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Why Stocks Keep Rising While Inflation Stays Sticky · HPK Provident Advisors: The Weekly Bull

• 0:03
  SPEAKER_01: Welcome to Friday Live.
• 0:05
  SPEAKER_01: Every Friday, some of the partners at HBK Provenant get together and discuss what we're seeing going on in the markets, the economy, and tying in some financial planning topics.
• 0:12
  SPEAKER_01: So with me today is Mr.
• 0:14
  SPEAKER_01: David Harper.
• 0:16
  SPEAKER_01: Good morning.
• 0:18
  SPEAKER_02: Fair disclosure.
• 0:19
  SPEAKER_02: I have both my grandsons here.
• 0:23
  SPEAKER_02: And so there might be some disruptions.
• 0:26
  SPEAKER_02: So if it is, so be it.
• 0:30
  SPEAKER_02: Hang in there.
• 0:32
  SPEAKER_01: Well, unfortunately, I don't have a lot to cover on my end this week.
• 0:35
  SPEAKER_01: We really didn't get a ton of economic data.
• 0:38
  SPEAKER_01: Maybe the highlight was the FOMC minutes, which I always consider a little dated.
• 0:44
  SPEAKER_01: But I think it leaned a little more hawkish, and I think that's appropriate.
• 0:47
  SPEAKER_01: I mean, we're going to get PCE next week, and we're looking at headline being at 3.9%, which is almost double the Fed's target.
• 0:56
  SPEAKER_01: So I think uh well, I mean, we get the new Fed chair in today.
• 1:02
  SPEAKER_01: Um, so I think there's a little excitement on that uh for a lot a lot of people.
• 1:09
  SPEAKER_02: Um and the market is reacting very positively to that.
• 1:15
  SPEAKER_01: Yeah, I think uh because the president appointed him, that there's the underlying assumption that he's gonna be more dovish, meaning uh cutting interest rates.
• 1:27
  SPEAKER_01: But I don't know, like his track record on the Fed in the past has been more on the hawkish side.
• 1:32
  SPEAKER_01: And um I know I mean he's definitely worried about the government deficit.
• 1:38
  SPEAKER_01: So maybe that means you know, running off the balance sheet a little more, um, bringing that down, but could also mean lower interest rates.
• 1:47
  SPEAKER_01: But I think that's gonna be hard to justify with you know core PCE and well above the target, and um, you know, just the war is not resolved yet.
• 2:00
  SPEAKER_01: Energy prices are still hovering.
• 2:02
  SPEAKER_01: I I think we're a little below 90 or$100 a barrel today, but not by much.
• 2:08
  SPEAKER_01: Um, and doesn't seem like there's much resolution going on.
• 2:12
  SPEAKER_01: But the stock market continues to kind of ignore all those.
• 2:17
  SPEAKER_01: As you can see, we're I mean, we had a little bit of a dip late last week, but um markets are marginally higher today, and that would mark the eighth straight week.
• 2:28
  SPEAKER_01: Um, and this comes at the same time that treasury yields have been rising, oil prices have stayed high, um, geopolitical uncertainty remains.
• 2:38
  SPEAKER_01: I think the 30-year hit the highest level since dating back to 2007.
• 2:44
  SPEAKER_01: Um, and you have the 10-year about 460.
• 2:49
  SPEAKER_01: So definitely uh, I mean, usually with yields rising, it's an inverse correlation to equities, but I mean, we're we're just creeping up past right back to the all-time highs again.
• 3:02
  SPEAKER_01: Um, now we did pull back from overbought conditions, which tends to, I mean, could mark a short-term top, but um it doesn't seem like we're getting that.
• 3:14
  SPEAKER_01: I I mean I I wrote a my blog post for Monday talking about um, you know, as as a portfolio manager, what is the next potential catalyst?
• 3:25
  SPEAKER_01: And is that gonna be to the upside or downside?
• 3:29
  SPEAKER_01: And I mean like a size of I don't know, at least 5% move.
• 3:33
  SPEAKER_01: And I think it's more likely that that move is to the downside in the short term, um, just given valuations, uh high and sticky inflation.
• 3:43
  SPEAKER_01: Probably the next move by the Fed is gonna be a rate hike, not a cut.
• 3:47
  SPEAKER_01: Um but at the same time, you know, I I think value like just given the recent like eight weeks of gains, um, how robust that was, it was one of the quickest recoveries of 10%.
• 4:03
  SPEAKER_01: That's why I think it's more um likely that the move is to the downside.
• 4:07
  SPEAKER_01: But intermediate to long term, I I think we're in a good healthy position.
• 4:12
  SPEAKER_01: Um the trend is your friend, and the economy's pretty pretty resilient outside of sticky inflation.
• 4:20
  SPEAKER_01: Earnings have been one of the best quarters ever.
• 4:25
  SPEAKER_01: I think we're up 25% on the quarter.
• 4:28
  SPEAKER_01: Um now um exposure on the rally has been a little thinner.
• 4:34
  SPEAKER_01: Um, we kind of revert it back to some of those megacaps names.
• 4:38
  SPEAKER_01: Um, but I mean that just gives opportunity to for those to recover in the future.
• 4:44
  SPEAKER_01: Um, not necessarily that the mega caps have to have to catch to the downside.
• 4:49
  SPEAKER_01: Um but yeah, that's uh I mean we have a shortened week uh next week.
• 4:55
  SPEAKER_01: Um the highlight will be the PCE deflator.
• 4:59
  SPEAKER_01: That'll come out on Thursday, and we'll just have to see where we go from here.
• 5:05
  SPEAKER_02: Mike, there seems to be a lot of optimism in the market, uh but uh with a temper of caution, uh, which is fully understandable.
• 5:16
  SPEAKER_02: A lot of people are are thrilled about their 401ks and their assets going up, but they're not thrilled about the the the rise in prices, uh, especially for gas.
• 5:27
  SPEAKER_02: Uh hopefully they're they're gonna come down, and we hear that that they're gonna come down, but we have no idea when.
• 5:34
  SPEAKER_02: Uh and it's getting long in the tooth.
• 5:38
  SPEAKER_02: Um uh people have a short memory.
• 5:42
  SPEAKER_02: Uh I I think they um their patience will will uh prevail.
• 5:49
  SPEAKER_01: Um for the yeah, and I mean yeah, that's energy prices really and gas at prices at the pump really affect um consumer sentiment.
• 6:02
  SPEAKER_01: Um and we're already coming off high prices, not necessarily the rate of increases, which is measured by the the economic data, is substantially high, but it's all about absolute price levels for them.
• 6:16
  SPEAKER_01: So they don't care that you know milk's only rising at 1% for the year because it's way higher than it used to be.
• 6:24
  SPEAKER_01: And that's the same with gasoline prices.
• 6:27
  SPEAKER_01: So consumers aren't really feeling, I mean, outside and like they always talk about the bifurcated economy, the K-shaped economy.
• 6:35
  SPEAKER_01: And that's so true, like what you just said.
• 6:37
  SPEAKER_01: The people with money and retirement accounts, 401ks, investments, uh home prices, they feel pretty good because those are going up.
• 6:47
  SPEAKER_01: Um, maybe housing not as much these days, but uh over the past five years, certainly the case.
• 6:53
  SPEAKER_01: Whereas those people without those assets are really feeling, you know, the prices are high.
• 6:59
  SPEAKER_01: Um, maybe they're getting wage increases, but not necessarily keeping up with inflation.
• 7:04
  SPEAKER_01: So that's really what they're talking about in that that dynamic of the K-shaped to cup economy.
• 7:09
  SPEAKER_01: So retail really hasn't uh been the buyer of the dip in this recent market.
• 7:15
  SPEAKER_01: So I mean, there is the potential for that to be a catalyst to kind of give a little more fuel to the upside.
• 7:21
  SPEAKER_01: But um, yeah, we'll just have to see.
• 7:23
  SPEAKER_01: I think uh I'm interested to hear what the new Fed chair has to say and see kind of what his uh stance is gonna be.
• 7:32
  SPEAKER_01: But I think it's probably gonna be a little more on the the hawkish side, just given the dynamics.
• 7:38
  SPEAKER_02: Because it it is sounds good to have that kind of caution, uh, with all the um well with all the headwind going.
• 7:46
  SPEAKER_02: Um uh from my good friend Thomas Edison.
• 7:54
  SPEAKER_02: Uh interesting.
• 7:55
  SPEAKER_01: I didn't know you guys were close.
• 7:57
  SPEAKER_01: What's that?
• 7:58
  SPEAKER_01: I didn't know you guys were close.
• 8:03
  SPEAKER_02: Uh only in the history books, buddy.
• 8:05
  SPEAKER_02: Uh but uh Ruby talks about um people are a whole lot more resilient than I think sometimes the certain uh sometimes the government gets them credit for, and they're a whole lot more resilient than certainly the media gives them credit for.
• 8:21
  SPEAKER_02: I think the media tends to use it more as a talking point or a or a bullet point.
• 8:26
  SPEAKER_01: Uh I think the consumer is really good at spending above their means.
• 8:31
  SPEAKER_02: Yeah, yeah.
• 8:32
  SPEAKER_02: And and so uh words of words of wisdom from Thomas Edison.
• 8:36
  SPEAKER_02: Okay, quote, when you have exhausted all the possibilities, remember this.
• 8:42
  SPEAKER_02: You haven't unquote.
• 8:45
  SPEAKER_02: Okay, so when you think about your your monthly expenses so forth, uh okay, uh might not be able to uh hot dogs, you can get two for one sometimes.
• 8:55
  SPEAKER_02: Uh uh use um it's this is temporary.
• 9:00
  SPEAKER_02: This is temporary, and when things correct, well then take the opportunity to get some more monies inside your emergency funds and so forth.
• 9:10
  SPEAKER_02: Um, so if you're if you have to tighten your belt right now, okay.
• 9:15
  SPEAKER_02: Um when you've exhausted all your possibilities, when you think, uh remember this, you have it.
• 9:22
  SPEAKER_02: There's something more that that can be done.
• 9:24
  SPEAKER_02: Uh, is it painful?
• 9:26
  SPEAKER_02: Uh yeah, sometimes it really can be.
• 9:29
  SPEAKER_02: Uh, do you have to put off um buying a certain thing?
• 9:32
  SPEAKER_02: Yes, um, but unfortunately that's when the washing machine goes down.
• 9:37
  SPEAKER_02: Um so I understand, okay.
• 9:42
  SPEAKER_02: Um this is a reality right now, but it doesn't have to define my future.
• 9:50
  SPEAKER_02: I think that's the key key takeaway.
• 9:53
  SPEAKER_01: All right, yeah, I like that.
• 9:56
  SPEAKER_01: Um and part of those might be like a budgeting decision, but um this little calculator, if you're comparing investments, um not really anything too um too revealing here.
• 10:13
  SPEAKER_01: I'd like to let's like just take a look at the power of compounding interest, is what I want to highlight on this chart.
• 10:22
  SPEAKER_01: Someone starting with investment option A, 100,000, investing$1,000 a month versus investment B starting with$200,000,$5,000 a month.
• 10:32
  SPEAKER_01: So kind of similar um returns over time, but basically they're going from those beginning levels of one to$200,000 and by a 30-year time horizon, that's compounding.
• 10:45
  SPEAKER_01: I mean, and we're at an expected return of 9%, which is very healthy, but it's been our experience in the last 15 years.
• 10:53
  SPEAKER_01: Those are growing to three plus million.
• 10:56
  SPEAKER_01: Um, investment A was close to three million.
• 10:59
  SPEAKER_01: So just the power of compounding interest, and especially if you're um on like a systematic buying plan where you can dollar cost average and just set it and forget it, have it come out of your bank on a monthly basis.
• 11:13
  SPEAKER_01: Um, there's it's really a remarkable thing.
• 11:16
  SPEAKER_01: Um, someone that might not think they are going to be in a good position to retire in 30 years might not be the case.
• 11:24
  SPEAKER_02: Yeah.
• 11:25
  SPEAKER_02: I think um I think Albert Einstein said about uh compounding interest is one of the great mysteries of life.
• 11:33
  SPEAKER_02: Uh you know, uh that that that's just that's something he could not fathom.
• 11:38
  SPEAKER_02: Uh believe it.
• 11:39
  SPEAKER_01: Is it mysteries or wonders?
• 11:41
  SPEAKER_01: What's that?
• 11:43
  SPEAKER_01: Is it mysteries or the great wonders of life?
• 11:47
  SPEAKER_02: Okay.
• 11:48
  SPEAKER_02: I can go you all need to Google that.
• 11:50
  SPEAKER_02: I know uh Einstein was a big component of was a big uh proponent of compound interest.
• 11:57
  SPEAKER_02: Uh and how what he actually said, I cannot recall right now.
• 12:01
  SPEAKER_01: Uh it's a wonderful thing.
• 12:02
  SPEAKER_01: I don't think it's really a mystery.
• 12:04
  SPEAKER_01: I mean, you start with a hundred thousand and get a five percent return, now your next five percent returns on a hundred and five thousand.
• 12:12
  SPEAKER_02: Yeah, yeah, yeah.
• 12:14
  SPEAKER_02: True, true.
• 12:15
  SPEAKER_02: Okay, so uh don't underestimate the the the power of money to um continue to produce and continue to compound.
• 12:27
  SPEAKER_02: Um, it's not the amount of money, it's the time that makes the difference for you.
• 12:33
  SPEAKER_02: Okay, and then we had a blog here about uh Medicare.
• 12:38
  SPEAKER_02: Um okay.
• 12:40
  SPEAKER_02: Medicare uh uh the Medigap premiums, they're gonna be going up.
• 12:46
  SPEAKER_02: Um you want to talk about that, Mike?
• 12:49
  SPEAKER_02: Can you see that?
• 12:51
  SPEAKER_01: Um yeah, basically, Medigap is uh to cover those areas that aren't covered in traditional Medicare.
• 12:59
  SPEAKER_01: And I think the average is those are rising uh like 46%, which is astronomical.
• 13:06
  SPEAKER_01: Um, some of that has to do with just more need for health care, aging demographic, higher health care costs.
• 13:14
  SPEAKER_01: Uh, but it's it's something we all need to plan for in retirement if we want our medical expenses fully covered.
• 13:23
  SPEAKER_01: So um kind of goes in the decision making of setting aside more money potentially for retirement or um perhaps stocking up on your HSA.
• 13:39
  SPEAKER_02: Uh those are sage words.
• 13:42
  SPEAKER_02: Uh put away time, put put away uh let your money work for you.
• 13:48
  SPEAKER_02: Uh start the earlier the better.
• 13:51
  SPEAKER_02: Uh but uh you need to buy you need to plan for uh uh for your retirement.
• 13:57
  SPEAKER_02: Uh and part of that is one of the biggest costs you have in retirement is gonna be your health coverage, your health care.
• 14:04
  SPEAKER_01: Um so take and you don't get a lot from social security, even if you're a high-income earner, so you really have to be able to supplement that, and especially for the young generation, whether social security will still be there, what age they'll receive it, maybe the amounts reduced.
• 14:27
  SPEAKER_01: So I'd say don't try to rely on the government, take it into your own hands.
• 14:33
  SPEAKER_01: Good, good.
• 14:35
  SPEAKER_01: Um, Mike, we're coming up to uh Memorial Day weekend.
• 14:38
  SPEAKER_01: Yeah, and so markets will be closed on Monday, and I hope everyone has a wonderful time with their friends and family.
• 14:46
  SPEAKER_01: But make sure we remember why we have the day off to honor those that have given their lives for our country and our freedom.
• 14:54
  SPEAKER_02: Okay, and for our loved ones that have passed that have given us our lives and our our grounding.
• 15:02
  SPEAKER_02: Um, for those people that don't have a history, uh uh that if you if you don't know your history, um you're you're in a rough spot.
• 15:14
  SPEAKER_02: Um, we need to know where we came from.
• 15:16
  SPEAKER_02: We need to know that uh 250 years ago, some people took it upon themselves to make all of our lives better.
• 15:24
  SPEAKER_02: Uh and that's pretty cool.
• 15:26
  SPEAKER_02: Uh, I think I heard another quote.
• 15:29
  SPEAKER_02: I sorry about these quotes, Mike.
• 15:31
  SPEAKER_02: Um, the tree maybe you should write them down next time.
• 15:35
  SPEAKER_02: Yeah, yeah.
• 15:36
  SPEAKER_02: What I can write them down.
• 15:37
  SPEAKER_02: It says uh the the tree that you're enjoying your shade uh was planted by someone many years ago.
• 15:44
  SPEAKER_02: I think that was Warren Buffett that said that.
• 15:48
  SPEAKER_02: Okay, that the the tree you're now resting under uh with the shade was planted by someone uh many years ago.
• 15:57
  SPEAKER_02: Okay, so that's all I got, Mike.
• 16:02
  SPEAKER_01: All right, well, on that note, we'll flip on the disclosures, and I hope everyone has a great long weekend, and we will be back next Friday by 1230 Eastern time.
• 16:11
  SPEAKER_01: Everyone have take care.
• 16:12
  SPEAKER_00: Take care.
• 16:13
  SPEAKER_00: It's offered through LPL Financial LLC, member FINRA and SIPC.org.
• 16:18
  SPEAKER_00: Advisory service is offered through LPL Financial LLC, a registered investment advisor.
• 16:24
  SPEAKER_00: Brian Peluso, Michael Kutch, and David Harper are registered representatives of LPL Financial LLC.
• 16:30
  SPEAKER_00: Content discussed is for informational purposes only and not intended as an offer or solicitation to buy or sell any security or investment strategy.
• 16:38
  SPEAKER_00: Any opinions expressed are those of the authors and do not necessarily reflect the views of LPL Financial or its affiliates.
• 16:45
  SPEAKER_00: All investments involve risk, including the possible loss of principal.
• 16:49
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• 16:53
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• 16:55
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• 17:01
  SPEAKER_00: 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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• 17:16
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• 17:19
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