Today's generation doesn't even know what inflation is compared to what we know inflation to
be from the eighties and nineties, and we don't want to have repeat of
that, of course. But the reality is is that I am very pleased
to see what they're doing with these rate pauses because I think that the job
is over. I don't think that they need to continue to raise rates on
us. You are listening to Carrie Lutz's Financial Survival Network, where you get
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You need the Financial Survival Network now more than ever. Go to Financial Survivalnetwork
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than ever, and welcome. You are listening to and watching the Financial Survival
Network. I'm your host, Carrie Letz. It's twelve thirteen, twenty three,
so we get the PPI numbers out, inflation is out, everything looking
good. What's the FED gonna do? Matthew Johnson with us now from Johnson
Wealth and Income Management, and well you find him at Johnson WIM dot com
if you got any questions for him or myself kl at Carrie lets dot com
is the email address. So, Matthews, great to have you back on.
What are you making here of the latest numbers, CPI, PPI,
personal consumption expenditures, all of that good stuff. What do you think.
Well, it's great to be back on the program. Thanks for having me
again, Carrie. There is just a lot of information to kind of unpack
over the course the last couple of weeks. So I guess we'll begin with
the latest piece of information, which is the Feds have decided not to go
ahead and raise interest rates in the month of December. Now, this is
this is good news. This is good news for us because the reality is
is we've gone through twenty four months worth roller coaster rides up and down,
watching the economy kind of go back and forth, shrink and then grow maybe
a little bit, and then back again. And we know that as the
Federal Reserve raises interest rates. Yeah, the main motivation is to bring inflation
down, which it's definitely worked. But the reality is is that it makes
growth really really hard for corporations, and it makes it hard just to grow
the economy in general. So the fact that they have taken and not paused
and raised interest rates not twice, but now three times. The general consensus
carry is really that this is now signaling the official pause, though I don't
think we're ever going to hear them say that for a very long time.
Their goal and their expectation is to try to keep a psychological lid on this
economy, and so they're not going to come out. They're not going to
be talking about rate cuts, not yet anyway, that's going to be a
while. That's probably going to be in the middle of next year, I'm
guessing. But good news is those interest rates aren't coming up. The second
thing that I think we can look at that is a good indicator that is
kind of reinforcing the decision of the Feds not to raise interest rate is the
personal consumption. What we're seeing is what we all really already know, and
that is that American families are not going out and buying big ticket items like
they used to. What they're doing is the majority of their household income is
really going to pay the utility bills. It's to buy the groceries and the
gasoline. And so we see that if the person consumption is kind of starting
to kind of dim just a little bit on those big ticket items. We
know that the Federal Reserve knows that what they've been doing raising interest rates is
actually helping CPI. CPI came down that was pretty broadly expected. Core inflation
at four cpis and three point one percent going in the right direction. Here's
a big question. Are they going to get down to the two percent like
they want? And the reality is I don't think so. And as I've
contended with many of my clients across many different platforms, I don't think that
they need to hit two percent for us to be comfortable at the rate of
inflation as Americans. You and I have discussed this in the past. You
know, today's generation doesn't even know what inflation is compared to what we know
inflation to be from the eighties and nineties, and we don't want to have
repeated that, of course. But the reality is is that I am very
pleased to see what they're doing with these rate lauses because I think that the
job is over. I don't think that they need to continue to raise rates
on us. So you think the rate raising is over? So happy days
are here again? Huh? Well again, They're going to keep a very
stern set of language that's hopefully keeping that psychological it. As I said,
on the market. You know, the thing that I think is going to
be a bit of a moving target for them is if we see how the
stock market is behaving right now. In fact, you know, September was
a bad month for the stock market. October was a dumpster fire, and
then all of a sudden you look at November and November things have completely changed.
Right. It's like the market chain to life. And today the stock
market is up and yet again on the news of no rate increase. So
now the Feds are going to be dealing with a different kind of psychology.
And this is what we call the wealth effect. So even though the majority
of household income in America today is now being focused more so on the actual
necessities of life, when individuals are starting to see their four to one k's
come back, they're starting to see their I ra's and their post tax investments
starting to come back, this is going to create a bit of a psychological
permission slip for Americans to say, Okay, well maybe we are out of
the woods, maybe we're getting back into growth, and I can feel good
about maybe taking some of my money out of my account and spending it,
and so that's obviously not what the Feds want. They want to continue to
see things shrink. But they're going to be contending with that wealth effect.
So I think in many respects, they're also going to be watching the market
very very closely because they know how emotionally connected as Americans we are to our
investments and do how much we've saved. Okay, so what do you do
now? Do you hop back in the market now that it's had this big
advance or do you play it safe? Well, it's interesting that you say
that because I've never been as a fiduciar area. I've never been a big
advocate of making wholesale moves in and out of the market. I'm really more
or less an advocate of being well diversified and making certain that you can take
advantage of the down times. And we do that by keeping very very close
eye on the fundamentals, which is Okay, I want to be diversified,
cross to various different asset classes. I want to make certain first in foremost
that I've got some safe money. I've got some money that's in fixed income,
I've got some money that's in some equities, and some real estate,
some precious metals. I want to have that diversification because I don't know from
day to day, month to month, a year to year which asset class
is going to be the best performer. But I really strongly encourage people to
take a look at their investments and make certain at the end of the day
that they are producing at least a good four percent or better in dividends.
And the reason they say that is, this is foolhardy to believe that if
let's say you've got money in the stock market, the stock market's always going
to perform. We know better than that. So there's going to be times
where the market isn't performing. So what if you're retired, Well, if
you're retired, you need income. You want to be selling those shares at
a loss to get that income. And the answer is obviously know, Well,
what if your portfolio is producing say four percent, five percent, six
percent dividends, which by the way, is doable. Now you've got income
to spend. But what if you're on the opposite end of that teeter totter.
What if you're not yet retired, You're not even closer retirement, You're
still in the accumulation stage. Well, the reality is is that you know,
many workers today they have access to retirement programs like four one ks four
or three b's and that sort of thing. But what if what if the
personal learning that you've invested is producing that four percent, five percent, six
percent, and you're using those dividend dollars to help continue the dollar cost averaging
story while the market is down, and here's a physical we all know,
it's almost as if we pop out of the wound we've been told, we've
already had it installed in our minds. We buy low, we sell high
right, And the reality is is that if we're not producing income off from
the assets that we own or not, doesn't mean we have to be taking
it. But if we're not producing the income, then we're not able to
only take advantage of the beautiful gifts that things like this situation with the FEDS
raising in restraints awards us. And so we want to be able to continue
to buy and stay diversified. We want to be able to make certain we're
getting income. We want to make certain we're paying attention to the distribution stage
of our life if we're in that and purposefully investing for that, if we're
not if you're still in the accumulation stage of your life. Let's say you're
forty five or fifty to fifty five years of age, and you still have
five, ten, fifteen years before you get to retirement. Stop playing it's
safe. Stop playing it safe, play it smart, and be aggressive because
the market always tends to come back. We know that, we just don't
know how long it'll take, and so we need to be absolutely sure to
be managing our investments. Things like this is going to happen in the future.
The Feds are going to make decisions in the future. We know that
it's going to affect us. Congress is going to be a bunch of boneheads
to continue to make really bad decisions from time to time, and it's going
to affect the market. So we've got to be prepared for that and be
agile enough within our portfolio to take advantage of it. All right, I
guess I guess that'll have to do. So you're better off being prepared than
being scared, That's correct. All right? Hey, well, thanks for
clearing that. Is clearing us up for that when we have this discussion next
December, where do you think things are going to be here? Matthew.
I think things that are things are really going to be elevated by December of
twenty twenty four. That's my expectation. We've gone through the Ringer in the
last three years, and I do expect good things. I think that we
just have to make certain that our optimism isn't clouding our judgment and we're making
rash decisions when we're supposed to just be taking a very moderate approach and doing
what we are supposed to do and not being swayed with the winds of Wall
Street or with the verious different headlines we see. We just continue to keep
our hands to that flow, be steady, be investing smartly, and making
certain that you've always got base is covered. So what kind of returns you
think we should be shooting for in this type of market. Well, that's
a great question, because really when you when you read the headlines, you
know everyone is pointing towards Look at the S and P. It's up twenty
percent. Well, don't mistake in that is twenty percent growth, because that's
not twenty percent growth, that's recovery. We look at where the S and
P is today compared to where it was at the end of twenty twenty,
we know that we're actually still below that high. By the end of twenty
twenty four, I would like to see that we're going to be anywhere between
eight to ten percent, maybe even twelve percent higher as an average in the
S and P. I think that that's very possible if the FEDS don't throw
us into a recession. Is that possible, Well, it is very possible,
but it really depends upon how long they choose to keep these interest rates
elevated. Carrot, Do you think we're in a recession now or we're kind
of on the cusp or on the edge? I believe we're on the ed.
I believe we're on the edge. I know that back in July I
was extremely nervous that they were being so very dogmatic that they were going to
push us to the edge of the cliff, and man, I could look
over the edge and see the bottom from where I was standing. But I
don't think that we're there yet. I know, depending upon the data that
you look at, some could argue that we already are in a recession,
and in some sectors of the economy, Carrie, we really are. But
as a general whole, I don't believe that we are all right. Well,
we won't get into China and it's effect on the world, what's happening
there. I think we'll just leave it here as an upbeat end of the
year message from Johnson Wealth and Income to all of you out there. Matthew,
just tell us where do we find you again? Where's the best?
Absolutely they can go to the website johnsonwim dot com, where they can go
to my YouTube channel, The Capitalized Life, and either which way reach out
to me. I'll be more than happy to excellent. Hey, got a
question for Matthew or myself, you can only send me an email kl at
Carrie LUTs dot com. Link is in the show notes to this interview on
our site Financial Survival Network dot com. While you're there, sign up for
your free newsletter. Matthew. Hey, best wishes to you and yours for
the holiday season and for the coming year, and we'll talk to you in
twenty twenty four. Sounds great. Thanks for listening to Carrie Letz's Financial Survival
Network your solution to today's trying times. For the latest, go to Financial
Survivalnetwork dot com. Financial Survival Network now more than ever