Joey Loss 00:00
All right, welcome back to another episode of Wealth Unplugged. I'm Joey Loss and I'm Adam Van Wie and we're here to help people filter out the noise and make smart, long term financial decisions. For those of you who've listened to episodes before, you kind of know the drill. For those who are new, we just try to parse through the stuff that we think people need to know right now. We don't necessarily give actionable advice, but we help you identify what's actually useful information to pay attention to and what is just noise. So to kick it off, I mean, the markets continue to be pretty kind the last couple of weeks. What do you think? Adam,

Adam Van Wie 00:37
yeah, I'd call it resilient. I mean, it has just been headwind after headwind this year, and the market just keeps brushing it off and going up. And it's, it's pretty amazing to watch. It doesn't necessarily feel the best, but it I mean, when you're sitting just off of all time highs that were set back in February, even when it doesn't feel the best, it's still, it's still, at least gives you the confidence that your account balance is up. Yeah.

Joey Loss 01:04
I mean, we sit here at 10am on June 6, Friday, June 6, and, you know, the market opened up pretty significantly. And what does that put us at, like, up three and change for the NASDAQ for the year?

Adam Van Wie 01:19
Yeah. So on the on the NASDAQ we're looking at with today, if this holds which, who knows, if it will, but you could be up closer to four and on the s, p, maybe three and a half through the high or, sorry, two and a half or high twos. So yeah, who thought we'd be here? I don't know. Yeah, it was a, it has not been a straight line from January to get to where we are today.

Joey Loss 01:42
No, it has not. It has been the ride of an equity investor, you know.

Adam Van Wie 01:47
Yeah, that's where you get the equity premium. That's right.

Joey Loss 01:51
So let's talk a little bit about, you know, like, what is the, what are the details behind this recovery we've seen, as far as, where is it coming from? Is it just the mag seven claiming back what they took. Or is it broader than that?

Adam Van Wie 02:04
I think it's been a bit broader than that, really. I mean that mag seven has recovered well. Nvidia has done quite well. They had another great earnings quarter, despite taking a big hit on China, which they knew was coming, because of the rules put in place by the administration. They were actually so this administration sort of continued the last administration's curbing of selling these AI chips to China. Nvidia kept whatever the rule was. They kept making the chip just under the capacity of whatever, wherever the rule was set, and the Trump administration came in and set it a little bit lower, so they actually had to stop selling all these chips that they had already produced to China. And this is really just to give the us a competitive advantage in the AI space. So I think it's a good policy to not encourage your biggest competitor, slash enemy, whatever you want to call them, and not give them the resources that you have to keep that competitive edge in this space. It's going to be really important in the future. Definitely, the headlines have focused

Joey Loss 03:14
almost exclusively on tariffs, and if you're just kind of lightly paying attention to what's going on, the tariffs have been probably the main thing you've noticed. But the to your point, like the there's so many other areas of international trade and national defense that tie in together and are part of this whole thing that's been going on. And, you know, chips. There was a chips Act, as you're referencing, from the Biden administration, that, you know, we're trying to carry on now through the Trump administration, but there are some problems that I think are at part of the core of this whole tariff effort in the first place. And some of those are, you know, we don't have supply chains for defense. Bullet manufacturing is way down in the United States relative to where it's been in the past. Does it make sense for us to count on our potential enemies to create the weapons with which we'll fight them. That's kind of some of the stuff that's at the core. And do we want to supply them with these super computer chips that give them state of the art cutting edge access to exactly what we're going to use to combat them?

Adam Van Wie 04:15
Yeah, exactly. China, well, somewhat friendly with us, really has a whole different set of goals, and they are, they are somewhat opposite of ours. So they're one of those, those friends slash enemies. So you just have to be really wary with them. And I completely agree with not depending on them for producing our our weapons of war, and and, and not maybe giving them the latest and greatest technology that we produce. I'm

Joey Loss 04:44
pretty sure it's a bipartisan take too. Like, I don't think the conflict exists around what you know is that a good or bad idea to keep those things at home. I don't think that's the problem. I think it's more about how do you get that done, and where does that sit in the broader it's tricky. Yeah. It's tricky, definitely tricky. But anyway, that's that's all stuff that's related to the tariffs, and to see a V shaped recovery like this, as we've seen, it's just what a roller coaster. It's been

Adam Van Wie 05:11
definitely And anecdotally, what we're hearing from our wealthier clients, who maybe run businesses and have their a lot of irons in the fire, some of the stuff that Trump is doing in this well, it's not just Trump, but Congress is doing with the big, beautiful bill, as they're calling it, is really going to be stimulative to us, production, manufacturing, business, whatever you want to call it, the immediate deduction on business expenses, instead of doing a 40% upfront and then the rest down the road, or 60% up front and the rest down the road, that is a huge thing for businesses. When you can deduct everything in one year, it makes it pushes decisions forward and spurs economic activity in that year. And so you might be looking at a business that's planning out a capital expenditure and they're thinking, Oh, okay, we can get this done in 26 or 27 but when it becomes immediately deductible to you in 25 then you're probably going to pull the trigger in 25 Yeah, especially

Joey Loss 06:16
if it happens to be a high income year, and you've got an awesome financial planner that's paying attention to that stuff,

Adam Van Wie 06:26
yeah, definitely. But it is. It's a, it's a big deal because it does pull forward that that economic activity, it's, it's, you know, that that that will have a positive effect on GDP, on it just, it does a lot of things. It actually increases employment, because when when more capital goods are purchased, you have to have people to to make them, to deliver them, to install them. I mean, there's all sorts of things that come from those types of purchases.

Joey Loss 06:54
Yeah, it's basically an easy money policy, you know? I mean, the Fed really controls how easy it is to get money, and at least in the short term, borrowing money things like that. When they want to make it easier for people to borrow money and they want to spur spending, they can dial down interest rates, encourage people to borrow money, and then that encourages the amount of spending that's happening in the economy, potentially increasing the rate of growth. When you pull a deduction, you know, put a deduction like that, make it 100% deductible this year, and put it in a tax bill. I mean, it kind of has a similar effect.

Adam Van Wie 07:29
Yeah, I really think it does. And, well, that is a tax deduction. It does actually create more taxes because of the other the ancillary activity that are involved with, say, installing that piece of capital equipment. You're, you're have to, having to hire people. There's payroll taxes there. You're having to, those people have to go out to eat. They're paying sales taxes. I mean, there's just all sorts of like, add on effects to that type of activity, because this is, we're talking about million dollar projects. We're not talking about someone going out and buying a new conference room table or something like that,

Joey Loss 08:06
right? Yeah, we're not talking about hundreds of dollars in sales tax. We're talking about 10s and hundreds of 1000s of dollars of federal taxable income on another transaction,

08:16
exactly. So some

Joey Loss 08:19
other things there's to look at. I mean, we've been watching inflation. Inflation has been a big topic, talking about the Fed and stuff like that. It seems like inflation has kind of been at the and the jobs reports have been at the center of whether the Fed is going to cut rates or not. Right now, trueflation is saying inflation in the US is sitting at about 1.84% which is higher than where we were a couple of months ago, but candidly, it's still well below the Fed's target at 2%

Adam Van Wie 08:47
Yeah, and we've been below that 2% target for quite some time now. I mean, you trueflation has us dropping below their last in March, and it stayed below ever since. So the inflation that everyone is has been predicting just hasn't come yet or may not come, I don't know, but it is. It's kind of surprising how low it is. And then you look at other countries around the world, they are not even near as low as we are. You're looking at closer to 3% in a lot

Joey Loss 09:18
of cases. Yeah, we've listened to a podcast recently, the all in podcast, for anyone who might know it, and you know, they were making an argument, at least someone on the show was making an argument for how we need to keep this these rate cuts in the chamber, because if the budget is plays out the way that It could, which is, you know, potentially putting upward pressure on Treasury rates over the longer terms, like the 10 year treasury and stuff like that, it could get more expensive to borrow. They thought that maybe there'd be a combination of factors that pushed up inflation through this, this budget, which many are saying, is overinflated. So we want to keep ammo. In the chamber for fed hikes when that happens, and not have rates be too low before then. But I don't know that. I feel like there's a chance that we're approaching a point where we were just sitting too long. And there's stuff that we can be doing now with rate cuts, at least. That's my perspective that would kind of help us in this moment. Where are you sitting

Adam Van Wie 10:20
on that? Yeah, it's a tough one. I can make an a pretty good argument on either side of this issue, but I listened to that same podcast, and I feel like whenever someone says that they they know what rates are going to do in the future, they're they're lying. They don't know what rates are going to do in the future, and predicting interest rates is harder than even predicting what's going to happen in the stock market, to me, so I just didn't buy a lot of that argument. I think it's one possible outcome, but there are probably 50 other possible outcomes, and I don't think that any one person will maybe in hindsight, looking back, you'll find someone who got it right, but most people will not get it exactly right, because the economy is just too big, and there are too many moving parts, and every time you touch something, five other things get affected. And it's just, it's a really dynamic system, so when you're when you're pulling these levers, you don't always know exactly what the outcome is going to be so could that happen? Absolutely. Could we start this period of economic growth where we actually increase our net revenue to the government, and therefore the government debt doesn't go up in the interest rates don't climb on the government debt and we stay either stable or go down. Yeah, that could happen too. So I don't know what's going to happen, but I do think making these very no matter how certain you are about your prediction, I don't feel like that's something you can be certain about. Yeah,

Joey Loss 11:54
I think that's fair. And to further make the counterpoint to that argument, the original argument. You know, if we look at where current rates are in the UK or India, you know, they're sitting in the threes, whereas we're in 1.84 according to trueflation, Argentina is at 37% you said they were over 250% not that long ago. But I mean, if you look around the world, where are you going to want to put your money? You know, even if you have emotional anti American sentiment at the end of the day, I don't care if there's a downgrade to the second best tier of credit quality in the United States, it's probably still going to be one of the better, safest places to put your money. And that has a big bearing on 10 year rates. Is how many, how much people are putting their money here.

Adam Van Wie 12:39
Yeah, yeah. And that downgrade was, it was almost a nothing, a non issue, because it was the third of the three firms that do this thing, and the other two had already downgraded. So it was the last one sitting at the highest level. And so they just matched their two peers, honestly. I mean, it just, I just don't see the relevance of that particular move, just because they hadn't done it yet. The first one was done years ago during the Obama presidency. So long time ago. So, yeah, and to the second tier, really? I mean, what's the difference between the first and the second tier? A little bit more debt that that's it. To me. It's just not a relevant issue in itself. Now, the fact that we do have so much debt that is a big issue, and we need to figure that out. And one of the ways that you can do that is grow your way out of it. I think that is the preferred method of this administration. Yeah, and

Joey Loss 13:39
I think they're looking at places like what there's another podcast we're listening to that was focused on Miami and what they've done as a city, and their solution to revenue needs and expanding their capacity to spend as a local government was to lower taxes and lean into an innovation. And that worked out really well for them. Is that possible and replicable on a national scale. I don't know. I don't have an MBA in macroeconomics and microeconomics with the United States, but it seems like there's a formula there, and that's what the Trump administration is trying to

Adam Van Wie 14:15
focus on. Yeah, it's becoming clearer, I think, as time goes on, that this really wasn't about the tariffs themselves. I do think they like the idea of having that additional revenue stream to a degree, but I think that the real plan here, the longer term plan, is explosive economic growth, which is something that we as financial planners would probably be for, because the stock market would certainly enjoy that.

Joey Loss 14:41
Yeah. And honestly, it kind of seems practically like the only real way out of this. I don't know how, what would you have to take taxes to today to start having an seeing that you might get into it balance, it's

Adam Van Wie 14:54
not possible, because if you do that, you're gonna you're gonna stunt economic growth. You're gonna end up with. Lower revenue to the government. It's not possible, I, in my opinion, to increase taxes enough to get out of the hole that we have dug. I think you have to pursue the other option. I think

Joey Loss 15:11
I think so too, and maybe there's a sweet spot where taxes are at a certain point and the economy can still grow very healthily over time, probably some combination of factors, but I don't think there's any formula version of this where emphasizing growth and innovation isn't a super key ingredient to solving this problem.

Adam Van Wie 15:29
Definitely. I mean, just as small business owners, I think we can speak to this a bit. If our taxes went up, we would immediately spend less money. There's no doubt in my mind that that's what I would do. I would look to cut things from my business, because I want to keep profit margins where they are. How do you do that? If one of your, one of your costs went up, you you have to cut things. And so would that, and that has a ripple effect on the economy. If, if millions of people think like I am thinking about this decision, that's exactly what's going to

Joey Loss 16:01
happen, definitely. So overall, I mean, if we step back, it feels like the obsession with Liberation Day and the tariffs has calmed down a bit. Maybe Trump and Elon's fight are helping us out a little bit. They've been hot to trot on the internet lately. But in general, I feel like, yes, we're still talking about tariffs. Yes, we're still concerned about international trade policy and what that future looks like, but the heat and intensity of that concern is not what it was.

Adam Van Wie 16:30
Definitely, I think that, I think that the administration has shown a willingness to back off of all those tariffs that were proposed, and in fact, it's been made into a meme and a even a trading scheme on online, I guess, like the taco thing, Trump always caves, or Trump, I can't remember what it is, but it's like it's been made into a somewhat of a joke at this point, that he is willing to just announce a tariff and then pull the tariff back. And so clearly, to me, that's a that's a negotiating tool, and that's what Liberation Day was, apparently all about. Didn't feel like it at the time, for sure, it was. It seemed like a wild, crazy like way to run the economy into the ground. But I don't, at this point believe that that was

Joey Loss 17:17
the intention. Yeah, and I certainly won't even pretend like I believed that it was a negotiating tactic the whole time. I mean, there's receipts on this podcast, if you go back where I was kind of freaking out like I was not super convinced this was the right way to handle this type of problem. All right, so let's dig into the jobs report a little bit. It was kind of a negative turn from where we've been not super negative, but we're seeing some slowing growth in the POS. What was a positive trend. Non Farm payrolls increased by 139,000 in May. So while this is a gain, it's a downshift from the previous months, which was 147 and that last month had originally been rated at 177 but was downgraded to 147 after they revised it. What does that mean? I mean, it kind of plays into what the Fed's looking at. Unemployment is unchanged at 4.2 so that's still a very healthy rate historically. What do you think about how this is evolving? Is this material shifting, or is this just kind of business as usual?

Adam Van Wie 18:19
It looks to me, like business as usual. If you look at the last since January, the last reports, yes, it was slightly this one was slightly lower than the last one, but it's above the other three from earlier this year, and the trend is still slightly up, flat to slightly up. Of course, we had two blowout reports in November and December of last year, and so that kind of makes these reports feel bad. But in reality, if you look at the long term average, 139,000 really isn't that terrible. It's kind of a little bit of a Goldilocks report, which is why I think you're seeing the the market react this way today. It isn't great and it's not bad. So the Fed could cut or not cut, but it doesn't. It just is kind of in the middle. It's like we're in a decent place with room to get better. But it certainly is not signaling that we're running the economy is not running into the ground. And

Joey Loss 19:18
if we look at our like wage growth, average hourly earnings, rose by 0.4% in May and 3.9% over the last 12 months, which is pretty healthy. I mean, that doesn't mean it perfectly lined up with inflation, but in the high threes is actual growth. I mean that that's higher than the average historically, for sure,

Adam Van Wie 19:40
yeah, for sure, that's, that's, that's really strong, especially in what many people consider a not so great economy. To see wage growth like that is an encouraging sign. Of course, we still have a ways to go to make up for the 2020, to 2024, inflation, but, but it's at least we're making some progress. Us towards that. The other interesting thing is that since January, government employment is way down, way down, and this month has been the was the largest drop in government employment, and yet we're still adding jobs to the economy, so cutting some of the federal workforce, but also increasing private jobs. So that's, you know, that's you would think, with the amount of jobs being cut at the federal level, that we might see slightly worse employment numbers. But it really hasn't. That hasn't been the case so far.

Joey Loss 20:36
Yeah, and from a macro picture, it looks like bond traders and economists are not expecting a rate cut in June because of some of this stronger data. Yeah,

Adam Van Wie 20:45
yeah, that's that's probably the case. I think one is warranted. I think I've said that several times on this podcast. I think you might be in the same boat that we could use one. But again, you know, if you want to keep your dry powder there, just in case something bad does happen. I can, I can make a case for not cutting as well, and it doesn't look like one is going to come. So

Joey Loss 21:07
in a way, I mean this podcast, some of the mood, I feel like the last three episodes, we've been kind of in the same place. So it's like we're kind of clenching and thinking like, oh, is this, you know, when is it going to get bad? Is going to get bad? In every episode, we feel a little bit less concerned that it's going to get bad and that actually things are actually things are kind

Adam Van Wie 21:25
of okay. Yeah, I think that's right. I think that's kind of been the trend. It looked really bad in April, in March, and then it started to turn in May, and now I'm feeling fairly good headed into the summer, not great, but definitely better than I was a couple months ago.

Joey Loss 21:42
Yeah, I think I'm in the same spot. And just to review, I mean, the winners this year have been those who had a really good ability to stay the course. I mean, we've seen clients who, you know, new clients who came in and they were holding mag seven stocks and way over concentrated so long term, not a great strategy. But even after the market tanked right in early April, they held course and were able to see recoveries. The same was true for well diversified portfolios, particularly over the last year, really going back to like November or so, maybe seven, eight months. You know, diversified portfolio with a rebalancing protocol has really paid off, because things have been kind of see sawing across different sectors and domestic versus International and so on.

Adam Van Wie 22:29
Yeah, if you hold a lot of gold or precious metals, if you hold a lot of international, you've done pretty well over the last seven, eight months, if you were all in s and p5 100, you haven't had a terrible ride. I mean, you were down a lot at one point, but you've come back. But if you had just diversified during that same period, you would have been a lot better off. So that 1.5% return on the S P, diversified portfolio, you're probably up maybe four to 6% at this point, just with with that, with that extra, those things that haven't worked very well for you in the past couple of years are working really well right now. Yeah.

Joey Loss 23:14
Then if you go to a graph and even just look at the S P and zoom out to the five year view, this really wasn't nearly as intense in the grand scheme of things as it felt like in the moment. And I think that's pretty true of all these big market events. I mean, it's just not as intense as it seems. And I think it's a good reminder that no matter the cause or your political beliefs about whatever's happening in the market and with governing, law and administrations, it's a good idea to take the long view. It really pays off. Always,

Adam Van Wie 23:48
always, yeah, you can't let I say this all the time on my radio show, but you cannot let short term politics dictate your long term investment plan, and reacting to those things is always a mistake, no matter who, what administration is doing it, or what side you're on, it will ultimately prove to be a mistake if you, if you try and do reactionary trading based on those kinds of events. In fact, I just pulled up the longer term S and P chart, a five year chart. I mean, 2022 was just an awful time in the market that no one ever talks about. But that was a that was a prolonged bear market that just was, just was awful to go through, but we got through it, and then we got to 20 plus percent years in a row. And now we're seeing a bit of a flat year. But if you had just held on through all that time, s, p5, 100 is up almost 100% in that time. Yeah. So it's remarkable how resilient the market is, and it just keeps pushing forward. Yeah,

Joey Loss 24:48
and even if you go back to COVID, I mean, those two years, 2020, and 2021, ended up being phenomenal years. And again, it was an instance of investors being rewarded for not freaking out. And frankly, if there was one of. Meant to freak out for COVID before we really knew what it was and what it meant and what it was going to do to everything. I think that was a fair time to do it. But those that that held the course still, you know, got paid. That was

Adam Van Wie 25:11
a scary, scary time. Those first couple of months were very, very scary in the market, and personally, and you know, professionally, for all of us, sure, but if you Yeah, it's another great example of what happens when you stay the course. Well,

Joey Loss 25:28
I'm glad that we don't have more shocking news to present this week, but you know, you never know what's going to happen over the next few weeks, and I guess we'll touch base then and see what's going on.

Adam Van Wie 25:38
Yeah, sounds good. Enjoy your summer vacations, everyone, and we'll talk to you sometime soon.

Joey Loss 25:48
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 strives wealth.com/podcast Special thanks to bode leesons for the intro outro music and to the podcast man for producing this show. Until next time,

Disclaimer 26:14
The Wealth Unplugged podcast is sponsored by Strivus Wealth Partners, Joey and Adam’s 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.