On this week’s show, Karl discusses all the positive news that lifted stocks to new highs. But, is it all baked in?
Hey, good morning everybody. Welcome to the podcast. Thanks for joining me. Karl Eggerss here on Creating Richer Lives, the podcast version, and I say that because we have a website called Creating Richer Lives as well, just creatingricherlives.com. Tons of stuff on there. Before you go there, if you just want to bypass all of that and give us a call, you can certainly do that, 210-526-0057, but if you do go to creatingricherlives.com, you’re going to notice a couple of things.
Of course, we put a lot of information regarding your finances, but Creating Richer Lives is also about the lifestyle that you want, the legacy you want to leave, philanthropy, which is what you want to give away to charity, and I have to give a shout out to Covenant mainly because I wasn’t just me. It’s a whole team of people, but Covenant did earn a National Recognition for Leadership in Corporate Philanthropy, so not only do we help clients with philanthropy, we also do it ourselves. That’s really what Covenant was founded on. There was 20 financial advisory firms around the country nationally that were nominated and selected for this 2019 Charitable Champions List, and it’s from an organization called Invest in Others, and really awesome stuff. I mean, you can go on the website.
We have the article on there. There’s a press release regarding it, and so we’re just proud to be a part of that group, and so shout out to all my fellow Covenant teammates. This podcast is brought to you by the aforementioned Covenant Lifestyle. Legacy. Philanthropy., just like we talked about. All right. Again, 210-526-0057.
All right. Let’s jump right in. By the way, not only will you find that article about philanthropy on our website in creatingricherlives.com, but you’re also going to see kind of a fun article that we put up there a few days ago from one of our wealth advisors, Terry Langston, and it’s called Elevating Your Holiday Wine Game. Essentially, it’s a whole tutorial, if you will, on really when you’re hosting a party to not only just have some wines, but make it an event. We kind of go through some cool, little tips on there and it’s a pretty economical way to do it, and really, as all the holiday parties are kicking off here the next several weeks, we thought it’d be helpful to put that up there in front, so go check that out, creatingricherlives.com, Elevating Your Holiday Wine Game.
All right. Well, this was a really busy week in the markets, and some weeks are not. Some weeks are, there’s a lot of movement, but not a lot of reason for it, not a lot of news events. This was a very, heavy news-oriented week. Now, that doesn’t always mean that you do something about it.
We’re clear on this podcast regarding that, but we do try to filter out what’s noise, what’s not, so let’s run through just kind of what did move the markets this week because it was a really, really busy week, and generally a positive tone, risk-on tone to the markets, so this whole week was about not only trade, but a big portion of it was trade. Monday, we come out, and China came out and said, “Yeah, we hope that we can reach a trade agreement as soon as possible.” Reuters said that, and of course, the Dow still finished down about 100 points, and then, of course Tuesday morning, we had, Futures were still down about 100 points, and then a report came out saying, “The U.S. might delay the tariffs.” Here we go again, but kind of piled on that was that we were going to get this United States, Mexico, Canada agreement, was scheduled to be signed. That was kind of another bullish headline coming out, but it was kind of still a mixed day overall.
Then, we heard from the fed this week, and what was interesting was the fed, of course didn’t raise or lower interest rates. They’ve lowered them three times in 2019, but they essentially said, “We’re not going to raise them in 2020 either.” Now, the markets celebrated that, but let’s remember that the fed’s track record here is not that great, right? Take it with a grain of salt, but it was something that certainly got the markets going. Look, remember, I said this last week and I’ll say it again, the shift a year ago, three rate hikes were scheduled in 2019.
Three, and yet, there was three cuts, a huge change of direction for the federal reserve, and you can just point right to why the markets struggled late last year. Not only the tariffs, but the fed tightening and a slowing economy move into 2019, and they start cutting in a slowing economy, and now, it seems like the economy is at least mixed signals, but they’re still on the sidelines and they’ve cut three times, hence, good market gains for this year. Thursday, we had some producer price index came out. A little weaker. Initial jobless claims went up.
That was something we need to watch, and then I’ll get to that in just a minute, but Trump, of course tweeted, “We got a big trade deal coming soon,” and the Dow popped 200 points. Look, at the end of the day, all of the stuff coming out with the tariffs, we got this agreement on Friday, and the market was kind of all over the place. Is it a buy the rumor, sell the news? Here’s what we do know. Housing price is at an all-time high. Stock market’s at an all-time high.
We got this economic expansion the longest in history, we’ve got a pretty good jobs market, and we got the fed that cut rates as I said, and some would argue they’re doing quantitative easing again. Remember, their balance sheet was shrinking. It’s going up again. For those out there that say, “Look, what the fed does matters,” it does, not only with the direction of interest rates, but what they do to inject or pull money out of the system, and they have put money into the system at a pretty big clip, something like $300 billion in the last few months, so all those things are big tailwinds, and then you throw on top of that the China trade deal, whether it’s partial or not, phase one, and the Mexico, Canada and United States agreement, and that’s risk-on. I mean, that is, you really can’t get a better scenario than that.
Now, what we have to watch out for, and we saw a weak retail sales number on Friday, is this a precursor, because remember, we have unemployment … The claims spiked up. Initial jobless claims comes out weekly. It spiked up a little bit, so you put that on the back of weaker retail sales, which is a bouncy number, but you put it on top of that and you say to yourself, “Uh-oh, as the consumer, is this the tipping point where the consumer is going to start struggling?”, which is still 70% of our economy as I remind you, because if that’s the case, do we have to worry about spending going down, at the same time, maybe we start to see some inflation perking up? I mean, there’s a lot of people seeing that. We may start to get that.
Who knows? I mean, the producer price index was weaker. That’s an inflation number. It was weaker, but there are some that are starting to see some little, green shoots of inflation, and if that happens at the same time, the consumer reins in. Not a good combination, but too early to tell.
I mean, again, all those things that I told you about that have happened this week is a recipe for gains, and that’s what we’re seeing. Where we are in terms of what kind of did the best this week, obviously, things that benefited from some of these trade agreements, Mexican stocks, but we even had semiconductors, which have had just a phenomenal year, up over 60% year-to-date for semiconductors, and boy, that’s a hard chart to buy if you’re looking to buy that, but we saw semiconductors up over 4% this week. Gold, miners, silver, all of that was up. High-beta banking stocks were up. A pretty good week overall.
Not a huge week for this, the general stock market, but certainly, some specific areas, especially things like emerging markets, which still bullish on. I’m personally bullish on emerging markets. Up over 3% this week. Not a bad week, and you’re seeing oil and gas stocks do very well also, beaten up considerably in some of those areas. What got hit? Real estate investment trusts were down.
Natural gas stocks just look horrible, I mean in terms of new lows, natural gas prices just plummeting down. Aerospace and defense was weak, and if you owned volatility, I mean the VIX … Remember the VIX last Christmas spiking up? It is now down 50% year-to-date, so a big, big drop if you believed. Listen, you have a lot of people on TV, podcasts, whatever saying, “The VIX is cheap. Buy it, buy it.”
That is a true statement. How much you own, you can get bit. People thought it was cheap a few months ago and it’s continued to get cheaper and cheaper, so the VIX down over 50% year-to-date. Now, you know, last week we talked about kind of some year-end tax strategies and things you can do. Still have time to do those. I would encourage you though, run a mock scenario for next year or this year.
In other words, if you gift next year versus this year, if you make that IRA contribution or you max out your 401(k) or don’t, there are ways to kind of do a proforma, if you will on your own taxes. If your CPA isn’t doing that, give us a call, 210-526-0057. See if that’s something we can help you with, because oftentimes, running those scenarios is really helpful to do in-depth financial planning. Without that, sometimes you’re missing some things. In other words, a lot of people right now are not able to take advantage of deductions when they give to charity.
There are ways to maybe, in different structures, to do a lot of charitable giving upfront and kind of front-end load it, if you will into different entities, and then be able to give to those charities later on. There’s different tactics and ways to do that. Again, I would encourage you, go back and listen to last week’s episode with some practical things you can do, but it’s not too late. We still have a couple of weeks, two, three weeks left in this year, and you need to decide what things you’re going to do now, versus next year. Now, before we wrap up this podcast, I did want to say Time Magazine has their person of the year each year, and regardless of if you think the person on there this year should be on there or not, let me just say that my persons of the year are first responders, teachers, anyone in the military, really any medical professional.
Those are people that to me that are underappreciated, and in various ways get attacked, are leaving the professions that they’re in sometimes, and I just want to say kudos to them, and really, they’re my persons of the year every year, so just want to give a shout out to them. Have a wonderful weekend, everybody. Take care. We’ll see you next week here on Creating Richer Lives.
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