Market Update: The S&P 500 reached its 21st record close of the year, with significant gains also seen in the Nasdaq and Dow Jones, highlighting continued market strength despite recent volatility.
Interest Rates: Rising long-term bond yields in the US, UK, and Japan indicate market nervousness about fiscal policies and potential inflation, with gold prices also hitting all-time highs as a safe haven.
Fed Rate Cuts: There's strong anticipation for a rate cut at the upcoming Federal Open Market Committee meeting, driven by weaker employment numbers and inflation concerns, with experts predicting a likely 25 basis point cut.
Trade Policy Uncertainty: A federal appeals court ruling against Trump's tariffs introduces potential volatility, as the administration seeks to appeal and maintain these economic measures.
Labor Market Concerns: Cooling labor market data, including fewer job openings and lower-than-expected job additions, raises questions about economic resilience and supports the case for Fed rate cuts.
Investment Strategy: Experts emphasize the importance of owning appreciating assets like stocks and real estate for long-term financial growth, especially for younger generations facing economic pessimism.
Consumer Sentiment: Despite stable economic statistics, consumer sentiment remains low, reflecting broader societal polarization and economic concerns, which could influence future market dynamics.
Transcript
There's been a lot of talk about how, you know, people should be worried about the White House politicizing the Fed. I would say that if they don't cut rates, the Fed should be worried about polit politicizing itself against the White House. [Applause] [Music] Welcome to Rise Up, where we take a look at this week's biggest stories out there. We break them down so you can understand what's happening so that you can make better decisions on growing and protecting your portfolio. Well, certainly there's a lot going on in the markets this week. Volatility, it can be very confusing for our viewers. Our mission here at RiseUp is to bring you the very best wealth management experts, the best conversations, and the people who work directly with clients each and every day, helping them make important financial decisions to live their best lives. If you would like some extra help during the show or anytime after, please go to wealthon.com for a free portfolio review from one of our experts at Grimes & Company. My name is Terry Coulson. I'm a managing partner at Rise Growth Partners. We want to give you a quick market update today. The broad market S&P 500 finished up 83% at 6502 while the Nasdaq composite was up.98% at 21707. The Dow Jones Industrial Average finished up about 350 points at 45621 and it was the S&P's 21st record close so far this year. And I want to introduce our partner Joe Duran who's with us here today. And Joe always has experts opinions on the market. Thank you for joining us today, Joe. >> It's great to be here. Uh, you know, I'm surprised we hit all-time highs. I mentioned last week. I thought it might get a little rickety in the beginning of September. And certainly we came off Labor Day and the market actually gave us a little bit of a spook. Uh, not much, but enough to rattle the markets a little. Obviously driven by interest rates. What we've seen everywhere is the surge in interest rates, especially in the foreign countries. England, I think we're at 5.8% on the on their long uh guild, it's called there that their long-term treasury bond. That's the highest it's been in many many years. Uh we have the number like I think it's around 20 30 20 years or so. That's hit an all-time high. Same thing's happened in Japan. Our 30 year hit around 5%. So, I think we're seeing some nervousness about the amount of debt that all of these developed countries are creating. We're also seeing gold hitting all-time highs as well, which suggests that there's a need for secure currency. And even though inflation has been reasonably muted, the stock market, especially the bond market and the gold market, is pricing in some level of instability in currencies or interest rates or inflation. Uh that's certainly being seen. Although you can't tell that from the stock market because we have one bad day and then it's like off to the races again. But I do think again I'm very happy we've got Kevin and Emily here with us to actually talk about what's happening. Uh Terry, do you want to introduce Kevin and >> Yeah, I'm very excited to and I know our viewers know both Kevin and Emily who come to us. Kevin is the CEO and CIO of the Grimes and Company. Emily Wood is the principal and wealth manager working at Grimes and Company serving clients each and every day. Welcome back Kevin and Emily. We're going to have a great show today, but you know before we jump into everything, there certainly is a lot going on in the longdated sovereign bond yields. They've surged across the globe this week driven by fiscal concerns. You know, Japan's 30-year bond yield is at a record high. The UK, Europe, and the US longdated yields have also hit recordter term highs. The weak dollar is holding steady this week as market prices cut a rate cut from the Fed. Big movers in equities, as Joe said, including Alphabet and Apple due to favorable court ratings. You know, Kevin, I'd love to get your perspective on what do you think is happening this week. >> Yeah, I mean, hoham, right? Another another new high for the S&P 500. Um I think well just to build on what Joe was saying I mean one one thing this week I think a little bit was uh you know bad bad news is good news it's going on with with some of the employment numbers you the ADP uh number we have the employment report tomorrow it's expected probably to potentially you know be a little weaker. Um, but that's what I mean by good uh, you know, bad news is good news is that that that obviously I think would solidify Fed rate cuts on September 17th when they have their next meeting and I think the market is welcoming that. So, um, you just to touch on uh, something Joe brought up while I have the mic here. I was thinking about Japan. Uh, you know, Japan highest yields ever all time, right? Certainly headline grabber. Um, but I was thinking, you know, Japan's a trends setter, right? Japan, it was they were the first major economy to uh to have a lost decade in the 1990s after the real estate uh debt crisis. Uh they were the first country to 100% debt to GDP in the early 2000s. They're the first to uh zero interest rates. We all thought they were crazy. Thought that that would never happened. And then, you know, you know, here we are or here we were uh after the global financial crisis at zero interest rates. uh Japan was the first to I guess uh manipulate their bond market to bring long-term bond yields down and and sure enough we followed with quantitative easing. So we thought all these things were crazy. We thought they were outliers but if you know if Japan is is still a trends setter then uh then maybe we should expect uh higher uh bond yields to come here and in Europe. >> Joe, I'd love to get your take on that. Should we be expecting higher bond yields? >> Well, I think I think we're bringing up a really good point here. I never actually Kevin thought about the fact that they've been ahead sometimes by as many as 5 to 10 years, but I do think you're seeing a a need for capital to be paid for its risk that it's taking. Um, and obviously there's concern that rates because the long end is what's being hit. There is some concern about fiscal responsibility that has been ignored by politicians for a very very long time. I don't think it would be one thing if this was happening in the context of rising uh economy of a growing economy. That's certainly not the case in the Japan. It's barely the case here in the US. So, it isn't because we've got the prospect of high growth which is why you often see higher interest rates which says something else is driving this and that's either people would rather have put their money in other places. And I do wonder if money is now going to gold, going to Bitcoin, going to to non Treasury assets as a as an alternative and certainly it's being drawn to the stock market. So again, as long as the market hits new highs, uh it's kind of unusual but not rare that the money would rather go to stocks than to bonds. It will be interesting to see what happens if the market actually has a sustained decline. Will interest rates do what they usually do, which is create a little bit of protection against uh market declines in your bond portfolios? That's not what's been happening in the few days we've had declines. But again, I I don't see a reason today why you should be confident. It's not like we're doing a whole lot to become more fiscally responsible. >> That's right. Emily, are your clients calling you about yields at this time? Are you recommending any floating rate bonds or anything like that? >> We've had floating rate in portfolios for for quite some time. Um, and we have a couple different tactical bond uh options that incorporate both high yield and floating rate. Um, which which can be good places to be. Um, so that's been nice. I would say if anything, we're getting a lot more questions about the Fed does cut rates and and what that might mean for portfolios. So, um, you know, for clients who have larger money market positions or CDs, uh, you know, just reminding them that those those might tick down a little bit over the coming months. Um, but just reminding clients, too, that, you know, the the Fed does not set, uh, longer term rates. The the Fed funds rate doesn't um doesn't dictate that. So, for anyone who's looking for, you know, mortgage rates to plunge or or their student loan debt rates to go down, you know, they they are um they're they're probably not going to see that happen, you know, in in the near term. >> That's great, Emily. I'm glad you brought that up because that really starts us into our big three for this week, and that's starting with the appellet court ruling on President Trump's trade agenda. So this past Friday, a federal appeals court ruled that Trump's tariffs are not legal, reaffirming an earlier decision by the Court of International Trade back in May that said Trump had gone beyond his authority in enacting them. The ruling deals with a major blow to one of the administration's core economic policies. However, the appeals court allowed for the tariffs to remain until October 14th, so the administration could appeal it. So yesterday they asked the Supreme Court to quickly overrule this this ruling and Trump said this could lead to an emergency or disaster warning that if Scotas upholds this ruling it could be an economic disaster for the United States. So that's you know talk about volatility and and um concern at stake is not only the future of Trump's tariff authority but billions in revenue already collected. So Kevin, do you see this ruling as a short-term disruption or is this something that can really reshape trade and investment flows in the long run? >> Yeah. Um I mean I hope it's a short-term disruption. Obviously uh right now we're positioned for it to be is a speed bump, you know, not a not a roadblock, but you there's no way to know. Uh I think that there's a reasonable chance that the Supreme Court upholds the ruling from the US Court of Appeals, but it's far from a foregone conclusion. Um remember the justices uh they lean conservative. I think it's six to three uh conservative majority. So that's that would be in in the White House's favor. Uh but if this were upheld, there are a couple options. Uh one would be that the White House would have to go and find another authority. Um or another I guess I guess uh cover for for the tariffs. Uh an example I was reading uh earlier this week was uh the Smoot Holly tariff act uh back in the 30s uh that allows the president to impose up to I think it's 50% uh uh tariffs on countries that that discriminate against the US. Uh so that could be something that's invoked and I'm sure the White House is doing their homework, right? They're planning they got plan B, plan C, plan D. Um, and honestly beyond that, the the president could always just work with Congress and try to pass new legislation. Of course, that would be that'd be kind of difficult with um wi with such a uh unequal uh footing uh Democrats and Republicans in in the House, but um but it's possible. Uh so to me, the main concern here is uncertainty. Like we're finally at a point where tariffs have been digested and they're expected and the deals are done, right? uh we're getting massive or we're going to be getting massive revenue to help fund deficits. Um there's hundreds of billions of dollars promised uh by foreign governments as direct investments in the US. I mean these these are good things. I mean change changing course right now would in my mind would not be good. Um I I think about the uncertainty like I said think about it if you were you were a manager a CEO how do you make decisions in this environment right? How do you make capital investments in your company? Look, we're we're we're we keep talking about trying to onshore. How do you how do you make these decisions to build uh plants here in the US when you know you thought you had all this turmoil earlier this year, you thought you had a resolution, you feel like things are going the right way and all of a sudden it's upended again. That would be I think um that would definitely be a source of volatility for the markets. Uh so I don't think necessarily that happens right now. I'm hopeful that um you know there's a kind of a swifter resolution and and we can just kind of move forward with a program that's on tap right now. >> And it's not even clear Terry think about the practical implications. We've now collected billions and bill hundreds of billions in revenue. How do you return this money back? How does like people have paid the price now for some of these products? Like I I it's not even clear to me how it would be reversed. Um so again I I agree with Kevin. And uncertainty is never good for the markets. It will be noise again for a short period of time. Should you do something with your money as a consequence? Of course not. Because whether they're there or not, we've kind of digested that. That's part of the uncertainty. I'm more concerned, frankly, with valuations and what that means for the long term given where we are. Um, and will there be opportunities globally because of this? Probably. you know, they're investing in the foreign countries is their valuations are significantly lower than the US right now. But, uh, again, I think just more chaos is just bad for everyone. >> That's right. And Emily, I I'm sure your clients are feeling this whiplash and with some uncertainty. How do you help them prepare for both the risks and the opportunities from policy shifts like this? Well, I you know, like Joe just said, a lot of this is just noise and in the short term, it typically isn't going to have a really meaningful impact. So, I think as long as clients are appropriately allocated. So, if they have a liquidity need, if they're taking a monthly income, if they know they need um cash or something, we want to make sure that that's set aside. But otherwise, we're not going to take our eye off the longer term goals that they have, which are usually going to include, you know, college or retirement or or something where there is the ability to have that time in the market, which will help smooth out the bumps. I mean, if anything, it can also provide investment opportunity for people with some cash on the sideline who maybe want to dollar cost average their way in. Um, but you know, again, a lot a lot of the the shorter term headlines and and policy shifts are are just that they're they're short-term in nature and you know, they're not a reason for us to make significant adjustments from a portfolio management point of view. >> You know, Joe, I've been thinking about this and you you and I run a lot of playbooks in our business, but this is one playbook I would not want to write is the refund policy for all these tariffs if it ever happened. I mean, I think we'd be working day and night, but um >> I think the reality is some version of the tariffs are going to go in place. We've the president's going to be in his seat for the next three and a half years, and he clearly has seen that it he feels good with the results. And so, as Kevin said, if the Supreme Court go uh blocks the way they have implemented thus far, they've given I'm sure they'll give him time to to address it in a different way. and and they will find another way to implement their own version of tariffs inciting whatever rules they need to to get there because they've in effect been put in place. So I think I would not put my money on this being reverted back and act as if they never occurred. I suspect that some version of these are here in place. I'm much more concerned about what the implications are for longer term inflation because the reality is it is it does make manufacturing and shipping and global trade just more expensive even if we onshore everything back to the US. It does increase costs and that means that we'll have a steady state of of inflation that will be a tick higher or than higher than it's been in the past and that has implications for our clients for people who are investing and especially for those that are retiring because again CPI typically understates the actual inflation that people feel by quite a bit. So, you know, people look at their their CPI and it's right around two and a half percent. And I don't think anyone who's on this watching this is feeling like things are up only two and a half percent. Certainly, if you go buy a burger on Fourth of July, the meat prices are up a ton. And what you'll see in almost every area, especially travel, if anyone's looking at vacation travel, everything is really, really expensive and not getting any cheaper. And that's probably a steady state for quite some time to go. U and that has implications. I think we're seeing that in the long long-term treasury has implications for your financial plan for when you retire. And obviously uh in the long term the stock market is basically reflecting the fact that things are going to get more expensive and when that happens actually earnings go up as you can imagine. So stock actually interesting enough Terry when you look at history the stock market unless you have runaway inflation the stock market is a great place to be when you do have inflation because the company's earnings can grow and adjust with pricing increases again not not to the sky not forever and not with big surges in inflation but um you'll find that inflation is not necessarily bad for stocks if it's managed and not, you know, no shocks to the system. >> Yeah. And when you think about profitability for firms, prices are going up and they're cutting a lot of their labor costs due to artificial intelligence, which we're seeing here in the Bay Area all over the place. So they're it is driving quite a bit of profitability for firms in the short term, I would agree. >> And again, not great for the consumer. Like if you're a worker bee and you're going to work every day and you're potentially losing your job and your pay is not going where it used to and you don't get pay increases because uh they can replace or use a lot of AI to to enhance your work. It certainly makes us workers more productive, but I don't know that it necessarily translates to increased income, especially when you see some of the job numbers that I know we're going to talk about in a second. >> Yeah, we're gonna get to that. But let's get to our second story, which is about Steven Mirren, the president's Trump pick to replace Adriana Cougler on the Fed board. And I understand this goes by Cougs, so we're going to call it Cougs from now on. Um Marine had his or Marin had his expedited nomination hearing today before the Senate Banking Committee in his prepared marks. Marin pledged to uphold the Fed's independence and dual mandate, but the timing is somewhat fraught, coming just a week after Trump's controversial attempt to fire Governor Lisa Cook. With that context as the backdrop, throughout the hearing, the committee then pressed Miren hard enough with questions about Fed independence and political interference. with the next federal open mark committee meeting just two weeks away. His confirmation could directly influence the debate over rate cuts. So Kevin, if Steven Marin is confirmed in time for the September FOMC meeting, how could this voice shift the balance of the rate cut debate? >> I don't honestly I I don't think it matters much at all. Um, I think it's going to be rate cuts on on uh September 17th, no matter what. Uh, I I think I guess if anything, depending on what you know, tomorrow's employment number is next week's inflation number is that there could be a situation where they're debating between 25 basis points and 50 basis points. And potentially, you know, if if Marin were were in there, then then he could, you know, could sway it more towards towards the 50. Um, that that could be the case. But the bottom line is I really think there's going to be cuts. I I'd be shocked. I mean, there's been a lot of talk about how, you know, people should be worried about the White House politicizing the Fed. I would say that if they don't cut rates, the Fed should be worried about polit politicizing itself against the White House. And so, uh, I, you know, you got inflation in the, you know, 2 to 3% range. You got, depending if you're looking at at headline or core, you you well below the neutral neutral rate. You got parts of the economy looking a little bit weaker, like the employment number we could talk about a little bit. Um, I I just think you it would be it would be shocking to me if the if there weren't a rate cut. >> I mean, I agree, Kevin. I think it would almost be a hostile act if they did zero. Uh I think everyone's pricing in 25 50 would probably be more than I would bet on. Uh but I think you can expect and again it doesn't make much of a difference. It's more of a signal to the market that we've started a an continuing and easing phase that started a year ago and going back on to like stabilizing the economy. Again, that 25 basis points by itself doesn't make much of a difference. What it does do is send a message that hey the economy does need a little bit of help here and the Fed is listening. I think if they didn't do it I can't imagine what the reaction will be from the White House but uh more importantly I just don't think that's where their heads are at. I think that they're the internal debate is there's a couple of the me fed governors who are zero but most of them are going to say 25 makes sense. I I don't know they go to 50. Uh, I do wonder if there wasn't so much pressure, would they go to 50? I don't know, but I think 25 feels like a pretty safe bet. >> Yeah, understanding that more than likely will happen. Emily, you know, how do you help your clients prepare when there's this added uncertainty about the Fed's decision-making process? >> I don't know that clients are really concerned about, you know, the the complexion of of the Fed and and who's in and who's out. I think they obviously want to have that um that comfort level that the Fed does remain an independent entity, but I don't know that any of them are are sitting around wondering, you know, what's going to happen with with the nomination hearing. they're more concerned about what I was saying earlier where you know where are short-term rates, what are CDs paying, what am I getting in my money market and um you know then then down the road how will that translate longer term to things like um you know bond deals and and um you know the prevailing rate on things like mortgages and student loans. So I don't think they're they're too too worried about the inner workings of the Fed as an entity though. Yeah, we might just start to see, you know, home buying go up, potentially refinancing potentially for current real estate. So there there are some positives that might come from it. >> Again, unfortunately, the 10 years is not reflecting that. The 30 years certainly at highs and that's really what sets the rates for that credit cards maybe go down a fraction. What definitely is true is people won't get as much yield on their on their cash accounts and and that people will feel for sure. um and might lead them to invest in other things and that hopefully drives longer rates a little down because they go out to 10 years to get the yield that they were getting right now for basically no no additional risk. >> Yeah, that's a great clarification. Thanks, Joe. Let's get to our last story. Fresh labor market data is raising questions about whether conditions are finally softening. There's a report called the Joltz report which stands for job openings and labor turnover supply. This report for July released yesterday showed that 7.18 million job openings. This is the lowest reading in 10 months and below the expectations of 7.4 million. For the first time since April of 2021, the number of openings fell below the number of unemployed workers, which now stands at about 7.2 million unemployed workers. Meanwhile, the ADP's private sector employment data for August released today revealed that just 54,000 jobs were added, far below the goal of 75,000 that was expected, down sharply from July. With Friday's official jobs report coming out, even more low figures could tilt the odds further towards rate cuts at the Fed's next meeting. Emily, how does a cooling labor market impact financial planning? Should they be thinking about job security, savings, debt repayment? What are you telling your clients? >> I think with a cooling labor market, you might see people get a little bit more nervous. I mean, certainly there's still a, you know, most people are are still gainfully employed and and have that consistent employment. And so for those people, we're always preaching, you know, stay the course, keep up with your savings habits. Um, but if you know you you are concerned about losing your job or or being downsized, you know, this is where it's really important to have already had a lot of those good habits so that we want to be able to rely on an emergency fund if we need it. Um, but you you might see, you know, consumers a little bit less likely to go out and and spend or be a little bit more cautious with their money if if they're nervous about, you know, where they might be for employment um, you know, a couple quarters down the road. And Terry, just the the kinds of jobs that are not being offered today, I can tell you just as having three daughters, two of whom have just graduated college, it's really tough labor market if you're a new worker. Um, because a lot of the entry level work that a lot of folks were learning early on are being replaced by AI. Everything from writing stock reports and analysis reports to legal briefings. And so what that means is that these law firms, financial firms can bring in fewer people to do the same amount of work. And that's happening up the food chain as well because the the overall productivity of people. You have online notetakers that take better notes than most people individually do. So I think this might be a structural change that's occurring. And unlike prior environments where it was hey uh we were moving all shipping and all manufacturing outside the US and those jobs were being lost. These are jobs that are not being shipped anywhere else. They're just jobs that are being replaced by technology in ways that we really haven't seen before. And yes, it will enhance the productivity of the existing workers. But it also has serious implications for people entering the labor market. People who certainly lose their jobs today. the likelihood of replacing. And so I think this has it's a longer conversation to have, but what does it mean for our labor force when AI is taking these are not again 50 or $80,000 jobs. These are jobs that could be potentially 200 and $300,000 a year coding jobs which are no longer available. And people are not yet losing their positions, but there aren't as many opportunities to get into new businesses because people are asking their employees to do more with what they have. And again, that jobs are the driver of GDP. If everything else being equal, the biggest driver of GDP is how many people are working and are they getting pay increases? And again, that's something to think about in the long term. I think more importantly for an individual, if there is a possibility that your job's at risk, then you need to make sure that you have a safety net in place that's large enough to take care of things. Uh if um if you're unfortunately way laid for whatever reason and your work. >> Yeah, Joe, I'm glad you said that because, you know, we I'm sure we have viewers out there right now that either can't find work or afraid they're going to lose their current job. So, I just want to recommend you go out to wealthyondon.com, do a portfolio review, get in touch with one of our financial advisors and get a better understanding of what type of emergency funds you should have, how should you be investing based on this time. But, um, Joe, you brought up another really good point about what's happening among consumers today. So I want to go into our big in-depth topic which is increasing pessimism about the US economy about among consumers and this data is about a cooling labor market. It's not surprising there's a revelation at this time. However, there are other data points on this gloomy outlook. So just bear with me. This is a little bit of a gloomy topic, but we're going to work through it together. There was a Wall Street Journal poll revealed just 25% of Americans believe they have a real chance of improving their standard of living, the lowest level since the tracking began back in 1987. And most of our viewers may not even been born in 1987, but nearly 70% say the idea that hard work leads to success is perceived as no longer true, and if it ever was. At the same time, the middle class households earning roughly 50,000 to 100,000 now report economic anxiety levels similar to lower income groups. Middle inome consumers are cutting back on discretionary spending, trading down to generics, postponing services and rising living costs. A new Bank of America workplace benefit survey confirms this reality. Only 47% of US workers feel financially well, down from 52% while a growing share are seeking help with emergency savings and debt amid broader worries about the economic outlook. So that's a lot of data and a lot of concern. But Emily, I want to throw the first question out to you. And this is Abby from California. And she asks, "How should younger people think about investing when it seems so much harder for younger generations to get ahead and accumulate assets?" >> That's such a great question, Abby. And honestly, the answer it's it's much easier said than done, but I would say we'd really want to be viewing, you know, saving and investing as an obligation and and not as a choice. So, for example, you know, as you're starting in the workforce, um if your company offers a employer sponsored plan like a like a 401k or 403b, invest in it. You know, start putting money in each month at the absolute minimum enough to take advantage of of your company match. So, if your company says, "Hey, we'll we'll match you up to, you know, 3% contribution," at least put 3% in there. And then you've got your 3% and the company's 3% so that 6% of your income is being put away. Um, you know, also Joe and I have both talked on on this show so far just about the importance of an emergency fund or a safety net. And so much like you can just have uh monthly 401k contributions come right out of your paycheck. Most employers will let you make automatic monthly contributions from your pay right to your savings account. So, you know, you want to start off saving some each month so that if you do run into hard times later, you you've got money set aside. It's it's wise to, you know, separate your savings from your checking so there's, you know, less inclination to dig in there. And if you've got enough in an emergency fund, think about opening a brokerage account so you can, you know, set aside some money and and get it invested and and hopefully growing more for the longer term because it might not feel this way, but saving a lesser amount for a much longer period of time. So, starting when you're young, um, that's much more potent than, you know, waiting till you you're in your 50s and and starting to put more significant chunks of money away. So, it's it's hard, but you know, it's definitely something I would recommend right out of the gates is is get going in the 401k, get going with some after tax savings. >> Yeah. And I'd say one other thing, too. I I feel I feel like a lot of the, you know, the younger people that I talk to, Abby, you sound like you might be, you know, maybe, you know, a recent entry to the workforce. Feel like there's a lot of pessimism out there. I feel like uh that a lot of that of your generation, you know, really questions the future of the country and questions the future of a lot of things and there's probably good reasons for that. Um but but I would say that for your long-term money and you're young, you you're talking about not accessing this money for decades. I mean, you this is not a specific recommendation, but I would say that you're going to want to invest that for growth. you're going to want to have that invested 100% in in in growth assets in stocks and uh and you want a diversified portfolio there and make sure you have uh you know you kind of spread things around in different markets and different size companies and different types of companies. you really want to make sure you're invested in growth because in in this world I more and more uh it's becoming a u it's becoming a world of of those that own assets and those that don't. And and people that own assets including stocks and real estate and things that appreciate in value, they're they're doing just that. They're appreciating in value and and they're it's probably going to continue. It's going to continue over especially over the long run. It's going to continue substantially. Um people that don't have assets are being left behind. And so I I would just really try to encourage you know the younger generation is hard to do it but to save to invest you know to if you can find a reasonable opportunity to try to you know to to take down an asset like a house or something you can improve and make it better. I mean this is how you try to get ahead in life um is is is you got to you got to make your money work for you. And in order to start that you have to accumulate some money to be >> Terry I I would just add for Abby here. I read a book years and years ago, Secrets of the Super Wealthy or something like that, and it said there's only one way to get rich in America, and that's to own an appreciating asset. Whether it's a house, whether it's a stock, whether it's your company, because of the tax system, because you will spend whatever you make, except if you're very disciplined in saving unless you own assets that appreciate in value, which compound out without paying taxes. It's very hard to get ahead because we all have experienced this. Minute you get a pay increase, you'll find a way to spend the money, taking nicer vacations, taking your kids to better schools. We all have a way of increasing our lifestyle with our income. So either force savings that you can then invest in growing assets or own assets directly that allow you to appreciate in value in a tax deferred basis. I'll just add Terry, I was reading a study actually yesterday. This is the first time since it's been tracked. Uh this was reported by Newsweek, which was a magazine we all used to read years ago, but now it's mostly online. still a reasonably credible source at times, but they found through a Gallup study, this is the first time that generations in their early 20s, the Gen Z, are actually significantly unhappier than people in their middle ages, in their 50s. What typically has happened historically is you leave school, you're really optimistic and feeling good about things. Even 10 years ago, I was just reading 52% of people 10 years ago in their 20s were very optimistic about the future. That number for people today in their 20s is 15%. So what is happening? They feel less confident. It feels overwhelming. My daughters can't imagine how they can get to being living the life I have. And that makes it feel insurmountable. Social media tells you that's the case. And so again, it's reinforcing this idea of hopelessness. And all I can tell you is the same thing I feel as a middle-aged human being. You have to start small, but own assets. Make sure you keep investing in an asset that is appreciating. And don't worry about the day-to-day fluctuations because America is a growing economy. That will be true as our entire lifetimes. And it's important that you do the thing that maybe other people aren't doing at your age, which is making long-term decisions for your well-being. >> That's excellent advice, Joe. And I want to move on to our next question. Kevin Anna Partners 9603 asks, "If yields go down to less than 1%, what are retirees to do about income if they rely on yields?" In other words, how can retirees safeguard their finances in this type of environment? Yeah. So, I I say this every other one of these shows, but uh I always tell my kids there's no such thing as is 100% or 0%, but I could say with a high likelihood that that that's not going to happen. I I I can't really see a sit a situation where you're going to see yields at 1%. Um, we're we're probably I I can't imagine us going back to the zero interest rate world uh that we were in uh after the global financial crisis. It's just that that's not going to happen. Inflation exists now. Um it's not problematic right now, but it's there. We can't go down there or all of a sudden that spectre will will shoot up and the Fed's, you know, it would just be bad. The Fed the Fed would have to raise rates. We'd have a recession. So, I I I can't imagine us being in that 1% world. Look, the Fed funds rate right now, let's not forget, we're still at four and a quarter to five, I'm sorry, four and a quarter to four and a half percent. So, I think it's like 4.33% uh Fed funds right now. So, even when we get some rate cuts, and we probably belong somewhere next year, like in the, you know, mid to low 3s, I think, for Fed funds. So, that's probably what you'd be getting that maybe a little bit less in your money markets. That's probably about right. You know, I I I think that, you know, we were talking a lot about bond yields earlier in this discussion and, you know, you're probably gonna see Emily made the point that, you know, bond yields are not necessarily set by the Fed at all. They're set by the open market and and you know, we're at what like a 430 something like that right now for the 10 year 10 year you said 4 417. So, you know, um we're at all-time highs in Japan and you know, these these elevated bond yields in Europe like we were just talking about. That's probably normal, right? I mean, our our our model for um for what what bond yields are or should be would be what's what's your GDP expectation and what's your inflation expectation? And you know, if you think the economy is going to grow around 2%, you think inflation is going to be somewhere, you know, 2 3%, you should be somewhere at least at four or 5% for treasuries. And it's some premium to that uh for corporate funds and probably a larger premium to that for for credit. So if you're retired, the only stuff you should really have in money markets if that are in short-term instruments are things that should that you really need liquidity for like things that you know that you need to spend money on in the next year or so. Um, other than that, even very conservative investors, you know, they you should be looking for opportunities to lock in higher yields because you can lock in in the fives with reasonable, you know, reasonable credits right now. Um, that's not so bad and and then maybe take a little bit of risk in the stock market. So, um, I I just I don't think that's going to happen. And I would highlight that Kevin, you know, again, no one should retire and not have some portion of their portfolio in equities because again, it's important to have a portion of your portfolio growing, especially with inflation that's out there. So, and there's, as Kevin said, there's yields outside of treasuries. You know, you can get yields with with companies, you can get yields with foreign countries. There are other places to get yield. uh you know and certainly there's even if you have the money uh there's structured debt vehicles and private debt vehicles there's many different ways to get yield that's not a concern I would have I share Kevin I don't think we're going down to below 1% anytime soon you should expect again if yields drop that's good for your long-term bonds but you should then if you believe that's the case you should be lengthening the maturity of your debt today because you again the 30-year bond is yielding over four and a half% today. >> That's right. And Emily, we have our last question from Ken in North Carolina, and he writes, "I want to keep investing for the long term, but how do I balance that with the day-to-day pressures of expenses without falling behind?" >> Well, it's not easy, Ken. Um, that's, you know, much like I said to Abby with her question, um, I really think that saving and investing has to be looked at as an obligation and and not a choice. So much like you might lay out your monthly bills and see what does my budget look like, I would include investing. So, you know, building up your after tax investments, add into your 401k as a necessary monthly expense so that it's it doesn't get overlooked and and you're not tempted to skip it when um you know thing things might get a little bit tight. Um, one trick I've seen a lot of people use, Joe alluded to this earlier, is that as you do get raises, um, increase your savings and your investing accordingly. So, you you get a 3% raise, you know, throw some more money into your 401k, throw some more money into your brokerage account. Don't let your lifestyle absorb, you know, that that extra income that you're earning because that's a really powerful way to put some extra money away. You know, the same might go for for a bonus. Um, so again, staying consistent over time is is really, I think, where you come out ahead. There is no there's there's no magic. Um, there's no magic to it. >> Good. Let's get to our big three stories now to watch for next week. And so, first of all, we'll have new PPI and CPI prints coming out. Kevin, what market moves would you expect if inflation comes in hotter or even cooler than expected? >> Yeah, inflation's the big one next week. There's there's no question about that. Uh for CPI, uh we're expecting 0.2 at the headline,.3 at the core. I think that's 3.1 or something like that. That would be the the annual number for for the core. So, it's expected to tick up reflecting some of the inflation. Uh you know, I'm sorry, some of the tariff stuff that kind of filtering into the economy. Um so, that would be very normal and expected. Um, look, I like I said, I think that that that the Fed's going to go no matter what. Uh, I don't I mean, it would have to be a big surprise to the upside to prevent a rate cut um uh in September. So, I I I assign a very low probability to that. Um, but, you know, nonetheless, the market's going to move on these things because the market, you know, if there is certainly if there is uh lower inflation, um, you'll see the market love it. Uh I would think I mean we are at high levels. It's it's you know but so the valuations are are pretty get you know pretty stretched I would say but um wait but you're going to you're going to hear people start talking about 50 basis points instead of 25 and and so the market would like that and and and in in similar vein if if it comes in you know hotter than expected meaning higher higher inflation than than what the analysts are expecting then the market's not going to like that because it could put in jeopardy the rate cut or it could put in jeopardy future rate cuts. even if we do get the first token 25 basis point cut. >> We'll also have consumer credit out on Monday. Emily, how closely do you watch consumer credit trends um when you're guiding your clients and what do you look for in these reports? >> Sure. So, I think that um these reports are helpful just, you know, looking a little bit at, you know, the the use of consumer debt and and the resiliency of the economy and things like that. Um, but I usually you I usually leave a lot of the economic reports to to Kevin's team. Um, you know, to to worry about because a a great, you know, report or or a bad one is not going to change the type of advice I'm giving clients on a day-to-day basis. >> I'll just Terry, I'll just add again, some of these reports are much more important for long-term. This is one of those. You know, they don't really move very much on a weekly, monthly, even quarterly basis. It's just the general trends. Consumers are very well behaved right now. Like we have most people with homes have long-term debt locked in. No one's overlevered after the 2008 2009. The crisis here that if we were to have a surprise, it's really not I don't even think on the inflation side. It's really on the econ on the economy and and I think that's where people's attention is right now. The jobs report right now is probably something that drives the market more than again unless you get a shocking number. I think everyone's kind of settled into this 2.8 to 3.2% inflation. And again, if we're within that band, I don't think there'll be a lot of excitement. >> Yeah, we've talked a little bit more about gloomy outlook for consumers and consumer sentiment will be out next Friday. So Kevin, if it shows continued weakness, how should we think about the markets and investors read into that? >> Yeah, I look at some of the numbers like consumer sentiment and and and think of them more as like a like a supporting evidence type figure, not something that's going to be really market moving, but that I think that that's interesting to to look at on the sidelines. I think it's really we talked a little bit about this this whole meeting. I think it's very interesting just how many people are are are feeling gloomy uh despite you know the statistics being reasonably stable for the economy and you know I don't know why that is but it's been like that for a long time actually and and I I think you know part of it is probably just live in a very polarized world right h half the country hates the president whoever the president is they half the country hated Biden half the country hates Trump there's little middle ground and and I feel like this polarization kind of carries on into everything so that people are just looking at the world through a rosecolored lens or, you know, or some other colored lens. It's not so nice. And so, um, I it's just, you know, it's I I I look at some of the sentiment numbers as far as what investors are doing because you can take the opposite side of that and make money a lot of times. Uh, the consumer's side, I, you know, I think it's just more, you know, anecdotal evidence as far as what people are feeling like. >> Yeah. Yeah, I just want to emphasize for our readers is that that's why we're bringing you the facts. We're bringing you the experts who work with clients each and every day so that you can use these facts and their experts to make better decisions and you don't have to be swayed by whatever winds of change are happening out there. So, I just want to remind you again if you have questions, concerns, please send them in to to our show. We want to answer your questions. We want to help you. We'd also invite you to go to wealthon.com for a free portfolio review and you will get experts just like Emily and Kevin there to serve you and help you make better decisions. And so I just want to thank my partner Joe. You did a fabulous job. I love the way you share your expertise and all the notes you've been reading every week. Thank you so much. And a special thank you as well to Kevin and Emily for joining us today. Really great show. Very helpful information. >> Thanks so much for having us. Thanks, guys. And hope everything's beautiful in Boston. >> Have a great week. >> You, too. >> You, too. Thank you.
Are Rate Cuts Now a Done Deal? | Rise UP!
Summary
Transcript
There's been a lot of talk about how, you know, people should be worried about the White House politicizing the Fed. I would say that if they don't cut rates, the Fed should be worried about polit politicizing itself against the White House. [Applause] [Music] Welcome to Rise Up, where we take a look at this week's biggest stories out there. We break them down so you can understand what's happening so that you can make better decisions on growing and protecting your portfolio. Well, certainly there's a lot going on in the markets this week. Volatility, it can be very confusing for our viewers. Our mission here at RiseUp is to bring you the very best wealth management experts, the best conversations, and the people who work directly with clients each and every day, helping them make important financial decisions to live their best lives. If you would like some extra help during the show or anytime after, please go to wealthon.com for a free portfolio review from one of our experts at Grimes & Company. My name is Terry Coulson. I'm a managing partner at Rise Growth Partners. We want to give you a quick market update today. The broad market S&P 500 finished up 83% at 6502 while the Nasdaq composite was up.98% at 21707. The Dow Jones Industrial Average finished up about 350 points at 45621 and it was the S&P's 21st record close so far this year. And I want to introduce our partner Joe Duran who's with us here today. And Joe always has experts opinions on the market. Thank you for joining us today, Joe. >> It's great to be here. Uh, you know, I'm surprised we hit all-time highs. I mentioned last week. I thought it might get a little rickety in the beginning of September. And certainly we came off Labor Day and the market actually gave us a little bit of a spook. Uh, not much, but enough to rattle the markets a little. Obviously driven by interest rates. What we've seen everywhere is the surge in interest rates, especially in the foreign countries. England, I think we're at 5.8% on the on their long uh guild, it's called there that their long-term treasury bond. That's the highest it's been in many many years. Uh we have the number like I think it's around 20 30 20 years or so. That's hit an all-time high. Same thing's happened in Japan. Our 30 year hit around 5%. So, I think we're seeing some nervousness about the amount of debt that all of these developed countries are creating. We're also seeing gold hitting all-time highs as well, which suggests that there's a need for secure currency. And even though inflation has been reasonably muted, the stock market, especially the bond market and the gold market, is pricing in some level of instability in currencies or interest rates or inflation. Uh that's certainly being seen. Although you can't tell that from the stock market because we have one bad day and then it's like off to the races again. But I do think again I'm very happy we've got Kevin and Emily here with us to actually talk about what's happening. Uh Terry, do you want to introduce Kevin and >> Yeah, I'm very excited to and I know our viewers know both Kevin and Emily who come to us. Kevin is the CEO and CIO of the Grimes and Company. Emily Wood is the principal and wealth manager working at Grimes and Company serving clients each and every day. Welcome back Kevin and Emily. We're going to have a great show today, but you know before we jump into everything, there certainly is a lot going on in the longdated sovereign bond yields. They've surged across the globe this week driven by fiscal concerns. You know, Japan's 30-year bond yield is at a record high. The UK, Europe, and the US longdated yields have also hit recordter term highs. The weak dollar is holding steady this week as market prices cut a rate cut from the Fed. Big movers in equities, as Joe said, including Alphabet and Apple due to favorable court ratings. You know, Kevin, I'd love to get your perspective on what do you think is happening this week. >> Yeah, I mean, hoham, right? Another another new high for the S&P 500. Um I think well just to build on what Joe was saying I mean one one thing this week I think a little bit was uh you know bad bad news is good news it's going on with with some of the employment numbers you the ADP uh number we have the employment report tomorrow it's expected probably to potentially you know be a little weaker. Um, but that's what I mean by good uh, you know, bad news is good news is that that that obviously I think would solidify Fed rate cuts on September 17th when they have their next meeting and I think the market is welcoming that. So, um, you just to touch on uh, something Joe brought up while I have the mic here. I was thinking about Japan. Uh, you know, Japan highest yields ever all time, right? Certainly headline grabber. Um, but I was thinking, you know, Japan's a trends setter, right? Japan, it was they were the first major economy to uh to have a lost decade in the 1990s after the real estate uh debt crisis. Uh they were the first country to 100% debt to GDP in the early 2000s. They're the first to uh zero interest rates. We all thought they were crazy. Thought that that would never happened. And then, you know, you know, here we are or here we were uh after the global financial crisis at zero interest rates. uh Japan was the first to I guess uh manipulate their bond market to bring long-term bond yields down and and sure enough we followed with quantitative easing. So we thought all these things were crazy. We thought they were outliers but if you know if Japan is is still a trends setter then uh then maybe we should expect uh higher uh bond yields to come here and in Europe. >> Joe, I'd love to get your take on that. Should we be expecting higher bond yields? >> Well, I think I think we're bringing up a really good point here. I never actually Kevin thought about the fact that they've been ahead sometimes by as many as 5 to 10 years, but I do think you're seeing a a need for capital to be paid for its risk that it's taking. Um, and obviously there's concern that rates because the long end is what's being hit. There is some concern about fiscal responsibility that has been ignored by politicians for a very very long time. I don't think it would be one thing if this was happening in the context of rising uh economy of a growing economy. That's certainly not the case in the Japan. It's barely the case here in the US. So, it isn't because we've got the prospect of high growth which is why you often see higher interest rates which says something else is driving this and that's either people would rather have put their money in other places. And I do wonder if money is now going to gold, going to Bitcoin, going to to non Treasury assets as a as an alternative and certainly it's being drawn to the stock market. So again, as long as the market hits new highs, uh it's kind of unusual but not rare that the money would rather go to stocks than to bonds. It will be interesting to see what happens if the market actually has a sustained decline. Will interest rates do what they usually do, which is create a little bit of protection against uh market declines in your bond portfolios? That's not what's been happening in the few days we've had declines. But again, I I don't see a reason today why you should be confident. It's not like we're doing a whole lot to become more fiscally responsible. >> That's right. Emily, are your clients calling you about yields at this time? Are you recommending any floating rate bonds or anything like that? >> We've had floating rate in portfolios for for quite some time. Um, and we have a couple different tactical bond uh options that incorporate both high yield and floating rate. Um, which which can be good places to be. Um, so that's been nice. I would say if anything, we're getting a lot more questions about the Fed does cut rates and and what that might mean for portfolios. So, um, you know, for clients who have larger money market positions or CDs, uh, you know, just reminding them that those those might tick down a little bit over the coming months. Um, but just reminding clients, too, that, you know, the the Fed does not set, uh, longer term rates. The the Fed funds rate doesn't um doesn't dictate that. So, for anyone who's looking for, you know, mortgage rates to plunge or or their student loan debt rates to go down, you know, they they are um they're they're probably not going to see that happen, you know, in in the near term. >> That's great, Emily. I'm glad you brought that up because that really starts us into our big three for this week, and that's starting with the appellet court ruling on President Trump's trade agenda. So this past Friday, a federal appeals court ruled that Trump's tariffs are not legal, reaffirming an earlier decision by the Court of International Trade back in May that said Trump had gone beyond his authority in enacting them. The ruling deals with a major blow to one of the administration's core economic policies. However, the appeals court allowed for the tariffs to remain until October 14th, so the administration could appeal it. So yesterday they asked the Supreme Court to quickly overrule this this ruling and Trump said this could lead to an emergency or disaster warning that if Scotas upholds this ruling it could be an economic disaster for the United States. So that's you know talk about volatility and and um concern at stake is not only the future of Trump's tariff authority but billions in revenue already collected. So Kevin, do you see this ruling as a short-term disruption or is this something that can really reshape trade and investment flows in the long run? >> Yeah. Um I mean I hope it's a short-term disruption. Obviously uh right now we're positioned for it to be is a speed bump, you know, not a not a roadblock, but you there's no way to know. Uh I think that there's a reasonable chance that the Supreme Court upholds the ruling from the US Court of Appeals, but it's far from a foregone conclusion. Um remember the justices uh they lean conservative. I think it's six to three uh conservative majority. So that's that would be in in the White House's favor. Uh but if this were upheld, there are a couple options. Uh one would be that the White House would have to go and find another authority. Um or another I guess I guess uh cover for for the tariffs. Uh an example I was reading uh earlier this week was uh the Smoot Holly tariff act uh back in the 30s uh that allows the president to impose up to I think it's 50% uh uh tariffs on countries that that discriminate against the US. Uh so that could be something that's invoked and I'm sure the White House is doing their homework, right? They're planning they got plan B, plan C, plan D. Um, and honestly beyond that, the the president could always just work with Congress and try to pass new legislation. Of course, that would be that'd be kind of difficult with um wi with such a uh unequal uh footing uh Democrats and Republicans in in the House, but um but it's possible. Uh so to me, the main concern here is uncertainty. Like we're finally at a point where tariffs have been digested and they're expected and the deals are done, right? uh we're getting massive or we're going to be getting massive revenue to help fund deficits. Um there's hundreds of billions of dollars promised uh by foreign governments as direct investments in the US. I mean these these are good things. I mean change changing course right now would in my mind would not be good. Um I I think about the uncertainty like I said think about it if you were you were a manager a CEO how do you make decisions in this environment right? How do you make capital investments in your company? Look, we're we're we're we keep talking about trying to onshore. How do you how do you make these decisions to build uh plants here in the US when you know you thought you had all this turmoil earlier this year, you thought you had a resolution, you feel like things are going the right way and all of a sudden it's upended again. That would be I think um that would definitely be a source of volatility for the markets. Uh so I don't think necessarily that happens right now. I'm hopeful that um you know there's a kind of a swifter resolution and and we can just kind of move forward with a program that's on tap right now. >> And it's not even clear Terry think about the practical implications. We've now collected billions and bill hundreds of billions in revenue. How do you return this money back? How does like people have paid the price now for some of these products? Like I I it's not even clear to me how it would be reversed. Um so again I I agree with Kevin. And uncertainty is never good for the markets. It will be noise again for a short period of time. Should you do something with your money as a consequence? Of course not. Because whether they're there or not, we've kind of digested that. That's part of the uncertainty. I'm more concerned, frankly, with valuations and what that means for the long term given where we are. Um, and will there be opportunities globally because of this? Probably. you know, they're investing in the foreign countries is their valuations are significantly lower than the US right now. But, uh, again, I think just more chaos is just bad for everyone. >> That's right. And Emily, I I'm sure your clients are feeling this whiplash and with some uncertainty. How do you help them prepare for both the risks and the opportunities from policy shifts like this? Well, I you know, like Joe just said, a lot of this is just noise and in the short term, it typically isn't going to have a really meaningful impact. So, I think as long as clients are appropriately allocated. So, if they have a liquidity need, if they're taking a monthly income, if they know they need um cash or something, we want to make sure that that's set aside. But otherwise, we're not going to take our eye off the longer term goals that they have, which are usually going to include, you know, college or retirement or or something where there is the ability to have that time in the market, which will help smooth out the bumps. I mean, if anything, it can also provide investment opportunity for people with some cash on the sideline who maybe want to dollar cost average their way in. Um, but you know, again, a lot a lot of the the shorter term headlines and and policy shifts are are just that they're they're short-term in nature and you know, they're not a reason for us to make significant adjustments from a portfolio management point of view. >> You know, Joe, I've been thinking about this and you you and I run a lot of playbooks in our business, but this is one playbook I would not want to write is the refund policy for all these tariffs if it ever happened. I mean, I think we'd be working day and night, but um >> I think the reality is some version of the tariffs are going to go in place. We've the president's going to be in his seat for the next three and a half years, and he clearly has seen that it he feels good with the results. And so, as Kevin said, if the Supreme Court go uh blocks the way they have implemented thus far, they've given I'm sure they'll give him time to to address it in a different way. and and they will find another way to implement their own version of tariffs inciting whatever rules they need to to get there because they've in effect been put in place. So I think I would not put my money on this being reverted back and act as if they never occurred. I suspect that some version of these are here in place. I'm much more concerned about what the implications are for longer term inflation because the reality is it is it does make manufacturing and shipping and global trade just more expensive even if we onshore everything back to the US. It does increase costs and that means that we'll have a steady state of of inflation that will be a tick higher or than higher than it's been in the past and that has implications for our clients for people who are investing and especially for those that are retiring because again CPI typically understates the actual inflation that people feel by quite a bit. So, you know, people look at their their CPI and it's right around two and a half percent. And I don't think anyone who's on this watching this is feeling like things are up only two and a half percent. Certainly, if you go buy a burger on Fourth of July, the meat prices are up a ton. And what you'll see in almost every area, especially travel, if anyone's looking at vacation travel, everything is really, really expensive and not getting any cheaper. And that's probably a steady state for quite some time to go. U and that has implications. I think we're seeing that in the long long-term treasury has implications for your financial plan for when you retire. And obviously uh in the long term the stock market is basically reflecting the fact that things are going to get more expensive and when that happens actually earnings go up as you can imagine. So stock actually interesting enough Terry when you look at history the stock market unless you have runaway inflation the stock market is a great place to be when you do have inflation because the company's earnings can grow and adjust with pricing increases again not not to the sky not forever and not with big surges in inflation but um you'll find that inflation is not necessarily bad for stocks if it's managed and not, you know, no shocks to the system. >> Yeah. And when you think about profitability for firms, prices are going up and they're cutting a lot of their labor costs due to artificial intelligence, which we're seeing here in the Bay Area all over the place. So they're it is driving quite a bit of profitability for firms in the short term, I would agree. >> And again, not great for the consumer. Like if you're a worker bee and you're going to work every day and you're potentially losing your job and your pay is not going where it used to and you don't get pay increases because uh they can replace or use a lot of AI to to enhance your work. It certainly makes us workers more productive, but I don't know that it necessarily translates to increased income, especially when you see some of the job numbers that I know we're going to talk about in a second. >> Yeah, we're gonna get to that. But let's get to our second story, which is about Steven Mirren, the president's Trump pick to replace Adriana Cougler on the Fed board. And I understand this goes by Cougs, so we're going to call it Cougs from now on. Um Marine had his or Marin had his expedited nomination hearing today before the Senate Banking Committee in his prepared marks. Marin pledged to uphold the Fed's independence and dual mandate, but the timing is somewhat fraught, coming just a week after Trump's controversial attempt to fire Governor Lisa Cook. With that context as the backdrop, throughout the hearing, the committee then pressed Miren hard enough with questions about Fed independence and political interference. with the next federal open mark committee meeting just two weeks away. His confirmation could directly influence the debate over rate cuts. So Kevin, if Steven Marin is confirmed in time for the September FOMC meeting, how could this voice shift the balance of the rate cut debate? >> I don't honestly I I don't think it matters much at all. Um, I think it's going to be rate cuts on on uh September 17th, no matter what. Uh, I I think I guess if anything, depending on what you know, tomorrow's employment number is next week's inflation number is that there could be a situation where they're debating between 25 basis points and 50 basis points. And potentially, you know, if if Marin were were in there, then then he could, you know, could sway it more towards towards the 50. Um, that that could be the case. But the bottom line is I really think there's going to be cuts. I I'd be shocked. I mean, there's been a lot of talk about how, you know, people should be worried about the White House politicizing the Fed. I would say that if they don't cut rates, the Fed should be worried about polit politicizing itself against the White House. And so, uh, I, you know, you got inflation in the, you know, 2 to 3% range. You got, depending if you're looking at at headline or core, you you well below the neutral neutral rate. You got parts of the economy looking a little bit weaker, like the employment number we could talk about a little bit. Um, I I just think you it would be it would be shocking to me if the if there weren't a rate cut. >> I mean, I agree, Kevin. I think it would almost be a hostile act if they did zero. Uh I think everyone's pricing in 25 50 would probably be more than I would bet on. Uh but I think you can expect and again it doesn't make much of a difference. It's more of a signal to the market that we've started a an continuing and easing phase that started a year ago and going back on to like stabilizing the economy. Again, that 25 basis points by itself doesn't make much of a difference. What it does do is send a message that hey the economy does need a little bit of help here and the Fed is listening. I think if they didn't do it I can't imagine what the reaction will be from the White House but uh more importantly I just don't think that's where their heads are at. I think that they're the internal debate is there's a couple of the me fed governors who are zero but most of them are going to say 25 makes sense. I I don't know they go to 50. Uh, I do wonder if there wasn't so much pressure, would they go to 50? I don't know, but I think 25 feels like a pretty safe bet. >> Yeah, understanding that more than likely will happen. Emily, you know, how do you help your clients prepare when there's this added uncertainty about the Fed's decision-making process? >> I don't know that clients are really concerned about, you know, the the complexion of of the Fed and and who's in and who's out. I think they obviously want to have that um that comfort level that the Fed does remain an independent entity, but I don't know that any of them are are sitting around wondering, you know, what's going to happen with with the nomination hearing. they're more concerned about what I was saying earlier where you know where are short-term rates, what are CDs paying, what am I getting in my money market and um you know then then down the road how will that translate longer term to things like um you know bond deals and and um you know the prevailing rate on things like mortgages and student loans. So I don't think they're they're too too worried about the inner workings of the Fed as an entity though. Yeah, we might just start to see, you know, home buying go up, potentially refinancing potentially for current real estate. So there there are some positives that might come from it. >> Again, unfortunately, the 10 years is not reflecting that. The 30 years certainly at highs and that's really what sets the rates for that credit cards maybe go down a fraction. What definitely is true is people won't get as much yield on their on their cash accounts and and that people will feel for sure. um and might lead them to invest in other things and that hopefully drives longer rates a little down because they go out to 10 years to get the yield that they were getting right now for basically no no additional risk. >> Yeah, that's a great clarification. Thanks, Joe. Let's get to our last story. Fresh labor market data is raising questions about whether conditions are finally softening. There's a report called the Joltz report which stands for job openings and labor turnover supply. This report for July released yesterday showed that 7.18 million job openings. This is the lowest reading in 10 months and below the expectations of 7.4 million. For the first time since April of 2021, the number of openings fell below the number of unemployed workers, which now stands at about 7.2 million unemployed workers. Meanwhile, the ADP's private sector employment data for August released today revealed that just 54,000 jobs were added, far below the goal of 75,000 that was expected, down sharply from July. With Friday's official jobs report coming out, even more low figures could tilt the odds further towards rate cuts at the Fed's next meeting. Emily, how does a cooling labor market impact financial planning? Should they be thinking about job security, savings, debt repayment? What are you telling your clients? >> I think with a cooling labor market, you might see people get a little bit more nervous. I mean, certainly there's still a, you know, most people are are still gainfully employed and and have that consistent employment. And so for those people, we're always preaching, you know, stay the course, keep up with your savings habits. Um, but if you know you you are concerned about losing your job or or being downsized, you know, this is where it's really important to have already had a lot of those good habits so that we want to be able to rely on an emergency fund if we need it. Um, but you you might see, you know, consumers a little bit less likely to go out and and spend or be a little bit more cautious with their money if if they're nervous about, you know, where they might be for employment um, you know, a couple quarters down the road. And Terry, just the the kinds of jobs that are not being offered today, I can tell you just as having three daughters, two of whom have just graduated college, it's really tough labor market if you're a new worker. Um, because a lot of the entry level work that a lot of folks were learning early on are being replaced by AI. Everything from writing stock reports and analysis reports to legal briefings. And so what that means is that these law firms, financial firms can bring in fewer people to do the same amount of work. And that's happening up the food chain as well because the the overall productivity of people. You have online notetakers that take better notes than most people individually do. So I think this might be a structural change that's occurring. And unlike prior environments where it was hey uh we were moving all shipping and all manufacturing outside the US and those jobs were being lost. These are jobs that are not being shipped anywhere else. They're just jobs that are being replaced by technology in ways that we really haven't seen before. And yes, it will enhance the productivity of the existing workers. But it also has serious implications for people entering the labor market. People who certainly lose their jobs today. the likelihood of replacing. And so I think this has it's a longer conversation to have, but what does it mean for our labor force when AI is taking these are not again 50 or $80,000 jobs. These are jobs that could be potentially 200 and $300,000 a year coding jobs which are no longer available. And people are not yet losing their positions, but there aren't as many opportunities to get into new businesses because people are asking their employees to do more with what they have. And again, that jobs are the driver of GDP. If everything else being equal, the biggest driver of GDP is how many people are working and are they getting pay increases? And again, that's something to think about in the long term. I think more importantly for an individual, if there is a possibility that your job's at risk, then you need to make sure that you have a safety net in place that's large enough to take care of things. Uh if um if you're unfortunately way laid for whatever reason and your work. >> Yeah, Joe, I'm glad you said that because, you know, we I'm sure we have viewers out there right now that either can't find work or afraid they're going to lose their current job. So, I just want to recommend you go out to wealthyondon.com, do a portfolio review, get in touch with one of our financial advisors and get a better understanding of what type of emergency funds you should have, how should you be investing based on this time. But, um, Joe, you brought up another really good point about what's happening among consumers today. So I want to go into our big in-depth topic which is increasing pessimism about the US economy about among consumers and this data is about a cooling labor market. It's not surprising there's a revelation at this time. However, there are other data points on this gloomy outlook. So just bear with me. This is a little bit of a gloomy topic, but we're going to work through it together. There was a Wall Street Journal poll revealed just 25% of Americans believe they have a real chance of improving their standard of living, the lowest level since the tracking began back in 1987. And most of our viewers may not even been born in 1987, but nearly 70% say the idea that hard work leads to success is perceived as no longer true, and if it ever was. At the same time, the middle class households earning roughly 50,000 to 100,000 now report economic anxiety levels similar to lower income groups. Middle inome consumers are cutting back on discretionary spending, trading down to generics, postponing services and rising living costs. A new Bank of America workplace benefit survey confirms this reality. Only 47% of US workers feel financially well, down from 52% while a growing share are seeking help with emergency savings and debt amid broader worries about the economic outlook. So that's a lot of data and a lot of concern. But Emily, I want to throw the first question out to you. And this is Abby from California. And she asks, "How should younger people think about investing when it seems so much harder for younger generations to get ahead and accumulate assets?" >> That's such a great question, Abby. And honestly, the answer it's it's much easier said than done, but I would say we'd really want to be viewing, you know, saving and investing as an obligation and and not as a choice. So, for example, you know, as you're starting in the workforce, um if your company offers a employer sponsored plan like a like a 401k or 403b, invest in it. You know, start putting money in each month at the absolute minimum enough to take advantage of of your company match. So, if your company says, "Hey, we'll we'll match you up to, you know, 3% contribution," at least put 3% in there. And then you've got your 3% and the company's 3% so that 6% of your income is being put away. Um, you know, also Joe and I have both talked on on this show so far just about the importance of an emergency fund or a safety net. And so much like you can just have uh monthly 401k contributions come right out of your paycheck. Most employers will let you make automatic monthly contributions from your pay right to your savings account. So, you know, you want to start off saving some each month so that if you do run into hard times later, you you've got money set aside. It's it's wise to, you know, separate your savings from your checking so there's, you know, less inclination to dig in there. And if you've got enough in an emergency fund, think about opening a brokerage account so you can, you know, set aside some money and and get it invested and and hopefully growing more for the longer term because it might not feel this way, but saving a lesser amount for a much longer period of time. So, starting when you're young, um, that's much more potent than, you know, waiting till you you're in your 50s and and starting to put more significant chunks of money away. So, it's it's hard, but you know, it's definitely something I would recommend right out of the gates is is get going in the 401k, get going with some after tax savings. >> Yeah. And I'd say one other thing, too. I I feel I feel like a lot of the, you know, the younger people that I talk to, Abby, you sound like you might be, you know, maybe, you know, a recent entry to the workforce. Feel like there's a lot of pessimism out there. I feel like uh that a lot of that of your generation, you know, really questions the future of the country and questions the future of a lot of things and there's probably good reasons for that. Um but but I would say that for your long-term money and you're young, you you're talking about not accessing this money for decades. I mean, you this is not a specific recommendation, but I would say that you're going to want to invest that for growth. you're going to want to have that invested 100% in in in growth assets in stocks and uh and you want a diversified portfolio there and make sure you have uh you know you kind of spread things around in different markets and different size companies and different types of companies. you really want to make sure you're invested in growth because in in this world I more and more uh it's becoming a u it's becoming a world of of those that own assets and those that don't. And and people that own assets including stocks and real estate and things that appreciate in value, they're they're doing just that. They're appreciating in value and and they're it's probably going to continue. It's going to continue over especially over the long run. It's going to continue substantially. Um people that don't have assets are being left behind. And so I I would just really try to encourage you know the younger generation is hard to do it but to save to invest you know to if you can find a reasonable opportunity to try to you know to to take down an asset like a house or something you can improve and make it better. I mean this is how you try to get ahead in life um is is is you got to you got to make your money work for you. And in order to start that you have to accumulate some money to be >> Terry I I would just add for Abby here. I read a book years and years ago, Secrets of the Super Wealthy or something like that, and it said there's only one way to get rich in America, and that's to own an appreciating asset. Whether it's a house, whether it's a stock, whether it's your company, because of the tax system, because you will spend whatever you make, except if you're very disciplined in saving unless you own assets that appreciate in value, which compound out without paying taxes. It's very hard to get ahead because we all have experienced this. Minute you get a pay increase, you'll find a way to spend the money, taking nicer vacations, taking your kids to better schools. We all have a way of increasing our lifestyle with our income. So either force savings that you can then invest in growing assets or own assets directly that allow you to appreciate in value in a tax deferred basis. I'll just add Terry, I was reading a study actually yesterday. This is the first time since it's been tracked. Uh this was reported by Newsweek, which was a magazine we all used to read years ago, but now it's mostly online. still a reasonably credible source at times, but they found through a Gallup study, this is the first time that generations in their early 20s, the Gen Z, are actually significantly unhappier than people in their middle ages, in their 50s. What typically has happened historically is you leave school, you're really optimistic and feeling good about things. Even 10 years ago, I was just reading 52% of people 10 years ago in their 20s were very optimistic about the future. That number for people today in their 20s is 15%. So what is happening? They feel less confident. It feels overwhelming. My daughters can't imagine how they can get to being living the life I have. And that makes it feel insurmountable. Social media tells you that's the case. And so again, it's reinforcing this idea of hopelessness. And all I can tell you is the same thing I feel as a middle-aged human being. You have to start small, but own assets. Make sure you keep investing in an asset that is appreciating. And don't worry about the day-to-day fluctuations because America is a growing economy. That will be true as our entire lifetimes. And it's important that you do the thing that maybe other people aren't doing at your age, which is making long-term decisions for your well-being. >> That's excellent advice, Joe. And I want to move on to our next question. Kevin Anna Partners 9603 asks, "If yields go down to less than 1%, what are retirees to do about income if they rely on yields?" In other words, how can retirees safeguard their finances in this type of environment? Yeah. So, I I say this every other one of these shows, but uh I always tell my kids there's no such thing as is 100% or 0%, but I could say with a high likelihood that that that's not going to happen. I I I can't really see a sit a situation where you're going to see yields at 1%. Um, we're we're probably I I can't imagine us going back to the zero interest rate world uh that we were in uh after the global financial crisis. It's just that that's not going to happen. Inflation exists now. Um it's not problematic right now, but it's there. We can't go down there or all of a sudden that spectre will will shoot up and the Fed's, you know, it would just be bad. The Fed the Fed would have to raise rates. We'd have a recession. So, I I I can't imagine us being in that 1% world. Look, the Fed funds rate right now, let's not forget, we're still at four and a quarter to five, I'm sorry, four and a quarter to four and a half percent. So, I think it's like 4.33% uh Fed funds right now. So, even when we get some rate cuts, and we probably belong somewhere next year, like in the, you know, mid to low 3s, I think, for Fed funds. So, that's probably what you'd be getting that maybe a little bit less in your money markets. That's probably about right. You know, I I I think that, you know, we were talking a lot about bond yields earlier in this discussion and, you know, you're probably gonna see Emily made the point that, you know, bond yields are not necessarily set by the Fed at all. They're set by the open market and and you know, we're at what like a 430 something like that right now for the 10 year 10 year you said 4 417. So, you know, um we're at all-time highs in Japan and you know, these these elevated bond yields in Europe like we were just talking about. That's probably normal, right? I mean, our our our model for um for what what bond yields are or should be would be what's what's your GDP expectation and what's your inflation expectation? And you know, if you think the economy is going to grow around 2%, you think inflation is going to be somewhere, you know, 2 3%, you should be somewhere at least at four or 5% for treasuries. And it's some premium to that uh for corporate funds and probably a larger premium to that for for credit. So if you're retired, the only stuff you should really have in money markets if that are in short-term instruments are things that should that you really need liquidity for like things that you know that you need to spend money on in the next year or so. Um, other than that, even very conservative investors, you know, they you should be looking for opportunities to lock in higher yields because you can lock in in the fives with reasonable, you know, reasonable credits right now. Um, that's not so bad and and then maybe take a little bit of risk in the stock market. So, um, I I just I don't think that's going to happen. And I would highlight that Kevin, you know, again, no one should retire and not have some portion of their portfolio in equities because again, it's important to have a portion of your portfolio growing, especially with inflation that's out there. So, and there's, as Kevin said, there's yields outside of treasuries. You know, you can get yields with with companies, you can get yields with foreign countries. There are other places to get yield. uh you know and certainly there's even if you have the money uh there's structured debt vehicles and private debt vehicles there's many different ways to get yield that's not a concern I would have I share Kevin I don't think we're going down to below 1% anytime soon you should expect again if yields drop that's good for your long-term bonds but you should then if you believe that's the case you should be lengthening the maturity of your debt today because you again the 30-year bond is yielding over four and a half% today. >> That's right. And Emily, we have our last question from Ken in North Carolina, and he writes, "I want to keep investing for the long term, but how do I balance that with the day-to-day pressures of expenses without falling behind?" >> Well, it's not easy, Ken. Um, that's, you know, much like I said to Abby with her question, um, I really think that saving and investing has to be looked at as an obligation and and not a choice. So much like you might lay out your monthly bills and see what does my budget look like, I would include investing. So, you know, building up your after tax investments, add into your 401k as a necessary monthly expense so that it's it doesn't get overlooked and and you're not tempted to skip it when um you know thing things might get a little bit tight. Um, one trick I've seen a lot of people use, Joe alluded to this earlier, is that as you do get raises, um, increase your savings and your investing accordingly. So, you you get a 3% raise, you know, throw some more money into your 401k, throw some more money into your brokerage account. Don't let your lifestyle absorb, you know, that that extra income that you're earning because that's a really powerful way to put some extra money away. You know, the same might go for for a bonus. Um, so again, staying consistent over time is is really, I think, where you come out ahead. There is no there's there's no magic. Um, there's no magic to it. >> Good. Let's get to our big three stories now to watch for next week. And so, first of all, we'll have new PPI and CPI prints coming out. Kevin, what market moves would you expect if inflation comes in hotter or even cooler than expected? >> Yeah, inflation's the big one next week. There's there's no question about that. Uh for CPI, uh we're expecting 0.2 at the headline,.3 at the core. I think that's 3.1 or something like that. That would be the the annual number for for the core. So, it's expected to tick up reflecting some of the inflation. Uh you know, I'm sorry, some of the tariff stuff that kind of filtering into the economy. Um so, that would be very normal and expected. Um, look, I like I said, I think that that that the Fed's going to go no matter what. Uh, I don't I mean, it would have to be a big surprise to the upside to prevent a rate cut um uh in September. So, I I I assign a very low probability to that. Um, but, you know, nonetheless, the market's going to move on these things because the market, you know, if there is certainly if there is uh lower inflation, um, you'll see the market love it. Uh I would think I mean we are at high levels. It's it's you know but so the valuations are are pretty get you know pretty stretched I would say but um wait but you're going to you're going to hear people start talking about 50 basis points instead of 25 and and so the market would like that and and and in in similar vein if if it comes in you know hotter than expected meaning higher higher inflation than than what the analysts are expecting then the market's not going to like that because it could put in jeopardy the rate cut or it could put in jeopardy future rate cuts. even if we do get the first token 25 basis point cut. >> We'll also have consumer credit out on Monday. Emily, how closely do you watch consumer credit trends um when you're guiding your clients and what do you look for in these reports? >> Sure. So, I think that um these reports are helpful just, you know, looking a little bit at, you know, the the use of consumer debt and and the resiliency of the economy and things like that. Um, but I usually you I usually leave a lot of the economic reports to to Kevin's team. Um, you know, to to worry about because a a great, you know, report or or a bad one is not going to change the type of advice I'm giving clients on a day-to-day basis. >> I'll just Terry, I'll just add again, some of these reports are much more important for long-term. This is one of those. You know, they don't really move very much on a weekly, monthly, even quarterly basis. It's just the general trends. Consumers are very well behaved right now. Like we have most people with homes have long-term debt locked in. No one's overlevered after the 2008 2009. The crisis here that if we were to have a surprise, it's really not I don't even think on the inflation side. It's really on the econ on the economy and and I think that's where people's attention is right now. The jobs report right now is probably something that drives the market more than again unless you get a shocking number. I think everyone's kind of settled into this 2.8 to 3.2% inflation. And again, if we're within that band, I don't think there'll be a lot of excitement. >> Yeah, we've talked a little bit more about gloomy outlook for consumers and consumer sentiment will be out next Friday. So Kevin, if it shows continued weakness, how should we think about the markets and investors read into that? >> Yeah, I look at some of the numbers like consumer sentiment and and and think of them more as like a like a supporting evidence type figure, not something that's going to be really market moving, but that I think that that's interesting to to look at on the sidelines. I think it's really we talked a little bit about this this whole meeting. I think it's very interesting just how many people are are are feeling gloomy uh despite you know the statistics being reasonably stable for the economy and you know I don't know why that is but it's been like that for a long time actually and and I I think you know part of it is probably just live in a very polarized world right h half the country hates the president whoever the president is they half the country hated Biden half the country hates Trump there's little middle ground and and I feel like this polarization kind of carries on into everything so that people are just looking at the world through a rosecolored lens or, you know, or some other colored lens. It's not so nice. And so, um, I it's just, you know, it's I I I look at some of the sentiment numbers as far as what investors are doing because you can take the opposite side of that and make money a lot of times. Uh, the consumer's side, I, you know, I think it's just more, you know, anecdotal evidence as far as what people are feeling like. >> Yeah. Yeah, I just want to emphasize for our readers is that that's why we're bringing you the facts. We're bringing you the experts who work with clients each and every day so that you can use these facts and their experts to make better decisions and you don't have to be swayed by whatever winds of change are happening out there. So, I just want to remind you again if you have questions, concerns, please send them in to to our show. We want to answer your questions. We want to help you. We'd also invite you to go to wealthon.com for a free portfolio review and you will get experts just like Emily and Kevin there to serve you and help you make better decisions. And so I just want to thank my partner Joe. You did a fabulous job. I love the way you share your expertise and all the notes you've been reading every week. Thank you so much. And a special thank you as well to Kevin and Emily for joining us today. Really great show. Very helpful information. >> Thanks so much for having us. Thanks, guys. And hope everything's beautiful in Boston. >> Have a great week. >> You, too. >> You, too. Thank you.