Speaker 1 (00:11):

Hello, my name is Chad Taylor, managing partner with MDT Financial Advisors here in Houston, Texas. Today is Monday, August the fifth, 2024, and I wanted to get on and kind of talk about the recent market volatility. Obviously not the volatility on the upside, it's here for the last week. It's been pretty rough in the markets as a whole, and so I wanted to kind of get on and go over a few things that we're seeing right now. A lot of this information we're getting from our friends at the Wells Fargo Investment Institute, and they're putting out reports all the time, so if you'd like a copy of any of this, please just let me know. And as I always say, when times are like this, and this happens quite often, most people that we work with have been through it a number of times, but it's always tough and it always seems like we've not seen it before and a lot of times we've been through bad times before, probably worse times, but it's the times we're in right now.

Speaker 1 (01:17):

And so if you want to talk, please let us know. If you want to revisit your plan to make sure everything's still on track, please let us know. It's always a good idea to look back and see where we've been. Sometimes it's not quite as bad as what you feel, especially when you turn on the news and see the markets down like they are today, and they were at the end of last week. So a few things that I've been reading about, we talk about the markets this week versus last week, even two weeks ago, I had to take Madison's car back because she was going back to Cincinnati to start her new season. And I remember on Friday, that Friday that I was off driving. The markets were up quite a bit and it didn't really make a whole lot of sense as to why they were up then. And then a week later they're selling off quite heavily.

Speaker 1 (02:21):

And I always have to remind myself as much as anybody that when the Dow Jones Industrial Average is up near 39,000 or 40,000 points, two or 3% moves, which are not uncommon, just feel a whole lot worse when you're seeing the Dow down. What was it? Down 600 points on Friday. It is down about a thousand points today at the time of this recording that catches your attention a bit. But one, two, 3% moves in the markets are not uncommon. What is uncommon is we're just so much higher that the numbers seem worse. But if you remember, and I know I've said it a number of times in these videos over the last year or so, we'd say bad news is good news with the markets. So bad news in the economy would come out and the markets would go up. Well, now we've kind of shifted and it's more bad news in the economy is bad news in the market.

Speaker 1 (03:27):

So it's gotten back to normal a little bit. And what was going on before, and the bad news is good news was that it was kind of telling the Federal Reserve, Hey, you can lower rates. Maybe the inflation is coming down. The economy, as we've talked about, remember we've been very cautious here the last year or so as far as our outlooks on things, and you had the magnificent seven stocks. Those seven stocks that were really running up last year and early part of this year or this year now are kind of pulling back. So it's hurting the market as a whole, but these things move quickly and with the markets pulling back here short term, I guess it's not surprising how quickly it's turned is a little surprising, but we've been saying for a while, let's just kind of be a little cautious here, and this is the reason why the Fed has not raised rates in a while talking about lowering rates.

Speaker 1 (04:40):

Now the next meeting is in September, the middle of September. We feel, and most people feel at this point that the Fed will lower rates at that point, if not sooner. They don't like to lower it between meetings. I've seen it many times in the past 25 years, but it's not something that they prefer to do. Will they do it this time? Not unless they have to. If this thing keeps escalating, then you could possibly see it. But if things calm down and I'll kind of go over what we're looking at, but if things calm down and the Fed does just wait until the September meeting, that's probably not a bad thing from where we sit right now. Now remember, markets normally sell off even in up markets in a year. The markets will sell off 10% in any given year. A lot of the time it happens quite often, even in good years in the markets you'll have 10% pullbacks.

Speaker 1 (05:45):

Is that what this is ultimately going to be? I don't know for sure the NASDAQ is down more than the Dow Jones Industrial average is, but that's also just a function of technology stocks, small companies that are really selling off in this go round. Now, this is a broad sell off right now. What kicked it off for us was the bad economic news from last week. Corporate earnings have been a little disappointing, but then what happened in Japan at the end of last week, you had Japanese Central Market, central Bank, they came out a little more hawkish and so the yen spiked up, which caused some unwinding of what's called of carry trades is what they call it. Basically, they were borrowing money, investing in technology stocks, small company stocks and financials, and when the yen spike, they started having to unwind those causing the selling to speed up. And so the Japanese market, the NI K overnight, was down about 12%, the largest one day pullback since 1987. If those of you that were invested back in 1987, you remember, that's what started that pull off. Our markets have held up a little bit or quite a bit better than that at this point, but that's kind of started it. So the bad economic numbers, corporate earnings not being quite as good as hoped, and then the Japanese market selling off pretty heavily is bleeding over into our markets.