Hi everyone. Hope everyone’s doing well. Um, we will start in a minute or two. Looks like folks are still joining us. Uh, as you can see, it is a blue sky here in Houston, Texas, which thank goodness for that because we had a storm that was kind of heading toward us, a little tropical depression. Uh, unfortunately it had taken a turn to the east and it’s heading toward Louisiana. So I’m not sure where everybody is joining me from on this webinar, but if you are in Louisiana, I am hoping everything is going to be okay and you all are going to be safe. Hopefully just a little bit of rain. It looked like quite a bit of rain. So [snorts]
Oh, hey Gary. I’m glad you’re a long way away.
So, you’re missing the fun as far as the storms out here. Uh ah that makes sense. The world is your oyster, right? If you if you retire from the airlines.
So, were you always a United or were you excontinental?
All right, we have ah classic. Nice. My dad worked well my family basically worked for both airlines. So, I’ll talk about that in a little bit. All right, it looks like we are 2 o’clock straight up and we got quite a bit today. So, I think we’ll just get this started and and people will be able to catch up because we’ll we’ll talk about some of the housekeeping stuff for a few minutes before. Um, so officially, welcome everyone. Thank you so much for joining me. Uh, anatomy of a recession, second quarter, and I realize it’s the end of the second quarter, but we’ll talk about what is currently going on as well. If you’re joining us for the first time, an extra special welcome. Uh, I’m Michael Marx. uh certified financial planner and financial consultant with Alliant Retirement and Investment Services or Aerys for short, AR II. I live right here in Houston, Texas, and I’ve been doing this for over 30 years now. Uh and my family has been tied to Alliant for longer than I’ve been alive. So, most of my family has worked for United or Continental since the 1960s. And as you may or may not know, Alliant is the original credit union for United Airlines. And last year they celebrated their 90th anniversary. So I realize that some of you may be joining us through different channels. So whether you’re joining us through United or former Continental, Google, Tesla, CBS, Comcast, wherever, Susie Orman, welcome.
A quick housekeeping. [clears throat]
Uh, so today’s session is for educational purposes and includes proprietary material to protect both the content and everyone’s privacy. We ask that attendees please not record or capture the presentation. Whether this is by video, audio, screen sharing, or AI tools without prior consent, we appreciate your understanding. We’re glad you’re here.
So, I’m not sure if you’ve joined this webinar via an email directly from us or if you signed up on the credit unions website. So, I’d just like to take a couple of minutes to talk to you about Aerys for those of you who are not familiar with us. Uh, in addition to the weekly webinars that we host, we offer full service wealth management and investment planning. Uh, broad variety of investment options and portfolios from fixed rate guaranteed to as aggressive as you want to be in the market. Um and frankly our portfolio modeling is a little different than what you would have in the traditional retail investment side. So as I said earlier we are primarily a wealth management financial planning department. We host educational webinars as a service to our members. Uh we offer multiple webinars throughout the week with different presenters. So each of us hosts twice a month. Um, our team of fiduciaries at Aerys is focused on helping you understand the ins and outs of investing, saving for retirement, and much more. So, if you haven’t, I encourage you to take a look at the resources on our website, uh, which is aalliancreditun.com. Uh, you can see a list of our weekly webinars, our podcast, Investsavvy, our blog, um, and other financial resources. You can find us directly on the Allian Credit Union website just under uh parent invest tab in the upper right hand corner. So, uh I try to host one webinar in the afternoon and one in the evening. So, my next webinar will be in the evening. That’s Tuesday at 6:00 p.m. Central, 700 p.m. Eastern. That’ll be June 30th. Uh we’ll be talking about Roth conversions as part of your long-term tax strategy. uh we’ll look at some of the tax impact on your RMD, your required minimum distribution, as well as the impact on your Irma, which are Medicare, and maybe some of your legacy planning. So, ideally, getting an early jump on this aspect of your retirement planning is best, but most everyone can benefit from this topic. My next webinar will be back in the afternoon, Wednesday, 2:00 Central time, 3 Eastern, and that will be middle July, July 15th. So, we’ll be talking about estate planning and trusts aren’t just for millionaires. So, we’ll take a look at maybe demystifying some of that estate planning misconceptions out there. Uh, a lot of people find that a pretty interesting topic and also we’ll talk about a little later. But now, but Aerys does actually offer um some of that, you know, traditional will trust services. Um, but I’ll talk I’ll briefly touch on that a little bit later. So, thank you for your patience. Uh, but this is what everybody came for. So, this topic usually runs a little longer than other webinars because there’s a lot of information to cover. Um, we’ll still have time at the end for questions and I’ll hang out a little bit longer if need be to answer some of those questions. So, not to date myself, but there was a movie back in 1977 called Smokeoky and the Bandit, and a song came out of that movie called Eastbound and Down by Jerry Reid. Um, so to quote a line from that song for those who may be old enough to remember it, we got a long way to go and a short time to get there. So, let’s jump right in. So um so the official official arbiter of recessions is a national bureau of economic research the NBER right. So most of us have heard that recessions are two consecutive quarters of mildly negative GDP growth or if in a recess uh depression for example the pullback would be more but that isn’t always the case and as you can see from this chart there are a number of data points to consider as well as the magnitude and the duration of of the impact on on those data points. So I always want to cut to the punchline early on this on this uh this topic, right? So we can focus on the context of things. I think it gives you a better understanding of how the economy works. Um and as you can see here, uh we’re almost all green. Job sentiment still a little weak and it has been for some time now. Uh part of this is AI, the Iran war, some of the impact on the elevated energy costs, some inflationary concerns. the Fed just met and announced today at one o’clock. Um but overall things are looking good until they don’t. Um so contextually, right? Um I’m always a fan of context for those of you who’ve been on webinars before. Uh so the question is something good or bad, right? And really um uh so there was a question on job sentiment. Basically, it’s like the future prospects of jobs and and the job market as a whole. Um, but I’m always a fan of context. So, something good or bad compared to what? Here’s a quick look at how some of those same metrics looked at past recessions. So, here you see a lot of red in those past recessions, right? A lot of red X’s, a few of the little caution, um, and then very little if any expansion in in that given metric. Now, obviously the outlier is 2020, right? There was still quite a bit of green in there and bam, we had a recession. So, for those of you who remember 2020, that was when COVID happened. So, it was a quick sharp decline, but a quick recovery by the end of the year. So, and we’ll talk a little bit about that later, but that’s really what most recessions look like when we’re when we’re talking about tipping points um and the metric. though. Oh, a look at oil. So, it’s a relevant question in today’s economy, right? Today, WTI, I don’t know where it was closing at, but when I was looking earlier today, it was about $76, and that’s West Texas Intermediary. Uh, still oil is about 76 bucks a barrel, and future expectations are heading down if we can truly wind down that Iran conflict. So, fingers crossed, some prayers said for that. Hopefully, that trend continues. um we are still below the line where it’s basically where they look at pricing year-over-year. Um and then that has been in the past an indication of a recession. We don’t really see that. Uh and the best way to describe that is that if energy prices stay elevated for a for an extended period of time, eventually that creeps into everything else, right? Goods and services. We’ll talk a little bit about I think there’s a slide on that somewhere later. Um right because because goods are carried so when you have fuel costs that are expensive right you have it cost it’s airlines are more expensive rail is more expensive truck is more expensive cargo ships are more expensive and just driving around is more expensive so so that does impact it eventually creeps down into the price of into the cost of goods so hopefully we’ll sort that but again it is trending the right direction and hopefully that trend continues Um, so this is what I would also say right so as far as don’t be so energy sensitive versus not today but at least how how it impacted things in the past right so when we look at like how it impacts personal consumption for every dollar like for example I mean this is not just a a business but individuals too right if I am paying oh what’s gas like 335 a gallon here in Houston we’re we’re kind generally less expensive than than the rest of the country. Um but you know when it creeps up to four and and other places five six $7 for every dollar I have to spend putting in the tank that is $1 that I don’t get to spend in other places right it isn’t necessarily a grocery store because that impacts too but hey you know whether I take that trip am I going to take my family to Disney World um or Disneyland or wherever so so extended matters um but this is what’s a little bit different though as far as as far as um vehicles go right so when you look back at 1980 where where that chart is kind of up there as far as a percentage on consumption. The fuel economy back then was like 19 miles per gallon, right? And it was kind of this transition where, you know, we’re starting to go into a little more fuel efficient cars. Um, but you know, you’re looking at hybrids now where our technology has gotten so much better and you’re looking at like 27 miles a gallon. And I’m here in Texas and we love our trucks here in Texas. But even now with the advanced technology, the trucks are still in the low 20s, right? They sh V8 engines shut down half of their their cylinders when they’re on the highway. Um, and even now they’ve gone to V6s and turbocharge them. So technology is better. You’re getting more bang for your buck. So you’re using less fuel for those same miles driven, but it still impacts it, right? So the tax tailwind, um, and I’ll refer to this when we talk about a tailwind versus a headwind. So tailwinds are something that helps, right? Just like a plane, a tailwind will help help the economy, um, help growth or a headwind is something that might
inhibit it, for lack of a better word. Um, so the one big beautiful bill that was signed into law about a year ago, July 4th, 2025. Um, and frankly, we we’re still sorting out the impact of the bill on the economy. The expectation is is a net stimulus to the economy if there have been so many other events in in these last 11 months, right? We had an extended Ukraine war that was supposed to be over, added Iran war, energy tariffs, um tariffs overall. So these can skew the impact, but the expectation is still a net positive to the economy. So this is a big one, right? So there’s a kind of general consensus out there that this year’s market run was if you look at the market S&P Dow etc it was mostly flat up until six 7 weeks ago and then it started moving. Um so we think most of this run is attributed to capex and those unfamiliar with that term is capital expenditures which is basically business spending money to expand the business and in this case it’s AI and the data center buildout right so this that shows up as profit kind of as a general so it shows up as profit as far as companies right the earnings are there um but they’re frontloading their investment um but this growth level you can is not sustainable. [snorts] So the future return on this is still a big unknown, right? So as companies invest in this, as investors own shares of those publicly traded companies, they want a return on that money. So what you’ll see is what we may or may not see is does this truly come to fruition? Um or will the market start making adjustments to the share price? um which could impact the market as a whole. Um but I would say we’re in it now. Stay tuned in the coming years and we will find out. But right now there’s a lot of growth because of that. So um so we talk about and the news talks about the tremendous amount of money that is invested in AI and it is a huge amount but compared to some of those historical investments right um it’s not as large when you look at some of the past tech innovations as far as the relative size to the GDP or the size of our country right our country is just so massive Now so you know auto electric motor tech railroads and we really don’t think about technology as like a railroad and the steam engine and things like that but that is it’s a huge technological advancement you know the the the light bulb I mean what a huge one right and then you know y’all obviously like with the internet and things like that but there there’s really a lot of innovation now I can tell you what one of the differences as far as technology goes is that technology permeates almost all sectors Right? So even if you look at mining, even if you look at um something like oil, right? Being able to frack, being able to directionally drill, that allowed that allowed access to reserves that, you know, 40, 50 years ago didn’t even exist. You just couldn’t get it. So now we have access, which opens up the supply, which could potentially lower our price. Um a new wave. So, so this is about technology, right? And that and that there there’s always these concerns about, hey, is technology going to eliminate jobs? And and candidly to some degree it does, right? It’s it’s it’s referred to as uh creative creative destruction, but but what also happens is it creates other jobs, right? So, if you look at how much more productive we are as as workers, especially when you compare us to the rest of the country, we are incredibly productive. Now, we also don’t take time off and things like that. We’re not exactly known for that. We work really long days and we’re kind of 24/7. Um, but at the end of the day, productivity per worker in the United States versus other places are still like head and shoulders above that. Um, so one of the things that we think is yes, the AI adoption may eliminate some jobs, right? And we’re kind of already seeing that to a smaller degree than probably given credit for. Um, but it also makes people far more productive in how they do their job. So again, stay tuned. We have benefited from each one of those technological uh innovations. And I’m going jokingly say for those who’ve seen Terminator until it doesn’t. So, uh, market outlook.
So, I and and I will say so, um, what they do is they look at like geopolitical events, right? You know, like wars. Uh, it’s usually pretty much wars, right? I think on this one. Yeah, it’s pretty much wars. So, you know, the question is whether you buy on the dip. Now if you’ll notice this this slide with data was as of the end of first quarter. So we have question marks in the 3 months and 6 months. Um but the RN conflict began in February 28th. Right. So that was right right during the Houston barbecue cookoff and right before the rodeo. But but we do know at least part of the answer. Right. So 3 months later the S&P was actually up 9%. So we will see where we are in August to see where we are in six months. So that is also still tracking right right after the conflict 3 months we’re generally up not every time. Um I mean obviously your obvious outlier would probably be the Russian invasion and then the Arab war I believe. Yeah. And then the Gulf War and that’s basically again that’s tied to oil right because oil just permeates everything that we do.
So closing the gap. So for all people who love that the MAG7 and I buy the S&P 500, you know, because it’s really broadly diversified, I would just I would say a note of caution. I mean, we use the index a lot too, but but at least understanding what that is, right? And maybe some of the expectations. So when you look at that right the S&P 500 for those unfamiliar with that index it is the largest 500 companies in the US um and they are weighted right so the bigger the company the bigger impact it has on the index movement whether up or down so it looks at like the earnings growth and the percentage of that right so what you can see is the the teal bars are the magnificent 7 the gray bar is the well the S&P 493 so right it’s the other companies that aren’t those those big seven there um and then you have the S&P 1000 which includes some mid and small cap companies um so what you can see right so what you’re seeing is is we had that peak somewhere around 2024 that mag 7 and we’re starting to see that come down now what’s actually happening on the earnings perspective right is that people put so much money in there we had talked about that a a little earlier that they’re like, “Hey, you know, is this becoming a little expensive for this buy? Maybe I need to look at other things.” And we’re also starting to see other things happen as far as with the other 493. So, kind of the expectation, you know, we’re is is that we’re starting to see those small and mid, the rest of the the 493 starting to catch up on the earnings, so they’re making a bigger play. So, if you’re in the individual stocks, things like that, it just looks at it just basically means there’s other opportunities out there. Um, now, not your father’s S&P 500. And this is an absolutely for sure. So, I would probably say less than 10 years ago. So, back in, you know, the S&P 500 as the largest 500 companies, but they’re weighted, if you recall. So, as these companies get bigger and bigger and bigger like Alphabet and Meta and the trillionaire Elon Musk, right? Um, what it’s starting to do is there’s a lot more technology um found in the S&P 500. Traditionally, it wasn’t that. It was usually a much much smaller position. the the the NASDAQ or if you’re looking at a trading symbol that was triple Q there. Um that was really where you found your technology. But really the S&P 500 is really it’s not as it’s not as different from the from the NASDAQ as it had been in in years past. And frankly, as those tech companies really kind of gain much more popularity, we’re not really sure if that is going to revert back to that mean. it’ll probably stay up there and still be a major part. Not something to necessarily be worried about, but it is something to be aware and how you allocate your portfolio.
So, this is something kind of cool, right? You hear on the news often that the market has hit a new high. And should this be a concern? Well, maybe, but usually not. So, markets don’t pull back just because they hit a new high, right? There’s so many other reasons um why a market will correct. It’s usually around a bubble. There’s not a whole lot of bubbles right now. Um and believe me, I get asked about this all the time by clients. So, with that, there are ways to position your portfolio to still participate in the market while mitigating some of that risk. You know, clients are like, “Hey, you know, maybe I need to be out of the market or I don’t want to go into the market because the market’s high.” And like, well, there’s different strategies on how you do that. So this is a quick summary for this second um second quarter um that it’s really looking at expansion and since we are at the end of second quarter we’re right um that ended up being true but we also expect that to continue on at this point um I would say the big rub as far as what goes on in the Middle East but but even then at this point it looks like it’s pretty
um so so at this point it still looks pretty positive. So, on to the next topic. So, we won’t spend too much time on fixed income or bonds as most people know them. So, few people, frankly, few people like talking about fixed income or bonds, right? Because they are so boring, not exciting. No one says, “Oh my god, you got to see this treasury I just bought. It’s so cool.” Um, but they’re really an important part of your portfolio. So, I wanted to talk about this because the impact on bond prices with interest rate movements. So, as you may or may not know, we have a new Fed chair, Walsh, right, who replaced Powell, who’s just the thorn in Trump’s side. Um, and the Fed met this week, right? So, they just made an announcement around 1:00 central time or like 1:20 somewhere around there. Um, so they did not move rates. anywhere. Uh, which was kind of expected. That was no surprise. And Borch, by the way, is not a fan of guidance where past Fed chairman, this goes all the way back to Greenspan, right? They’re really good on communicating the Fed’s intention or their thoughts. And the intention on that was to kind of smooth the market a little bit. Hey, this is kind of our thought. You know, you guys can kind of make that adjustment out there on Wall Street. Um, and he’s not a fan of dot plots, which is basically a chart that the Fed would put out on where they kind of see interest rates going, whether it’s up or down. In this case, it was kind of on the upside and then and then the down. But, um, I mean, that that going away wasn’t really too big of a surprise because frankly, the Fed was terrible on the dart the dot plot. It was it was usually so far off what Wall Street would forecast and then you would see as those got closer is that you would see them getting a lot closer to the Wall Street forecast. So, I’m not sure if if the world is any worse off without those. Um, but I can say this, right? So, the Fed chose not to hike rates um or cut rates. They did nothing. Um, but the the expectation prior to the Iran conflict was that there would probably be one maybe two rate cuts this year. So inflation’s proving to be a little stickier than expected and and frankly that was exacerbated by the energy costs creeping into some of the pricing goods or price of goods and services right now. Um we’re probably looking at maybe one rate hike toward the tail end of Q3 or the beginning of Q4. But you know again these situations are fluid so I would say stay tuned. Um, I think a lot of that impact is going to be what goes on with with Iran. Um, but you know, you’ll want to consider the impact on the current bond holders, right? If you’re on like a bond holder right now, like in your mutual funds, things like that. Um, and and I’ll explain what this chart is. So, what this says is not not so much I’ll give you the gist of it. The longer a bond is, it’s called convexity, but the longer a bond is, the more sensitive the price of the bond is to an interest rate movement. So whether it’s a hike or whether it’s a cut and the price goes opposite. So if the price if interest rates go up, the price of that bond gets beat up. If interest rates go down, the price of that bond goes up, right? because your bond now and I’m holding a 5% bond and now interest rates are now four because of rate cuts. My bond is more valuable than a new issue bond. So that’s kind of bonds 101 for those of you uh who had to take economics like forever ago. Um and basically what happens the longer your bond is the more sensitive to an interest rate movement is. So if you look at a US Treasury right that’s the most obvious one. So I like pointing that out. So, that 30-year Treasury, if interest rates came down 1%, the price of that bond would go up 22, almost 23%. Um, if interest rates went up by 1%, you would see that it comes down a little over 9%. Now, again, because there’s more of a chance of a rate hike, this is kind of significant, right? Because bonds are starting to finally do well over the last year, year and a half. Um, but if you were in bonds and you’ve held them for a while as part of your asset allocation, that 7030 or that 6040 or whatever that percentage is, like you can say your bond portfolio has gotten absolutely smashed. When you look at a five-year return on there, they’re like flat. Um, but you still you still hold them for a reason. Um, we’ll talk a little bit about that, but but you’re basically holding there to reduce your heartburn. So, um, now the expectation, so, so because interest rates were looking to come down, come down, then we’re like, okay, some of those bond portfolios are actually going to finally maybe recoup some of those some of those losses that I took from 2022. That might not be the case. That might you might have to wait a little bit longer. So, again, another thing that clients comment on, and I will say this all the time, [laughter] will this be our undoing? you know, our debt is so high and and you know, I mean, maybe but probably not today. So, and yes, our debt is high, 39 trillion with a T, but our economy is is also huge, right? We’re a really wealthy country when you look at our assets, both government, corporate, personal. So, so I would say this, right? Because even though 39 trillion is a lot of money and I don’t want to I don’t want you to think I’m dismissing this or being dismissive of that. But if someone owed a million dollars, right, is that a problem? Maybe, right? Context. Um maybe if they’re worth a hundred,000 and they owe a million, that might be a problem, but less so if they’re worth 5 million, right? Their debt ratio. Um with that, we definitely have some work to do as a country. And I’m going to jokingly say this, taxing the millionaires and the billionaires and now trillionaires thanks to Elon. That’s not going to solve the problem, right? Probably a combination of things, right? Maybe increase some taxes, cuts in some areas that overlap. Maybe Washington could be better stewards on how they spend our tax dollars. Um, but I’m sure that debate is going to go on for years and years and years, long after I am gone from this earth. Um, but we do know this, right? US debt treasuries are still very popular globally and that’s why the debt that we have is and it’s it’s at a a relatively low rate, right? Demand is still pretty high for that. And as you can see, you know, we’re still pretty high on the um as far as our debt to GDP ratio, but our rates are still considerably lower than some of the other developed countries out there. So here’s an example of why. Right? Here’s a comparison of the US dollar, the euro, Japanese yen, and the Chinese one. So we are still the preferred currency for reserves and and there’s a reason for that. So there was this debate um oh my god back in 2008. So I’ve been doing like 30 years. So, it’s just one long year for me sometimes. So, back in like 2008, 2009, oil um spiked up to about $147 a barrel and it was there for a bit. Um and there was this question that hey, maybe the dollar shouldn’t be this global trading currency anymore. You know, maybe we should look at other things like the Chinese want like and and and there and the reality is that is probably going to happen someday, right? So, so prior to that, you know, we had the Swiss Frank, we had the British pound, um, that were that were, you know, the global trading currency, but but what happens, what you need the the reality, there’s only like three currencies that could be the global currency. Um, and that’s the US dollar, uh, the euro, and the one. So the reason why those other two probably would not work at this point is that you need a few things, right? You need an economy large enough to be able to handle that scale, which all three of those work, right? The European Union, not one country in particular. Um, but you also need a unified currency that is transparent and that the devil is in the details and that’s what eliminates the other two, right? Um Europe for example so we have a unified monetary and fiscal policy right the EU with the euro although large enough does not have that right they have the unified monetary in the fact that everybody uses the euro but fiscally Greece can do what Greece wants to do Germany can do what Germany wants to do France can do what France wants to do or we fought a civil war for that right so that’s why we have the Fed um and we have Congress so that is an advantage. And as far as transparency goes, China isn’t exactly known for their transparency. So investing in this currency, you’re not really sure. And and yeah, I mean, they used to peg it, but now it’s they they float it, but it’s still a far cry far cry from from Transparent. So the US being
uh being ousted, that’s probably something for much further down the road. So we’re doing okay on time here. So let’s talk a little bit about risks. So [snorts] um some of the headwinds talking about jobs, employment, we see some of those numbers. Now the job numbers actually came out, the last one that came out was actually pretty good. Uh but but I would say as a general rule this time was different right because normally what happens is if you see like an unemployment rate that starts ticking up things like that right usually within a certain time period I think it’s like a year and a half or something like that you’ll see you’ll see recessions follow well this has not been the case so far right so for number reasons right So a lot of this we think is just companies are just becoming a lot more efficient in how they do things and they’re still making money on that. So So it is a different time when we talk about unemployment, when we talk about jobs, it is important but it doesn’t have the same impact like it had before. Uh and profits don’t look recessionary. So companies are still making money, right? And and part of that reason is is basically efficiency. Now, whether it’s AI or not, that that probably remains to be seen as far as how much of that goes. Um, but but they’re still making money and and obviously some of those profits are still under pressure, right? Because cost of energy, cost of tariffs, increase your cost of goods, which cuts into profits. So, we’re going to have to still and wait and see how that plays out. But right now, profits are still there. So I had mentioned this before a little bit of creative destruction um and and and really when you look at this right the these are about the jobs right so that gray is occupations that didn’t exist um versus did exist as of 1940 right so you’re really looking at like World War II at that point um so as you can see there are a lot more jobs that are created since the 1940s that simply didn’t exist prior to that. And frankly, most of that stuff is tech. Um, but as you can see, it permeates all sectors, right? Technology makes our job easier because, I don’t know, 20 years ago, we wouldn’t be hosting these, right? It would be somewhere where we would host for our members and we’d have sandwiches or snacks or something in some rented room or in one of our branches. But now I can talk to you in New York or Florida or Louisiana or Mexico or wherever you might be. So over time it does create it and and really I don’t want to sound flippant or dismissive because I do understand that some people’s jobs are going to be lost as a result of this and we are talking about real people. So yes, we’re talking about data but I have never lost sight of the fact that data is real people and real families. So let’s talk about market concentration, right? We talked a little bit about the S&P 500 with the bigs controlling most of it. So if you look at over time, right? So the last like 35 years since the ‘9s and that was kind of the boom for the technology side, right? You look at the largest 10 companies in the S&P and what percentage, right? As you can see, it started out somewhere around the 20s, somewhere around there, and we are up almost double that now. So as the as the as the tech industry becomes more prominent, you will probably see that number continue up. But we have had a little bit of pullback, right? We’ve had some profit taking on the tech side because people are questioning, hey, is it too expensive and looking at other opportunities. So again, we’ll see how that plays out. So along those same lines, right, trees don’t grow to the sky. So at some point as [snorts] these companies get larger and larger and larger and they represent a larger percentage what you’ll see is they end up reverting back to the mean where they become smaller not non-existent but smaller and smaller. So that just means there’s a lot more opportunity in the other 493 companies in that S&P 500. Or if you’re in that index, what you’ll see is it’ll start pulling back a little bit and as the other companies catch up.
So um what that also means too is that you’ll start seeing some opportunities outside of the US and that has really been the case over the last couple of years, right? We’ve seen some of the international plays if you’re holding international funds u those have actually run like a champ over the last couple of years uh we still see opportunity not as a broadbase but in in certain areas in certain parts of the world and even within countries there’s like you know if you look at Asia or if you look at South America there’s there’s other countries are a little bit here more or there uh that might be a little more favored so non US So obviously there is a home country bias. So we live here, we invest. We invest in what we’re familiar with, right? So when you look at the percentage of the global GDP, right, we’re we’re actually smaller than the rest of of the emerging markets. But when you look at like the the market cap, the the value of our companies, we are a big a big share of that, right? We go from a quarter of the global GDP but our market cap is you know like over 60%. And where our US portfolios 75% US which is pretty common we have better I don’t know we just are more comfortable with those companies and a lot of the innovation frankly has come out of the US and I think that is probably the biggest driver. Now will we stay that market leader? I don’t know. Um, you know, if you go back like to the ’90s, the ’90s was really obvious if if you’re old enough, and I’m assuming people on this are old enough to remember that, um, you know, Japan had this big push, uh, and they just kind of owned and dominated the innovation in a lot of the sectors and technology. But as things started changing, you know, 80s went to the US and then the ‘9s kind of the rise of Japan and then through the 2000s, we saw the rise the US taking back and a lot of that was our our large retail plays, a lot of the technology side. In 2010, you saw a little bit different, right, where you saw some of the oil companies, right? That was kind of your biggest push right there when you brought in the international plays. Um, and now where are we? We’re kind of back again to the US, but China is making quite the run on what they’re doing. So I, you know, the expectation is China will continue to probably grow. Uh, but they are, by the way, our largest economic threat is nothing. I mean, every I would tell you that every economist, this isn’t a political statement, that every economist pretty much knew that since 94. Um, but here we are. So it’s a global economy. we are better for it um in a free market. So here’s your cycles. Nothing huge. Basically what this tells you is that hey some cycles the US outperforms other cycles non US outperforms. Uh right now we’re still in the US. Over the last couple years though a case could be made for adding some international. So US dollar. So, um, so we talk about like cycles, right? It’s usually about 16 years is what they’re saying here. And then, and then we start seeing a little bit of of something getting beat up there. Um, are we there? We’re not really sure. U, right now, I would say the dollar is a little bit weaker, but it’s still strong. Um, so, so today the the dollar index is at 100 because it says a little question mark, but it’s actually a little bit higher than where that is showing. Uh, this was 330. So this is a couple months ago. So the dollar dollar is actually up from there. So this kind of gives you an idea, right? So weaker dollars, it helps the international play. Um and for the obvious reason is the dollar is softer than it was a few years ago, but it’s still very strong. So a weaker dollar helps US exports, right? Because like a stronger foreign currency can buy more US stuff where in the past a strong US dollar bought a lot of foreign stuff and usually it was like Chinese stuff. Um but but the reverse is true. So I mean this is something that frankly Trump wants to see more of, right? More US exports etc. So investor pitfalls. Let’s just talk a little bit about this because this is important. There is always a reason to stay out of the market. Uh you know whether in 2000 it’s the tech bubble burst, right? September 11th, Iraq war, maybe Hurricane Katrina, Ebola in 2014, which we’re having an issue right now. Um, you know, Brexit 2016, COVID in 2020, um, liberation day last year, right, with old tariffs. But but if you look all right what they do is they show your max draw downs during that period but they and then they show you hey you know if you had just held out where would you be today right in that cumulative return so to go back to that tech bubble burst that S&P draw down was 17 and I know it was painful because I was in the business back then but if you had sat tight you know you’re up 360%. So, and that’s as a whole, right? Because I know a lot of those dotcoms, if anybody’s going to say that, uh there is a uh there are a lot of those companies that simply don’t exist anymore. And so, so don’t fall victim to panic attacks. That’s basically what we’re saying here, right? So, don’t overreact. And let let me put a quick and early note uh about the homes category because I can already hear the outrage permeating through this webinar. So before anybody blows me up on the chat or in the Q&A, this is nationally, right? And if you’re looking at costs like not what you just buy and what you sell it for, you actually need to adjust the cost of your annual property tax, school tax, utility tax, insurance, any upkeep like your roof or foundation repair in Texas, you know, um, etc. So, yes, I understand real estate can be very lucrative, but kind of as a whole, it is not. But you need a place to live. So, and if you have rental, it spins off a dividend. So, there is something about that.
Um,
so I love this chart. So it goes back 42 years I think. No, longer than that. Yeah. Yeah. 42 years. And um, so in this so these gray bars, so let me explain this what this is briefly. So the gray bars are when the market is what the market ended December 31st, right? So the year end. So in 1983 the market was up like 20some percent. In 84 it was up I don’t know seven or eight% somewhere around there. And if it’s below that line it was down right. So 2008 the market was down about 39%. So if you look at that there’s 42 years the market was down seven times. So that means it was up 35 times. So that means most of the time you get a win 75 80% of the time. Um, but again the devil is in the details and we’ll give you context. So
we’ll give you some context. What those teal dots are is what the draw down was the decline for that given year. So even your winning 75 80% of the time every year you are having a draw down. So it is rough. It can be a rough path. That’s why we always say, hey, there’s a reason why we allocate. Um, you want to be mindful of that on how you invest because there’s a lot of heartburn along that path. So, can you time the market? Um, maybe in the short term, but historically, not so much in the long term. As you can see, just the buying and holding and then some of the buys and sells, right? You buy after a trough, you sell after a peak, you end up with considerably less money. Now, it’s a very long period of time, but even in the shorter long period, it still matters. So, what we say is don’t miss the best days of trading, right? Um, as you can see, being in the market, not trying to time the market. Um, you want to be in the market, but be mindful. And basically what this chart says, I’ll give you an idea. So, we’ll pick
we’ll pick something that let’s go to 1980 because 1980 is always really interesting or 19 Yeah, 1980. Um, so basically what it said over that decade the market was up the S&P was up 227%. Right. But if you miss the best 10 best trading days, and that’s not the 10 best trading days every year for that decade. That is the 10 best trading days over the entire decade. Your return was more than h less than half. And the reason for that is it’s it’s behavioral science, right? Um and and basically what happens is when the market gets smashed, people are like, “Oh my god, I got to get out of this. I’m going to sell my position and I’ll get back in.” And I’ve heard this many times. Can’t we sell and then get back in when the market gets better? I was like, “Yeah, sure we can.” But the question is, when is the market better, right? Especially when the market trades on future expectations. So, you usually don’t feel better until well after the market’s already recovered. And then you know you you sold low and then you bought high. And I am again don’t confuse this. I’m not saying sit in here throw hell high water. You don’t worry about it. You don’t need to worry about it. You just need to be mindful on how your positions are concentrated etc. But again, don’t try to time the market. It’s time in the market, right? It’s not timing of the market. Um, and I know a lot is made of who’s in the White House and there’s a lot of fingerpointing that goes on through the decades and it probably will continue. But the reality is presidents get they often get a lot of credit, sometimes too much credit for things that go well and when things don’t go well. Um, as you can see from from the earlier data, right, there’s just a lot more moving parts to the economy than the politicians care to admit because well then they might not be as important as as we think they are. Well, so at the end of the day, businesses do business and continue to show profit right throughout the different administrations. Time is on your side, but again, be mindful.
So, how can we help you navigate through some of those times of uncertainty such as this? Um, like I said, we are award planning as allocation modeling um is what we do. So, you know, whether we’re helping you plan some of those questions that are an, you know, that are unanswered, social security, pension, cash flow management, uh, if you haven’t done a financial plan, I encourage you to do that. It’s something we do as part of the service for our members here. Uh we have some estate planning coordination where we can actually coordinate you know some of the basic wills, trusts, uh hibbit uh letters, things like that. Um we have many no free products and retirement strategies. Uh looking at lifetime income, how you how you actually look at your planning there, some dividend portfolios, etc. And we do like the feebased structure, things like that. some of the lowcost passive portfolios as well. Look, I want to thank everybody for attending. Um, and if you have questions, this is the Q&A part. So, I’m going to put up a one question survey. So, it’s a two-part one part. So, type any questions that you have. And we have some questions already there and there’s some other talking points. So, we have, you know, five minutes, maybe seven minutes um as far as answering some of those questions. uh if you’d like to have a call for me also that QR code will take you directly to my calendar so you can go ahead and schedule some time if you want to talk about something on an individual basis on how we can help you. Um but I will also put up a poll uh if you want to be contacted by us. Obviously it’s no pressure but I do think if you haven’t worked with AIS before um you probably be pretty interesting on what we do and how we how we approach things. Uh let’s look at some of those questions while while we’re working on this. So you do to investing? How can my money be used to invest? So that is a great question. Um I would say this um it kind of depends on the individual and basically it really is a function of your goals. Uh that would be one of those things that go ahead and hit yes and we can look at specifically what you’re doing. Get an idea for your risk tolerance. What experience if any have you had in the past and say hey these are some of the the uh options that are available on how you could structure that. uh in the recession dashboard where you showed current versus prior recessions. How go back did you go in those prior recessions? You have to go to see mostly the green result like today. In other words, the 1991 recession. You have to go back to 88 to see all that. No. Um you don’t have to go back that far because those are actually separate. Um they’re actually separate periods of time. So basically when you look at recessions, so um the uh the economic bureau will will go back and and they’ll look at those and they’ll say, “Hey, this is when it started. This is when it ended.” And and they can usually determine that pretty quickly, but they usually determine it after the fact. Hopefully that answered the question. Unfortunately, you missed 15 minutes. Was this webinar recorded? Unfortunately, no, it isn’t. For compliance reasons, we cannot repost these. These are actually just made for like a live webinar, a live Q&A, etc. But I will tell you if you have any questions, one of the things we do on planning, if you have any questions, just go ahead and either hit the QR code, um, you can schedule some time or give me a call. Um, or just say, “Yeah, give me a call and we can kind of figure out how that applies to you.” Uh, let’s see any other questions.
So, a couple of points while we’re having people either ask questions or not because I do get these questions quite a bit. um when people talk about the 1990s right in that.com bust uh they’re like hey you know this AI feel and this tech run you know it kind of feels the same and I would say that yes there are some similarities to it but it’s really really different and basically your biggest difference is there’s money now right when we were doing the com those companies didn’t have any money they weren’t making any money people were just buying because they were buying because they’re do well right now like if you look at their earnings per shares like much much much much better now with those companies. Um and and the PE earnings the price earning those are much much lower too. So you have better earnings the PE is much lower. So it’s a much more stable environment than it was in the 1990s. Um how do we invest in today’s market? Um it’s a good question. It’s a complicated question but it’s a good question. So so what I would say is is one of the things that we do with our clients now is is we look at hedging, right? We look at taking profits because there’s a lot of volatility. So, we can look at kind of protecting some of your downside. And and the reason why we can do this is we we have access to institutional things that you really don’t have in a traditional retail environment, whether you’re in the Fidelity side or or Vanguard or Schwab or whomever. You just don’t cuz some of the things that we do where I came from, you had to be worth 10 million or more to do it. So, the credit union does not have that limit. They allow access. So you can just do things that you couldn’t do before. I guess the wealth I guess wealth, right? Um Oh, a debt question. That’s pretty good. Okay, so the question on on um so our debt because yes 39 trillion is a lot and China’s probably the biggest holder of our debt. So So there said and think it’s just more talking heads out there, right? you know, on on internet and stuff and they’re like, “Ah, China can just call our debt and then we’d be in trouble.” And two things. One, you can’t call that debt. That debt’s out there. What they could do is sell the debt, dump the market, but they would be absolutely crushing themselves if they did that because again, demand, you would have a problem, right? So now you’d have this huge supply, not as much demand. So that price would have to fall. So they’d get absolutely smashed on that. and they’re not really interested in tanking that that holding because it’s vast. Uh maybe one more. All right, good one on this one. So, private credit. So, we don’t talk about this much, but earlier in the year there were some potential defaults in the private credit market, right? where um and they’re like, “Oh, is this is this kind of like 2007 where the credit the credit market just got absolutely hammered and it it caused the stock market to fall and and subsequently cause the failure of Lehman Brothers and Bear Sterns etc. and and not really this is not really even close to the same and and simply because of this um the private credit market is only about 5%. It’s really a small percentage only about 5% of our country’s G GDP, right? But in 2007, those mortgage back securities, right? If we remember those, those mortgage back securities uh were over 30% of the GDP. So they had a really really big share. So they had a really big impact. And there were some problems in the government structure on how they were doing that. And thank God they they corrected. It wasn’t TARP that fixed it. It was basically the markettomarket. they finally changed a lot on how on how how those mortgage back securities were priced and magically we started to see a recovery. So with that I am Hey, we’re 4 minutes till three. Um or at least I think I am. It looks like it. Yes, we are. So it looks like we had all the questions. Thank you so much for the participation today. I really appreciate it. I hope you guys have a wonderful day uh today and be safe and I hope to see you on future webinars. Take care. Bye now.