Hello! Thank you for watching our market alert video for today, which is May 31st, 2024. I know I promised you that this week we would have a surprise video was something kind of cool that happened while I was in Saint-Émilion France. Kind of cool. But given the historic circumstances of President Trump being found guilty, yesterday and the impact that that may have on our investments, and on what we see going forward, I thought we would delay that for next week. So, I’ll be doing it for you next week! I wanted to address this week, what the impact of all of that is.
So, first of all, I want to say hi to all you SCWPer’s. I hope you’re out there, SCWPering your tails off out there, and you’re not worrying about this stuff, right? That’s not your job! That’s our job. You should be enjoying your second childhood without parental supervision. And for those of you who are not SCWPer’s yet, our singular purpose is to get you there, we want you to go out and and have that second childhood. So, want to say hi to all of you first!
Okay, so now, in our view, and we said this many times, profits are what drive stock prices. And so, you could have the Great Depression, okay, or the worst economy, maybe in the history of our country. But you have a company that is doing very well their profits are skyrocketing. Guess what’s going to happen to their stock price? Now, if you look at the opposite side, let’s say we have a fantastic economy, everything is going great. And everybody’s making money, except this one company over here that’s losing money hand over fist, what’s going to happen to their stock price? So, it’s not inflation, it’s not jobs. It’s not the elections. It’s not Trump being found guilty. It’s none of that. It’s profits! And so, what the market looks at is what impact did these events have? What effect will they have on profits?
I go back to the election year of 2004. This was John Kerry and George Bush. And if you remember those years, I do I was there. The market heading into October was down significantly. In fact, it came so close to our sales strategy, we almost got out. And why? Well, because John Kerry was leading in the polls, and he represented a lot of new regulations and a lot of new taxes. And those things would impact profits negatively. And therefore the market didn’t like that. Now is it Democratic or Republican? No, it had nothing to do with that. It was profits! So, then what happened was that George Bush started to lead in the polls heading into November of the elections and he won. And then the market went way up after that. Why? Because he represented a more profitable environment for businesses. So that’s really what drives it, in our view is profits!
So, what happened this morning, we got a very important number, the PCE deflator, which is what the Federal Reserve looks at, primarily to determine where we’ve come with regard to inflation. And the number came in at the lowest rate that it has this year. So basically, inflation is at the coolest level that it’s been this year so far. Well, that’s good news, if you want inflation to go down, which is what the Fed wants. So, there’s been a lot of on the table, off the table, on the table, off the table of the question that is are the Feds going to raise interest rates because inflation hasn’t come down fast enough? Or no, we’re taking that off the table, we’re gonna put it back on the table, we’re gonna take it off.
Well, now it’s been taken off. Okay, so it’s off the table now. And so now the view is the bias is towards lowering interest rates. So why would that be good? Again, think about profits. If interest rates go down, cost of money goes down. Businesses make more money. That’s more profit! That’s why interest rates going down is well received, generally by the stock market. So, we’ll see where all this takes us. It’s going to be an amazingly crazy election year this year for sure. But again, keep your eye on on profits.
So, our view is that profits are going to hold despite all this political stuff, and therefore we don’t see that we’re going to have to get out, but we do have our strategy in case we do have to get out. So rest assured, if this turns into a big bad bear market because of all this turmoil politically, then we will get you out and we will do our best to protect you. That’s our job and we will do it! Okay. So thanks for watching this video. I hope you are well you’re healthy, wealthy and wise, and share it with as many of your friends and family and business associates as you possibly can. Okay, we want to create as many SCWper’s as we can. So thanks for watching, 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