  SPEAKER_01: It was actually as low as 14 in June at one time.
• 10:39
  SPEAKER_01: Uh it traded there and then rallied to 21, went to 16, uh, and then now is even below that in the last couple of days.
• 10:46
  SPEAKER_01: You had international markets returned 1.9% in the month, and that's based on the MSCI EFE index in the US dollar terms, which matters because of currency takes it out.
• 10:59
  SPEAKER_01: And emerging markets fell 3.3% based on the MSCI emerging market index.
• 11:04
  SPEAKER_01: The 30-year treasury yield surged to a 19-year high.
• 11:09
  SPEAKER_01: I think the last time I talked about the market on this show, I was talking about the 10-year being where it should be, is right around 4.2 or even four.
• 11:16
  SPEAKER_01: It was trading at the time of 4.3.
• 11:18
  SPEAKER_01: Now it's 4.74 close the end of the month.
• 11:21
  SPEAKER_01: So that's a peak.
• 11:22
  SPEAKER_01: Uh the overall, the 30-year was 5.28.
• 11:25
  SPEAKER_01: So in the uh Bloomberg U.S.
• 11:27
  SPEAKER_01: aggregate index fell 1.3%.
• 11:30
  SPEAKER_01: So the aggregate index is bonds.
• 11:32
  SPEAKER_01: And the so if you run to the hills and basically turn everything away from equities in the month of July that was so bad and say, look, uh, just throw me in bonds, I'm good.
• 11:42
  SPEAKER_01: You lost 1.3%.
• 11:43
  SPEAKER_01: So uh it was across the board in July, uh, without a doubt.
• 11:47
  SPEAKER_01: And uh, you know, it's been very difficult to find.
• 11:50
  SPEAKER_01: Uh, but with the long-term aspect, long-term perspective, and you're in good investments, you'll you'll you'll be fine.
• 11:57
  SPEAKER_01: It's just a matter of just having to weather this.
• 11:59
  SPEAKER_01: It is what it is.
• 12:00
  SPEAKER_01: It's called volatility.
• 12:01
  SPEAKER_01: I always say, you know, they call it they call it fishing, not catching.
• 12:05
  SPEAKER_01: So when I go fishing, you know, you don't always catch.
• 12:08
  SPEAKER_01: With the investment, they call it investing, and there is going to be volatility.
• 12:12
  SPEAKER_01: So you have to be able to know that look, it's not investing, it does come with this risk.
• 12:17
  SPEAKER_01: So just make sure you are okay with it.
• 12:19
  SPEAKER_01: Oil prices.
• 12:20
  SPEAKER_01: Let's talk about oil prices.
• 12:21
  SPEAKER_01: They rose again, climbing above$100 before closing at$90 per barrel at the end of the month, and WTI was at about$85 per barrel.
• 12:30
  SPEAKER_01: Now both are below$80.
• 12:33
  SPEAKER_01: They're down over 5.5% today.
• 12:35
  SPEAKER_01: They were down 7% yesterday.
• 12:37
  SPEAKER_01: So hopefully some sort of resolution in Iran becomes uh uh and it actually happens.
• 12:42
  SPEAKER_01: One last thing, the dollar index, the DXY, fell under 100 while the Japanese yen depreciated significantly, closing around uh 157.
• 12:52
  SPEAKER_01: So that was big news.
• 12:54
  SPEAKER_01: The market didn't like that.
• 12:55
  SPEAKER_01: And there's a number of reasons for that.
• 12:56
  SPEAKER_01: I won't go into today, but uh gold did end up the month approximately unchanged at about$4,000,$400,050 per ounce is where it closed.
• 13:05
  SPEAKER_01: It really hasn't moved much in a while.
• 13:07
  SPEAKER_01: Other news that came about, second quarter, real GDP growth increased by an annual rate of 1.5%.
• 13:13
  SPEAKER_01: That's down from the 2.1% growth recorded in the first quarter of the year.
• 13:17
  SPEAKER_01: So that was nervousness about the economy.
• 13:19
  SPEAKER_01: And congratulations, our new uh Fed chair had his first big meeting, July, FOMC Federal Reserve meeting was uh in July, and they decided to keep rates changed at four and a half to three seventy-five in a nine to three vote.
• 13:35
  SPEAKER_01: So the big news that's out there is AI investments and how the mixed results really kind of came across the tech sector.
• 13:41
  SPEAKER_01: We were watching corporate earnings and certainly wanted to be able to go through that for the second quarter.
• 13:46
  SPEAKER_01: And that raised new concerns and new questions about AI investments and actually the amount of money that's going into these investments, and are they paying off as far as the return on investment or the ROI?
• 13:57
  SPEAKER_01: The market is challenging these companies to say, hey, look, you know, you are you sure about this multi-billion dollar expenditure?
• 14:05
  SPEAKER_01: Are you sure it's going to pay off?
• 14:06
  SPEAKER_01: Now, this caused huge market swings, primarily reflecting investor concerns over like the free cash flow of companies, the large company, you know, the these large technology companies.
• 14:17
  SPEAKER_01: And, you know, they're often referred to as hyperscalers.
• 14:21
  SPEAKER_01: And these companies continue to invest hundreds of billions of dollars in new data centers and AI infrastructure.
• 14:26
  SPEAKER_01: And the market is scrutinizing, you know, that it's what it does.
• 14:29
  SPEAKER_01: It uh it holds them accountable to determine whether these massive capital expenditures will translate into profits.
• 14:36
  SPEAKER_01: And at the same time, spending on data centers alone has become a meaningful contributor to the U.S.
• 14:41
  SPEAKER_01: economy overall.
• 14:42
  SPEAKER_01: I mean, it really has happened.
• 14:43
  SPEAKER_01: It's surpassing all categories as far as office construction.
• 14:47
  SPEAKER_01: So it's a big driver in the economy.
• 14:50
  SPEAKER_01: But concerns over this level of investment are also triggering volatility in the international markets.
• 14:56
  SPEAKER_01: So it's definitely it triggers, and specifically among global semiconductor companies.
• 15:02
  SPEAKER_01: So major chip suppliers faced these really sharp corrections during the month.
• 15:06
  SPEAKER_01: You saw the SMH semiconductor index go down.
• 15:10
  SPEAKER_01: The leading the overall was said the South Korea, the Coast B, the 200, that index fell 24 in the month of July.
• 15:17
  SPEAKER_01: Let me say that again.
• 15:18
  SPEAKER_01: 24% in the month of July, the South Korean semiconductor index, uh, you know, continued with volatility, but man, it just got hammered.
• 15:26
  SPEAKER_01: And then it, you know, it had a huge run-up, obviously, in 2025 and 2026.
• 15:31
  SPEAKER_01: But to lose 24% in a month is painful.
• 15:34
  SPEAKER_01: Now, while AI continues to be a major theme fueling all these markets, obviously just periods that we're gonna have to navigate and figure it out if we're in good names.
• 15:44
  SPEAKER_01: But another development in July that was through the release of a new large language model that came out, Kimi K3, if you haven't heard of it.
• 15:53
  SPEAKER_01: But this is the Chinese company Moonshot AI that came out with this version.
• 15:59
  SPEAKER_01: It's a very large language model.
• 16:01
  SPEAKER_01: And the model reportedly competes with the most advanced models from companies such as OpenAI, Anthropic, and Alphabet.
• 16:07
  SPEAKER_01: Now, it is also what's called open weight, and that means that anyone with the right hardware can run the model themselves.
• 16:15
  SPEAKER_01: And in contrast to most frontier models, which is they're all proprietary.
• 16:20
  SPEAKER_01: So again, the other big three I just mentioned OpenAI, Anthropic, and Alphabet, all have proprietary.
• 16:26
  SPEAKER_01: This is this is basically an open weight model.
• 16:30
  SPEAKER_01: So while if you remember the story about Deep Seek that happened just last year, while last year's Deep Seek models really showed that AI models could be more efficient, Kimmy K3 shows that newer open models can be competitive with cutting-edge ones and for cheaper.
• 16:45
  SPEAKER_01: So this creates further uncertainty really about the future of the AI industry, both in terms of hardware infrastructure needs, as well as protection, compliance, you know, your overall data, do you really trust?
• 16:56
  SPEAKER_01: Just because it's maybe cheaper or faster, do you trust it?
• 17:00
  SPEAKER_01: And as well as any country that will eat this next phase of AI capabilities, you know, we really have to be having those questions, those hard questions about what countries do you want to have your data in.
• 17:10
  SPEAKER_01: One more thing to throw out there as far as July goes, but Fitch, the credit rating agency, it flagged what it's described as a quote unquote major credit risk across the AI ecosystem.
• 17:21
  SPEAKER_01: Now, their report cited showing slowing consumer momentum and a highly interconnected nature of financing uh and supply arrangement among the major players.
• 17:32
  SPEAKER_01: So basically, they lowered the rating uh overall as far as the industry goes, as far as that credit that companies take out and the financing that they need to be able to pay for these multi-billion dollar facilities.
• 17:44
  SPEAKER_01: It doesn't just grow on trees.
• 17:46
  SPEAKER_01: So they want to be able to finance it and they want to make sure that they uh have enough money to be able to pay for it.
• 17:51
  SPEAKER_01: So uh Fitch put up a warning sign on that, and uh that was interesting too.
• 17:55
  SPEAKER_01: So it's something to watch for sure as these large investments continue.
• 18:00
  SPEAKER_01: So for long-term investors, it's obviously I mentioned this again, it's a very important to remember that AI theme is only one set of factors that drives markets.
• 18:09
  SPEAKER_01: Now, I do have a chart that I always like to throw up there.
• 18:12
  SPEAKER_01: It's on our on our blog.
• 18:13
  SPEAKER_01: If you go to farewell.com, uh you can find it on our blog and uh see these charts.
• 18:17
  SPEAKER_01: But the chart that I have that showed really tr shows that other sectors performed extremely well, including energy, industrials, and more.
• 18:27
  SPEAKER_01: While markets really continue to kind of gauge this long-term economic impact of AI, investors should uh certainly continue to stay balanced across the asset classes, like I talked about.
• 18:38
  SPEAKER_01: Before I go into the Middle East and having that conversation, just one quick station identification.
• 18:43
  SPEAKER_01: This is Greg Farrell, CEO and owner of Feral Wealth.
• 18:46
  SPEAKER_01: I'm the licensed financial advisor and owner of a federal wealth management firm that helps clients in 25 states uh manage their money, navigate the waters of their money.
• 18:56
  SPEAKER_01: And that's what we do in this show is talk financial literacy.
• 18:58
  SPEAKER_01: You can find this show on anywhere you pod, Spotify, Apple, Google, you name it, and our YouTube.
• 19:03
  SPEAKER_01: And check out our YouTube channel as well.
• 19:05
  SPEAKER_01: It'll be on our YouTube channel later today.
• 19:07
  SPEAKER_01: And then we're broadcasting on WVO, WVLP 103.1 FM here locally in Valparaiso, Indiana.
• 19:14
  SPEAKER_01: And uh thanks for joining us.
• 19:15
  SPEAKER_01: I highly recommend you like, subscribe, and also contact us if you have any anything you'd like to be able to talk about as far as any content, any questions about anything investments and anything financial to do, anything to do with money.
• 19:29
  SPEAKER_01: The last few things I want to talk about is the Middle East, but that really pushed oil back up in July with this ongoing conflict and war that uh the tensions certainly reignited mid-month.
• 19:40
  SPEAKER_01: U.S.
• 19:41
  SPEAKER_01: conducted more air strikes against Iranian military sites, and it led to slower traffic through the strait.
• 19:48
  SPEAKER_01: And it's a critical, obviously a critical choke point of global oil.
• 19:52
  SPEAKER_01: And the conflict really expanded in when another waterway, the uh Bab El Mandeb Strait in the Red Sea, also came under fire when Yemen's uh Houthi uh forces struck Saudi Arabian oil tankers.
• 20:07
  SPEAKER_01: So that sent us into a tailspin for sure.
• 20:09
  SPEAKER_01: And crude oil then jumped over$100 a barrel, and that briefly settled back down to$90 by the end of the month.
• 20:16
  SPEAKER_01: And before that, in early July, it was trading$72 a barrel.
• 20:20
  SPEAKER_01: So here we are now in just the last few days of or the first few days of August.
• 20:25
  SPEAKER_01: Uh we're back under$80, which is great.
• 20:27
  SPEAKER_01: It's not$100.
• 20:28
  SPEAKER_01: And so higher energy prices really matter for the broader economy because they obviously direct they directly affect every single consumer, but it raises raised fuel costs for households and businesses just sucks and it hurts, and nobody wants that.
• 20:43
  SPEAKER_01: And gasoline prices are still hovering around$4.10 per gallon across the country, which certainly could potentially keep uh headline inflation higher.
• 20:52
  SPEAKER_01: Now, here in Indiana, I just passed the pumps this morning.
• 20:55
  SPEAKER_01: I saw our E85 that's heavy ethanol uh base, it was at$2.19.
• 21:01
  SPEAKER_01: So there is hope.
• 21:03
  SPEAKER_01: Uh and then also our 87, 89, obviously other octanes.
• 21:07
  SPEAKER_01: I think 87 I saw as low as 329 today here.
• 21:10
  SPEAKER_01: So no, that's not California, but um, and that's not national.
• 21:15
  SPEAKER_01: But I definitely would think that the$4.10 per gallon number across the board that was the end of July certainly has come in considerably and will be below that$4 number here in the next in the recent weeks.
• 21:27
  SPEAKER_01: The last thing I want to mention is the Federal Reserve, and uh they held uh rates amid this uh really divided committee.
• 21:33
  SPEAKER_01: It's a new committee, or it's definitely a new chairmanship, new leadership.
• 21:37
  SPEAKER_01: And it's July, in its July meeting, the Federal Reserve Open Open Market Committee, the F O M C kept Federal Reserve rates at 3.5 to 3.75, uh even though they are concerned about higher inflation.
• 21:50
  SPEAKER_01: Now, this led to additional volatility as bond yields rose, which sucks.
• 21:55
  SPEAKER_01: Nobody wants that.
• 21:56
  SPEAKER_01: And the investors tried to gauge when the Fed might uh begin raising.
• 22:00
  SPEAKER_01: Rates.
• 22:00
  SPEAKER_01: You know, the last thing you want is as fed is as the rates rise, you're just trying to get a coupon and trying to get paid as a bondholder.
• 22:07
  SPEAKER_01: And uh there's a lot of volatility in the bond market when there's uh a lot of d discussion and animosity between the feds.
• 22:14
  SPEAKER_01: So the new Fed chair chair, Kevin Walsh, which I just talked about two weeks ago and his new installation of being the the new Fed chair in a I think podcast 191, he intentionally reduced communication around how the Fed may act at future meetings.
• 22:31
  SPEAKER_01: And so he his philosophy is less talk is better.
• 22:36
  SPEAKER_01: I'm not going to telegraph where we're going or what we're doing.
• 22:39
  SPEAKER_01: We're just going to tell you at the meeting what we're doing, and then that's it.
• 22:41
  SPEAKER_01: And there's no no you know no noise, which actually, in my opinion, is refreshing because we've gone so long and so far since the Greenspan days of all these Fed chairs acting like they are super important and which they are, right?
• 22:56
  SPEAKER_01: But they don't need to broadcast everything and go on Twitter and X and all the other socials or whatever they decide to to do with their comments.
• 23:05
  SPEAKER_01: It just really messes up the market.
• 23:07
  SPEAKER_01: And so he's basically turning it around and saying, look, we're gonna we're gonna be pretty, pretty tight-lipped here.
• 23:13
  SPEAKER_01: And he avoided questions on how the Fed might react to different economic scenarios.
• 23:18
  SPEAKER_01: Uh he gave less forward guidance, which means that investors may be less sure about how the Fed might respond to entire inflation, a slower labor market, and other factors.
• 23:27
  SPEAKER_01: Look, the market's figuring out that Warsh doesn't like to talk a lot.
• 23:31
  SPEAKER_01: And then you've got to be able to we've got to get through that.
• 23:34
  SPEAKER_01: And it will.
• 23:36
  SPEAKER_01: It will.
• 23:36
  SPEAKER_01: But initially, that causes volatility.
• 23:39
  SPEAKER_01: This guy doesn't talk.
• 23:40
  SPEAKER_01: The other guys, everybody used talk.
• 23:42
  SPEAKER_01: They telegraphed everything and you know, and the market would react to it.
• 23:46
  SPEAKER_01: So the immediate reaction was a jump in bond yields initially, with both the nominal and real treasury rates climbing to their highest levels in recent years.
• 23:55
  SPEAKER_01: Market-based expectations for sure just sort of suggest that the Fed could raise rates by once, maybe once by October, and possibly twice by the middle of 2027.
• 24:04
  SPEAKER_01: You know, we'll see.
• 24:05
  SPEAKER_01: You know, see how this goes.
• 24:06
  SPEAKER_01: Trust me, the way he's gonna uh talk about it is not talk about it.
• 24:10
  SPEAKER_01: So you're gonna find out when it's at the meeting.
• 24:12
  SPEAKER_01: There's not gonna be a lot of lead up here.
• 24:14
  SPEAKER_01: But three Fed officials dissented at the latest meeting, meaning that they favored a rate increase.
• 24:19
  SPEAKER_01: So that was interesting.
• 24:20
  SPEAKER_01: Uh, and this represents really a level of internal disagreement that has been really rare in in recent years, and a disagreement of this kind last occurred, just to give you a historical presence.
• 24:32
  SPEAKER_01: The last times there there was this much dissension and so much animosity on the Fed indifference, it was September of 2016.
• 24:41
  SPEAKER_01: So a decade ago was the last time there was this much argument.
• 24:45
  SPEAKER_01: So, look, I think that's good.
• 24:47
  SPEAKER_01: You know, it's okay.
• 24:48
  SPEAKER_01: That's what at least they're doing their job.
• 24:50
  SPEAKER_01: Not everybody's just a yes man to be able to accept whatever the Fed chair decides.
• 24:53
  SPEAKER_01: So for markets, this represents a hint to as to what the Fed may be considering at upcoming meetings, especially inflation remains elevated, and we'll see.
• 25:03
  SPEAKER_01: So for investors, please, Fed uncertainty could result in more volatility and yields as far as the bond markets.
• 25:08
  SPEAKER_01: And it does definitely represent opportunities for portfolio diversification across the board.
• 25:14
  SPEAKER_01: One last thing before I close, I want to talk about the new tariffs that add really more economic uncertainty.
• 25:19
  SPEAKER_01: So most people don't know this, but and I don't know if you saw this on the news because you probably didn't because it wasn't there.
• 25:25
  SPEAKER_01: New tariffs added further complexity to economic backdrop.
• 25:29
  SPEAKER_01: I haven't really heard much about tariffs recently.
• 25:31
  SPEAKER_01: I don't know if you have, but the Supreme Court ruled that last year's reciprocal tariffs under the International Emergency Economic Powers Act were illegal.
• 25:41
  SPEAKER_01: Administration responded by implementing new tariffs under a different trade law called Section 122 of the Trade Act of 1974.
• 25:49
  SPEAKER_01: Now, those tariffs expired in July, resulting in the White House implementing an additional new tariffs under different trade rules.
• 25:57
  SPEAKER_01: So what that boils down to is, again, volatility, uncertainty, and just another factor.
• 26:03
  SPEAKER_01: And it boils down to that many countries now face tariffs ranging from 10 to 12.5%, which honestly most of them can handle.
• 26:10
  SPEAKER_01: Additionally, certain countries face much higher rates, including a 50% tariff on certain Canadian goods, such as cement, dairy, and alcohol out of Canada.
• 26:19
  SPEAKER_01: These tariffs were rolled out under Section 338 of the Tariff Act of 1930.
• 26:24
  SPEAKER_01: This is cited, this is obviously because they're big-time lawyers that have the ability to be able to know this stuff, and go under whatever trade act they're actually able to get through.
• 26:34
  SPEAKER_01: This really cites the administration that's described sort of as discriminatory treatment of American products.
• 26:42
  SPEAKER_01: Call it whatever you want.
• 26:43
  SPEAKER_01: You're gonna have to deal with it if you're a certain country.
• 26:46
  SPEAKER_01: And as always, the economic effects of these tariffs measures will, you know, it's gonna take time to materialize.
• 26:52
  SPEAKER_01: So the key consideration for long-term investors is that many of these market and economic concerns from tariffs have really not played out as some had feared at all.
• 27:04
  SPEAKER_01: And honestly, many of them needed to happen, in my opinion.
• 27:08
  SPEAKER_01: There's been, we've been not, we've been not been able to compete in multiple different markets because those countries tariff us and tariff our goods, and we don't tariff them.
• 27:17
  SPEAKER_01: So while tariffs do affect specific industries and consumer prices, companies can also react and adjust their pricing over time.
• 27:25
  SPEAKER_01: Not gonna say it's easy.
• 27:26
  SPEAKER_01: I'm not gonna dissuade that.
• 27:28
  SPEAKER_01: But in fact, the economy has really grown steadily and the SP 500 has hit many new highs over the past years, in past years, in spite of all of this, in spite of all these tariffs and fear mongering and everything else you've got going on.
• 27:41
  SPEAKER_01: So the bottom line is July really reinforced once again the importance of keeping a long-term perspective.
• 27:46
  SPEAKER_01: Market challenges can create one up and down move in a month, you know, is not going to be as necessarily something you remember 10 years from now for sure.
• 27:54
  SPEAKER_01: Uh if you do, good for you.
• 27:56
  SPEAKER_01: I I certainly wouldn't.
• 27:57
  SPEAKER_01: But market challenges really create these opportunities for investors who are positioned across different asset classes, stay focused, see the bigger picture rather than reacting to the news headlines for sure.
• 28:10
  SPEAKER_01: And just, you know, remain the best, is really remains is the best way for you to achieve your financial goals.
• 28:16
  SPEAKER_01: So with that, uh, the show's Money Matters with Greg.
• 28:18
  SPEAKER_01: I'm Greg Farrell, CEO and president of Faro Wealth, management firm here in Valparaiso, Indiana.
• 28:23
  SPEAKER_01: And Money Matters with Greg is broadcast on 103.1 FM W VLP here locally, and then also anywhere you pod.
• 28:31
  SPEAKER_01: Reach out to us.
• 28:32
  SPEAKER_01: Greg at farwealth.com is my email.
• 28:34
  SPEAKER_01: And if you want to certainly discuss about this, discuss topics about the show or anything else.
• 28:40
  SPEAKER_01: Uh hopefully today was a nice little recap of July.
• 28:43
  SPEAKER_01: And hopefully August is going to be a better month because uh July was pretty ugly.
• 28:47
  SPEAKER_01: And many people got, you know, they they they had some nice gains going into June for the beginning of the year, and uh the many of those gains were taken away in July.
• 28:55
  SPEAKER_01: So we'll see what happens, and hopefully this is some sort of solace for you to understand what's been going on, and then also be a long-term investor, diversify your portfolio, and thanks for tuning in to Money Matters with Greg.
• 29:10
  SPEAKER_00: We hope you gained some valuable insights today.
• 29:13
  SPEAKER_00: Remember, your financial journey is personal, but you don't have to go it alone.
• 29:18
  SPEAKER_00: If you enjoyed the show, be sure to subscribe and share.
• 29:21
  SPEAKER_00: Until next time, here's to making your money work for you.
• 29:24
  SPEAKER_00: Securities and investment advisory services offered through LPL Financial, a registered investment advisor, member FINRA SIPC.