SPEAKER_01 0:06

All right, for today's podcast, I thought we would take a trip down memory lane a little bit. And let's go back. Uh this where this came to me from or where I got this from was thinking about, as we talked about in the last podcast, about IPOs and what IPOs might do and what they might not do. And look, it's all it all falls under prediction. And um I really like to mark events, mark time, and go back and see what people said and what happened. And it's it's not to prove anybody wrong. It's not to say anybody's not intelligent. I mean, these people are smart, you know, they they work in finance, they they follow a certain stock or they they follow a certain sector. So it I'm not trying to make that point. What I am trying to do is that um to point out, to educate, to keep centering you, my client, on the fact that nobody can do this, nobody can predict the future. The markets reprice and move a lot quicker than any fundamentals do, whether it's a company or whether it's a market. So for us to be able to look at events and then make some kind of a short-term prediction, meaning, you know, six months, a year, stock is going to do XYZ or some percentage, or you should do this, or you should do that, you should move to cash, you should not. I mean, it really bore it really borders on the silly. Um, but rather than just, you know, think about that, what I like to do is to say, well, we're living through things all the time, and we can go back and we can we we can capture those things and then go see what happened. So what I did was I went back and it looked a year, um, a year past, June of 2025. And what we were talking about on this podcast was actually what happened in April of 2025. Now, if you remember, April of 2025 was Liberation Day. It was the it was the tariff event where we had major, major downside volatility, seemingly out of nowhere. Um, it wasn't really out of nowhere if you if you do what I do all day long, which is just follow the the politics and the markets and and how these things are all kind of intertwined. Um, the new administration had told us that these tariffs were coming. Um, so it really wasn't out of nowhere, but when they did drop, when they did hit in A, I think it was April 2nd of 2025, we had significant downside uh drops. And and here's what some of the major predictions were at the time. Uh again, this was in April of 2025. According to Politico, um, recession fears have now surged. Economists and strategists are warning that tariffs uh uh with other countries retaliating, that the U.S. is going to experience two consecutive quarters of negative GDP growth. That's very highlight, highly likely. That's according to Politico back then. Um stagflation, we actually did a podcast on that because that term was coming up over and over and over as a result of the tariffs. Uh, this is again from Politico in April of 2025. Uh, they were saying the concern is the tariffs would simultaneously raise prices while also slowing economic growth. This could very well lead to a difficult environment similar to the 1970s. And that was a fear that that many outlets used because you know, anybody who's been around for any length of time, if you're in your 50s, 60s, or or older, of course, you remember the misery index, you remember the 70s and high inflation and and gas rationing and all of these things. Uh, and so the 70s is is used a lot to get, I believe, to get clicks because it gets a negative kind of connotation and people want to tune in, like, well, what is that? What are we gonna what are we gonna be hit with? Um, the Wall Street Journal, uh the Wall Street Journal on April 3rd, they were reporting, this is obviously accurate, that the Dow fell 1700 points, SP declined about 5%, NASDAQ dropped about six, three trillion dollars of market value was erased that day. And the Wall Street Journal was reporting that their experts are saying this is just the beginning of a prolonged downturn. Now, define prolonged. I don't know what they meant by that, but that's the word that they used. Uh, and then finally, the Washington Post um economist modeling worst case scenario involving one, unemployment rising above 7%, two, stock prices falling another 20 to 25 percent, and three, millions of job losses if tariffs become permanent and retaliation uh intensifies. So these are these are scary things. And this is what we were dealing with in April. And I remember saying then is look, just hit the pause button. Nobody knows the future. We don't know how this is all gonna play out. We certainly don't know what the administration is going to do or what they're not gonna do. We just don't know. There's no reason to be selling into this with everybody else who's jumping ship. Um, the other thing that happened was uh, and I I don't I remember this really, this is more anecdotal, but I I just we we did a podcast on this. If you go back and listen uh in April of last year, actually, what I did is I came out in June and I I re-recorded and I said, look, none of these things happen. What I'm referring to is the experts were starting to say that, look, we're gonna have shortages. Um they were kind of liking it to March, uh, you know, March, April, May, June, July of 2020 when we didn't have toilet paper, we didn't have essentials that were the this the shelves were just not stocked. And what they were reporting was a massive decrease in shipping into the LA uh Los Angeles ports. I mean, I remember this as clear as day. You might as well. If not, just go Google it, it'll pop right up. And that was fearful because we had quote unquote just lived through that. I mean, it was five years prior, but it just feels like a blink of an eye, you know, that we went through that COVID, the pandemic era. We were, we people were going out and they were shopping for food, you know, and and basic necessities because they were afraid that they weren't gonna be able to get it. And we were being told the again, the experts were saying, hey, this is very likely to happen again because with tariffs, you're gonna have a shutdown of shipping. They were reporting, they were showing scary maps of the world and like dots across the ocean, and those dots were disappearing and ships weren't coming. And I remember saying to the time on the podcast, saying to you uh on the podcast, I don't know. I mean, I'm a I'm not an economist. Maybe that does happen. Um, but I marked it and we went back in June, uh, five, six, seven weeks later, we looked, none of it happened. We didn't run out of anything. We, you know, we I I reported from being in Naples, Florida, we were on vacation and we were shopping at Target and the grocery stores, and shelves were full. You know, Christmas time rolls around at the end of last year, shelves were full. You could get it none of it materialized. Now, this is not a comment on whether tariffs are good or not, right? It's not a it's not a comment on an administration's uh economic policy, good or bad, uh, Republican or Democrat. It I never really comment on that. What I'm showing is that the fear sells, right? That the if it if it bleeds, it leads, still works in media. If you put out a bad headline, people click on it. And that's what the media wants, is they want that that attention. They're paying for attention. Um, now we're we're well over a year into this now, so I want to give you some numbers. Because on that iPad here that I had in my hand uh a second ago, we were reporting uh all the death, doom, and destruction that could you know happen, whether whether it was 7% unemployment or stocks dropping another 20 to 25%, etc. Here's some numbers for you. This is all directly from Yahoo Finance, in no particular order. Uh, this is a rolling one year. Okay, so this is June of last year through June of this year, uh, end of June last year through end of June this year. The SP 500 is up 24%. I'm rounding. That seems pretty good. So look, the historical average of the SP is somewhere between 9 and 12%, depending on the time period that you're um that you're measuring. So if we go back to 1926 through 2026, you know, it's a long-term rate of returns about 10. If you go over the last five years, it's it's much higher. Well, the last year it's oh it's 24%. That's one market. As you know, if you're a client of mine, that's just one market of several that we follow. So here's another market. If we look at US small cap value, that market is up almost 32% since the end of last June through the end of this June. 32%. SP, I think, was 24. That's 32. Um, international small value. So again, value being distressed companies. Uh let's see here. Um, oh, I just read that one. So that was up 32%. Now let's look at um how about the Russell 2000? So this is just this is just US small growth companies. That's up 41%. So you've got you know, US large up 24%, you've got international small value, which is distressed, which is up 30 some odd percent. And then finally we've got Russell 2000, which measures US growth companies up over 40%. Those are not, those numbers are not sustainable, by the way, for long periods of time. There's nobody that thinks we're gonna get 40% in US small growth linearly for a long period of time. Science and math tells us these things need to move back towards their averages, right? So if we just look at the SP 500, if the average on that is let's just call it 10% for ease of numbers today, because the last hundred years is roughly 10%, and last year it's up 24%, and the last five years maybe it's up 25-30%. Um, well, then that tells us that that market has to come back down, right? We talk about valuations a lot. Oh, things are overvalued, they're undervalued. Well, if that's true, if this is running hot, it doesn't need to have a crash to correct. And I feel like right now that's what's out in the press a lot. You know, it's it's hey, it things are running hot, you we're looking for there could be a crash, oh, the tariffs are here, 7% unemployment, shelves are empty, economic collapse. Maybe, maybe something like that does happen that we can't predict and that we don't know that is out there. But the reality is we don't know. So rather than worry about it, just know that look, if things are gonna come back towards its averages over long periods of time, well, what that could look like is extended lower returns. The SP doesn't get 20%, it gets only 5% for an extended period of time, or maybe it does have a big pullback. The point being is that we can never predict it, we never will predict it, and we're gonna consistently point out other people who try to predict it. And again, I'm not trying to point them out as bad, wrong, nefarious, silly, any of it. I just think that it doesn't make any sense to put much stock in it because there's there's no way to predict the future. If we could predict the future, I wouldn't tell you. You know, we would I've said it many times, you wouldn't even know me. I'd have some big island somewhere and we would just uh have an amazing time. We'd have all the money. Nobody can predict the future, least of all financial advisors. So let's let's temper any kind of, oh, this stock is going to be amazing, whether it's an IPO or not, uh, or this industry, AI is going to be amazing. Or the flip side is, oh no, this is gonna be an abject failure and you got to get out now. Nobody knows on either point. And we're just gonna keep going back in time. And now that we've got two, three years of podcasts, we can go back and we can show you like this is what we were saying at the time, and then here's how that played out. That's it for this short podcast this week. We'll see you in a couple more weeks.

SPEAKER_00 11:22

Joseph Delisi is a registered representative and financial advisor of Park Avenue Securities, LLC, OSJ 5280 Carol Canyon Road, 300 San Diego, California, 92121-619-6486400. Securities, products, and advisory services offered through PAS, member FINRA, SIPC, financial representative of the Guardian Life Insurance Company of America, Guardian, New York, New York. PAS is a wholly owned subsidiary of Guardian. Westpac Wealth Partners LLC is not an affiliate or subsidiary of PAS or Guardian. Insurance products offered through Westpac Wealth Partners and Insurance Services, LLC, a DBA of Westpac Wealth Partners LLC. CA Insurance License No. D34103. This podcast is for informational purposes only and is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Guardian and its subsidiaries do not issue or advice with regard to mortgages, property and casualty insurance, and or car insurance. Consult your tax, legal, or accounting professional regarding your individual situation. All investments and investment strategies contain risk and may lose value. Diversification does not guarantee profit or protect against market loss. Equities may decline in value due to both real and perceived general market, economic, and industry conditions. Investing in securities of smaller companies tends to be more volatile and less liquid than securities of larger companies. Investing in the bond market is subject to certain risks, including market interest rate, issue, or credit, and inflation risk. This material is intended for general use. By providing this content, Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity. Past performance is not a guarantee of future results. Indices are unmanaged and one cannot invest directly in an index. 9902 73.1. Expires 628.