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Don't fall in love with your investments · The Financial Exchange Show

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Speaker 1: making a donation Today. Face is the Financial Exchange with
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Speaker 1: Mike Armstrong and Mark Vandetti.
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Speaker 2: Morning, Mark, Morning Tucker. More than everybody listening.
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Speaker 3: Hi, Hey Michael.
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Speaker 4: Happy Tuesday, although it's not terribly happy out there. Markets
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Speaker 4: which finished mixed yesterday are once again selling off strongly
1:26
Speaker 4: in early trading, and some interesting stuff going on in
1:28
Speaker 4: the bond market as well. You've got commentary from Donald
1:32
Speaker 4: Trump saying the tariffs on Canada and Mexico are quote
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Speaker 4: going forward. We'll be covering that on today's show, but
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Speaker 4: we wanted to talk a bit about markets today because
1:42
Speaker 4: things are getting a wee bit hairy out there. I
1:46
Speaker 4: don't want to over exaggerate. Yeah, I'm doing my Jimmy Clay.
1:49
Speaker 4: We been marry out there. Markets reached all time high
1:55
Speaker 4: the S and P five hundred did on February nineteenth,
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Speaker 4: where we sat at sixty one forty four. We're now
2:02
Speaker 4: down what's the total on this down to fifty nine
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Speaker 4: forty eight, a few hundred points on the S and
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Speaker 4: P five hundred, and you know, representing Look, it's still
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Speaker 4: probably only about three percent when all is said and done,
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Speaker 4: off of the all time highs. But you do have
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Speaker 4: markets moving, and especially in the bond market, and you know,
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Speaker 4: I think the bond market moves are always interesting because
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Speaker 4: oftentimes they tell you a bit more. And so let's
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Speaker 4: just talk about Let's talk about first the context here,
2:33
Speaker 4: because since I would say, twenty twenty two you had
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Speaker 4: this divergence where bond yields up often meant stocks down.
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Speaker 4: You had twenty twenty two that divergence where bonds moved down,
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Speaker 4: stocks moved down, and it was all about inflation. Today
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Speaker 4: we're seeing stocks move down, bond prices up, which.
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Speaker 2: Is normal, more normal. Quite frankly, that's the that's the
2:59
Speaker 2: usual environment.
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Speaker 4: As you see when investors are not terribly concerned about inflation,
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Speaker 4: it's hey, sell stocks, flee to safety by bonds, and
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Speaker 4: sea yields come down. That was not the relationship we
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Speaker 4: had for all of twenty twenty two, and frankly, a
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Speaker 4: lot of the last couple of years, as those concerns
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Speaker 4: about inflation were still playing out. But today we do
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Speaker 4: have I would consider this return to normalcy, but a
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Speaker 4: pretty big swing in that ten year treasury just to
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Speaker 4: cover this, the US ten year currently off almost ten
3:29
Speaker 4: basis points zero point zero nine percent. It's bringing you
3:32
Speaker 4: down on the ten year treasury yield to four point
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Speaker 4: three percent. And I'm just intrigued by your your view
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Speaker 4: on this swing, because it's not as though.
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Speaker 3: I haven't as though it might be stupid. I haven't
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Speaker 3: given you don't be prematurely intrigued. I don't have anything.
3:47
Speaker 3: I'm really scrambling for something insightful to say here, and
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Speaker 3: I don't have an explanation.
3:52
Speaker 4: Well, I think the most interesting piece to me is
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Speaker 4: simply that it is a divergence from what we have
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Speaker 4: typically seen over the last few years, which was uh,
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Speaker 4: yields up, stocks down, and today you have yields down,
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Speaker 4: stocks down, which is a bit of a return to normalcy.
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Speaker 3: For the most part. The only reason a long term
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Speaker 3: investor would own risk what we call risk free. We
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Speaker 3: really mean credit risk free when you hear that expression,
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Speaker 3: because they're not inflation risk free, at least not conventional treasuries,
4:19
Speaker 3: but most people think of treasuries as a risk free asset.
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Speaker 3: All Why credit risk free because the US government will
4:26
Speaker 3: not default. The full faith and credit of the US
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Speaker 3: government is as close as you can get to a
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Speaker 3: goal plated guarantee in this world. They can print money
4:34
Speaker 3: to pay their obligations YEP, or raise taxes, so the
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Speaker 3: risk free rate is something that can be exploited in
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Speaker 3: a portfolio context to prevent, to protect an investor against
4:49
Speaker 3: stock market turmoil. It's the only reason to own bonds.
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Speaker 3: It's why in your target date fund there's always some
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Speaker 3: unless you're in the most extreme in a risk sense fund,
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Speaker 3: there are always some treasures the US government bonds in
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Speaker 3: a target date fund to protect against severe market pullbacks
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Speaker 3: because in crises, government bonds longer term especially, tend to
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Speaker 3: go up in price and down in yield when stocks
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Speaker 3: are going down. Not always, but they tend to. That
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Speaker 3: hints it broader instability in the relationship. Bonds and stocks
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Speaker 3: don't always move in different directions at different times, so differently,
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Speaker 3: bonds don't always diversify portfolios. The correlation a fancy way
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Speaker 3: of saying co movement. Does one zig when the other's
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Speaker 3: aggs or do they instead move together? The correlation is
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Speaker 3: not stable. So this morning is you open with and
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Speaker 3: I think that's the perfect observation of the one that
5:42
Speaker 3: you made. This feels more normal. Stock selling off a bit,
5:46
Speaker 3: the drop in yields or equivalently, the gain and price
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Speaker 3: of bonds seems a little extreme, But then you look
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Speaker 3: at what's happening around the world, and bond yields are
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Speaker 3: falling in some cases more steeply than others in developed
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Speaker 3: economies around the world. So something bigger shift mic might
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Speaker 3: be happening here is investors reprice, so to speak, whatever
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Speaker 3: risks are out there.
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Speaker 4: So a example of this breaking down in that that
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Speaker 4: relationship not really working was twenty twenty two, as I mentioned,
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Speaker 4: and at their worst for the year. In twenty twenty two,
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Speaker 4: I believe the S and P five hundred was off
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Speaker 4: by about twenty five percent. Again, didn't finish there, but it,
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Speaker 4: you know, was down at one point by twenty five percent,
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Speaker 4: and the global or the US bond index that we
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Speaker 4: track pretty regularly was down about fifteen percent at their worst,
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Speaker 4: as opposed to say, two thousand and seven, two thousand
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Speaker 4: and eight time period when we were going through the
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Speaker 4: Great Recession, when peaked trough S and P five hundred
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Speaker 4: was down somewhere in the fifty percent range, whereas you know,
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Speaker 4: major indices for government bonds were up pretty substantially during
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Speaker 4: that period of time. That is the more normal relationship,
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Speaker 4: and that is what we are seeing on a much
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Speaker 4: smaller scale today is investors seemingly selling stocks and moving
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Speaker 4: into bonds.
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Speaker 2: Now, yeah, working today, the movements on stocks are not extreme.
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Speaker 4: You've got the NASDAC down one and a quarter percent,
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Speaker 4: the S and P off six tens of a percent,
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Speaker 4: and the Dow is basically flat.
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Speaker 2: So I don't want to over.
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Speaker 4: Exaggerate this, And that's why the bond market being up
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Speaker 4: so much and yields being down quite as substantially kind
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Speaker 4: of took me for a surprise because I would more
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Speaker 4: normally associate this type of yield sell off, this type
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Speaker 4: of decrease in rates similar to like a two to
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Speaker 4: three percent sell off inequities, which I just find interesting.
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Speaker 2: This is a bit more extreme than we would typically see. Yeah.
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Speaker 3: Yeah, Volatility is measured by the VIX index, not something
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Speaker 3: we tall, or at least I don't. I lose sight
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Speaker 3: of it. But it's been climbing the past several days.
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Speaker 3: You don't really know what's going on under the surface.
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Speaker 2: Sure, no one does.
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Speaker 3: No one has a global view on these things, even big,
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Speaker 3: very sophisticated managers. But there is a clear trend over
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Speaker 3: the past few days. Stock's looking wobbly, if you will,
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Speaker 3: Bonds firming, volatility ticking up. Is it geopolitical concerns. What's
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Speaker 3: going to happen in Ukraine? Is it going to get settled?
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Speaker 3: Is it worries about tariffs? I tend to poo poo
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Speaker 3: that I don't know about you, because that's like a
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Speaker 3: that's a perennial thing or a continuous thing. Now right,
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Speaker 3: every day we get new tariff threats. Hard to point
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Speaker 3: your put your finger on a single catalyst. Maybe it
8:17
Speaker 3: comes back to something we were talking about yesterday, Mike
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Speaker 3: stocks being really expensive and really expensive markets being kind
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Speaker 3: of fragile, just sort of balanced on the edge of
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Speaker 3: a table, if you like, and a little breeze could
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Speaker 3: push them off. I don't want to be overly dramatic.
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Speaker 3: We don't know whether or not this selloff has legs,
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Speaker 3: but maybe that's the best explanation.
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Speaker 4: So again, you know, since Friday, stalks have been wobbly,
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Speaker 4: as Mark put it, and this is Mark the third
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Speaker 4: day in a row. If it continues this direction with
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Speaker 4: a general equity market selloff like albeit, like I said,
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Speaker 4: some changes on that if you look at the Dow
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Speaker 4: and other things like that, but it's been fairly persistent
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Speaker 4: on the solid news here, the good news for some
8:58
Speaker 4: folks anyway, with the and your treasury, you're yield moving
9:01
Speaker 4: down to that four point three percent range. You now
9:04
Speaker 4: have the interest rate on a thirty year fixed rate
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Speaker 4: mortgage still really expensive from a recent historical context, but
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Speaker 4: you're down to below six point nine percent, whereas just
9:14
Speaker 4: last week you are up in that seven point one
9:17
Speaker 4: percent on a thirty year fixed rate mortgage on average,
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Speaker 4: according to Mortgage News Daily. So we'll continue to track
9:23
Speaker 4: this out, and I would expect those mortgage rates to
9:25
Speaker 4: come down further should you see this ten year continue
9:27
Speaker 4: to decline, but frankly, without a significant sell off, without
9:31
Speaker 4: big changes to deficits government spending taxes, I don't see
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Speaker 4: a huge justification for those rates to come down substantially unless,
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Speaker 4: like I said, you enter some period of economic downturn,
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Speaker 4: which I don't think anyone in any administration is really
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Speaker 4: hoping for.
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Speaker 3: You know, Mike, one framework for thinking about this, and
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Speaker 3: this might be oversimplifying.
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Speaker 4: It is oversimplification. It's good, Mark, right, It's a good
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Speaker 4: starting point for the show. We can get more complex later.
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Speaker 3: It is it is my middle name. Is the market
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Speaker 3: or our investors on average, more worried today tomorrow whenever
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Speaker 3: about recession or growth that's too hot.
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Speaker 4: Today's actions, I don't think they would put it in
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Speaker 4: the words of growth too hot, but inflation.
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Speaker 3: Is having inflation is what is a more succinct way
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Speaker 3: to put that. Today the balance of risks in the
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Speaker 3: estimation of the market seem to have shifted toward recession.
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Speaker 3: I don't know exactly why we haven't gotten any new data.
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Speaker 3: No influential CEO or government official has uttered anything that
10:32
Speaker 3: might be considered destabilizing.
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Speaker 2: Nope.
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Speaker 3: But markets are forward looking. Sometimes they make self fulfilling predictions,
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Speaker 3: and this is what policymakers will be keeping an eye on.
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Speaker 2: I would think, let's take a quick break.
10:45
Speaker 4: When we come back, I want to get to the
10:48
Speaker 4: announcements or rumors when it comes to tariffs on Canada
10:51
Speaker 4: and Mexico, as well as some new regulations on chip
10:54
Speaker 4: making in China.
10:55
Speaker 2: Will be back with that next. On the Financial Exchange.
10:58
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Speaker 4: At ten am this morning, the Conference Board released some
12:08
Speaker 4: survey data that they took in the month of January. Nope, sorry, February.
12:14
Speaker 4: They did survey this data back in February and it
12:17
Speaker 4: joins a growing list now of purely sentiment surveys that
12:22
Speaker 4: are out there that speak to growing concern about the economy. Again,
12:26
Speaker 4: we did not see anything hard data wise saying that
12:30
Speaker 4: people are buying less stuff, that they are losing jobs,
12:33
Speaker 4: anything like that, But this grows.
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Speaker 2: This joins a growing list.
12:36
Speaker 4: Of data from the Conference Board, the University of Michigan,
12:39
Speaker 4: and other sources speaking to people's lack of confidence in
12:43
Speaker 4: the economy right now. The Board's Consumer Confidence Index slipped
12:46
Speaker 4: to ninety eight point three for the first for the month.
12:50
Speaker 4: That's down nearly seven percent and below the forecast for
12:55
Speaker 4: one hundred and two point three. It's the lowest rating
12:57
Speaker 4: that they've seen since June of twenty twenty four. I
13:01
Speaker 4: want to take us back a few months and just
13:03
Speaker 4: kind of remind everybody what we were looking at back
13:04
Speaker 4: in June of twenty twenty four, because if you weren't
13:07
Speaker 4: thinking about the economy in the moment, you'd probably say, well,
13:10
Speaker 4: you know, stocks were good last year, economy is pretty
13:13
Speaker 4: good last year. In twenty twenty four June, we were
13:16
Speaker 4: facing a period of time where unemployment was increasing pretty rapidly.
13:19
Speaker 4: We crossed the Psalm rule recession indicator sometime in June
13:24
Speaker 4: July of that year, there was growing concern that, hey,
13:28
Speaker 4: rates are too high, we need to pull them back.
13:30
Speaker 4: Economy slowing, unemployments rising. That turned out to be a
13:33
Speaker 4: bit of a blip on the radar that didn't really
13:34
Speaker 4: come to pass, and we spoke at length about that.
13:37
Speaker 4: But we just got a reading that tells you, hey,
13:40
Speaker 4: consumers in terms of their expectations are as pessimistic as
13:43
Speaker 4: they were back in June of twenty twenty four, when
13:45
Speaker 4: they were actually pretty pessimistic. It's also the largest single
13:49
Speaker 4: month drop that you've seen since August of twenty twenty one.
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Speaker 4: So I'm not exactly sure what to do with this data, right.
13:58
Speaker 4: I tend to, in my opinion, pretty heavily discount whenever
14:02
Speaker 4: we get soft data. And this is soft data. This
14:06
Speaker 4: is not sales, this is not unemployment surveys. This is
14:10
Speaker 4: how are you feeling about things? And I discount that
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Speaker 4: in part because certainly throughout history, but you know, even
14:19
Speaker 4: more so over the last several decades, this has become
14:22
Speaker 4: increasingly partisan. And we've seen that in the Michigan sentiment
14:25
Speaker 4: surveys that breaks down their data Republican versus Democrat. But
14:29
Speaker 4: this data has become increasingly partisan when it comes to
14:32
Speaker 4: when you get asked, how do you feel about the economy,
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Speaker 4: We've seen it pretty consistently during the Biden administration.
14:38
Speaker 2: Republicans were saying it's terrible. I hate it.
14:40
Speaker 4: I don't find the opportunities that I have inflations, you know,
14:44
Speaker 4: to bad. And in spite of that, stocks did quite well.
14:48
Speaker 4: And today you've seen that flip where Democrats are saying
14:50
Speaker 4: inflation is going to be too high, growth is slow,
14:52
Speaker 4: and I'm worried about that. And so I am not
14:55
Speaker 4: saying that we should ignore this, because I think there's
14:57
Speaker 4: a reasonable justification and assumption to say that this is
15:00
Speaker 4: causing some of the equity market sell off that we're
15:03
Speaker 4: seeing right now. But I do also tend to discount
15:06
Speaker 4: it and say it can be an indication of something,
15:09
Speaker 4: but let's wait until we see data back this up
15:11
Speaker 4: in terms of hiring, firing, spending, other things that we
15:15
Speaker 4: can actually measure.
15:17
Speaker 3: Excuse me, agree completely we should prefer hard over soft data.
15:21
Speaker 3: But there's a reason why they produce soft data one
15:23
Speaker 3: hundred percent. So while the relationship between the data and
15:30
Speaker 3: the future value of whatever it is you're trying to
15:32
Speaker 3: forecast can change, so you have to continually update your process.
15:37
Speaker 3: If you're a researcher and you're using this stuff in
15:40
Speaker 3: your in your forecasting, I wouldn't be quick to dismiss
15:46
Speaker 3: it without overweighting it. I guess, Mike, am I actually
15:50
Speaker 3: saying anything? Now? I don't think I am adding anything
15:54
Speaker 3: because I basically acknowledge what you said, but then said,
15:56
Speaker 3: but there's another side to that, and then didn't take
15:58
Speaker 3: a side. Is that help?
16:00
Speaker 2: No?
16:00
Speaker 3: I don't think it.
16:01
Speaker 2: Isn't Chris, wann't we do it? It was great filler.
16:04
Speaker 3: No, Well, we don't do traffic here, so occasionally I
16:07
Speaker 3: just need.
16:07
Speaker 2: To draw.
16:09
Speaker 1: No.
16:10
Speaker 3: But Mike, these things can be helpful forecasters.
16:12
Speaker 2: They can't.
16:13
Speaker 3: Yeah, it's partisan, but you know blue so called blue
16:17
Speaker 3: states are like sixty five percent of the GDP, right,
16:21
Speaker 3: so if they, oh, sorry, go ahead.
16:22
Speaker 4: Good to your point, Like, if people actually believe what
16:26
Speaker 4: they are saying here and actually respond in ways that
16:30
Speaker 4: affect the economy, then it absolutely becomes self fulfilling.
16:32
Speaker 3: Policymakers pay attention to it.
16:34
Speaker 2: Cool.
16:34
Speaker 3: Look at equities, by the way, I should have brought
16:36
Speaker 3: this out. Equities are not soft, but they are tied
16:40
Speaker 3: directly to sentiment. They are the ultimate sentiment indicator, because
16:42
Speaker 3: they changed her out the day every day. Uh, they're
16:45
Speaker 3: pointing to some of the same things that some of
16:47
Speaker 3: these softer surveys are.
16:51
Speaker 2: Quote from the survey views of current labor market conditions weakened.
16:54
Speaker 2: Consumers became pessimistic about future business conditions and less optimistic
16:58
Speaker 2: about future income. That's from the Board's senior economists for
17:02
Speaker 2: Global Indicators. Pessimism about future employment prospects worsened and reached
17:07
Speaker 2: a ten month high. So, like we said, this survey
17:10
Speaker 2: here joins what we saw last week from the University
17:12
Speaker 2: of Michigan, reporting a large than expected monthly decrease of
17:16
Speaker 2: nearly ten percent in February, while the five year inflation
17:19
Speaker 2: outlook among respondents hit its highest level since ninety five.
17:22
Speaker 2: So again, I don't think you should or can't ignore
17:24
Speaker 2: any of this. I'm sorry, good, but let's see how
17:26
Speaker 2: the data works out go ahead.
17:28
Speaker 3: Are there plausible reasons for this here?
17:30
Speaker 4: There are?
17:30
Speaker 3: People are much better informed about the impact of tariffs
17:33
Speaker 3: than I would have given them credit for everybody I
17:35
Speaker 3: have asked, I do my little own private polls when
17:37
Speaker 3: people will talk to me and they seem to understand
17:40
Speaker 3: the tariffs raise prices.
17:41
Speaker 2: I'm just picturing you.
17:44
Speaker 3: Excuse me, store, You're there with the French bulldog. How
17:47
Speaker 3: do you feel about do you gotta hear you? Pervert?
17:50
Speaker 3: Wait a second, why am I a pervert? And then
17:52
Speaker 3: she gets into my record, And so people are aware
17:58
Speaker 3: of the implications of these policies. I'm surprised and encouraged
18:03
Speaker 3: by the logical connection between policies that are being proposed
18:07
Speaker 3: and the expectations for what effects they'll have. They all
18:11
Speaker 3: make sense to me.
18:13
Speaker 4: So, speaking of policies, we said we would mention this.
18:16
Speaker 4: So the tariff scheduled on Mexico and Canada were suspended
18:20
Speaker 4: delayed until next Tuesday, a week from today, March fourth.
18:24
Speaker 4: When asked about this during Emmanuel Macron's visit to the
18:28
Speaker 4: United States, French President of Manuel Macron, Donald Trump said
18:32
Speaker 4: that they are moving along very rapidly and the tariffs
18:34
Speaker 4: are on time. A US official who spoke on the
18:39
Speaker 4: condition of anonymity, said the fate of those special twenty
18:42
Speaker 4: five percent tariffs on Canada and Mexico were still to
18:46
Speaker 4: be determined and very uncertain. So my takeaway from all
18:49
Speaker 4: this is, let's not move anywhere on this until we
18:53
Speaker 4: actually see these in place, and see them in place
18:56
Speaker 4: for actually a prolonged period of time, because we I
19:00
Speaker 4: myself kind of bought that they were going into place
19:02
Speaker 4: a few weeks ago, and up until ten thirty am
19:05
Speaker 4: on the show, we kind of thought that they were
19:06
Speaker 4: before being dissolved and suspended. And so we will see
19:10
Speaker 4: what's to come. But a week from today is the
19:13
Speaker 4: self imposed deadline that the Trump administration is setting out
19:16
Speaker 4: for themselves when it comes to newly announced tariffs or
19:19
Speaker 4: previously announced tariffs on both Canada and Mexico. Quick Break
19:23
Speaker 4: Wall Street watches next.
19:40
Speaker 1: Like us on Facebook, then follow us on Twitter at
19:42
Speaker 1: TFE show. Breaking business news is always first right here
19:47
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall Street.
19:52
Speaker 1: Watch a complete look at what's moving market so far
19:55
Speaker 1: today right here on the Financial Exchange Radio Network.
19:59
Speaker 5: Looks like we got a little bit of a selloff
20:01
Speaker 5: so far this morning. Is weaker than expect to. Consumer
20:04
Speaker 5: confidence numbers came in at ten o'clock this morning, and
20:09
Speaker 5: is also increase uncertainty around tariffs among investors. Wall Street's
20:14
Speaker 5: also reacting to more retailer earnings this morning.
20:17
Speaker 3: From Home Depot.
20:19
Speaker 5: At the moment, the Dow is down by three tenths
20:22
Speaker 5: of a percent, or one hundred and twenty nine points.
20:24
Speaker 5: SMP five hundred is down just over one percent or
20:28
Speaker 5: sixty points, the Nasdaq down nearly two percent now at
20:32
Speaker 5: three down three hundred and sixty four points. Russell two
20:34
Speaker 5: thousand is off over two thirds of a percent. Ten
20:37
Speaker 5: year Treasure reeled down by ten basis points so far
20:41
Speaker 5: today at four point two eight percent, and Crude oiled
20:44
Speaker 5: down just over two percent lower now at sixty nine
20:49
Speaker 5: dollars in twenty one cents a barrel. Ahead of the
20:52
Speaker 5: opening bell, Home Deepot reported fourth quarter earnings that narrowly
20:55
Speaker 5: beat street estimates, despite elevated interest rates and housing prices
21:00
Speaker 5: impacting consumer demand for larger remodels and price yer projects.
21:04
Speaker 5: The home improvement retailer also posted positive comparable sales following
21:09
Speaker 5: eight straight quarters of declients. Home Depot up by three percent. Meanwhile,
21:14
Speaker 5: at its first investor day in four years, PayPal said
21:17
Speaker 5: Venmo will play a key part in their turnaround effort.
21:20
Speaker 5: CEO Alex Chris, who joined the digital payments company in
21:24
Speaker 5: the fall of twenty twenty three, told investors that it
21:26
Speaker 5: will focus on expanding Venmo's role in digital commerce, where
21:31
Speaker 5: Venmo can top two billion dollars in revenue by twenty
21:34
Speaker 5: twenty seven. PayPal, however, retreating by three percent. Elsewhere, Hymn's
21:39
Speaker 5: and Hers sinking by twenty eight percent after the telehealth
21:43
Speaker 5: company said it would stop selling an alternative to Novo
21:47
Speaker 5: Nordisk weight loss drugs WeGo v and Ozepic. Zoom Can
21:51
Speaker 5: Communications offered revenue. Guidancetead disappointed investors, sending MATT stock down
21:56
Speaker 5: over eight percent. Pallenteer shares continued to skid down another
22:01
Speaker 5: four percent today. The data analytics company stock has sold
22:05
Speaker 5: off over the past four sessions, and Unilever shares down
22:09
Speaker 5: by one percent after the consumer goods giant announced CEO
22:13
Speaker 5: Heind Schoemaker would step down after less than two years
22:17
Speaker 5: on the job. Current CFO Fernando Fernandez is set to
22:21
Speaker 5: take his place leading the company. I'm Tucker Silvan.
22:24
Speaker 1: That's Wall Street Watch.
22:26
Speaker 2: It's a solid name, great name. I just think of
22:28
Speaker 2: the same thing. What does he lead?
22:30
Speaker 5: Sorry I didn't CFO Unilever is the company top top notch.
22:35
Speaker 2: Fernando Fernandez, I really like that name.
22:37
Speaker 4: So since Wednesday's close, we've seen the S and P
22:41
Speaker 4: five hundred now sell off by three point six percent,
22:44
Speaker 4: and I'm just taking a look at what sort of
22:46
Speaker 4: information we received since Wednesday of last week and what
22:50
Speaker 4: might be driving this. There were no massive earnings reports
22:53
Speaker 4: that came out, None of the you know, you know,
22:55
Speaker 4: none of the biggest ten stocks in the S and
22:57
Speaker 4: P five hundred reported primarily what you saw here in
23:00
Speaker 4: terms of data, jobless claims that didn't really indicate much
23:04
Speaker 4: of anything. Philly manufacturing survey, nobody pays attention to. The
23:09
Speaker 4: big piece was obviously what we talked about. The consumer
23:12
Speaker 4: sentiment survey on Friday came out worse than expected, and
23:16
Speaker 4: then today you did have the Conference Boards sentiment survey,
23:20
Speaker 4: which again worse than anticipated. And so when I'm looking
23:23
Speaker 4: at this type of thing, I'm wondering in my mind, Okay,
23:25
Speaker 4: what if anything could reconfirm some of this and send
23:29
Speaker 4: markets lower or reverse course on it and send markets higher,
23:32
Speaker 4: other than just people saying, hey, fier's market, let me
23:34
Speaker 4: jump in here, which also does happen. You don't need
23:37
Speaker 4: new data or new information to change people's perspectives.
23:40
Speaker 3: Go ahead, sentiment and the ultimate leading indicator. It's not
23:44
Speaker 3: always right but the ultimate in terms of frequency and
23:47
Speaker 3: the speed with which it gets updated is the stock market,
23:50
Speaker 3: which is why it is part of leading in disease
23:52
Speaker 3: and has been for one hundred years. The next runner
23:56
Speaker 3: up is the soft stuff Mike because of the frequency,
24:00
Speaker 3: we only get GDP quarterly and then it gets revised
24:03
Speaker 3: over a period of.
24:03
Speaker 2: Three We'll get a revision on Thursday of this week,
24:06
Speaker 2: in fact, and so.
24:06
Speaker 3: You're always looking backwards, right and by that time it's
24:09
Speaker 3: ancient history.
24:10
Speaker 2: So you know, other things that I think maybe could
24:12
Speaker 2: play a role here.
24:13
Speaker 4: You do have a very big earnings report on Wednesday
24:17
Speaker 4: of this week within Nvidia telling us how they did
24:20
Speaker 4: that is after the bell on Wednesday. That let's be honest,
24:23
Speaker 4: that has the ability to move the entire market if
24:25
Speaker 4: in Nvidia knocks the cover off the ball.
24:26
Speaker 2: So that's a possibility in.
24:28
Speaker 4: Terms of moving market, but in terms of data, in
24:31
Speaker 4: terms of data that probably matters for this market. Pending
24:34
Speaker 4: home sales that's out on Thursday. Man not really going
24:36
Speaker 4: to do anything jobless claims. Should those shoot up in
24:39
Speaker 4: the wrong direction, that could potentially move you know, add
24:42
Speaker 4: to this narrative of concern. But I you know, I
24:45
Speaker 4: certainly don't think the government layoffs are going to show
24:47
Speaker 4: up in that data anytime soon. Personal income PCEE index.
24:52
Speaker 4: I suppose if you saw a big spike in inflation,
24:54
Speaker 4: that could move things, But this isn't a market that's
24:56
Speaker 4: worried about inflation right now.
24:57
Speaker 3: We just talked about the balance of risks of shift
25:00
Speaker 3: towards slowness exactly overheating.
25:03
Speaker 4: The following week, again Mark taking a look at things
25:06
Speaker 4: here ism manufacturing historically leading indicator in terms of the
25:10
Speaker 4: economy that could move things.
25:11
Speaker 2: That's on Monday, March third.
25:14
Speaker 4: We will then get a job's report on Friday, March seventh,
25:17
Speaker 4: and that would be I think the first big data
25:19
Speaker 4: point that I can look at in terms of hard
25:21
Speaker 4: data that I could say, oh, if this moves you know,
25:25
Speaker 4: let's say we get a big job creation number or
25:27
Speaker 4: a big job loss number. I think that could confirm
25:30
Speaker 4: or reverse the thought process on this market sentiment.
25:33
Speaker 2: Right.
25:33
Speaker 3: You just have to keep in mind that and I
25:36
Speaker 3: know you know this, but we need to keep in
25:37
Speaker 3: mind that joblessness is a lagging indicator. Yeslex decisions, but
25:41
Speaker 3: three and six months ago, so it'll be a while
25:43
Speaker 3: before that registers a problem. The most current, The most
25:48
Speaker 3: immediate snapshot we get is the stock market follow I
25:51
Speaker 3: know I'm repeating myself here, but followed by sentiment this
25:54
Speaker 3: other stuff. GDP is a is a coincident indicator, but
25:58
Speaker 3: it's somewhat backward looking because of the revisions.
26:00
Speaker 2: Yeah, I would call weekly jobless claims pretty close. Those are.
26:03
Speaker 3: Yeah, those might have a little bit of forecasting value
26:06
Speaker 3: in them because of the free do just think of
26:08
Speaker 3: frequency and yep.
26:11
Speaker 4: But yeah, hey that's what we're seeing right now. And
26:14
Speaker 4: again I always just find it interesting to see, Okay,
26:15
Speaker 4: what what's coming? What could reverse this, what could confirm it?
26:19
Speaker 2: And that's what I guess.
26:20
Speaker 3: The point I was trying to make is should it
26:22
Speaker 3: matter if joblessness is strong that's backward looking. Should it
26:25
Speaker 3: matter if GDPs are vised upward by a couple of
26:27
Speaker 3: tents of a person.
26:28
Speaker 2: Maybe maybe not, but you know market parts like good.
26:31
Speaker 4: News, Yeah, yeah, it can be enough to shift sentiment,
26:34
Speaker 4: so we will see.
26:35
Speaker 3: Yeah, there's that feedback between sentiment and the hard data,
26:39
Speaker 3: which makes all this very confusing and interesting.
26:41
Speaker 2: Uh.
26:41
Speaker 4: The Trump team is seeking to tough and Biden's chip
26:44
Speaker 4: controls over China, So in the waning days of the
26:46
Speaker 4: Biden administration, they kind of handed off a playbook. There
26:49
Speaker 4: was a handshake agreement between the Biden administration and the
26:53
Speaker 4: Dutch over limiting gear maintenance in China. If you're not familiar,
26:57
Speaker 4: the pretty much only company that provides manufacturing equipment for
27:02
Speaker 4: semiconductors is a Dutch company that pretty much has a
27:06
Speaker 4: monopoly on the equipment and has years long back orders.
27:09
Speaker 4: But if they don't maintain that equipment in China, for instance,
27:13
Speaker 4: over a course of a few months or years, it
27:15
Speaker 4: becomes incredibly difficult for the Chinese to continue to produce.
27:20
Speaker 4: In any case, the Trump officials recently met with their
27:22
Speaker 4: Japanese and Dutch counterparts about restricting both Tokyo electrona Tokyo
27:27
Speaker 4: Electron and ASML holdings from sending their engineers to maintain
27:31
Speaker 4: semiconductor gear in China. Should they get agreement on this,
27:35
Speaker 4: then it is just another I guess what would they
27:41
Speaker 4: call it? Something to delay. I'm trying to think of
27:43
Speaker 4: the right wording. I don't know, problem for the Chinese
27:47
Speaker 4: to overcome when it comes to continuing their R and
27:50
Speaker 4: D into the semiconductor space.
27:52
Speaker 2: We will see if they get agreement.
27:53
Speaker 4: The Dutch had apparently very much reverse course on any
27:57
Speaker 4: of their promises after Trump was elected, and so we
28:00
Speaker 4: will see what sort of negotiating tactics they're able to
28:02
Speaker 4: employ to continue this push on China and this agreement
28:06
Speaker 4: from all the big powerhouses. When it comes to the
28:10
Speaker 4: again latest and greatest gear and equipment to manufacture semiconductors.
28:15
Speaker 3: I think most experts think that we can slow them
28:18
Speaker 3: down a little bit with these little speed bumpy obstacles,
28:21
Speaker 3: but ultimately they're going to reach their destination. That seemed
28:24
Speaker 3: to be the opinion of the people in the last
28:26
Speaker 3: administration and others who've thought.
28:28
Speaker 2: One hundred percent.
28:28
Speaker 4: And that tends to be the case with most any technology,
28:31
Speaker 4: whether it's nuclear power, whether it's nuclear weapons, there's always
28:35
Speaker 4: this push to hey, we might be able to slow
28:36
Speaker 4: it down, but when it comes to scientific achievement and movements,
28:43
Speaker 4: it tends to move forward, and it's very difficult to
28:46
Speaker 4: prevent that. See nuclear restrictions in Iran, for example. It's
28:50
Speaker 4: just very, very difficult to slow progress when it comes
28:53
Speaker 4: to technological understanding and innovation. Let's take a quick break
28:57
Speaker 4: when we come back, want to let's focus a little
29:01
Speaker 4: bit more on excuse me, on Chinese manufacturers, specifically speeding
29:06
Speaker 4: up their efforts to dodge what they assume will be
29:09
Speaker 4: the latest Trump tariffs.
29:10
Speaker 2: That's next here on the Financial Exchange text.
29:13
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29:15
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29:18
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29:20
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29:46
Speaker 2: There's a piece from the Wall Street Journal and Nvidia
29:48
Speaker 2: had a.
29:49
Speaker 4: Rough start to twenty twenty five, investors still love the stock.
29:53
Speaker 4: I want to focus on that word love when it
29:58
Speaker 4: comes to stocks for a moment here, but to to
30:00
Speaker 4: find the trouble that.
30:01
Speaker 2: They've had, the rough start that they've had so.
30:04
Speaker 4: Far this year in video stock at the moment down
30:06
Speaker 4: about fifteen and a half percent from their all time
30:09
Speaker 4: highs that were reached back on January sixth of this year,
30:14
Speaker 4: and year to date the stocks only down about eight
30:17
Speaker 4: and a half percent, but again from that peak to trough,
30:20
Speaker 4: down about fifteen percent, and again I want to focus
30:23
Speaker 4: on that word love, because that is a word that
30:28
Speaker 4: in my mind, belongs nowhere near your investment portfolio and
30:34
Speaker 4: is again kind of dangerous. We talk about emotional investing
30:38
Speaker 4: all the time, but I see it time and time
30:43
Speaker 4: again where whether you want to use the word love
30:46
Speaker 4: or infatuation or just excitement about a company, you see
30:52
Speaker 4: people make money on companies and then really have a
30:56
Speaker 4: tough time letting go because they believe that something can
30:59
Speaker 4: reed itself, that every company is going to be the
31:02
Speaker 4: next Amazon, the next Facebook, Meta, the next great big
31:07
Speaker 4: success story out there, and just refuse to let go.
31:11
Speaker 4: And I think that is something that is very understandable
31:15
Speaker 4: why somebody would fall in love with a stock like
31:17
Speaker 4: Nvidia and be attached to the story, attached to the CEO,
31:20
Speaker 4: attached to some part of it, but have a very
31:24
Speaker 4: difficult time with how to digest all of that. And
31:28
Speaker 4: I don't know that you have much to add on
31:29
Speaker 4: that mark or not, But like the word love.
31:33
Speaker 2: Belongs nowhere near your.
31:34
Speaker 3: Now, I have nothing to add on the subject of love.
31:36
Speaker 3: I will point out though, that even professional investors, people
31:41
Speaker 3: who run money for pension funds, endowments, they run hundreds
31:45
Speaker 3: of millions of dollars. They make tens of millions a
31:48
Speaker 3: year fall into this trap, which is why they have
31:51
Speaker 3: internal committees where they aggressively challenge each other's Even very
31:55
Speaker 3: senior portfolio managers get the best firms, people like Fidelity
32:00
Speaker 3: in Wellington and others in town. Here in Boston, for example.
32:04
Speaker 2: They have smart people Monday morning meet challenging people.
32:07
Speaker 3: Trying to poke holes in their So what they call
32:10
Speaker 3: THESS their ideas, Why do you want to own this?
32:12
Speaker 3: What if this goes wrong? What if that goes wrong?
32:14
Speaker 3: It's tough to do that to yourself. For the most
32:17
Speaker 3: part is your If your spouse doesn't share, your significant other,
32:20
Speaker 3: doesn't share your interests, you have no sounding board. I
32:23
Speaker 3: think that's where it gets dangerous. No one's able to
32:25
Speaker 3: sort of grab you by the lapels and shake you
32:27
Speaker 3: out of your your your infatuated stupor with induced by
32:34
Speaker 3: your obsession with a company. And that's the big problem
32:36
Speaker 3: to me.
32:37
Speaker 4: Yeah, So what's the lesson here? The lesson is emotional
32:40
Speaker 4: investing is universally and always bad investing. You're starting at
32:45
Speaker 4: a disadvantage most individual investors, right you, by default probably
32:49
Speaker 4: do not have that sounding board that Fidelity and other
32:52
Speaker 4: big players have to say, hey, here's my idea, here's
32:55
Speaker 4: my thesis.
32:56
Speaker 2: What's wrong with it? What am I missing? What's stupid
32:58
Speaker 2: about this idea?
33:00
Speaker 4: And so if you get caught up further to say, oh,
33:02
Speaker 4: now emotions playing a role or you know another one
33:06
Speaker 4: we see commonly letting the tax tail wag the dog
33:08
Speaker 4: right saying well, you know, I can't possibly sell my
33:11
Speaker 4: holdings because look at the massive tax bill I would incur.
33:14
Speaker 4: Well compared to the lack of a tax bill you
33:17
Speaker 4: would incur by losing all of your money. It doesn't
33:19
Speaker 4: really matter. And so what I would just tell people is, hey,
33:22
Speaker 4: if you are finding yourself in this position, maybe you
33:24
Speaker 4: have had an incredibly successful investment thesis over the last
33:28
Speaker 4: few years. Many people have. It has been a tremendously
33:32
Speaker 4: good market, especially for some specific areas, and are suddenly
33:36
Speaker 4: finding yourself in a portfolio that seems overly concentrated to you.
33:40
Speaker 4: Maybe it's one area of the market, what maybe it's
33:43
Speaker 4: just US markets in general. Maybe it's one individual company
33:46
Speaker 4: and you're not sure how to de risk or reevaluate
33:52
Speaker 4: your risk exposure. Please give the folks at Armstrong Advisory
33:55
Speaker 4: Group a call, let us perform a full portfolio analysis
33:59
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34:02
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34:05
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34:08
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34:13
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Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
34:27
Speaker 1: registered investment advisor. Nothing in the ad or in any
34:29
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34:32
Speaker 1: your own financial tax into state planning advisors before making
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Speaker 1: advisory services.
34:39
Speaker 4: About three weeks ago, when we were all focused on
34:42
Speaker 4: the Canada and Mexico tariffs that ended up getting suspended
34:45
Speaker 4: until a week from today, the tariffs on China also
34:49
Speaker 4: did go into place, and what was very different there
34:51
Speaker 4: was a they were smaller ten percent increase on tariffs
34:54
Speaker 4: and in China, and B you did not see the
34:57
Speaker 4: Chinese run to the negotiating table in the same way
35:00
Speaker 4: that Mexico and Canada representatives did, and those tariffs are
35:04
Speaker 4: in place right now on China, the ten percent tariffs
35:08
Speaker 4: on Chinese products that were imposed, and instead of any
35:12
Speaker 4: sort of negotiating tactic, the Chinese have been really planning
35:16
Speaker 4: for this, it seems in a lot of ways. There's
35:19
Speaker 4: a Chinese based techno electronics manufacturer called a Jillian who,
35:24
Speaker 4: over the course of the last few years, have become
35:27
Speaker 4: increasingly worried about new tariffs should Donald Trump return to
35:30
Speaker 4: the White House, and so over the last few years
35:32
Speaker 4: have been planning out contingency plans and they put them
35:36
Speaker 4: into place pretty recently where the company very rapidly brought
35:41
Speaker 4: up to speed a factory in Malaysia that they've been
35:43
Speaker 4: exploring for quite some time and are now ramping that
35:47
Speaker 4: up more quickly. And this is what is occurring seemingly
35:50
Speaker 4: with many Chinese companies across the globe. Is hey, where
35:54
Speaker 4: can we set up shop elsewhere? How much is it
35:56
Speaker 4: going to cost us to do it? And does it
35:58
Speaker 4: allow us to still manufacture a large amount of our
36:02
Speaker 4: product in China, ship something that's mostly finished to a
36:06
Speaker 4: country like Malaysia and then avoid the tariffs entirely that
36:09
Speaker 4: is certainly the tactic I think that is likely to
36:12
Speaker 4: be employed there and also speaks to again, if I'm
36:16
Speaker 4: going to find a way to complement the Chinese here
36:19
Speaker 4: for a moment. You know, the Belton Road initiative that
36:21
Speaker 4: they have gone after for the course of the last
36:23
Speaker 4: few decades, I think is paying off right now, where hey,
36:28
Speaker 4: we have infrastructure investments in places like Malaysia, in places
36:32
Speaker 4: like parts of Africa and the rest of Southeast Asia
36:34
Speaker 4: where we have friendly enough relationships with the local governments
36:38
Speaker 4: where we can step in here and pretty rapidly ramp
36:41
Speaker 4: up production of certain items in those countries without much
36:45
Speaker 4: in the way of pushback.
36:46
Speaker 3: Yeah, it does turn into a game of whack a mole.
36:49
Speaker 2: It does.
36:49
Speaker 3: It will always they will always find a way around that.
36:52
Speaker 3: By this, I mean the Chinese find a different way
36:54
Speaker 3: to source stuff or sell their outputs so as to
36:58
Speaker 3: evade sanctions, tariffs, restrictions, you name it.
37:03
Speaker 4: Yeah, And I don't mean that to say that I
37:05
Speaker 4: don't think it's worth doing now.
37:07
Speaker 3: You got to think that.
37:08
Speaker 4: I think there's plenty of reason to go forward with
37:10
Speaker 4: this type of stuff. But to your point, it does
37:12
Speaker 4: become this rapid game of whacka mole where you say, Okay, now,
37:15
Speaker 4: do we need to you know, slap tariffs on anything
37:17
Speaker 4: from Malaysia because it's truly just Chinese made stuff, you know,
37:22
Speaker 4: routing its way through there. Do we need to stop
37:24
Speaker 4: exporting semiconductors to Malaysia because they'll be able to be
37:27
Speaker 4: imported back into China because of the Belton Road initiative.
37:31
Speaker 4: It becomes this, yeah, constant game of whacka mole, and
37:35
Speaker 4: you start to, if not agree with, at least comprehend
37:38
Speaker 4: why the administration is talking about universal tariffs across the board.
37:43
Speaker 4: But really the way to I think approach it and
37:46
Speaker 4: solve it is a coalition of governments that say, no,
37:49
Speaker 4: we're not touching Chinese made products. And you know, you
37:53
Speaker 4: talk about a few of the largest economies in the world,
37:55
Speaker 4: like the United States and Germany, which are not at
37:58
Speaker 4: all on the same page right now, but were they
38:00
Speaker 4: to get on the same page, could actually.
38:02
Speaker 2: Have a real impact on Chinese activity. Quick break.
38:05
Speaker 4: A lot more to cover in the second hour of
38:07
Speaker 4: the Financial Exchange, including those big home depot earnings. That's
38:10
Speaker 4: next here on the Financial Exchange