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Want to learn more about how annuities can help reduce the risk of outliving your savings in retirement by creating a reliable income stream? Let’s connect today. For disclosure information, see thrivent.com/social
Want to learn more about how annuities can help reduce the risk of outliving your savings in retirement by creating a reliable income stream? Let’s connect today. For disclosure information, see thrivent.com/social
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Day 17: 🧠 Understanding the Psychology of Inflationary Economics 🚨📚 Financial Literacy Essentials: Understanding Inflation and Interest Rates in 18 Days 📚🚨 (A Series by Tyler J. Fall, MSF🎓👔) ————————————————————————————————— The mind can be a trickster, but it can also simply be wishing for a break every once in a while. How does the economic burden of high Inflation affect our psyches? 🧠The Mind Under Financial Pressure😣 Inflation mentally affects our Confidence. In the moment, we see the diminishing worth of our money, and concerns of future decreases in buying power can creep in. These effects can have serious mental health implications, including chronic anxiety, exhaustion, strained relationships, and refusal to access services that could potentially help! 😶Adaptive Coping Strategies?🧐 Consumers may notice inflation's effects consciously—but what about subconsciously? Who has grown more unsettled with their current salary? Gotten slight road rage after having to put that item back on the shelf? You're not alone. Inflation-induced hardships, and their creation of financial stress, uncertainty, and powerlessness in managing finances, can lead to feelings of hopelessness and emotional turmoil 😨Fear: A Self-Fulfilling Prophecy⌚ Fearing the inability to pay for basic necessities (e.g. food, housing, & healthcare) can understandably create immense insecurity & worry for individuals & families regarding their financial security. Yet, attempts to front-run these Inflationary impacts can manifest a self-fulfilling prophecy—spending quickly to beat rising prices can fuel Inflation. The power of thought can form our reality! 🥱Where are the Fun & Games?🎳 Cutting back on leisure & self-care activities to ensure the affordability of the essentials? Who could blame you for feeling as if the days don’t seem as sunny anymore? Resenting those with a little more financial wiggle room, or simply adopting an isolated feeling of dissatisfaction, is not a way that anyone wants to live—especially after working their hardest to attain, and retain, their quality of life We've all experienced moments when having someone in our corner could have made a significant difference. While the goal is to improve your financial situation, any advisor should also embody the role of an advocate—partnering with those who genuinely have your best interests at heart is invaluable Do You Have any Concerns? I’d love to talk them through 📲🤝 Schedule an Initial Consultation, today. Visit: https://linkedin.com/in/tylerfall for additional financial information ————————————————————————————————— (This post is for informational purposes only and is not intended as investment advice. Investment decisions should be made based on individual financial objectives and risk tolerance) Disclosures: thrivent.com/social
Day 17: 🧠 Understanding the Psychology of Inflationary Economics 🚨📚 Financial Literacy Essentials: Understanding Inflation and Interest Rates in 18 Days 📚🚨 (A Series by Tyler J. Fall, MSF🎓👔) ————————————————————————————————— The mind can be a trickster, but it can also simply be wishing for a break every once in a while. How does the economic burden of high Inflation affect our psyches? 🧠The Mind Under Financial Pressure😣 Inflation mentally affects our Confidence. In the moment, we see the diminishing worth of our money, and concerns of future decreases in buying power can creep in. These effects can have serious mental health implications, including chronic anxiety, exhaustion, strained relationships, and refusal to access services that could potentially help! 😶Adaptive Coping Strategies?🧐 Consumers may notice inflation's effects consciously—but what about subconsciously? Who has grown more unsettled with their current salary? Gotten slight road rage after having to put that item back on the shelf? You're not alone. Inflation-induced hardships, and their creation of financial stress, uncertainty, and powerlessness in managing finances, can lead to feelings of hopelessness and emotional turmoil 😨Fear: A Self-Fulfilling Prophecy⌚ Fearing the inability to pay for basic necessities (e.g. food, housing, & healthcare) can understandably create immense insecurity & worry for individuals & families regarding their financial security. Yet, attempts to front-run these Inflationary impacts can manifest a self-fulfilling prophecy—spending quickly to beat rising prices can fuel Inflation. The power of thought can form our reality! 🥱Where are the Fun & Games?🎳 Cutting back on leisure & self-care activities to ensure the affordability of the essentials? Who could blame you for feeling as if the days don’t seem as sunny anymore? Resenting those with a little more financial wiggle room, or simply adopting an isolated feeling of dissatisfaction, is not a way that anyone wants to live—especially after working their hardest to attain, and retain, their quality of life We've all experienced moments when having someone in our corner could have made a significant difference. While the goal is to improve your financial situation, any advisor should also embody the role of an advocate—partnering with those who genuinely have your best interests at heart is invaluable Do You Have any Concerns? I’d love to talk them through 📲🤝 Schedule an Initial Consultation, today. Visit: https://linkedin.com/in/tylerfall for additional financial information ————————————————————————————————— (This post is for informational purposes only and is not intended as investment advice. Investment decisions should be made based on individual financial objectives and risk tolerance) Disclosures: thrivent.com/social
Are you prepared for the tax impact of taking money out of your IRA and other tax-deferred accounts? Let’s connect to make sure you’re doing all you can to maximize your retirement income and reduce your tax burden. See thrivent.com/social for important disclosures.
Are you prepared for the tax impact of taking money out of your IRA and other tax-deferred accounts? Let’s connect to make sure you’re doing all you can to maximize your retirement income and reduce your tax burden. See thrivent.com/social for important disclosures.
Day 16: 🌐Globalization Patterns & their Inflationary Effects 🚨📚 Financial Literacy Essentials: Understanding Inflation & Interest Rates in 18 Days📚🚨 (A Series by Tyler J. Fall, MSF🎓👔) ---------------------------------------------------------------- As we continue to improve our financial literacy, today we focus on the interplay between Globalization and Inflation, key factors shaping the Modern World Economy—and the wallets of U.S. consumers. 💡Understanding Global Economic Patterns💱 For starters, Globalization is how businesses, economies, and cultures have become interconnected and interdependent through cross-border trade, investment, technology, & migration. Thus, it Affects: How/Where Goods are Produced, the Stability of Currencies, & Businesses’ Abilities to Adapt to Global Economic Shifts 1️⃣ Trade and Production Costs: The Global Market includes both Deflationary (available cheaper imported goods) & Inflationary (supply constraints from increased global demand) Implications 2️⃣ Labor Market Dynamics: The Global Labor Market may Decrease Costs thru Labor & Materials Outsourcing—however, any Global Living Standards Improvement can Increase Wages & Costs—fueling Inflation, & Limiting this exploitative practice in time 3️⃣ Monetary Policy Spillovers: Decisions by Major Central Banks have Global Economic Impacts (e.g. U.S. Federal Reserve rate changes), including Domestic Inflation and Global Capital Flow via Currency Exchange Rates & Domestic Policies 4️⃣ Commodity Price Volatility: Commodities (e.g. Gold, Oil, etc.) are Shared Globally, thus their Sensitivity to Global Supply-Demand Shifts is higher—for both Inflationary and Deflationary Pressures 5️⃣ Financial Market Integration: Free-Flowing (Cross-Border) Capital can Inflate Asset Prices due to Foreign Direct Investment and Intl. Trade (as the Goal is to seek Optimal Investment Returns)—eventually Trickling Down to the Domestic Economy ---------------------------------------------------------------- 📓What this Means for Us💲 🔛Currently: Global Economic Policies impact Domestic Pricing, and are Directly Proportional to the Domestic Economy’s a) Global Reliance, and b) Global Influence. Rising prices in everyday life—from Fuel to Food—contain Global Economic Variables (e.g. the Market’s reaction to Russian Missile reportedly striking Poland in 2022) 🔜Future: Knowledge of Global Trends & Patterns, and their Impacts on Domestic Valuation & Pricing, allow for Improved Financial Planning by Anticipating and Mitigating Potentially Probable Risks (e.g. the USD’s Relevance in Global Trade & it’s Probability of Staying the Global Currency Front-Runner) ---------------------------------------------------------------- 🧑🤝🧑What We Can Do🎬 1️⃣Assess your Investment Exposure on an Asset-Class & Geographical Basis 2️⃣Consider Investments in Sectors & Companies that have Pricing Power (ability to Offset Cost-Ratio Shifts) 3️⃣Explore Real Assets (e.g. Real Estate & Inflation-Protected Securities [TIPS]) 4️⃣Assess the Role of Currency Hedging in Managing Global Risk-Exposure 5️⃣Ensure you Work with an Advisor who Understands the Importance of Global Economics ---------------------------------------------------------------- A well-structured Investment Strategy & Financial Plan reflects Global Economic Realities, preparing You for any Volatility in Global Economic Markets ---------------------------------------------------------------- Schedule a Free-Consultation Today (home page) Follow me on Linkedin for more Financial Information (home page) ---------------------------------------------------------------- (This post is for informational purposes only and is not intended as investment advice. Investment decisions should be made based on individual financial objectives and risk tolerance) Disclosures: thrivent.com/social
Day 16: 🌐Globalization Patterns & their Inflationary Effects 🚨📚 Financial Literacy Essentials: Understanding Inflation & Interest Rates in 18 Days📚🚨 (A Series by Tyler J. Fall, MSF🎓👔) ---------------------------------------------------------------- As we continue to improve our financial literacy, today we focus on the interplay between Globalization and Inflation, key factors shaping the Modern World Economy—and the wallets of U.S. consumers. 💡Understanding Global Economic Patterns💱 For starters, Globalization is how businesses, economies, and cultures have become interconnected and interdependent through cross-border trade, investment, technology, & migration. Thus, it Affects: How/Where Goods are Produced, the Stability of Currencies, & Businesses’ Abilities to Adapt to Global Economic Shifts 1️⃣ Trade and Production Costs: The Global Market includes both Deflationary (available cheaper imported goods) & Inflationary (supply constraints from increased global demand) Implications 2️⃣ Labor Market Dynamics: The Global Labor Market may Decrease Costs thru Labor & Materials Outsourcing—however, any Global Living Standards Improvement can Increase Wages & Costs—fueling Inflation, & Limiting this exploitative practice in time 3️⃣ Monetary Policy Spillovers: Decisions by Major Central Banks have Global Economic Impacts (e.g. U.S. Federal Reserve rate changes), including Domestic Inflation and Global Capital Flow via Currency Exchange Rates & Domestic Policies 4️⃣ Commodity Price Volatility: Commodities (e.g. Gold, Oil, etc.) are Shared Globally, thus their Sensitivity to Global Supply-Demand Shifts is higher—for both Inflationary and Deflationary Pressures 5️⃣ Financial Market Integration: Free-Flowing (Cross-Border) Capital can Inflate Asset Prices due to Foreign Direct Investment and Intl. Trade (as the Goal is to seek Optimal Investment Returns)—eventually Trickling Down to the Domestic Economy ---------------------------------------------------------------- 📓What this Means for Us💲 🔛Currently: Global Economic Policies impact Domestic Pricing, and are Directly Proportional to the Domestic Economy’s a) Global Reliance, and b) Global Influence. Rising prices in everyday life—from Fuel to Food—contain Global Economic Variables (e.g. the Market’s reaction to Russian Missile reportedly striking Poland in 2022) 🔜Future: Knowledge of Global Trends & Patterns, and their Impacts on Domestic Valuation & Pricing, allow for Improved Financial Planning by Anticipating and Mitigating Potentially Probable Risks (e.g. the USD’s Relevance in Global Trade & it’s Probability of Staying the Global Currency Front-Runner) ---------------------------------------------------------------- 🧑🤝🧑What We Can Do🎬 1️⃣Assess your Investment Exposure on an Asset-Class & Geographical Basis 2️⃣Consider Investments in Sectors & Companies that have Pricing Power (ability to Offset Cost-Ratio Shifts) 3️⃣Explore Real Assets (e.g. Real Estate & Inflation-Protected Securities [TIPS]) 4️⃣Assess the Role of Currency Hedging in Managing Global Risk-Exposure 5️⃣Ensure you Work with an Advisor who Understands the Importance of Global Economics ---------------------------------------------------------------- A well-structured Investment Strategy & Financial Plan reflects Global Economic Realities, preparing You for any Volatility in Global Economic Markets ---------------------------------------------------------------- Schedule a Free-Consultation Today (home page) Follow me on Linkedin for more Financial Information (home page) ---------------------------------------------------------------- (This post is for informational purposes only and is not intended as investment advice. Investment decisions should be made based on individual financial objectives and risk tolerance) Disclosures: thrivent.com/social
Day 15: 🌿 Environmental Sustainability & Inflationary Economics 🚨📚 Financial Literacy Essentials: Understanding Inflation and Interest Rates in 18 Days 📚🚨 (A Series by Tyler J. Fall, MSF🎓👔) Switching gears, let’s dissect a topic that intertwines with the fabric of our economy, society, and planet: Environmental Sustainability amidst Inflationary Pressures 📈🍃 💱Eco-Innovators’: Investing in the Long-Game🌳 ✅Projected Consumer Demand: As environmental awareness grows, so does the demand for sustainable products. With EVs growing in popularity, and international governments & alliances initiating a swift transition to alternative forms of energy & processes, the future of “Green” investments may have some real further potential, and maybe even some steady growth ❎Paying the Time Value of Money: Businesses and individuals focused on investing in sustainable products and companies often prioritize long-term value (not solely monetary) over current investment opportunities & trends that have provided, and will most likely continue to provide, significant returns. As “a dollar today is worth more than a dollar tomorrow” due to our ability to invest that dollar starting today, it seems there are only two explanations regarding the “Green Investors’” strategy: 1. They clearly don’t understand the point of investing, nor the significant opportunity costs that occur time-and-time again, or 2. They simply Don’t. Care. — (oh yeah, mother nature rules🧘) 🌱The Green Symbiosis: Let’s be Try to See the Positives 👀🤞🏼 - 🍃Chances for Long-Term Cost Savings & Innovation Grants to potentially offset some inflationary costs are possible - ☘️The Consumer Demand for Green Products, especially from younger generations, may help certain markets stay afloat, even during inflation - 🏕️Certain Equities and Commodities linked to Green Projects could possibly act as an inflation hedge due to their varying correlations with the broader market - 🥗A Thriving Economy and a Healthy Environment are NOT Mutually Exclusive, as Green Initiatives provide Job Diversity, gifting the Economy the Opportunity to Thrive, and build further economic resilience during inflationary periods (Now, Hold Up → Only if The + > - ) So: Could these Green Strategies ultimately turn into Golden Opportunities? 📗🤔🪙 🌎Investing isn’t One-Dimensional👪 In these inflationary times, consider how your investment strategy & portfolio can contribute not only to your financial wellness but also to the betterment of those around you. Let’s meet to discuss how we can accomplish BOTH: - Incorporating what matters to you into your investment strategy, AND - Crafting a Financial Plan aimed at achieving your goals 📈💼 As Always, God bless (This post is for informational purposes only and is not intended as investment advice. Investment decisions should be made based on individual financial objectives and risk tolerance) Disclosures: thrivent.com/social
Day 15: 🌿 Environmental Sustainability & Inflationary Economics 🚨📚 Financial Literacy Essentials: Understanding Inflation and Interest Rates in 18 Days 📚🚨 (A Series by Tyler J. Fall, MSF🎓👔) Switching gears, let’s dissect a topic that intertwines with the fabric of our economy, society, and planet: Environmental Sustainability amidst Inflationary Pressures 📈🍃 💱Eco-Innovators’: Investing in the Long-Game🌳 ✅Projected Consumer Demand: As environmental awareness grows, so does the demand for sustainable products. With EVs growing in popularity, and international governments & alliances initiating a swift transition to alternative forms of energy & processes, the future of “Green” investments may have some real further potential, and maybe even some steady growth ❎Paying the Time Value of Money: Businesses and individuals focused on investing in sustainable products and companies often prioritize long-term value (not solely monetary) over current investment opportunities & trends that have provided, and will most likely continue to provide, significant returns. As “a dollar today is worth more than a dollar tomorrow” due to our ability to invest that dollar starting today, it seems there are only two explanations regarding the “Green Investors’” strategy: 1. They clearly don’t understand the point of investing, nor the significant opportunity costs that occur time-and-time again, or 2. They simply Don’t. Care. — (oh yeah, mother nature rules🧘) 🌱The Green Symbiosis: Let’s be Try to See the Positives 👀🤞🏼 - 🍃Chances for Long-Term Cost Savings & Innovation Grants to potentially offset some inflationary costs are possible - ☘️The Consumer Demand for Green Products, especially from younger generations, may help certain markets stay afloat, even during inflation - 🏕️Certain Equities and Commodities linked to Green Projects could possibly act as an inflation hedge due to their varying correlations with the broader market - 🥗A Thriving Economy and a Healthy Environment are NOT Mutually Exclusive, as Green Initiatives provide Job Diversity, gifting the Economy the Opportunity to Thrive, and build further economic resilience during inflationary periods (Now, Hold Up → Only if The + > - ) So: Could these Green Strategies ultimately turn into Golden Opportunities? 📗🤔🪙 🌎Investing isn’t One-Dimensional👪 In these inflationary times, consider how your investment strategy & portfolio can contribute not only to your financial wellness but also to the betterment of those around you. Let’s meet to discuss how we can accomplish BOTH: - Incorporating what matters to you into your investment strategy, AND - Crafting a Financial Plan aimed at achieving your goals 📈💼 As Always, God bless (This post is for informational purposes only and is not intended as investment advice. Investment decisions should be made based on individual financial objectives and risk tolerance) Disclosures: thrivent.com/social
Dreaming of the future? Make your bucket list 📝 and I’ll help you create a financial strategy to bring it to life. Together, let’s create a personalized financial plan that prioritizes your unique goals. #Thrivent #FinancialStrategy #FinancialAdvisor See thrivent.com/social for disclosures.
Dreaming of the future? Make your bucket list 📝 and I’ll help you create a financial strategy to bring it to life. Together, let’s create a personalized financial plan that prioritizes your unique goals. #Thrivent #FinancialStrategy #FinancialAdvisor See thrivent.com/social for disclosures.
Day 14: 📊 The Equity Market Equation: Inflation’s Dual Impact 🚨📚 Financial Literacy Essentials: Understanding Inflation and Interest Rates in 18 Days 📚🚨 (A Series by Tyler J. Fall, MSF🎓👔) Everyone's favorite subject in finance: Equities (aka “Stocks”). So, how do inflation and interest rates influence investor decisions and market performance? Well, contrary to my original prompt on this series, and this being the underlying reason for my slight hiatus from it, I wanted to go more in-depth on this specific topic. So… 👍The Good and The Bad👎 We know that inflation erodes purchasing power, but we also know that it can signify economic growth, affecting different equities in opposite ways: 🟢The Good Companies in Necessary Industries, or with Brand Loyalty, can keep business afloat while passing on inflation’s higher costs to consumers These higher costs, depending on the Cost Ratios (Losses Passed-On vs Losses Taken), can actually lead to increased Revenues and Profits Increased Profits → Boosted Stock Price 🟥The Bad: Companies without this luxury are not able to pass these costs on to consumers when demand decreases These higher costs, due to the comparatively inverted Cost Ratio, can lead to decreased revenues and profits Decreased Profits → Depleted Stock Price 🏦 The Central Banks’ Two Cents (+ Interest) Again, this Cost Ratio is affected by increased Interest Rates, as the Central Banks increase rates to combat inflation as rates make things more expensive, thereby decreasing demand, which slows spending, theoretically curbing inflation. This can lead to the re-valuation of equities: Increased Business Expenses → Increased Goods & Services Prices → Consumers Buy Less → Company Earnings Drop → Stock Prices Drop Secondly, and not as widely known, Earnings during these times are Discounted at Higher Rates, meaning they are “Perceived as Less Than What They Seem on Paper vs The Applicable Interest Rates and Inflation Rate” (Here: Discounted = “Real Value”). This makes Stocks Less Attractive, EVEN IF they are Performing Well vs Other Companies in the Same Industry This is especially true for Speculative Corporations (e.g. “High-Growth-but-Not-Yet-Profitable Companies). Some may be looking at Tesla right now, as an example (albeit, different) 🐻Bear with Me (Pun Intended) This is typically where we see inflation create a market downturn, and there's a few things that investors tend to do at this point: 🥉The Novice — Sells 🥈The Intermediate — Sells, Buys into Dividend Stocks 🥇The Experienced — ‘Fancy things’, like Sells and Hedges with Value Stocks, Seeking Companies with Stable Earnings, Strong Dividends, and Lower Volatility, while dabbling in Fixed Income Investments 💎The Advanced: ‘Above and Beyond Fancy Things’, such as Beta Weights Asset Classes taking into account Technical and Statistical Analysis based on each class’s Correlations, Delta Hedges their Holdings based on the Skewness of the Market Demand perceived in the Put:Call of the Indexes Option Chain, with Downside Protection via Put Option Strategies playing on both Volatility and Time Decay, etc. (but NOT sell calls as Unlimited Risk to Upside!) Point is, there’s a lot more to it all then just “buy” and “sell”. Yet, in the end: Inflation ⬆️ → USD Value ⬆️ → Overall Stock Market Price ⬆️… Right?... But, did the Real Value ⬆️?🧐 🔍 Sectors & Hedging Inflation The Experienced Strategy is nothing to laugh at, and is a truly advanced feat for the average investor to conjure up. Hedging by selectively investing in sectors that aren't historically sensitive to inflationary pressures is a commonly utilized ‘safe bet’ to mitigate risk: - Resilient Sectors: Sectors such as Energy, Commodities, and Financial Services often perform well during Inflationary Periods as they can Benefit from Higher Prices, although in differing ways - Vulnerable Sectors: On the other hand, Consumer Discretionary and High-Tech Sectors may struggle as their Costs Rise and Consumer Demand may Weaken due to their Non-Essential nature. However, as we see now with Tech, they can also have Quite the Aggressive Bounce Back when it comes Full-Circle… but: Isn’t a Bubble a Circle… Kind Of? 💭Here, a question can be posed during economic downturns: Are we scared of actually losing money, or is it the Opportunity Cost that plagues all Investors when they Miss an Opportunity? In Other Words: Just a bad case of FOMO? 🧐 📊 Equity Valuation, Inflation Expectations, & Market Sentiment I don't know who rolled their eyes earlier in regards to the Economic and Quantitative Book Value Argument for Stock Valuations during Inflation, as if Supply & Demand Dynamics are the Sole Dictator and Inflationary Periods are as easy as ‘2+2’... because, ask the Fed chair—Right now he’d probably answer ‘5’. Obviously, I wouldn't lie to you and leave it at this High-School Level Personal Finance book cliche. 🧩So, What’s Going On❔ What we are Currently Seeing in the Market in the Present Day, as in the All-Time Highs in the Indexes while the word ‘Recession’ is still Tossed Around (due to people thinking we just forgot that they decided to change the very Economic definition of the term “Recession”... who knows why? right?), can be summed up in 1 word: Expectations — (However, if there was to be a second, I'd say “Greed”). These Expectations play perhaps the most critical in Equity Valuations: 📥‘Pricing In’ Inflation: I'm sure we've all heard this term over the past couple years, but it’s Not Only Applicable to Inflation. The Markets always Look Ahead, and this Forward Looking Perspective is a big game of ‘Follow the Leader’. As Big Institutions make their claims on what the future may hold, they Orchestrate the Direction of the Market via their Influx of Investment Volume and Capital, or its Removal. Then, these Expectations Influence the Markets to the Point that You either Ride the Tide, or Try to Fight the Current… and You Lose. (Momentum wins in a lot of things, unless you are the Undefeated going into the CFP #GoNoles 🍢) So, if Inflation is Anticipated, Markets may have already Priced-In its Effects, for Better or Worse in Terms of Your Portfolio Balance. Unless there is Shocking News that even Surprises the People who are the Best at What They Do, this would Lead to Underwhelming Market Movements, which causes a Drop in the Implied volatility, when actual Inflation Data is released (this Drop in Volatility is where the Robinhood Options-Loss Memes come from, FYI 📉) 🎉Surprise Factor: Well, Not as Uncommon as I previously Insinuated, the case of ‘Shocking News that even Surprises the People Who are the Best at What They Do’, does happen. Inflation Surprises, or Unforeseen Interest Rate Hikes, Shock the Markets, and the People who May Very Well Be in Cahoots begin simultaneously ditching the Game of ‘Follow the Leader’, and instead Begin Playing a Game that more closely Resembles that of “Chicken”, while Retail Traders just happen to sit back and watch it all go down, Riding the Tide when they can, or attempting to be the Next Contrarian Legend in a Reddit Community. Unexpectedly High Inflation leaves everyone Uncertain, and, although the Institutions Hold a Majority of the Investment Supply, they Aren't Necessarily Keen on Going Against a Tide, either. However, they May be Enticed to Beat Everyone Over to the Fixed Income Investments, because What Fun Are Those? (sigh, they aren’t bad guys). This Can Undoubtedly Trigger Market Volatility and a Prompt Sell-off in Equities as Investors Adjust Their Expectations… amidst… Panic. 💹 Interest Rate Investment Strategies A bit ago, we covered how Rebalancing Portfolios is Necessary to Maintain Your Portfolio's Allocation balance at a Suitable Level for it to Remain in Line with your Investment Profile, and, most notably, Your Risk Tolerance. As Interest Rates Rise due to Increased Inflation, Equities see Increases in Volatility (To Note: this Volatility is the Most Widely Used Measurement Of Risk in regards to Investments, as it is This Variability in Price Levels that Constitute Risk (so: I ask… how Suitable ARE these Markets?). As Most Investors will Rebalance at These Times in the Market cycle, they do it by Reducing The Risk Exposure presently found in Their Equity Holdings by Exchanging Them in Favor of Fixed-income Securities (hence, my previous reference). This is for 2 reasons: 1. Predictable rates of return on investments are the complete opposite of volatility, especially volatility that is so unpredictable and experiencing significant downwards momentum, and 2. When Rates Decrease Again (as they must at some point for our economy’s sake), the returns will remain the same (fixed). So, not only do they calm their experience in the storm, but they also get to relish in it in the aftermath. 💹 Fixed Setbacks? Yes. A few are possible. Mistiming reallocation, and being too early when there’s the possibility of inflation persisting for a sustained period of time, means these rates may not be attractive pretty soon. Also, as we can see in Today's Market, some Equities are at All-Time Highs with most Recoveries over their Pre-Recession peaks by +10%. “Well, why couldn’t they just sell [their fixed investments]?” They could have! But, the Time for which these Fixed Investments are forced to be held (or, more difficult to sell at a reasonable price), can be Equally Detrimental to an Investor’s Portfolio. The Financial Sector in 2022, where the Biggest Firms faced Bankruptcy rumors as they couldn’t make up the Losses due to their Entrenchment in Fixed Income Yields, were plagued by the Inverted Yield Curve — they couldn't get out, reasonably. Oppositely, due to ST Rates > LT Rates from this Inverse (opposite of normal), this ‘Timing’ issue with Fixed Investments is Lessened, and can be a Strategy for Buffering the Difficulties during Inflationary Periods. Wait... Sound Familiar? To prove a point, Everybody Knows what CDs are now, but, Why? Yields Inverted, and then 2-3 Mo. Yields became Higher than LT Rates. Easy, isn’t it? So, then, Why do You think Your 5% APY Savings Account will stay that way? Hmm. 🥁Back to THE Question: Are we Scared of ACTUALLY Losing Money, OR is it the Opportunity Cost that Plagues all Investors when they Miss an Opportunity? Just a bad case of FOMO?! 🧠Verdict: Ask Long-Term Investors⌛ Long-Term Investors see Market Dips as Buying Opportunities. They Focus on "Good", Not "Perfect". Well, with Their Historical Returns vs Timers, and the Avg Recovery Time for the Indexes being about 1.5-2yrs from their Lows, Maybe these Boring, No Fun Having, Compounded Interesters Really are Onto Something… and We All Just Have a Bad Case of FOMO.🤷 ⏰PSA🚨 I said this series would be written in a simple way… but the Equities Trading is NOT Easy, and NOT Simple. Be safe, and, if you trade, trade smart — you never know when your Wifi might lag, and that screen could refresh in your hand as you just gambled away the funds that could’ve doubled your retirement savings. Have your attention? Awesome. Now, Let’s get you a strategy that works for you 👔 (This post is for informational purposes only and is not intended as investment advice. Investment decisions should be made based on individual financial objectives and risk tolerance) Disclosures: thrivent.com/social
Day 14: 📊 The Equity Market Equation: Inflation’s Dual Impact 🚨📚 Financial Literacy Essentials: Understanding Inflation and Interest Rates in 18 Days 📚🚨 (A Series by Tyler J. Fall, MSF🎓👔) Everyone's favorite subject in finance: Equities (aka “Stocks”). So, how do inflation and interest rates influence investor decisions and market performance? Well, contrary to my original prompt on this series, and this being the underlying reason for my slight hiatus from it, I wanted to go more in-depth on this specific topic. So… 👍The Good and The Bad👎 We know that inflation erodes purchasing power, but we also know that it can signify economic growth, affecting different equities in opposite ways: 🟢The Good Companies in Necessary Industries, or with Brand Loyalty, can keep business afloat while passing on inflation’s higher costs to consumers These higher costs, depending on the Cost Ratios (Losses Passed-On vs Losses Taken), can actually lead to increased Revenues and Profits Increased Profits → Boosted Stock Price 🟥The Bad: Companies without this luxury are not able to pass these costs on to consumers when demand decreases These higher costs, due to the comparatively inverted Cost Ratio, can lead to decreased revenues and profits Decreased Profits → Depleted Stock Price 🏦 The Central Banks’ Two Cents (+ Interest) Again, this Cost Ratio is affected by increased Interest Rates, as the Central Banks increase rates to combat inflation as rates make things more expensive, thereby decreasing demand, which slows spending, theoretically curbing inflation. This can lead to the re-valuation of equities: Increased Business Expenses → Increased Goods & Services Prices → Consumers Buy Less → Company Earnings Drop → Stock Prices Drop Secondly, and not as widely known, Earnings during these times are Discounted at Higher Rates, meaning they are “Perceived as Less Than What They Seem on Paper vs The Applicable Interest Rates and Inflation Rate” (Here: Discounted = “Real Value”). This makes Stocks Less Attractive, EVEN IF they are Performing Well vs Other Companies in the Same Industry This is especially true for Speculative Corporations (e.g. “High-Growth-but-Not-Yet-Profitable Companies). Some may be looking at Tesla right now, as an example (albeit, different) 🐻Bear with Me (Pun Intended) This is typically where we see inflation create a market downturn, and there's a few things that investors tend to do at this point: 🥉The Novice — Sells 🥈The Intermediate — Sells, Buys into Dividend Stocks 🥇The Experienced — ‘Fancy things’, like Sells and Hedges with Value Stocks, Seeking Companies with Stable Earnings, Strong Dividends, and Lower Volatility, while dabbling in Fixed Income Investments 💎The Advanced: ‘Above and Beyond Fancy Things’, such as Beta Weights Asset Classes taking into account Technical and Statistical Analysis based on each class’s Correlations, Delta Hedges their Holdings based on the Skewness of the Market Demand perceived in the Put:Call of the Indexes Option Chain, with Downside Protection via Put Option Strategies playing on both Volatility and Time Decay, etc. (but NOT sell calls as Unlimited Risk to Upside!) Point is, there’s a lot more to it all then just “buy” and “sell”. Yet, in the end: Inflation ⬆️ → USD Value ⬆️ → Overall Stock Market Price ⬆️… Right?... But, did the Real Value ⬆️?🧐 🔍 Sectors & Hedging Inflation The Experienced Strategy is nothing to laugh at, and is a truly advanced feat for the average investor to conjure up. Hedging by selectively investing in sectors that aren't historically sensitive to inflationary pressures is a commonly utilized ‘safe bet’ to mitigate risk: - Resilient Sectors: Sectors such as Energy, Commodities, and Financial Services often perform well during Inflationary Periods as they can Benefit from Higher Prices, although in differing ways - Vulnerable Sectors: On the other hand, Consumer Discretionary and High-Tech Sectors may struggle as their Costs Rise and Consumer Demand may Weaken due to their Non-Essential nature. However, as we see now with Tech, they can also have Quite the Aggressive Bounce Back when it comes Full-Circle… but: Isn’t a Bubble a Circle… Kind Of? 💭Here, a question can be posed during economic downturns: Are we scared of actually losing money, or is it the Opportunity Cost that plagues all Investors when they Miss an Opportunity? In Other Words: Just a bad case of FOMO? 🧐 📊 Equity Valuation, Inflation Expectations, & Market Sentiment I don't know who rolled their eyes earlier in regards to the Economic and Quantitative Book Value Argument for Stock Valuations during Inflation, as if Supply & Demand Dynamics are the Sole Dictator and Inflationary Periods are as easy as ‘2+2’... because, ask the Fed chair—Right now he’d probably answer ‘5’. Obviously, I wouldn't lie to you and leave it at this High-School Level Personal Finance book cliche. 🧩So, What’s Going On❔ What we are Currently Seeing in the Market in the Present Day, as in the All-Time Highs in the Indexes while the word ‘Recession’ is still Tossed Around (due to people thinking we just forgot that they decided to change the very Economic definition of the term “Recession”... who knows why? right?), can be summed up in 1 word: Expectations — (However, if there was to be a second, I'd say “Greed”). These Expectations play perhaps the most critical in Equity Valuations: 📥‘Pricing In’ Inflation: I'm sure we've all heard this term over the past couple years, but it’s Not Only Applicable to Inflation. The Markets always Look Ahead, and this Forward Looking Perspective is a big game of ‘Follow the Leader’. As Big Institutions make their claims on what the future may hold, they Orchestrate the Direction of the Market via their Influx of Investment Volume and Capital, or its Removal. Then, these Expectations Influence the Markets to the Point that You either Ride the Tide, or Try to Fight the Current… and You Lose. (Momentum wins in a lot of things, unless you are the Undefeated going into the CFP #GoNoles 🍢) So, if Inflation is Anticipated, Markets may have already Priced-In its Effects, for Better or Worse in Terms of Your Portfolio Balance. Unless there is Shocking News that even Surprises the People who are the Best at What They Do, this would Lead to Underwhelming Market Movements, which causes a Drop in the Implied volatility, when actual Inflation Data is released (this Drop in Volatility is where the Robinhood Options-Loss Memes come from, FYI 📉) 🎉Surprise Factor: Well, Not as Uncommon as I previously Insinuated, the case of ‘Shocking News that even Surprises the People Who are the Best at What They Do’, does happen. Inflation Surprises, or Unforeseen Interest Rate Hikes, Shock the Markets, and the People who May Very Well Be in Cahoots begin simultaneously ditching the Game of ‘Follow the Leader’, and instead Begin Playing a Game that more closely Resembles that of “Chicken”, while Retail Traders just happen to sit back and watch it all go down, Riding the Tide when they can, or attempting to be the Next Contrarian Legend in a Reddit Community. Unexpectedly High Inflation leaves everyone Uncertain, and, although the Institutions Hold a Majority of the Investment Supply, they Aren't Necessarily Keen on Going Against a Tide, either. However, they May be Enticed to Beat Everyone Over to the Fixed Income Investments, because What Fun Are Those? (sigh, they aren’t bad guys). This Can Undoubtedly Trigger Market Volatility and a Prompt Sell-off in Equities as Investors Adjust Their Expectations… amidst… Panic. 💹 Interest Rate Investment Strategies A bit ago, we covered how Rebalancing Portfolios is Necessary to Maintain Your Portfolio's Allocation balance at a Suitable Level for it to Remain in Line with your Investment Profile, and, most notably, Your Risk Tolerance. As Interest Rates Rise due to Increased Inflation, Equities see Increases in Volatility (To Note: this Volatility is the Most Widely Used Measurement Of Risk in regards to Investments, as it is This Variability in Price Levels that Constitute Risk (so: I ask… how Suitable ARE these Markets?). As Most Investors will Rebalance at These Times in the Market cycle, they do it by Reducing The Risk Exposure presently found in Their Equity Holdings by Exchanging Them in Favor of Fixed-income Securities (hence, my previous reference). This is for 2 reasons: 1. Predictable rates of return on investments are the complete opposite of volatility, especially volatility that is so unpredictable and experiencing significant downwards momentum, and 2. When Rates Decrease Again (as they must at some point for our economy’s sake), the returns will remain the same (fixed). So, not only do they calm their experience in the storm, but they also get to relish in it in the aftermath. 💹 Fixed Setbacks? Yes. A few are possible. Mistiming reallocation, and being too early when there’s the possibility of inflation persisting for a sustained period of time, means these rates may not be attractive pretty soon. Also, as we can see in Today's Market, some Equities are at All-Time Highs with most Recoveries over their Pre-Recession peaks by +10%. “Well, why couldn’t they just sell [their fixed investments]?” They could have! But, the Time for which these Fixed Investments are forced to be held (or, more difficult to sell at a reasonable price), can be Equally Detrimental to an Investor’s Portfolio. The Financial Sector in 2022, where the Biggest Firms faced Bankruptcy rumors as they couldn’t make up the Losses due to their Entrenchment in Fixed Income Yields, were plagued by the Inverted Yield Curve — they couldn't get out, reasonably. Oppositely, due to ST Rates > LT Rates from this Inverse (opposite of normal), this ‘Timing’ issue with Fixed Investments is Lessened, and can be a Strategy for Buffering the Difficulties during Inflationary Periods. Wait... Sound Familiar? To prove a point, Everybody Knows what CDs are now, but, Why? Yields Inverted, and then 2-3 Mo. Yields became Higher than LT Rates. Easy, isn’t it? So, then, Why do You think Your 5% APY Savings Account will stay that way? Hmm. 🥁Back to THE Question: Are we Scared of ACTUALLY Losing Money, OR is it the Opportunity Cost that Plagues all Investors when they Miss an Opportunity? Just a bad case of FOMO?! 🧠Verdict: Ask Long-Term Investors⌛ Long-Term Investors see Market Dips as Buying Opportunities. They Focus on "Good", Not "Perfect". Well, with Their Historical Returns vs Timers, and the Avg Recovery Time for the Indexes being about 1.5-2yrs from their Lows, Maybe these Boring, No Fun Having, Compounded Interesters Really are Onto Something… and We All Just Have a Bad Case of FOMO.🤷 ⏰PSA🚨 I said this series would be written in a simple way… but the Equities Trading is NOT Easy, and NOT Simple. Be safe, and, if you trade, trade smart — you never know when your Wifi might lag, and that screen could refresh in your hand as you just gambled away the funds that could’ve doubled your retirement savings. Have your attention? Awesome. Now, Let’s get you a strategy that works for you 👔 (This post is for informational purposes only and is not intended as investment advice. Investment decisions should be made based on individual financial objectives and risk tolerance) Disclosures: thrivent.com/social
401(k) Plans: Opportunities Go Two Ways In the current economic landscape, marked by inflation and interest rate volatility, record-high ‘hardship withdrawals’ from 401(k) plans were observed in the past year (according to Vanguard). This trend points to the financial stress many are facing, but it also signals the unintended role 401(k)s have played in providing a safety net during challenging times. The median 60-year-old’s 401(k) balance is between $70,000 - $210,000—a significant spread amongst presumably varied income levels, savings rates, and investment choices. However, the average balance is approximately $555,600, indicating the presence and effects of high-value outliers. Equity and Stock Market Trends: The Fed's Influence and Investors' Dilemma The U.S. economy continues to indicate growth, as consumer spending and job growth have seemingly endured the past 2 year’s turbulence, and despite expectations of economic cooling due to persistent inflationary pressures and high borrowing costs. This scenario has created quite the predicament: will the Fed actually achieve a 'soft landing'? Curbing inflation without precipitating a recession (a second one)? Equity valuations, while high, are not sufficient to forecast the impending story of resiliency, but instead draw a line of caution for investors wary of potential corrections. The projected earnings growth of S&P 500 companies by 2024 has been set to 10.9% (via Vanguard), and offers some justification for the market's optimistic stance. Meanwhile, investors have been trending towards index funds, presumably seeking alignment with the broader market's performance, and to avoid significant valuation changes in their holdings day-in and day-out. Correcting the Forecast: Further Disparity? So, with the record of ‘hardship withdrawals’, and the economy’s chance at a ‘soft landing’: - Could this be yet another ‘missed opportunity’ to ‘level the playing field’ for the average U.S. consumer, as withdrawals decimate retirement compound interest? - Will these outliers multiply, and the median:average value-disparity of the nation’s 401(k)s grow further? - Or, is the soft-landing standing on a leg weaker than your local cafe’s coffee table, being propped up by a pile of white napkins (with white, symbolically, representing the color of the flag we all are refusing to throw up)? We can’t predict the future, but we can do our best to prepare for it. Don’t miss your opportunity—Work with an Advisor who wants What’s in Your Best Interest Visit: linkedin.com/in/tylerfall to learn more (This post is for informational purposes only and is not intended as investment advice. Investment decisions should be made based on individual financial objectives and risk tolerance. Past performance is not indicative of future performance) Disclosures: thrivent.com/social
401(k) Plans: Opportunities Go Two Ways In the current economic landscape, marked by inflation and interest rate volatility, record-high ‘hardship withdrawals’ from 401(k) plans were observed in the past year (according to Vanguard). This trend points to the financial stress many are facing, but it also signals the unintended role 401(k)s have played in providing a safety net during challenging times. The median 60-year-old’s 401(k) balance is between $70,000 - $210,000—a significant spread amongst presumably varied income levels, savings rates, and investment choices. However, the average balance is approximately $555,600, indicating the presence and effects of high-value outliers. Equity and Stock Market Trends: The Fed's Influence and Investors' Dilemma The U.S. economy continues to indicate growth, as consumer spending and job growth have seemingly endured the past 2 year’s turbulence, and despite expectations of economic cooling due to persistent inflationary pressures and high borrowing costs. This scenario has created quite the predicament: will the Fed actually achieve a 'soft landing'? Curbing inflation without precipitating a recession (a second one)? Equity valuations, while high, are not sufficient to forecast the impending story of resiliency, but instead draw a line of caution for investors wary of potential corrections. The projected earnings growth of S&P 500 companies by 2024 has been set to 10.9% (via Vanguard), and offers some justification for the market's optimistic stance. Meanwhile, investors have been trending towards index funds, presumably seeking alignment with the broader market's performance, and to avoid significant valuation changes in their holdings day-in and day-out. Correcting the Forecast: Further Disparity? So, with the record of ‘hardship withdrawals’, and the economy’s chance at a ‘soft landing’: - Could this be yet another ‘missed opportunity’ to ‘level the playing field’ for the average U.S. consumer, as withdrawals decimate retirement compound interest? - Will these outliers multiply, and the median:average value-disparity of the nation’s 401(k)s grow further? - Or, is the soft-landing standing on a leg weaker than your local cafe’s coffee table, being propped up by a pile of white napkins (with white, symbolically, representing the color of the flag we all are refusing to throw up)? We can’t predict the future, but we can do our best to prepare for it. Don’t miss your opportunity—Work with an Advisor who wants What’s in Your Best Interest Visit: linkedin.com/in/tylerfall to learn more (This post is for informational purposes only and is not intended as investment advice. Investment decisions should be made based on individual financial objectives and risk tolerance. Past performance is not indicative of future performance) Disclosures: thrivent.com/social