It seems like an uncertain time, doesn’t it? High inflation, high interest rates, job uncertainty for some…and just under one year from now, a huge presidential election. These are the types of years when people sit out of the financial markets. They wait for “calmer waters” and “better times” to invest, moving their money to cash. But is that the right move? What should you do with your money as we ramp up toward another presidential election cycle?
Today we’ve assembled an All-Star panel to address that very question. From T. Rowe Price, CFA and Capital Markets Strategist in the Multi-Asset Division, Tim Murray joins us. And from Fidelity Investments, Certified Financial Planner and Vice President, Financial Consultant Ryan Viktorin also chimes in, as does our behavioral expert, Certified Financial Planner and Co-Founder of the Financial Psychology Institute, as well as Associate Professor of Practice at Creighton University, Dr. Brad Klontz. We’re excited they’re all here and ready to help you guide your financial boat into safe waters.
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A big thanks to our contributors! You can check out more links for our guests below.
Tim Murray, CFA
Another thanks to Tim Murray from T. Rowe Price, CFA and Capital Markets Strategist in the Multi-Asset Division, for joining us on today’s special roundtable! Learn more about Tim and his work at T. Rowe Price by visiting Tim Murray | T. Rowe Price (troweprice.com).
Ryan Viktorin, CFP
Another thanks to Certified Financial Planner and Vice President, Financial Consultant Ryan Viktorin for joining us on today’s special roundtable! Learn more about Ryan and her work at Fidelity Investments by visiting her LinkedIn profile at (1) Ryan Viktorin, CFP® | LinkedIn.
Dr. Brad Klontz, CFP
Another thanks to our behavioral expert, Certified Financial Planner and Co-Founder of the Financial Psychology Institute, as well as Associate Professor of Practice at Creighton University, Dr. Brad Klontz. You can learn more about Brad and his work by visiting his webpage, Dr. Brad Klontz.
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Written by: Kevin Bailey
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Live from Joe’s mom’s basement, it’s a special edition of the Stacking Benjamins Show. We’ll be talking about investing in an election year. What should we know? Joining us today on this very special panel, we welcome from T. Rowe Price, CFA and Capital Markets Strategist in the Multi Asset Division, Tim Murray.
And from Fidelity Investments, Certified Financial Planner and Vice President Financial Consultant, Ryan Victorin. And our Behavioral Expert, Certified Financial Planner and Co Founder of the Financial Psychology Institute, as well as Associate Professor of Practice at Creighton University. Dr. Brad Klontz.
Now here to lead this discussion to help you make better investing decisions in 2024, it’s Joe Saul Sehy.
Hey stackers and welcome to a, as Doug so eloquently said, a very special edition of the Stacking Benjamins show. You didn’t expect us on a Tuesday, did you? But you know what? We are about 51 weeks away from.
a big election. I don’t know if anybody knows that, but we’ve got a big election right around the corner, just under one year from now. And what a better group of people to have. Well, there is no better group of people to have than the people we have to help you guide decisions the next few years. So let’s go right down the line, the way Doug introduced you.
We’ll start off with the gentleman who joins us from T Royal Price. Tim Murray’s here. How are you, Tim?
I’m doing great. Pleasure to be here, especially after the Orioles had a good season. So I can actually have something to say to that Detroit Tigers hat.
By the way, Tim, how does, how did the Orioles have a good season?
that happen? Uh, so you’re asking the wrong person. Um, maybe we waited 25 years and eventually something works.
It has been a long time coming. In fact, our, our stacker friends, we have a few, uh, good friends and a great following in Baltimore that are Ravenous fans. And they had this huge conspiracy that maybe the American League East, like the ownership thinks they get more money if the Boston Red Sox win or the Yankees win.
You think that’s true?
I’m not sure about that, but I can tell you the Orioles, uh, draw better if they, if, if the Yankees and Red Sox fans are showing up at our stadiums. So unfortunately that’s, I don’t know, it does work out from that standpoint.
I’ve been to 15 stadiums that I really want to get to Camden Yards.
I haven’t been there. People are going to wonder when we’re talking politics. We’ll do that here in a second. Let’s go to, I believe Massachusetts, where a woman who has twins like I do joins us. CFP Ryan Victorin’s here. How are you?
Yes, I’m busy. Tired because of the twins. But yeah, busy. I’m happy to
Doesn’t it always, Ryan, I don’t know, when people say, Oh, I wish I had twins. I’m like, uh, beware what you ask for. Yeah. It’s
kind of like before you do that, don’t do that. It’s, it’s a lot. It’s a lot of work. Right.
So now do you have boys,
girls? Two boys. It’s like living with two tornadoes. Yeah,
mine are 28 and when they come home, they’re still tornadoes, right?
So I know exactly that part doesn’t
change. Yeah, mine are gonna be eight So we were very excited about the Halloween holiday and and they’re still coming off the you know, like sugar high from all of it
You you heard by the way earlier Tim mentioned a Detroit Tigers hat if you’re not watching us on YouTube You don’t know what he’s talking about.
He’s pointing to dr. Brad Klontz who I always see online Mixing it up, stirring the pot, getting people’s emotions going about investing. Brad, are you a pot stirrer? I
have been accused as being such, I don’t think I am. I think it’s, I’m just trying to support people in a, um, non overstimulating way. That’s my
Well, I’m super happy that all three of you are here and you’re all so great at what you do. And definitely our stacker community needs your mentorship this year. And Ryan, let’s go back to you for a second. All of you guys were around last election cycle. I mean, you remember how crazy it got four years ago.
This is an emotional time for investors.
It is, and it’s just overwhelming and it’s everywhere. And the speed at which information comes to us with the media or social media is just, it really makes it. All consuming because it’s all around us all the time and to Brad’s point and based on everything he does, it just gets really emotional about a lot of things, especially because elections can drive some of these feelings of the values you have and that it really gets heated.
Quickly, it’s hard to talk about and we feel like it’s going to have this massive effect on, you know, the economy and the markets and, you know, all of us will talk today with more detail about how it actually doesn’t have as much of an effect as you would think, but it feels like it does. And so it’s a challenging time for a lot of people out there.
Well, hopefully it doesn’t, but let’s go to some of those numbers, Tim. I’m assuming at T Roll price, you guys have a phenomenal economics team, uh, economists and people looking at what’s going on next year. We’ve got inflation numbers. I’m sure we’ve got, uh, interest rates that are up. What does T Roll price kind of see for 2024 and the crystal ball this coming year?
Yeah, so it’s, it is an interesting time. I’ve been referring it to what we’re going through right now as economic purgatory. So we got a soft landing, right? There was all going into the air. There’s all this concern about whether or not we are going to have a recession or a soft landing. We got that soft landing, the data.
The data really supports that we did get that soft landing in the middle of this year, and that got everyone excited temporarily, because the thing about the soft landing isn’t so much the soft landing, it’s what comes after that, which is normally a recovery, and that is not happening. And we don’t buy
soft landing, just to be clear, because some people might not even know that term, Tim, that means we avoided the calamity of the deep dark recession, I think is what you’re saying.
Exactly. Yeah. So you get an economic slowdown, but you don’t get a recession. We knew we had to kind of take some steam out of inflation and you need a little bit of an economic slowdown, at least to take the steam out of inflation that happened. But unfortunately, inflation is still extremely elevated, right?
It was, it was at 9%, uh, you know, CPI year over year was 9 percent in June of 2022. It came down to 3 percent by June of 2023. That looks really good. Unfortunately, to your, to your question about inflation, that was the easy part. The nine to three was the easy part. The three to two, that’s going to be the real hard part.
And so that’s, that’s what we’re worried about. That’s what Jerome Powell and the Federal Reserve are worried about. And because they’re worried about it, they’re going to keep rates elevated. That’s why you can’t get the recovery that normally happens after the soft landing, which is, which is what is really the great thing for the economy and the great thing for stock markets.
So we expect probably in 2024 from an economic standpoint, from an inflation standpoint, kind of a sideways, another situation where we’re asking the question, are we going into recession or not? We’re probably going to test that question again sometime in the middle of next year and inflation. We’re probably going to see some good news and some bad news and a little back and
Ryan, back to you, is it, does that kind of echo what you guys are seeing at
Fidelity? Well, I think the purgatory is an interesting word to use because, you know, our asset allocation team has. It’s basically had us in the late stage of the back half of the late stage of the business cycle for about a year now.
And it just gets a little hard for clients to continue to hear, yeah, we’re still in the same spot, you know, as we were a year ago. And that said, it’s really hard to predict always when a full blown recession will happen, how bad it’s going to be and how long it’s going to last. So it’s just kind of difficult to navigate at, at this point.
Right now. But yeah, I agree. It’s we’re just kind of like waiting for the next thing to happen. And of course, with, you know, with inflation being here, a lot of people are really feeling the fact that prices have gone up year over year, and it’s getting more difficult out there, which is why some of that slowdown has happened that, you know, Tim was was talking about.
And, um, you know, it’s not dire out there that we’re seeing now, but it’s slowing. So still positive, but slowing down. That’s You know, consistent with what we’re seeing.
Well, this is, and I know all of you are experts in behavior and working with people on behavior, which is partly why we wanted all three of you here.
But Brad, you truly are. This is your wheelhouse is behavior. And I don’t want to get to what we should do yet. I really want to present the whole argument first, but I feel like what people like you and Ryan and Tim have probably told people a million times, and I certainly have is listen, this is just like last time.
Right? This is just like before. But like Tim said, and Ryan said, because this is coming out of a pandemic and we’ve kind of have these, I feel like these post pandemic waves that kind of created this, this truly is a different thing, isn’t it? I mean, this is a different, little bit different ball that we’re worried about.
So you could see how people might be worried going into 2024 about maybe a different feeling than we’ve had in the
past. Right. As we’re talking and I’m listening to Tim and Ryan and you, Joe, I’m like, Okay, wait, are we scared now? Or are we excited? We’re, I think we’re sort of sitting here trying to figure this out.
Is this next apocalypse? Is this going in the wrong direction? Or is there light at the end of the tunnel? I’m just a herd animal, Joe. Like I’d like to say that I’m a psychologist and I, and I am an intellectual and I do all this research, but really it’s my emotional brain that drives most of our, my behaviors.
And so I think collectively we’re, we’re sitting around, we’re, we’re a bunch of horses in the field, not sure which direction we’re going to run. And we’re looking at each other and we’re trying to analyze the data. And it really is a time of uncertainty and things do change. So has, has it ever been exactly like this before?
No. Are we in this area of uncertainty constantly over the last couple, you know, thousand years of investing? The answer to that is yes. I mean, we’re constantly in a state of uncertainty.
Before we get to the big picture, let’s talk about a couple of the big things that Tim and Ryan both brought up. And Brad, we’ll start with you.
Let’s talk about interest rates. So with interest rates, it sounds like maybe remaining high, uh, higher, I guess if we look long term, right? I kind of roll my eyes when people say interest rates are high. As a guy who’s 55 years old, I’m like, no, this ain’t how, uh, how is this going to affect short term instruments like cash CDs or, you know, Heck Brad, let’s even throw in bonds.
Well, you know, I’m not an economist, but what, what I have noticed is there’s a lot of money in cash and there’s a lot of money in those types of instruments. And, um, I, I don’t know what the number is. Um, I’m sure Ryan and Tim have a better sense, but it’s, it’s over a trillion dollars, just money sitting there.
And that is the, um, financial manifestation of the herd of horses, not sure which way to go. Um, and so that’s the question. So when, and if that money will start flowing in another direction, I wish we could all predict it right now because. We’d go all in that asset class right now and just wait for it, wait for all that money to come in.
But yeah, I mean, there’s, there’s a lot of attractive things happening in those areas. And for many people who are new to investing and, um, an alarming number of new people were investing at this last bubble. I see it all the time on social media, which is where I see the first signs of what’s happening culturally.
So I do a lot of stuff on Tik TOK and elsewhere, and I knew we were getting in trouble. A few years ago when I saw like every other video I was seeing was a day trader, um, giving us stock picks, you know? Um, and I, I was so alarmed and, and I, I’m older. And so I was, I literally thought people stopped day trading back after the tech bubble and an entire generation sort of did, right?
We were into it and then we’re like, Oh my goodness, this is probably not a great approach to managing money and investing. And I was really alarmed to see that pop up. That’s been real quiet. For the last year or two, but I got to tell you, I’ve noticed it again. In the last few months, we’re getting back into this, this sense of people are talking about the bull that’s coming, the bull that’s coming.
And now all of a sudden, all these, there’s all these videos about which stocks to buy. And that’s where I think many of us are real vulnerable to getting sucked into that out of a sense of excitement or wanting to belong or wanting to make money.
Yeah. And it’s funny. I would be okay, Brad, if I didn’t hear the term diamond hands ever again, after I feel like that went away, maybe 12 months ago, I didn’t hear it.
else are you going to get to the moon, Joe, without the diamond hands?
Get to the moon. I forgot. Yeah. I want to go back to that question though, Tim, let’s talk about short term instruments like cash, CDs, different types of bonds. You know, Brad brings up a great point. I’ve seen that number too. I don’t have the date number right in front of me, but it seems like at the very least.
Heck, if you’re going to sit in cash, which might not be the right thing to do, it’s a great time to, at the very least, optimize your
cash. I think it is a great time to be in cash. I mean, and when we say cash, certainly you want it in a money market fund, um, as opposed to just sitting, you know, sitting under your mattress.
Really cash, there’s rarely been a better time to invest in cash. One of the things about having a longer duration bond, and when I say longer duration bond, I mean 10 year treasury, so a longer maturity bond, is That instrument is not only does it give you a yield, but it can act as a hedge against recession risks.
Typically when your equities sell off because of recession, the 10 year treasury bonds or whatever government bonds that you own will do really well. However, right now we have two risks. We have the recession risk on one side and we have the inflation risk on the other side. And inflation risks… are the worst, or maybe not the worst, but one of the worst for long term treasuries.
So, right now, you can be in cash, you can get actually more than you’re getting in longer term treasuries from a yield standpoint, and you don’t have to worry about either one of those risks. You know it’s going to be okay in money markets. So, it’s hard to remember a better time to, to be in money markets.
Also, I would note that, you know, You also have to kind of think about the real yield and by that I mean, what’s the yield minus what inflation is doing, you know, how much your, um, Your funds are being deteriorated by inflation. And right now the real yields are as high as they’ve been. And I think about a decade, maybe a decade and a half, uh, somewhere in the neighborhood of 2%.
So that’s, that’s pretty attractive right now. So what’s going to make that change. I it’s hard to see what’s going to make that change other than just getting more of an all clear on the economic situation or rates going even higher so that we no longer have this inverted yield curve where. You’re getting a higher yield from the short term cash instrument than you are from a long term bond.
I have seen Ryan, um, and I don’t want to get into, you know, I don’t have time to make TikTok videos and be a day trader like Brad was talking about. And I certainly don’t want our stackers chasing stuff, but we have seen people staying away from bonds that maybe should be in bonds because heck, even look at Ginny Mays.
You know, super, super conservative investment just got destroyed. The bond market. Is it a good time to be in bonds? If you should be in bonds, should I be afraid of going back to bonds now? Well,
it’s funny you mentioned, um, where you said, I’m a little bit older. So I remember like these interest rates aren’t super high.
And when I talk to my clients, especially older ones, where they all remember what their mortgage rate was in the eighties. Right. And you get one of these, like I remember with the finger at 12
percent on a CD.
Yeah. I mean, yeah, that’s what me and my grandmother used to buy those. They said, this is easy.
Investing is easy. What are you talking about? But I think at the same time, up until about 18 months ago for the 15 years that I’ve been an advisor, sitting with clients doing this, we have been dying to try to generate some income off of some more stable investments. And we are finally able to see that.
So you kind of have two things happening with rates in general. One is that if you’re going to buy a house, it’s kind of a tough time to go get a mortgage, relatively speaking, to two, three years ago. But if you’re heading into retirement or you’re a little bit closer to your goal, you can finally make some of that income.
So for a lot of those clients, it can be very compelling when that’s the, the sort of lens. That you’re trying to put on your portfolio as you get a little bit closer to your goal and you want a little bit more stability, but I’m with Tim that, you know, we’re seeing money markets with five, five and a quarter percent on them, and it’s really difficult to, like, look past how compelling that is, but zooming out, you know, And looking at the full picture is the way that we have to see it because trying to time the market for when to get in and out or not is almost impossible to do.
interesting is the huge difference to me, Ryan, between, I think the national average on a, on a savings account right now is like 0. 48 as we record this, I believe. And yet the top 1 percent are paying nearly 5, right? Like there’s this huge delta. between what most people are getting. So to your point, at the very least, and Tim’s point, optimizing your cash, it’s a great time to make sure you’re getting a decent rate, at least.
especially for those, you know, from the financial planning world, we always say, you want to have an emergency fund to make sure there should be an amount of cash that’s part of their, have it work way harder for you than it is right now, sitting in a bank account. So go out there and just make sure you’re trying to find this high interest rate as possible would be advice I would give.
Brad, let’s turn to inflation. Let’s say inflation stays high this year as there’s all this uncertainty. How does that change the game for your investing portfolio, your investing philosophy? I mean,
in several ways. So first of all, I mean, everyone’s feeling the crunch, the amount of income that is going to simple things like groceries has gone up.
Exponentially. And so it’s really stressful. I, and I think we are all feeling it, especially people who are struggling financially prior are feeling it the most, and it can have a huge impact on your ability to invest for the future and make you really, really afraid. And so inflation is very, very real.
And it also, though, It’s more important than ever to invest because, you know, as Tim said, having that money just sitting around not invested, you’re losing a tremendous percentage of that value much more than is the historical average of around like two to 3 percent inflation. So it really does encourage us to invest.
It’s more important than ever to do so. All this
stuff going on. I think what we take from that Brad mostly is it’s more important than ever to make sure your investments beat that inflation number.
Right. And, and it’s hard to do that because you know, Ryan was talking about sort of the frame of reference and it’s real hard to do that with a narrow frame of reference.
And this is how we’re sort of wired. We’re wired to look at what’s happening right now. I mean, because that is what led to our survival as a species. And I always go back to the cave person, hunter gatherer brain. This is, this is how we actually manage money and how we actually invest as individuals and collectively.
And so we’re really wired to pay attention to what’s happening right now and to respond to that because that is why we’re here. Our ancestors who were sitting around in a hunter gatherer tribe and were thinking about the future and not reacting to what happens right now, they usually got picked off by a predator, frankly.
So we are collectively wired to over respond and pay very close attention to the information right in front of us. Which, and again, many people who are new to the market, they don’t have that historical perspective. And so as Ryan said, with our clients who… Who’ve experienced like really high inflation rates.
They’re having a very different emotional experience about the inflation they’re seeing right now for many reasons. One of them has to do with how long that might last, because for many of us, when you’re having this as your first experience, the question is this, Oh my gosh, everything has changed. This is the new reality.
And then the assumption is this reality is going to continue exactly the way it is right now. So there’s there is some of that benefit to having that frame of reference and being older gives you some of that perspective because you actually lived through some of that emotional experience. I wanted
to start there.
Everybody’s wondering still, you know what? And so we talked about all this uncertainty. I want to put that as a framework before we talk about the election. So coming up after the break, that’s what we’re going to do, guys. We’re going to add, Brad, more of that uncertainty to this discussion as we talk about now, let’s throw on top of all that, let’s throw the election year on top of that.
We’ll be right back. And we’re back with Ryan, Tim and Brad. All right, guys, here is what we have now. And, um, this is not the way I’m sure your firms would put it. I’ll put it the way Stacky Benjamins puts it. We’re looking at an election where we have one candidate who is facing lots of legal trouble. May or may not be in the race.
We’re not sure. We have another one who’s just a few years older, but you feel like he’s 120. You have all these other candidates who are out there. Everybody’s throwing up their hands. You’re seeing more and more social media, and we still have 51 weeks to go. It’s only going. To get to be more of a circus.
So let’s do this. Let’s get a little bit of history on this. Tim, I’m sure you guys have looked historically at elections with this, uh, coming year election cycle. What do things look historically when we look back at past elections?
The unfortunate thing is I don’t have a lot of, I don’t have any data that is going to be particularly convincing one way or the other.
If you look at the data, it gives you mixed signals. I would say, I mean, so if you’re the president, if you’re the incumbent president, Obviously, the economy matters. It’s usually the number one issue in an election, so you want to do everything you can to make sure the economy is successful or is strong at that election year, so that certainly is part of it, but the reality is that the president only has so much impact over over what the economy is doing.
One thing that you can say about an election year is that Generally, what the stock market likes the least is uncertainty, you know, as we were talking about. As it turns out, generally, when you end up with the election result being a split, uh, one party holds Congress and one party holds the presidency.
You get gridlock, and that’s actually the best thing for stock markets, because
when you’re analyzing, it’s going to get
done exactly the rules. The rules don’t change. I mean, when our analysts look at a company, they want to be able to say, okay, here’s what we think is going to happen over the next five years.
And if they can have conviction that the rules aren’t going to change. They like that that that makes them more confident. I think that’s really the key is the more uncertainty there is, the less confident you are in about you have about the outlook. So if you’re an analyst recommending a stock, or if you are someone considering investing in the stock market, The more uncertainty there is out there, the less you’re going to be willing to jump in.
So, less uncertainty is good, and you get less uncertainty when the government is split. Wow.
Ryan, any other historical data to, from Fidelity, to throw on that very interesting pile that Tim just gave us?
Yeah, and I, it’s, it’s echoing more of the same, right? And some of the, the data that Again, based on how you feel, you know, as a person for the way that you want the election to go, you tend to feel like, oh, it’ll be kind of better or worse if it doesn’t happen.
And so two really important points, one is a data and then one is echoing something Brad said. When we look at the historical stock market returns with a Republican presidency or a Democratic presidency, They are within striking distance of one another. There’s really no data that supports the differences like this.
Not even enough to really note it necessarily. So 8. 6, you know, in a historical returns with Republicans, 8. 8 for Democrat. I mean, it’s so close. But one of the things that I think is incredibly common and one of the points that Brad made is that what I hear from clients a lot is, Oh, I’m just going to come out and go to cash, let it calm down, let the election finish, and then I’ll get back in.
Sometimes like right when you get that certainty, like Tim was saying, it can be a little choppy and then we have a result and the market kind of goes back up. You could miss some of the best days in that year. And we all again know the data between missing, you know, the five best days in any given year is more detrimental than staying in the whole time, you know, and bailing early.
And so, um, or the reverse. So it’s more advantageous to stay in, you know, and so I think it’s. Just really common to get really wrapped up in all of it. But, you know, we kind of wish we could say, Oh, historically, this is really more helpful, and we can avoid it. It’s not as impactful as we think it would be on the stock market or even the economy.
Let’s go specifically, Brad, to this year. I’ll throw a stat in here too, to add to Tim’s and Ryan’s 20 of the past 24 election years, presidential election years, the stock market has been positive 20 of the past 24. We talked about all this uncertainty, Brad, before the break. That tells me what Ryan says.
It’s more dangerous than ever to wait on the sidelines.
Yeah, I totally agree with that. And I was going to talk a little bit about the psychology of elections because yeah, it’s, um, so first of all, most Americans are moderates. Like I’m not, I’m not trying to cause a fight. I mean, this is just statistically correct.
Elections create really intense emotions, really intense emotions because to get through the primaries, to become a candidate nowadays, people have to take really extreme positions on either side. Really. I think it’s really helpful to know that most people. are going to end up voting for their least worst candidate.
Okay, so it’s like most people don’t love one candidate or the other. This is, and by the way, this has been borne out by studies. So we end up getting a real twisted view of our neighbors during an election cycle. It’s one of the things I hate about it most, and especially social media, which just sort of pummels one, perhaps one argument over the others.
You’re looking on there and you’re like, Oh my gosh, I’m surrounded by people who have these radical opinions that just don’t, here I am. I’m, I’m sort of more down the middle, which most people are. And they, they tend to be on one side or the other, but it’s kind of down the middle. So I think it’s really important to just understand that we have a real false sense of what’s happening in our country.
In the midst of an election, because that’s the only way for a candidate to actually make it through the battle to become the candidate is they have to take more and more extreme positions that really don’t represent what most of us feel and most of our neighbors feel. So I think that’s an important thing to remember to kind of calm down some of that anxiety.
It is so frustrating. We took a social media course, Brad, through MIT, and it was so frustrating to see that the way to break through the noise on social media is to say something really radical because then people will jump all over it. And for reasons that are only profit based, uh, pick the social media platform of your choice.
They will show more people because they see a fight going on. That leads us, I think, Brad, to exactly what you’re talking about.
Right. And so when I, when I do stir the pot, Joe, um, which I’ll admit I do do, I definitely noticed that myself. And so you see that in personal finance too, like how do you, how do you become famous in personal finance?
Well, you say something that’s really radical that goes against what people traditionally think. It’s true. And so just being aware to that, it’s, it’s really important to be aware of how we’re sort of manipulated by social media. I think it’s really important to be aware of that for many, many reasons in terms of our spending behaviors, our investing behaviors, and definitely during an election cycle, like every time you see a post on social media that has gone viral, you need to be thinking in the back of your head, like, How is, how did this become viral?
And it’s usually because you’re going at somebody’s sense of an emotional experience for people that’s highly controversial, that’s often insulting. Um, but it’s just full of emotion and, and that’s really what drives views.
Tim, both Brad and Ryan spend most of their time with clients and with individuals.
I get the feeling, I don’t know this, but that you spend a lot of time with your fund managers, with the people that are making these decisions on a professional level. The thing I’ve heard during my whole career is I want to invest more like the pros do. Tell me how the pros at T. Rowe Price are treating this next 12 month election cycle.
I can tell you that the election result is not at the forefront of everyone’s mind, the Federal Reserve and what they’re going to do is at the forefront of everyone’s mind. You’re sending Jerome
Powell holiday gifts.
Exactly. He’s, you know, I think there’s also, there tends to be this view out there that the Fed acts.
Somewhat independently, that’s not a view held by, um, professional investors, but there’s a bit of a conspiracy theory group out there that says, Oh, the Fed just does what it wants to do. The Fed does what inflation tells it to do. And so that’s going to be really the big factor going forward is inflation and then what that means that the Fed does.
If inflation, comes down faster than expected. That will be good for the economy. As far as the election is concerned, I think the number one issue that we’re thinking about is that you’ve got the Trump tax cuts that will be up for renewal January 1st, 2026, I believe is when that happens. So this next president will determine if they get renewed or if they do not.
That’s probably the biggest issue. There’s some other minor issues there that for some companies are bigger than others. But that’s certainly a big issue. Another issue that I would say the professional investors really are paying attention to is tech regulation. When will we actually have biting tech regulation that impacts these companies that are at this point, the drivers of the stock market?
We’ve heard a lot of rhetoric every single election cycle about that. and we have yet to see any, anything with teeth. So that’s what we’ll also be paying attention to, to see if, if it looks like there’s any new, new regulation that could come from one candidate or the other. Ryan, you’re nodding
Yeah, and I think there’s a lot of questions about that and also about the impacts of AI on all of this. And again, even the regulation that will come from that. And I think it’s really important to understand how when we think about the professionals and the asset allocation team, at least at Fidelity, we I’ve coined a term called now casting based on what we tried to structure, how we would manage portfolios, how changes should be made, how clients should think about it because we publish it for everybody to go and find for where are we right now in the business cycle.
And when we know where we are, then you can know historically and statistically speaking, what tends to happen in this stage of the business cycle. And so when we think about investing like the pros, like what Brad is saying, I’ve seen this kind of trend out there where it’s like, you should do this yourself.
You should be able to, to, you know, tackle all this. You should be able to be those day traders like, you know, Brad was referencing before. And I think most people, because of emotion and maybe because of lack of knowledge, but definitely because of lack of time. tend to not be as strong in this area. And so I’m, it’s starting to be common where people say, I know they say I should, but I really don’t know how.
And so I really maybe need some help, both from a financial planning perspective, like what I do, or from a management perspective. So I’m, I’m hearing that too of like, whoa, time for some help. And I’m also going back to what you said before, Joe, about maybe this time is different. We hear that a lot. What is different is our clients lives and, you know, they’re closer to their goals.
They’re trying to accomplish. Maybe their retirement is a major goal for a lot of people or they’re saving for a house or they’re saving for college or whatever it is. You know, they’re older, they maybe are closer to the goal. And so their lives are different. And now they’re saying, Oh, wait a minute.
This might be more impactful to me now than it was 10 years ago or 15 years ago. So it’s economic data that we can lean on, but the emotion for what Brad’s talking about is just so important right now. And so nodding my head with a lot of what these guys are saying, a lot of good reasons.
Well, Brad, I asked him and Ryan the outward approach, but this is why I was so excited that you were joining us today is, is I really wanted to ask you this question, how much of it is looking at what the pros are doing and try to emulate them and how much of it behaviorally is looking at you and where historically you’ve been your own worst enemy in the past?
Well, I think it’s an interesting thing to think about how well the pros are doing, because I mean, I know we have some excellent pros here, but a lot of times the pros are making bad calls, you know, um, and a lot of times it’s, it’s really difficult to beat the market as a whole. And one of the challenges is when we think that it’s a logical experience, you know, and this is where we actually get into, into big trouble, I think, is where we think that.
The market is going to respond in some sort of rational way to some, some actual hard data. And my perspective is that human beings are absolutely insane when it comes to money and investing just on a core level. And the markets are full of a bunch of crazy and insane human beings. And so quite often many of us are left and Ryan talked about historical.
Evidence. And it’s really important. And so what that will tell you is that in this current situation, there’s an 80 percent probability of a five to 6 percent gain in the next six months. I mean, that’s, that’s what we know, but those types of probabilities. They don’t really bear out, um, in terms of predicting the future.
So we all like to think we can predict the future, but we’re actually terrible at it. And, and this is what I usually see proceed horrific individual decisions around investing. It’s two, two statements. And so if this is running through your head during this period of time, it’s time for you to actually do nothing.
I think this is do nothing. Seek some expert advice, but. This time it’s different. This time it’s different. That precedes terrible decisions in a bubble where everyone’s really excited. This time it’s different, but this time it’s different. And it also precedes the terrible decisions in terms of selling at the bottom.
And the other one I hear is. Everything has changed. Everything has changed. You know, this time it’s different and everything has changed. No, it’s no different this time. And actually nothing has changed. I mean, that’s what you need to say to yourself, I think. Well,
and even if it is slightly different, Brad, I mean, I know you guys have all seen the Ibbotson charts and for people that haven’t, just do a quick Google search, but I love the Ibbotson chart, which shows the markets since 1920 on up.
And I love the one specifically, Brad, that shows all the downturns and why this time was different. And why you shouldn’t invest now. And yet the markets continue to race on. And the only person who got burned by not moving at that point was you.
Right. Yeah. And there’s always something slightly different, you know, and it’s the black swan nobody saw coming.
So that’s the thing that’s never different. It’s always the thing nobody saw coming, right? Um, and that’s the thing that’s going to continue to happen because everything else is baked in, like we’re all, we’re all anticipating and trying to plan for everything we already know that’s happened, but there’ll be a new twist on it.
And so I think it’s really helpful to just keep in mind that most of what’s happening in the market is really based on human emotion and human psychology. And that’s why we’re all looking around to see, are we, are we running? Which way are we running? And so when things are sort of stalled out, that’s kind of what’s
Which brings me back, Tim. We started this whole conversation with, you know, what’s the economic outlook? What’s the forecast? And certainly even your pros, I don’t think, are investing based on just the economic forecast. You said we’re more worried about where interest rates are headed and keeping your head above water.
sure. It’s. As I said before, the president doesn’t have that huge of an impact on what happens with the economy. There are exogenous shocks that have a lot to do with that. And right now, it’s absolutely interest rates are the number one thing. As I mentioned at the beginning, We have the conditions for an economic recovery in place right now.
There’s actually a lot of good things going on in the economy. The problem is, if the Fed lets it continue to be really strong, then you get inflation back. The inflation problem won’t go away. That’s the big determinant right now. How quickly can we get to a place where the Fed can say, Okay, we don’t have to worry about inflation anymore.
We’re at the point where we can let the economy heat up without it creating an inflation problem. So that is number one on, on everyone’s mind right now. When does that happen? I would say another thing that is also really interesting to look at is the employment side of things. Employment reports are really important.
They always drive the stock market a lot. And right now we have one of the strongest job markets we’ve ever seen, despite the fact that we went through, you know, an economic downturn, we have one of the strongest job markets that we’ve ever seen. Everyone kind of looks at that and says, that should be great.
But what I would caution about that is generally when, when unemployment rises a little bit. It quickly rises a lot. So that is something you really have to keep your eye on. And that’s another one that we’re looking at. As soon as you start to see the labor market really start to weaken a little bit, you have to be worried about the fact that it could soon weaken a lot.
And individual investors. Certainly, Tim, you got, you’re looking at individual investors, but I’m speaking to you on this panel from just the professional money manager side for big groups of people. There’s that. I want to focus more on one on one Ryan with you. And from your client’s perspective, Tim’s worried about interest rates and about employment.
If you’re talking to your client, what’s the number one thing your client should be worried about this
coming year? Well, I think it’s always what is all of this mean for me is really the question, right? And the number one thing that I guess I’m going to say what they should be thinking about is probably the way that I want to turn this around is.
We really want to make sure the conversations I’m having now are making sure that because we’re in this, you know, late stage of the business cycle, we don’t know what next year is really going to mean ever, right? It’s always gonna, we don’t know, it’s gonna be good, bad, up, down, sideways. At the end of the day, it’s always a little bit of guesswork.
We want to make sure that your financial plan is sound. And that you are in the allocation, you’re going to ride the next wave through and making sure that it’s always in line with the goals that you’re hoping to accomplish. So right now is a really good time to either revisit your financial plan. If you don’t have one, go create one.
That’s what I do every day, you know, is help clients do this. And so making sure that you in moments like this, or when it gets noisy. Whether it’s next year or next week, whenever there’s any sort of noise, whether it’s globally or, you know, domestically, zoom out and look at the broader plan. It’s what pulls us away.
Like Brad was saying of, Oh my gosh, I’ve got to react to going on as what’s going on right now, as opposed to let me zoom out and say, what are my longer term goals? What am I really hoping to accomplish? Who are the people that I really care about? And is what I’m doing now in the way that I’m invested now or saving now supporting those goals?
Has it really changed? Or is it just noise? And so that’s what I would tell everyone to go and look at right now is look at the broader plan, revisit it, talk to someone if you want help, look at the numbers that you’ve built for yourself and just make sure that you can stay there and make sure you’ve got something in place where you can have peace of mind the whole time without the All going to cash and sitting and doing nothing.
So it’s, it’s fine. This, you know, happy middle within that plan.
Well, and I think what gives you that peace of mind and, and I think get the nail on the head, I feel like, and, and Brad, this is an overused analogy, but the flight plan, right? We always talk about landing the plane or taking off or making little adjustments, but seriously, knowing what the flight plan is.
Ahead of time, I think gives you a lot more peace of mind. So you can do exactly what you talked about a few minutes ago, which is do nothing.
Right. And, and, you know, from Tim’s perspective and the economy at large, like the job reports really does matter, but the only thing that matters to you is your job report.
You know, so how steady is your income? How, um, do you need to? have an alternative source of income? Do you need a side hustle? How is your stability in your job? How is your plan working for you? And really what I see as Ryan was talking, it’s like We can get really emotional about the broader economic news, which, by the way, we have zero ability to control, which just creates more anxiety.
I can do nothing about that. And part of the planning process that Ryan was describing is actually hitting a different part of your brain. So it’s, it’s the emotional part of our brain that leads us to do terrible things. What Ryan was doing is encouraging people to flip on their prefrontal cortex, you know, so that part of the brain that is responsible for planning and asking yourself, well, how does this really impact me?
How does this impact my goals? Let’s say the market does go down 10 or 15 percent next year. Did I already bake that into my plan as a risk tolerance that I’m willing to accept along the way? And I think it’s a great time to revisit some of those questions. It’s a terrible time to make big decisions. Um, all in, all out.
These are the, these are the ways that people destroy themselves when it comes to money and focus more on what it really does, what it matters to you. What are your top goals? How is this going to impact your ability to achieve it? You didn’t make any slight tweaks because your risk tolerance has now changed.
So you just, you thought you were a bit, you know, a swashbuckling risk taker until the last crash. And then you, you felt like you sold and you probably sold some, you probably shouldn’t have, you sold at the bottom and then it bounced back up. By the way, this is the way everyone invests through that sort of experience.
So if, if you noticed, you just went through that, to me, that’s, you know, risk tolerance. It’s an abstract concept that studies show is a terrible predictor of your actual behavior. Um, I mean we’ve done studies at, I used to be at Kansas State, we did studies where the gender of the person asking you the risk tolerance questionnaire changed, and all of a sudden your risk tolerance changed.
Wow. The real test of risk tolerance is risk composure, which is essentially, what did you do the last time the market crashed? That is much more, um, valid information about what you’re going to do in the future. One of the great opportunities in going through a period where the market has crashed is it’s a test of your actual risk tolerance, your true risk composure.
And so if you’ve learned a lesson through that, now’s a great time to set yourself up to not have to experience that and perhaps make a bad decision when the market crashes. I
love this idea and I think it’s so helpful to think about just working, building a machine and working on the machine because I find when I work on the machine versus reacting to all this noise that we talked about today, I do so much better and I feel like Tim, from your perspective, the pros that you deal with every day have a machine that they’re working on and Ryan, you talked about this with building the financial plan and, and Brad, with all the emotional stuff that you brought us to the table.
Uh, fascinating how that gets in the way. And if we just, yeah. Focus on the machine and our controllables. To your point, we do so much better. I think that was so helpful for all of our stackers. You guys, I know all have resources that our stackers can go to if they want more help, Tim, let’s start with you.
Thanks so much for joining us. Tell us, uh, people go to TRO price. com. I would think, and there’s a bunch of resources there for investors.
Exactly right. Yeah, you go to t ro price. com. You can look for an insights page that has a lot of videos and some materials that you can download and read. Some of them may have been written by me.
I might be in some of these videos, so I highly recommend it. And also certainly you can invest in our funds on that website as well.
Timmy, show all your family members your videos, like bragged and humble bragged to people.
Something like that. The good ones I do.
The good ones. Yeah, that’s right. Uh, and it was funny as we all get fascinated because we’re, we’re money geeks, like, Hey, look at how fun this is.
And the family thinks it’s not quite as fun as we do, but anyway.
That is 100
percent true. Ryan, thank you so much for joining us. You guys at Fidelity. I know you also have a bunch of resources for people and how can they find you if they want more help?
Yeah, absolutely. So it’s the same, you know, Fidelity.
com. And there’s lots of information. I always call it an ocean of information that most people just like barely dip their toe into so you can really find everything you need. You can go to our planning and guidance center and begin to build a plan. You can go to find an advisor. com and start to find the people, the me’s across the country, right?
That can help and will help you set up a plan and it’s totally free. Just come and do it. Uh, it doesn’t cost you anything, but I also think that it’s. helpful to get some of those more resources. Like Tim, I do a lot of these things and all, you know, a lot of videos and I’ll say, my son thinks it’s cool.
Cause he thinks it’s famous because I’m famous. Cause two people know me. That’s his definition of it. I think it’s now like these three. So I’m going to tell him it’s three now, according to this podcast here is he’ll be very excited. Well, we got
all of us and we’ve got mom upstairs. So we got mom too.
He’s going to be very excited.
Joe’s mom knows who you are. By the way, if people are walking the dog or you’re, you’re commuting for the people that still commute, uh, we’ve got you covered on all these links. They’ll be at stackybenjamins. com on our show notes page for today’s show. Just scroll to the bottom of the main page and you’ll find our show notes page.
Brad, so glad you could join us, my friend. Great seeing you again. If people want to get a hold of you and your firm, uh, how do they find you?
Yeah, so I’m at Dr. Brad Klontz on most social media, and I wasn’t prepared for you to ask me about resources, but I happen to be holding,
uh, one of my recent books.
It just happened to be in your hand this whole
time. It’s so bizarre. What are the odds? And it’s called Money Mammoth, and I really do talk about… The prehistoric brain in this and how that’s driving all of our financial decisions and one of the key elements I think that is so important is to never trust your instincts when it comes to investing decisions because we are wired To survive in that hunter gatherer tribe where threats are abound and the person who stands still When the tribe is running died and so all those people didn’t pass their genes on to us.
So just understanding that When things are really exciting, when things are really scared, we are going to have an impulse to run. And statistically speaking, we run in the wrong direction. I mean, that’s just the bottom line when it comes to investing. What worked for us when we had a predator chasing us worked perfectly is the exact opposite thing that we should be doing when it comes to investing.
And that is things are really exciting. You know, you sit on the sideline, the market has taken off. Now I’m going to invest. That’s called buying high, right? The market has crashed. Oh no, things are looking terrible. I’m going to sell. Now you’re selling low. And this is how we’re naturally wired to do investing.
So never trust your instincts.
Brad, Tim, Ryan, thank you so much for helping our stackers. I think you guys were great mentors for all of us today. Happy election year and happy, happy watching this circus unfold over the next 12 months.
Thanks for listening to and sharing this special episode of the Stacking Benjamins Show.
Join us Wednesday for our regularly scheduled show where we’re learning to stop chasing shortcuts and bet on yourself with BiggerPockets own David Green.