Joey 0:02Welcome back to Wealth Unplugged. I'm your host Joey Loss and I'm riding solo today. I'm recording this on Friday, March 20, 2026. Adam is surfing in Nicaragua with his son and probably doesn't regret missing this recording and I don't blame him for that. If you've been following the show, you know we've spent much of the last year talking about the incredible resilience displayed by the market. Through tumultuous headlines. This week, that resilience is finally being tested in a way that we haven't seen in quite some time. For the first time since May 9th of last year, 2025, the S&P 500 opened below its 200 day moving average. That 214 market session streak of staying above that long term trend line is officially over. The S P is down nearly 4% this month alone and we're sitting at the highest. I'm sorry, we're sitting at the lowest levels for the index since November. Glancing at US Markets until late February, the Nasdaq and S and P were running upwards. We're now seeing a rapid retracement of that movement. We've got ugly market breath and only 46% of stocks are trading above their 200 day moving averages right now. Which just means that more than half the market is effectively in a technical downtrend. That's not what you want to see after such a good start to the year. Globally, everyone seems to be playing defense in Asia. Japan's market had a rough 3% drop in a single day and China was down too. The one surprise recently was South Korea which actually finished the week up over 5%. But it's worth noting that that comes after a double digit drops in the Korean market just days after the start of the war due to their intense energy dependence on on supplies from the Strait of Hormuz. Europe is really feeling the heat from the energy crisis right now. Their major markets fell about 2% this week, mostly because natural gas prices are staying high. You can think of that as a massive mandatory tax on every factory and business over there. When energy is this expensive, it forces companies to completely rethink their plans just to keep the lights on. And we're going to see more and more of that the longer this goes on. Even, you know, tiers, you know, lower tiers than medium tiers and higher tiers of companies could potentially run into cash management issues while the rest of operations are fine. And that starts to slow things down. So this really makes oil the elephant in the room right now. It's, you know, oil is always an important resource and an important factor when you're looking at market behavior and forecasts and trying to determine what's what. But it's unusual for oil to be as front and center as it is right now. And in fact, I can't think of another period where oil is playing as big a role in overall market sentiment and performance as it is right now. Since the war in Iran began, crude has been on a tear, hitting $97 a barrel earlier this week before settling near 95 yesterday and today. Year to date, energy is the only sector with any positive moment, any real positive momentum. 95% of energy stocks are above their 50 day moving average while virtually every other sector is struggling to keep its head above water. We're going to go deeper on the effects of oil.Joey 3:28$4 gas is more than just a line item in your budget. It's a psychological barrier that changes how consumers behave. We're going to talk more about that and then we're also going to talk about why the black box of private credit. You, you may have seen some headlines. You're going to see. We're going to talk about why it's garnering bad press and whether it's something that investors really need to worry about. That's been an investment that's more widely adopted over the last few years by regular everyday investors. It hasn't completely penetrated the market, but its reach is far. So we're going to talk more about that. So focusing on the consumer, I want to look at the current economic situation through the eyes of the individual consumer as a way to indicate what why oil is so important in the current environment. When we look at broader research at the office here, we just see data points. We can put those data points where we want and tell a broader story. But when you're standing at the gas pump in D.C. or Virginia or Neptune beach or wherever you are, you see a shrinking disposable income every time that gas price goes up. Oil uncertainty and gas prices along with it makes for a unique kind of economic poison. The current issue is not just that prices are high today. It's that nobody knows if they're gonna go even higher or for how long they will remain elevated. Economists are currently debating the recession threshold pricing for oil. And by that I mean the consensus that they're coming to is that we don't see a true US recession risk unless oil is able to hit $138 a barrel and it stays there for several weeks. That's kind of a lofty data point to even call out, but it is useful in the sense that that's their acknowledgment that oil is sort of front and center to what's going on. And if it goes to that point, 1,3 8 a barrel and hangs out there for a while, that's when we're really going to start to see some damage. Not just at the household level, which people are already feeling, but you know, in a meaningful way for small businesses and medium sized businesses. That that really starts to kill the momentum of GDP growth. With that said, the average family is not going to wait for $138 a barrel to start cutting back on their own spending. We're seeing fuel price shocks becoming a temporary fiscal burden for households when gas prices surge. It also acts like an immediate tax uncertainty around these prices prevents people from making bigger ticket purchases like buying new cars, buying homes. We'll talk more about housing and spending on consumer goods. When you suspect it might cost $100 or $150 to fill your SUV next month, you're probably not signing a new lease or booking that big summer vacation. This precautionary saving behavior can kind of become self fulfilling around recessions. I mean, this is what, at the end of the day, 70% of US GDP is driven by consumer spending behaviors. And so even when there's a concern of a recession driving a slowdown in consumer spending, sometimes that can become the ingredient that fulfills the destiny of a recession. So that's kind of the moment we're in now. That's not to say that we think here that a recession is coming.Joey 6:54There's a reason you can only define a recession technically six months after it started. And that's because you can't identify the moment that you're starting to enter a recession. You can identify that you've been in one for some time. But we are saying that oil prices and current conditions are setting a stage for an increased possibility of a recession.Joey 7:18Moving on to the Fed. The Fed met this week and their message was pretty clear. Rates are staying put until there's more clarity on the world stage. The Federal Open market committee voted 11 to 1 to hold rates where they are, but their summary of economic projections, otherwise known as the dot plot, shifted pretty significantly. The median Fed member Now sees core PCE inflation. This is producer inflation at 2.7% for 2026. That's an upward revision from where we were, but it's still pretty healthy. You know, anything the new target for the last 10 or 20 years has been 2%. Inflation is kind of the target. And Adam and I and Steve and I have debated and we all sort of agree that 2% is a bit of a ridiculously low target. I mean, if 3% is the historical average, we had a decade where 2% was pretty normal, that was the 2010s, and just decided that that should be the new normal. 3% is by all considerations a very healthy level of inflation. So for PCE to be at 2.7%, that on its own doesn't scare me. But that's the Fed's way of acknowledging that the Iran conflict and the resulting commodity spikes are making inflation sticky. And we may not see it continue to drop to the low twos unless we see something change on the international conflict front.Joey 8:46Because of this, Fed funds, futures markets and other prediction markets like polymarket are now pricing out pretty much any other rate cuts for 2026. And this is a shift we've gone from expecting a series of rate cuts, which everyone was looking forward to, at least on the consumer side, the lower end of the K. If you've heard us talk about the K shaped economy, to wondering if we might see a potential rate hike if oil continues to march to and past $100 a barrel. I don't personally think a rate hike is going to happen. It would be too hard on businesses and consumers. And you know, when Covid happened and everything sort of halted in a moment for whatever reason, the EU's response, the EU central bank was to raise rates and that just absolutely crushed people. So in an environment like this where everything else is tightening on its own, yes, in theory it would make sense to raise rates to combat inflation. But the reality is raising rates elsewhere while oil is also going up kind of can create more of a storm than it does in alleviating other problems. So I am doubtful that we would see a rate hike unless things drastically changed and we saw other prices rising too. I don't think it's a good idea to just measure inflation by what's happening with oil. You got to look at everything else. But we will see what happens. The market seems to think that the storyline's changed and we're not going to see big, big rate cuts this year. In the bond market, the 10 year treasury yield is holding firm above 4.3%. This is also a rise from where it was. It was kind of in the high threes, low fours, and the 10 year is really the primary determinant for the 30 year bond. Reason for that being, most mortgages don't make it to 30 years, they make it to 7 or 10 years. I think the average is 7. And so the 10 year bond rate determines for the most part what the 30 year mortgage rates will be. And there's a spread there. So those rates, 30 year mortgage rates are about 6% and above at this point. We had touched just below 6% before the Iran conflict started. So moving on to housing, I promised some comments here. The January data was not good. New single family home sales dropped 17.6% for the first month of the year. Some of that was definitely related to unusually severe weather storms that kept buyers at home. But we're also seeing the lock in effect of rates and that is definitely a part of the real story. We have a considerable divergence going on within the housing markets. On the new home front, builders are sitting on the highest inventory of completed homes since 2009. Because they need to move these units, they are offering incentives and price cuts. The median price for a new home is down 6.8% over the last year to just over 400,000, which sounds pretty expensive to me. For the median price on the existing homes front, the market is essentially frozen. If you're a homeowner with a 3 or 4% mortgage that you got during the low points of the last five years and you're looking at the current 30 year fixed rate that you can get if you move, which is hovering in the high sixes or low sevens, pretty much every one of you is deciding to stay put and that's creating a bit of a supply side stalemate. Unless you want to go buy a new, you know, Toll Brothers manufactured home, which is most of the supply that's out there, those types of homes, Ryan homes and so on,Joey 12:20you really don't have that much options and you're probably not going ahead and buying those homes. Even though prices are softening a bit, the cost of financing a home is so high that the monthly payment for a new buyer is still near record highs. Historically, until that 10 year yield moves down back towards 3.5 or 4%, you're probably going to see this lock in effective rates continue contributing to a volume desert as far as what options are out there for people to buy and actual transactions coming through. All right, so I went through a lot of negative stuff. It's really not representative of how we feel. But it's important to note that our thoughts and perspective on the market are always long term. Every year we go through some series of headlines or some period like this. In fact, historicallyJoey 13:11a market correction occurs just about every year. And our last market correction, which I'm sure most of you remember quite well, occurred almost exactly a year ago. And that was the lead up to the tariffs issue.Joey 13:27Markets went down and down and down on anticipation of the tariffs. And then they were eventually announced and the market did not like what it saw. It was shocked. I think everybody was kind of shocked. And then when there was a delay put on the tariffs, the market shot up over 9% in a period of two hours.Joey 13:48And that's just sort of the environment that we're in. So I'm not saying something like that's going to happen, but it's, it's important for investors to acknowledge that if you're truly an investor and not a trader, your perspective should be long. And these types of corrections are regular. They're, you're going to experience them on average every year. And the only way not to benefit from the recovery that eventually happens historically every timeJoey 14:14is to just stay invested. You know, it doesn't mean it's a guarantee you're invested the right way. That's something to check with your personal advisor to figure out. But assuming that you are, there's really nothing to be done in the short term when stuff like this is going on. So I'm going to move into some positive, it's not all doom and gloom. We saw some what they call triple plays this week, which is companies beating expectations on earnings, revenue and guidance. And so Micron Ticker MU, they're up 55% year to date. Their high bandwidth memory is the backbone of the entire AI build out. This is a company that works kind of in the same field as Nvidia and Taiwan Semiconductor. They're essentially sold out of supplies through 2026. DocuSign, another company, ticker DOCU, their new AI driven agreement platform reached 350 million in annual recurring revenue in just 18 months. And that shows that even in a tough macro environment like the present, companies will pay good money to obtain efficiency. And so I'm not recommending either of these stocks. Neither of these two stories are significant on their own, but I think they point to a type of optimism that exists just underneath the surface of the market. And these are the types of headlines that we enjoyed the first part of the year before things started to turn sour. And they're the type of headlines that would take over if concerns about oil and stagnant or rising rates were to end tomorrow. And again, just don't be shocked at how quickly that happens whenever the end of this conflict occurs or whenever there's some sort of agreement on oil that removes some of the uncertainty people are responding to. Today, there is one last shadow looming over the alternative space. Again, this isn't something that's going to affect most investors unless you own things like Ares or Apollo Global or any direct private credit funds. But the Cliffwater Corporate Lending Fund, which is a $42 billion behemoth, is the latest to face redemption pressure. Investors are trying to get their money out and the fund is limiting how much money that they can take. The concern here is what people are calling the black box, and this has been for a while, the criticism of private credit. Although for the last three or four years, these private credit funds have on paper returned 7 to 9 to 12%. And it's funny, the funny thing is, whenever a fund is returning like that so consistently, people don't really feel the need to ask questions. Once sentiment changes as it has now, everybody suddenly wants to go get their money. And all these questions boil to the surface. So unlike a public stock, where the price for a fund or security is discovered every single second on the exchange, private credit loans are valued internally. There's a growing suspicion in the private credit space that the net asset values of these loans are inflated, that they haven't been marked down to reflect the reality of the present environment of 7% interest rates. And if you open a black box like this and find 5,000 more black boxes inside, you probably shouldn't be surprised when you can't find the exit and get your money out. For individual investors, this is a major buyer beware moment. For anything labeled buyer private that doesn't offer daily liquidity. Now, private credit, when it comes to giving advice like we, we talk about this with clients, it's a whole separate bag. But I, I just think this is a good example of if you can't understand a fund or a security thesis and explain it in 30 seconds, then it's probably not something that you should own. Even if it's done well for the last few years, you know, these types of hazards exist. And so there's a, there's a right time to have things like private credit. There's a right way to allocate it, there's a right situation to own these things. If you're a regular investor tied up in private credit or something like this or some other security that you don't fully understand and know how to describe, just be aware that there's an extra level of risk there that makes it different from owning a procter and gambler, owning even your favorite tech growth stock that's gone wildly successful over the last few years. There's another layer of opacity and challenge there if conditions turn sour. So finally, to close this out, technicals appear to be a little bit broken in the market right now, and the Fed is leaning in a hawkish direction, meaning that they're poised to hold or raise rates and fight inflation and check instead of lowering them, which was the previous narrative to increase liquidity and spur growth. And oil is currently acting as a psychological weight on the consumer. And again, the consumer drives the vast majority of GDP growth. And that's why there's concerns about a self fulfilling prophecy there with regards to a recession if oil keeps rising. But there is some good news and it's a bit counterintuitive. So public survey sentiment shows that bears market bears, people who think the market is going in a bad direction are now over 50%. Historically, whenever, when everyone is this pessimistic, The S&P 500 is higher six months later, 85% of the time with an average gain of over 7%. The gloomiest night often precedes the morning. Or as Harvey Dante says in Batman, the night gets darkest just before the dawn. Whether we're at the darkest part of the night or not yet remains to be seen. But when we regain some element of certainty around oil in the direction of rates, recent history suggests that the market recovery can be swift. So as a parting thought, you know you'll always hear me say this. It's best to focus on the things that you can control. This is cash flow, this is prudent tax planning. And of course, maintaining a well diversified portfolio that makes sense for your goals.Joey 20:17I'll be in Amelia island next week relaxing with family and reading about markets and not reacting to short term market fluctuations because our focus is on the long game. So you know, one of the benefits when you really adopt a long term investment perspective and you understand that you're invested the right way is you can just kind of look at the market like a soap opera. I mean, I love preparing for these podcasts and having conversations with Adam. We've got our radio show on Saturdays every Saturday morning. We love talking about it because it's just like the greatest soap opera on earth to us to watch how all these things interact and learn how the market works to a greater degree every week. But at the same time, it's sort of amazing how all it does is reaffirm the right way to invest and where to make bets, which is that everybody wants to make money in the long term and if I own a piece of what they're doing, I'm going to get access to that as opposed to I'm going to bet on this part of the market and that part of the market and this part of the market and that part of the market. It just reaffirms this long strategic asset allocation approach. So it makes it fun to watch. Don't really get that emotionally invested and that's because we know we're doing the right things in the areas that we can control and that's what we help clients do. So I rarely ever make a pitch to give us a call, but you know how to reach us if you think that you need some help with any of these things. For now, I'm Joey Laws. Thanks for listening to Wealth Unplugged and I'll talk to you guys in a few weeks. It.