Thoughtful Money with Adam Taggart

Is The Market Correction Over? | Lance Roberts & Adam Taggart

Sat Apr 27 2024

market overviewinflationeconomic growthglobal economic outlookwealth building strategies

Description

This episode covers various topics including the market overview, inflation and economic growth, global economic outlook, and wealth building strategies. It provides insights into the current state of the market, factors influencing inflation rates, global economic trends, and practical tips for building wealth. The episode emphasizes the importance of understanding market dynamics, maintaining financial discipline, and seeking professional advice when necessary.

Insights

Market Overview

The market is at a critical juncture, with potential to retest recent lows or reach all-time highs.

Inflation and Economic Growth

Inflation is driven by supply versus demand, not just monetary or fiscal policy.

Global Economic Outlook

The influx of $1 trillion back into liquidity is expected to boost asset prices in the short term.

Wealth Building Strategies

Building wealth requires establishing good financial habits and processes over time.

Summary

Transcript

Market Overview

00:00 - 13:19

The market is at a critical juncture, with potential to retest recent lows or reach all-time highs.
A new premium service called Macropass has been launched for newsletter subscribers on Thoughtful Money.
Recent economic data shows slower GDP growth and higher inflation, leading to discussions about stagflation.
Headline data can be misleading, as seen in the case of PCE Core Price Index's volatility.
Personal consumption expenditures (PCE) and GDP show a strong correlation, indicating a decline in PCE since 2020-2021.
The projection shows GDP returning to normal growth rates by the end of 2025, impacting PCE and inflation.
The Fed is focused on cutting rates rather than hiking rates due to clear data trends.
Stagflation concerns are addressed with expectations of decreasing inflation as GDP growth declines.
Bond portfolio allocation includes underweighting duration and expecting yields to fall as the Fed cuts rates.
Multiple portfolio models are managed based on individual needs and risk tolerance, emphasizing customization over cookie-cutter approaches.

Inflation and Economic Growth

13:01 - 44:41

Inflation is driven by supply versus demand, not just monetary or fiscal policy.
Limited supply and high demand lead to price increases, not necessarily price gouging.
Economic growth is slowing due to a balance of supply and demand, impacting inflation rates.
Future changes in bond market thesis depend on policy shifts like increased liquidity or infrastructure spending.
Current economic status quo suggests continued slowing of economic growth and potential stagflation.
Inflation is about the rate of change in prices, not just high prices.
Government measures like employment and inflation are crucial for markets.
CPI, a key measure of inflation, includes shelter costs which can impact the overall index.
Prices for goods and services may not come down significantly due to inflation resetting baselines.
Inflation leads to a reset in baseline prices, making it unlikely for certain prices to return to previous levels.
Wage prices generally do not decrease due to employee resistance.
People become accustomed to higher prices and rates over time, accepting them as the new normal.
Short-term inflation is highly correlated with commodity and oil prices, while long-term inflation requires higher economic growth rates.
Shelter costs play a significant role in inflation indices, with projections suggesting a decline in shelter costs may lead to lower overall inflation rates.
Health care costs adjust once a year, leading to a big bump in January and February but stabilizing for the rest of the year.
Rental contracts reset monthly, impacting inflation rates with a nine-month lag to CPI.
Various rental rate indicators suggest rents are either increasing or decreasing based on location and demand.
Potential triggers for inflation include Treasury holding nearly a trillion dollars that may flow into the market, impacting inflation.

Global Economic Outlook

44:19 - 1:10:38

The influx of $1 trillion back into liquidity is expected to boost asset prices in the short term.
Increased wealth from rising asset prices may not lead to a significant surge in spending by the top income earners.
China's shift from deflation to inflation due to stimulus programs could impact global inflation rates.
Stimulus efforts by countries outside the US may not result in substantial economic growth globally, as their dependence on US demand for cheaper goods persists.
There is a discussion on the economic imbalance between the US and the rest of the world, with predictions that they will eventually meet at around 2% global economic growth.
Factors such as Fed rate cuts, fiscal stimulus, and potential recession concerns are analyzed for their impact on inflation.
The importance of stimulating consumer economic activity through supply and demand dynamics is highlighted, especially in relation to China's growth and retail sales.
Market analysis indicates a critical juncture with considerations of moving averages, MACD buy signals, and potential market rally or retest scenarios.
The market is currently at a critical juncture with the potential for retesting recent lows or reaching all-time highs in the short term.
Seasonal patterns suggest a rally in May and June, followed by a correction leading up to the election.
CEO confidence has risen above the 50 line, indicating potential increase in stock buybacks through the end of the year.
Buybacks are crucial for market support, but other dynamics and election uncertainties may lead to risk-off trading closer to August, September, October.
A recent correction in the market was seen as healthy and necessary.
Market optimism is influenced by election outcomes and economic policies.
Earnings growth is tied to stable economic growth and inflation rates.
Lance Roberts advises younger adults to focus on paying off debt before investing.

Wealth Building Strategies

1:10:10 - 1:42:28

Dave Ramsey's pay down program for credit cards involves paying four times the minimum payment on the card with the highest interest rate and snowballing payments to other cards once one is paid off.
Avoid using credit cards after paying off debt to maintain financial discipline.
Build up six months' worth of emergency savings in a money market account to cover expenses in case of job loss.
After paying off debt and saving emergency funds, focus on investing by maxing out your 401k plan at work and aiming to save 30% of gross income.
Consider contributing to a pre-tax 401(k) plan before switching to a Roth if unable to reach full funding initially.
Invest in an S&P 500 index fund regularly without trying to time the market for long-term savings.
Building wealth requires establishing good financial habits and processes over time.
Starting with dollar-cost averaging into an S&P index helps in understanding how the market works.
Learning about market trends and behaviors is crucial before venturing into individual stock portfolios or real estate investments.
Maintaining financial discipline, avoiding lifestyle inflation, and consistently saving and investing lead to long-term wealth accumulation.
A success story exemplifies how a disciplined approach to saving and investing can significantly increase net worth in a relatively short period.
Building wealth requires sacrifice and commitment, including giving up certain luxuries and possibly taking on additional work for extra income.
Transitioning from a survival financial state to stability can significantly improve quality of life and provide more control over one's circumstances.
Having a financial cushion is crucial to weather unexpected setbacks and gradually build wealth with less vulnerability.
Once a certain amount of capital is accumulated, opportunities for further wealth multiplication through investments like real estate, stocks, or businesses become more accessible.
Reaching a milestone amount like $100,000 can serve as a launching point for expanding investment strategies and seeking guidance from financial advisors.
Graduating from investing in S&P index to diversifying across asset classes is a good time to partner with a financial advisor.
Simplevisors platform will offer tools for young investors to start their wealth-building journey.
Conscientious frugality is emphasized for long-term wealth building, as seen in the habits of self-made millionaires.
Wealth should not be assumed based on appearances, as some wealthy individuals lead frugal lives.
Encouragement to save and invest by paying yourself first before other expenses.
Financial advisor discusses recent trades made in the portfolio, including adjustments in positions like AMD, Nvidia, Berkshire Hathaway, Costco, Walmart, and Apple.
Emphasis on looking beyond overall market performance to identify individual stocks with significant corrections for potential investment opportunities.
The importance of paying yourself first is emphasized.
Listeners are encouraged to tune into the weekly market recap for financial insights.
Consider scheduling a free consultation with endorsed financial advisors at ThoughtfulMoney.com.
Financial advisors prioritize those who are committed to wealth building goals.
Prompt follow-up is done for leads, but no excessive chasing if there's no response.