Joey Loss 00:14

Welcome back to another market chatter. The guest this week is Adam van Lee, hello. This week, we come to you not as friends, joining from afar in a podcast, but actually from the same office. Since we last recorded an episode, Adam and I officially merged our firms. And so now, if you want to see what we're up to, our firm is called strivus wealth partners, looking forward, we just want to share a couple minutes about why we did this. Adam and I have been friends for seven years, which started with a stint on the financial planning Association's executive board here in Jacksonville. And you know, for years, we've kind of just grabbed beers, shared notes, didn't really think we would be business partners at some point, but that sort of just organically arose. Adam brought up the idea a little over a year ago, and we realized there was a lot to gain, you know, mostly for our clients and also for us. And you know, we were both at that time owning our own firms and building and we realized, you know, if we really want to give our clients the best that we can give them. We should allow ourselves to be experts at specific things and share notes with someone else who's an expert at a few other topics. And it's there's just so much that's always evolving and changing in what we do that it felt like the prudent thing to come together and create process that allowed clients, all of our clients, to benefit from two experts in the field.

Adam Van Wie 01:41

Definitely, I think there was even more to it than that. If something should ever happen to one of us, we now have an automatic backup for our clients. There's no fear of lack of continuity. I had gotten to the point also where I just really needed some more help. I built the practice with my dad. He is not getting any younger. He's still with the firm, but he won't be forever. And so there was just a hole to fill. And I thought Joey was the best person to do that.

Joey Loss 02:09

Awesome. And we're very excited to be sharing notes and just and just running forward. You know, we've also got in the office, for anybody who's been here, we've got Megan, our office manager, who is fantastic. She's a great addition to my workflow. She's been working with Adam for some time, and there's just, there's just a lot to be grateful for about the merger. So we're excited about that for sure. I know that's why you all came here, but I guess we can talk about market returns and some other stuff, if you'd like as well. So just some overview. Last year 2024 was an insane year, another insane year for market returns. The ending return for the S and P was north of 26% the second year in a row where it was higher than 20% and that was with the week December. Yeah, December. You know, you might have missed it if you were just paying attention to December, but it was an incredible

Adam Van Wie 02:57

year. It really was. And if you look at the NASDAQ. It was even better, north of 27% with uh, with a uh, December, that was up. But the last two weeks of December, it certainly was not

Joey Loss 03:09

right. And in fact, if you look back, the s, p is only posted back to back 20% plus year returns three other times in history. And I was trying to see this goes back to 1900 so we're talking really small sample size, very small sample size. And and I went to see, is there anything we can glean from this based on what happened after that? And the answer could not be less helpful. Yeah, the first time this happened, we had negative 30% returns or something. The year after the next time it happened, we had about a 0% return in the following year, and then the next time it went up another 20 or 30% so there's really nothing foretelling about this sequence.

Adam Van Wie 03:50

I know which one I would prefer, but oh yeah, no telling. I think that. I think it could. I think things are looking pretty good in terms of the economy, the future growth, I think, is, I think we're poised for for something good, but that doesn't mean that we'll actually see it

Joey Loss 04:08

right? Well, let's talk about today. You know what? What are we seeing from President Trump and Congress, and we have a lot of change going on and on. I kind of want to look back at 2024 and then look forward at 2025, and beyond, and see where do things seem like the chips might fall. So to get that started, you know, Donald Trump's inauguration speech was yesterday. He suggests a bit of a lighter touch on the regulatory front, with a very pro business focus. I think that's certainly going to have some impacts for the market.

Adam Van Wie 04:41

The regulation piece, I think, is particularly important. The last thing that businesses need to spend their time on is dealing with the federal government, and this just sort of ensures that that will not be the case. Yeah,

Joey Loss 04:55

I totally agree that that's going to have positive impact for for small business. This in particular. In addition, you know, there's a good chance now that the Trump tax law from 2018 the tax cut and Jobs Act, will be extended or made permanent, which also has some some significant consequences for small business,

Adam Van Wie 05:16

yeah, particularly if you're a small business owner, if the qbi deduction went away. That's an enormous tax hike for small business owners that would have been extremely painful and costly and probably a negative sort of a drag on the overall economy. That is just, it's something that can't go away without major repercussions. Yeah,

Joey Loss 05:39

I agree. I mean, just speaking from the experience of a small business owner now part of a larger one post merger, you know the early days, you're just so hungry to get to profit, and it is a very hard thing to do. And qbi, for listeners, is qualified business income. That was a deduction that basically helps you save about another 20% on taxes. It made 20% of your income ineligible for reach of taxes if you are a small business owner, and that matters in the early days, because that could be, you know, if you have a $60,000 income business, you know, that's potentially another three or $4,000 in your pocket. That's a big difference at that type of income level. It

Adam Van Wie 06:23

really is. And it really all it did was made small business taxes equal the C Corp taxes relatively. There was the under the new tax law, with the corporate rate going down as much as it did, small businesses weren't going to see that because you're you pass through all the taxes to the business owner, and so this sort of even the playing field between C corps and LLCs, and it was, it was a really great part of the of the current tax law, and it was set to expire, along with everything else, it really would have been a major blow.

Joey Loss 06:57

Yeah, there's always a bit of love and hate for every tax law, but that was one of the pieces that pretty unanimous. Unanimously, people seem to be okay with.

Adam Van Wie 07:05

Yeah, I think outside of a few people that don't ever like seeing taxes go down, I think that within the business community it was, it was widely accepted, and I don't think anyone would have turned it down if they had given the option, right?

Joey Loss 07:21

So before we get too deep into 2025 let's look at 2024 and Adam. I was wondering if you could just kind of overview, like, what was the storyline throughout the year? Because it feels like it was kind of a long year. There's a lot of different phases and chapters to the year.

Adam Van Wie 07:36

Definitely. I think that the story of 2024 was a bit of surprise that the market did as well as it did, because after a year like 2023 you don't necessarily expect to see another year just as good or close to as good. And I think that no one really predicted that the market would be up as much as it was. It was. I think some of the major themes were, were the presidential election, and that added some optimism, but also a lot of uncertainty to the to the picture. I think the second major theme was probably AI and the success of Nvidia and the related AI type companies. There's there's AI the chips, and then there's the AI users and and both of them were, were just working like crazy to be the first movers. And every, every part of the AI boom, and I think you're going to see that continue in the next few years, those seem to be the two dominant themes that we saw. But overall, I think most people were surprised by how well the market did the

Joey Loss 08:43

second half of the year. The change in breadth that we saw in the market really made me feel more confident about the reality of positive market situation. And by that, I mean in the beginning of the year, there was just such a heavy reliance on tech lifting all the boats and the mag seven specifically, and the fact that the second half of the year allowed that to spread throughout financials, communication services, consumer discretionary spending, that to me, said, Okay, consumers are actually behaving like they're in a pretty healthy economy, and that the stock market is actually propping up in a meaningful way. It's not super vulnerable to a couple companies tumbling. Definitely.

Adam Van Wie 09:23

That was a big reassurance to me as well. And you really saw that trade start to turn on in the third quarter, where the first half of the year was all the big tech companies,

Joey Loss 09:34

right? And so just to call out by sector who really dominated through the end of the year, the least surprising is, for anybody who followed, Nvidia is going to be semiconductors? Yeah, they just did absolutely gangbusters. They were 41% on the year. The previous year, they did over 50% clearly, the dominating sector, does that mean they're going to continue to be so nobody knows. Yeah, but they clearly played a big role the other communication services. Great

Adam Van Wie 10:04

thing about that, though, Joey, is that when you look at semiconductors, a lot of people consider that a bellwether for the economy. Now, whereas transports used to be the one that everyone looked to to sort of predict where the rest of the market is going, that in this day and age is semiconductors, because they go in everything. I mean, you can't, you basically can't build anything without semiconductors these days. So it's a really good sign when you see that going up as much as it is. It's interesting

Joey Loss 10:32

to think about like that, that shift from assets moving right was the indicator that things are eventually going to be sold and or that production is really healthy to now people are buying the things that are going to send the data exactly kind of a testament to the age. Consumer discretionary, like I said, was healthy. Financials all around 30% communication services was up over 35% some of the weaker areas were materials. Real Estate didn't really have that exciting a year, although, honestly, 5% in any other circumstance would have been a pretty good year. Yeah, real estate

Adam Van Wie 11:07

beaten. Beat inflation for last year. So that's that's a good sign,

Joey Loss 11:11

yeah? But it's just tough to sit next to semiconductors and technology. You know, over 20% each, it would

Adam Van Wie 11:17

not be a good thing to see real estate going up 41% we've all seen that happen in the last five years, and it's, it's the last thing we need right now. Everything's already unaffordable, yeah.

Joey Loss 11:28

And people might be, you know, if you follow Zillow or Redfin or any of these things for your own home, people might be hearing 5% increases and saying, BS on that, because their home went down in value, which mine did, yeah, over the course of the year. It's

Adam Van Wie 11:41

very possible there. It's very location dependent, as real estate always is. But the the overall trend is probably leveling off to down across the US this year. And that's okay. We got a little bit ahead of ourselves over the last few years, and I think a little downtick in prices probably isn't the worst thing in the world, right?

12:00

Industrials was up over 18% See, utilities had a heck of a year over 20%

Adam Van Wie 12:08

that's AI, it's utilities. They need more energy to power all these server farms. And that's where it's coming from, from the utility sector.

Joey Loss 12:16

Yeah, that's very interesting. And so, you know, one of the common questions that comes up is, people are so interested in AI, because obviously it's a huge headline right now. It's been building steam Since 2019 but it seems like 2024 was really the year where everybody started paying attention. That's exactly right. So one of the questions we keep getting in meetings and I get from friends who are not clients, and is, you know, how do I invest in AI? What's the best way to capture the title wave of AI?

Adam Van Wie 12:46

Great question. I I think there's, there's two particular funds that we use that sort of track it, not really, but they're, they're good enough that they're, they're close enough related to AI, and hold a bunch of the companies that are in the space. What I would not do, though, is more important. I do not like thematic ETFs. I would stay far, far away from those. In my experience, they never work. They they will not get you the returns you're looking for, and they won't correlate with anything having to do with the actual thing that they're supposed to correlate with. So just a warning, I just would stay away. But I think that the best way to do it is in the semiconductor SMH, or one of the one of the really heavily traded ETFs that track that sector. That's sort of a no brainer. If you had been in that in the last two years, you'd be up very big. And then I think another decent way is just to buy the NASDAQ QQ, or QQ, QM is my favorite. Those are great ways to sort of get exposure to the AI boom without being overly concentrated, or buying things that are on the periphery, that that aren't really part of it and may not, may not benefit as much as you think the from the exposure to AI,

Joey Loss 14:06

I totally agree. And for listeners, the thematic at the ETF that he's talking about that just means something that has AI in the name, right? So it's like, maybe they own 20 AI companies, and they're focused on just the returns of those companies that that's pretty problematic, because you're right now, you're probably in a extremely high risk territory, because there's probably three or four of those companies that are going to come out as the titans in the end, but exactly when they're going to perform is a very difficult thing To track, and if you're over invested in that, that's that's going to be hard on your portfolio. And more broadly, you know, it's so easy whenever something changes, to focus just on the AI piece, right? And look at those AI companies or tech companies that are producing AI related products. But the truth is, the impact. Of AI is going to create profit opportunities across the entire market. And so if you're I think that's literally the story of last year, in a way. The beginning of the year, the AI discussion started right, and the first half of the year, we saw a few tech companies really leading the charge, having great performance compared to everybody else, and really lifting the boats. If you looked at most of the S p5 100 companies, they had barely moved, but you had a few companies that had moved so much that if you just look at the S P ticker, it looked like we were kicking butt and taking names in the market as a whole. But as AI technologies start to roll out and impact companies and financials and other places, the deployment of AI is going to create profits elsewhere. So I just want to encourage listeners to, like Adam said, not just look for AI or tack even, but more broadly, focus on the market as a whole and take this as a new wave of excitement about what can happen and what might happen to profits across the board going forward. Yeah. The great

Adam Van Wie 15:59

thing about AI too, is that it's really a productivity enhancer. That's what it does. And when you see businesses get more get more productivity out of the same amount of existing workers, you're going to see profits follow that when you can take, like, meaningless work out of off of someone's table and replace it with doing the things that are most profit generating for the company. That's a huge thing, and we're just seeing the very, very tip of the iceberg in terms of how AI will affect that in the future today, so five years from now, 10 years from now, when we're so much further along this path, it's, it's going to be a huge productivity and therefore profit enhancer. That's my prediction. Doesn't mean it will come true, but that, that's the way I see it.

Joey Loss 16:48

And from a risk perspective, you know, we don't know which, I think a big part of every company's storyline over the next 10 years is going to be who can efficiently deploy AI to keep up with competition and and if you can tell me exactly who those companies are, you can email me at Joey at strivous wealth.com otherwise, you know, it's best to own these indexes that that really capture everything, because those those winners are going to rise. And just like if you owned Amazon in 2000 through a fund that owned a lot of companies, the representation you have in your portfolio of that winning company is just going to continue to grow and grow and

Adam Van Wie 17:28

grow. Yeah, no different than Nvidia today, exactly looking

Joey Loss 17:32

ahead. You know, we've got the AI question. Another question that's come up a few times is, are certain sectors, particularly sectors like defense poised to win over the next few years.

Adam Van Wie 17:45

Yeah, maybe I've had a lot of experience with this, and clients always want to try and pick out the winning sector, and 90% of the time, it is not the sector that they think it will be. I mean, I think the best example is look at energy. We had a huge boom in energy over the last in energy stocks over the last four years, under an administration that was actively working to end reliance on fossil fuels. And what did that do? It drove up the price of oil, and it made all the energy companies a ton of money, but that is so counterintuitive to most people. And these types of things, they tend to happen when you try to guess or time the market or pick a stock or pick a sector, it just never works out the way you want it to. And I find, I have found, and I will probably continue to find, that the real winners are the people who buy and hold with a diversified portfolio and buy indexes. Because guessing it just is, it's never going to work out the way you think it is right,

Joey Loss 18:53

and I think it's easy, you know, you listen to advisor. I mean, presumably any listener out there. This isn't the only time you've heard an advisor say, diversify, buy and hold blah, blah, blah. So it can start to feel like, okay, well, sounds like, I just buy spy or QQ, and I wait. And so why would I need an advisor? Why do I, you know, what is? What are we doing? Adam, that's different than just that broad description,

Adam Van Wie 19:18

yeah, and you're not wrong. If you buy spy and QQ and wait, you're probably going to come out ahead, but it's going to be a wild ride. There's no doubt that you're going to see big swings in your portfolio, which one you're when you're young and you don't have much money and you're just starting investing, that's just a buying opportunity for you. But when you get closer to retirement, there's a lot more to take into consideration. You probably have more money by then. You can't afford to take these wild swings in your portfolio, because you might need to actually take the money out and spend it. So the as you approach retirement becomes much more important to have a. Diversified portfolio and someone that you trust, they're sort of guiding you into that retirement phase of your of your life. And there's so much more that we do, but when it comes to investments, that's the most important thing. You can't have money that you are going to depend on be down 40% when you go to withdraw it that that's that you might not be able to retire when you were hoping to retire in that case, right?

Joey Loss 20:25

Yeah, it's just about systematizing, really understanding the relationship your money has to the future needs of your situation. And it's kind of amazing how much that can direct a portfolio when it's done, right? Okay? And then so short term volatility. Yeah, I

Adam Van Wie 20:42

mean, I think it's, I think it's a real possibility we've got a new administration, and that's 180 degrees different than the last one. And whether you agree with it, disagree with it really doesn't matter. Just that that change is going to cause some pretty major events in the next, I don't know, 100 days. That's what they always measure the presidencies by but it's going to be tumultuous, and that could have an effect on the stock market. It may not, but, but I would not be surprised to see some pretty, you know, major swings in the market over the next next 100 days. It would, it would be, it would be more surprising if it was just slow and steady increases like we saw last year. I

Joey Loss 21:22

agree, and I think just the energy, you know, the current administration now, current is responding to a lot of energy around certain political ideas. And so I think we should expect, you know, maybe even more than normal, sort of a rapid fire change of policy. And so, you know, this is the first 100 days. Is a period that commonly sees volatility, and I think, you know, we might see even a little bit more than normal. But just like always, let that run its course. And as time goes on and we settle into the next administration, if the economy and the market is healthy, investors are going to reap the rewards, no

Adam Van Wie 22:01

doubt about it, and we it's not like everything's perfect right now either. There is optimism, but we've still got problems. We've got housing market that is almost unaffordable to a large portion of the population. We have interest rates that are much higher than they've been previously. We've starting to get used to the six and 7% mortgage rates, but I don't think people have fully got on board with them. They're still hoping to see four and 5% later this year, maybe, and so I don't think the housing activity that we're seeing is anywhere near the peak that we'll see in the next few years. I think that we also have some problems when it comes to the job market. You've seen the number of available jobs drop dramatically over the last year, and anecdotally, I keep hearing how hard it is to find jobs as a white collar worker right now, and that is not a great sign either. Now will that change? Probably. But which direction will it change? And when?

Joey Loss 23:02

Yeah, these are great points. And the last note you made reminds me of something I saw this weekend that was talking about how people are now. You know, particularly certain white collar jobs are afraid that AI may replace them and they'll have no place to go. And I saw a funny cartoon from the early 1900s talking about how, you know, steam power was going to replace all of the jobs for manual laborers and and then it looked forward to the.com bubble, right? And we thought that the advent of the Internet and computerization of everything was going to take away all the jobs. The reality is, these things adapt, and it's back to the idea that we don't, we just don't know the timelines and how it's going to happen. But, you know, people wake up in the morning looking for how can they make things grow? And there's always going to be work to be done to make those things grow. And so what the jobs might look like and what we spend our time doing may change, but I'm confident that there's always going to be things for us to do. Yeah,

Adam Van Wie 24:02

the other thing is, we that on the positive side, there's still a lot of positives too, and it's kind of been like this since COVID happened. You can point out an equal number of positives, positives and negatives, and create a narrative depending on what you want it to say. Because if you pick and choose your data points, it's really easy to make a very bullish case for the economy right now, but it's equally easy to make a very bearish case for the economy right now. So just be careful when you're when you're listening to talking heads on TV or reading articles. Just try and figure out what what their biases are, what they want to present to you, because, like I said, you can just make a you can make a case either way right now, and it's very easy to do

Joey Loss 24:47

awesome. Well, I think we can. We can wrap it there for now. I'm sure, based on how things have been going, next month, we'll have a ton more to talk about, and I look forward to it. Yeah, me too. Thanks for having me on again. Thanks for coming out. Thanks for joining us. If you enjoyed the podcast, please consider sharing it with your friends or family. This is the best way to spread the word, and we want to keep churning out great content for you guys. Show Notes and episode transcripts are available on our website at strivous wealth.com/podcast Special thanks to Bo de leesons for the intro outro music and to the podcast man for producing this show. Until next time,

25:31

the wealth unplugged podcast is sponsored by strivus wealth partners Joey and Adams SEC registered investment advisory offering Financial Planning and Investment Management services to clients across the United States. The opinions voiced in this episode are for general informational purposes only. Nothing any host or guest says on the podcast is meant to serve as 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 substitute for individualized tax insurance or estate planning advice. Please consult your tax advisor, insurance agent or estate advisor regarding your specific situation.