Latest / HPK Provident Advisors: The Weekly Bull / What GDP, Inflation, And Earnings Say About The Economy Right Now

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What GDP, Inflation, And Earnings Say About The Economy Right Now · HPK Provident Advisors: The Weekly Bull

• 0:02
  SPEAKER_02: Welcome to Friday Live every Friday or sometimes Thursdays, as as it is today.
• 0:07
  SPEAKER_02: The partners of HBK Provident get together and discuss what we're seeing going on in the markets, the economy, and talk about some financial planning topics.
• 0:15
  SPEAKER_02: So I will be starting my drive across the country tomorrow.
• 0:19
  SPEAKER_02: So hence we are doing it today.
• 0:22
  SPEAKER_02: And you know, I think we got enough data and Fed meeting, enough to talk about that um today's as good as tomorrow.
• 0:32
  SPEAKER_01: Mike, I I know you're a big fan of the Fed.
• 0:39
  SPEAKER_02: I may have I may have posted a kind of an angry thing at the Fed yesterday on my LinkedIn.
• 0:45
  SPEAKER_02: But yeah, I'm just I love Fed meetings.
• 0:48
  SPEAKER_02: I I've watched all of Janet Yellen's and Jerome Powell's, and you know, I always took at least something away from those meetings um that kind of gauged my view of what they were gonna do going forward.
• 1:02
  SPEAKER_02: This new Fed chair just he doesn't give me anything.
• 1:06
  SPEAKER_02: I I don't know.
• 1:07
  SPEAKER_02: It's just like their big statement was we need more data to come in.
• 1:12
  SPEAKER_02: Um, but then he goes and criticizes the former Fed and how inflation's been too high for six years.
• 1:20
  SPEAKER_02: And so if it's too high for six years and you think the economy's strong, what are you waiting for?
• 1:26
  SPEAKER_01: You know, uh raise those rates, uh battle the inflation.
• 1:32
  SPEAKER_01: Uh that seems to be a pretty good recipe to uh battle inflation, and he's not pulling the trigger.
• 1:42
  SPEAKER_01: Uh and I thankfully, I mean, Mike, you and I both agree on this, and and so many others.
• 1:47
  SPEAKER_01: We're we're thankful that he he didn't raise rates yesterday, uh, this close to the election.
• 1:53
  SPEAKER_01: I I get that.
• 1:54
  SPEAKER_02: Uh yeah, and I understand wanting to get clarity out of the I mean who controls the House and Senate and what impact it might have on the future economic policy.
• 2:05
  SPEAKER_02: Um, but yeah, he he doesn't want to give forward guidance.
• 2:10
  SPEAKER_02: And in my opinion, if you don't guide especially the fixed income market, the fixed income market's gonna guide you.
• 2:19
  SPEAKER_02: Uh, I remember this interview with uh Jeffrey Gunlock about who should be the next Fed chair.
• 2:25
  SPEAKER_02: This was like six months ago, and he's he kind of jokingly says, I think it should be the two-year treasury.
• 2:31
  SPEAKER_02: And I'm like, okay, well now, yeah, now I think you're the the Fed's just gonna follow the fixed income markets.
• 2:40
  SPEAKER_02: They're not, I mean, it doesn't pay to go against if if you're pricing in a 90% chance of a rate cut, rate hike, or pause, to go against that is just gonna create economic drama.
• 2:54
  SPEAKER_02: Like, what's the point?
• 2:56
  SPEAKER_01: So uh he he's painted himself in a picture, he's he's painted himself in a corner, uh and uh by bypassing a rate hike in September, which sort of like his last chance before the election, possibly, you know, uh maybe before would have been nicer, but uh I certainly Mike, um I certainly believe that he's probably gonna there's gonna there's gonna be a rate hike at the next Fed uh after the election.
• 3:31
  SPEAKER_02: Yeah, and I mean that's pretty much priced in at this point, unless I mean I think I think the only things that could make that not happen is get a very weak non-farm payrolls next week, or actually we'll have two two data points on that, or if we see some resolution with the war going on and see a substantial drop in oil prices, I think that could also prevent them from hiking.
• 3:58
  SPEAKER_02: Um now, I I'm I'm I was talking about, you know, what are they waiting for if they think inflation is too high.
• 4:06
  SPEAKER_02: I'm not saying I'm an advocate of them raising rates at this point.
• 4:10
  SPEAKER_02: Um I don't think I mean the economy.
• 4:21
  SPEAKER_02: Yeah, I I mean we got uh preliminary quarter three GDP read today, which came in at uh 3.4 percent for the quarter.
• 4:34
  SPEAKER_02: So very strong on an annualized basis, 2.1 percent.
• 4:38
  SPEAKER_02: Um inflation pretty much came in line.
• 4:40
  SPEAKER_02: The feds preferred inflation gauge, the core PCE came in at 0.32, um, slightly higher than last month, but in line with consensus, that's 3.12% on an annualized basis.
• 4:51
  SPEAKER_02: Uh came in 0.49 for the headline reading, which includes food and energy, and that's up to 3.65.
• 5:00
  SPEAKER_02: And then one other component that I want to mention, which I've been flagging as a concern of mine, personal consumption decelerated to 0.5%, not a terrible number, but it is weaker than the prior month.
• 5:13
  SPEAKER_02: But again, we see another monthly read where personal income was 0.2, so uh well outpaced by what people are spending and what inflation is.
• 5:26
  SPEAKER_01: Well, I do believe, Mike, that consumer spending has taken, and I I could be wrong on this, but I think the consumer spending has certainly spent a whole lot more on chocolate uh in prepare in preparation for Halloween recently.
• 5:43
  SPEAKER_02: And in in this uh GDP read for the quarter, um consumer spending remained strong, uh, pretty much in line with the the prior quarter.
• 5:52
  SPEAKER_02: Um, but the big the big tailwind was infrastructure spending for good reasons.
• 6:00
  SPEAKER_01: Yes, yes.
• 6:02
  SPEAKER_02: Now, besides that, we got uh, you know, it's really starting to heat up on earnings season.
• 6:07
  SPEAKER_02: Um, I think we have 159 of the SP 500 components reporting this week.
• 6:12
  SPEAKER_02: Last night we got some big players.
• 6:15
  SPEAKER_02: We got Microsoft, which had a pretty good earnings report initially up on the day, and then I believe uh it gave back those gains and is now in the red.
• 6:27
  SPEAKER_02: Alphabet was a big disappointment.
• 6:30
  SPEAKER_02: I think the stock is down over 10% currently.
• 6:33
  SPEAKER_02: Um Search was pretty weak, which really drove that um investor sentiment down on that.
• 6:42
  SPEAKER_02: And then uh Caterpillar was another disappointment, although it was uh a beat, I believe, on the top and bottom line.
• 6:49
  SPEAKER_02: Their backlogs uh and and guidance going forward looks a little on the weak side.
• 6:55
  SPEAKER_02: So um that stock is also selling off.
• 6:57
  SPEAKER_02: We're seeing big moves, and I mean that's been kind of the story of this earnings season.
• 7:01
  SPEAKER_02: Um, a lot if good news is priced in and the bar is high, so you really have to be and impress investors to have your stock price go up.
• 7:15
  SPEAKER_02: Turning to the markets, do you have anything to add on earnings?
• 7:20
  SPEAKER_02: Have you seen any?
• 7:22
  SPEAKER_01: Uh this is good season.
• 7:26
  SPEAKER_01: Companies are still making money.
• 7:28
  SPEAKER_02: Uh now I mean, we're still like hand over foot on pace for like 29% earnings growth for the quarter.
• 7:35
  SPEAKER_01: Like unbelievable.
• 7:37
  SPEAKER_01: Um so the the economy is chugging uh very well.
• 7:44
  SPEAKER_01: Um obviously there's those those little outliers uh downward and upward, but uh market is chugging along.
• 7:58
  SPEAKER_02: Yeah, so I I am still thinking we need some more to see a little bit more downside.
• 8:05
  SPEAKER_02: I'm looking at this short term.
• 8:07
  SPEAKER_02: Uh I'll draw the line here.
• 8:10
  SPEAKER_02: Yeah.
• 8:11
  SPEAKER_02: I I think we have to get above that line to really, you know, move back to all-time highs, but my bias is to the downside.
• 8:20
  SPEAKER_02: Um, NASDAQ is just about at the 100 day.
• 8:24
  SPEAKER_02: We've been up and down above those levels uh for the past week, 10 days, two weeks.
• 8:31
  SPEAKER_02: Um bond yields have you know remained pretty pretty uh you know not we're well off of the highs on the 10 year.
• 8:44
  SPEAKER_02: Um since the Fed meeting, both the two year and the 10-year are slightly lower.
• 8:50
  SPEAKER_02: Um and then I'd also like to point out, oh, eagle weight's been doing really well.
• 8:57
  SPEAKER_02: Um, it's up about four percent on the month versus the cap weight is about flat on the month.
• 9:03
  SPEAKER_02: So we're seeing that broadening trade, although you know the AI, the Max 7 names have some of them have gotten hit pretty hard.
• 9:12
  SPEAKER_02: Uh crude is down a little bit on the day, still about$100 a barrel.
• 9:17
  SPEAKER_02: Um, we did see a spike earlier in the week in the high yield spreads, got up to you know the highest level since the beginning of the year.
• 9:26
  SPEAKER_02: Um, but today that is down to 3.18.
• 9:30
  SPEAKER_02: So uh it would be healthy for the markets if that if that came back down.
• 9:37
  SPEAKER_02: But um I think you know there's a lot of concern about all the financing for this AI build out, it's very costly.
• 9:48
  SPEAKER_02: I mean, Meta's doing a huge uh share offering to finance it, and we've seen a lot of debt issuance, so something to keep an eye on.
• 10:00
  SPEAKER_01: Yeah, and it's it costs a whole lot more money to borrow now than it did even a year ago, let alone uh when money was so easy to come by uh prior to 2022.
• 10:16
  SPEAKER_01: Um, so companies would have to pay a whole lot more money to raise capital um than than they've been accustomed to for almost a decade.
• 10:28
  SPEAKER_01: Um but uh they see how it works.
• 10:32
  SPEAKER_02: And good for the companies that took advantage of that low rate environment.
• 10:37
  SPEAKER_02: But I think a lot of those bonds for corporations are gonna start to roll off in the next year or two.
• 10:43
  SPEAKER_02: Yeah.
• 10:43
  SPEAKER_02: Um, so they'll have to issue new debt at, like you said, these higher rates.
• 10:49
  SPEAKER_02: So that's not gonna be good for their bottom line.
• 10:52
  SPEAKER_01: Yeah, but but they're making money now.
• 10:55
  SPEAKER_02: Uh and they're open making money now.
• 10:58
  SPEAKER_02: Yep.
• 10:58
  SPEAKER_01: They're hoping with all that.
• 11:00
  SPEAKER_02: And they're hoping uh AI will be monetized and be worth it in the long run.
• 11:06
  SPEAKER_01: Yes.
• 11:07
  SPEAKER_01: And these companies have been around for quite some time.
• 11:11
  SPEAKER_01: Uh they've seen markets such as this.
• 11:14
  SPEAKER_01: Uh so I well, uh I'm on the opposite side.
• 11:19
  SPEAKER_02: Like you were mentioning, like you were mentioning last week, like Meta has negative free cash flow now for the first time in a decade plus.
• 11:29
  SPEAKER_01: Yeah, but they ended up being write-off, didn't they?
• 11:31
  SPEAKER_02: With the yeah, and they they had a big litigation one one-off charge.
• 11:38
  SPEAKER_02: Yeah.
• 11:39
  SPEAKER_01: Um write-off for a month.
• 11:42
  SPEAKER_02: Uh turning to our blog posts.
• 11:44
  SPEAKER_02: Um, the one earlier in the week is talking about how AI could affect prices and how the previous price dynamic is gonna be a thing of the past.
• 11:54
  SPEAKER_02: Really, what this is saying is they're gonna track your spending behaviors and it's gonna be dynamic pricing based on that.
• 12:02
  SPEAKER_02: So if you buy Oreos every week, they're gonna start charging you more for it.
• 12:10
  unknown: Okay.
• 12:11
  SPEAKER_01: No, Mike, I'm okay with Oreos.
• 12:14
  SPEAKER_01: I can I can live without those, but ice cream, ice cream will be tough for me.
• 12:19
  SPEAKER_01: So uh the more you buy, uh, the the more you pay.
• 12:30
  SPEAKER_01: Yeah, yeah.
• 12:32
  SPEAKER_01: Now.
• 12:33
  SPEAKER_02: So you want to talk about our other blog post, caring for aging parents?
• 12:37
  SPEAKER_01: Oh, yes, yes, dynamic.
• 12:40
  SPEAKER_01: And I've seen it a lot with clients.
• 12:42
  SPEAKER_01: This is not a recent phenomenon, okay, but uh it's it's probably fair to point out where this comes from, caring for aging parents, okay, is our society for the longest time was agrarian rural peace, and and that changed around World War II, okay.
• 13:04
  SPEAKER_01: But for the longest time, you had Walton Mountain, and you had the Waltons, the grandparents and the parents and the kids all under one roof.
• 13:13
  SPEAKER_01: That it was pretty typical that your parents, your elderly parents, would be living with you and also helped with child care.
• 13:21
  SPEAKER_01: All right, that has not happened since the 50s or where it is branching out, and and we're talking the 1950s.
• 13:30
  SPEAKER_01: I wasn't even born then, okay.
• 13:33
  SPEAKER_01: So I was raised in the area where the grandparents are somewhat more independent, and more independent uh is what they wish.
• 13:43
  SPEAKER_01: Now, God love my my in-laws, um Ron Zucchelli, as a lot of you know, is 98, still living independently.
• 13:54
  SPEAKER_01: And his wife, my mother-in-law, is Jean.
• 13:57
  SPEAKER_01: She's oh okay, so I I won't I won't reveal her age, okay?
• 14:01
  SPEAKER_02: But she that's that's probably smart.
• 14:05
  SPEAKER_02: She might not like that.
• 14:07
  SPEAKER_01: But she is amazing, okay.
• 14:10
  SPEAKER_01: Um, and uh it it's so caring for aging parents, it's you know, our our parents are growing older.
• 14:19
  SPEAKER_01: It's not easy to see your parents getting older, okay.
• 14:24
  SPEAKER_01: Uh, and people are living longer, okay.
• 14:28
  SPEAKER_01: But um understand that you really should be taking time to think about these things as your parents are growing older and what your role is in here, uh understand that you really need to take care of yourself, okay.
• 14:48
  SPEAKER_01: Um because if you become a primary caregiver, that can very that can very much weigh you down, okay.
• 14:59
  SPEAKER_01: Um so getting ahead of the time, uh what information you may need to know, you know, um there's there's there's those activities of daily living, all right.
• 15:13
  SPEAKER_01: And it's it's pretty remarkable where you have a husband and wife, uh your elderly parents, that they're not functioning 100%, but together they could a lot of times work well, and so there's a huge difference between caring for your parents when they're both still alive, as opposed to one passing.
• 15:36
  SPEAKER_01: Um, and we all have those experiences, or know of our friends that have that experience, okay, and it is a different dynamic.
• 15:45
  SPEAKER_01: Uh, so be mindful of that and be thorough.
• 15:50
  SPEAKER_01: Um, if uh there's some times where the the parents are so one remains so independent, and it's good for them.
• 15:58
  SPEAKER_01: They they should be.
• 15:59
  SPEAKER_01: There's a lot of choices that you can have about having uh services in the home where they're most comfortable with, they love being at home, all right.
• 16:10
  SPEAKER_01: Uh, but they also need some times out.
• 16:13
  SPEAKER_01: Uh, if you know you really want to try to uh give the primary caregiver breaks.
• 16:21
  SPEAKER_01: So if uh if they're so much involved with the care of a of an of their spouse, bring the spouse up to your house.
• 16:33
  SPEAKER_01: Bring the spouse, uh, bring bring the other and let the other spouse have some time off.
• 16:38
  SPEAKER_01: Uh and in my case, um for Patty and I, you know, so we'll let Patty go with her mom, uh, get some time alone together, shopping, so forth.
• 16:49
  SPEAKER_01: And and Ron and I uh we'll spend some time.
• 16:54
  SPEAKER_01: Um usually on Fox News.
• 17:01
  SPEAKER_01: Um yeah, uh but occasionally I'll try to put on a good old western.
• 17:10
  SPEAKER_01: Uh and and he's so I could see his his lips curling and say, ah, okay.
• 17:16
  SPEAKER_01: But yeah, uh but you get the picture, right, Mike?
• 17:21
  SPEAKER_02: Yeah, and then the other um dynamic of this with more people living beyond 65.
• 17:28
  SPEAKER_02: This article states uh a statistic that over the last decade that group has grown by 38 percent.
• 17:35
  SPEAKER_02: That also comes with additional funding needs.
• 17:37
  SPEAKER_02: Living longer requires more savings and more wealth to live off of.
• 17:44
  SPEAKER_01: Okay.
• 17:45
  SPEAKER_01: Be mindful of there, there are some unique hybrid uh products.
• 17:50
  SPEAKER_01: Now, an annuities are always a complex investment vehicle, um, but there are some pieces where you can add a long-term care component to that annuity.
• 18:04
  SPEAKER_01: Some annuities offer that free of charge.
• 18:07
  SPEAKER_01: Most annuities now uh you can have a waiver where you there's not gonna be any kind of back-end charge if you need um to pay for long-term care or uh expenses.
• 18:20
  SPEAKER_01: Okay.
• 18:21
  SPEAKER_01: Uh that's a nice feature.
• 18:23
  SPEAKER_01: That wasn't always the case.
• 18:24
  SPEAKER_01: It's pretty, it's pretty industry standard now, okay.
• 18:27
  SPEAKER_01: Um, but these hybrid hybrid policies, uh, you may want to look into those.
• 18:34
  SPEAKER_01: Um uh you still collect an ongoing uh an ongoing income stream, um, and sometimes it gets doubled if you are unable to perform uh less than less than three of those five activities of daily living.
• 18:53
  SPEAKER_01: Okay.
• 18:54
  SPEAKER_01: Um there's there's many options available.
• 18:59
  SPEAKER_01: Uh it's sometimes it it might take some investing uh to uh knowledge to try to figure out what works best for you.
• 19:09
  SPEAKER_01: If we can assist you with that, uh we'd be more than happy to.
• 19:16
  SPEAKER_01: Obviously, long-term care policies, a straight policy, uh they're very pricey.
• 19:24
  SPEAKER_01: Um if you and try not to go for something that you're thinking that that would pay for all of the long-term care, those are really, really pricey, but something to help extend your dollars, you know, uh that's very beneficial.
• 19:43
  SPEAKER_01: And don't forget about the power of of compound interest.
• 19:49
  SPEAKER_01: So like if you if you have a dollar and spend it, it's gone.
• 19:54
  SPEAKER_01: If you have a hundred dollars that makes um that makes a dollar this this and you spend that dollar, you still have the the other dollar coming back.
• 20:06
  SPEAKER_01: Okay, so uh be mindful of that.
• 20:12
  SPEAKER_01: Mike, uh I got a nice quote.
• 20:14
  SPEAKER_01: Uh are we ready for that yet?
• 20:17
  SPEAKER_02: Um, yeah, go for it.
• 20:19
  SPEAKER_01: Okay.
• 20:20
  SPEAKER_01: This is from Norman Vincent Peel, uh, a famous theologian and so forth.
• 20:24
  SPEAKER_01: And he says, quote, change your thoughts and you change your world.
• 20:32
  SPEAKER_01: Um I like that, you know, and uh I uh you might have heard me say this before.
• 20:39
  SPEAKER_01: Um, you can either live under the Ten Commandments, you say they tell you what to do.
• 20:45
  SPEAKER_01: You these are your behaviors.
• 20:48
  SPEAKER_01: Um, you follow the Ten Commandments and the world has changed and you're changed, or in the New Testament, you have the the Sermon on the Mount, the Beatitudes.
• 20:58
  SPEAKER_01: You change your attitude, therefore your behavior changes.
• 21:03
  SPEAKER_01: So this is sort of along the lines where you know you change your attitude, you change your thoughts, and the world changes as a result.
• 21:11
  SPEAKER_01: Um, you can use both approaches.
• 21:14
  SPEAKER_01: Uh, a lot of times, uh, people gravitate toward, hey, I'm gonna change my behavior, therefore my attitude changes, hence the the Ten Commandments, you know, uh, or I'm gonna change my attitude, therefore my behavior changes.
• 21:30
  SPEAKER_01: I gravitate toward the Beatitudes.
• 21:33
  SPEAKER_01: Um, but uh like most people, I I fail.
• 21:38
  SPEAKER_01: Um, I try my best.
• 21:41
  SPEAKER_01: Okay, and I think that's all that that God asks of us is to do your best with the resources you have at the time.
• 21:49
  SPEAKER_01: Um and hopefully not just the world changes, but also your world changes.
• 21:56
  SPEAKER_02: You know, and thoughts have that domino effect.
• 22:00
  SPEAKER_02: If you start your day off with a negative thought, I mean it just kind of continues to spiral from there, and vice versa.
• 22:08
  SPEAKER_02: If if you try to take the positive view on thing and get in that habit of um, you know, thinking positively and optimistically, it kind of just builds on itself.
• 22:20
  SPEAKER_01: A lot to be said for that.
• 22:21
  SPEAKER_01: Um, studies are very clear, health-wise, uh longevity.
• 22:27
  SPEAKER_01: Uh but uh we all have those eeors in our lives, and boys, sometimes they're funny people, and sometimes uh if you can get an Eeyore to laugh at themselves, you're doing good.
• 22:46
  SPEAKER_01: Uh so um that's all I got, Mike.
• 22:50
  SPEAKER_02: All right, well, we have another uh Mag 7 name reporting this evening, and then more to come next week.
• 22:58
  SPEAKER_02: Um, and we'll also get all the jobs data, unemployment rate's supposed to stay at 4.2, non-farm payrolls is expected to be about 55,000.
• 23:08
  SPEAKER_02: Um, and then we'll get job openings, ISM services, and I believe ISM manufacturing.
• 23:14
  SPEAKER_02: So it'll it'll be an important week to watch.
• 23:18
  SPEAKER_02: And we will be back next Friday by 12 30 Eastern time.
• 23:23
  SPEAKER_02: I hope everyone has a wonderful weekend.
• 23:25
  SPEAKER_01: Okay, Mike, blessies to you, safe travel.
• 23:28
  SPEAKER_01: So L.
• 23:28
  SPEAKER_02: Thank you.
• 23:30
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• 23:33
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  SPEAKER_00: Brian Peluso, Michael Kutch, and David Harper are registered representatives of LPL Financial LLC.
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