Latest / Money Matters with Greg / Midyear Market Checkup For Long-Term Investors

Transcript

Midyear Market Checkup For Long-Term Investors · Money Matters with Greg

• 0:01
  SPEAKER_01: Welcome to Money Matters with Greg, where we dive into the money conversations shaping your life.
• 0:08
  SPEAKER_01: From investments to estate planning, insurance to taxes, we cover it all with a fresh perspective.
• 0:14
  SPEAKER_01: Join Greg and his guest each week to get inspired and take control of your financial future.
• 0:20
  SPEAKER_01: Let's get started.
• 0:22
  SPEAKER_01: Securities and investment advisory services offered through LPL Financial Registered Investment Advisor members and Red S IPC.
• 0:50
  SPEAKER_00: I'm Greg Farrell, CEO and owner of Ferrell Wealth.
• 0:53
  SPEAKER_00: It's a wealth management firm here locally in Valparaiso, Indiana, and managing money for clients in 25 states now.
• 1:00
  SPEAKER_00: So we bring conversations that we have with our clients and with our team to this show, hopefully helping you add some value to your life and also your pocketbook.
• 1:13
  SPEAKER_00: Ultimately, we want you to be able to save some money, put some money away, and invest your money wisely.
• 1:19
  SPEAKER_00: And uh that's what we try to do here.
• 1:21
  SPEAKER_00: So broadcasting today on V VLP 103.1 FM.
• 1:25
  SPEAKER_00: Again, thank you to WVLP for the opportunity to be able to broadcast here locally.
• 1:30
  SPEAKER_00: Uh Tower goes to Merrillville, Indiana, all the way to starts getting a little sketchy around South Bend, but it broadcasts here in northwestern Indiana.
• 1:38
  SPEAKER_00: And then you can find us on any podcast where you're wherever you pod.
• 1:42
  SPEAKER_00: But Apple, Spotify, you name it, YouTube, as well as our YouTube channel at Feral Wealth.
• 1:48
  SPEAKER_00: You can find us on all socials at Feral Wealth, and we'd love to hear from you.
• 1:51
  SPEAKER_00: Try to make it very interactive.
• 1:53
  SPEAKER_00: We have a number of people contact us and ask us questions of about topics that they'd like us to discuss or like me to kind of go over.
• 2:01
  SPEAKER_00: That's what we try to do on this show.
• 2:03
  SPEAKER_00: You can find many of our latest episodes.
• 2:05
  SPEAKER_00: I think we're on 190 now, but you can find them on our YouTube channel, and we talk everything from mortgages to realtors and real estate all the way to uh Trump accounts and the new Trump accounts that are going on.
• 2:18
  SPEAKER_00: Uh tomorrow uh next next week we get uh uh a guest on the show.
• 2:23
  SPEAKER_00: We have many guests on the show that are experts in their field, and I love being able to talk about what they're seeing in the business world uh in regards to activity and inventories and a number of different things that we could bring to you.
• 2:36
  SPEAKER_00: Um again, I always feel like I'm some of the conversations I'm very privy to, I'm honored to be a part of.
• 2:43
  SPEAKER_00: And I feel like I wish everybody could hear some of these things just because uh it just educates you and educates everyone to become better investors and become wise institutional investors as well as retail investors.
• 2:56
  SPEAKER_00: So that's what we try to do here.
• 2:58
  SPEAKER_00: Again, uh please contact us, please reach out to us.
• 3:01
  SPEAKER_00: You can find us at Wblp.org as well, streaming live right now uh here on the show, and then also uh we broadcast on one o'clock on Thursdays and then three o'clock on Saturdays, and then again, obviously anywhere we pod.
• 3:15
  SPEAKER_00: So uh would love to hear from you also.
• 3:17
  SPEAKER_00: Uh Greg at uh farewell.com is my email, so please reach out overall.
• 3:22
  SPEAKER_00: Want to talk about really some amazing things going on uh today.
• 3:26
  SPEAKER_00: Want to talk about last week, and then also you know, it's been the half of the year.
• 3:30
  SPEAKER_00: So the end of the year, into the half year, July 1st is uh end of the quarter, and then kind of want to talk about what's going on for the next six months.
• 3:38
  SPEAKER_00: So in regards to the markets and in regards to investing the Federal Reserve and a number of different things.
• 3:43
  SPEAKER_00: We just did a a large, a full show on the Federal Reserve.
• 3:47
  SPEAKER_00: Check that out on our YouTube channel.
• 3:49
  SPEAKER_00: But I just want to bring up the show.
• 3:52
  SPEAKER_00: I can't I can't start this this July 8th show or July 9th show without recognizing the fact that I think the last week of pure American spirit and just fantastic esprit de corps as a country as we celebrated our 250th birthday, as well as uh the World Cup.
• 4:13
  SPEAKER_00: I mean, obviously the the result of the World Cup did not go as planned uh for sure.
• 4:18
  SPEAKER_00: I think it would have been absolutely insane to get into uh to to make it through the quarterfinals.
• 4:23
  SPEAKER_00: It would have been incredible for all of us as Americans, uh, for sure.
• 4:27
  SPEAKER_00: We're definitely following the men's team and cheering for them, and then also just celebrating the fireworks shows and the celebrations that went throughout the nation were just absolutely incredible.
• 4:38
  SPEAKER_00: And I hope you were able to enjoy them with you and your family.
• 4:41
  SPEAKER_00: I hope everyone has uh ten fingers after the the festivities, watching the festivities in Washington, uh, which is probably the largest fireworks show certainly in my lifetime or ever will be.
• 4:53
  SPEAKER_00: And also worldwide, many of our uh allies at the top of the list is Japan uh with their festivities were incredible.
• 5:02
  SPEAKER_00: And then you can kind of go across the world as well, as many of the festivities were celebrating us as 250th year.
• 5:09
  SPEAKER_00: The festivities in New York were incredible and beautiful to watch.
• 5:12
  SPEAKER_00: I hope you were able to check them out and uh be a part of it because it really was just very, I don't know, it was just very, very proud nation that we have, and we live in an incredible country.
• 5:24
  SPEAKER_00: And yes, everyone has blemishes for sure, but we are blessed to have been but born here, to have been raised here, and to create a life, a family, and business uh here in America is uh just an absolute honor.
• 5:38
  SPEAKER_00: And Sir Lates was reflective in in the celebrations that happened just recently.
• 5:44
  SPEAKER_00: So way to go.
• 5:45
  SPEAKER_00: We looked pretty amazing.
• 5:47
  SPEAKER_00: Uh, you ask any of the Europeans that came over here uh that were celebrating the experiences that they saw here as they took a chance on coming to America for World Cup.
• 5:57
  SPEAKER_00: Uh some of the amazing follows, whether you follow uh the personalities on different social media channels, and then ultimately uh many of them were invited to different concerts and different uh even the White House.
• 6:09
  SPEAKER_00: So that's been really, really cool to watch in regards to just innocent, everyday people as a fan coming to America and experiencing buckies and or f just all the different things that are Amer that make us an amazing country.
• 6:25
  SPEAKER_00: Uh not only the landscapes and the geography of our wonderful vast country, but also the different things that we maybe take for granted.
• 6:33
  SPEAKER_00: So it's been everything from ranch dressing to A1 sauce.
• 6:36
  SPEAKER_00: So I just wanted to be able to mention something that's just good for everyone out there as Americans, thank you for uh this wonderful country that we have.
• 6:45
  SPEAKER_00: And uh hopefully this show can help you increase your wealth and then ultimately maybe help out those fellow Americans with different things you might be able to do because you invest wisely and you've learned some things on this show that that have helped you along the way.
• 7:01
  SPEAKER_00: So along the lines of the ships of that sailed uh through New York and through the uh obviously the the bay past the Statue of Liberty that just happened.
• 7:13
  SPEAKER_00: Uh many different countries brought their sail ships.
• 7:16
  SPEAKER_00: I want to talk about the smooth seas that uh sometimes smooth seas do not make skill skillful sailors, is the as the saying goes.
• 7:25
  SPEAKER_00: And uh when it comes to investing, uh there's really no time has been more true during the first half of the year.
• 7:31
  SPEAKER_00: So I want to talk about the first half of the year and uh discuss some of the things that investors have been facing and what we've been facing as a wealth management firm and managing money for our clients is really investors face major events, including the war in Iran, which is obviously still ongoing.
• 7:48
  SPEAKER_00: As of today, we've had another issue with the strait, and uh the market has sold off a little bit, over a little over 1% today.
• 7:56
  SPEAKER_00: Uh we'll see.
• 7:57
  SPEAKER_00: There's a lot of still some saber rattling, but oil prices have pushed up.
• 8:01
  SPEAKER_00: But they've been pushing inflation to, at one point, multi-year highs.
• 8:06
  SPEAKER_00: And the question's really about artificial intelligence as well as AI goes along and the future of that.
• 8:12
  SPEAKER_00: All of these things have affected and made for murky, if not uh wavy conditions in regards to the investments in the first six months.
• 8:21
  SPEAKER_00: And yet markets have climbed to new all-time highs, corporate earnings have grown to double-digit paces, and many asset classes have really performed extremely well, considering all of this, all of these waves that uh that we see and these murky waters.
• 8:39
  SPEAKER_00: So the first six months have really been a reminder of the importance of staying invested and maintaining this long-term, long time horizon, longer time horizon that uh we preach about so much on the show.
• 8:51
  SPEAKER_00: And uh, the lesson is really perhaps even more important today because the business cycle is now in its seventh year, while the market cycle is approaching its fifth for investors to really kind of feel as if that same set of concerns have cycled in and out of focus, back and forth here of what we talk, you know, we were talking about including inflation, uh up, now down, and it definitely come back immensely uh from just two years ago.
• 9:20
  SPEAKER_00: The Fed, valuations, and all of these things can be so confusing to just everyday investors.
• 9:26
  SPEAKER_00: And that's why we try to break it down here to make it real simple for you.
• 9:30
  SPEAKER_00: Managing these conflicting these conflicting challenges is just not just uh anything new, uh it's just a part of investing.
• 9:39
  SPEAKER_00: And those who stay the course are rewarded in the long run.
• 9:43
  SPEAKER_00: And I want to be able to make sure that you know that there is no doubt to that there are unexpected events that happened uh, you know, that certainly could happen in the second half of the year.
• 9:54
  SPEAKER_00: These could be including, you know, developments ongoing with the in the Middle East conflict and the uh the war in Iran and the upcoming midterm election, which happens in November, the new market activities such as new IPOs.
• 10:07
  SPEAKER_00: We saw SpaceX with their IPO.
• 10:10
  SPEAKER_00: There are a number of IPOs that are slotted to uh come about here in the next the second half of the year.
• 10:17
  SPEAKER_00: So, how can you as investors maintain a perspective as events unfold?
• 10:22
  SPEAKER_00: And I want to talk about the key uh economic drivers that were in the first half and talk about things and where we are and then where we're going.
• 10:29
  SPEAKER_00: The SP 500, the NASDAQ, and the Dow Jones Industrial have returned 9.6, 12.8, and 8.9% year to date through the end of June, respectively.
• 10:40
  SPEAKER_00: And the second quarter has historically been strong for the SP 500, returning 14.9 at the NASDAQ of 221.4, and the Dow at 12.9%.
• 10:51
  SPEAKER_00: So you know, those have been, it's been a really good beginning of the year.
• 10:57
  SPEAKER_00: The U.S.
• 10:58
  SPEAKER_00: aggregate bond index has risen 0.6% year to date, which is pretty pathetic.
• 11:03
  SPEAKER_00: If you're a bond investor, it's been very difficult to find yield.
• 11:06
  SPEAKER_00: We've talked about this on the show multiple times as far as finding yield for those conservative investors and also those pension plans, endowments that are mandated to invest in bonds and then invest in treasuries.
• 11:19
  SPEAKER_00: Uh, the bond index is only up 0.6, and that's just not going to get it done if you are a university and you're expecting to get a four to five percent return on your endowment with a sizable amount of bond private bonds.
• 11:32
  SPEAKER_00: So uh the 10-year treasury yield is into the second quarter at 4.47.
• 11:37
  SPEAKER_00: That's risen from 4.17 at the start of the year.
• 11:40
  SPEAKER_00: That is uh concerning.
• 11:42
  SPEAKER_00: It has definitely risen that I feel like that is higher than it should be as to where things are as far as the economy.
• 11:49
  SPEAKER_00: But the bond market sees something that I obviously don't.
• 11:52
  SPEAKER_00: So, you know, you want to be aware of that for sure.
• 11:54
  SPEAKER_00: I would assume the tenure would be closer to 4.3 or 4.2 or back to the 4.17.
• 12:00
  SPEAKER_00: But uh currently 4.47 at the end of June.
• 12:04
  SPEAKER_00: Um just going overall development, but international markets, uh, they've gained 7.7.
• 12:08
  SPEAKER_00: Emerging style emerging markets have returned 22.7 year to date, which is incredible.
• 12:13
  SPEAKER_00: So obviously having a diversified portfolio and owning multiple different things has helped you.
• 12:18
  SPEAKER_00: The commodities index has risen 12.3% year to date.
• 12:22
  SPEAKER_00: And this is due to the strong first quarter, which experienced a gain of 23.3% in the overall quarter versus a decline of 8.2%, 8.9% in the second quarter.
• 12:33
  SPEAKER_00: So things have definitely come off uh immensely in the second quarter for commodities.
• 12:37
  SPEAKER_00: Uh Brink crude peaked as far as oil goes, peaked at$120 per barrel in May before closing the quarter at$73 a barrel, which is a huge help to everyone.
• 12:49
  SPEAKER_00: Consumers, uh businesses, you name it.
• 12:51
  SPEAKER_00: Gold prices fell from$4,000 per ounce, while Bitcoin declined to a recent low of$58,000, currently trading right around$61,000.
• 13:00
  SPEAKER_00: But this is at the end of the quarter.
• 13:01
  SPEAKER_00: Uh headline CPI rose to 4.2 year over year in May, and this is largely driven by energy prices at the time, which have obviously come back.
• 13:09
  SPEAKER_00: Core CPI, uh, which includes excludes food and energy, rose 2.9%.
• 13:14
  SPEAKER_00: Uh, just to update everybody, just as a reminder, the Federal Reserve kept rates unchanged at 3.5% to 3.75 through the first half of the year.
• 13:23
  SPEAKER_00: And Kevin Walsh is our new uh head of the Fed was sworn as in as the new Fed chair in May.
• 13:30
  SPEAKER_00: And again, we did a show on that as well.
• 13:33
  SPEAKER_00: So that's the update in regards to 2026 uh for the first half of the year.
• 13:38
  SPEAKER_00: And uh, as I said, it's gone very, very well.
• 13:42
  SPEAKER_00: It's uh so far so good.
• 13:43
  SPEAKER_00: You know, we'll see where things go.
• 13:45
  SPEAKER_00: I think uh there's obviously a summer lull.
• 13:48
  SPEAKER_00: A lot of people go on vacation.
• 13:49
  SPEAKER_00: Many people travel to the Hamptons or wherever they go uh from New York, sort of disappear for the summer, and the trade desk are uh manned typically by uh interns or junior traders, where everybody else goes and disappears for the summer and comes back.
• 14:04
  SPEAKER_00: Usually September is when you kind of feel that everyone's back in the saddle and back in their chair.
• 14:09
  SPEAKER_00: The real quick, just station identification.
• 14:12
  SPEAKER_00: This shows money matters for Greg and uh Greg Farrell, CEO and owner of Farrell Wealth.
• 14:16
  SPEAKER_00: It's a wealth management firm, a financial advisor, and uh obviously owner of a wealth management firm that manages money for clients all over the nation.
• 14:23
  SPEAKER_00: We're broadcasting on D103.1, VUVOP FM, uh, and also anywhere you pod.
• 14:30
  SPEAKER_00: I also want to mention that they I forgot to mention this, and this is for compliance sake.
• 14:34
  SPEAKER_00: The opinions voice in the show, program, and money anything on money matters uh with Greg are for general information only, and they're not intended to provide specific advice or recommendations for any individual and determined uh to determine which strategies and investments may be suitable for you.
• 14:50
  SPEAKER_00: Please consult the appropriate qualified professional prior to making any decisions.
• 14:55
  SPEAKER_00: Third-party guests are not affiliated with LPL Financial or for Wealth.
• 14:59
  SPEAKER_00: Uh so it's my disclaimer that I apologize I should have done that in the beginning, uh, but get the house cleaning out and get get that out of the way.
• 15:07
  SPEAKER_00: So, talking about the rest of the year, it may be surprising to some investors that their current business cycle began in April, really April 2020, amid the pandemic.
• 15:17
  SPEAKER_00: So the market fell apart, dropped 38%.
• 15:21
  SPEAKER_00: And we just passed the sixth anniversary in the second quarter here of this robust change uh since the pandemic and since we were shut down.
• 15:31
  SPEAKER_00: Um, and there have been several times when investors and economists worried that there might be another recession.
• 15:36
  SPEAKER_00: That included when inflation peaked in 2022, which was insane, and when tariffs disrupted trade last year, which is just a year ago.
• 15:44
  SPEAKER_00: You know, trading through trade wars, one thing, trading through a real war is another thing.
• 15:49
  SPEAKER_00: Through it all, the economy has been resilient and growing steadily despite these chant challenges.
• 15:55
  SPEAKER_00: So the business cycle affects all aspects of investing and financial planning from mortgage costs to annual pay raises, everything's affected.
• 16:05
  SPEAKER_00: And the healthy healthy economy drives consumer spending, a business investment, fuels corporate earnings and ultimately stock market returns.
• 16:14
  SPEAKER_00: So while the stock market and the economy are not the same thing, they are often closely linked because they are.
• 16:21
  SPEAKER_00: The chart that I show uh that I will show in our blog, if you can go to our blog on farewell.com and you'll see this also anywhere well or on our YouTube channel, you'll see the charts that I put up.
• 16:34
  SPEAKER_00: Obviously, not able to do that here on a podcast, but you'll see that the longest business cycles, including the one that began after the 2008 financial crisis and the 1990s during the dot com boom, have lasted for a decade or longer.
• 16:51
  SPEAKER_00: So, you know, what's to say that this doesn't continue and how is the economy doing today is the question.
• 16:56
  SPEAKER_00: And one question we're asking all the time as we go through our investment committee meetings that we have as a team here to talk about where we're headed, how are things going, what chinks in the armor can we see, and uh, are we seeing anything that is concerning for sure for our investors and for our clients?
• 17:14
  SPEAKER_00: How's the economy doing today?
• 17:16
  SPEAKER_00: Inflation is high, but could improve if oil prices remain low for sure.
• 17:21
  SPEAKER_00: Um, and we fully expect that that be the case.
• 17:24
  SPEAKER_00: It's dropped from$120 in crude to now$73 and was just trading$67.
• 17:32
  SPEAKER_00: So the job market has begun to heat up again, sort of reversing last year's concerns over a slow pace of hiring.
• 17:39
  SPEAKER_00: The dollar has stabilized and rebounded more recently, and trade is still uncertain, but has stabilized in regards to many of the deals that have happened, many agreements that have happened.
• 17:49
  SPEAKER_00: Business investment has accelerated.
• 17:52
  SPEAKER_00: You see multiple different countries as well as companies investing in America.
• 17:57
  SPEAKER_00: You know, all of that aside, consumers are feeling pretty pessimistic, which is amazing to me.
• 18:02
  SPEAKER_00: But they kind of even though they're they the the most of the polls say that they're pessimistic, they're continuing to spend on necessities and discretionary items.
• 18:11
  SPEAKER_00: It's not like they're shutting down.
• 18:12
  SPEAKER_00: And the overall the economy appears to be healthy, despite some mixed signals, which is historically positive for financial markets, of course, in the long run.
• 18:23
  SPEAKER_00: So many asset classes have performed extremely well because of this.
• 18:28
  SPEAKER_00: And a variety of global asset classes have contributed to portfolios so far as far as being in those asset classes, like I talked about being in a diversified portfolio.
• 18:37
  SPEAKER_00: So these have continued from last year's trends and includes not only large cap stocks represented by the SP 500, but also small caps have really come out about emerging markets and commodities.
• 18:49
  SPEAKER_00: Um, you know, the second quarter in particular is one of the strongest on record, and that is saying something.
• 18:54
  SPEAKER_00: And this is partly due to the timing of the war in Iran, which resulted in the market recovery, which began in the start of April.
• 19:00
  SPEAKER_00: And that definitely contributed.
• 19:02
  SPEAKER_00: There are many themes behind these returns, including the strength of the economy, hopes of a peace deal in Iran, enthusiasm around AI, and many of these factors have really drive driven corporate earnings growth with profits rising over 20% in the past 12 months for the SP 500 companies.
• 19:18
  SPEAKER_00: That's incredible.
• 19:19
  SPEAKER_00: This strong market environment has also led to a wave of high-profile IPOs, including the SpaceX in the second quarter, and really anticipated listings of OpenAI and Anthropic, uh, both AI companies are pending on their way as far as their IPO.
• 19:38
  SPEAKER_00: And while investors often focus on the first few days of an IPO when there's like the most headlines and the real benefits accrue, you know, the real benefits accrue basically over the longer period of time.
• 19:52
  SPEAKER_00: So once you get a chance to be able to investigate and do your research in these companies that go from private to public, the benefit of these listings is that they broaden the opportunity that's set for all investors, which is especially important since many companies have been staying private longer due to regulations and multiple different things that have happened in the last few years.
• 20:14
  SPEAKER_00: And many companies have just decided to stay private.
• 20:16
  SPEAKER_00: Now, what matters most is how these businesses then perform over the years and decades that follow, and how they utilize the money and the influx, uh influx of money from investors' money and going public and what they do with it in the future.
• 20:31
  SPEAKER_00: Uh you can remember with Meta, uh, which with the time was Facebook, went public and the stock immediately went below into the teens.
• 20:39
  SPEAKER_00: They pivoted.
• 20:40
  SPEAKER_00: They went from a desktop company in essence to a mobile company.
• 20:44
  SPEAKER_00: And they used a lot of the money that they were given based on the uh going public uh towards that.
• 20:50
  SPEAKER_00: And that uh really changed and transitioned them as a company.
• 20:53
  SPEAKER_00: The largest technologies companies today, for instance, have grown over a long period through many market and economic cycles.
• 21:01
  SPEAKER_00: So it takes time for many of these things to see themselves out.
• 21:06
  SPEAKER_00: All of these positive trends do mean that the U.S.
• 21:09
  SPEAKER_00: stock valuations are historically high.
• 21:11
  SPEAKER_00: And the S B 500 currently trades at a price-earning ratio of about 20 times, which is above the long-term historical average of 16.3.
• 21:20
  SPEAKER_00: Now, that means that like back in the dot-com boom, dot-com bust, back then prices were high and there were no earnings.
• 21:29
  SPEAKER_00: Now, prices are high and there are earnings.
• 21:31
  SPEAKER_00: And there's a lot of justification for the higher pricing because of the earnings that are coming about.
• 21:37
  SPEAKER_00: So that's why we spend so much time watching the earnings numbers and the strength of earnings in regards to our companies that uh that we want to invest in and the asset classes that we want to be in.
• 21:48
  SPEAKER_00: So these valuation rating ratios really do not predict what the markets will do over the next year or two.
• 21:55
  SPEAKER_00: Instead, they're really sort of a helpful guide in building long term portfolios, especially considering.
• 22:00
  SPEAKER_00: Other asset classes and overall risk management, but it it's it's very important to pay attention to.
• 22:05
  SPEAKER_00: So this overall, this year's asset class returns show the importance of maintaining a balance and being balanced overall as much as possible in a in a overall portfolio and an investment portfolio.
• 22:18
  SPEAKER_00: One last thing I want to talk about before we close here is inflation remains a concern, but oil's oil prices really have improved immensely.
• 22:25
  SPEAKER_00: So I want to talk about the ups and downs of the conflict in Iran.
• 22:28
  SPEAKER_00: They've definitely had a primary effect on the U.S.
• 22:31
  SPEAKER_00: economy as well as energy markets.
• 22:33
  SPEAKER_00: Disruptions to oil transportation through the strait pushed, you know, Brent Crew to nearly$120 a barrel before they pulled back.
• 22:42
  SPEAKER_00: And uh as I mentioned before, they've fallen below$70.
• 22:46
  SPEAKER_00: Right now trading around$73, and they're up today based on new news.
• 22:50
  SPEAKER_00: But gasoline prices have followed a similar path.
• 22:53
  SPEAKER_00: And they always say, you know, in the oil industry, I've always heard rises like a rocket and falls like a feather.
• 23:01
  SPEAKER_00: And that's exactly what's happening with gasoline prices that followed really a similar path on the delayed basis, peaking around$4.50 a gallon before gold going below$4 here in Indiana.
• 23:14
  SPEAKER_00: I mean, I just filled up my gas tank the other day for$2.88.
• 23:17
  SPEAKER_00: So energy prices swings have directly impacted inflation rates.
• 23:22
  SPEAKER_00: The consumer price index rose to 4.2 year over year in May.
• 23:26
  SPEAKER_00: That's the highest reading in several years.
• 23:28
  SPEAKER_00: And the gasoline component of that jumped 40% over the next same period.
• 23:34
  SPEAKER_00: So core CPI, which excludes food and energy, rose at 2.9%.
• 23:38
  SPEAKER_00: And this shows that inflation has really been concentrated in fuel prices and not yet on a broader phenomenon.
• 23:44
  SPEAKER_00: If you've noticed egg prices are not what they used to be, things have come down, and many other things have come down in regards to prices too.
• 23:52
  SPEAKER_00: It's not as insane as it was just a couple of years ago.
• 23:55
  SPEAKER_00: So with oil prices following, following recently, many economists hope that the near peak inflation levels, so that we're near those peak inflation levels, and this is similar to past geopolitical shocks we've seen that have affected the supply of oil sudden, uh, you know, as you know, you look back at Russian's invasion into the Ukraine of 2022, and you know, many other situations, once they've stabilized, have often improved and they're bringing the inflation right down below.
• 24:23
  SPEAKER_00: And then one last thing, just mentioning volatility.
• 24:25
  SPEAKER_00: Look, investors have grown very accustomed to brief periods of volatility because of macroeconomic events.
• 24:32
  SPEAKER_00: It's between tariffs and Middle East conflict and uncertainty around the Fed and uh elections.
• 24:37
  SPEAKER_00: I can go on and on about the different things that we've seen and what I've seen in my in my career for sure.
• 24:42
  SPEAKER_00: But these events really have these short-lived market swings, and it's just best to kind of focus, you know, on you know, n getting rid of the noise, not listening to the noise, and just paying attention and having your discipline.
• 24:54
  SPEAKER_00: That's uh, you know, can you can be seen in the VIX index, in the volatility index is a common measure of stock volatility.
• 25:01
  SPEAKER_00: You know, as it spikes, people get very nervous, and currently the VIX is reading at about 16.
• 25:06
  SPEAKER_00: That's below the long-term average of 18.4, and it's well below the recent peaks that we've seen.
• 25:13
  SPEAKER_00: So you're just seeing a lot of you know calmness coming back into the market, a lot of data being the data-driven market, which is what we want.
• 25:21
  SPEAKER_00: Uh, we don't want Washington wagging the market's tail, and vice versa.
• 25:26
  SPEAKER_00: We want the market to be left alone if we can possibly have our way, and as regards investments, just let us do our thing.
• 25:33
  SPEAKER_00: And another way to think of how the market really moves affects investors via the largest pullback of the year.
• 25:40
  SPEAKER_00: So far, the SP's largest pullback to like the peak, the trough decline, basically from the high to the low, has been 9%.
• 25:47
  SPEAKER_00: Now, while pullbacks like these are never pleasant, markets really tend to rebound when investors least expect it.
• 25:54
  SPEAKER_00: So today, not only has the market fully recovered from its earlier pullback, but the SP 500 has reached a 24 new all-time highs, 24 new all-time highs so far this year.
• 26:04
  SPEAKER_00: So, look, the first half of the year demonstrates that the most important risk for investors navigating episodes, these episodes back and forth of this volatility itself is not the volatility itself, but it's how you react to them.
• 26:17
  SPEAKER_00: It's tempting to try to time the market during times of periods of uncertainty, but this often backfires.
• 26:23
  SPEAKER_00: So instead, it's better to hold on to a portfolio that's designed to withstand all the parts of a market cycle while serving long-term financial goals and taking advantage of some of these opportunities and these asset classes you might not have access to.
• 26:37
  SPEAKER_00: Now might be a time where you might want to add or add more or get into some of the asset classes we talked about.
• 26:45
  SPEAKER_00: So when you're doing this, investors can better prepare for the inevitable periods of uncertainty to the second half in the year.
• 26:52
  SPEAKER_00: So it's important to stay invested.
• 26:54
  SPEAKER_00: And one of one of the effects of investors exiting the market during periods of volatility is often referred to as cash on the sidelines.
• 27:02
  SPEAKER_00: So the primary problem with this strategy is knowing when to get back in.
• 27:06
  SPEAKER_00: And uh that is a very, very difficult for many investment advisors, uh investment managers, as well as everyday retail investors.
• 27:15
  SPEAKER_00: Uh money market funds have reached a record$7.9 trillion currently.
• 27:21
  SPEAKER_00: And that's more than double than the predamic pre-pandemic levels when interest rates were nearly zero.
• 27:27
  SPEAKER_00: So this reflects both market uncertainty over the past few years, but also certain higher, you know, higher short-term rates that make cash a little bit more attractive.
• 27:37
  SPEAKER_00: But while cash may feel safe and stable on paper, the challenge is that cash yields often do not offset inflation.
• 27:44
  SPEAKER_00: And so, for instance, the average, current average rates on certificates of CDs mean that the real income from cash is currently negative after adjusting for inflation.
• 27:54
  SPEAKER_00: So imagine that you go into a CD and you're actually losing money.
• 27:57
  SPEAKER_00: So even with nominal yields on money market funds and short-term interest rates instruments really appearing more attractive, there can be challenges due to inflation.
• 28:06
  SPEAKER_00: So just you want to make sure you don't want to erode your cash holdings over time.
• 28:10
  SPEAKER_00: And historically, this is why it's important to hold a balanced portfolio that can benefit growth, income generation, capital preservation.
• 28:22
  SPEAKER_01: Thanks for tuning into Money Matters with Greg.
• 28:24
  SPEAKER_01: We hope you gained some valuable insights today.
• 28:27
  SPEAKER_01: Remember, your financial journey is personal, but you don't have to go it alone.
• 28:32
  SPEAKER_01: If you enjoyed the show, be sure to subscribe and share.
• 28:35
  SPEAKER_01: Until next time, here's to making your money work for you.
• 28:39
  SPEAKER_01: Securities and investment advisory services offered through LPL Financial, a registered investment advisor, member FINRA SIPCONISERSING.