Latest / HPK Provident Advisors: The Weekly Bull / Nonfarm Payrolls Strength Meets Fed Uncertainty

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Nonfarm Payrolls Strength Meets Fed Uncertainty · HPK Provident Advisors: The Weekly Bull

• 0:04
  SPEAKER_00: Welcome to Friday Live.
• 0:06
  SPEAKER_00: Every Friday, the partners of HBK Provident get together and discuss what we're seeing going on in the markets, the economy, and tying in some financial planning topics.
• 0:13
  SPEAKER_00: So with me today for week number three, Brian Peluso, our CFP, Social Security expert, and some other designations there.
• 0:21
  SPEAKER_00: Brian, good to have you as always.
• 0:23
  SPEAKER_00: Oh, truly my pleasure.
• 0:24
  SPEAKER_00: Back from Kentucky.
• 0:26
  SPEAKER_00: It was beautiful.
• 0:27
  SPEAKER_00: Yeah, did you do a little bourbon tasting while you're there or just uh watch the ponies?
• 0:33
  SPEAKER_01: No, no bourbon, no ponies this time.
• 0:35
  SPEAKER_01: Uh just picked up my uh my daughter from the end of her freshman year.
• 0:40
  SPEAKER_01: And uh yeah, moving furniture.
• 0:43
  SPEAKER_01: Yes, it is.
• 0:44
  SPEAKER_01: And uh out of the sixth floor is uh is not fun.
• 0:49
  SPEAKER_01: Yeah, I feel like you know, hey, everybody always told me, and it's true, uh, every year you get older, time goes quicker and quicker.
• 0:55
  SPEAKER_01: That's a fact.
• 0:56
  SPEAKER_01: Uh it is.
• 0:57
  SPEAKER_01: I can't like I feel like we just turned over a new calendar year.
• 1:02
  SPEAKER_01: Uh well, geez, we're into May.
• 1:04
  SPEAKER_01: I mean, it won't be long before 2026 is halfway through.
• 1:09
  SPEAKER_01: Life goes quick, certainly when it's interesting.
• 1:12
  SPEAKER_01: And we got some uh interesting stuff going on in the markets, of course.
• 1:17
  SPEAKER_00: Those that say sell in Maine go away um aren't right so far for the first week of May, but it's still pretty early on.
• 1:24
  SPEAKER_00: I mean, I I don't know what makes uh a Friday better than getting both non-farm payrolls and making all-time highs on a day.
• 1:33
  SPEAKER_01: Uh well, Friday in Pittsburgh could be better if it weren't uh 45 degrees or whatever it is, but I mean I I agree with the sentiment, Mike.
• 1:40
  SPEAKER_01: Yes.
• 1:41
  SPEAKER_01: Yeah, your portfolio is up.
• 1:42
  SPEAKER_01: That outweighs me.
• 1:44
  SPEAKER_01: That warms me up.
• 1:45
  SPEAKER_01: It certainly does.
• 1:46
  SPEAKER_00: Oh, yeah.
• 1:47
  SPEAKER_00: So non-farm payrolls came in at 115,000 for the month.
• 1:50
  SPEAKER_00: That was close to double projected.
• 1:52
  SPEAKER_00: I think we were calling for 65,000.
• 1:55
  SPEAKER_00: Um March was revised slightly higher, and February was uh revised lower.
• 2:02
  SPEAKER_00: So net, I think it was about a 16,000,000 job reduction.
• 2:08
  SPEAKER_00: Nothing too material.
• 2:09
  SPEAKER_00: Um, I before this reading, I think the average for the year was about 65,000.
• 2:15
  SPEAKER_00: It's been very volatile though, big up months, big down months.
• 2:18
  SPEAKER_00: Um, so hopefully this is the start of something a little more normalized.
• 2:23
  SPEAKER_00: Um, participation rates very low.
• 2:26
  SPEAKER_00: Um, that's a combination of both the immigration story and boomers leaving the labor force.
• 2:33
  SPEAKER_00: Uh, that's actually the lowest level since 2021.
• 2:36
  SPEAKER_00: So we'd like to see that pick up, but it's kind of that low hiring, low firing environment, although we're starting to see a pickup in the hiring aspect, which is good.
• 2:45
  SPEAKER_00: Average hourly earnings could be a little better.
• 2:48
  SPEAKER_00: Um, we're tracking 3.6 on an annualized basis.
• 2:53
  SPEAKER_00: On a monthly basis, that's 0.2.
• 2:55
  SPEAKER_00: So really not that great for the in terms of the consumer.
• 3:00
  SPEAKER_00: Um, we'd like to see that be a little higher, especially given inflation and higher energy prices.
• 3:06
  SPEAKER_00: Uh, but in terms of what that means for the Fed, you know, it makes both their mandates look a little better, solid uh employment situation, and wages are certainly not going to add to inflation.
• 3:17
  SPEAKER_00: So um, I mean, the data's been pretty good of late.
• 3:21
  SPEAKER_00: Um, although we did see a slight deceleration in ISM services, it's still healthy and expansionary territory, and that's really a big engine of our economy this day.
• 3:32
  SPEAKER_00: In this in this time period, we're kind of not as much manufacturing driven as we used to be.
• 3:37
  SPEAKER_00: So that's been good.
• 3:39
  SPEAKER_00: Although uh new orders in that component were pretty weak, uh, a big deceleration there.
• 3:45
  SPEAKER_00: Outside of that, we got the ADP numbers that come out weekly.
• 3:48
  SPEAKER_00: That was solid um in terms of job gains, and the uh weekly weekly jobless claims remain pretty low.
• 3:56
  SPEAKER_00: So, overall, pretty good.
• 3:57
  SPEAKER_00: Um productivity though came in a little surprising um to the downside.
• 4:03
  SPEAKER_00: I mean, it was still positive, but um seeing very robust numbers there, and that's really been fueled by this AI uh transition, which fortunately has been very, very good for earnings.
• 4:16
  SPEAKER_00: I mean, I think we're tracking 25% on the quarter for earnings growth with 85% of the SP reporting um going into the reports, uh, the earnings season.
• 4:26
  SPEAKER_00: I think they're calling for 12%, and that really jumped after the Max 7 earnings.
• 4:30
  SPEAKER_00: It went from 15 to 25.
• 4:33
  SPEAKER_00: So that's really given stocks a reason to celebrate.
• 4:36
  SPEAKER_00: Um, like I said before, we're making all-time highs.
• 4:40
  SPEAKER_00: Take a look at the SP 500 right there, up another seven-tenths of a percent today to all-time highs.
• 4:47
  SPEAKER_00: We did pull back yesterday a little bit.
• 4:49
  SPEAKER_00: Um, there was some midweek optimism that a uh a war deal would get done quickly.
• 4:56
  SPEAKER_00: Um that was pulled back a little bit on Thursday, and seems like that's kind of continuing into the weekend, but earnings are enough to keep it up.
• 5:05
  SPEAKER_00: Uh, the 10-year treasury is in a pretty I mean, I like to see it be a little less volatile than it's been.
• 5:12
  SPEAKER_00: So we've just been kind of sitting above 430.
• 5:15
  SPEAKER_00: Um, not really uh, I mean, I would like to see it a little lower, but I think kind of 450 is probably the the area where people start to set like get a little panicked.
• 5:25
  SPEAKER_00: So it's still in a relatively healthy region.
• 5:29
  SPEAKER_00: Um, the two-year, which is kind of the projection of what the uh monetary policy will do, we're kind of in the range of um, I think the upper end of the Fed funds rate is 375 right now.
• 5:41
  SPEAKER_00: So we're slightly above that on the two-year.
• 5:43
  SPEAKER_00: So that could indicate that hikes might be a little more likely than cuts in the given um in the given couple months and quarters.
• 5:52
  SPEAKER_00: Uh we will get a new Fed chair.
• 5:55
  SPEAKER_00: Um, I think that starts next week.
• 5:58
  SPEAKER_00: So that'll be interesting to learn his dynamics.
• 6:01
  SPEAKER_00: Um, on the really the the telltale of the war, crude oil prices did uh tick down lower in the week, and then uh we're starting to see some upward pressure there, sitting at 95.6 a barrel.
• 6:15
  SPEAKER_00: Um so maybe the oil market's not really reflecting or believing that we're gonna get a near-term uh de-escalation in the war.
• 6:25
  SPEAKER_00: But uh overall things are going pretty good.
• 6:27
  SPEAKER_00: Um, SP is in overbought territory, but overbought does not mean over.
• 6:33
  SPEAKER_00: Um, maybe it'd be healthy for a little bit of a consolidation here.
• 6:37
  SPEAKER_00: Uh, but in terms of valuations, we're actually cheaper than the start of the war based on how robust earnings growth has been.
• 6:46
  SPEAKER_00: So overall, in uh pretty pretty healthy spot.
• 6:51
  SPEAKER_00: You've been having any expand reactions to the market, do they know what's going on?
• 6:55
  SPEAKER_00: I mean, that sometimes the headlines outweigh the what's actually going on in the stock market in the economy.
• 7:02
  SPEAKER_00: Um, what's been the feeling?
• 7:04
  SPEAKER_01: Yeah, so I want to clarify one thing.
• 7:06
  SPEAKER_01: Consolidate, when you say a consolidation could be healthy, that means the market goes down a little bit, right?
• 7:11
  SPEAKER_00: Not necessarily a little breathing.
• 7:14
  SPEAKER_00: It could be more of like a trading range for a little bit.
• 7:17
  SPEAKER_00: Um, so consolidation is anywhere from you know around the current level to I would put it as down to a five percent pullback, and then five percent kind of in my terminology signifies a pullback, and then that remains a pullback until you hit the 10% level, then it becomes a correction, and then 20% level becomes a bear market.
• 7:41
  SPEAKER_00: So we we like to throw in all these financial jargon terms in in our industry, so that's kind of what they mean there, and actually it's interesting in in the CMT curriculum, if it goes down, it's actually a throwback.
• 7:55
  SPEAKER_00: Oh, I like that.
• 7:56
  SPEAKER_01: Okay, I might have to uh incorporate that a throwback.
• 8:03
  SPEAKER_00: Yeah, a pullback is actually after a decline, it going up.
• 8:09
  SPEAKER_00: Oh it's been a little while since I read those, so if I'm if I'm false on that, please don't call me out.
• 8:14
  SPEAKER_00: I'm just kidding.
• 8:14
  SPEAKER_00: If you can call me out on it, I need to be corrected if I'm saying something incorrect.
• 8:20
  SPEAKER_01: Yeah, but to your question, Mike, uh, you know, of course, you know what we do on Friday live, 12:30 p.m.
• 8:26
  SPEAKER_01: Eastern Standard Time on Facebook.
• 8:27
  SPEAKER_01: We couple other partners at HBK.
• 8:29
  SPEAKER_01: We're you know, we put out social media posts during the week.
• 8:32
  SPEAKER_01: Uh Monday's Market Monday.
• 8:34
  SPEAKER_01: Uh, try to do some tax-related stuff.
• 8:37
  SPEAKER_01: We don't prepare taxes, uh, we don't give tax advice.
• 8:42
  SPEAKER_01: Um, but tax Tuesday, we talk a little bit about tax-related items.
• 8:47
  SPEAKER_01: Uh wealth building Wednesday, you know, kind of talk about how to build uh your net worth.
• 8:53
  SPEAKER_01: Uh, think ahead Thursday or just kind of general topics, things you might want to consider.
• 8:58
  SPEAKER_01: And we wrap it up on Fridays.
• 9:00
  SPEAKER_01: We talk a little bit about the different social media posts.
• 9:03
  SPEAKER_01: Uh, but Mike, to your earlier question, what are what kind of what's the sentiment out there, the conversations that I'm having?
• 9:09
  SPEAKER_01: I I would say most folks are kind of surprised.
• 9:12
  SPEAKER_01: Um, you know, oftentimes in our reviews, we look at a rolling one year, uh, just to give a little bit of a broader uh perspective as opposed to just always doing year-to-date numbers uh on a rolling one year.
• 9:25
  SPEAKER_01: And some of the numbers are uh fantastic.
• 9:28
  SPEAKER_01: The portfolio is growing, net worth growing.
• 9:31
  SPEAKER_01: Uh, but I I would say there's still a little bit of a hesitancy, like, okay, when is it coming?
• 9:37
  SPEAKER_01: Uh, when is what coming?
• 9:39
  SPEAKER_01: I don't know.
• 9:40
  SPEAKER_01: Um, but uh I I would say there is uh uh the reviews are pleasant surprises.
• 9:48
  SPEAKER_01: Oh, okay, we did pretty good here uh for the most part.
• 9:52
  SPEAKER_01: And uh, but there is a hesitancy.
• 9:54
  SPEAKER_01: Yeah, but the world is strange.
• 9:56
  SPEAKER_01: There's a lot of weird things going on.
• 9:58
  SPEAKER_01: We got the Middle East, the gas prices, all of that comes to roost at some point.
• 10:04
  SPEAKER_01: Uh felt like it did in the beginning of the year, and then it didn't.
• 10:07
  SPEAKER_01: And now a lot of the indices, the major indices, uh are doing pretty good.
• 10:13
  SPEAKER_01: So I would say the sentiment is pleasantly surprised with a cautious eye towards the future.
• 10:20
  SPEAKER_00: Yeah, it's really amazing that the market can just look back, look past some of these geopolitical things going on, and just like, okay, we're over it.
• 10:28
  SPEAKER_00: Yeah.
• 10:29
  SPEAKER_01: Well, it kind of, you know, it fits in with our planning philosophy, which is kind of um plan for the worst, hope for the best, somewhere in between is your reality.
• 10:37
  SPEAKER_01: So we do as much as we can um with the resources folks have to um kind of lay out what could be uh you know their worst case scenario.
• 10:49
  SPEAKER_01: Uh we hope for the best.
• 10:51
  SPEAKER_01: We uh make adjustments in the portfolios that manage, of course, uh based on conditions.
• 10:57
  SPEAKER_01: Um but uh I I'm gonna say people are uh cautiously surprised at how well portfolios are doing right now.
• 11:08
  SPEAKER_01: You know, maybe it's a time in the some of the conversations we're having.
• 11:11
  SPEAKER_01: Hey, you know, do you want to protect some of these profits?
• 11:14
  SPEAKER_01: Um if we can do that, it's a little more difficult and non-qualified.
• 11:19
  SPEAKER_01: These are outside of IRAs, outside of retirement accounts, outside of tax-protected accounts.
• 11:24
  SPEAKER_01: That would be a uh traditional IRA, Roth IRA, 401k.
• 11:28
  SPEAKER_01: It might be a little more difficult to protect some of those profits because if you readjust those, you could be selling things that have gone way up and realizing capital gains in the near term.
• 11:39
  SPEAKER_01: Um, in retirement accounts, think of a traditional IRA, for example, it's a little bit easier to say, hey, you know, do you want to maybe take the opportunity to protect some of these profits that we've had over the last couple of years?
• 11:54
  SPEAKER_01: And uh as with everything, um, there's uh everything in financial planning is kind of weighing um the pros and cons.
• 12:03
  SPEAKER_01: What are the benefits of doing this?
• 12:05
  SPEAKER_01: What are the uh potential uh drawbacks of doing this?
• 12:12
  SPEAKER_01: So um some of the conversations that have been around, wow, this has been really great.
• 12:16
  SPEAKER_01: Can I protect some of this in some way?
• 12:18
  SPEAKER_01: The answer is yes.
• 12:19
  SPEAKER_01: And in doing that, uh there are things that you can do that become a little more costly, uh, potentially.
• 12:26
  SPEAKER_01: Um and also, what are you giving up?
• 12:28
  SPEAKER_01: You you're you're giving up, if you're taking some of those profits that you had over the last couple of years, you're giving up some of the potential of that portion going up in the future.
• 12:39
  SPEAKER_01: If we kind of continue this trend and 10 years from now and say, wow, the market has been fantastic, and you go into protection mode now, 10 years from now, on that portion, when you look back and say, geez, it really could have been X times something as opposed to uh X plus.
• 12:56
  SPEAKER_01: But hey, uh, you know, it's a very individual exercise, and some people would be more comfortable with that.
• 13:03
  SPEAKER_01: Say, hey, I'm gonna take, you know, protect some of my profits.
• 13:06
  SPEAKER_01: And 10 years from now, if I look back and say, geez, that money that I protected then could have been much higher, but I'm okay with that.
• 13:13
  SPEAKER_01: I slept great along the way, uh, and my life is wonderful, then that's something uh maybe to consider.
• 13:19
  SPEAKER_01: Um, so I would say that's the same thing.
• 13:22
  SPEAKER_00: And that type of client who's wants to do the protection, what what kind of conversations are you having?
• 13:28
  SPEAKER_00: Are you talking about just a shift in allocation or maybe a different investment vehicle?
• 13:35
  SPEAKER_01: All the above.
• 13:36
  SPEAKER_01: Uh, you know, we can go shift in allocation, obviously, not obviously to everybody, you know, uh uh higher level of fixed income can fixed income being bonds.
• 13:46
  SPEAKER_01: You could look at uh lower potential, potentially lower uh overall returns um in the bond portion, a little bit more income, uh hopefully a uh some buffer on the downside.
• 14:01
  SPEAKER_01: So it could be a change in allocation from uh you know, shift from the some of the stock portion to the bond portion.
• 14:08
  SPEAKER_01: Certainly could be that.
• 14:09
  SPEAKER_01: Uh it could be a different investment vehicle.
• 14:12
  SPEAKER_01: There are um there are ways, there are investment products that you can put some of that money in where um your money won't go down and it has the potential to go up.
• 14:24
  SPEAKER_01: But that comes with uh that comes with some uh considerations, uh potentially higher costs to do that.
• 14:32
  SPEAKER_01: One, uh lower liquidity.
• 14:34
  SPEAKER_01: A lot of people say, well, wait a minute.
• 14:35
  SPEAKER_01: Um it's too good to be true that my money won't go down, but it could go up.
• 14:41
  SPEAKER_01: I would say, yes, uh, it seems that way.
• 14:43
  SPEAKER_01: It's not too good to be true because it can happen.
• 14:46
  SPEAKER_01: We can do that for you.
• 14:47
  SPEAKER_01: Uh it's too good to be immediately liquid.
• 14:50
  SPEAKER_01: Uh, some of those products that I'm talking about, they really want you to uh stay with them for some period of time, three, five, seven years.
• 14:58
  SPEAKER_01: Um, those are often done through insurance companies.
• 15:02
  SPEAKER_01: And the insurance company says, Hey, if I can work this deal with you, I you know, it's not going to go down, it could go up.
• 15:08
  SPEAKER_01: Then I need some commitment from you three, five, seven, oftentimes ten years, which I think's a little long.
• 15:15
  SPEAKER_01: But uh, but I need you to uh you know leave that money with me for some period of time so that the things that I'm telling you I could do, this is what the insurance company would say.
• 15:26
  SPEAKER_01: Things I'm telling you I can't do, you know, I I I really needed that money to stay with me for some period of time.
• 15:33
  SPEAKER_01: So uh some of those options are a little more costly and uh a little less liquid.
• 15:39
  SPEAKER_01: You don't can't get to the money as quickly.
• 15:41
  SPEAKER_00: Yeah, what do you always say in most investment vehicles?
• 15:44
  SPEAKER_00: You can get two out of the three, which you're referring to liquidity, uh safety of principle.
• 15:51
  SPEAKER_00: That's right.
• 15:52
  SPEAKER_00: And income?
• 15:53
  SPEAKER_00: Are those the three that you like to refer to?
• 15:55
  SPEAKER_01: Yeah, yeah, it's uh, you know, when you look at any investment vehicle, you there's three characteristics you want to look at.
• 16:03
  SPEAKER_01: One is safety.
• 16:05
  SPEAKER_01: Uh, you know, if I place a dollar somewhere and I go back, you know, is that dollar is still going to be one dollar?
• 16:10
  SPEAKER_01: That's one.
• 16:11
  SPEAKER_01: Uh, two would be the potential for income or high return.
• 16:16
  SPEAKER_01: So you got the safety factor, you got the potential for high income, high return.
• 16:21
  SPEAKER_01: And then the third would be access.
• 16:23
  SPEAKER_01: How quickly could I get to the money?
• 16:25
  SPEAKER_01: Um, would there be any penalty to get to it?
• 16:28
  SPEAKER_01: Uh, and the trick is for most places that you consider placing your money, uh, you're only gonna get two of the three.
• 16:36
  SPEAKER_01: So, for example, if somebody came to me and said, I want safety, if there's a one dollar that I place somewhere, I want to know when I go back there's gonna be one dollar.
• 16:46
  SPEAKER_01: Okay.
• 16:47
  SPEAKER_01: Uh, then you could pick one of the other two.
• 16:50
  SPEAKER_01: Uh, one of the other two, they say, Well, I want safety as well.
• 16:53
  SPEAKER_01: Um, uh, you know, I want the safety and I want the uh, well, let's say liquidity.
• 17:00
  SPEAKER_01: I, you know, if I place a dollar somewhere, I know I want it to be a dollar.
• 17:04
  SPEAKER_01: Uh, and I don't uh uh, you know, I want to get a little bit of return, for example.
• 17:10
  SPEAKER_01: I want I want to get a little bit of yield.
• 17:12
  SPEAKER_01: Well, you know, what you're giving up there is you you're picking safety and you're picking liquidity.
• 17:18
  SPEAKER_01: So I want it to be safe and I want to be able to get to it quickly.
• 17:21
  SPEAKER_01: Well, you've given up the third.
• 17:23
  SPEAKER_01: You've given up the potential for higher growth or higher um uh yield interest on that.
• 17:32
  SPEAKER_01: So if you say I want safety, I want liquidity, you you gotta recognize that you're probably giving up the potential for it to grow.
• 17:39
  SPEAKER_01: Now, if you say I want it to grow, uh, that's my number one priority.
• 17:44
  SPEAKER_01: And I want access to it, well, that's kind of a diverse diversified portfolio, stocks, bonds, ETS, right?
• 17:50
  SPEAKER_01: It has the potential to grow.
• 17:52
  SPEAKER_01: You can often get to it uh whenever you want to, but what have you given up?
• 17:58
  SPEAKER_01: You've given up the third, you've given up that absolute safety factor.
• 18:02
  SPEAKER_01: So when that is a very simplified beginning of a conversation where if you prioritize in that mind in your mind, and this is for different buckets of money, this isn't 100%.
• 18:14
  SPEAKER_01: I mean, that you can have different buckets of money and say, for this portion of my money, I want it to be safe and I want to have access to it.
• 18:20
  SPEAKER_01: Okay, great, but it's not going to grow a lot.
• 18:22
  SPEAKER_01: You're giving up the potential for higher yield or higher return.
• 18:26
  SPEAKER_01: If you say, uh, I'm not worried about access, but I want safety and high return.
• 18:32
  SPEAKER_01: Well, there are things that we can do for that and say, and that's kind of what I was alluding to you know, in protecting some of this.
• 18:37
  SPEAKER_01: Okay, you're you're picking safety, you're picking, picking the potential that it can grow, but you're giving up on that portion of money, just for that portion, you're giving up that you can get to it right away without any sort of penalty.
• 18:51
  SPEAKER_01: So safety, potential for high return, and access or liquidity.
• 18:56
  SPEAKER_01: If you look at any bucket of money and say, okay, I want to prioritize this portion of my financial life, and my priorities are pick two of the three.
• 19:06
  SPEAKER_01: Very hard to find all three.
• 19:07
  SPEAKER_01: So, yes.
• 19:10
  SPEAKER_00: Awesome.
• 19:11
  SPEAKER_00: Yeah, I love that explanation.
• 19:13
  SPEAKER_00: Uh, you you uh put out a post on Tuesday for our tax Tuesday, make time after tax time.
• 19:20
  unknown: Yeah, yeah.
• 19:21
  SPEAKER_01: Yeah, you know, and so it's uh you know, tax time is a it can be a um can be a moment of reflection on your financial life.
• 19:36
  SPEAKER_01: Because you know, if you're looking at your tax return, really there's so much of what goes on in your financial life that ends up on one of those pages of your tax return.
• 19:44
  SPEAKER_01: And so this is a good time to stop and look and say, okay, did this play out the way I hoped it would?
• 19:51
  SPEAKER_01: Now, the what what everybody really hopes is I don't ever have to pay taxes, never anytime for any reason.
• 19:56
  SPEAKER_01: Well, that's not gonna happen.
• 19:58
  SPEAKER_01: But what you want to do is you want to look at that tax return and say, did I is this kind of what I expected?
• 20:05
  SPEAKER_01: Um a year prior, a year ago, before I get did my tax return in April of 2026, when I was April of 2025, is this kind of what I expected?
• 20:15
  SPEAKER_01: Um, what were the surprises there?
• 20:18
  SPEAKER_01: Uh did you pay too much in one category?
• 20:21
  SPEAKER_01: Were was there a pleasant surprise where you say, geez, I I I thought I was going to end up paying more taxes on that portion of my financial life?
• 20:29
  SPEAKER_01: So it's a good time for reflection to sit back and uh the real question is what was I surprised by, either on the positive or the negative side?
• 20:38
  SPEAKER_01: And then the next question becomes are there things that I can do right now proactively so that I am not surprised in April of 2027.
• 20:49
  SPEAKER_01: Um and and that's an exercise that we go through with our clients on a regular basis and try to make those adjustments.
• 20:57
  SPEAKER_01: Uh, I don't think you're gonna have much of a choice in if you pay taxes.
• 21:01
  SPEAKER_01: There are some portions of your your money that you won't have to pay taxes, but overall you're gonna pay taxes in some way.
• 21:08
  SPEAKER_01: Um so, but when uh you realize those taxes, when they end up on uh your tax return, and how much of that ends up on your tax return uh in any given year, uh, those are things that you do have control over.
• 21:26
  SPEAKER_01: Um so you don't as much have uh control over whether you will or will not pay taxes.
• 21:31
  SPEAKER_01: That's more of Congress and the IRS dictating those rules.
• 21:35
  SPEAKER_01: However, you can take control of when you want to realize that, when they end up on your uh tax return as opposed to if.
• 21:43
  SPEAKER_00: So this is a really great time just to review.
• 21:46
  SPEAKER_00: But we can help out with a lot of that stuff.
• 21:48
  SPEAKER_00: Like if you come to us and say, you know, Mike, I I want I I only want to realize$8,000 a year in capital gains.
• 21:57
  SPEAKER_00: Okay, well, let's set that budget, maybe.
• 22:00
  SPEAKER_00: We also go a little deeper, and I love the thing you talk about with um asset location.
• 22:07
  SPEAKER_00: So maybe we make your income-producing things in your retirement accounts where you don't have to pay interest on it, or maybe we look at if you're RDA doing QCDs or something along those lines, maybe gifting.
• 22:22
  SPEAKER_00: Um, so those are discussions that we can certainly have.
• 22:26
  SPEAKER_01: Yeah, that's yeah, that's an important part.
• 22:28
  SPEAKER_01: We don't prepare taxes, we're not tax preparers.
• 22:31
  SPEAKER_01: We don't give uh specific tax advice in the sense that, hey, you should do this.
• 22:35
  SPEAKER_01: However, we do a lot of tax planning.
• 22:38
  SPEAKER_01: Hey, recognize if you do this, here's the benefit, here's the consequence.
• 22:43
  SPEAKER_01: Benefit is maybe it grows and you then there's capital gains, right?
• 22:48
  SPEAKER_01: You buy something for$5, you sell it for uh$8,$3 capital gain, right?
• 22:53
  SPEAKER_01: We we can kind of talk about that.
• 22:55
  SPEAKER_01: Um, Mike, you bring up uh you know a wonderful point.
• 22:59
  SPEAKER_01: Asset location.
• 23:00
  SPEAKER_01: Everybody talks about asset allocation.
• 23:01
  SPEAKER_01: How much the ox bonds of large, mid, small growth, value municipals, taxable, that kind of stuff.
• 23:06
  SPEAKER_01: How much do you have?
• 23:07
  SPEAKER_01: Uh, but where it's at is incredibly important.
• 23:10
  SPEAKER_01: Uh, for example, Mike brings up a great point.
• 23:12
  SPEAKER_01: If you have a traditional IRA, it's pretty much for the most part, hey, there's exceptions, for the most part, it's taxed in one way.
• 23:19
  SPEAKER_01: It's when when it comes out, it's taxed essentially like it's uh income from work.
• 23:25
  SPEAKER_01: That's the way it's taxed.
• 23:26
  SPEAKER_00: And you gave a good example about this earlier when we were talking about uh the way we manage portfolios being tactical, it's a lot easier on those retirement accounts because we don't have to take into account the tax implications.
• 23:38
  SPEAKER_00: So that that's kind of that tax location that Brian's referring to.
• 23:42
  SPEAKER_01: Absolutely.
• 23:43
  SPEAKER_01: Uh you know, if you have a very active portfolio, uh, hey, maybe you consider uh that in a tax protected bucket and IRA.
• 23:53
  SPEAKER_01: I mean, if if you're somebody, which we are not, uh, but if you're somebody that you're, you know, you're trading every day, right?
• 24:00
  SPEAKER_01: You buy something for five, it goes up to six, you sell it at six, two days later, that's a short-term capital gain, which is taxed at a less friendly rate than a long-term capital gain.
• 24:12
  SPEAKER_01: So if you're if you're doing that, maybe it's best to be in an IRA where there's there's only one, uh, there's exceptions.
• 24:21
  SPEAKER_01: I get it.
• 24:21
  SPEAKER_01: But for the most part, there's there's one tax and it's on the way out.
• 24:25
  SPEAKER_01: So if you're doing a lot of things day to day today, well, you're not getting taxed on that in the year that you're doing that.
• 24:31
  SPEAKER_01: Uh, Mike, you bring up fixed income.
• 24:33
  SPEAKER_01: You know, for the most part, interest on bonds is taxed in one way, and oftentimes long-term capital gain rates are more tax friendly.
• 24:43
  SPEAKER_01: So maybe you're a lot of that income that is less tax friendly, uh, maybe that goes in the IRS.
• 24:50
  SPEAKER_01: But again, all very personal uh decisions based on a you know, a bigger bucket of money, uh, you know, uh or a more diversified bucket uh uh financial picture.
• 25:00
  SPEAKER_01: Uh, you know, for those folks that come to us and say, hey, I've been saving all my money in my 401k and my IRA, and that's and I then got a little bit of money in my checking account.
• 25:09
  SPEAKER_01: Well, there's less flexibility there.
• 25:11
  SPEAKER_01: You know, if all of your net worth is in your house and in your IRA, well, you just got to recognize we have less flexibility.
• 25:18
  SPEAKER_01: Doesn't mean it's a terrible picture, oftentimes a wonderful picture.
• 25:22
  SPEAKER_01: Uh, but some of these things that we're talking about.
• 25:25
  SPEAKER_01: So that kind of leads into a little bit the tax triangle.
• 25:29
  SPEAKER_01: What is the tax triangle?
• 25:30
  SPEAKER_01: Think of a triangle.
• 25:31
  SPEAKER_01: Well, you want to have buckets of money where you're not gonna pay taxes on those.
• 25:35
  SPEAKER_01: Simple example could be a Roth IRA, um, could be cash value of a life insurance policy.
• 25:42
  SPEAKER_01: So you're not gonna pay for the most part.
• 25:45
  SPEAKER_01: There's always exceptions to these things, right?
• 25:46
  SPEAKER_01: The IRS is it's either this or this, unless.
• 25:50
  SPEAKER_01: So there's always exceptions.
• 25:51
  SPEAKER_01: But you want to have, you know, a potentially tax-free bucket of money.
• 25:55
  SPEAKER_01: You want to have a tax-deferred bucket of money, which is that money isn't gonna be taxed until you take it.
• 26:02
  SPEAKER_01: And then you want to have a bucket of money that is taxed along the way.
• 26:06
  SPEAKER_01: That would be something outside of an IRA.
• 26:08
  SPEAKER_01: You recognize that when you get dividends or interest or when you buy and sell things in there, you get taxed in that year.
• 26:15
  SPEAKER_01: So if you have that tax triangle, potentially no tax, tax only when I want to access it, and then tax along the way, uh, that becomes very, very powerful.
• 26:25
  SPEAKER_01: And for the folks that are fortunate to have each of those buckets or that want us to uh help them design each of those buckets, but they have the resources to do it.
• 26:35
  SPEAKER_01: That's when you really have the control over okay, which of part of my tax triangle am I gonna pull from and when, then I get to decide.
• 26:45
  SPEAKER_01: Um, I have more choices on when uh I realize those taxes.
• 26:51
  SPEAKER_01: Yeah, exactly.
• 26:51
  SPEAKER_01: Boy, we got Dave from the Weeds on a lot of this stuff.
• 26:54
  SPEAKER_00: We did.
• 26:54
  SPEAKER_00: Okay, on the next chart here, the next uh blog post we did.
• 26:58
  SPEAKER_00: Considering you grew up and spent most of your life in Western PA, I would have to assume that you know how to make a snowball.
• 27:03
  SPEAKER_00: So my yeah.
• 27:04
  SPEAKER_00: Is this what this chart is referring to?
• 27:07
  SPEAKER_00: How Brian Pluso makes a snowball?
• 27:10
  SPEAKER_00: What's that?
• 27:11
  SPEAKER_01: No, no, not really.
• 27:13
  SPEAKER_01: Uh, this is really talking about compound interest and the beauty of compound interest.
• 27:17
  SPEAKER_01: And uh, you know, it's the idea that you you invest money and it grows in some way.
• 27:24
  SPEAKER_01: Either it grows because you bought something for five and it grows to eight, nine, ten, or whatever.
• 27:29
  SPEAKER_01: Uh, or you have interest and you reinvest that interest, right?
• 27:33
  SPEAKER_01: You think of something, and the most simple example really is not a great example, simple example would be you know, uh checking her savings account, right?
• 27:40
  SPEAKER_01: It earns a little bit of interest, then that interest goes back into your account.
• 27:44
  SPEAKER_01: And then that interest from last month, you get to interest this month, and you really build that.
• 27:49
  SPEAKER_01: And you can see on this chart in time, how you know it's it's the snowball of compounding interest, the eighth wonder of the world, which means I put money in an appropriate place, I let it do grow, I let the growth of that money grow.
• 28:05
  SPEAKER_01: And you know, eventually in uh in many years' time, what's happening or could happen potentially is um that money that you never place there, that it just your your money earned money, that becomes the driver of the returns.
• 28:23
  SPEAKER_01: So you look and say, boy, I put a bunch of money here and then it grew.
• 28:27
  SPEAKER_01: And how is it growing more?
• 28:29
  SPEAKER_01: It's because you were reinvesting, putt money back into that account and letting that grow.
• 28:34
  SPEAKER_01: And the driver of it becomes like, wow, I you know, I put ten thousand dollars in here decades ago, and now and I I've got uh a huge uh amount, more than 10,000, is growing them by more than 10,000.
• 28:48
  SPEAKER_01: And so that's compounding, that's the snowball effect.
• 28:51
  SPEAKER_00: And this is a very conservative example, in my opinion.
• 28:53
  SPEAKER_00: This person is putting in a thousand dollars a year for 30 years and getting a 5% return.
• 28:58
  SPEAKER_00: So his total 30,000 investment goes to I can't even see it on the chart, about 70,000.
• 29:06
  SPEAKER_00: Um, historically, SP returns have been much better than that, and hopefully you can contribute a little more each year and really get um you set up better for when you enter those retirement years.
• 29:19
  SPEAKER_01: Absolutely.
• 29:20
  SPEAKER_01: And you overlay that with what we were talking about earlier, and if you do it as uh tax friendly as you possibly can, uh then the IRS is taking less of what is compounding.
• 29:32
  SPEAKER_01: And so that goes into that really ties into location, uh, asset allocation, uh, asset location, and uh um the importance of recognizing uh that it's uh the after-tax return that oftentimes is the real driver.
• 29:50
  SPEAKER_01: So if you take that snowball effect and you say, okay, and if I do that in as tax-friendly a way as I possibly can, the compounding uh is accentuated.
• 30:02
  SPEAKER_00: All right.
• 30:02
  SPEAKER_00: Well, I think we'll just suggest that everyone take a look at this blog post.
• 30:07
  SPEAKER_00: We don't need to go into too much detail.
• 30:08
  SPEAKER_00: There's some fun facts in it about retirement, things to do and don't do.
• 30:12
  SPEAKER_00: Um, I know Brian has a lunch meeting to get to, so I'll try to wrap it up real quick and let him get on his way.
• 30:20
  SPEAKER_00: Um let's do it.
• 30:22
  SPEAKER_00: Thank you, everybody.
• 30:23
  SPEAKER_00: Next week we'll get uh CPI, the inflation data on Tuesday.
• 30:26
  SPEAKER_00: I think the headlines are supposed to come in at 3.7.
• 30:29
  SPEAKER_00: So we're really getting away from the Fed's target there.
• 30:32
  SPEAKER_00: Uh core, I think, is supposed to come in at closer to 2.8, also arise there, but not as much.
• 30:38
  SPEAKER_00: Uh PPI, the wholesale inflation numbers on Wednesday, retail sales on Thursday, which is uh expected to see a deceleration.
• 30:46
  SPEAKER_00: I think the control group, which directly feeds into GDP, is expected to come in about 0.2% for the month.
• 30:53
  SPEAKER_00: Um, so a lot of economic data.
• 30:55
  SPEAKER_00: Uh, we'll be back next Friday uh by 12:30 Eastern time to talk about a lot of these developments.
• 31:02
  SPEAKER_00: Um, Brian, anything to add before we flip on the disclosures?
• 31:06
  SPEAKER_00: No, no, we'll have more good stuff next week.
• 31:09
  SPEAKER_01: And uh the markets will bring us always more and more interesting stuff.
• 31:13
  SPEAKER_01: So tune in next week.
• 31:14
  SPEAKER_01: Uh Friday, that would be the May 15th, 1230.
• 31:18
  SPEAKER_01: Eastern p.m.
• 31:19
  SPEAKER_01: Eastern Standard Time on Facebook.
• 31:21
  SPEAKER_01: Thank you.
• 31:22
  SPEAKER_00: All right, we'll see you next week.
• 31:24
  SPEAKER_00: Everyone have a good weekend.
• 31:25
  SPEAKER_01: It's offered through LPL Financial LLC, member FINRA and SIPC.org.
• 31:30
  SPEAKER_01: Advisory service is offered through LPL Financial LLC, a registered investment advisor.
• 31:35
  SPEAKER_01: Brian Peluso, Michael Kutch, and David Harper are registered representatives of LPL Financial LLC.
• 31:41
  SPEAKER_01: Content discussed is for informational purposes only and not intended as an offer or solicitation to buy or sell any security or investment strategy.
• 31:50
  SPEAKER_01: Any opinions expressed are those of the authors and do not necessarily reflect the views of LPL Financial or its affiliates.
• 31:57
  SPEAKER_01: All investments involve risk, including the possible loss of principal.
• 32:01
  SPEAKER_01: This communication may include links or references to third-party websites.
• 32:05
  SPEAKER_01: These links are provided as a convenience only.
• 32:07
  SPEAKER_01: LPL Financial and its representatives are not responsible for the accuracy or content of such sites.
• 32:13
  SPEAKER_01: Brian, Mike, and David, and HBK Provident Advisors may only transact business in states where they are properly registered or exempt from registration.
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• 32:27
  SPEAKER_01: Past performance is not indicative of future results.
• 32:31
  SPEAKER_01: You should consult with your financial advisor, tax professional, andor attorney regarding your specific situation before making any investment decisions.