This week’s Market Alert breaks down what the Fed’s latest rate cut means for your investments, why AI could actually increase inflation, and how today’s market excitement echoes the dot-com era with key lessons for long-term investors.
Ken Moraif and Chief Investment Officer Jordan Roach share insights and perspective on what’s shaping today’s markets:
• The Fed cuts rates again: As expected, the Federal Reserve lowered interest rates but signaled uncertainty about future moves, citing “driving in a fog.”
• Market reaction remains positive: History shows that when the Fed cuts rates while markets are near all-time highs, stocks tend to rise double digits over the following year.
• AI’s surprising impact on inflation: While many expected AI to drive costs down, massive demand for energy and raw materials may actually push inflation higher.
• Rising electricity demand: The surge in AI data centers is straining energy supplies, potentially lifting power costs for both businesses and consumers.
• Commodity pressure building: Core materials like copper, nickel, and aluminum are in heavy demand for AI infrastructure. This is yet another inflationary force.
• Early inflationary cycles often boost markets: Historically, stock prices climb in the initial phase of inflation before higher costs eventually weigh on growth.
• Echoes of the dot-com era: Corporate spending on AI infrastructure now mirrors late-1990s investment trends, though today’s companies are far more profitable.
• Not all hype is harmful: Unlike the unprofitable startups of 2000, today’s tech giants have real earnings, but stretched valuations still warrant caution.
• A possible setup for volatility: If AI spending slows or fails to deliver results fast enough, markets could face sharp corrections similar to Y2K’s aftermath.
No matter the cause — inflation, AI, or policy shifts our strategy is designed to react quickly if markets turn downward. We’re fully invested while the trend remains positive, yet always ready to act decisively should the environment change.
You can rest easy knowing our focus remains protecting your lifestyle and your second childhood without parental supervision.

Transcript:
Ken Moraif
Hello everyone, and welcome to our weekly ARPOA market alert podcast. I hope this video finds you healthy, wealthy and wise, and we are going to have more fun than a human being should be allowed to have when talking about all of this boring financial stuff. But before we get started, I have to tell you, I’m in the Houston office, and I visited with some some clients and people who came in, and what I always ask them is, are you a client, or are you a SCWPer? And three of them knew what I was saying. One of them actually said, well, she’s a SCWPer and I’m still a client. And I said, Good, you got you know what I’m talking about. The fourth one was like, What on earth is a SCWPer? I’m like, you don’t know what a SCWPer is. SCWPer is the acronym for second childhood without parental supervision. When you retire, you become a skipper. We want you to go play and have fun and enjoy, and that’s what we call you. And he goes, Oh, well, in that case, I’m a SCWPer. So we have a lot to talk about on this, our weekly excursion into the land of personal finance. So let me go over with you what we’re going to talk about. First of all, the Fed lowered interest rates as as we expected. But then Jeromy Powell, the Federal Reserve Chairman, said that, well, you know, we may not do it in December, because it’s kind of like with the government shutdown. It’s kind of like driving in a fog, driving in a fog. Are you kidding me? They’ve been driving in a fog for five years. What are they talking about? Why is this different? So we’ll, we’ll, we’ll have some fun with that. Also, this week, we’re going to talk about everyone thinks that AI, or it seems like everybody thinks that AI is going to bring inflation down. It’s going to be disinflationary. But interestingly, it seems like there’s the potential that it could be doing the exact opposite. So we’re going to talk about that and how that’s going to affect our investments. And then finally, today, our third topic is going to be, you know, is the frenzy with AI? How does it compare to the irrational exuberance that we saw during the DotCom era in Y2K and the similarities are just piling up, so we’ll talk about that as well. So we have a lot to talk about. So let’s get started. Jordan, why don’t you join the fray? How’s it going?

Jordan Roach
Jordan, going well here in the north side of Texas, in the Dallas area, yeah.

Ken Moraif
So Jordan is our chief investment officer, and so welcome. So let’s talk about the Fed. So the Fed said that they’re going to that. Well, they did lower interest rates. They said that, but then they said that the December is kind of they don’t know, because with the government sat down that they’re driving in a fog. What do you think about that?

Jordan Roach
It’s pretty, pretty rich coming from them. I mean, I seem just times where, you know, even if it was a clear, sunny day, we don’t know if they’d find the road. So this is foggy. I don’t know if it’s going to help them one way or another, but it’s

Ken Moraif
like they were late to the party, right? Inflation was transitory. 2021 the whole transitory thing, it was gonna pass a short deal. And now they’re trying to play catch up. And they’re thinking, Well, you know, maybe we shouldn’t we should. It seems like they’re very confused. But anyway, you mentioned a very interesting statistic to me earlier today about historically, what happens when the Fed lowers interest rates? Yeah.

Jordan Roach
I mean, you know what we’re seeing right now is, this is kind of the environment we want to be in, which is the Fed is lowering rates when the market’s basically at all time highs, right? Where a lot of times they’re lowering rates when we’re already deep into problems, right? The market’s already been sold off. So when you go back, there’s been about five times the Fed has cut rates close to an all time high, and five out of five times, you look one year later, the market’s up double digits every time, right? So that’s historically that, I mean this time, but it does bode well for some precedent. Hopefully the market kind of follows those past cycles. Wow.

Ken Moraif
Okay, so that’s good news. So we like it. That’s good. So far, so good. So now let’s talk about the this thing that you know AI is supposed to bring, you know, efficiency and productivity and all that should be bring disinflation, or at least lower inflation, but yet, you’ve diagnosed something that seems to be the opposite of that. Yeah,

Jordan Roach
and this is interesting. This is something to think through of you know, again, we’ve been focused that maybe tariffs are the thing that cause inflation to rise, but maybe it’s this AI spending craze, because it does a couple things. One is the demands for data centers, and then the electricity that those data centers will command, right? They’re going to need to utilize. You have extreme demand coming online and limited production, limited supply. And what does that do? That usually leads prices to move quite a bit higher, and then those electricity prices have to be absorbed by businesses. Have to be absorbed by potentially retail and it brings, you know, a big part of all our lives, right? It’s utilities. We all gotta pay our utilities, brings them higher. So that’s one side.

Ken Moraif
So we’re competing as consumers, with these gigantic companies who have hundreds of billions of dollars that need all this electricity to to keep to make this AI thing work, and you and I, with our electric bill, are going to be subsidizing that, or at least competing with these people, and we can’t. So electricity bills could start going up significantly. That’s right, and that’s very inflationary. It affects practically

Jordan Roach
everybody, everybody, all businesses, all people. So that’s one thing that could be inflationary. The other side is, you know, what are the metals? What are the base supplies that all this, these technology companies, what are they going to need? And they need base metals, right? They need nickel and copper and all these things. And those type of metals are in everything, basically we use to run our everyday lives, rather in TVs and computers and phones, they’re in certainly semiconductors. And now you have all of these, you know, competitors chasing a limited supply of metals, which again, causes that front end cost to skyrocket eventually, and maybe come across the rest supply chain. And so that could be something that’s

Ken Moraif
inflationary. So who knew that we could, we could start seeing inflation pick back up because of the very thing that’s supposed to make us productive and make us, you know, everything become cheaper because it’s faster and easier with AI and robots. Now, the interesting thing about inflation is that in the early stages of an inflationary cycle, if we do get this inflation because of AI, the early stages of the inflationary cycle are actually very good for the stock market. Interestingly,

Jordan Roach
yeah, that’s a great point. So you know, the first, first part of it is, it’s not necessarily bad for you and I right for every everyday people, companies can use that to pull up prices and usually expand margins before it really hits and we see the lasting effect. So you’re right that this could be part of the reason that the markets continue to rally short term, even if inflation does start creeping up.

Ken Moraif
Yeah. I mean, I look back at the hyperinflation period that we had back in the early 80s, which I guess I’m dating myself. But during that time, in the early part of that, the stock market went up phenomenally during the early stages, because inflation inflates everything. It inflation inflates prices, but it also inflates the stock market. So everything goes up at the same time, and the stock market did very, very well, until eventually those higher prices become so much that consumers and others can’t afford it anymore, and then we see the bad part of inflation. And back in the 80s, we had a very terrible bear market that came from that. So that leads us to the conversation about, how does the AI frenzy that we’re seeing now, you know, with the spending that’s going on, which is massive as a percentage of the stock market, etc, compare to the.com and the irrational exuberance that we saw when people were trying to build out the internet.

Jordan Roach
Yeah, we’re right now, obviously studying, right? Because every day we hear more and more about this deal was struck, this firm was acquired. These dollars are going to be put to drive the, you know, AI capabilities across all these huge firms, right? So you’ve all these expenditures from across all these companies in s, p5, 100, and if you compare their percentage that’s being spent dedicated to for capital expenditures broadly relative to the revenue that’s being generated by these firms. It’s very similar to what we saw leading up to the, you know, y2, k.com, bust, right? So meaning, again, people are spending kind of in line with what we saw in the late 90s, right now

Ken Moraif
as a percentage of their revenue, that is percentage of their revenue.

Jordan Roach
But there’s something that’s important here, is that relative to their operating income or their profits, actually, it’s pretty low. It’s not near what the level we saw, y, 2k, and that’s part of the reasons probably the market right now is is is a high valuation, because companies are profitable, the fundamentals are good. We have not gotten to that frothy level that we saw just ignoring profitability that we saw in the late 90s. Yeah.

Ken Moraif
So back in the.com days, like pets.com for example, which is the poster child for the whole thing, they had no they had no income. They had no profits whatsoever. These companies have a viable business already, and now they’re they’re piling on the A on top of it. Google already has a business. You know, all these companies, they already have businesses that are very profitable. So as a percentage of their profits, it’s not as big of a deal yet, but you know, that doesn’t change the fact that their stock prices could be so high that if something bad happened that we couldn’t see their stock prices drop by half.

Jordan Roach
That’s the interesting side of this, right? So it’s setting up for problems potentially, right? If they cannot continue to. Increase their expenditures the way they have, and it starts eating into their profitability. That’s a problem, right? Because, let’s say, you know, you have all these risks that could come in where spending can come down, and now people aren’t getting as excited about all this new growth that they’re discounting in the future of what AI means the other side would be, at some point the market says, Okay, you’re spending all these dollars. What’s it returning? Or is that, is it the length to get back that spending? Is it being lengthened, right where you’re not going to get your money back over a certain, you know, short time frame? And that’s where you could see things sell off again to come back down to reality.

Ken Moraif
And that is exactly what happened in y, 2k because I remember that, you know, there was all this excitement about building this infrastructure, building the internet, but at the time, it was like, okay, you know, where’s the beef? Where No, nobody was making money on this thing. And you know, right now, many studies that I’ve looked at, you know, Fortune Magazine did a, did a study. 95% of the projects that are AI related that companies are implementing are resulting in no in nothing, right? So we’re still learning how to do that. So there’s a long gap between the build out and the use of this infrastructure. We could see the very same thing that happened between the build out of the internet and the actual use of the Internet, and that gap could cause some severe dislocation. So, you know, that’s the very reason why I am so glad we have our invest and protect strategy, you know, ready to be enacted, because it’s agnostic as to why the market is going down. It just knows that the market is going down, and if it reaches a point where the statistics and our methodology, our metrics, tell us that this is not a good time to be staying in, then we’re going to get out and protect our clients and our skippers. And, you know, in 2008 in November of 2007 actually, our strategy did say to sell. And so, you know, we got out, we stayed out for, what, a year and a half so clients that followed our advice, and, you know, we avoided those losses that happened then. And we certainly hope that our clients will follow our advice if it happens again this time.

Jordan Roach
Yeah, hopefully there is no this time. You’re right that we have some continue to run away here on fundamentals and earnings. But that’s right. Things change pretty rapidly, and we’ll be doing this case.

Ken Moraif
All right, so everything looks great until it doesn’t, I guess we could just say that,

Jordan Roach
right? It’s gonna be a short video. That’s it. That’s right.

Ken Moraif
All right. Well, ladies and gentlemen, as always, thank you for watching and as always, we hope this video found you healthy, wealthy and wise. Please share this with your friends and family and anybody that you think might be interested. Make sure you like and subscribe as well, and we’ll talk soon.

Please note: transcript has been modified after the time of recording. 

Economic indicators and stock market performance cannot be predicted. Opinions expressed regarding the economy and the stock market belong solely to Ken Moraif on behalf of Retirement Planners of America and may not accurately portray actual future performance of the economy or stock market outcomes. Opinions expressed in this video is intended to be for informational purposes only and is not intended to be used as investment advice for individuals who are not clients of Retirement Planners of America. All content provided is the opinion of Ken Moraif, CEO and Founder of RPOA Advisors, Inc. (d/b/a Retirement Planners of America ) (“Retirement Planners of America”, “RPOA”). ©Copyright 2023