Well, good morning. Thank you for tuning in to Let's Talk Money on
eight ten WGY. I'm John Malay and I'm going to be your host for
the next hour. I'm a certified public accountant and I'm the chief financial Officer,
chief operating officer, and a wealth advisor at Bouchet Financial Group. Again,
I want to thank you for tuning in with me this morning. You
know, here we are the last weekend of June. I can't believe this
year is halfway over. Big exciting week ahead of us with the holiday fourth
of July week, So hopefully you all have some great plans to enjoy the
you know, really all that this region has to offer. And I think
summer is certainly one of the most special times here in upstate New York.
Obviously we've got the Adiron Decks, Lake George, Saratoga, cat Skills,
even the Berkshire is so close. Just a lot of great activities. I
hope you have an action packed summer planned. I always tell my kids,
like, you know, summer, you know, once we hit July fourth,
the summer clock is on, and all those plans, we have,
all those activities we want to do. We're now on the clock, we
got to get them done. So but I will say, you know,
Steve really believes in you know, we have the slogan health, Wealth for
life, and we really live that and believe that. And you know,
not only in financial planning with our clients making sure hey you know, we're
make us responsible for managing your wealth and really at the end goal we want
to help our clients have healthy lives and really enjoy what they've done. So
you know, this is certainly you know, summer is a great time to
enjoy family and just you know again all that this region has to offer.
And uh so I appreciate you tuning in this morning, you know, and
I encourage any listeners to call with questions. You can reach me at eight
hundred talk WGY. That's eight hundred eight two five five nine four nine.
You know, this morning we're gonna you know, recap the markets. You
know, certainly here we are at the midway point, you know, halftime,
so we can kind of you know, take a look at what markets
have done for us so far, talk also investing some financial planning topics and
whatever questions you have. So again, uh courage listeners, if you have
questions, call in you can reach me at eight hundred talk WGY. That's
eight hundred eight two five five nine four nine. So let's jump right into
market, you know, recap. So uh, you know, Friday was
the last trading day of the month, of the quarter and the first half
of the year, so certainly a lot to talk about there. And you
know, all the major indexes in June, you know, with the S
and P five hundred, you know, within view of the fifty five hundred
target Nasdaq within striking distance of eighteen thousand, and you know, and quite
frankly both in inter day trading on Friday, eclipsing those and we'll talk about
that in a minute. So you know, both indexes at near all time
highs, and you know, those games really been driven by you know,
several factors, you know, calming inflation news which is great to see,
earnings, corporate earnings have been positive, cash flow has been positive, some
major stock buyback programs happening in the first half of the year, you know,
and certainly you know, I would say, an improving global economy.
So certainly have some some great positive fundamentals that are combining, you know,
creating what we saw for the first half you know again, So although the
first half was very strong, you know, Friday, you know, we
went into the week. You know, Friday started off strong with some good
inflationary news, and again inter day trading we hit all time highs now gave
up some of those gains as the day closed out, and so you know,
it would have been nice to have all time highs ending the quarter,
which would have been nice to be talking about this morning. But you know,
in Friday trading, some of those games were given up and so kind
of you know, kind of closed out with a little bit of a whimper.
But that's okay. So certainly, you know, the bulls are still
riding high. We've got you know, again, as I said, all
indexes are close to record highs first half of the year. S and P
rose fourteen and a half percent, almost fifteen percent, NASDAC for the first
half of the year up eighteen whopping eighteen percent, the tech heavy Nasdaq,
and we've talked a lot about AI and it's impacted some of the big tech
companies, and Nasdaq certainly delivering that with a you know, year to date
eighteen percent return. Now you know, clearly laggered behind the others just up
a little less than four percent, but still you know, good return for
the year now as staggering, you know, as great as those numbers are.
I mean, and again, if we were to sit back in December
and say, hey, the FED is not going to start cutting rates and
this is what the market's going to deliver, I think we would all say
I'll take that. I'll sign up for that all day long. You know,
a fifteen percent increase in the S and P eighteen Nasdaq, and the
Fed has has been able to be patient, right and hold off on rate
decreases until they feel comfortable. And so just just great returns for the first
half, but it's like long term, you know, investors, we always
like to put things in perspective. So as well as that first half performance,
you know, believe it, it's not believe it or not, it's
worth noting that it's actually they're below what we achieved last year twenty twenty three.
So for the first half of twenty twenty three, so through June of
twenty twenty three, the S and P was up sixteen percent, so slightly
more than it is this year. For the first half, NASDAK up a
whopping thirty two percent for the first half of last year of twenty twenty three,
and the dial up about the same, a little under four percent.
So uh, you know, just uh, you know, we all you
know, twenty twenty two in our rearview mirror, certainly a year where you
know, stocks were down, really every asset class was down. But what
two great years are recovery, you know, twenty twenty three in so far,
you know, the first half of twenty twenty four. And as we
here, we are at the halfway point. You know, the coaches got
us in the locker room. Okay, it's halftime. What are we do
in the second half of the game? And that's the big question, right,
And you know, uh, certainly you look at a year like last
year and the halfway point was great, and guess what, it only got
better for the full year. Right, So the S and P full year
up over you know, twenty four percent NASDAK forty three and the DOW of
fourteen percent for the full year. So you know, and I go,
that's just a one year snapchat. But if you look at history, generally,
when we achieve good results through the first half, generally that that continues
through the year. So certainly a lot of factors to be considered for the
remainder of twenty twenty four, some of those being obviously, you know,
what is the Fed going to do? When are they going to start cutting
rates? It seems that with some of the recent inflation prints, and we'll
talk about the PCEE print that came out on Friday, certainly seems to be
showing inflation is certainly cooling down, getting closer to the FED target of two
percent. But you know that does you know, so there certainly are some
expected you know, rate cuts for the remainder of the year, and that's
certainly an uncertainty. Another in certainty for the mayor of twenty twenty four is
the presidential election. We got a little bit of taste of that this past
week with the first presidential debate, which was certainly you know, gained a
lot of attention and uh, you know, not to get political on this
show at all, but uh, you know, certainly I don't think was
our finest moment as a nation. But you know, that's uh, you
know, that will play itself out. And you know what's interesting is,
you know, Ryan Bouchet, our chief investment officer, uh, for our
annual State of economy economy, you know, to do some analysis and put
some presentations out on you know, historically the impacts of Democrats in the presidency
versus Republicans and its impact on the stock market and overall again a historical long
term it really doesn't matter, you know. Now, in this short term
it could cause some disruption, but long term, you know, markets adjust,
Companies figure out even with changing you know, regulatory uh landscape, you
know our we have you know, great companies figure out how to deliver results
even with small changes like that. So certainly the you know, certainly the
political landscape could cause a little controversy for the second half of the year.
Market might react, but we again we think long term, regardless of how
the outcome of the election is, you know, we're still very bullish on
US equities in the stock market in general, and regardless of how that race
ends up. Again where this is not a political show. We're not going
to get political. But regardless of how it ends up, you know,
we're still bullish and the US equities and feel that's the great place to be
putting your money right now. So again putting you know, context, first
half of the year. Great, Now we look at where we go the
second half, and I talked about you know, Friday, you know,
we've got the Fed's preferred inflation gauge, the Personal Consumption Consumption Index, the
PCE, was released on Friday, and it showed a you know, really
flat from increase from April to May, which is really great to see,
and also showed you know, the core PCE also really the lowest levels we've
seen since March at twenty twenty one, so seeing annual rate of increase really
decreasing the two point six percent down from two point seven seen in April.
So good news on the inflation front. I'll get into that print a little
bit more detail a little bit later than show. The headline is no surprises,
right, came in line with expectation, showing cooling what we'd like to
see. Also in the personal May's Personal Income and Outlays report was also encouraging,
you know, so obviously showing the step down inflation, which is great
to see, but also robust income growth and moderate spending which you know,
you know, really suggested that there's not an urgency for rate cuts. Right.
Things are certainly slowing down, but there's not an dramatic hold, so
FED can continue to be patient, which they've been. And you know,
I know we were all very critical of the FED really for you know,
many of us thought delaying rate increases too long, you know, with with
comments about inflation being transitory back a few years ago. Clearly it was not,
and they were late to the party and increasing rates. But I will
say, you know that that certainly their patients uh has been paying off.
You know, I would have to say, uh, you know this year
and certainly you know, markets are still doing great uh in in the in
the FED is really allowing the FED to really be patient and make sure they're
comfortable inflations in the target zone that they want to see. So great news
on Friday. Again it was as expected and as we all know about the
street, you know, the street reacts more to surprises than expectations, so
we did see a little pop on Friday. You know, Nike came out
with some bad earnings and bad expectations for me in the year. That kind
of was ended up being the big story on Friday, kind of tempering markets,
bring them down, but still closing out. As I mentioned, near
record highs on Aldheim highs and the S and P NASDAC so in Nasdak,
so great place to be. You know, as we look here, you
know, the last week in June, we look at the week ahead.
You know, we got a short week with the holiday week, so stock
market, the bond markets will close early on Wednesday and be closed Thursday with
the observation of Independence Day. But there will be some important data coming out
this week. So Tuesday, the jobs report will come out, and you
know, certainly expectations are some healthy growth and job openings. I think current
expectations are a little bit under eight million job openings, which is they're expecting
a slight decrease from April. And then you know, on Friday, the
full jobs report will come out. So actually this is the BLS will release
the job openings data, but the full jobs report will come out on Friday.
Again. Streets currently expecting you know, about a little under two hundred
thousand dollars non farm payroll, you know, a decrease from what it was
put on in May of almost three hundred thousand, and expect the inflating the
unemployment rate to to stay stay rate around four percent. So uh, barring
any major surprises, there you know that's uh, some data we'll see out
next week, but a short week as uh you know, markets closed early
on Wednesday and closed on Thursday. But important data and this is going to
be important for the you know, the Fed clearly is looking at you know,
inflation numbers. We're good. On Friday we talked about now they want
to see jobs data, seeing again the economy cooling down and you know,
the numbers have you know, the unemployment RaSE still very low. Earnings growth
is positive and so good signs for the consumer. But the Fed just wants
to make sure things are not you know, getting out of control. There,
so some important jobs data coming out next week. You know. It
is interesting. You know, as we talk about, you know, the
returns of the markets first half of the year. You know, there's certainly
been a talk about you know, the magnificent seven, magnificent eight and tech.
It's it's really its impact and in whether we're getting breadth of market and
certainly, you know, it is interesting. Certainly, there's no question tech
has been leading the way and some of the major techs have been you know,
certainly leading the charge. But as you really passed through the data,
you know there is there certainly is several indicators showing that there is breadth.
And you know, one thing is historically, really if you look back at
the stop market, you know, generally some of the top performers are you
know, driving a significantly high percentage of the market growth. So that is
not something new. So certainly as we're seeing that, you know, years
ago it might have been geed you know, exon DuPont At and t,
but they were you know, the top five were driving a lot of the
market growth. But some of the data as you dig into it, what
we're looking at is when you really look at the S and P five hundred,
you know, you've got thirty three percent of the S and P five
hundred is up over ten percent year to date, thirty three percent ten over
ten percent, twenty four percent is up over fifteen percent, sixteen percent of
the S and P five hundred is up over twenty percent year to date,
and eight percent is up over thirty percent. So se means forty of the
S and P five hundred stocks are up over thirty percent year to date.
And you know, when you look at that data, it you know that
hardly shows that it's fully you know, a narrow market. It's really you
know, the breadth is there, and it really counters the argument that it's
only a few stocks that are driving the returns. Certainly those are the headlines,
and there's certainly those top seven are driving significant returns. But if you've
got you know, thirty three percent of the S and P five hundred up
over ten percent year to date, that certainly is showing you, you know,
some breadth to the market. And so which is which is important to
see because you know, again historically you will have a small percentage driving a
big part. But here we you know, I think this data shows that
certainly there is the breadth of the market. Return is certainly there. When
you've got over thirty three percent of the S and P up over ten percent,
that's certainly a good sign for that. And again, you know,
as we look back in the rear mirror, we see what the markets have
delivered thus far, and now we got to look about where we go moving
forward. And what you know is our firm, you know, we still
you know, long term diversified portfolios. You know, we think as long
term investors, again, we're we're still very bullish on US equities, thinks
that's a great place to be. And certainly on fixed income, we'll talk
a little bit more about bonds, but certainly, you know, fixed income
bonds have an important role to play for the portfolio, and even cash and
and I certainly want to you know, center on that a little bit.
Uh something we're seeing uh kind of being referred to as a cash trap.
But but as we look out at the rest of the year, you know,
certainly there are some uncertainties, but there's always uncertainties, right, and
I think that's what we have to remember as long term investors. I know,
one of the charts that Steve really likes to present, you know,
it really shows over you know, a five year period that included you know,
the COVID peace pandemic, you know, massive job lost, the capital
riots, the warden started the war in Ukraine. You look at that five
year period and even with all that uncertainty, you know, market's doubled.
And so again what's important is, hey, you want to have a diversified
portfolio. You want to make sure you're paying attention to to how you're allocated.
But it's certainly you know, every you know in the market, if
you're in the market, you're subject to uncertainties, and certainly, again that's
where it's important to have a well diversified portfolio, you know, So wrapping
up, you know, kind of the market update SMP, you know,
for the month of June up almost four percent and fourteen and a half percent
year to date, Dow up a little over one percent for June, almost
four percent year to date, NASDAK up almost six percent for month of June
and eighteen percent year to date. So certainly for the first half of the
year, I think we can say markets have delivered, uh, even uh,
even when the Fed has paused on inflation or paused on interest rates because
of you know, really their eye on inflation. So you know, certainly,
you know, we're also seeing you know, ten year treasury ten year
treasuries. We certainly saw those yields come down significantly. H really started to
take a little bit of an increase. Finished out the quarter a little bit
higher, right around four point four percent with a little about ten basis point
yield. So certainly, as we look at the markets, look at those
returns of great numbers, what's interesting is there there still is skepticism out there
with consumers and and you know, I'm going to say a healthy skepticism.
So I will say most consumers from a spending point of view, still feel
the impact of inflation. And you're seeing what's interesting is you're seeing on products
consumers start to draw back their spending a little bit, but things like travel
and services, there's they're still spending. So it is interesting. But but
if you you know, if you talk to consumers, they still feel this
little bit of uncertainty. I think part of that is, uh, you
know, a couple of things that they know the Fed is going to start
cutting rates and they're unsure of how that's going to impact things. Also,
you know, there is concern about election year, and I think you know,
again as I talked about with analysis we've done showing that, uh,
you know, really election results, whether it's red or blue, not a
significant impact on the overall market. But there is concern right any any time,
Uh, there can be some uncertainty, some potential concern. But uh,
but I would say, you know, market sentiment, I would say
overall still does remain a little cautious and skeptical. And and you know what,
that's what we're resulting is we're seeing a lot of cash uh, still
sitting on the sideline, which uh, which is interesting, you know part
of that, you know, I think there's some time I'm ticking that investors
have to make some decisions. But we'll get into that a little bit a
little bit later in the show. So just a little bit more detail on
the inflation data that came out on Friday. Again it's the Fed's preferred inflation
gauge, the PCEE, the Personal Consumption Index showing a year over year increase
of two point six percent, which was down from the prior month. Is
really it's the smallest increase since we've seen in May of twenty twenty one.
So, you know, core inflation really showing the FED what they want to
see and really that the disinflationary trend is there. And so that's great.
See, you know, and you know the FED open market. You know,
they'll be meeting again in July, and you know, I would say
most economs are not expecting a rate decrease in July, but the meeting again
in September. I think September is certainly being targeted as a meeting that we
may see our first first rate decrease, and you know, certainly with some
great inflation data, if we continue to see a cooling, that certainly would
bode well for for some rate increases there. And you know the other part
that that that the report on Friday showed is really personal income so was up
point five percent in May, and spending rows, you know, really small
point three percent, really focused on services, as I mentioned, rather than
good So you got to remember that with the consumer representing seventy percent of the
economy, that's that's so important. You know that the US consumer is still
healthy and right now the data shows that. Right so, unemployment is still
low, we're still seeing strong balance sheets, which is important, and we're
seeing spending under control. So so a healthy consumer certainly what we want to
see and what the Fed wants to see, which is going to help this
economy continue to move forward. So I can't believe it. Here we are.
We are not only halfway through the you we're halfway through today's show,
and we're gonna be taking a break. I want to thank you for tuning
in with me today and I hope you enjoying the show. We encourage any
listeners to call in with questions. You can reach me at eight hundred Talk
WGY. That's eight hundred eight two five five nine four nine. Well,
thank you for staying with us through that short commercial break. I'm John Malay
and I'm the host for this morning show. I appreciate you tuning in this
morning. I encourage any listeners if you have any questions, please don't hesitate
to reach out at eight hundred Talk WGY. That's eight hundred eight two five
five nine four nine. So the first half really given updates on markets,
wrapped up kind of talking about the inflation data that came out on Friday,
and really, you know, pointing to a really healthy consumer, which is
great to see. And one of the byproducts of that healthy consumer is healthy
balance sheets and a lot of cash. And you know, one of the
things we're seeing, you know, particularly with new clients coming on board,
is you know, to really protect against some of what we saw in twenty
twenty two, right the markets down, bond market, stock market. You
know, we've seen investors pile money into cash, and really since the Fed
has started raising interest rates and you can now get a decent return on a
decent yield on money markets. You know, money market funds have approached to
a record, you know, six two point one trillion dollars as of earlier
this month, and which is a significant amount of cash. And and you
know, let's face it, you know, prior to interest rates going up,
you know that that cash might have been yielding point one point two percent.
Now you're getting yields north of five percent. So it can be attractive.
And it's certainly helped investors kind of weather some of the volatility and some
you know really you know, maybe the exited positions and equities or or really
evaluating reevaluating their fixed income. But but now you know, if you're sitting
with that cash, really you've got some choices to make. Right. It's
either you can keep sitting on that cash and as the Fed starts to cut
rates, you're going to see those interest payments you're getting, right, what
you're earning on the money is going to shrink, no question about that.
Or figuring out how to redeploy that cash, and you know, you know,
you know, decide how to rebalance your portfolio is challenging. And I
will say it's challenging even for professionals. You know, our investment committee meets
weekly and actually they're probably communicating daily right, and we're looking at how to
manage our portfolios and what opportunities to take advantage of or what risk to try
to mitigate. And so, you know, we're seeing a lot of investors
coming in who were kind of in this so called you know, cash trap.
They've got you know, really you know money that they've maybe they've taken
out of equities or they've you know, taken out of their their fixed income.
You know, if you've got somebody with a balance like sixty forty portfolio,
maybe that forty percent that was sitting in fixed income. They were concerned
about bonds because of what they saw in twenty twenty two, not really understanding
the bond markets and how they react, and went to all cash, and
hey, if you're yielding five percent, you might say that that's not bad.
You might look in the rear view mirror and say, look, hey,
the last twelve thirteen months, I've got five percent out of my fixed
income portfolio. That's great, But you got to remind yourself that that's the
rear view mirror, right, you know, So you got as a long
term investor, you've got to say what am I going to do going forward?
And if you're sitting with a pile of cash in your portfolio. And
you know, particularly because I have seen clients who have you know, client
new clients coming on board, who where they've taken a significant part of their
fixed income portfolio and converted it to cash, you know, money market type
investments. And again they feel good about that because you know, for maybe
the last twelve to eighteen months, they've been yielding good returns. But now
they've got to determine what they need to do with that, you know.
And there's one thing we do know. If the FED is going to cut
rates, we don't know exactly when, and you will see the yield on
those money markets start to come down. And you know, the question is,
you know, if you wait too late, you know that's going to
be concerned. And so, you know, we certainly believe as long term
investors, you got to return to a diversified bond portfolio so you can,
you know, lock in attractive yields really before the FED starts cutting rates.
Right, So if if you wait until the FED starts cutting rates, it's
too late, you know, because really it's it's no different than any other
form of market timing, right, I mean, Listen, we all wish
we had a crystal ball and knew exactly what sectors of stocks were going to
be popping, what individual stocks will be popping, Right, that'd be easy,
and then we could we could certainly move our money and capture that.
But we don't, right, But we do know, we do know that,
you know, cash does have a place in a portfolio, but there's
no question bonds are a better choice for locking in yields and boosting returns over
the long haul. And you know, I do feel as we as we
talked to new clients, you know, some and not all this is,
you know, but some who have retreated to cash, you know really,
you know, they they look in the rear view mirror and say, well,
it's done a good job. So that's where we should be going forward.
And again I just got a caution, just like anything. Yeah,
you could look at almost any asset class over any short term window and say,
well this is where we should be. But again, as long term
investers, right, you know, we certainly believe in a diversified portfolio.
And if you're in a balance to what we call our growth or growth and
income with a fixed income mix, you know, we certainly believe in the
long term, bonds are a much better place to be than cash. Doesn't
mean that cash doesn't have its purpose, and it does. And certainly,
you know with cash, you know, cash instruments yielding what they are right
now, they seem attractive. But again, we know that the FED is
going to start cutting rates and that and that will impact what's going to happen
in the bond market. And so you know, bonds, you know one
thing, yields are in a good position right now. So just have to
remember that, you know, the inverse relationship between interest rates and bond prices.
Right so, when interest rates rise, which we saw the FED do
pretty significantly, bond prices fall. So when rates went from you know,
near zero to five percent, bonds took a hit. Now that yields are
high, you know, it really softens the blow of any potential rate increases.
I think at this point, you know, I'm not saying it's important.
You know that that there's no way the FED could increase rates. I
would say it's not likely. The more likely is is a rate decrease.
And so when rate decreases, right, that's where you're going to see the
attractive side hit bonds that bond as rates go down, bond prices will go
up. And so that's a concern, right if you if you're waiting,
if you're sitting on the sideline and you decide you don't want to get into
bonds until rates start coming down, you know you're gonna miss the opportunity.
You're gonna be leaving cash on the table. There's no question. And again
we like historical numbers, right and as long term investors, that's what we
look at, and there's no question. You know, bonds capture better returns
than cash over time. So you know, one window looking at like over
the last forty years, you know, bonds have averaged a six point four
percent annual return and that's one and a half times better than cash is done
and and bonds have been consistent outperformers. It's not just during any little segment.
You know, in the period from nineteen you know, January nineteen eighty
six to mid twenty twenty two, bonds had a better five year return in
all but ten period, So that's a ninety eight percent success rate. And
those times where it wasn't better, cash only slightly outperformed you know by less
than zero point five four percent, so and that leads soon vanished. So
so, simply put, you know, bonds have been a have done a
better job than cash at helping investors grow their assets over the long term.
And again, as long term investors, that's we think the horizon you should
be looking at. So so again with with so much cash sitting on the
sideline, and if that's a significant I mean, obviously if you pulled that
out of your equities, right, you've missed out on certainly the gains I
talked about achieving in twenty twenty three and thus far in twenty twenty four.
But the more I see, I think, the more prevalent condition I'm seeing
is really investors taking their fixed income part of their poor folio. So equities
they're keeping invested, but the fixed income, you know, they kind of
did a little rush to safety and and and went to cash when when cash
yields were up. But but now you know there's there this time we're going
to see rates changing. I will just say, you don't want to wait.
You don't want to wait too long because you will miss that opportunity.
Uh. And you know, when you also look at interest rate cycles.
So when you see pauses, you know, times periods of time between the
last rate increase and then when we start to see decreases, so that pause
period, you know, really looking historically over those periods, bonds, bonds
are set up to outperform and they have so over those past four interest rate
cycles, bonds outperformed cash by over six percent in the twelve months following the
Fed's latest FED hike. So those are you know, another important point that
and you know investors who wait for the FED to cut are going to be
leaving money on the table. So certainly, uh, I think, and
and I know it's you know, it's it's many times, you know,
investors can look at that that yield and say, well, I'm getting five
and a quarter. Well, one of the things he's gonna remember is,
you know you're getting in that an annualized basis, right, So if you're
only holding that for for three months, you're not getting five percent over that
three months. You're getting five percent over on an annual basis. And so,
uh, certainly, you know where we're seeing. You know, certainly,
we we do believe cash and bonds have roles. You know, bonds
have certainly again, over historical periods of time, you know, proven their
stability during turbulent times in the stock market. Right. And and you know,
getting back to why why do we have a balanced portfolio? Right?
And and that's meant to provide diversification. Right, So the balance portfolio when
it's performing as planned, if you're seeing turbulence in the equities, right,
you're seeing the fixed income part of your portfolio providing some stability. Now that's
not perfect. It doesn't happen every time, and certainly twenty twenty two was
a year where it didn't. Right, we had both equities and bonds down,
but there's no question you know, on a historical perspective, bonds have
played an important role in providing stability during turbulent times in the stock market,
you know, reducing reducing overall portfolio losses. So, you know, to
wrap up this part of the conversation, we certainly understand, you know,
many investors who might have been spooked during twenty twenty two, you know,
went to cash. Certainly on the equity side of the portfolio. We've verged
and we you know, we telegraphed a lot of this with our clients,
so we didn't have many clients react like that, but certainly twenty twenty two
was a year that did I think investors risk tolerance is uh And we certainly
have had you know, individuals we met with who went to all cash,
and you know, we've certainly coached and encouraged them to get back into equities
with that part of their portfolio. But I'm fixed income. You know,
I still meet clients, you know, perspective clients who on the fixed income
side. You know, really two moves went to treasures, which we we
really support. You know, I think that was a great move, But
then I also have a significant and and the data shows that at a national
level, you know, a lot went to cash, and you know,
I would just encourage if you're in that position, right, it's it's time
to look at that and say, there's no question if you sit and hold
that cash, you're going to see your your yield dwindle down, right,
because it will, and you're going to miss an opportunity on the bond side.
So I would certainly say look to diversify. And you know, typically
where where we find find our use for cash or cash instruments is really when
we're trying to identify cash flow needs. Right. So an important part of
our financial planning process is, you know, if we've got somebody in retirement
and maybe looking at their distributions, but it also could be significant purchases.
You know, you may be looking to fund a daughter's wedding, or maybe
you're thinking of buying a summer home and you've identified an outlay of the portfolio
that you need, you know, within two years, and you know,
typically what we're doing is really that's the best role we feel for cash is
in that role where we want to take those that part of the portfolio really
segregated from some of the market risks that are there for both equities and bonds
and parking in an instrument with little principal risk but still providing some yield.
And you know, there were times when that yield was paltry, and so
we certainly wanted to be conservative with the amount of cash we were putting aside.
Today's environment, we're certainly getting better yields, but still you want to
be cautioned to put too much into cash. We still believe in your fixed
income, you know, component of your portfolio. You know, bonds are
a really good place We're also using more alternatives, but certainly you know,
instruments that are going to react positively with where we think its traits are going
and also provide some yield. So we are going to take a quick commercial
break, so please stay tuned and we'll be right back with let's Talk Money
on eight ten WGY. Well, good morning, and thank you for staying
with me through that quick commercial break. A little drink of water there,
so I appreciate Zach you give me that opportunity. I encourage any listeners to
call in with questions. You can reach me at eight hundred talk WGI.
That's eight hundred eight two five five nine four nine. So just wrapping up
the conversation prior to the break is really you know, as a diversified long
term investor, you know, we feel there's a place for equities, bonds,
and cash, and you know, I think at a national level,
we're seeing a significant amount of cash sitting there on the sidelines, and you
know, investors have some decisions to make, and we certainly encourage if if
you have decided where cash is going to make up your fixed income sleeve,
that you've got some decisions to make and by leaving it there, you're gonna
you're giving up some not only opportunity for growth, but I think some protection
that bonds typically play. So we'll wrap up that segment. You know,
one of the things that we certainly talked a lot about over the last few
years is, you know, wrawth accounts and the benefits of and certainly we're
seeing you know, the growth of WROTH components of four to oh one K
plans. And you know, just to remember, you know, a traditional
four oh one K, you're you're you're putting money in, you're making contributions,
and that money is going in tax free, and so you're getting that
tax benefit up front. The contributions are made tax free, the growth happens
tax free now, but then when you pull money out, that's where you're
going to be paying tax on it. Now. The WROTH, just like
roth IRA, with the WROTH four oh one K, you're not getting the
tax break as you're putting money in, right, but the money you draw
out of that account will be tax free. And so a lot of investors
are looking at ways and at how can I get more money, how can
I get more tax sheltered WROTH money, And certainly, you know One of
the things we try to encourage investors to is if you can go into reach
hirement with kind of diversified streams of money with some of it being taxable and
some of it being pre tax it helps on the planning side, right because
if you retire and all your money is sitting in an IRA or IRA rollovers.
Let's say you've you've really put most of your money into four oh one
k's, you retire, you roll that over into an IRA. Every you
know, now when you're pulling distributions out, you can be paying tax on
that. Also from an inheritance point of view, right if you pass away
and your your heirs inherit that they then have to take that money over ten
year period and they'll be taxed on that. So they're you know, they're
getting a knight, could be getting a nice balance in IRA, but it's
all going to be taxable money to them as they draw it down. So
many individuals are trying to figure out how can I get more and more money
into ROTH and you know WROTH foowen K can be a component of that.
So one is obviously if if you have to have a plan that offer that
and we're certainly seeing more and more plans offer a Wroth component. And you
know so from a from an advisory point of view, you know, depending
and it all depends on somebody's personal situation, age, you know, what
their income is. But we see individuals putting all their contribution towards WROTH or
maybe splitting it in their four oh one K between a traditional four on and
K and wroth. But the other thing you can do with with a with
a four O one K if if your plan allows it. And this is
where it's not all plans do. So you certainly have to talk to your
employer understand what your plan allows. But if you have a Wroth component,
uh, some plans will allow an in plan four oh and K conversion so
where you can convert the balance you have in your traditional four on and K
to the Wroth component. Now, of course you can have to pay tax
on that right and and uh, and this is definitely not a one size
fits all that everybody should do this, but it is a component. It
is a way that if you you know, depending on your age, your
circumstances, it may make sense to UH if you're again, if your four
oh one K plan allows it, to convert some of your traditional four oh
one k UH to a to a wroth and so uh so what that would
you know, you'd have to pay tax, so you'd have to do some
good tax planning to see what the federal state impact of that. But that
could allow you to take a significant part of your four oh and K balance
which is pre tax UH and converted over to to a wroth component. And
so certainly, as as UH, this is one where it's totally going to
depend on what your four oh one K plan allows. So certainly talk to
your employer, see what your plan document allows. You know, you can
also do uh, you know, in service distributions right, and so this
is a strategy that allows that if you don't have a wroth for OW and
K option, right, So you wouldn't do this if you had a wroth
for O and K option, but if you if you didn't have that option,
you could do a Again, if your plan allows in service distributions,
you could do an in service distribution UH to a traditional IRA and then roll
that to a wroth through a wroth conversion. So certainly, again I would
obviously big tax impacts with these moves. So certainly you'd want to work with
your tax professional advisor to really evaluate, uh, you know, that circumstance
before doing it. But certainly, I would say we're seeing individuals really scrambling
to try to get more and more money into wroths because there's certainly a great
vehicle and there are some you know, limitations based on income as to how
much you know, when you can contribute when you can't. So we're seeing
wroth conversions and we've talked a lot about wroth conversions on the radio show,
and that's you know, a strategy where you take an IRA and convert it
to a wroth. And again there's a you know, some people just say
everybody should do it. It's not. You know, there's there's an analysis
you should do. There's break even, and you know a lot has to
do with can you pay the tax burden without using money from your rollover?
So if from an outside source, that has a big impact, because you
certainly want to leave, you want to leave that entire balance that you're rolling
over really in the wrath to grow, to grow and tax free. So
I would just say, if that's if you do have a four to one
K that does have a wroth component and does allow in plan conversions. That's
a strategy to look at and talk to with your tax professional or investment advisor.
So some certainly some strategies there. You know. The last thing I
just want to touch on, you know, real briefly is you know,
investment management, no question, is the biggest component of what we do,
but financial planning is also really important. And you know, many times the
question comes up is you know, what's the role of insurance from a financial
planning perspective? And you know, from a comprehensive financial plan, there is
a role for insurance. And we certainly don't view insurance being a primary investment
or wealth building tool, but we do feel there's a place for it to
a role for it in the financial plan because remember, you know, insurance
is fundamentally meant to protect against risks, protect against risks, right, So
now, I know there's some advisors who who really talk about it more from
an investment point of view, We really talk about it from a risk perspective.
And believe it or not, we're coming to the last minute of this
show. So this is a big topic that I think I'm going to save
for another time, but you know I appreciate you taking the time on this
weekend to listen to our show. I hope you have an amazing day.
I hope you enjoyed the show. I know that I certainly did. I
hope you enjoy the rest of your weekend and have an amazing holiday week ahead.
With the fourth of July, please have a safe and happy holiday.
Also, please be short to tune in next week for some other great shows.
Check out our website Bouchet dot com. You are listening to Let's Talk
Money, brought to you by Bouchet Financial Group, where we help our clients
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for tuning in this morning and enjoy the rest of your weekend and the week
ahead. Thank you.