AI helps us generate these transcripts from the audio and sometimes it makes some funny mistakes.

Joey Loss  00:19

Adam Van Wie. Welcome back to the show.

Adam Van Wie  00:21

Hey Joey, thanks for having me back. I really appreciate it

Joey Loss  00:24

for listeners. This is a new segment that Adam and I are going to be doing together every month to talk about what’s going on in global markets and what these current events might mean for investors in a variety of situations. The other episodes on this channel are evergreen content with expert guests and a variety of topics, but we thought it’s it would just be kind of fun and interesting to get together every month talk about what’s going on in the world, what’s going on in headlines, and kind of make sense of what does this mean for us as advisors, what might it mean for investors around the world and and kind of go from there. One of the things before we get into this, just a reminder that none of what we discuss is individual advice to purchase or sell any specific security or insurance product to make those decisions for your case, you should always consult your personally hired professionals in investments tax and otherwise Adam looking at markets right now And you know, the Fed, I think, is meeting as we speak. Yeah, what’s kind of top of mind for you?

Adam Van Wie  01:25

I mean, that’s it right now. That’s really all the all the talk. And I think saying the Fed encompasses many more things. The Fed is looking at all the economic data. So you you can’t talk about the Fed without talking about the jobs data, without talking about inflation, all the things that have been on the top of our minds for the last four years, but now, really since covid I think the Fed is discussing today, and they’re making a huge decision right now. This is the first time since the covid crash, I believe where they are actually, since the inflation run up, where they’re talking about cutting rates, and they’re going to cut either a quarter point or a half point off of the Fed rate, and it’s going to have an effect on the economy, on the stock market, and a lot of other things as well. You know, that’s

Joey Loss  02:14

been in the headlines for a while. I feel like for months I’ve been seeing Fed rate cut coming. Fed rate cut coming. What have they been waiting for as the indicator? So

Adam Van Wie  02:23

when the Fed looks at the timing of a rate cut, and I do have to say that historically, they don’t have a great track record of timing Fed rate cuts or increases correctly, but what they’re looking at is the overall health of the economy, the inflation rate they’re trying to gage, do we need to get tighter on monetary policy or get looser on monetary policy? And the effect of a cut or a rate hike on the economy can be fairly dramatic. It can take a lot of time, but it can be pretty dramatic in the months following that type of event. So they’re gaging all the data available to them and then trying to make the best decision to keep the economy running along, but not running along so hot as to where we get to say a 9% inflation rate. Again, for listeners,

Joey Loss  03:12

Adam alluded to loose money policy and tight money policy, and that has many names, easy money policy, hard money policy. And basically, what the Fed tries to do is it looks at the situation in the markets and the economy, and what it tries to do is if, if the market is running too hot and inflation is getting high, as it did over the last few years, what the Fed will do is raise interest rates to do two things. One, it makes it makes it a little bit harder to borrow money because interest rates are higher, so the cost of borrowing money goes up, and that keeps consumers from spending a little bit more of money they don’t have. Perhaps it also increases the reward of keeping money in things like high yield savings accounts or purchasing bonds, because the coupon rates are higher on those items when interest rates are higher. So that’s one of the tools that they have for cooling off the economy, slowing spending so that there’s not so much competition, pushing price up from the buyer side. Alternatively, tight money policy is the opposite. So if they’re looking to cut rates right now, that means they believe that inflation has fallen far enough that they know no longer need the artificial constraint of higher interest rates putting pressure on against purchasing from the consumer side,

Adam Van Wie  04:32

those high rates, to some degree, are, are sort of stifling economic activity, because when you are either a business or a consumer thinking about your next purchase and how you’re going to fund that. If you have to pay more to access that money, it’s harder to come to the conclusion that it’s worth borrowing that money to make a new decision, make a new purchase. And so the higher interest rates go, the harder that decision we. Comes and conversely, when interest rates start to come down, it becomes much easier to justify making that decision because you’re paying less to access the capital to make that purchase.

Joey Loss  05:11

Yeah, and the place that people feel it more than anywhere has been real estate.

Adam Van Wie  05:16

Absolutely, that’s why you’re seeing real estate dominate the headlines, because we’ve gone from essentially 2% mortgage rates up to seven and a half, I think at the peak, or maybe higher. I know there, there probably people out there watching this right now that have a mortgage rate in the sevens, and it’s come down into the sixes. And so now you’ve got a real decision to make, especially after this week, when the Fed starts to lower rates, you may see mortgage rates come down even further. So timing that next that refi is going to be really important. Yeah,

Joey Loss  05:47

and timing a refi is a very tricky thing because we really don’t know what’s going to happen. And if there’s any proof that rates can kind of turn on a dime, or at least, market circumstances can turn on a dime. It’s been the last four

Adam Van Wie  05:59

years. We’ve seen every type of mortgage rate in the last four years. It’s been pretty incredible.

Joey Loss  06:04

Yeah, at the end of 2020 when I was buying my house, a couple things, I was sure I was buying at the top of the market, not that you can time it, but I was like, forget it. I just want a house, right? And turned out not to be the case. Turned out to be a great time to buy in hindsight. But you just never really know when it comes to rates and home prices.

Adam Van Wie  06:24

You really don’t, and you’re probably going to hate me for this, but I just lucky, lucky, lucky. My wife came home one night and said, Honey, I saw a mortgage rate under 2% on a 15 year and I said, That’s not possible. I don’t believe that. She’s like, look it up. And so I got on my iPad, we’re watching TV, and I found it, and I started the refi process right then, and ended up with a 15 year mortgage under 2% and sometimes you just get really lucky.

Joey Loss  06:54

That’s insane. Yeah, that’s easily the lowest I’ve ever heard ever I know a lot of people in the twos, but below is unheard of. Honestly,

Adam Van Wie  07:01

I think it’s dumb that the bank is loaning me money, or ever loaned me money at that rate. It just doesn’t even make sense from a financial standpoint. I would never loan anyone money at under 2% I don’t care what interest rates are. It’s just a bad decision. But I lucked out. Yeah,

Joey Loss  07:17

at that point. I mean, knowing what we do in our comfort with markets. Personally, I wonder why you would ever not have a mortgage at 2%

Adam Van Wie  07:23

I don’t pay any extra on that thing. It’s the cheapest money I’ll ever get my life, and I’m gonna hold it until the day that it’s I have to pay it off because it’s the end of the mortgage.

Joey Loss  07:35

So that captures the Fed and for listeners, you know, questions that you might be asking yourself, if rates come down, are many people have been flocking to high yield savings accounts over the last few years, because for our lifespan, the rate has been as high, about as high as it’s ever been. And so the idea of putting money in a place where I have complete liquidity, I can pull it out at any time. There’s really no tie up like a bond with some sort of term on it has been attractive, but as those rates go down, that’s going to become less attractive. And so a question people might be asking themselves, and a question I’m asking for clients, as we look at situations, is, does it make sense? Is there a portion of money based on the overall planning picture that can be in longer bonds, is that where we need to be? Do we have the right amount in high yield savings accounts? Because the reward for having it in that place is going to be relatively less, and if rates continue to fall, which we don’t know, but if they do, you know having having an allocation in longer bonds is probably going to be a reward that’s not going to be there in the high yield savings space anymore. Absolutely.

Adam Van Wie  08:46

This is probably the biggest investment question I’ve been getting recently is, what do I do with my money market funds, my high yield savings funds, that because at four to 5% that’s really attractive. At three to four, still attractive, but not, not as attractive. It’s, you know, rates come down, you’re not making the same amount of money that you made the previous year on that savings. And is there a better alternative that is safe? And so one thing that I’ve been doing for a lot of clients in our who have longer term money, I’ve been as those bonds, those individual bonds have matured. I’ve been moving it over to bond funds. And the reason I like bond funds in this situation is that bond funds historically have done well during times when the Fed is cutting interest rates, because suddenly all the bonds held in that portfolio are worth more than they used to be. And you’ll if you look at the ETF AGG right now, it’s the aggregate bond market. It’s one of the one of the bigger ETFs that’s traded, and it, over the last three months has it’s done really, really well before the Fed has even cut rates. But everyone’s anticipating those rate cuts, and you’re seeing the performance of. Of the of the ETF go up because of that anticipation. And I, when I looked at it the other day, I think it was up something over 6% in the last few months, which is pretty good performance from a from a relatively safe asset class,

Joey Loss  10:15

yeah. And that’s the capital gain element alone, right? There’s, you know, people buy bonds for the income, which has nothing to do with the percentages we see. So I think long term averages for bonds are 5% a year. Yeah,

Adam Van Wie  10:27

the last three years have been a real anomaly in bonds with there was several times where we’re giving our quarterly reviews to clients and you’re seeing, like, the three year return on bonds being negative, and not just a little negative, like over 3% negative. And that just doesn’t, or hasn’t happened in my lifetime, and definitely not my lifetime as an advisor. So this was the first bear market and bonds that I’ve ever experienced in a really unusual situation that doesn’t happen very often,

Joey Loss  10:58

right? Well, with that, what are you seeing broadly in the market? Like, how are you feeling about equities in the state? What’s your confidence level and where

Adam Van Wie  11:09

things are? It’s an interesting question. We’re in September, which is historically the worst month of the year for equities. So far hasn’t been terrible, though. We’ve seen one really bad week to start the month, and then a really good bounce back week last week, and this week has started off pretty well, but fed meetings, without a doubt, always cause volatility. I’m sure there’s an exception to that, but it just feels like every time the Fed meets or speaks, you’re going to see some volatility, so that might be coming later this week Overall, though, I feel that the market is in a high but pretty good spot. I don’t feel I feel pretty neutral towards it. I’m not exuberant about it, and I’m definitely not fearful of it. Right now, there are certain things about the market that are very positive to me right now. I think the breadth expanding is really good. You’re seeing more stock, more areas of the market that have been underperforming start to show some signs of life, and you’re seeing the things that have led the market higher, specifically the seven mega cap tech stocks, maybe not do as well, not be the only thing that’s performing well. And personally, I like that, because we use diversified portfolios, much like you do, Joey, and that tends to be good for the market and diversified portfolios over the long term. And that’s how we always invest. We don’t we don’t trade, we don’t get in and out or try and time the market. We don’t do any of that. We have long term horizons, and we think about things in terms of what I want to buy now that’s going to be good in the next 510, 15 years. So I kind of like where the market is. I’m not fearful of it. I feel like it’s kind of an average market right now.

Joey Loss  12:51

Yeah, I would agree. I was very happy to see I was looking at recent year to date by sector performance in the equity markets. And I was very happy to see that exactly like you said, the the tide is coming from a much wider breadth of stocks than it was, say, after q1 or q2 this year, where Tech was really those seven tech stocks were carrying everything.

Adam Van Wie  13:14

Yeah. And if you go back over the last three years and look at the equal weight, S p5 100, the S p5 100 is normally a cap weighted index, which means that the largest stocks have a larger holding within the within the ETF, and but you can buy one where every, each one of the 500 stocks has the exact same weight in the in the portfolio. Well, the S P, actual ETF is up, I don’t even know, a huge amount, over the last three years, the equal weight portfolio is barely up at all. That means that those mega cap tech stocks were dragging everything higher and kind of disguising some some weakness underneath. And you’re starting to see that reverse, which, in my mind, is great news, because if those stocks that have underperformed can start over performing, you’re really going to see that help move the market higher as well.

Joey Loss  14:04

That’s a great comparison using those two funds.

Adam Van Wie  14:07

It’s one of my favorite things to look at, because sometimes the indexes don’t tell the whole story. You really have to dig underneath and look at things. There’s a certain REIT that we use just a small percentage of our portfolio, but I’ve been getting alerts every day, new 52 week high, new 52 week high. So you’re starting to see real estate perform, and that hasn’t happened in quite some time. So things like that get me encouraged. That’s

Joey Loss  14:32

great. Yeah, I agree. And for listeners, one of the reasons it’s so exciting to advisors who are looking at this stuff all the time to see a wide breadth of support from equity driving performance up is there’s two types of risk in your portfolio. There’s systematic risk, which is like America goes to war suddenly, and all markets are shocked, and it applies to companies equally. So that’s the system. Them itself. They call it systematic risk. And then there’s another element called unsystematic risk, which applies to individual companies. So Enron, which was blew up for fraud and all sorts of issues back in the day, if you held a ton of Enron, you had a disproportionate amount of unsystematic risk, right? It had nothing to do with what the world was doing. It was just about that company. And so when the market’s being carried by seven or eight stocks at a time, that’s a little bit scary, because it means there’s a disproportionate amount of unsystematic risk in all of our portfolios at that moment. But when that return, when that return sourcing spreads out across, say, 100 or 500 or 1000 companies, that’s a much more confident place to be, because it would really take a shock to the system to harm us as much as we might get harmed if a single company in a batch of seven hit bad times.

Adam Van Wie  15:50

Absolutely, that’s a great point. If Apple has a misstep, and it’s 15% of your portfolio, even if you don’t actually own apple, but it’s in every ETF that you’ve purchased, and something, they just really mess something up, and their stock gets tanked. And, I mean, it’s going to really hurt you. That’s a lot of risk that you didn’t probably even know that you had. And so I think that’s a great point, Joey, like having the those other 499 companies also doing well, would really cut that risk by a substantial amount? You

Joey Loss  16:26

spoke before we hopped on here about the similarities between the market this year and last year. Can you tell us more about that? Yeah,

Adam Van Wie  16:33

it’s interesting. I was looking at a chart that had last year’s performance overlaid with this year’s performance, and I had no idea, but remarkably similar this year to date. So there’s good news and bad news there. If that trend were to hold the next month, it may not be so fun, because that’s what happened last year. The market kind of tanked around this time of year, but then we saw a really strong Santa Claus Rally wiped out all the damage that have been done over the next month, and ended the year up substantially last year. So I don’t know that that will happen. Rarely does the past predict the future, but it is pretty remarkable. What how close the performance has mirrored last year at this point in the year, and it’s not it’s not as unusual as it might sound, because many years you see the market rally in the first part of the year, flatten out over the summer, go down a bit in the fall, and then rally into the Christmas and holiday season. So it’s not as crazy as it might sound, but the performance was just kind of strikingly similar. One

Joey Loss  17:38

of the things that’s interesting, maybe we can talk a little bit about this is, you know, there are patterns to how the market behaves. And despite that, you know, we’ve been in this field, we’re working with lots of clients from all over the country, and we don’t listen to those patterns as we as we trade for clients. And why is that? Can you talk a little bit more about why market timing is a bad idea,

Adam Van Wie  18:07

one of my favorite topics, because people always think that they can, can do this, and it’s just, I think it’s just basic human nature to feel like you, you have an edge, you, you, you figured something out, but the market will always make you feel like an idiot. I can’t tell you the number of times that I have a handful of clients that are very nervous investors, and I know that if they call me and tell me to sell out that day will be the bottom of the market. And I say that jokingly, but it does feel like that, because you the market, for some reason, can create that kind of pain point where you just feel like you can’t take it anymore. And right when it gets to that point, and everybody sees the, I think Warren Buffett said the blood in the streets, that’s when you need to buy. But everyone wants to sell at that point, and the only thing you will end up doing, if you try and market time is lowering your own return. You cannot do it. You will end up selling, even if you nail it on one side, the selling out of the market is always the easiest decision. Getting back in is the hardest decision. And so you’ll end up just losing out on some of the bounce back on the way back up, and lowering your overall return, and it’s just such a ill advised strategy, I never do it because I’ve seen the results of it when, when clients have made me, force me to sell out their positions, it always, 100% of the time, has lowered their their long term returns. And it’s not worth it.

Joey Loss  19:37

Yeah, I may. I can’t remember if I mentioned this on an episode yet, but my grandparents totally blew up their finances in 2008 by selling,

Adam Van Wie  19:47

oh yeah, that. I mean, I think a lot of people did that in 2008 and

Joey Loss  19:51

to your point, it wasn’t hard to get out. It was they just could never get the confidence to go back in. You know, it’s almost like you lock in the. Ocean that you felt at the bottom of the market when you sell at that moment, like you just can’t get past it. I’ve

Adam Van Wie  20:06

seen the mental gymnastics of trying to get back in. And people will say they’ll see an up day, and they won’t trust it, so they want to wait one more day, and then the market will pull back just a small fraction, and they’re like, Oh, I was right. Thank goodness I didn’t get in. And then they take a week off and don’t look at it, and it’s up another 5% and they’ve completely shot themselves in the foot by by selling out and not being able to get back in. Yeah, yeah.

Joey Loss  20:29

And that just brings it back to, you know, I know this is a market chatter episode, but I’d be remiss if I didn’t flip it to financial planning for a second. This is why it’s so important to just make sure, as you think about all this stuff and all these everything that’s going on in the market, Fed rate cuts, that you really have money allocated across your picture at risk levels you can tolerate, because we know markets are going to move that systematic risk I was talking about is going to hit every so many years. In fact, it’s going to hit most years we have a correction. I think every 1.84 years is the last I look, and that correction means markets fell by over 10% that’s just going to happen. That’s a part of the journey of being an investor. And so one of the things we need to make sure of from a financial planning standpoint, is that we have money in the right places. You know, your high yield savings account has a purpose. That’s your that’s your guaranteed to be their money. If, if something hits the fan and you need some cash, that’s where you’re going to get it first. The next place will be the bond side of your portfolio. We know that there’s times that that market’s going to fall. It’s rare compared to equities, but it does have volatility at times. With that said, it’s still a more stable part of your portfolio, there’s some risk involved, more so than a high yield savings account, but less so than the equity markets. And then for money that we know we’re going to spend a lot later, that’s where we can get involved in equities. And we can withstand fluctuations, significant fluctuations, because we know we’re in it for the long haul.

Adam Van Wie  22:00

Yeah, yeah, all great points. And when you’re when you’re thinking about how you allocate your money, it’s way more important than the actual investments that you pick. The investors tend to underperform their own investments. So what that means is that you try and do market timing, you try and do trading, you try and pick winners and losers, and you’re never going to be able to do that effectively over a long period of time. So allocating that money to groups of assets that that have track records of success, like the S, p5, 100 and indexes like that, that’s really the only successful method that’s been tried and true and works over a long period of time. The only problem with it is really boring. So when you first get started and you’re putting in, you know, a couple 100 bucks out of your paycheck, and it just takes forever to have any substantial amount of money, you get to $1,000 and you have a 20% year, and you’ve made $200 it’s, it’s just, it’s so boring, but when you get to a million dollars and you have a 20% year, you’ve made 200 grand. So it’s just, it just takes so long to get there. But that’s the power of compounding, and that’s the power of saving over a long period of time. And it when you look at a compounding chart, it sort of looks like the global warming hockey stick chart. It’s like nothing, nothing, nothing, and then just off the charts. And investing is kind of like that. When you finally get a substantial amount of money, that’s when it gets really fun.

Joey Loss  23:35

Yeah, absolutely, that’s a great point. We’ve been talking about the emotions of reacting to different market situations, I want to bring our attention to a specific event that happened at beginning of last month, which in all our minds, is already out of the market cycle. We don’t even remember it. So I had to look back to get some info. But I want to focus on August 5 through August 9 of last month, which, if anybody, if you guys remember the global selloffs and Black Monday 2.0 headlines, which, of course, is a reference to the 1987 actual market crash that happened, the headlines were making it seem like we’re here, right? The recession’s here. The crapper is upon us. And, you know, grab your pitchforks. And it just kind of amazed me, because the timeline of events was, Sunday night was when the pre market headlines started coming out, right? It was obvious in pre market trading that things were going to take, allegedly, a dive and over, and then into Monday. Monday morning, they got a little bit broader. They were on more periodicals, and the world was getting out. And then over the course of that day, the market fell a whopping 3% which is a big movement for a single day, yeah, sure, but black market 2.0 or Black Monday hardly.

Adam Van Wie  24:52

You have to remember, we’re in a we’re in a political season, and so every. The thing is going to be amplified, and it’s all going to be wrong. I mean, it’s just going to be people pointing fingers at the other side and saying, it’s your fault. It’s your fault. Ignore all of that. It’s completely irrelevant. It just makes no sense. But it’s going to happen. So know that it’s know that it’s out there. That reaction was just an, in my mind, just a overblown, normal negative sentiment day. I mean, a 3% drop. We didn’t even hit any stock market triggers to stop trading or halt trading like we did during the covid crash. Those were really bad days. This was just a, I mean, it was a bad day, no doubt about it, but, and it was a bad week, but it also was just normal market action. I was just astounded by some of the just irresponsible headlines and people talking heads on TV saying that this was a crash and I mean, the hyperbole and the exaggeration was just it was so ridiculous.

Joey Loss  25:58

Yeah, I can’t figure out what it was about that particular moment, that call I’ve never heard, Black Monday, 2.0 thrown out there. Is it just because it was a Monday? Were they just sitting on that? I

Adam Van Wie  26:09

really don’t know why the hysteria, what was so amplified over this, this bad day of trading on that Monday, it just seemed to come out of nowhere. And I really think maybe you could point to the the upcoming election and just everybody wanting to, like, have a something they can point at and blame the other side for. I don’t know,

Joey Loss  26:32

yeah, yeah. I think yeah. Maybe it was just a melting pot of high tension and they knew they could run with it. Yes.

Adam Van Wie  26:40

I mean, I think, I think everyone’s a little bit on on edge because of politics right now. I see it in my clients, for sure. Yeah, it’s just a little bit heightened. I personally, I can’t wait until December when everything’s over and we can just go back to being normal, agreed, relatively normal,

Joey Loss  27:01

yeah, whatever normal is now, yeah, yeah. And interesting. By the end of business on Friday of that week, the S P was down a whopping 0.04%

Adam Van Wie  27:16

on the week. Wow. And

Joey Loss  27:18

And honestly, like, aside from covid, the emotions of those headlines seem worse to me than even 2019 at the end of that year. I mean, I remember calls for recessions, but they were kind of ambiguous in nature, right? They’ve been calling for it every year for, I don’t know, seven years now. It feels like, oh yeah. And I guess the point I’m trying to get to here is just, you know, there’s so much noise and, and you said it like there’s always going to be something, whether it’s an election or some set of circumstances, that can be organized in a certain way to create these doomsday headlines. And the reality is, if we had listened to any one of them since, let’s say, going back to 2018 which is the earliest I can remember. These aggressive recession calls based on the historic bull market that had already existed at that time and has continued for the most part, we would have done a huge disservice to clients for our own money, right? Because we treat that money no differently. So I just think it’s a good example of what good investing is like, and that it can be challenging in those acute moments. Yeah,

Adam Van Wie  28:24

I think, I think the last five years is just an excellent example of why you don’t do market timing, why you buy and hold look at what we’ve been through, the covid crash, inflation like we haven’t seen in America since the 70s, we saw 2022 where the market absolutely tanked. The bond market was down 13% it was just a terrible year. But look at the performance of not only equities, but bond bonds are positive now. They were negative for quite a while. But if you look at the performance in either if you were invested in either asset class, you probably are up or up substantially at this point. And we’ve been through a lot in the last five years. And maybe I don’t like saying more than normal, because you probably everybody says that about their last five years, but it does feel like a substantial amount of of crazy events and volatility, and here we are sitting at all time highs, I believe, intraday today.

Joey Loss  29:30

Yeah, it’s kind of amazing to look at the last five years and realize what markets can withstand.

Adam Van Wie  29:37

It’s the resilient that. And really, when you think about what a market is, a market is, it’s a collection of companies that are all individually out there trying to maximize their own profit and do the best that they can given their set of circumstances. So when you think about an individual company, that it’s a bunch of people who get to go. There for a common goal, try and sell as much as possible at the highest profit margin possible. And it doesn’t really matter what the rules are or what the situation is, they’re still going to try and maximize no matter what is thrown at them them. So I think this is a great example of having a whole lot of stuff thrown at all these companies, and yet they found ways to get product to their consumers that consumers want and have the money to buy at a price point that is that makes sense for both the consumer and the company. Now, that may not feel like the case over the last few years with inflation, but fact is, the price of everything has gone up their inputs have the price of everything that companies buy has gone up, and they’re having to pass it along, and we’re having to take it. And that can go both ways. It can go up, it can go down. We’ll see where it goes from here. But the goal of those companies hasn’t changed, and they’ve been able to continue to make money even through an extremely difficult set of certain circumstances.

Joey Loss  31:00

Yeah, yeah. And it’s so interesting to look at, you know, as you’re describing the individual interests of each individual company out there, it’s interesting how, as global circumstances change. So like with covid, it kind of created this window where tech companies could soar. Oh, yeah, right. So you have zoom, you have peloton for a period who way overplayed their hand, right? I mean, they went from like, huge stock prices, amazing returns, to like, pennies on the dollar. Now, nobody wants the peloton.

Adam Van Wie  31:31

My wife loves you, the only one left. I don’t know

Joey Loss  31:37

it’s interesting, and it’s easy in those moments as an investor, to say, like, okay, the future’s here, right? It’s all tech now. Let’s go heavy on the NASDAQ. And you could be right for a period. And if you held the NASDAQ last year in the early part of this year in a disproportionate weighting, you received benefits for it. But now what tends to happen is the rest of the market integrates itself, right? That self interest of every one of these companies finds a way to play the game and get a piece of it. And so that’s part of what we’re seeing with the broadening of the market performance, is it’s not just tech now, it’s finance, financials, utilities,

Adam Van Wie  32:16

yeah. I mean, there’s lots of examples right now, you’re absolutely right. You can call it. There’s a lot of names for it. The one I usually use is reversion to the mean. You rarely see the same sector dominate returns more than a very short time period, so a year, two years, three years, but then, most likely, the next year, something else is going to replace that. And it doesn’t mean that that that asset class has to fall to the bottom of the pile. It might be second, it might be third, but it doesn’t tend to last. It’s very hard to generate outsized returns for a long period of time. It’s somewhat easy to do it for a short period of time, but that, again, just speaks to why you hold a diversified portfolio and rebalance. So when things are going great, you sell off some of that, the things that have done really well, and buy some of the things that have underperformed. Because over a long period of time, you’re going to see some reversion to the mean, where those underperforming assets are eventually going to lead the market or get close to it,

Joey Loss  33:24

yeah, and that right there is why rebalancing adds such a reliable premium to long term investment performance.

Adam Van Wie  33:33

Yeah. And there’s been so many studies that have proven that, and I just think it’s such a fundamental part of investing at this point, there really isn’t much argument that anyone can make that would convince me that is not important. I really believe that. Yeah,

Joey Loss  33:47

absolutely. So we’ve covered a lot. Do you have anything else top of mind as far as what’s going on right now? No,

Adam Van Wie  33:54

I think it’s I think there’s a lot of fear out there right now. I I sense that I don’t know if, I don’t know if that’s accurate. I don’t. I haven’t taken a survey or anything, but I, I sense there’s a lot of fear out there. People always get scared when the market’s at an all time high. But if you look back through history, the market’s at an all time high almost more often than it isn’t. That doesn’t mean it can’t go higher. That doesn’t mean it’s not going to drop it. It’s just a again, it’s, it’s businesses doing well, selling more at a higher price than they ever have before. And so the logic behind seeing all times highs actually makes a lot of sense, if you think about it on an individual company basis, but it does. It does give people a lot of fear. It makes people worry that, Oh man, it’s too good. It’s going to crash back down. But the thing that I do to comfort myself in those situations is I go back and I look at the three year return. If you look at three year returns in the market, especially on the equal weight index, you’re well be low long term averages. And so, yeah, it’s at an all time high. But have we really done that? Well, I. Think there’s still room to improve in this market. It may not happen immediately, but it’s going to come eventually. And so I that that kind of gives me a level of comfort with my investments when things are are like they are today.

Joey Loss  35:12

Yeah, yeah, I agree. And and the reality is, if we have the right money placed into the into equities to get that opportunity 10 years from now, we’re pretty darn confident that we’re going to be at New all time highs compared to today.

Adam Van Wie  35:26

I’d be, I’d almost be willing to wager on that, that, yeah, that will happen. Yeah.

Joey Loss  35:32

So I think that that wraps up this first episode of Market chatter. Would love some feedback. If anybody out there wants to reach out, you can reach me at joey@flowfinancial.com but we’re going to keep doing this every month. You know, the headlines are churning. There’s plenty to talk about, probably not the last Fed rate cut we’ll see. So we’ll have more to talk about as time goes on and the rest of the year

Adam Van Wie  35:54

on full. Fourth quarter, I can assure you, there’s going to be a lot going on. There’s just so much news coming out, and just it’s going to be, it’s going to get a little crazy. I think that’s the that is one prediction I’m willing to make. Yeah,

Joey Loss  36:09

absolutely. Well, Adam, thanks for joining and I look forward to talking with you next month.

Adam Van Wie  36:14

Really appreciate you having me on. Thanks, Joey. All

Joey Loss  36:16

right, take care. You. Music. Thanks for joining us. If you enjoyed this episode, be sure to subscribe to the show and share the episode with friends or family that may find a conversation helpful or interesting. Show Notes and episode transcripts are available on my website at flow, financial.com/podcast I want to give a special thanks to Bo delicens for the music explorer and to the podcast man for producing the show. We’ll see you next time

Disclaimer  36:47

the wealth unplugged podcast is sponsored by flow financial, Joey’s Registered Investment Advisory offering Financial Planning and Investment Management services to clients across the United States. The opinions voiced in this material are for general informational purposes only, and are not intended to provide specific advice or recommendations for any individual security to determine which investments may be appropriate for you. Consult your financial advisor prior to investing. This information is not intended to be a substitute for individualized tax advice, please consult your tax advisor regarding your specific situation.