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We May Be Going Back Into Bonds

Hello, and welcome to our Market Alert video for today, which is December 8, 2023. I hope this video finds you healthy, wealthy and wise, and that you are getting ready for the big Cowboy game Sunday night, I know that I am. The big Cowboys fans looking forward to it. The jobs number came out this morning and very interesting came in very strong, a lot stronger than people thought. So the notion that we’re headed for a big bad recession seems to be waning, because hey, how can you have a recession when you’ve got under 4% unemployment, it’s pretty hard to do that. So however, if you look at the numbers that came out, and you unwrap the package, if you’re looking under the hood, to use a couple of cliches, what you’ll find is, is that a large percentage of the jobs that were created, quote, unquote, came from people who are on strike who went back to work, and that’s many 1000s of people. So if you take them out, and you take the seasonality out of that number, then you end up with a very small increase in the jobs number. So what does that mean? Well, obviously, jobs numbers are always very important. So we want to look at those. And when we’re looking into the future as to how that’s gonna affect our investments and what investment decisions we should make. But the important number is going to come up next week, there are two data points that are going to come out. One of them is on Tuesday, the 12, which is the actual inflation number itself, perhaps the most important one of the month. But then secondly, on Wednesday, the Federal Reserve will tell us what they are going to do about the aforementioned inflation numbers and job numbers. So our view is that they are neither gonna raise nor lower interest rates in this session. And it doesn’t appear that they need to do anything other than just let these high interest rates take their effect over time. However, what’s very important always is what does the Federal Reserve Chairman Jerome Powell say about what interest rates and the inflation rates are doing? And our view is that he’s going to be a little bit hawkish, meaning that he’s going to say, you know, we may raise interest rates, some more. Inflation isn’t quite under control, yet, don’t get excited people, because you know, this is not over yet. And we’re not ready to say it is. So the reason why we think he’s going to do that is because he’s, had the market do a lot of the work for him, they’ve only raised, and I say only, interest rates to 5% are a little over. But if you look at mortgage rates, credit cards, car loans, all those other things, they’re way higher than that. Why? Because the expectation has been that interest rates are going to keep going higher. And so those high interest rates have caused people to not be able to buy houses, to not buy cars, and not buy stuff, it’s kept inflation down and in fact, has made it start to come down some. So if the expectations become that interest rates are gonna go down, then people will start buying stuff, they’ll start doing things. And that’ll have the opposite effect that what the Fed wants. So they need to convince us that they could still raise interest rates, so don’t go thinking otherwise. Because otherwise, they may actually have to raise interest rates to compensate. So I hope that made sense. Basically, the Federal Reserve wants interest rates to stay high. And they will speak to that. But we don’t think they’re actually going to do anything about it. So going into the end of this year, we feel that we’re very getting very, very close to going back into bonds. Why? Because in the second half of next year, we think that interest rates will start to come down, and perhaps by a percent, or maybe even a percent and a half, that being the case, bonds could have a significant and historic rally, meaning going up historically, because we’ve had a historic bear market in bonds, which by the way, we’ve been out of bonds, right? We’ve been out since April of last year, year and a half. So that was a very good decision we made on your, on your behalf to keep you out of that because it’s been devastating for many people. And so maybe now would be the time to go back in. Because if we’ve had a historic bear market, then it’s very likely in our view, that we could have a historic bull market in bonds, we could see them go up tremendously. And so because of that, we want to wait until next week when we find out what the Fed is going to do and what inflation is. But we’ll keep you posted. So next week, we’ll tell you if we’re going back in or not, but right now our bias is that there’s a good chance we’ll be doing that. Now on the on the stock side as we said that it would happen we had the correction, which was a scary 10% Drop in the market back in October and September. And of course, it scared all of us, no kidding. But we said to stay to be strong, let the strategy defend us if we needed to, but not to panic. And we said we’d see a big comeback on the market. And sure enough, that’s what we’ve seen. November was tremendous. And we think that most likely through the end of the year, we should see a slight increase from where we are today. Now, next year is going to be very interesting. Because stocks in light of the Fed lowering interest rates in the second half of next year, stocks could go either up a lot or down a lot. Why? Why if we have the same input? Why could we get two different outputs? Well, it’s all gonna depend on why the Fed is lowering interest rates in the second half of next year. If they’re lowering rates, because they don’t need to have them as high anymore, inflation has come down, and the economy is still okay, then stocks will really like that. And we should have a strong rally in the second half of next year in the stock market. However, if the reason why they are lowering interest rates is because they’ve caused a bad recession. And because the economy is falling apart, and they need to lower interest rates to stimulate the economy to get it going again, then that would be bad news. And therefore the stock market could fall in that scenario. But the interesting thing is that in either of those scenarios, if the Fed lowering interest rates, bonds should do well. So right now, we’re not ready to make our fearless forecast. But it’s looking like that next year, there’s a strong possibility that bonds could actually do better than stocks. And as a precedent for that it happened in the in the 80s. So we’ll keep you posted on that the fearless forecast is until after the first of the year, but we wanted to kind of go over where we are right now and kind of tell you in advance because it’s likely that next week, if the data comes in, as we think, that we’ll be going back into bonds. And as you know, we’ve been out of bonds. We’ve been in the money market fund this whole time. Very good decision. We’re glad we made it. I hope you are. And so we want to take advantage of the opportunity that potentially bonds could represent for us. So long video, thanks for watching. I hope you are out there SCWPering you SCWPers. Our goal is to get all of you to be SCWPers right? So as many SCWPers as we can create, the happier we are. So if you are retired, you’re out there enjoying your second childhood. That’s wonderful. And if you’re not, you’re working towards it. It’s our determined goal to get you there and celebrate your SCWperness. Okay, we want you to go out there and, and enjoy. So thanks for watching. Share this video with as many of your friends as you possibly can. We’d love to help them too if we could. So 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 MMWKM Advisors LLC (d/b/a Retirement Planners of America). ©Copyright 2023