Flourish Insights, hosted by Director of Investments, Jay Pluimer, provides timely information on the markets, the economy, and the impact that they have on your investments.
Episode #81: Bond Market Outlook for 2025 In this episode, we're diving into an exciting development in the fixed-income market: the resurgence of bonds as a compelling investment option for investors. Bond income potential has reached its highest level in decades, offering investors a powerful tool for diversification. Does this mean the long-held mantra of TINA – There Is No Alternative to stocks – no longer applies? Let's dig into what elevated bond yields may mean for investors in 2025. Always check back for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com. Enjoying this podcast? Please write a review of this podcast on Apple Podcasts or Alexa! Send us your feedback online: https://pinecast.com/feedback/flourish-insights/2b30616b-033e-4405-9448-696813850ba6
Episode #80: Is the S&P 500 Index Too Top-Heavy? In this episode, we're diving into an important topic that could be impacting your portfolio – concentration risk in the S&P 500. We'll start with a recap and then discuss ways to balance this risk with small cap and international investments. Listen now! Don't forget to check back for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com. Please write a review of this podcast on Apple Podcasts or Alexa Send us your feedback online: https://pinecast.com/feedback/flourish-insights/37b80446-73a5-41c2-b899-bcf7b5c24d4d
Episode 79: Elections + Economy Do Not Equal Market Returns Do election results and the economy dictate market returns? In this special episode, Jay explains why it makes sense to be an evidence-based investor and shares market data and historical context to explain why the outcome of the election will not necessarily dictate what will happen in the markets. Listen now! Check back for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Enjoying this podcast? Please write a review of this podcast on Apple Podcasts or Alexa! Send us your feedback online: https://pinecast.com/feedback/flourish-insights/a493ec14-5c64-4a33-aace-9b1b7431c519
Episode #78: Federal Reserve Policy in 2024 The Federal Reserve is navigating a complex economic landscape in 2024, and they have made several notable moves this year. Let's review the Fed's stated objectives, the conundrum they continue to deal with, and expectations for the future. Always check back for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa Send us your feedback online: https://pinecast.com/feedback/flourish-insights/e6a9579b-7b15-47f8-8ceb-bea4189e7732
Episode #77: FOMO - Avoid the Investment Trap We're back with a new episode! Join Jay Pluimer as he tackles a common dilemma for many investors – how to handle FOMO, which is short for the Fear Of Missing Out. FOMO can impact investment decisions and potentially create a trap if it leads to making impulsive investment decisions that may not align with your long-term plan. Listen now and learn how to avoid it! Check back for more Flourish Insights with Jay Pluimer and don't forget to visit our blog at https://flourishwealthmanagement.com/flourish-insights/ If you enjoy the show, please write a review of this podcast on Apple Podcasts or Alexa! Thank you! Send us your feedback online: https://pinecast.com/feedback/flourish-insights/9b96f4b1-a863-45af-845c-325ab5eff114
Episode #76: Fate of the U.S. Dollar The U.S. Dollar has been the global reserve currency since 1944, when the Bretton Woods Agreement solidified the transition from the British Pound to U.S. Dollars. Recently, several clients have asked whether the U.S. Dollar can withstand challenges from growing currencies, like the Chinese Yuan, or from digital currencies. In this episode, we will review the history of currency markets, along with a deep dive into the strength of the U.S. Dollar compared to other major global currencies. Want more Flourish Insights? Check out our insights blog at https://www.flourishinsights.com. If you're enjoying the show, please rate and review it on Apple Podcasts or Alexa! EPISODE TRANSCRIPT Hi everyone, Jay Pluimer here with Flourish Insights. As the director of investments at Flourish Wealth Management, I take pride in providing our clients, colleagues, and friends with resources and information that can help them make strategic and effective choices regarding their investments. Did you know we have an Alexa Skill? To listen on your Alexa device, just say, “Alexa, play Flourish Insights.” Today, in response to client questions, we are discussing the Fate of the US Dollar. I appreciate when clients ask questions that challenge whether or not the foundations of the current market are sustainable in the future. Some of those questions relate to US versus International investments or the opportunities for a portfolio with 60% in Stocks and 40% in Bonds to earn an attractive return. An excellent example of client questions popped up recently when a couple different clients asked questions about the sustainability and reliability of the US Dollar as the global default currency. These questions challenged whether or not the US Dollar could withstand challenges from growing currencies like the Chinese Yuan or from digital currencies. It was a helpful opportunity to review the history of currency markets along with a deep dive into the strength of the US Dollar compared to other major global currencies. The US Dollar has been the global reserve currency since 1944 when the Bretton Woods Agreement solidified the transition from the British Pound to US Dollars. This was a reflection of the balance of power for the United States as the largest economy in the world in the 1940s, a status that the US continues to hold. Although the definition of a reserve currency can be complicated, the most effective way to explain this status is that countries selling goods and services to the US and are paid in dollars, meaning that the more business a country does with the US the more dollars they have in their Treasury. For example, China is the second largest economy in the world and a major trade partner of the United States, resulting in China holding over 1 Trillion US Dollars. The result is that it would be very difficult for the Chinese Yuan to replace the US Dollar as the global currency because that would significantly reduce the value of one of the largest assets sustaining the value of their own currency. The US Dollar represents about 60% of global foreign exchange reserves. The closest competitor is the Euro at 20% and no other currency represents more than 6%. A primary reason for the US Dollar to maintain its status as the global reserve currency is that it has consistently represented between 60% and 66% of global foreign exchange reserves, dominating all competitors by a significant margin. This consistency is impressive considering the introduction of the Euro as a global currency in 1999 and the entry of the Chinese Yuan in 2010. In addition, the US Dollar is valued relative to other currencies while the Chinese Yuan has an exchange rate that is controlled by the Chinese Government, an arrangement that has created complications for currency markets on a periodic basis over the years. A final aspect to consider for a reserve currency is the percent of global transactions that take place in that currency. Each transaction means US Dollars are being bought and sold, resulting in a transition of currency between the two countries. Right now over 96% of transactions in the Americas are in US Dollars and 70% of global transactions are also in US Dollars. Any competing currency would need to surpass these benchmarks to challenge the US Dollar as the reserve currency, something that hasn't happened over at least the past 50 years. The premise that a digital currency could replace the US Dollar would mean that almost all of the transactions would need to change to a new currency with the understanding that each transaction would effectively reset the currency value because there wouldn't be a global economy supporting the value of the currency. It would also mean that countries like China would have to be comfortable selling over $1 Trillion of US Dollars in exchange for a digital currency that is effectively controlled by consumers instead of a government or governmental agency. One of the digital currency options referenced in a currency article forwarded by a client was being launched by Russia and Iran, two countries that represent under 5% of the global economy, meaning that the other 95% of the world would need to agree that two of the smaller economies would be preferred over the United States which represents almost 60% of the global economy. Similar to the digital currency question, anything is possible but it would be hard to imagine governments and corporations taking the risk that the value of their goods and services wouldn't be supported by a recognizable economic infrastructure. Based on this research, the Fate of the US Dollar is strong. As long as the United States is the largest open trading economy in the world, as long as every country and company wants access to the US economy, and as long as it would be both an inconvenience and a big risk to switch default currencies, the position of the US Dollar as the reserve currency is secure. It was a helpful exercise to review the reasons why the US Dollar is the reserve currency and what would be required for an alternative option to take its place, but it was also reassuring to conclude that a significant change is not visible on the horizon. For more up-to-date insights into the market, the economy, and what it all means for your portfolio, subscribe to Flourish Insights on Apple Podcasts, Spotify, or wherever you listen to podcasts. You can also find our full catalog of episodes at FlourishInsights.com. Thanks so much for listening, and don't forget to stay focused and think long-term. Send us your feedback online: https://pinecast.com/feedback/flourish-insights/bb7e7892-3ee3-4727-bb53-1a12d9231f86
Episode #75: The 2022 Bear Market is Over The bottom of the 2022 bear market happened in mid-October when the market was down 25% on a year-to-date basis, and it was the second time the market hit a 25% dip last year, which is actually better than the average bear market loss of 34%. There has been upward momentum since then, and Jay Pluimer discusses the specifics in this optimistic episode. Want more Flourish Insights? Check out the Insights Blog at https://www.flourishinsights.com. If you enjoyed this episode, please write a review of this podcast on Apple Podcasts or Alexa. EPISODE TRANSCRIPT Hi everyone, Jay Pluimer here with Flourish Insights. As the director of investments at Flourish Wealth Management, I take pride in providing our clients, colleagues, and friends with resources and information that can help them make strategic and effective choices regarding their investments. If you've been enjoying the show, be sure to subscribe on Apple, Spotify, Google, or wherever you get your podcasts, so you'll never miss an episode. Today, we are discussing what measures are used to determine that The 2022 Bear Market is Over. The technical definition of a Bear Market for Stocks is a loss of 20% or more, while the definition of a Bull Market for Stocks is a gain of 20% or more. Because bear markets frequently decline by more than 20%, the technical end of a bear market frequently happens before the market has made a full recovery. In addition, the math of bear and bull market cycles don't equate to a full recovery. For example, a market starting at $100 with a 20% drop will have a value of $80, but a gain of 20% from $80 results in a value of $96 which meets the bull market recovery but doesn't mean the investor has made all of their money back. The bottom of the 2022 bear market happened in mid-October when the market was down 25% on a year-to-date basis. That was the second time the market hit a 25% dip last year, which is actually better than the average bear market loss of 34%. There was a mini-rally for stocks in the latter part of the year as the S&P 500 Index ended with a loss of 19%. The market has continued to gain ground over the first 5-plus months of 2023, leading to a 20% gain from the mid-October 2022 bottom and the official end of the 2022 bear market. There have been a few different factors supporting the stock market recovery, some of which are more favorable than others. The least positive aspect of the 2023 recovery is the dominance of Big Tech stocks, particularly stocks like Nvidia and Apple with large exposure to Artificial Intelligence. This has led to what's called a narrow or shallow recovery because a small number of stocks have driven the market to a 20% recovery, meaning that a large number of companies have not made meaningful progress to recoup their losses from 2022. You may recall references to so-called FAANG stocks which referred to Facebook, Apple, Amazon, Netflix and Google, the Big Tech stocks that drove market performance for most of the 2010s. According to Goldman Sachs, the new acronym for Big Tech is MAGMA which stands for Meta (the new brand of Facebook), Amazon, Google, Microsoft, and Apple. These 5 stocks currently represent 24% of the S&P 500 Index and have represented an outsized percentage of stock market returns in 2023. For example, MAGMA stocks are up 42% year-to-date while the other 495 stocks in the Index are up a combined 2%. This lack of market depth is definitely a concern and will play a big role in determining whether or not the new bull market will be able to sustain itself. The other key drivers of the stock market recovery reflect optimism that (1) we are getting closer to the end of high inflation and that (2) the Federal Reserve will begin to cut interest rates at some point in 2023 or early 2024. We think the market might be early in the expectations for Fed rate cuts and that there is actually a good chance that there is at least one more rate hike before the end of the year, but we are more optimistic about the downward trend for inflation rates. The most recent Consumer Price Index or CPI data from April reflected an inflation rate of 5%, down significantly from the 2022 high of 9% but with room for additional progress toward the 2% target inflation rate. The 2022 bear market was the longest since the 1940s, lasting 14 months compared to the average duration of 12-months, while the 25% drop was below the bear market average of 34%. I won't miss the bear market but I'm not exactly rushing into the arms of the new bull market because it would be helpful to see more stocks participating in the recovery with a more definitive timeline for when the Fed will start to cut rates. In fact, we expect to experience a fair amount of stock market volatility over the next 3 to 6 months while we get clarity about progress for lowering inflation and whether or not the US will be able to avoid a recession. There could also be market swings if the Fed hikes interest rates or takes longer to begin cutting rates than market participants think currently. So although it's important to note the end of a bear market, we are balancing acknowledgment of the market transition with patience for a more sustained recovery. If you enjoyed this episode, please take a moment to rate and review us on Apple Podcasts so that more investors like you can find the show. And don't forget to check out Flourish Wealth Management's other podcast, Flourish Financially with Kathy Longo, available on all your favorite podcast providers. Thanks for listening, and don't forget to stay focused and think long-term. Send us your feedback online: https://pinecast.com/feedback/flourish-insights/425f32af-969d-46e1-8749-733a767ff11d
Episode #74: Emotional Roller-Coaster Ride With the last market all-time high occurring more than 450 days ago - and another not yet in sight - the stock market has been quite the emotional rollercoaster for investors. Looking at history, though, shows that time favors the patient investor. Jay Pluimer shares tips on how to weather the ride back to the top in this optimistic episode. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com. Enjoying the show? Please write a review of this podcast on Apple Podcasts or Alexa! Episode Transcript: Hi everyone, Jay Pluimer here with Flourish Insights. As the director of investments at Flourish Wealth Management, I take pride in providing our clients, colleagues, and friends with resources and information that can help them make strategic and effective choices regarding their investments. If you've been enjoying the show, be sure to subscribe on Apple, Spotify, Google, or wherever you get your podcasts, so you'll never miss an episode. Today, we are discussing why investing in the stock market leads to an Emotional Roller Coaster Ride. The last time the stock market hit an all-time high was on January 3rd of 2022, which is over 450 days ago. It probably feels like longer for most investors, and there doesn't seem to be much hope on the near-term horizon that we will experience another market peak any time soon. Welcome to the emotional roller coaster ride called the Stock Market! There have been 11 Bear Markets with a drop of over 20% since the mid-1950s. The average stock market loss during those downturns has been a painful 35% and Bear Markets have lasted an average of 14 months. In addition, it has generally taken over 3 years for a market to exceed the previous all-time high through a Bear Market. Those are some scary statistics and are a big reason why investors generally have a much more vivid memory of the fall down a roller coaster than the slow trip to the prior peak. To brighten the mood a little, the stock market has had positive returns over 100% of the 20-year time periods and 95% of 10-year time periods. That means time is definitely in favor of the patient investor who keeps their money in the stock market for longer periods of time. Five-year returns have been positive over 88% of the time and 3-year returns have been positive over 84% of the time, meaning that even medium-term investors have a very good chance of making money on their investments. However, the numbers become closer to a coin flip when looking at 1-day stock market returns which are positive around 55% of the time. One-month returns aren't much better at 63% showing that investors will experience a lot of unfavorable daily losses on the way to experiencing a positive 20-year return. I think it can be helpful to compare the emotional ups and downs of the stock market to a roller coaster ride because there are significant similarities between the two. For example, 100% of investors make money over 20-year time periods and close to 100% of people who ride roller coasters are alive at the end of the ride. In addition, the downturns tend to produce screams and a desire to shut your eyes until the bad part is over. The ride to the top of the roller coaster is generally less exciting or memorable, except that part toward the end when the peak is approaching, which is also where the anxiety starts to build before everything turns downward. Those last couple of sentences were about the stock market but are hard to differentiate from the description of a roller coaster ride. I'm afraid of heights and am reluctant to ride roller coasters, but no matter how high my anxiety spikes during the ride I feel safe knowing I'll get through the ride. I encourage investors and clients to embrace a similar approach when looking at the daily, weekly, or monthly ups and downs in the stock market. It can be hard to remember hitting a peak while suffering through the initial downturn and the following smaller hills afterwards, but it's important to know that another peak is on its way. The biggest difference between a roller coaster and the stock market is that we can usually see when another upswing is coming our way on a roller coaster, while stock investors need to stay patient and remember that a recovery is inevitable no matter how bleak things might feel toward the bottom of the downturn. And please remember – the more often you look at your stock market investments the more likely it will make you feel terrible and lose hope for a recovery, even when your brain knows that your investments will end up with positive returns over longer periods of time. If you enjoyed this episode, please take a moment to rate and review us on Apple Podcasts so that more investors like you can find the show. And don't forget to check out Flourish Wealth Management's other podcast, Flourish Financially with Kathy Longo, available on all your favorite podcast providers. Thanks for listening, and don't forget to stay focused and think long-term. Send us your feedback online: https://pinecast.com/feedback/flourish-insights/7f9db6c5-8268-49d4-937e-7cd6ba2e83a9
Episode #73: If it Bleeds, it Leads Media companies are in the business of making money, and their profit motives tend to supersede other agendas. However, we may have reached a saturation point when it comes to negative financial news stories, with some investors having a skewed view of market performance that is not based in reality. It may be time for fewer flashy headlines and more context, and that's what we'll examine in this episode. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com, Please write a review of this podcast on Apple Podcasts or Alexa EPISODE TRANSCRIPT Hi everyone, Jay Pluimer here with Flourish Insights. As the director of investments at Flourish Wealth Management, I take pride in providing our clients, colleagues, and friends with resources and information that can help them make strategic and effective choices regarding their investments. Did you know we have an Alexa Skill? To listen on your Alexa device, just say, “Alexa, play Flourish Insights.” Today, we are discussing the role of media and their commitment to the premise that If it Bleeds, it Leads. This will not be an anti-media podcast episode. However, the reality is that the vast majority of media companies are in the business of making money. That fact is also true for social media companies that amplify messaging and storylines from mainstream media. The profit motive supersedes any potential political agendas for media companies, in my opinion, although some stories may be skewed to appeal to certain audiences. It has been startling to meet with a large number of Flourish clients over the past few months who are honestly surprised to see that their accounts have positive returns in the first few months of 2023. The stock and bond markets have both been up pretty consistently through the first 4 months of the year, including parts of the market that have done poorly over the past years like Emerging Markets and International Stocks. Although I don't expect the media to provide a fair and balanced approach to all of their news stories, the emphasis on negative storylines may have reached a saturation point when investors are no longer aware that they are making money. For example, I was watching the news while getting ready for work in late February when a story tease before a commercial break stated “don't check your 401k statements”. That statement caught my attention because I wasn't aware of a significant market dip over the past few days, so I stopped what I was doing to look at the latest financial news stories and market movements, all of which were positive for the week. I was motivated by the tease to stick around for the news story which basically summarized that 2022 was a bad year for Stocks and Bonds, noting that globally balanced portfolios with around 60% in Stocks and 40% in Bonds had one of their worst years on record. All of that information was correct, but it wasn't any more relevant in late February than it was at the beginning of the year and there was no mention during the news story about stock markets performing well to start the year. In addition, if I was tempted to look up market performance by watching the news story, then I can only imagine how many other people did the exact opposite of the tease and checked their 401k statements that morning. My conclusion was that the story was mostly accurate while leaving out any information about positive trends, but it wasn't “news” from the standpoint that the information wasn't new. The fact is that negative storylines about bank failures or high mortgage rates or growing credit card debt can be accurate, but need more context than is being provided by most media companies to fully understand the story that is being presented. Leading a newscast by showing logos of local banks in a story about bank failures is designed to feed into fears that your local banks are in trouble. Although the news story ends up being about Silicon Valley Bank and Signature Bank New York, both of which failed earlier this year, the implication is that the same thing could happen to local banks that are used by the viewers. The missing context is that Silicon Valley Bank and Signature Bank New York had a very specific chain of events that led to their failures, so unless your local bank has huge venture capital loans, has over 25% of its customers in the Cryptocurrency industry, or has overextended themselves with bad investments your accounts are safe. Plus, FDIC Insurance supports cash and CD balances up to $250,000 which is probably more than the vast majority of viewers would have at the bank. I don't blame the media for telling stories that attract and retain viewers because that's what they need to do in order to have advertising dollars. I also don't blame members of the media for not being experts about the banking system or failing to differentiate between a healthy balance sheet at a local bank and a unique set of bad decisions at a bank in a different part of the country. However, it's important for members of the Financial Services industry to share context and information to help clients understand the news better and then allow them to make their own conclusions. For example, I had a client ask me whether or not they should use some of their cash to buy bars of gold, a question that I am guessing was motivated by fears and worries created by the media (FYI that I said “no” to buying gold because it earns 0% interest, never pays a dividend, and there is no guarantee of getting the value of your investment back compared to buying a 12-month CD with 5% interest and FDIC Insurance on the value of your investment). The goal of this podcast is to encourage listeners to look for more information and ask your own questions whenever you see a news story that provokes fear. That applies as much to a warning about urban violence and tornadoes as it does to concerns about the banking industry or your current 401k balance. In addition, it's important to remember that the person telling you the news has a motive to make money off the information they are sharing. The media isn't necessarily good or bad, but focusing most of the daily coverage on negative news stories without complete context will consistently create an environment of fear and anxiety that isn't conducive to making good long-term financial decisions. For more up-to-date insights into the market, the economy, and what it all means for your portfolio, subscribe to Flourish Insights on Apple Podcasts, Spotify, or wherever you listen to podcasts. You can also find our full catalogue of episodes at FlourishInsights.com. Thanks so much for listening, and don't forget to stay focused and think long-term. Send us your feedback online: https://pinecast.com/feedback/flourish-insights/fb3c3506-b983-48c4-9756-30a19c080a64
Episode #72: "Mr. Worldwide" is Back For the past 14 years, U.S. stocks have outperformed international stocks by a wide margin. However, things have begun to change over the last several months. Although it's too early to tell at this point whether or not this trend change is sustainable, there are reasons to favor International stocks in the current market environment. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa Episode Transcript: Hi everyone, Jay Pluimer here with Flourish Insights. As the director of investments at Flourish Wealth Management, I take pride in providing our clients, colleagues, and friends with resources and information that can help them make strategic and effective choices regarding their investments. If you've been enjoying the show, be sure to subscribe on Apple, Spotify, Google, or wherever you get your podcasts, so you'll never miss an episode. Today, we are discussing why “Mr. Worldwide” is Back. For pop music fans, the title “Mr. Worldwide” is immediately associated with the artist named Pitbull. I like his music because it incorporates a global beat and brings a lot of positive energy. It's also fortunate that Pitbull has collaborated with a large number of other music stars because that brought a lot of depth to his music. He gave himself the title “Mr. Worldwide” based on the premise that his songs incorporated themes and genres from around the world, that he toured the world performing his music, and that as part of an immigrant family growing up in the United States Pitbull represents the American Dream of success that is generally shared around the world. I promise that is the end of my efforts to take a deep dive into pop music culture! Today's podcast is really about the positive returns from International Stock investments which are affirming the desire to have a globally diversified investment portfolio. We frequently reference a chart in client meetings from JP Morgan showing that US Stocks have outperformed International Stocks for over 14 years with a performance advantage of over 275%. It has been difficult to justify global diversification over that time period because US Stocks were providing better performance almost every year, and frequently with significantly better returns. However, International Stocks have flipped the script over the past few months. The MSCI Europe Asia Far East (aka EAFE) market Index is up over 23% since November 1st of 2022 compared to 7% for the S&P 500 Index. That is the largest performance differential between these two stock market indexes over the past 15 years and the first that has demonstrably favored International stocks. Although it's too early to tell at this point whether or not this trend change is sustainable, there are reasons to favor International stocks in the current market environment. The past 10+ years featured low inflation and historically low interest rates, an environment that favored Growth-oriented investments. Technology and Communications stocks represent 30% of the S&P 500 Index compared to just 15% for the MSCI EAFE, so a favorable environment for Growth stocks will consistently favor US markets. However, a period with moderate inflation and moderate interest rates will favor stocks that have consistent revenues, profits, and favorable valuations (also known as Value stocks). The EAFE Index has a 47% allocation to Value sectors like Industrials, Financials, Energy, and Materials compared to 27% for the S&P 500 Index. Assuming the era of free money is over, there are reasons to add exposure to Value investments. A sustained period of moderate interest rates is favorable for Financial Services companies like banks because they will be able to generate more revenues from loans with higher interest rate payments. In addition, most Financial Services stocks have relatively low prices due to mediocre long-term performance. Similarly, Industrial stocks have lagged due to a lack of investment in manufacturing over the past decade but the transition to “near-shoring” is adding manufacturing capabilities in India, Mexico, and Canada as companies shift away from China. The emphasis on renewable energy also means that many of the existing manufacturing facilities are being updated to be more efficient and sustainable across the globe. The last time period of sustained International Stock outperformance was in the 2000s before the Great Recession. International Stocks outperformed by over 65% during those 7 years, which was the longest time period of outperformance by either US or International Stocks until the recent 14+ years of US stock market dominance. We have always incorporated a global stock market approach in client portfolios at Flourish with International and Emerging Markets representing 30% to 35% of the stock investments. The commitment to International Stock diversification has consistently demonstrated benefits from a risk reduction standpoint, and it would be nice if clients experience a performance benefit for the first time in the 9-year history of Flourish. Although our Investment Committee has not made a decision to actively increase exposure to International Stocks at this time, it will be an important topic of discussion in our monthly meetings as we explore tactical asset allocation opportunities. If you enjoyed this episode, please take a moment to rate and review us on Apple Podcasts so that more investors like you can find the show. And don't forget to check out Flourish Wealth Management's other podcast, Flourish Financially with Kathy Longo, available on all your favorite podcast providers. Thanks for listening, and don't forget to stay focused and think long-term. Send us your feedback online: https://pinecast.com/feedback/flourish-insights/e0080198-08e3-4d5b-9651-8b13a6ef2566
Episode #71: The Debt Ceiling Question The U.S. Government hit its legal debt limit of $31.4 trillion in debt on January 19, 2023, and we're getting closer and closer to June - when the 6-month extension expires. So, will Congress take measures to reset the limit? Will we have another close call? What does it all mean for the markets? I answer these questions and more in this episode. Want more Flourish Insights? Check out our insights blog at https://www.flourishinsights.com EPISODE TRANSCRIPT: Hi everyone, Jay Pluimer here with Flourish Insights. As the director of investments at Flourish Wealth Management, I take pride in providing our clients, colleagues, and friends with resources and information that can help them make strategic and effective choices regarding their investments. If you've been enjoying the show, be sure to subscribe on Apple, Spotify, Google, or wherever you get your podcasts, so you'll never miss an episode. Today, we are discussing The Debt Ceiling Question. An interesting comment about recording this episode in late February is that over 95% of the articles I looked at about the debt ceiling were dated in mid- to late-January. That's odd because we are a month closer to running out of money but conversations about the debt ceiling are no longer grabbing headlines or being featured in doom-and-gloom articles. Just a guess, but debt ceiling articles will become all rage again and grabbing attention at some point in June because that's when the debt ceiling will be approaching a final expiration date. The US Government hit its legal debt limit of $31.4 trillion in debt on January 19th, 2023. By definition, the debt ceiling sets the limit that the US Government can borrow to keep the country running. The US has used debt ceilings since 1917 to cap government spending, although its been a very flexible cap that has been raised or suspended 102 times over the past 104 years. The US can continue to spend and borrow money for a few months due to “extraordinary measures” by the Treasury Department and the Federal Reserve, but those can't keep the government afloat for more than about 6 months. Congress is in charge of the debt ceiling and is responsible for resetting the debt limit as needed. The last extension took place with minimal fanfare back in 2021 when Covid relief spending still had bipartisan support. In contrast, partisanship is all the rage in Washington DC these days as both sides of the political aisle are using the debt ceiling topic as a beach ball to whack back and forth in the Halls of Congress. The odds are in favor of a deal happening at some point over the next few months because there has never been a time when the US failed to increase the debt ceiling or defaulted on debt payments. The closest call to a default took place in 2011 when negotiations concluded just 2 days before the US was going to run out of money. The close call resulted in the first and only downgrade for the US Credit Rating from AAA to AA+, plus the US Dollar sold off and the stock market dropped by over 16%. An uncomfortable similarity between now and 2011 is that we had the exact same political configuration then as we do today with a Democratic President and Senate paired with a Republican majority in the House of Representatives. Many analysts and commentators have expressed surprise that the US Stock Market is up over 8% through the first 7 weeks of the year with the debt ceiling crisis looming over the markets. Without getting into the weeds of political discourse in Washington DC, both parties have legitimate arguments about how the US Government should or shouldn't spend money in the future. Although there don't seem to be any adults in the room to help politicians put their egos on the back burner and negotiate in good faith at the moment, there is hope that fear will eventually provide the motivation necessary for a solution to take place. And there is good reason for politicians from whichever party looks most responsible for failing to negotiate in good faith to be fearful because Republicans took the brunt of the blame for the debt ceiling crisis in 2011 and then performed poorly at the polls during the 2012 election. From my perspective, the debt ceiling crisis will most likely get lumped into conversations about persistently high levels of inflation that will continue to be a problem through the first half of 2023. Although these considerations are independent of each other, it's hard to argue with the coincidence when two worrisome things are happening at the same time. However, if the stock and bond markets start to dip in April and May due to these concerns that will put additional pressure on Congress to make a deal. The most likely outcome is increased market volatility with the potential to give up most or all of the gains from the first couple of months of 2023 until a deal happens. At that point we expect the Fed to be closer to the end of their interest rate increases which should provide a dual tailwind for the markets during the second half of the year. What is the worst-case scenario? There are scenarios where hardliners from either or both political parties refuse to negotiate and commit to turning the global markets upside down. That could put not only the credit rating of US debt at risk but it would also likely result in a significant downfall for the US Dollar, creating a powerful double whammy that would be hard to recover from. The global economy does not want this scenario to take place because there isn't another great option for a default currency or a safe lender that issues as much debt as the US does on an annual basis. I don't want to go too far down this line of thought because the chances of a default happening are low…but they aren't zero. What should investors do to prepare for something that may or may not create significant market turmoil? Historical evidence consistently demonstrates that the best option is to stay fully invested, maintain a diversified portfolio, add money if possible during a downturn, and make sure you have an emergency reserve to support at least 6 months of spending if a worst-case scenario takes place. Our Team at Flourish will provide as much education as possible throughout the political negotiating process, staying optimistic for a timely resolution while also being prepared for a default. In addition, I recommend that you avoid getting too invested in watching headlines or articles while the politicians in Washington DC play beach volleyball with the debt ceiling topic. None of us can influence this conversation until the next time we vote, so it won't help anybody to get too wrapped up in the debt ceiling conversation. If you enjoyed this episode, please take a moment to rate and review us on Apple Podcasts so that more investors like you can find the show. And don't forget to check out Flourish Wealth Management's other podcast, Flourish Financially with Kathy Longo, available on all your favorite podcast providers. Thanks for listening, and don't forget to stay focused and think long-term. Send us your feedback online: https://pinecast.com/feedback/flourish-insights/a384097b-b182-4f0a-8201-423014e67b99
Episode #70: Dividends Reward Discipline The traditional approach to dividends is that they are an important supplement to generating income and can be used to support a steady withdrawal rate in retirement. An updated approach is that dividends are an important aspect of total return and help grow a portfolio through reinvestment. We're exploring this topic today, using historical data from the S&P 500 to illustrate important points for investors. Always check back for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com. EPISODE TRANSCRIPT Hi everyone, Jay Pluimer here with Flourish Insights. As the director of investments at Flourish Wealth Management, I take pride in providing our clients, colleagues, and friends with resources and information that can help them make strategic and effective choices regarding their investments. Did you know we have an Alexa Skill? To listen on your Alexa device, just say, “Alexa, play Flourish Insights.” Today, we are reviewing the impact dividend income has on long-term performance by stating that Dividends Reward Discipline. Dividends can be a surprisingly controversial discussion topic for investors and investment professionals. The traditional approach to dividends is that they are an important supplement to generating income and can be used to support a steady withdrawal rate in retirement. An updated approach is that dividends are an important aspect of total return and help grow a portfolio through reinvestment. Basically, dividends can be used to support distributions or be reinvested for long-term growth. In this episode, we will focus on the benefits of reinvesting dividends as part of a disciplined approach for long-term investors. I will be referencing information and statistics for the S&P 500 Index throughout this episode, so this is a quick reminder that the S&P 500 measures performance for the largest 500 companies on the US Stock Market. The companies in the S&P 500 change over time, based on market movements, and can be significantly different over time. This Index has the most reliable historical data and is a good reflection of US Large Cap stocks at any point in time. Although there are other good indexes to capture historical performance for this part of the market, the data I will reference over the next few minutes is all for the S&P 500. From 1928 to the end of 2022 the stock market increased by 21,500%, which leads to an annualized return of 5.8%. That is the return for the price of the Index and doesn't include reinvested dividends. Although 5.8% is a solid return, the S&P 500 Index returned 9.9% annually when dividends are reinvested and included in the total return calculation. In other words, reinvesting dividends resulted in a return that was almost 70% higher over a 95-year time period. My initial reaction to these numbers was surprise because I did not think dividend payments of a few percentage points a year would add up to such a big difference in returns. The gap is huge when comparing the growth of $1 from 1928 with price increases alone growing to $216 compared to $7,500 with dividend reinvestments. This is where the word discipline comes in because a significant part of the performance difference is due to compounding. Frequently referenced as the 8th Wonder of the World, a quote that is most often attributed to Albert Einstein, compounding reflects the impact of dividend payments from 80 or 90 years ago that are allowed to grow over time. The disciplined part is to let the dividends continue to grow instead of cashing them out to cover short-term spending needs. The longer the time period an investor has, the more compounding will work in their favor. In fact, once the historical performance data is broken down into components it becomes clear that dividends are not a magical source of investment returns; instead, the point is that leaving money in the market for multiple decades will increase the opportunity to maximize long-term gains. Reinvesting dividends to support higher long-term performance is an important aspect of being a disciplined investor. In addition, minimizing fees and taxes will result in better long-term returns, as will continuing to add money to your portfolio regardless of the market environment. Our goal at Flourish is to help clients follow a disciplined investment approach to capitalize on opportunities that reward long-term investors while encouraging all investors to embrace these evidence-based concepts. For more up-to-date insights into the market, the economy, and what it all means for your portfolio, subscribe to Flourish Insights on Apple Podcasts, Spotify, or wherever you listen to podcasts. You can also find our full catalog of episodes at FlourishInsights.com. Thanks so much for listening, and don't forget to stay focused and think long-term. Send us your feedback online: https://pinecast.com/feedback/flourish-insights/bab7b848-dedc-4646-becd-1251222b15f4
Episode #69: “Past Performance is No Guarantee of Future Results” This common client disclosure is typically meant as a warning that positive results are not always sustainable, but what if we look at it from a different angle? Just because 2022 was a bad year for the markets, it doesn't necessarily mean the same will happen in 2023. So, let's talk through what we might expect from a typical 60/40 “center of gravity” portfolio this year. This common type of diversification is meant to provide long-term upside growth with downside protection from bonds. What will it produce for investors in 2023? Listen in for my take. Enjoying the show? Please write a review of this podcast on Apple Podcasts or Alexa - thanks! EPISODE TRANSCRIPT: Hi everyone, Jay Pluimer here with Flourish Insights. As the director of investments at Flourish Wealth Management, I take pride in providing our clients, colleagues, and friends with resources and information that can help them make strategic and effective choices regarding their investments. Did you know we have an Alexa Skill? To listen on your Alexa device, just say, “Alexa, play Flourish Insights.” Today, we are reviewing performance of a diversified portfolio over the past year using the compliance disclosure that “Past Performance is No Guarantee of Future Results”. The title of this podcast refers to a common compliance disclosure about investment results. Typically the disclosure is a warning that the amazing performance results being quoted in an advertisement or client report are not necessarily sustainable. In this podcast we are flipping that concept on its head with a reminder that just because 2022 performance was bad, it doesn't necessarily mean the same thing will happen in 2023. I will be referring to a diversified portfolio with 60% in Stocks and 40% in Bonds or Cash, reflecting a common mix of investments to provide long-term upside growth from Stocks with downside protection from Bonds. Investment legend Peter Bernstein liked to call a 60/40 portfolio “the center of gravity” for long-term investors. That's because the 60% allocation to stocks would produce returns not much lower than a 100% stock position, while the 40% in Bonds and Cash usually buffered the sharp declines that stocks can deliver in down years. According to an article in The Wall Street Journal by Jason Zweig, a typical 60/40 portfolio lost about 15% in 2022, which would be the 4th worst year ever for that portfolio approach. The biggest driver of bad market returns in 2022 was rising interest rates, a theme that caused bond investments to have their worst year ever. Although bonds have historically reduced risk and offset stock market losses, we just experienced a bond market that should only happen once every 130 years. So why are we taking the approach that the historically bad returns for a 60/40 portfolio in 2022 don't necessarily predict similar returns in 2023? There continue to be questions about additional interest rate hikes by the Federal Reserve along with valid concerns about an economic recession. However, for the first time in recent memory bonds are yielding over 4%. That yield provides a lot of cover for falling bond prices in a rising interest rate environment, along with more confidence that we won't experience a year with double-digit bond losses like 2022 again regardless of decisions by the Federal Reserve. The outlook for stocks is uncertain for 2023, with optimistic projections reflecting upside opportunities in the second half of the year. A combination of positive economic growth rates, improving corporate earnings, and low unemployment with rising wages creates a strong foundation for a sustained stock market recovery at some point over the next few years. However, even if stocks continue to struggle in 2023, we should not expect a double whammy from bonds leading to positive return projections. There are still no guarantees that we will have good returns this year, but we can rest assured that past performance from 2022 does not predict or dictate returns this year. For more up-to-date insights into the market, the economy, and what it all means for your portfolio, subscribe to Flourish Insights on Apple Podcasts, Spotify, or wherever you listen to podcasts. You can also find our full catalog of episodes at FlourishInsights.com. Thanks so much for listening, and don't forget to stay focused and think long-term. Send us your feedback online: https://pinecast.com/feedback/flourish-insights/6738ebb2-17b5-4272-87d4-61cc888d5be0
Episode #68: 2022 - A Year of Hard Lessons Much of 2022 gave us market events that had a negative impact on performance - and created headlines focused on short-term market movements. However, long-term investors can learn a lot from the past 12 months, too. In this episode, we'll review stats and facts with an eye to the future to help you make smart investment decisions in 2023 and beyond. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa EPISODE TRANSCRIPT: Hi everyone, Jay Pluimer here with Flourish Insights. As the director of investments at Flourish Wealth Management, I take pride in providing our clients, colleagues, and friends with resources and information that can help them make strategic and effective choices regarding their investments. If you've been enjoying the show, be sure to subscribe on Apple Podcasts, Spotify, Google Podcasts, or wherever you get your podcasts, so you'll never miss an episode. Today, we are discussing 2022 – A Year of Hard Lessons. There were a lot of historic market events that took place during 2022. Although most of those events had a negative impact on performance on client account values, long-term investors can learn a lot from the past 12 months. I prefer to avoid using terms like “unprecedented” or “historic” in client conversations because they tend to put a lot of emphasis on short-term market movements and feed into mass media storylines. However, a year like 2022 had so many different things happen that either had never happened before or hadn't happened in the same way that there were a lot of learning opportunities. My goal with this podcast episode is to share some of the stats and facts from 2022 with an emphasis on what we can learn to help with future investment decisions. Stocks and Bonds both fell by double digits in 2022. It's rare for both markets to lose money at the same time, just 4 times in the past 100 years, but this was the first time ever when Stocks and Bonds both lost over 10% in the same year. The lesson is that Bonds are an important tool to decrease portfolio volatility, with the caveat that the diversification didn't work in a rapidly rising interest rate environment. The Federal Reserve wanted the Stock market to fall. Although the primary target for Fed rate hikes was to reduce inflation, a preferred side-effect was to reduce stock market valuations after hitting record highs in 2021. There were multiple Federal Reserve Governors who went on the record talking about the Stock market, noting that falling stock markets would reduce wealth and decrease consumer spending. I don't recall a situation where the Fed targeted stocks in this way, so it's important to learn how they view stock market investments. Mortgage rates doubled and then some last year. Mortgage rates hit historic lows in 2021 and supported a red-hot housing market where prices were increasing at an unsustainable rate. I'm sure we all remember stories of houses selling at prices well above ask, all-cash deals, and buys without an inspection (or even seeing the house in-person). Mortgage rates of 7% or more in 2022 sucked the air out of demand for home purchases and took a big bite out of home prices. It makes sense that a rising interest rate environment would significantly increase mortgage rates, but the impact on the housing market could be felt throughout 2023 and beyond if mortgage rates stay above 5% for an extended period. Cryptocurrencies were not an inflation hedge. Although I am on record as a crypto skeptic, I was open to the premise that they were an uncorrelated asset that wouldn't be affected by rising Fed interest rates. The premise was that the various cryptocurrencies were independent of the Federal Reserve, government spending, and inflation. Unfortunately for crypto investors, this premise did not hold true with various cryptocurrencies down 60% or more. It's a good reminder of the lesson that just because an investment's characteristics are described in a certain way, investors should wait to see if those alleged characteristics hold up in the real world. My final lesson from 2022 is that gas price fluctuations don't necessarily dictate whether or not it makes sense to invest in sustainable energy. There was justifiable concern about the ability to fill gas tanks when the price of gas went over $5 a gallon after Russia invaded Ukraine in early 2022, but prices eventually dipped back below $3 a gallon. I read a lot of articles in the first half of the year blaming governments and corporations for pursuing solar and wind power generation because none of those could fill up a tank of gas. In the end, disruptions in the supply of gas are independent of long-term investments in sustainable energy resources, particularly when the cost of the sustainable resources are decreasing on a consistent basis regardless of geopolitical events. I hope this was a helpful opportunity to revisit various aspects of market activity from 2022 in a growth mindset. I'm sure there will be more surprises and lessons to learn throughout 2023 and in future years, one of the many characteristics of investing that I find to be challenging and rewarding in equal measures. Hopefully, these lessons will lead to a patient investment approach that emphasizes long-term growth of assets over short-term trading opportunities. Best wishes for success in 2023 and beyond! If you enjoyed this episode, please take a moment to rate and review us on Apple Podcasts so that more investors like you can find the show. And don't forget to check out Flourish Wealth Management's other podcast, Flourish Financially with Kathy Longo, available on all your favorite podcast providers. Thanks for listening, and don't forget to stay focused and think long-term. Send us your feedback online: https://pinecast.com/feedback/flourish-insights/bfd925f2-5a27-4b66-8b0d-0844027788f6
Episode #67: Bonds Aweigh There are two major questions many investors are asking with regard to the bond market these days, and we'll examine both in this episode. We'll also discuss the impact of inflation, provide historical context, and share the Flourish Wealth Management approach to client portfolios within this context. Want more Flourish Insights with Jay Pluimer? Check out our insights blog at https://www.flourishinsights.com If you're enjoying this podcast, please write a review of this podcast on Apple Podcasts or Alexa EPISODE TRANSCRIPT Hi everyone, Jay Pluimer here with Flourish Insights. As the director of investments at Flourish Wealth Management, I take pride in providing our clients, colleagues, and friends with resources and information that can help them make strategic and effective choices regarding their investments. If you've been enjoying the show, be sure to subscribe on Apple Podcasts, Spotify, Google Podcasts, or wherever you get your podcasts, so you'll never miss an episode. Today, we are discussing the state of the bond market while putting the bad performance from the first half of 2022 into context. When interest rates go up, bond prices go down. The price impact can be particularly painful when bond yields are at historically low levels and can't provide much of an offset. This has been the story for bond markets in 2022 as interest rates have risen at a staggering pace on the backs of high inflation expectations and aggressive interest rate hike policies from the Federal Reserve. It's important to note that although we will be focused on the US Bond Market in this episode, 40 countries are currently raising interest rates in efforts to fight high global inflation rates, meaning we are not alone with this problem and there is no place to hide from the bad environment. Bond prices have been falling across the spectrum, hitting corporate and municipal bonds at the same time while causing the worst returns in over 40 years. As of June 30th, UltraShort Bonds had lost 3%, Short-Term Bonds dropped 7%, Core Bonds were down 10%, and High Yield Bonds were down over 14%. This is the first time since 1994 that stocks and bonds have both lost money at the same time. These dramatic losses raise a couple questions. The first question is whether or not we are in a Bond Bear Market. We all know that a 20% drop in the Stock Market is the definition of a Bear Market for stocks, but there isn't a similarly clear definition for bonds. Part of the reason we don't have a definition for bonds is that they have been in a Bull Market for the past 40 years during a mostly declining interest rate environment, plus it's extremely rare for bond investments to fall that much. If a 10% loss for long-term bonds and a 5% loss for core bonds define a bear market, then we have definitely exceeded those benchmarks. The last broad-based bear market for bonds occurred from 1960-1981, during a period of high inflation in the US. The yield on a 10-year US Treasury rose from 3.9% to 15.8% during that time. Since bond prices fall when interest rates rise, we would expect the total return on the 10-year Treasury note to have been abysmal during that period. In fact, while annual returns ranged from -5.4% to 18.3%, the average annualized return during this period was 4% because as interest rates rose, income and principal payments could be reinvested at higher rates and offset the impact of price decreases. The second question is whether or not now is a good time to buy into the bond market. We have been encouraging clients with cash on the sidelines to add stock exposure while the market is on sale by 20%, but we are not as optimistic about bonds at the moment. The first consideration is that the Federal Reserve is not done raising interest rates, so the yield curve could continue to be a headwind for bond investors. In addition, core and long-term bond rates have not moved up in tandem, with short-term rates leading to a slightly inverted yield curve, an environment that is not favorable for new investments. Although bond yields are higher now than 6 months ago, we could continue to see negative bond returns through the rest of the year. In addition, looking at real returns for bonds means calculating the current return minus inflation, meaning that a 3% return for bonds over the next 6 to 12 months has a negative real return of 6% when inflation is at 9%. Our approach in client portfolios over the past few months has been to purchase short-term CDs, between 6 and 24 months, to capture moderate yields between 2.5% and 3.5% while protecting the principal of the investments. Staying short-term also maintains flexibility to buy higher yielding bonds in the future if the Fed continues to increase interest rates. We feel this provides a safe approach to capture positive bond yields to offset some of the damage from earlier in the year, but we will continue to closely monitor the bond markets for investment opportunities. Hopefully the next couple of years will be more favorable for bond investors so we can recover from historically bad bond market returns in 2022, understanding that bonds continue to be an important part of client portfolios because they reduce risk for a diversified portfolio while providing reliable income. If you enjoyed this episode, please take a moment to rate and review us on Apple Podcasts so that more investors like you can find the show. And don't forget to check out Flourish Wealth Management's other podcast, Flourish Financially with Kathy Longo, available on all your favorite podcast providers. Thanks for listening, and don't forget to stay focused and think long-term. Send us your feedback online: https://pinecast.com/feedback/flourish-insights/72294d5b-2ad9-400e-ba93-792dda8cac63
Episode #66: Recession-ish The U.S. economy shrank in the first two quarters of 2022, and we met the historical definition of a recession. However, there is an ongoing debate about whether we're really in one. So, are we in a recession? Is there a soft landing somewhere in our future? Or are we occupying an in-between space at the moment? Tune in as we discuss all this and more. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to visit our insights blog at https://www.flourishinsights.com Are you enjoying this podcast? Please write a review on Apple Podcasts or Alexa! EPISODE NOTES Hi everyone, Jay Pluimer here with Flourish Insights. As the director of investments at Flourish Wealth Management, I take pride in providing our clients, colleagues, and friends with resources and information that can help them make strategic and effective choices regarding their investments. Did you know we have an Alexa Skill? To listen on your Alexa device, just say, “Alexa, play Flourish Insights.” Today, we are discussing if we are in a recession, if there is a soft landing in our future, or if we're somewhere in between in a Recession-ish environment. The US economy shrank at an annualized rate of 0.9% during the second quarter after a 1.6% decline in the first quarter. Two straight quarters of declining Gross Domestic Product, or GDP, is the historical definition of a recession, but there is a debate whether we are currently in a recession or not. The official decision about a recession is made by the National Bureau of Economic Research who has rejected the historical definition. Instead, a recession is a significant decline in economic activity that is deep, broad, and lasts for more than a few months. For example, the US economy went into recession during March and April of 2020 during the COVID shutdown, which we all felt in real time but wasn't official until the end of the year when the National Bureau of Economic Research made the declaration. In addition to declining economic activity, we have also been living with record high inflation. The most recent headline inflation rate of 9.1% was a new record. Despite those somber headlines, personal consumption increased during the second quarter while the economy added over 1 million jobs for the second quarter in a row. In addition, unemployment is at a historically low rate of 3.6% and wage growth continues. Regardless of our recession status, we are definitely facing an economic crisis. An analogy I will borrow from economist Michael Lebowitz is that we have a trolley car problem. The scenario is that an unstoppable trolley car is barreling down the track. As the switchman, you stand at the junction where the track branches and you must choose which path the trolley will follow. Unfortunately, people are tied to both sets of tracks, making the decision incredibly difficult and without a clear “best” option. That's basically the situation for the Federal Reserve, choosing between persistently high inflation and rate hikes that could trigger a recession. Increasing short-term interest rates is designed to decrease consumer demand while reducing prices. Successfully finding a path where rising interest rates slow the economy without creating a recession is called a soft landing. There have been almost 15 recessions since World War II and more than two-thirds of the recessions were caused by the Fed raising interest rates faster than the economy could handle. At the same time, the other third of the time the Fed was able to reduce inflation with minimal negative impacts on GDP and unemployment. As of the end of July, the Fed has raised interest rates four times in 2022, going from basically 0% to 2.25% with another 1% priced into the market for additional hikes this year. When asked to share his thoughts about the chances the Federal reserve can fight inflation without causing a recession, Fed Chair Jay Powell stated “There are a number of plausible paths to have a soft or soft-ish landing. Our job isn't to handicap the odds, it to try to achieve that.” He compared a soft-ish landing to a bumpy but otherwise successful airplane landing. So, basically, we are in a recessionary environment, without knowing whether or not it's a technical recession, facing high inflation, and hoping that the Fed rate hikes can accomplish a soft-ish landing. Our perspective at Flourish is that the next few months will be bumpy, but we are optimistic that the economy and the stock market will take an upward turn later this year. There are a lot of variables to consider, so we will continue to stay proactive to position client portfolios for an eventual rebound without taking on short-term risk too soon. For more up-to-date insights into the market, the economy, and what it all means for your portfolio, subscribe to Flourish Insights on Apple Podcasts, Spotify, or wherever you listen to podcasts. You can also find our full catalogue of episodes at FlourishInsights.com. Thanks so much for listening, and don't forget to stay focused and think long-term. Send us your feedback online: https://pinecast.com/feedback/flourish-insights/f66a0fb9-74a0-4f59-9914-05de9fcc9aa0
Episode #65: Bear Hunting We hit a milestone in mid-June when the stock market settled into Bear Market territory by dropping over 20% from its highs. Though it wasn't unexpected - or a market anomaly - it's still painful for investors. In this episode, we will be discussing what brought us into Bear Territory, what it will take to recover, and what timelines might be involved. Always check back for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com! Please write a review of this podcast on Apple Podcasts or Alexa EPISODE TRANSCRIPT Hi everyone, Jay Pluimer here with Flourish Insights. As the director of investments at Flourish Wealth Management, I take pride in providing our clients, colleagues, and friends with resources and information that can help them make strategic and effective choices regarding their investments. Did you know we have an Alexa Skill? To listen on your Alexa device, just say, “Alexa, play Flourish Insights.” Today, we're going Bear Hunting. We hit a milestone in mid-June when the stock market settled into Bear Market territory by dropping over 20% from its highs. The markets flirted with bear territory in late-May before recently exceeding that milestone. The NASDAQ 100 Index of Technology and Communications stocks has been in Bear Market territory for a few months, as just 8 stocks, all of which are in the NASDAQ Index, have generated about half of the losses in the S&P 500 Index for the year. In today's episode of Flourish Insights, we will be discussing what brought us into Bear Territory, what it will take to recover, and what timelines might be involved. Bear Markets are more typical than we might initially think. Each one is painful in its own way, but Bear Markets happen about every 6 years. Market dips often happen after periods of sustained gains, followed by a sharp decline like we experienced in 2018 (trade war with China) and 2020 (COVID crisis). The primary driver of the current bear market is Inflation. Although our economy continues to grow, inflation is slowing everything down and seems to be shifting into a more permanent – and scary – trend. The sharper the market drop, in most cases, the quicker the recovery. The Federal Reserve has shifted into a more aggressive mode in an effort to decrease inflation, raising rates by 75 basis points during the most recent meeting with questions about whether or not they will raise by a similar level in late July. In the meantime, we are receiving negative economic data as manufacturing and service growth rates are coming in below expectations, new home sales rates have plunged due to higher mortgage rates, and consumer confidence has dropped to its lowest level in over 40 years. It's important to reiterate that a Bear Market and a Recession don't always happen at the same time and can take place independent of one another. We don't know if we are currently in a recession at the moment, as that determination is usually made a few months after the fact. However, stock market activity reflects expectations for the future so many analysts have been predicting that the Bear Market is predicting an upcoming Recession. The bad news is that the bear market isn't over, and the market could continue to decline this summer. But the good news is that expected returns for the market to recover its losses are pretty attractive. The S&P 500 is currently down around 23%, meaning it would need to rise about 30% to breakeven. If it takes two years to make up that lost ground that would mean annualized returns of 14%, while a three-year recovery means 9% annual returns. There are different types of Bear Markets, each of which reflect different conditions that led to the market dip along with a variety of factors that could contribute to the eventual recovery. The “easiest” form of a Bear Market is called Short and Shallow, similar to what we experienced in both 2018 and 2020 when it took less than 5 months for the market to dip, and then the market recovered to hit new highs within a year of the low. Another form of Bear Market is Long and Deep which is the variety that most people associate with bear markets because they include losses of more than 50% over the course of 12-plus months, plus much longer recovery times. If we can avoid an economic downturn, we are more likely to experience and short and shallow decline. However, a prolonged recession frequently means we will experience a long and deep market dip. At this point we are leaning toward a short and shallow bear market with the possibility of a market reversal later in calendar year 2022. That is when the mid-term election cycle will wrap up and when we should start to see the economic effects of the Federal Reserve rate hikes. It is hard to know when high gas prices will ease up, but alleviating other inflationary pressures can go a long way toward creating a more favorable environment for stocks. For example, both stocks and bonds have performed well during periods when inflation is under 6%, so the Fed doesn't necessarily need to eliminate inflation before we can see a market recovery. In general, only 15% of trading days in the history of the S&P 500 have taken place during a Bear Market while 29% happen during the recovery and the other 56% of trading days happen during Bull Markets. At this point we plan to stay fully invested in the market, look for rebalancing opportunities relative to market opportunities, and make sure that client cash plans are in good shape. We have also been encouraging clients with cash on the sidelines to add money to their portfolios under the premise that the market is “on sale”. Although the market could drop further from where it is now, the opportunity to buy a long-term growth investment at a discount of over 20% is compelling for those that have the cash and the time for that type of investment. For more up-to-date insights into the market, the economy, and what it all means for your portfolio, subscribe to Flourish Insights on Apple Podcasts, Spotify, or wherever you listen to podcasts. You can also find our full catalogue of episodes at FlourishInsights.com. Thanks so much for listening, and don't forget to stay focused and think long-term. Send us your feedback online: https://pinecast.com/feedback/flourish-insights/bbabc857-d365-4169-9c03-c68da89a1ada
Episode #64: Tech Wreck Over the last few weeks, we've experienced perhaps the most significant market decline of 2022, and many investors see nothing but a bleak outlook ahead. Tech stocks, in particular, have taken a beating. However, analyzing statistics about drawdowns and looking to history as a guide is helpful in understanding why it's happening - and why there's still a great probability for positive returns in 2022. Want more Flourish Insights with Jay Pluimer? Check out our Insights blog at https://www.flourishinsights.com. Like what you hear? Please write a review of this podcast on Apple Podcasts or Alexa EPISODE TRANSCRIPT Hi everyone, Jay Pluimer here with Flourish Insights. As the Director of Investments at Flourish Wealth Management, I take pride in providing our clients, colleagues, and friends with resources and information that can help them make strategic and effective choices regarding their investments. If you've been enjoying the show, be sure to subscribe on Apple Podcasts, Spotify, Google Podcasts, or wherever you get your podcasts, so you'll never miss an episode. Today, we're talking about the ongoing Tech Wreck. In direct contrast to the most recent episode of Flourish Insights about Silver Linings, the stock market has been experiencing another steep decline over the past couple of weeks. This is the third time we've experienced a dip in the markets during 2022, and so far it seems to be the most aggressive with a couple of days when the S&P 500 Index dropped by over 2%. Small Cap Growth and Large Cap Technology stocks have been hit even harder and are both in Bear Market territory, meaning they have lost over 20% so far this year. Although it seems like the S&P 500 has done as bad or worse this year, Large Cap Stocks are down around 15% so far this year. An important statistic during periods when stock prices are dropping is that the market spends about one-third of the time in drawdown. Drawdowns have happened in 33 of the 96 years that we have market data. The drawdown actually has two components – the decline and the recovery. The decline is what we are in right now when the market is falling and nobody seems to know how long it will last or how low the market will go. Bear markets have historically lasted a little over a year with a total loss of around 33%. However, at some point the downward slide ends and the recovery stage begins until the market reaches the pre-downturn level. It might help to know that the average annual market drop over the past 40 years is 14%. The market is down at some point during the year 100% of the time but has a positive return 75% of the time. That means that our current loss of 15% is pretty average based on market activity over the past 40 years, and that there is still a 75% chance of a positive return in 2022. But let's talk about why the market downturn this year feels so bleak. The barrage of negative headlines about inflation, rising food prices, the War in Ukraine, and pain at the pump is a lot to bear for investors. Add in worries about a recession from aggressive Federal Reserve interest rate hikes and it's not a surprise that investors are questioning why they should stay in the market. (By the way, people definitely should stay in the market or they will lock in the year-to-date losses and miss out on the eventual recovery.) The hardest hit part of the market so far has been Large Cap Technology and Communications stocks. These companies make up the majority of the NASDAQ Composite which is down about 26% this year. It's a grim part of the market with 4,700 stocks where 61% of those stocks are down more than 20%, 43% of the stocks are down more than 40%, and 29% are down over 60%. Some of the notable losers this year include companies that had benefited from the COVID economy, including Zoom, Netflix, and Shopify, all of which are down over 70% this year. There are a few reasons why companies in the NASDAQ Composite are taking the biggest hits from the correction. The first reason is valuation, meaning the stock prices for these companies had been very high after 3 consecutive years of big gains. Stock price estimates are based in part on calculations that use the discount rate, which has been basically zero for the past couple of years but is on the way up with every Fed rate hike. Another hit from higher interest rates is the significant amount of bond debt that these companies have taken on over the past few years, initially issuing record levels of new bond debt to capitalize on the zero interest rate environment but now paying the price for that debt as interest rates spike. Technology and Communications companies represent over 60% of the NASDAQ Composite compared to 35% of the S&P 500 Index. These companies have been driving stock market returns for the past 10+ years, generating between 20% and 40% of the returns in a given year. For example, the so-called FAANG stocks of Facebook, Apple, Amazon, Netflix, and Google have returned over 40% per year for the past 5 years while representing almost 25% of the S&P 500 Index and 40% of the NASDAQ. Those stocks are down between 14% (Apple) and 72% (Netflix) so far this year, leading the way for the Tech Wreck we are experiencing at the moment. It's hard to know what's next at this point. Historical evidence shows that we could be close to the bottom of the market dip or at the halfway point of a larger decline. One thing I can be sure of is that companies like Netflix and Peloton still have millions of subscribers and continue to grow, just not at the astronomic rates experienced in 2020. Zoom is here to stay as an important office resource and most of the restaurants I've visited over the past year use point of sale technology from Square. I can't fully explain why each of those stocks have dropped over 60% this year, but they are good businesses with real revenues and attractive growth opportunities, so my expectation is that investors will start to buy those stocks again at some point. The same can be said for most of the stocks that have been beaten up during the Tech Wreck. This is definitely NOT a repeat of the year 2000 when companies like Pets.com, Global Crossing, and Palm went out of business in the blink of an eye. Although I doubt we have seen the bottom of the Tech Wreck, history shows that these companies will experience a recovery at some point on their way to setting new record highs. Hopefully that turning point will happen sooner rather than later. If you enjoyed this episode, please take a moment to rate and review us on Apple Podcasts so that more investors like you can find the show. And don't forget to check out Flourish Wealth Management's other podcast, Flourish Financially with Kathy Longo, available on all your favorite podcast providers. Thanks for listening, and don't forget to stay focused and think long-term. Send us your feedback online: https://pinecast.com/feedback/flourish-insights/0df6b57d-7d90-4bcd-b1cb-32558c8d40b7
Episode #63: Silver Linings The current economic environment is full of dark clouds, and it's all too easy to focus only on the negative headlines. Although we're in a tough place at the moment, investors should not lose hope for a better tomorrow. There is optimism for the future, and it's based on the predictive power of the stock market. Always check back for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa EPISODE TRANSCRIPT Hi everyone, Jay Pluimer here with Flourish Insights. As the Director of Investments at Flourish Wealth Management, I take pride in providing our clients, colleagues, and friends with resources and information that can help them make strategic and effective choices regarding their investments. If you've been enjoying the show, be sure to subscribe on Apple Podcasts, Spotify, Google Podcasts, or wherever you get your podcasts, so you'll never miss an episode. Today, we're talking about Silver Linings. The current environment is full of dark clouds. The last couple episodes of Flourish Insights have discussed these economic and investment threats in detail, focusing on the War in Ukraine, fears of an impending recession, along with the tightrope walk for the Federal Reserve. It's easy to fall into the habit of doom scrolling by scanning the headlines and bouncing from one piece of bad news to another. The fact is that we're in a tough place right now with lots of things to be concerned about, but that doesn't mean investors should lose hope for a better tomorrow. Let's start by revisiting the predictive power of the Stock Market. There have been many times where the daily and weekly ups and downs of the market seem to lack connection to the current reality. A perfect example happened in April and May of 2020 when most of the global economy was shut down as the COVID Crisis became reality. Despite the real concerns about personal safety and the future of life during a pandemic, the stock market was in the middle of a rally that would turn into the fastest recovery from a bear market in history. The surprising stock market rebound was actually the topic of the first episode of Flourish Insights and was titled “Why are markets booming in the midst of a crisis?” We have experienced similar behavior from the stock market frequently over the past year where market returns didn't seem to line up with investor sentiment or economic statistics. The market dropped almost 5% in September of 2021 during a period where corporate earnings were approaching 30% growth rates, unemployment had fallen under 4%, mortgage rates were hitting historic lows, and the zero-interest rate policy was supporting record consumer spending. On the flip side, the market rebounded 9% this past month despite an escalating war in Ukraine, record gas prices at the pump, supply chain shortages, and fears of a new COVID strain. The reason that market returns don't always line up to current events is that the stock market acts as a predictor of what will take place in the future. For example, the stock market rally in the Spring of 2020 reflected expectations for increased consumer spending during the summer. The market dip last Fall reflected concerns about rising rates of inflation while the recent market rally indicates confidence that the Federal Reserve will be able to significantly reduce inflation through aggressive interest rate hikes. However, although the stock market acts as a predictor of the future it doesn't always get things right, particularly in periods of “excess exuberance” that led to market bubbles in the late 1990s and mid-2000s. So what is the silver lining about the recent market recovery? I've been having a lot of client conversations lately where they are justifiably worried about the state of the economy and the potential implications for their investments. Constant headlines about an impending recession with record inflation and daily updates about the atrocities taking place in Ukraine are excellent reasons to be worried. At the same time, the stock market is more focused on what could happen in 6 months with the conclusion of mid-term elections, decreased inflation, a resolution in Ukraine, and supply chains that are working again. We have been guardedly optimistic about the market fundamentals in the US with strong corporate earnings and profits supported by high levels of consumer spending. Although consumer confidence has been dipping lately, that is frequently a contrarian indicator, so doom and gloom often points to an investment opportunity. The optimism for an economic and market recovery in the Fall of 2022 doesn't mean it will be smooth sailing over the next few months. There are still significant concerns about how the economy will respond to rising interest rates, questions about the Federal Reserve's ability to walk a tightrope between inflation and recession, plus concerns about options for a peaceful resolution to the military situation in Ukraine. I expect to see relatively high market volatility over the next few months and will be closely monitoring the VIX Index, also known as the fear index, as an indicator of investor sentiment. In general, there are reasons to focus on the silver linings of the current environment rather than falling subject to doom scrolling negative headlines. We encourage clients and investors to look beyond the negative stories about today and look toward the future with hopes for a better tomorrow, particularly if the stock market is signaling a break in the clouds. If you enjoyed this episode, please take a moment to rate and review us on Apple Podcasts so that more investors like you can find the show. And don't forget to check out Flourish Wealth Management's other podcast, Flourish Financially with Kathy Longo, available on all your favorite podcast providers. Thanks for listening, and don't forget to stay focused and think long-term. Send us your feedback online: https://pinecast.com/feedback/flourish-insights/44076bdb-8b02-4b1a-8219-4cedc9130fb0
Episode #62: The Next Recession Many analysts and economists have been confidently predicting that a recession is imminent in the United States. They cite factors like an inverting yield curve and sticky inflation with persistent supply chain issues. In this episode, we'll summarize the various reasons people think a recession is imminent, and use historical evidence and trends to provide additional context. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please consider writing a review of this podcast on Apple Podcasts or Alexa! EPISODE TRANSCRIPT: Hi everyone, Jay Pluimer here with Flourish Insights. As the director of investments at Flourish Wealth Management, I take pride in providing our clients, colleagues, and friends with resources and information that can help them make strategic and effective choices regarding their investments. Did you know we have an Alexa Skill? To listen on your Alexa device, just say, “Alexa, play Flourish Insights.” Today, we're talking about The Next Recession. With all of the turmoil happening in the world at the moment, it isn't surprising that a lot of people are worried about a significant downturn in the economy and in the markets. I have been surprised to see how many analysts and economists have been confidently predicting that a recession is imminent in the United States. As a refresher, a recession is defined as one or more quarters with negative economic growth and typically include job losses, declining real income, meaning after adjusting for inflation, and lower consumer spending. Most recessions are accompanied by a stock market correction, meaning a 10% drop, or a Bear Market when losses are 20% or greater. So why are so many people so confident that a recession is imminent? Do we share those concerns at Flourish? And what should investors do when there is so much negative sentiment? Let's start by summarizing the various reasons people think a recession is imminent. For the record, a recession is inevitable because historical evidence shows they happen every 3 and a half years. In this case, however, people seem very confident that the next recession will take place in 2022. One of the recession indicators that people reference is the yield curve, noting that an inverted yield curve predicts a recession. An inverted yield curve takes place when short-term rates are higher than long-term rates, typically reflecting that investors are not confident about the current environment or the prospects for growth in the future. It is a fact that short-term rates are rising, due in large part to interest rate hikes by the Federal Reserve. The Fed has set the overnight borrowing rate at 0% since the onset of COVID in early 2020. The first increase of 25 basis points took place in mid-March with expectations that we will experience at least 4 additional increases this year, and potentially as many as 7. That would push short-term rates from basically 0% to over 2% in a matter of months. The short end of the yield curve started to move up in late 2021 in anticipation of the upcoming actions by the Fed, but medium and long-term rates have remained relatively stable. If the trend of rising short-term rates continues it is a logical concern that the yield curve could invert. After all, an inverted yield curve has predicted every recession since 1955, with only 1 false signal during that time. The yield curve inverted in late 2019 and correctly predicted the COVID recession, although it's hard to state that the two are directly related. Still, it's hard to imagine that we would go from the current GDP growth rate of 7% to negative growth over the next few quarters. Another reason people are predicting a recession is that commodity prices have skyrocketed over the past few months. The War in Ukraine and the Russian sanctions have led to significantly higher oil and energy prices, along with rising prices for wheat and other commodities. These higher prices are definitely hurting the pockets of American Citizens as household debt is spiking again and inflation rates close to 8% are wiping out wage growth. Inflation has been above 7% for almost 6 months, so it's not exactly a new phenomenon, but there aren't any indications that we will see lower inflation rates any time soon. The combination of an inverting yield curve and sticky inflation with persistent supply chain issues make a compelling argument that a recession is imminent. We know that recessions happen every 40 plus months, and it's been 24 months since our last recession, so we know that another recession is inevitable. It's hard to argue with the evidence in favor of a recession in 2022, although a contrarian investor prefers to go the opposite direction as everybody else and look at the prevailing pessimism as a potential buying opportunity. Assuming we are facing a combination of rising short-term interest rates with slowing economic growth and a stock market downturn, investors will be faced with some difficult choices. The environment I just described makes it hard to make money in either stocks or bonds, and with cash still earning minimal interest it's hard to make a case for sitting on the sidelines. We have been exploring opportunities to add exposure to commodities and real assets, along with other strategies that perform well during an inflationary environment, but that approach is designed to add diversification instead of putting our head under the covers and hiding until things get better. The fact is that nobody knows exactly when the next recession will start or when the stock market will react with a significant drop. Historical evidence shows that we will likely have a recession in either 2022, 2023, or 2024. In addition, as discussed in episode 60 of Flourish Insights, the Federal Reserve will be doing everything they can to successfully walk the tightrope to support an economic recovery with lower inflation rates without over-correcting into a recession. We also know that long-term investment returns include both the good times and the bad times, and that we've had a couple very good years in the stock market so a down year wouldn't be too surprising. All that being said, recessions and market downturns typically last about a year, so we look at the current volatility as a potential buying opportunity for investors with additional cash to invest. For those that rely on their portfolio to sustain their lifestyle, on the other hand, we have three to five years of cash flow ready to meet spending needs without needing to sell stocks at a discount. In short, we plan to stay fully invested while looking for opportunities to rebalance client portfolios, add diversification, and make sure clients are well positioned for the eventual stock market recovery. In contrast, the people using these stats and facts to scare investors out of the market will never get them back in, and unfortunately, staying out of the market is the only way to guarantee that your long-term goals will be out of reach. For more up-to-date insights into the market, the economy, and what it all means for your portfolio, subscribe to Flourish Insights on Apple Podcasts, Spotify, or wherever you listen to podcasts. You can also find our full catalogue of episodes at FlourishInsights.com. Thanks so much for listening, and don't forget to stay focused and think long-term. Send us your feedback online: https://pinecast.com/feedback/flourish-insights/4cad178c-4025-4b13-9539-d18b1ddcac1f
Episode 61: World in Crisis Over the past few years, the world has collectively struggled with various crises all demanding our attention. From a global pandemic to rising concerns over climate change to a war in Ukraine that's leaving us all holding our breath - it's hard not to be scared over current world events. As an investor, a world in crisis can become even scarier when we begin seeing changes in our economy and in a volatile market. So, what are investors supposed to do in an environment where there is no place to hide from the triumvirate of COVID, Inflation, and War? Tune in to this week's episode of Flourish Insights to find out. Want more Flourish Insights? Check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa! Episode Transcript: Hi everyone, Jay Pluimer here with Flourish Insights. As the director of investments at Flourish Wealth Management, I take pride in providing our clients, colleagues, and friends with resources and information that can help them make strategic and effective choices regarding their investments. Did you know we have an Alexa Skill? To listen on your Alexa device, just say, “Alexa, play Flourish Insights.” Today, we're discussing a World in Crisis The curse that “may you live in interesting times” has been extremely relevant for the past couple of years. We are approaching the 2-year anniversary of our work from home world due to the ongoing COVID pandemic while confronting a brutal war in Ukraine along with an inflationary environment that is hurting the financial situation for millions of Americans on a daily basis. It would be difficult to handle even two out of those three crises at the same time, and close to impossible when confronting all at the same time. The global balance for peace and economic stability was broken when Russian President Putin invaded Ukraine over two weeks ago. This had been a developing situation since the beginning of the year as Russia amassed military forces and promised to be the savior of Ukrainian citizens. The lies told by Russia to justify the war in Ukraine have been disclosed to the world and, unfortunately, we are all bearing witness to the enormous cost in lives and property on a daily basis. Although I have been fortified with videos of Ukrainian farmers stealing Russian tanks with their tractors and the bravery of President Zelenzky, the horror of this war is inescapable. In addition to the emotional and psychological cost of witnessing the destruction in Ukraine, we are all being affected by dramatically higher gas and energy prices. We recently set a new record with the price of gas exceeding $4 per gallon, but there is a path to $6 per gallon gas prices. Inflation rates of 7% plus are here to stay for the next few months, even in an environment where the Federal Reserve will begin to raise interest rates in an attempt to bring down inflation. Higher prices at the pump aren't the only cost we are experiencing in America as the stock market is firmly in correction territory with losses of over 10% in the S&P 500 Index and 12% plus for Small Caps. Bonds have also been losing money over the first few months of the year, leading to a situation where expenses are rising while the value of investment accounts are falling. So, what are investors supposed to do in an environment where there is no place to hide from the triumvirate of COVID, Inflation, and War? The most important approach is to stay patient and avoid making significant portfolio changes, particularly in an environment where the future is becoming even more difficult to decipher. There are realistic concerns about the safety of nuclear facilities in Ukraine, world hunger without crops being planted, and consequences if NATO or the US get more involved in the war. There are a wide variety of perspectives about what will happen over the next few days, weeks, and months, although at this point we can all agree that the chances of Ukrainians accepting Russian rule without a fight are zero. It's too early at this point to know when the conflict will end, or even what a resolution could look like, but we do know that Flourish will take a patient approach to helping client portfolios weather the storm while staying positioned for long-term success. For context, we analyzed data from other geopolitical crises from the past 30 years to see how markets reacted. The market dipped during first couple weeks of each crisis but was generally flat over the course of the crisis. Once the crisis was resolved, the markets bounced back by an average of 5% in the first 6 months and 9% after a year. Selling stocks and hiding in cash during the crisis would lock in the losses that we have experienced so far this year, which is not an attractive option. Plus getting out of the market now means getting back in at some point in the future and the decision to buy is usually more difficult to make, much less execute on a timely basis. Our approach has been to complete Tax Loss Harvesting and rebalancing trades to maintain fully diversified portfolios that will be positioned to capitalize on an eventual recovery. In the meantime, we recommend that our clients stay patient with world and market conditions. We also send our thoughts and prayers out to the people of Ukraine with hopes for a speedy and peaceful resolution to a brutal and unnecessary war. For more up-to-date insights into the market, the economy, and what it all means for your portfolio, subscribe to Flourish Insights on Apple Podcasts, Spotify, or wherever you listen to podcasts. You can also find our full catalogue of episodes at FlourishInsights.com. Thanks so much for listening, and don't forget to stay focused and think long-term. Please write a review of this podcast on Apple Podcasts or Alexa Send us your feedback online: https://pinecast.com/feedback/flourish-insights/d0f5234a-b7e0-400f-a2b3-a4ca7ca23578
Episode #60: Episode Title The Federal Reserve is returning to the forefront of conversations in an economy that has largely recovered from COVID, and it's making a U-Turn. Unlike last Saturday's Super Bowl, where there could only be one winner, the goal is to have everybody win as the Fed starts to walk the tightrope between inflation and deflation by increasing interest rates. Want more Flourish Insights? Check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa! Episode Transcript: Today, we're discussing how to Walk a Tightrope, the Federal Reserve Edition. Recording this episode of Flourish Insights on Super Bowl Sunday is a little ironic based on the topic. The Super Bowl can only have one winner, the LA Rams or the Cincinnati Bengals. However, the goal is to everybody win as the Federal Reserve starts to walk the tightrope between inflation and deflation by increasing interest rates. As discussed during recent episodes of Flourish Insights, the US Economy is currently experiencing the highest inflation rates in a generation. Year over year inflation rates have been at or above 7% for the past 3 months. A portion of that high number can be explained by comparing a mostly open economy with multiple effective COVID vaccines today against a time period in late 2020 and early 2021 where we were still exploring what a post-covid economy would look like. Although there are still significant headwinds and we definitely aren't out of the woods with COVID, higher prices reflect a rapidly growing economy with low unemployment rates, increasing wages, and people going back to work. We have also continued to experience strong consumer spending as most American families have less debt and more cash to spend than they did 12 months ago. There are still supply shortages and logistics obstacles that need to be worked out, but the consensus is that inflation will remain high for the foreseeable future unless something slows it down. The Federal Reserve, led by Chairman Jay Powell, is returning to the forefront of conversations about the economy because they are in the process of making a U-Turn, transitioning from being patient and passive while the economy recovered, to a much more aggressive approach that will include interest rate increases. As a reminder, the Federal Reserve cut interest rates from 2% to 0% in early 2020 to support the economy during the COVID shutdown. Lower interest rates are described as “stimulative” because they support economic growth in a variety of ways. A few examples of how lower interest rates work is that they decrease the cost of debt, helping companies borrow money from banks and investors to keep their business running or even expand while paying very little interest. Individuals and families benefit in a similar way with lower mortgage rates to support the purchase or refinancing of homes. In addition, earning 0% in your checking account means people are more likely to spend money instead of saving it, including putting more money into the Stock market. A Zero Interest Rate Policy, also known as ZIRP, is the most aggressive response available to the Federal Reserve to support economic growth and consumer spending. This is also when Jay Powell started to walk a tightrope between inflation and deflation. We know that inflation can be bad if prices get too high and families can no longer afford basics like food, transportation, and clothing. But deflation is even worse because it means prices are falling so fast that companies are laying off employees and people will struggle to make ends meet. I don't envy the role that the Federal Reserve will play over the next couple of years, because a misstep in either direction will mean an economic crisis. The Federal Reserve has committed to increasing interest rates in March, just a few weeks away from when I am recording this episode. Most experts predict that the Fed will raise interest rates 4 times this year and a total of 7 to 9 times over the next two years. Higher interest rates will reduce corporate and individual borrowing, slow down rising prices in the housing market, and potentially pause wage growth. The bond market has already started to price in the first year of rate increases which has sparked some of the recent market volatility because investors are being forced to re-evaluate future growth rates for stocks, the potential opportunity to invest in bonds, and even opportunities to keep money in cash accounts. I picture the tightrope walk to being similar to watching a circus performer or the movie “Man on Wire”. It's relatively easy at the start because the rope is close to the anchor and the performer is fresh with lots of energy and patience. That should describe what we will see during 2022, with the only danger being a potential 50 basis point increase at one of the Fed meetings this year because the market is expecting that each hike will be in 25 basis point increments. The tightrope will start to look thinner and have more sway as we enter 2023. At that point, inflation should be decreasing but economic growth rates should still be around 2% or better. That's a sweet spot for the economy. The winds trying to knock the performer off the tightrope will be unemployment levels, wage growth, and consumer prices. Failing to increase rates substantially enough will mean a period of prolonged inflation, which is dangerous. However, this is also when the Fed will start to face the opposite risk that raising interest rates too high and too fast will create momentum for a deflationary environment. We should expect to see people pulling their money out of the stock market, starting with highly speculative investments, and buying safer investments with attractive yields. A bond yielding 3 or 4 percent can be pretty attractive if inflation is close to zero. Another factor that the Fed will need to consider at this point is the voices of the crowd, some screaming to stop raising interest rates while others are yelling that higher interest rates are absolutely necessary. This is when I envision the tightrope performer starting the walk from the bottom of the rope to the far side, balancing against falling to either side while also finding balance between falling forward or backward. We won't know whether or not the Fed has successfully walked the tightrope until mid- or late-2023, with the true results showing up a year or two later based on economic growth rates, inflation levels, and unemployment rates. At this point, it's important to understand the balancing act the Fed is walking, what they are trying to accomplish, and knowing that a successful trip across the tightrope means that we all benefit from lower inflation while still having economic growth. I send my best wishes for success to Jay Powell and the rest of the Federal Reserve as they attempt to walk this dangerous tightrope! For more up-to-date insights into the market, the economy, and what it all means for your portfolio, subscribe to Flourish Insights on Apple Podcasts, Spotify, or wherever you listen to podcasts. You can also find our full catalog of episodes at FlourishInsights.com. Thanks so much for listening, and don't forget to stay focused and think long-term. Send us your feedback online: https://pinecast.com/feedback/flourish-insights/3fae0d0e-3800-4698-844d-cfa42bdf7986
Episode #59: Avoid Investor Complacency In our last episode, we discussed expectations for 2022 - including higher volatility than we've seen in the last few years. We're seeing it already, so this episode will delve further into why we expected this to happen. We'll talk about inflation, back-to-back years of strong market performance, and the Federal Reserve. We'll also discuss why it's important for investors to avoid becoming complacent in times of higher volatility, and why you should have plans in place for inevitable market dips. Please write a review of this podcast on Apple Podcasts or Alexa! Episode Transcript: We finished our “Expectations for 2022” by stating that higher volatility should be expected this year. Since the first few weeks of market activity this year have been pretty volatile, it might help to explain why we expected this to happen. The first is that higher inflation rates have historically led to more volatility because investors are forced to re-evaluate their earnings expectations as some companies struggle during an inflationary environment while others thrive. We are also coming off back-to-back years of strong stock market performance despite an ongoing global pandemic. In addition, expectations for what the Federal Reserve will do to fight inflation while supporting economic growth vary on a daily basis. There were 52 trading days in 2021 when the market moved up or down by 1% or more, which is below the average of 63 days. We experienced 70 new all-time highs for the S&P 500 Index last year despite having negative returns on 43% of the trading days. The worst single trading day was down 2.6% and the biggest cumulative drawdown for the year took place in September when the market fell by a little over 5%. All things considered, those are better than average results and a stark contrast from 2020 when there were 109 days when the market was up or down by more than 1%, including 7 of the 20 most volatile trading days in market history. It's important for investors to avoid being complacent during periods of market volatility, which has definitely been the case in the early stages of 2022. Over 220 companies with market capitalizations over $10 billion are down at least 20% from their market highs. We have witnessed the highest volatility levels in the Nasdaq Index which is dominated by Technology companies. Although the Index is down about 7% for the year, about 40% of the stocks in that index are down 50% from their highs. It can be difficult to explain that investors maximize their return opportunities by being long-term investors who stay patient through market downturns while also stating the importance of avoiding complacency. I want to explain the strategies we use at Flourish during periods of market volatility. The starting point is to have plans in place for the inevitable market dips. A drop of 10% is defined as a “market correction” and typically happens at least once every 18 months. It's been almost 2 years since the last market correction in February and March of 2020, so a market correction in the first half of this year should not be a surprise to anybody. The bigger question is how to react when the correction occurs while staying invested in case a correction doesn't happen. At Flourish, we look at two data points simultaneously. The first is to confirm that clients who are taking periodic withdrawals from their portfolios to support their lifestyle have a safe multi-year cash flow plan in place. It is reassuring to know that a stock market dip of 10% or more will not influence a client's ability to access the cash they need. In addition, we closely monitor the impact of a market dip on client allocations, looking at how the target allocation to stocks and bonds is being affected by market movements. In many cases, a correction is a buying opportunity for long-term investors who can sell a portion of their bond holdings to buy stocks at a discount. Corrections are also an opportunity for clients who have cash reserves outside of Flourish to add to their portfolio through additional stock purchases. For investors who measure success based on 5-, 10-, and 20-year returns, a market dip measured in days, weeks, or months is a relatively short time period. Market volatility can also extend into the Bond market, although our focus on shorter-term bonds with high credit quality ratings typically benefits from stock market corrections. At the same time, this environment creates an opportunity to evaluate the mix of bond investments to identify new investment options that could be added to client portfolios. We are currently exploring a few different bond investments that are designed to do well in a rising interest rate environment along with alternative investment strategies with a non-traditional approach to minimizing risk while earning moderate returns. Sticking to the same mix of preferred investments despite changing market conditions is the definition of complacency, in my opinion, so it's our responsibility as a Fiduciary to constantly be in search of investment options that capitalize on a changing market environment. We also take a proactive approach to Tax Loss Harvesting trades during market downturns. Tax Loss Harvesting involves identifying positions in a taxable account with a current value lower than what was initially paid at the time of purchase, also known as cost basis. We run reports that analyze client holdings by tax lot to identify opportunities to sell those investments and capture or harvest the loss to offset other taxable gains. In addition, we reinvest the proceeds in a similar investment so the client's asset allocation stays aligned with their long-term goals. Tax Loss Harvesting is an example of avoiding investor complacency because we maintain the same long-term approach to the market while reducing the future tax burden for our clients. Staying diversified across investment opportunities is an important concept that we do not abandon just because part of the market may be experiencing short-term headwinds. Hopefully, this has been a helpful overview about how you can stay proactive with your investment decisions while maintaining a long-term buy and hold investment philosophy. This will likely be an important mindset to maintain throughout 2022 as the volatility we've experienced in the first part of January could extend throughout the year in one form or another. For more up-to-date insights into the market, the economy, and what it all means for your portfolio, subscribe to Flourish Insights on Apple Podcasts, Spotify, or wherever you listen to podcasts. You can also find our full catalog of episodes at FlourishInsights.com. Thanks so much for listening, and don't forget to stay focused and think long-term. Send us your feedback online: https://pinecast.com/feedback/flourish-insights/b6749fa4-bddd-439e-b076-a205a4c77c6c
It's a new year, and we've been busy evaluating market dynamics in order to make projections about what might happen next. We follow an evidence-based investment approach here at Flourish, and it helps us understand what is happening in the markets today so that we can effectively position client portfolios for 20+ years into the future, while also incorporating what we expect to happen in the next 2-3 years. In this episode, we share what we expect to happen in the markets in 2022. Enjoying the show? Please write a review of this podcast on Apple Podcasts or Alexa! Send us your feedback online: https://pinecast.com/feedback/flourish-insights/8825eb47-42b2-47b9-af3e-cb58f617aab4
In episodes 21 and 22, we reflected on 2020 and shared expectations for 2021. I'm happy to say we got some predictions right, but I'm not surprised we got a lot wrong, too. It always bears repeating - you can't time the market, and that's never an approach we try to take here at Flourish. As of this recording, it's safe to say the stock market exceeded expectations for the year, and we're digging into the details - including more than 50 new all-time highs for the S&P 500. Always check back for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com If you're enjoying the podcast, please write a review of this podcast on Apple Podcasts or Alexa - thank you! Send us your feedback online: https://pinecast.com/feedback/flourish-insights/951b094b-c209-4253-89ed-506d44abad05
Episode 56: How Statistics Almost Ruined Thanksgiving If you watched the news on Thanksgiving this year, you might have found it to be a negative experience. The statistics generating media headlines about inflation painted a bleak picture. However, it's important to take a skeptical approach to how statistics are used, because numbers can have a lot of manipulative power. In this episode, we're discussing why it's important to never accept statistics at face value. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa Send us your feedback online: https://pinecast.com/feedback/flourish-insights/72b65dd2-5128-4568-a866-fea0b44e0c3c
Episode #55: Corporate Earnings and Market Bubbles You've probably seen the recent headlines asking whether the market is in a bubble, and this strikes fear in many investors. After all, most remember the 2008-2009 burst during the Great Recession, and the quick transition from all-time high to losses of over 30% in early 2020 with the Coronavirus. These memories make the term “market bubble” especially terrifying, and some capitalize on the fear associated with it to get the public's attention -- even though the fundamentals of the U.S. market are very good at the moment. There has been a gain of more than 25% this year, due to a supportive Federal Reserve and rebounding consumer spending, both of which directly support strong corporate earnings. We'll examine what it all means in this episode reflecting on our post-Covid economy. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa Send us your feedback online: https://pinecast.com/feedback/flourish-insights/8b049536-c600-4f70-8e6f-c47448420b64
Episode 54: Panflation: What is it? When will it end? As evidence-based investors, we typically rely on historical stock market and economic data from the past one hundred years to answer the common questions we're hearing from our clients. Every once in a while, however, we come upon a question without much historical context - and the current environment certainly qualifies. We're currently experiencing the characteristics of a global pandemic, an ongoing economic recovery, strong stock market performance, an historically low interest rate environment, and huge dislocations in the supply chain. We're calling it “panflation” - an inflationary environment that has been created by a pandemic. It's different from traditional inflation and from stagflation, and we examine why in this atypically non-historical episode. Make sure to check back in two weeks for more Flourish Insights with Jay Pluimer, and don't forget to visit the Insights blog for more content right now at https://www.flourishinsights.com. Enjoying the show? Please write a review of this podcast on Apple Podcasts or Alexa. Send us your feedback online: https://pinecast.com/feedback/flourish-insights/93d3c48a-7ef7-4cdf-9a94-e87b46de02b6
We're back with a new format of biweekly episodes, where we dive even deeper into the themes and developments that are driving market activity. In this episode, we discuss the potentially volatile period we are currently facing in the economy and in the markets. The U.S. government is walking the tightrope between the competing ideas of spending and saving, with a contentious political environment in the mix, too. The U.S. has never defaulted on its debt because Congress has always taken bipartisan action to avoid it. However, it may be time for more significant action to lessen our spending or to substantially increase the debt limit moving forward. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa Send us your feedback online: https://pinecast.com/feedback/flourish-insights/3d895060-a4a7-4ad3-a794-b13d2cf76269
Episode 52: Update on Meme Stocks In this follow-up to Episode 26, which discussed the difference between investing and trading, Jay Pluimer revisits the rise of “meme stocks”. There are two sides to every trade, and looking back eight months later, we can better understand several aspects of the waves that meme stocks created in the market. In this episode, Jay tackles questions like: Who made more money, individual investors or the companies? Has the number of meme stocks gone up or down over time? Are all of these trades based on the idea to create a “short squeeze” like with GameStop? Get the answers to these questions and more in this insightful episode. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa
Episode 51: Tapering: Who, What, Why, and When Episode description. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa
Episode 50: Why Invest in the Stock Market In this milestone 50th episode, Jay Pluimer digs into the reasons why the stock market is such an important investment opportunity, and the role it plays in helping investors accomplish their long-term financial goals. He explains how being in the market creates opportunities to benefit from innovations and inventions in the marketplace -- without having to have a revolutionary idea or build a marketing plan yourself. Through context, insight, and statistics, Jay also shares why the odds are always in the favor of a patient investor, and how you can capitalize on a 100% chance of earning a positive return. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa
Episode 49: Let's Talk About Bonds, Baby Are bonds on your mind? You're not alone! In this follow-up to episode 36, Jay revisits frequent questions about what bond allocations mean for your portfolio in the current climate of rising interest rates. Giving full credit to Salt ‘N' Pepa, he shares “all the good things and the bad things that may be.” As bonds are a complex topic, this episode provides insight on the four roles bonds play in a traditional, diversified portfolio, as well as how they can and cannot be leveraged in a time of rising inflation. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa
Episode #48: Update on Personal Savings and Spending Rates The COVID crisis changed the landscape of the American economy. One bittersweet consequence is that the average American family is in better financial shape today than they were before the pandemic. So, what shifted over the past 18 months - and what are the implications for the near future? In this episode, Jay Pluimer explores the pandemic's impact on personal finances, including personal spending rates, average debt, and savings habits. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa Send us your feedback online: https://pinecast.com/feedback/flourish-insights/d466c12e-1466-49a2-be26-d4b13508790a
Episode 47: What's Up with the Housing Market? The state of the housing market is a frequent topic of conversation these days, with prices soaring, homes selling in days, and sellers fielding multiple offers above the asking price. In this episode, Jay Pluimer provides historical and supply chain context for the current market, and shares advice for those who may be considering selling in order to capitalize on what is, perhaps, the best seller's market in history. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa
Episode 46: Revisiting the Inflation Question Inflation is once again a hot topic among economists and investors. Now that we have four months of economic data for 2021, coupled with multiple inflammatory headlines and notable comments from the Federal Reserve, should Americans expect prices for their everyday purchases to rise? In this episode, Jay Pluimer discusses inflation versus transitory inflation, the role the Federal Reserve plays, and why inflation is such an important topic for investors. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa
Episode 45: Should Anybody Sell in May and Go Away? If you've heard the common investing refrain, “Sell in May and go away”, then you may be wondering if taking a break from the markets each summer is a smart move. Although there is historical context for this idea, Jay Pluimer explains why it's time to stop taking investment advice from a century ago. After all, time in the market is a lot more important than timing the market. Check out this week's episode to learn why, and for the modern summer market data that should drive your evidence-based investment decisions. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa
Episode 44: ESG vs. Big Oil Environmental, Social, and Governance investments have been a popular topic, both on this podcast and in the wider investment context. An important theme in the conversations is that a growing number of institutional and individual investors are taking a new perspective when making investment decisions, specifically to support companies in the clean energy sector. Today, we're talking about one of the most important days in ESG's history - May 26, 2021, when three of the oldest and largest oil companies in the world had the universe turned upside down. Jay Pluimer shares the bombshell news and discusses whether it marks a turning point from old energy to sustainable investments in this episode of Flourish Insights. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa
Episode 43: A Comprehensive View of Your Investments It's common to have an incomplete picture of your savings and investments. Even the most organized people have the occasional pension plan that has been turned into a cash balance plan, a forgotten or unknown side account set up by a grandparent, or a 401(k) or 403(b) from an old job. Additionally, most people have changed jobs, banks, or brokerages at some point in the last few decades, which can make it hard to keep track of all your accounts. However, it's an important aspect of wealth management to get a consolidated understanding of all your assets and liabilities. If you've lost track of any of your savings or investment accounts, Jay Pluimer shares where to start with locating them and getting organized, including analyzing your overall market risk and assessing your total fees. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa
Episode 42: The Return of Value Investments Value-oriented investments have returned to prominence in the stock market, with indications that they may lead the next market cycle. This investment style has shown strong returns over the past eight months, and it is characterized by investing in companies with positive but moderate earnings and profits, usually in the single digits and above, that are trading at low prices relative to similar stocks. Value stocks, essentially, are trading at prices below what they are currently worth. In contrast, a growth-oriented style of investing is characterized by seeking companies with strong earnings and revenue growth in the mid-teens and above, even if the companies aren’t profitable yet. Growth investments have dominated over the last ten years, with significantly better returns. However, value stocks are making a comeback. Jay Pluimer explains why - and what it could mean for your portfolio - in this episode of Flourish Insights. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa
Episode 41: Can You Get Back Into the Market Now? It’s been over a year since the bottom dropped out of the stock market during the midst of the coronavirus crisis. At Flourish, we encouraged our clients to stay in the market and focus on the long-term throughout the turmoil. However, not all investors were able to withstand the emotional, psychological, and financial strain of watching account balances drop on a near-daily basis. As a result, many people sold when the market was on its way down, or even at the bottom. The question then becomes, when is it wise to get back in? In this episode, Jay Pluimer shares his perspective about why now is a good time to reinvest in the market, based on both historical trends and current data. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa
Episode 40: The Income Replacement Dilemma As you approach retirement, it is essential to plan for how you will replace your current income and support your preferred retirement lifestyle. There are many ways to structure your investments prior to retirement, but the goal should always be to build a long-term saving, investing, and spending plan. Whether you want to travel, buy a second home, or start the business you always dreamed of, you’ll need a plan to accomplish this with no paycheck to count on. Instead, you’ll rely on your investments to support your financial needs. Can your portfolio truly replace your former salary, though? In this episode, Jay Pluimer explores whether or not it’s possible to generate a consistent and reliable income stream from an investment portfolio in the current market environment. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa
Episode 39: To Crypto, or Not to Crypto? Cryptocurrency is a term used to describe a variety of digital currencies, with the two best known and largest being Bitcoin and Ethereum. Cryptocurrencies have a market capitalization of over $2 trillion as of mid-April 2021, but they are still a very small part of the investment universe when compared to the global stock market at $95 trillion. As a relatively new investment option, it’s important to consider the potential merits of crypto -- as well as potential disadvantages. In this episode, Jay Pluimer discusses how Flourish Wealth Management views crypto as a potential investment for client portfolios, while analyzing crypto as an investment option compared to traditional investments like stocks, bonds, real estate, or commodities. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa
Episode 38: Is the 60/40 Portfolio Dead? A 60/40 portfolio refers to a traditional mix of accounts with 60 percent invested in U.S. and international stocks, plus 40 percent invested in bonds and cash. This has been the template for a “balanced portfolio” for about fifty years, although the mix of investments has changed a lot over time. Some advisors like to use actively managed strategies to fill out a 60/40 portfolio, while others - like Flourish - focus on less expensive and more predictable index strategies. There are lots of combinations for investors to try, and the 60/40 portfolio has been a very successful investment strategy over the years. Despite that, some economists are saying this investment approach is on its way out. Is it dying, though, or simply taking a nap? Jay Pluimer takes you through the details in this episode of the Flourish Insights podcast. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa
Episode 37: Mind the Wealth Gap The stock market and the U.S. economy have experienced a spectacular recovery from late March 2020, when the coronavirus crisis had our lives in shutdown mode. This recovery has also highlighted the growing disparity, however, between the “haves” and the “don't have as much.” The term “wealth gap” refers to the unequal distribution of assets across households in America, and we are currently experiencing the largest gap in 70+ years. For example, the bottom 50 percent of U.S. households accounts for just two percent of our nation’s wealth. Though this episode is not about making everybody equal, understanding the wealth gap - and the factors driving its growth - is important for all of us. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa
Episode 36: Bond Investments in a Rising Interest Rate Environment Frequent headlines over the last few months reference two similar messages: “Death of the 60/40 Portfolio” and “Higher Rates Spell Inflation Doom.” Both warnings are about our current environment of rising interest rates and lower investment expectations for bond investments. It’s a tough pill to swallow because we’ve been in a falling interest rate environment since the early 1980s. However it's important to understand that a rising interest rate environment doesn't necessarily mean inflation is right around the corner, or that now is the time to sell all your bond holdings. In this episode, Jay Pluimer discusses the outlook for bond prices over the next few years and what it could mean for investor portfolios. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa
Episode 35: What Biases Influence Your Investment Decisions? There are as many different approaches to making investment decisions as there are colors of the rainbow, but they all share a few common elements. At Flourish, we embrace an aspect called behavioral finance, which explains how personal influences and biases affect the financial behavior of investors. Behavioral finance is a relatively new concept, and the study of human emotions and financial decision-making is still evolving. However, an important development has been that, despite our best intentions, we are not able to make rational investment decisions without being influenced by three broad categories of biases: representativeness, anchoring, and availability. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa
Episode 34: COVID Savings Equals Vaccine Spending The fundamental belief for a post-covid economic recovery in the U.S is based on the equation that people saved money while the economy was shut down due to the virus, and that they are ready to spend that money as fast as possible as soon as the economy is fully open again. Is this the case? Though millions of families have struggled to survive during the coronavirus crisis, the average American is in a better financial situation today than they were before the pandemic, with household savings rates up and debt down. Jay Pluimer shares the facts and explores the potential for post-COVID consumer spending in this episode of the Flourish Insights podcast. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa
Episode 33: How Can the US Handle More Debt? Across the United States, people are receiving money from the recent American Rescue Plan - the third economic stimulus effort over the past year. They total $3.2. trillion, which begs the question: How can the U.S take on this much new debt? The most important consideration is that all three relief plans were cheap to finance because of tools used by the Federal Reserve to keep the economy and markets in good working order - namely, very low-interest rates. The second consideration is that the U.S. economy is poised for growth, meaning additional income tax revenue for the federal government. Jay Pluimer dives into the details on this episode of the Flourish Insights podcast. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa
Episode 32: Turning 180 Degrees in 12 Months We have now passed the one-year mark since COVID-19 caused an economic recession and a market depression happening simultaneously - and all just one month after the stock market hit a record high in February 2020. Twelve months ago, the news headlines were justifiably horrible. However, dramatic and proactive efforts from the Federal Reserve and the U.S. government led to the fastest market recovery in history, lasting just 128 days. What stands out in retrospect is how important it was for investors to stay fully invested despite significant financial fears and concerns from the Coronavirus. In this episode, Jay Pluimer revisits where we were just one year ago, and discusses the eye-popping returns investors are seeing today from a market that has bounced back. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa
Episode 31: What is the Real Unemployment Rate? The coronavirus crisis has led to millions of lost jobs, and millions more workers who have jobs but who aren’t making as much today as they were a year ago. Official numbers state that the unemployment rate is at 6%, but that is misleading because it doesn’t count underemployed, marginally attached, and discouraged workers. In this episode, Jay Pluimer shares the real unemployment rate, provides context for why the Federal Reserve has been so active in stimulating the economy and discusses what it all means for consumer spending and the U.S. GDP. Always check back next week for more Flourish Insights with Jay Pluimer and don't forget to check out our insights blog at https://www.flourishinsights.com Please write a review of this podcast on Apple Podcasts or Alexa
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