Hello, and welcome to our Market Alert video for today, which is January 12, 2024. Thank you for watching. And I want to dive right into what we have on tap for you this week. But before I do that, I want to share some incredible news with you. I found out that we had in 2023 250,000 downloads of our podcast. Oh, my gosh, all I can say is thank you. Thank you. Thank you. Thank you. Our goal this year 250,000? Bah! Our goal this year is 1 million downloads, and we need your help to get there. So those of you who are not downloading our podcast, I want you to do it. It’s simple, easy as pie, ask your retirement planner, ask your CSA, it’s very, very easy to do. Okay, and you can get it downloaded to your device. You can listen to it every week whenever you want to and never miss a single show. Wow, what more could you ask? So let’s talk about what happened with inflation. We got the numbers this week of what happened in December because it’s always a month off. And inflation went up. Oh, no. Is it terrible? We didn’t expect that? Well, let’s go over why we think this is not something to be overly concerned about. And you don’t have to worry about it. Okay, so let me share my screen with you. And this chart that I’m going to show you here you’ve seen before if you’ve been watching our videos, and so I want to go over it with you to explain how they calculate inflation, and therefore why we think inflation is going to head downward. And it’s going to be good news. Okay, so the first thing I want to do is direct you here to the top left. Okay, so over here on the top left, the date, okay, then we have the CPI, this is the inflation level, this is the monthly change from month to month, what did that inflation change by. This is the annualized. So if you take that change, multiply by 12, you’re analyzing it. And then this is year to year, the comparison of year to one year versus a year or the year before. Now, what they do is they take the inflation rate, for example, here in November of 2022. And they compare it to what happened in December of 2022. And that was a minus 31. Okay, .31% down. Now, if you go a fast forward a year later, and you look at the change from November to December of 23, you can see that it was a minus point two. So what they always do to calculate what the inflation rate was is they compare the month to month change from the reading they have to the reading from the year before. So the year before it was down minus three one, this time it was down as minus point two, minus point two is higher than minus point three. I know that’s reverse English. And it’s confusing you. But basically inflation did not go down by as much as it did in December 23 From November as it did a year before. And therefore inflation went up from 3.1 here to 3.4. And you can see on the chart here, that’s December. So this graph, this little bit of a increase. Now the reason why we don’t think that it is a big thing to be worried about is because let’s do some forecasting. Okay, let’s have some fun with this. And let’s say that inflation goes up by a quarter of a percent .25%, every single month for the year for this year for 2024. Now, where you see that it’s pink right here, these pink numbers mean that they are lower than the year before. So for example, January is .25, but January of 23, it was at 0.8. 0.8 is higher, .25 is lower, therefore inflation went down. And we think therefore we will see inflation go from 3.4 to 2.8. And if it does that, again in February, that’s .56, we’re comparing that to .25. That’s lower inflation goes down again. So the trend you can see on the chart here is it’ll go down, down down. And we think that it’ll get down into the 2% range, which is what the Fed is trying to get to in June, July, August in that timeframe. So right over in this area here. Now, the Fed has said they’re not going to start lowering interest rates until they are confident that we are going to stay in that 2% range. So if we hit the number in April, that’s the first time not confident, how long do they need to be confident? Our view is three to six months. So therefore we think that they won’t start lowering interest rates probably until July, August, September in that area right in here. Okay, downward inflation has held in that 2% range for enough time for them to have confidence. So what does that all mean to us? Well, let’s look at the two parts of our portfolio. Let’s look at bonds first. If in fact, inflation comes down, as we just described, and the Fed decides they’re going to start lowering interest rates in the second half of this year, then what that is, is good for bonds, okay? Bonds generally go down when interest rates are going up, and they go up when interest rates are going down, which is why we’ve had the worst bear market in bonds over the last several years, because the Fed was raising interest rates so dramatically. Our view is that now that that seems to be over, we had the biggest bear market in bonds, we could have the biggest rebound in bonds this year in history. And that’s why we think bonds will outperform stocks this year. So we’re very bullish. And that’s why we finally bought back in in December of last year. Let’s talk about stocks now. Well, if in fact, inflation is coming down, as we think. And in fact, the Fed does lower interest rates, then what does that mean? It means the consumer has more purchasing power, right? They can buy cars, they can buy houses, the economy can start doing well. Businesses can borrow money, less expensively, they can grow more fat more quickly. And so that being the case, stocks should like that. So we think stocks will have a good year also. Now we’ve been asked, well, if you think that bonds are gonna outperform stocks, then why don’t we go all into bonds? Well, because we don’t have a crystal ball. Okay, all kinds of things can happen. And by the way, if inflation heats way up, and it goes up, everything we just said will be wrong. Ah, wait, is that what it feels like to be wrong? Jeez, what a horrible feeling. Ah. But anyway, Donald Rumsfeld is famous back in the Iraq war for saying that when you go to war, there are three things. There’s the known known, the known unknown, and the unknown unknown, okay, and he said, I can deal with the first to the last one, you can’t know what the unknown unknown is. So therefore, you deal with it when it comes your way. That’s why we want to stay diversified. We don’t want to go all into bonds, because we could be wrong. We don’t know for sure. By staying diversified we are okay. Now, if we are really wrong, and we have a terrible bear market, and the stock market crashes, guess what, we have a sell strategy for that. Our Invest and Protect strategy is designed to help us to not lose massive quantities in that scenario. So I think we’ve got this year covered, and this year should be a good year for us. Okay, so thanks for watching this video. I know that was a lot. You can watch it several times. I encourage you to do that. And I think it’ll all make sense. It didn’t make sense to me, but hopefully they will to you. Now for those of you who are SCWPerS, congrats, SCWPer nation. Yes. Going out there SCWPering and your little tails off. I’m glad you’re doing that. For those of you who are not SCWPerS, yet, we want to get you there. We’ll do everything we can to get you to where you can go out and play. Let us worry about all this boring financial stuff for you so that you don’t have to. And please download our podcast. 250,000 Are you kidding me? Wow, we want to get to a million though, forget the 250, that’s yesterday’s news. So help us get there. We’d love it and you can help us celebrate. We’ll celebrate right with you. So thanks for watching this video, share it with friends, family, everybody that you want to. We love that we want to help as many people as we can. So again, thank you and we will 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 MMWKM Advisors LLC (d/b/a Retirement Planners of America). ©Copyright 2023