Latest / The Financial Exchange Show / Why are investors getting defensive ahead of Fed rate cuts?

Transcript

Why are investors getting defensive ahead of Fed rate cuts? · The Financial Exchange Show

0:00
Speaker 1: The Financial Exchange is produced by Money Matters Radio and
0:03
is hosted by employees of the Armstrong Advisory Group, a
0:05
registered investment advisor. All opinions expressed are solely those of
0:08
the hosts. Do not reflect the opinions of Armstrong Advisory
0:11
or anyone else. Investments can lose money. This program does
0:14
not offer any specific financial or investment advice. Please consult
0:17
your own financial, tax, and estate planning advisors before making
0:20
any investment decisions. Armstrong Advisory and the advertisers heard on
0:23
this program do not endorse each other or their services.
0:26
Armstrong and Money Matters Radio do not compensate each other
0:28
for referrals and are not affiliated. This is The Financial Exchange,
0:35
with Mike Armstrong and Paul Lane, your exclusive look at
0:39
business and financial news affecting your day, your city, your world.
0:44
Stay informed and up to date about economic and market
0:46
trends plus breaking business news every day. The Financial Exchange
0:51
is a proud partner of the Disabled American Veterans Department
0:54
of Massachusetts. Help us support our great American heroes by
0:58
visiting DAV five k dot com Boston and making a
1:01
donation today. The DAV five K Boston is presented by
1:04
Veterans Development Corporation. Face is the Financial Exchange with Mike
1:09
Armstrong and Paul Lane.
1:12
Speaker 2: Go ahead, morning, and welcome back to the Financial Exchange
1:15
on a Thursday. After a CPI Wednesday that saw stocks
1:20
surging once again, we're now once again within spinning distance
1:23
of all time highs on the S and P five
1:26
hundred that we reached back in mid July on the
1:30
S and P. At least, that was the last all
1:32
time high July sixteenth, and then we've been bouncing around
1:35
since then. It continues to come across as a market
1:38
that is just desperate for any hint of good news.
1:41
And the inflation report by in large that we got yesterday,
1:45
I don't know how you and Chuck qualified it. There
1:47
were some areas of concern, but the big headline that
1:50
everyone seemed to want to pay attention to was that
1:52
headline inflation year over year down to two and a
1:55
half percent, which is the best we've seen in three
1:59
ish years.
2:01
Speaker 3: Yeah, the market action yesterday, Mike was kind of confounding
2:04
because when we began the program after that report, it
2:07
was mostly negative across the major indices, and we were
2:10
pose poised for a day that looked like we're gonna
2:12
see markets drop over one percent, and that's just didn't
2:15
end up being the case. I can't really point to
2:18
a structural reason as to why it changed so dramatically.
2:21
I know that the pessimism that began the day is
2:24
perhaps the idea that because that inflation report was relatively strong,
2:29
we push we poked holes a little bit in some
2:32
of the shelter costs where.
2:34
Speaker 2: The core stuff did not look as yeah, we can
2:36
spend some more time there.
2:37
Speaker 3: Today we can dive into that, But basically, the overall
2:40
sentiment was that the fifty basis point rate cut was
2:44
off the table after that reasonable inflation report, And it
2:48
seems like in all likelihood, at least yesterday, when I
2:51
looked at the CME futures, which assessed the probability as
2:54
to whether or not we're gonna cut by twenty five
2:57
basis points or fifty base points, that was a resounding
3:00
eighty five percent, And it sits there today that there's
3:02
an eighty five percent likelihood that we will see a
3:05
quarter basis point cut. So that was the initial pessimism,
3:09
but it did seem to revert during the day, and
3:11
you saw sectors like the tech sector and others pick
3:14
up a little bit late trading yesterday.
3:16
Speaker 2: Yeah, so we also received weekly jobless claims this morning
3:20
at a thirty am seasonally adjusted claims for the week
3:24
ending September seventh, again not making big enough moves to
3:28
be worried about at this stage. Coming into two hundred
3:30
and thirty thousand. That's an increase of two thousand from
3:33
the previous week's revised levels, but again certainly not anything
3:36
resembling a spike in jobless claims. And we'll talk about
3:41
that a bit more later in the show as to
3:43
what that might mean historically, because historically you don't actually
3:47
get a spike in jobless claims until pretty late in
3:49
the cycle here, and so maybe this is just an
3:52
indication of how early we are in a potential you know,
3:55
reversing cycle towards a slow down. But I want to
3:58
start off with this piece from the Wall Street Journal
4:00
of Investors adopting a defensive stance ahead of the FED
4:04
rate cut and speaks to you know, one thing in
4:06
particular that we've seen this year, which is pretty stellar
4:10
performance from the utility sector. And you know, for folks
4:13
that don't follow markets all that closely. Historically, utility sector
4:18
has been described as one of the most defensive areas
4:21
of the stock market out there. In this country. We
4:24
largely have regulated utility companies. They're all but guaranteed to
4:28
make a profit unless they go and burn down half
4:31
of California, and generally seen as this defensive area of Hey,
4:35
you know, if I, you know, hold onto this for
4:38
a long period of time, I'll get paid a dividend
4:40
and I might see some appreciation. This year's been a
4:42
bit different. We've seen the utility sector as a whole
4:45
up a good twenty percent, and you know, people kind
4:48
of scratching their heads wondering, you know, what is this?
4:50
And the Wall Street Journal puts it as a kind
4:53
of defensive posturing ahead of a potential recession. I have
4:56
some other theories to go along with that, but wanted
4:58
your take and are we seeing this in other areas
5:00
the market of investors preparing for a recession or economic slowdown. Yeah.
5:06
Speaker 3: I don't necessarily agree with the rotation theory that's positive
5:10
here by the Wall Street Journal. Rather, it's pretty simple
5:13
in my view, the utility sector is really yield sensitive,
5:17
really interest rates sensitive. We've gone into a period of
5:20
time where the US ten yure Treasury sits at three
5:23
point sixty five percent. I don't have the numbers in
5:26
front of me, but I know we were at least
5:27
at four to seven at some point during the course
5:30
of this year. And as a result, what you've seen
5:34
is a real sort of yo yo performance on the
5:37
utility sector. And just to give people a sense, you know,
5:40
when we talk about utilities, largely it's it's electrical companies.
5:43
They make up about two thirds of the sector, so
5:45
it's next Era Energy, Duke Energy, Southern Company, Constellation, et cetera.
5:50
If you look at their sector performances year by year,
5:54
they were they've been the best performing sector year to
5:57
date in an interest rate environment where interest rates have
5:59
come down significantly. In twenty twenty two, they were not
6:04
They were a pretty strong performing sector. Because twenty twenty
6:07
two was a really bad year for the stock market.
6:09
The stock market was down eighteen percent, utilities were up
6:11
about one point six percent. Now you could argue, oh, Paul,
6:14
inflation was running high, interest rates were coming up in
6:17
twenty two. Really largely, it was twenty three that we
6:20
saw the impact of that, and as a result, utilities
6:22
were down seven percent in twenty three, one of the
6:25
worst performing sectors. So they've kind of just gone with
6:28
where rates have gone. It seems like that's where the
6:30
correlation has always been.
6:31
Speaker 2: Now you can make the argument though, that rates coming
6:34
down has been a result of people doing that exact
6:37
rotation that we're talking about of saying, hey, growth might
6:40
not be there, so I'm buckling down with debt or
6:43
buckling down into the bond market buying longer term debt,
6:46
driving down yields, which is what's helping the utility sector.
6:49
So it could all be interconnected here. But the other
6:52
story that you know I We've been talking about all
6:56
year that isn't really mentioned here. I think we might
6:58
have talked to Paul la Monica about this a few
7:01
months ago, was a few of these utility companies in
7:04
particular seeing a big surge again from the AI craze
7:08
and the theory here just to play it out for everyone,
7:11
is with this immense surge and interest in artificial intelligence
7:16
and the massive computing requirements in order to perform the
7:21
perform the transactions and come up with large language models,
7:26
some of these big utility companies, specifically those with nuclear capacity,
7:30
have been looked at as a play on the AI
7:34
trade in some way, shape or form, and I'm not
7:36
remembering the names off the top of my head, but
7:37
a few of them. At one point in the year,
7:39
I think we're up a good forty to fifty percent.
7:41
And so when you have a litany of those different items,
7:44
right it's tough to tell exactly what's driving the sector
7:48
forward right now, but I suspect it's a bit of
7:51
all of those, right. Yeah. They are looked at as
7:54
a counter to the or an inverse to the overall
7:59
interest rate market. You do have these fears of being
8:02
economic slowdown coming, and then you also do have this
8:06
still excitement about artificial intelligence and the role of nuclear
8:10
power in its future. And I think all of those
8:12
might be contributing to that one area in particular, because
8:16
I don't see I don't see a ton else in
8:19
this area that would insinuate that investors are really prepping for.
8:23
I guess you could look at energy as another one
8:25
to say, Okay, look at oil prices. Clearly there's some
8:27
betting going on about global slowdown, but that's probably as
8:30
much to do with China as it is with the
8:32
United States.
8:33
Speaker 3: No question It's interesting now, Mike, that we are quoting
8:36
yields from the real estate sector at three percent. Those
8:39
did not look appealing over the last sixteen to eighteen months.
8:41
There as rates come down, they start to look more
8:44
and more attractive, very reminiscent of kind of the pre
8:48
twenty one or pre twenty two era.
8:50
Speaker 2: Yeah, no doubt here, and so yeah, it is there
8:54
is a rotation happening here. You know, it's rare to
8:57
have the utility sector kind of move up nearly as
9:02
much as the overall technology sector in any given year,
9:05
and especially in one that's been defined by earnings growth
9:09
for tech companies. So that has been the surprise here.
9:12
But overall, I hate to attribute it all to one
9:15
thing as seems to be happening here, and I'm not
9:18
sure that you can clearly say, oh, well, look out.
9:20
With utility stocks being up, it means everyone's prepping for
9:23
a big recession and market downturn. So let's go ahead
9:27
and take a quick break. When we come back, I
9:29
want to talk a bit more about what you hinted
9:31
at with the Federal Reserve and their plans for the future.
9:35
Paula Monica actually has a piece out today you know,
9:38
talking about how Earning's estimates seem to be forgetting about
9:41
the FED and what it could mean for stocks. We'll
9:43
talk about that next. On the Financial Exchange.
9:47
Speaker 1: There's only one show that follows Wall Street's continued volatility.
9:51
Keep it here all morning long on the Financial Exchange
9:54
Radio Network. Get up to the minute market updates with
9:58
Wall Street Watch week days a only here on the
10:01
Financial Exchange Radio Network.
10:17
Speaker 2: We're gearing up for the fed's next meeting, which occurs
10:22
exactly five days from now. Yeah, mid next week, we've
10:24
got the FED meeting kicking off here. And if you
10:28
have it, Paul, why don't we bring back up those
10:30
expectations for rate cuts. And I do want to look
10:33
a little bit further out here, because not that they're
10:36
ever right, you know, the important thing to know about,
10:40
you know, the Federal Reserve Board members expectations for rates
10:43
as well as market expectations for rates. They've been pretty
10:46
consistently wrong over the last few years, and I don't
10:48
know that they're ever wonderfully accurate except in the very
10:51
short term. They've been pretty accurate in the very short term,
10:53
but when you get out a year, it's kind of
10:55
close to useless. But let's take a look there and
10:58
talk about expectations for next week's meeting on the eighteenth
11:02
of September. What are we seeing here in terms of
11:04
likelihood for cuts.
11:05
Speaker 3: So as I was mentioning before the semi futures that
11:08
we're going to talk about here, these are assessing the
11:10
probabilities that we do see a ray cut for the
11:13
next meeting on what's that Wednesday of next week. There's
11:16
a eighty five percent probability that we see a twenty
11:19
five basis point cut, meaning that the federal funds rate
11:23
will go from five and a quarter to five and
11:25
a half down to five and five and a quarter
11:27
if we look out to the subsequent meeting in early November,
11:31
right around the time of the election. I believe it
11:32
will be the day after the election. We are seeing
11:36
that it's relatively split now between whether there is an
11:41
additional twenty five bas point cut, meaning that it brings
11:44
it down from five to five and a quarter to
11:46
four seventy five to five percent. That is, at the moment,
11:51
slightly the higher probability, but there is also almost an
11:55
equal chance that we would see a fifty basis point
11:57
cut in that meeting in November, bring us dawn to
12:00
four and a half to four seven five, and then
12:02
I guess I'll touch on December. I don't really like
12:04
going out too much more than two or three meetings.
12:06
I know that some will go further, but we sit
12:10
at year end in around four and a quarter to
12:13
four and a half percent, which would mean basically a
12:15
full one percent cut from where we are today.
12:19
Speaker 2: Yeah, I will take things a step further if we
12:21
If we go out a full year here to basically
12:24
this time next year, expectation for rates is you know,
12:30
I guess I'll describe it as about seventy five percent
12:33
likelihood that rates are a full two percent lower than
12:39
where they are now or more. So that's where we'll
12:44
phrase things. And the point that's brought up by paul
12:46
A Monica is that at the same time that we're
12:49
talking about two full percentage points of rate cuts over
12:52
the next twelve months, earnings expectations are not exactly slowing down.
12:56
Analysts are now predicting that profits for S and P
12:59
five hundred company will rise more than fifteen percent in
13:02
twenty twenty five, up from their twelve point eight percent
13:04
forecast that started this year in a hotter pace than
13:07
twenty twenty four's expected earnings growth of ten point seven.
13:10
I think the real takeaway here is that it's probably
13:13
tough for both of those things to happen at the
13:15
same time. Right, you know, forget about the short term
13:17
rate expectations, But is there a path towards earnings growing
13:22
fifteen percent at the same time that rates come down
13:25
by more than two percent? And I would argue it's
13:28
pretty tough to happen. In order for rates to come
13:31
down by more than two percent over the next twelve months,
13:34
you need to have more than just inflation going away.
13:37
You need to have an economic slowdown. Otherwise, why is
13:40
the Fed going to keep cutting rates? They will cut
13:43
rates just because they think they're restrictive, but that probably
13:46
doesn't bring you down to below three percent. There you're
13:49
getting back to really low mortgage rates. You're probably keeping
13:52
things in what you think is neutral, which a lot
13:55
of people have put around four percent. And so I
13:57
think that's the interesting divergence, and the piece that probably
14:01
has me most concerned for markets is this simple fact
14:05
of expectations from analysts are for earnings to increase by
14:09
more than fifteen percent in twenty twenty five, at the
14:12
same time that many economists across the country are predicting
14:16
recession sometime in the next twelve months.
14:19
Speaker 3: I agree it's concerning, but I'm in my head here
14:22
trying to think about both of these could be could
14:25
be very wrong, right. You know, we talked about before
14:27
the interest rate path. In fact, frequently are they will
14:30
you know, likely be wrong. So where where do we
14:32
necessarily settle? It's anyone's guess. I agree that if you're
14:36
doing projections and predictions for earnings growth next year, you
14:40
do need to account for the fact that they the
14:42
interest rate market is something that you need to at
14:45
least account for when you're making those assessments. But at
14:48
the same point in time, every pundit on here is
14:51
sitting here and saying that we're going for a slowdown.
14:53
We're going for a slowdown. In yes, there are some
14:56
economic data points out there that point to a week
15:00
labor market. However, what PAULA Monica doesn't fully to me
15:05
elaborate on here is where are we seeing the other
15:08
areas of weakness? You know, he mentions this idea of
15:11
price cuts at Target and Walgreens and things like that,
15:14
but overall, from a consumer standpoint, we're still in a
15:17
relatively good place. You can make the argument too, that
15:19
the labor market is still relatively strong. So I push
15:23
back on that notion a little bit. I need to
15:25
see a little bit more economic evidence for me to
15:28
run with this idea that hey, we are really going
15:31
into a slowdown, because it could be a plateau of sorts.
15:34
We saw retail sales rise about one percent for the
15:37
month of July. If you would adjust that for inflation,
15:40
it's about point eight percent. We'll see. We're going to
15:43
get our next retail sales report, I believe on the
15:46
seventeenth at some point next week. But I'm just not
15:49
fully ready to go there just yet. But I could
15:52
be proven wrong within a week or two in terms
15:54
of data coming in.
15:55
Speaker 2: Yeah, and I will say, you know, there is precedent
15:58
by the way to have it's being cut into a
16:01
growing economy. Right if you recall it's tough to remember
16:05
some of these things, but in twenty nineteen we did
16:09
have a rate cutting cycle that had nothing to do
16:11
with the pandemic. The Federal Reserve just looked around and said,
16:15
you know, we think that we can push more growth
16:18
without causing inflation by cutting rates a little bit. And
16:20
they did. You know, at meetings in the summer of
16:24
twenty nineteen, right through the end of the year, you
16:26
saw rate cutting cycles into a growing economy. And so
16:30
it is possible, albeit somewhat uncommon, to see rates get
16:37
cut into what turns out to be a growing economy.
16:40
And that's I guess that's the risk of buying too
16:43
much into any of these things. And why if any
16:46
story makes you change your overall strategy, then just check
16:49
yourself a little bit. One. Analysts are always predicting that
16:53
profits grow more than they ever do. Then those companies
16:56
go and revise their profits downward, and then they go
16:58
and beat on those revisals.
17:00
Speaker 3: Percent of the s and p fivend it will be
17:01
earning exactly.
17:03
Speaker 2: And you know, analysts have also pretty frequently bet that
17:07
FED is going to cut rates faster than they actually
17:12
have throughout the last several years. And so I wouldn't
17:16
be surprised to see rates settle in you know, this
17:19
time next year. Maybe they're only down by a percentage
17:22
point from here, especially if we don't get that recession
17:25
that everybody is worried about. So time will tell here,
17:28
But you know, don't don't let these things scare you
17:31
away way too much when when reading through them, because
17:34
they can they can't do that. I mentioned we received
17:38
data on jobs this morning. Again, this is the weekly
17:41
jobless claims data we get and specifically came in at
17:45
two hundred and thirty thousand, a pretty low number. And
17:48
the question becomes, and one that Chuck and I were
17:51
asking each other, is pretty tough to have a recession
17:54
that's just caused by a growing labor force. But some
17:59
look at history seems to insinuate that, well, those layoffs
18:03
don't usually come too early in the business cycle here,
18:06
and maybe we're just still at the early stages.
18:08
Speaker 3: I thought this is a really strong piece put together
18:10
in the New York Times here, Mike, where they basically
18:13
mentioned that layoffs are not a leading indicator for a
18:18
weakening labor market. And it makes sense psychologically. If you
18:22
think about running a business, you're much more likely to
18:25
hold employees for as long as possible and not lay
18:28
people off because it is costly, it's just dis eruptive,
18:31
and it's morale damaging. Sure, but certainly you're going to
18:35
be much more quick to say, you know, what, Mike,
18:38
I don't think we need that new employee. We can
18:40
get by with what we have. And that's really it
18:42
seems like the collective in terms of studying unemployment shifts
18:47
that you see is that not so much layoffs pick
18:49
up or they pick up at the end of the cycle,
18:51
I should say, it's that the hiring slows down pretty rampantly.
18:55
Speaker 2: Yeah. So the unemployment rate, for example, began rising in
18:58
early two thousand and eight, which is when we called
19:00
the start of a recession. It wasn't until late o eight,
19:03
right after the Lehman collapse, that you actually saw employers
19:06
start cutting jobs. It's just that, you know, earlierweight unemployment,
19:09
why was it increasing. They just kind of put a
19:12
pause on hiring as they were sorting things out. But
19:14
it wasn't until well the actual you know what hit
19:18
the fan that the really companies started looking at their
19:22
payrolls and saying, no, we have to cut here. And
19:24
that's a late cycle decision, not an early one. Let's
19:27
say a quick break Wall Street watches Next.
19:41
Speaker 1: Like us on Facebook and follow us on Twitter at
19:44
TFE show. Breaking business news is always first right here
19:48
on the Financial Exchange Radio Network Time Now for Wall
19:53
Street watch a complete look at what's moving market so
19:56
far today right here on the Financial Exchange Network.
20:00
Speaker 4: Following yesterday's volatile session, Wall Street today is reacting to
20:04
another inflation measure in the Producer Price Index, which showed
20:08
wholesale prices climbed zero point two percent in August, in
20:12
line with expectations. Yesterday, we saw the Consumer Price Index
20:17
also meet expectations. Right now, the Dow is down by
20:20
forty six points, SMP five hundreds up a quarter percent,
20:24
and the Nasdaq is up by over half a percent
20:27
or ninety eight points. Russell two thousand is up by
20:30
nearly a third of a percent. Ten year Treasure reeled
20:33
up by three basis points this morning at three point
20:35
sixty nine percent. In crude oil up one in three
20:39
quarters of a percent, trading at sixty eight dollars and
20:42
fifty two cents a barrel. Shares of Moderna plunging seventeen
20:46
percent after the biotech company announced plans to slash one
20:49
point one billion dollars in expenses by twenty twenty seven
20:52
as it looks ahead to its post COVID future. The
20:56
company added it expects ten new product approvals during the
20:59
same timeframe will pause or end development of some drugs. Meanwhile,
21:03
Kroger posted quarterly results ahead of the open this morning,
21:06
with a grocery store Chain's profit beat estimates, but its
21:09
sales fell just short. The company's chief executive also reaffirmed
21:14
its planned Albertson's merger, despite regulatory pushback. That stock Kroger
21:20
up by three percent. Elsewhere, Alaska Air Group piked its
21:23
third quarter out look, noting strong summer demands, sending that
21:26
stock up by about one percent. Shares in clothing company
21:29
Oxford Industries down by two percent after the owner to
21:32
brands like Tommy Bahama miss second quarter earnings expectations, while
21:36
it's revenue also missed the mark. And McDonald's announced this
21:39
morning it would again extend its five dollars value meal
21:42
offer into December in most US markets. We're roughly eighty
21:46
percent of local markets opted to extend the deal. McDonald's
21:50
shares our flat so far today. I'm Tucker Silva and
21:54
that's Wall Street.
21:55
Speaker 2: Watch uh Peace from CNBC that I found pretty helpful
21:59
today on potential tax changes. So I want to kind
22:04
of start with what is current law in terms of
22:07
tax changes that are coming, and then what's been discussed
22:11
and what it all might mean. But first things first,
22:14
the Donald Trump tax cuts that were put into place
22:16
changed a boat load on the individual tax side code
22:21
of things. You had the salt deduction, do you remember
22:25
all that one? So were the state and local tax
22:27
caps where you can only deduct ten thousand dollars worth
22:30
of state and local tax. You had changes to the
22:34
individual rates across the board. What was fifteen went down
22:37
to twelve. I mentioned that one because that's where most
22:41
median income around here falls, is that twelve percent bracket.
22:45
But it changed across the board. Thirty nine point six
22:47
came down to thirty seven. You had changes to the
22:52
standard deduction. You had changes really all over the place
22:55
during the Trump tax cuts, and those are by and
22:58
large other than the corporate taxes due to sunset meaning
23:01
go away at the end of next year. So twenty
23:05
twenty six, according to current law, will go back to
23:09
tax rates that were in place beforehand. So in terms of,
23:13
you know, big increases, you're likely to see those in
23:15
some of the Interestingly, the biggest increases will be felt
23:19
by some of the lower tax states where you don't
23:23
really have the ability to deduct whereas in Massachusetts, New York,
23:26
New Jersey, California, Hawaii, where high income tax payers also
23:30
have a lot of state deductions, won't see quite as
23:33
big of an increase compared to say, if you live
23:35
in Oklahoma or Texas. Regardless, those things are on the table,
23:38
and people have been planning for and big changes to
23:41
the estate tax picture as well. With those numbers, you know,
23:45
the death taxes basically getting cut in half as part
23:47
of this. In addition to that, you have a whole
23:51
bunch of proposals that are slowly becoming a bit more
23:54
clear from both Donald Trump and Kamala Harris. And the
23:57
question is what do you do about these? Right, you
24:01
have tax changes that are by law supposed to go
24:04
into place. You have candidates that want to change those laws.
24:08
Donald Trump wants to lock in those current tax rates,
24:10
even lower them some. You've got Kamala Harris that wants
24:13
to raise them in some areas and lower them in others,
24:16
or lock in those changes in other areas. And it's
24:19
really tough to know at this stage what do you
24:21
do Because if you had a perfect picture, there'd be
24:24
plenty of stuff that you could be doing today to
24:26
take advantage of current tax code.
24:28
Speaker 3: Yeah, I think it's important that during the election cycle
24:32
a lot of proposals will be mentioned from both candidates
24:34
and both parties, but from an individual standpoint, from a
24:39
family standpoint, it should not cause a major deviation in
24:43
your strategy. You know, everyone should continue to do what's
24:46
in their best interests and work with their respective accountants
24:49
and advisors for the plan that works best for them.
24:52
Because this has been reinforced going back to the last
24:55
election cycle, where there will be many pieces that you
24:59
will read on if Biden gets in, if Trump gets in,
25:01
here are the potential impacts, and now it's going to
25:03
be if it's Harris or Trump. And it's important to
25:06
note that when Biden got into office, these were some
25:09
of the tax proposals that he had in place. Increase
25:12
the corporate income tax to twenty eight percent didn't happen.
25:16
Impose a twelve point four percent solid security payroll tax
25:19
for wages over one hundred four hundred k did not
25:22
happen either. Repeal the tax and job cut acts for
25:26
high income filers did not happen. You know, so this
25:28
is important to keep those in mind that you'll hear
25:31
a lot of these things talked about, but you gotta
25:34
wait for it to be enacted because what's so critical
25:36
here is we don't know what's going to happen with Congress,
25:38
and your proposal is only as good as getting the
25:41
majority in the Congress.
25:43
Speaker 2: Right. This leads in and dovetails nicely into and a
25:46
couple of events that we have coming up. One's going
25:49
to be on October eighth out in Springfield at the MGM.
25:53
The other is going to be on October twenty fourth
25:54
down on Cape Cod and Hyenas at the Margaritaville Hotel
25:58
and Resort. So what are we doing. You're in a
26:00
live broadcast of this show. You can come check us
26:02
out and you see us do a live broadcast of
26:04
the show. Tucker may or may not be there. He's
26:07
probably going to be here in Needa making sure that
26:09
we can actually you know, aren't just speaking to a
26:11
crowd of fifty people and actually broadcasting over the air.
26:15
But we'll be doing a live broadcast from those two locations.
26:18
I'll give the dates out again. But after that, that's
26:20
where we're going to be digging in and we're going
26:22
to be speaking a lot specifically about the upcoming election,
26:26
what it means for markets, what it means for financial planning,
26:28
what could be the results of tax policy changes or
26:32
just the sunsetting of the existing tax policies, if we
26:35
have complete gridlock in Washington, and what you can do
26:38
about it now to start to address those future changes,
26:43
and what it means for the average American here in
26:46
New England especially. Once again, the details on those two events.
26:50
We have one coming up Tuesday, October eighth at the
26:54
MGM in Springfield. The second one the Margheritaville Hotel and
26:58
Resort in Hyanas. That's on October two, twenty fourth. On
27:01
that one, we're going to have special guest Ed Lambert
27:03
joining us as well from the XTK Morning Show to
27:06
meet and greet folks and help facilitate a conversation. You
27:09
can sign up for the event nearest to you by
27:12
visiting Armstrong Advisory dot com slash events. Again. It's a
27:17
live broadcast of the Financial Exchange followed by an event
27:20
hosted by the Armstrong Advisory Group on the election and
27:23
policies likely to come out from different candidates. You can
27:27
you can sign up in one of two ways. Once again,
27:29
that website Armstrong Advisory dot com slash events. Fill out
27:33
the form with the event that you'd like to attend,
27:35
or you can just give us a call the phone
27:36
number eight hundred three nine three four zero zero one
27:41
or Armstrong Advisory dot com slash Events.
27:44
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
27:47
registered investment advisor. Nothing in the ad or in any
27:49
Armstrong guide a specific financial, legal, or tax advice. Consult
27:53
your own financial tax into state planning advisors before making
27:55
any investment decisions. Armstrong may contact you to offer investment
27:58
advisory services.
28:00
Speaker 2: Yeah, Paul, I've been trying to think of a way
28:02
to criticize this piece and make it bad about the
28:05
state of Massachusetts, but I think you can only come
28:07
away with positivity here. So incomes in Massachusetts grew last year.
28:11
Probably didn't feel that way because they didn't quite keep
28:13
pace with inflation of the last few but Massachusetts now
28:17
occupies the spot of the second highest median household wages
28:24
in the entire country, only second to the District of Columbia,
28:28
which is just a city like Let's. I mean, Let's
28:32
Massachusetts is pretty darn close in terms of, you know,
28:35
the portion of people that live in metro areas, but
28:38
nonetheless Massachusetts coming in at a median wage last year
28:42
of ninety nine, eight hundred and fifty eight dollars. Like
28:45
I mentioned, that was second only to the District of Columbia,
28:47
which came in at one oh eight, and a number
28:50
of New England states around there too, New Hampshire actually
28:53
occupying the number five spot here at ninety six, eight
28:57
hundred and thirty eight dollars, Connecticut coming in at nearly
29:00
ninety two thousand dollars. So I was trying to come
29:03
up with something critical here, and I guess the only
29:05
thing you can criticize about this is there are wide divergences.
29:09
But remember that these are not averages. We're talking about
29:12
median wages here, which is just the middle number of
29:14
wages in the state of Massachusetts. The other piece that
29:18
I guess you can harp on would be, why do
29:20
you think it costs so much to live here when
29:22
you've got wages this high? Hiring anybody to stock groceries
29:26
or you know, working fast food, or you know, provide
29:29
any services, it's expensive.
29:31
Speaker 3: Yeah, it was nice to see that it was an
29:34
increase if you look back the first since the pre
29:36
pandemic about one and a half percent if you adjust
29:38
for inflation. And like you said, there's all ends of
29:41
the spectrum here, we're just hitting on the media number,
29:43
which is about one hundred grand on the highest end
29:46
of things. You got Newton coming in at one hundred
29:48
eighty five thousand for the highest median income within Massachusetts,
29:52
and then Springfield comes out a little bit lower on
29:55
the lower end, around forty seven thousand, and my tapeaway
29:58
is the same as you might get. It's interesting to
30:01
note it certainly ties into why it's so being expensive
30:04
to live around this area because of the different sectors too,
30:09
I think plays into it. We have a lot of
30:11
biotech and technology companies and consulting around this area. Those
30:15
are typically high paying jobs, and as a result, you
30:18
see a high median income as a result of this
30:21
as well.
30:21
Speaker 2: But I'll also say that Massachusetts has slowly climbed these
30:24
ranks that the Boston Globe has a piece here where
30:26
they're looking at this from twenty ten right through twenty
30:28
twenty three, and you know back in twenty look, Massachusets
30:31
has always been towards the top. We have a lot
30:33
of higher education and well paying jobs in the Commonwealth,
30:38
but you've also seen it slowly move its way towards
30:42
the top here back in twenty ten, twenty eleven, Massachusetts
30:45
is occupying the sixth top spot, and right now again
30:48
other than the District of Columbia, which I kind of
30:51
do discount, we are taking the top spot here in Massachusetts,
30:55
and I don't know, I think that the only way
30:59
to look at that is to celebrate it a little
31:02
bit here Again, there's good reason for it, but yeah,
31:06
it's a pretty positive story about not only the level
31:10
of wages but the pace at which it has eclipsed
31:14
some of the peers such as Hawaii, Alaska, New Jersey
31:17
and others. Let's take a quick break here when we
31:20
come back. Another area that made a fair bit of
31:24
splash in the presidential debate from Tuesday Night. Tuesday Night,
31:30
the oil market and Kamala Harris's changing views on oil
31:34
and drilling, etc. We're going to cover that next on
31:37
The Financial Exchange.
31:38
Speaker 1: Miss any of the show. The Financial Exchange Show podcast
31:42
is available on Apple, Spotify, and iHeartRadio. Hit the subscribe
31:46
button and leave us a five star review. This is
31:49
the Financial Exchange Radio Network. Text US six one seven
31:53
three six, two thirteen eighty five with your comments and
31:57
questions about today's show, and let us know what you
31:59
think about the stories we are covering. This is the
32:02
Financial Exchange Radio Network.
32:06
Speaker 4: This segment of the Financial Exchange is brought to you
32:09
by the US Virgin Islands Department of Tourism. The US
32:12
Virgin Islands are Saint Croix, Saint Thomas, and Saint John.
32:15
Summer is just about over, so now's the time to
32:17
start looking at a fabulous holiday vacation. And there's no
32:21
better place than the US Virgin Islands. Enjoy perfect weather,
32:24
world class dining, incredible beaches, in a vibrant nightlife. No
32:27
passport is needed, and there's no money to exchange. Take
32:30
your next vacation in America's Caribbean paradise, the United States
32:33
Virgin Islands. Go to visit USVII dot com to book
32:37
your trip. That's visit USBI dot com.
32:40
Speaker 2: Paul, I want to turn to another. I guess good
32:44
lesson in presidential politics. When Kamala Harris was campaigning for
32:50
the primary, what would that be five years ago now
32:54
twenty nineteen or early twenty twenty against Joe Biden. She
32:59
laid out of policy stateants of banning fracking and prohibiting
33:03
oil drilling. Now as vice president, she's overseen a pretty
33:06
large expansion of not only oil drilling and gas output,
33:10
but also drawdowns from the Strategic Petroleum Reserve which have
33:15
been significant. I was just taking a look at the levels.
33:17
By the way, they finally bottomed out in terms of
33:21
thousands of barrels really just around labor Day and have
33:25
very recently been increasing. Sorry, no, this was about a
33:29
year ago. They bottomed out in fall of twenty twenty
33:33
three and slowly been adding back to the Strategic Petroleum Reserve.
33:37
But again, I think where I put this is on
33:42
the list of lessons where investors can get burned by
33:47
rhetoric and you know, campaign pledges, right, you had Biden
33:53
campaigning for president did not call for a fracking band
33:56
to my knowledge, but certainly was playing up his as
34:00
a you know, a friend of the green energy movement
34:05
and you know, not exactly a friend to big oil.
34:08
He's since overseen one of the largest expansions of oil
34:11
production that our nation's seen and not for you know,
34:16
it's not as though he's gone out there though and
34:18
been a big supporter of big oil. I think it's
34:21
just more an acknowledgment that quite frankly, the White House
34:24
doesn't have a ton of control over oil production in
34:27
the same way that Russians and Saudi's do.
34:29
Speaker 3: That's a huge piece of it, Mic, where you have
34:31
states like New Mexico, Texas, and North Dakota that have
34:35
really benefited from the boom and shale production that we've
34:38
seen over the last decade, to the point where America
34:41
is currently the world's top oil producer, pumping more than
34:44
fifty percent more crude each day than Saudi Arabia, which
34:48
I don't think a lot of people would guess if
34:51
you ask them to who is the biggest oil producer
34:54
at the moment. But unlike Russia and Saudi Arabia, like
34:58
you mentioned, they, the government here does not have a
35:01
spigot that they can just turn on and off in
35:03
terms of the production piece. These states that I mentioned
35:06
here benefit greatly from the amount of jobs and money
35:09
that flows through them as a result of this production.
35:11
So it's not the same when it's private land that
35:14
they can step in and really make a dramatic change.
35:17
But it just hammers home the point, Mike that politicians
35:21
will do anything for votes. Pennsylvania is one of the
35:25
biggest battleground states in this upcoming election. They are part
35:29
of the backaway Baby exactly, so if Harris wants their votes,
35:35
all of a sudden, you can see a quick flip
35:37
flop on policy.
35:38
Speaker 2: Stumper sticker with their face on a drilling well baby,
35:41
let's go yeah. I mean again, though, this is where
35:45
I think investors have gotten burned historically, because again, if
35:49
you listened to I'm gonna take four years back here
35:53
and listened to you know, campaign and campaigner Joe Biden
36:00
about what he was trying to do, you could get
36:02
a sense that he wanted to invest in renewable energies,
36:05
like that was a big campaign pledge. Right. He then
36:08
got elected and guess what he did it? Right, Like,
36:12
whether you hate it or love it, he passed the
36:14
single biggest set of subsidies for renewable energies that our
36:19
country's ever seen, the Inflation Reduction Act. Was that it
36:22
was some several hundred billion dollars in subsidies for electric vehicles,
36:27
clean energy production, all sorts of different policies specifically directed
36:31
towards the renewable energy sector. And so I don't know,
36:34
as a logical person, you might have said, oh, that
36:37
should create some interesting investment opportunities and gone there. If
36:42
you go take a look at how the you know
36:45
quote clean energy sector of the stock market has performed
36:49
over the last five years, and I'm saying five years
36:51
just because that's what I have data on it, and
36:54
compare it to just your traditional big oil companies. Guess what,
36:59
Big oil has absolutely demolished that sector. I mean, they're
37:03
both positive, but they've gotten absolutely had their clocks cleaned
37:08
by you know, traditional big oil. And it comes down
37:12
to the fact that house stocks perform usually have very
37:15
little to do with policy that gets passed in Washington.
37:18
They're part of bigger overall trends. And the big overall
37:21
trend for big oil companies of the last few years
37:24
has been, yeah, maybe a White House that's not been
37:27
the friendliest to the sector and isn't about to approve
37:30
new offshore drilling wells in Alaska. But they didn't need them.
37:34
They had plenty of oil elsewhere to pump between. You know,
37:38
what's the country that I'm seemingly obsessed with is a
37:41
French guiana in Latin America that's like the fastest growing GDP. Ever,
37:45
they've got plenty of oil to go find that it's
37:47
been easy to extract at pretty high prices over the
37:51
last few years with Russia's invasion of Ukraine and growth
37:55
reopening from COVID. And so it's I'll just leave it
37:58
with this, that trying to figure out how markets are
38:01
going to perform, even individual companies are going to perform
38:04
under one president versus another, I continue to say, it's
38:07
a very challenging and perhaps fools errand quick break. A
38:10
lot more to cover in the second hour of the
38:12
financial Exchange, including an unlikely partnership in the auto manufacturing space.
38:17
Will we be cover in that when we come back