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When The 10 Year Hits 5 Percent What Breaks First · HPK Provident Advisors: The Weekly Bull

• 0:02
  SPEAKER_01: Welcome to Friday Live.
• 0:04
  SPEAKER_01: Every Friday, some of the partners HBK Provident get together and discuss what we're seeing going on in the markets, the economy, and tying in some financial planning topics.
• 0:11
  SPEAKER_01: So it just meet a day, so I will keep it short, mostly market-related, but I will touch on a couple other subjects.
• 0:18
  SPEAKER_01: So the highlight of the week was well, retail sales and then the Fed meeting.
• 0:24
  SPEAKER_01: So starting with retail sales came in much better than expected in last month's negative reading coming in at 1.2% on the headline number.
• 0:32
  SPEAKER_01: Now, you might think that gasoline had a lot to do with that because oil has certainly risen substantially over the last couple weeks.
• 0:40
  SPEAKER_01: However, X um gasoline was still 1.2, and the control group, which feeds into GDP, was actually 1.4.
• 0:48
  SPEAKER_01: So that really raised the Atlanta Fed's GDP now, and essentially giving the Fed the green light to raise interest rates for the first time in three years or so, going a quarter of a basis percent.
• 1:03
  SPEAKER_01: Now, markets were pricing in a 90% chance of a rate hike, so not surprising at all.
• 1:09
  SPEAKER_01: And the market reaction was a little bit down, um, well off the highs, but saw a nice rebound yesterday.
• 1:16
  SPEAKER_01: Um so you know, I I think I don't think the new Fed chair really had a choice because his previous comments really backed him into a corner.
• 1:26
  SPEAKER_01: The long end of the yield curve really rose quite a bit.
• 1:30
  SPEAKER_01: We're we're hovering right around 5% on the 10-year and are still at those current levels.
• 1:36
  SPEAKER_01: So um, if he really wanted to give Fed credibility, I think going 50 basis points would have been the better thing, and then maybe 50 and pause, as opposed to is this the start of a new rate hiking cycle?
• 1:50
  SPEAKER_01: Now, although I think he had to do it based on his previous comments uh before the Jackson Hole meeting, um, and including that one, I guess.
• 2:00
  SPEAKER_01: But I personally I don't think, I mean, hopefully I could have, if I'm not ever gonna be the Fed chair, but if I gave different messaging, um, I don't think the long end would have risen up so much up to that point.
• 2:14
  SPEAKER_01: And I probably would have stayed on the sidelines as a pause.
• 2:17
  SPEAKER_01: There's a lot of contradicting information, economists, market strategists, whether the economy is strong or if it's kind of weakening, um, you know, they go back and forth.
• 2:28
  SPEAKER_01: I, you know, the the last couple uh data points we had were positive for retail sales, like I mentioned.
• 2:36
  SPEAKER_01: Um, we saw a nice uptick in non-farm payrolls in the last report, but the data's been so volatile and the seasonal adjustments.
• 2:43
  SPEAKER_01: Um the bottom line is we've been averaging about 70,000 uh job growths, jobs added over the past three months.
• 2:53
  SPEAKER_01: Um inflation has you know cooperated.
• 2:56
  SPEAKER_01: We're about the 2% level over the last three months.
• 3:00
  SPEAKER_01: Um and then my big concern is I mean, I flagged the credit card data last week, but that that's that's certainly rising.
• 3:09
  SPEAKER_01: And uh consumer spending has been outpacing uh personal income for quite some time, and wage growth has been outpaced by inflation for some quite some time.
• 3:19
  SPEAKER_01: So, although there's a lot of positive dynamics going on in the economy and for the markets, including earnings growth, you know, the markets close to all-time highs or a couple percent off.
• 3:31
  SPEAKER_01: Um, housing hasn't really declined price-wise, although housing has been weak overall.
• 3:37
  SPEAKER_01: Um, and then now they're gonna be getting higher rates, especially the higher net worth on uh savings rates and interest-bearing vehicles.
• 3:47
  SPEAKER_01: So definitely uh I'm still sticking to the K-shaped economy.
• 3:51
  SPEAKER_01: Um, I think there's some underlying weakness that I certainly wouldn't have uh raised rates, at least at this point.
• 3:58
  SPEAKER_01: Um I think we have to see some more data.
• 4:01
  SPEAKER_01: And real, I mean, where where beside outside of energy, um, where is the inflation growth really coming from?
• 4:08
  SPEAKER_01: As I mentioned, it's not coming from wages, uh, the money supply is not growing substantially.
• 4:13
  SPEAKER_01: Um so I just don't see it.
• 4:16
  SPEAKER_01: Um but overall, you know, the market's hanging in there.
• 4:20
  SPEAKER_01: We'll turn to the markets now.
• 4:21
  SPEAKER_01: I think the most important things we need to look at besides the overall price action.
• 4:25
  SPEAKER_01: So this is the SP 500.
• 4:27
  SPEAKER_01: We're kind of in this descending triangle.
• 4:30
  SPEAKER_01: Now, typically in a bull market, this this tends to um push to the upside and break out.
• 4:35
  SPEAKER_01: Um, but this range is getting narrower.
• 4:39
  SPEAKER_01: The VIX is pretty low.
• 4:40
  SPEAKER_01: So we could see a substantial move in the next couple weeks.
• 4:43
  SPEAKER_01: Whether that's to the upside or downside, we'll have to see.
• 4:46
  SPEAKER_01: Um, with the points I just mentioned, and I mean, we're coming off of incredible earnings growth.
• 4:52
  SPEAKER_01: Is that potentially the peak or is it going to keep accelerating?
• 4:56
  SPEAKER_01: Um, this this time of year tends to be very volatile, especially in a midterm year, the end of September into the first week or so of October.
• 5:03
  SPEAKER_01: So I'm thinking we could break to the downside in the short term.
• 5:07
  SPEAKER_01: I don't think that's a sustainable thing unless the you know Fed keeps going at it hard and really um putting pressure on the economy.
• 5:15
  SPEAKER_01: But there's kind of consensus that they're not going to go before the midterms to kind of keep that not being biased by uh the executive branch.
• 5:25
  SPEAKER_01: I think that kind of signals they are potentially.
• 5:30
  SPEAKER_01: Um but, anyways, um, so it was a unanimous vote.
• 5:34
  SPEAKER_01: Um, all members voted for a 25 basis point increase.
• 5:38
  SPEAKER_01: And I believe 16 of the 18 that gave projections uh see one additional rate hike this year and staying at a long higher level um going into next year and actually raising the neutral rate.
• 5:52
  SPEAKER_01: Um the Fed chair Warsh did say that it's hard to argue that we're in a restrictive monetary policy right now.
• 6:00
  SPEAKER_01: So um I think we really need to watch out for, keep an eye on the 10-year outside of October or so of 2023, where we got pretty close to this level.
• 6:12
  SPEAKER_01: The 10-year is now trading at the highest level, besides that, going back to 2007-ish.
• 6:18
  SPEAKER_01: So could put some pressure there on the economy.
• 6:22
  SPEAKER_01: Um, crude did come down today.
• 6:25
  SPEAKER_01: However, we're still at 97 a barrel.
• 6:28
  SPEAKER_01: It looks like we had good.
• 6:30
  SPEAKER_01: I mean, it's certainly a good thing that we we failed at this level because we don't want to see a breakout there and see substantially higher energy prices.
• 6:37
  SPEAKER_01: I think some of the relief is that we're gonna have some geopolitical talks next week.
• 6:42
  SPEAKER_01: Um, so hopefully we can make some progress on that in the war.
• 6:46
  SPEAKER_01: Um outside of that, we started seeing an uptick in high yield spreads that's retreating back today, um, but still very low levels.
• 6:55
  SPEAKER_01: Um turning to our and and before I go into our blog post, next week there's, I mean, we get some housing data, but it's kind of light on an economic uh front.
• 7:06
  SPEAKER_01: So we'll just be watching price action closely and see uh if we get a breakout in any direction.
• 7:12
  SPEAKER_01: We're likely to consolidate around this level for the next, I would say, week and then see a breakout in either direction.
• 7:19
  SPEAKER_01: Um, we do try to post every day on uh our Facebook page.
• 7:24
  SPEAKER_01: So we had an article come out on, I believe, I actually I think they all came out on the 15th because of the timing with compliance.
• 7:32
  SPEAKER_01: But protecting your legacy, um, it goes into details about you know, a will is great, you should have one.
• 7:40
  SPEAKER_01: Not that everyone does, um, but that's just kind of where it starts.
• 7:43
  SPEAKER_01: Uh, make sure you have power of attorneys, like medical, and if something happens to you, you have decision making uh by someone you trust, and that's usually a family member.
• 7:54
  SPEAKER_01: And then there's some good resources down here talking about, you know, the exemption of estate taxes, what that level is, and just some things to think about.
• 8:03
  SPEAKER_01: Um, the other article we had come out, which was I thought pretty helpful, was the about your retirement plan and some of the options you have in there.
• 8:13
  SPEAKER_01: Uh, they talked about HSAs, which are um a great, a great tax uh efficient vehicle.
• 8:21
  SPEAKER_01: You get the tax deduction on the way in.
• 8:23
  SPEAKER_01: If you invest it, which most plans do have those capabilities, it grows tax-free.
• 8:28
  SPEAKER_01: And then if you use it for the qualified healthcare expenses, which is a pretty broad category, um, it's tax exempt.
• 8:35
  SPEAKER_01: So a great vehicle.
• 8:37
  SPEAKER_01: Um, it talks about also disability insurance um provided by your company.
• 8:43
  SPEAKER_01: You know, it's it's usually a shorter term thing.
• 8:46
  SPEAKER_01: Um, so make sure you're just covered and your family's in a good place in case something happened to you and you were unable to work.
• 8:54
  SPEAKER_01: So, like I said, I'm gonna keep this one short.
• 8:56
  SPEAKER_01: Um, everyone have a wonderful weekend.
• 8:59
  SPEAKER_01: And before I go, I'm gonna flip on the disclosures and we will see you next Friday.
• 9:06
  SPEAKER_00: Security is offered through LPL Financial LLC, member FINRA, and SIPC.org.
• 9:12
  SPEAKER_00: Advisory services offered through LPL Financial LLC, a registered investment advisor.
• 9:17
  SPEAKER_00: Brian Peluso, Michael Kutch, and David Harper are registered representatives of LPL Financial LLC.
• 9:23
  SPEAKER_00: Content discussed is for informational purposes only and not intended as an offer or solicitation to buy or sell any security or investment strategy.
• 9:32
  SPEAKER_00: Any opinions expressed are those of the authors and do not necessarily reflect the views of LPL Financial or its affiliates.
• 9:39
  SPEAKER_00: All investments involve risk, including the possible loss of principal.
• 9:43
  SPEAKER_00: This communication may include links or references to third-party websites.
• 9:47
  SPEAKER_00: These links are provided as a convenience only.
• 9:49
  SPEAKER_00: LPL Financial and its representatives are not responsible for the accuracy or content of such sites.
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  SPEAKER_00: Brian, Mike, and David and HBK Profiden Advisors may only transact business in states where they are properly registered or exempt from registration.
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• 10:09
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• 10:13
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