Jason Jacobi, CFP® (00:01.388)
Welcome back to the closing bell. Jason Jacobi, Mark Boyer, AKA Coach Boyer, AKA tight end, 8480 Colts, Jets, you know who it is. We’re back with you. Coach B, what’s going on?
Coach Boyer (00:15.214)
What’s happening, brother? You doing good today? I’m doing great. Well, you forgot pepper, salt and pepper. You forgot salt and your pepper. You forgot that part.
Jason Jacobi, CFP® (00:19.553)
I
Jason Jacobi, CFP® (00:23.56)
I did I did but you know we have a lot of nicknames these days so it’s
Coach Boyer (00:26.754)
All right. We just make them up every week. It’s great. All right. How you doing? Good week. Good week in the markets. What we talk about today.
Jason Jacobi, CFP® (00:34.456)
Yeah, great week in the markets. We hit some new highs, but before we get into that and you share kind of like your John Gruden-esque like playbook strategy sitting in the QB room, going over charts and so forth, we’re gonna talk about a few updates to the IRS tables and some tax planning rules at a glance, okay? So let’s get into it here on the screen or if you’re listening, oh, go ahead.
Coach Boyer (01:03.281)
Yeah, let’s roll this out right away. It’s good to hear. We need to talk about this early in the year. So this is good stuff. All right.
Jason Jacobi, CFP® (01:08.9)
So overall, just with inflation, obviously the tax numbers have shifted a little bit. The tax rates haven’t shifted, but the brackets in terms of the amounts you can make in each specific bracket have gone up. So you could potentially be paying less tax, again, potentially. But let’s talk about first education. So 529s, you can still gift 18,000 per year before gift taxes. Per couple, 36,000 per year. You can do an accelerated five-year gift at once for 90,000.
or 180,000 per couple. Won’t talk too much about learning credits, student loan deduction limits, 2,500 still. We got phase outs for American opportunity credit, college savings credits. So what we really should focus on here is retirement. A lot of people here that are listening, we’re all going towards the goal of retirement, some closer than others. So.
Coach Boyer (02:02.99)
Easy, easy, what does that mean? Sound closer than others.
Jason Jacobi, CFP® (02:07.596)
I was going to see if you picked up on that, but so IRA.
Coach Boyer (02:09.366)
I did. Yeah. All right. That’s a roundabout way to say somebody’s old. You know what I’m saying? But that’s cool. It was tacky. It had some tack. I like it. All right. Anyway, yeah, some of us are closer to that than others. But this is super important, right? The retirement side. So what’s up? How much of, you know, I’m over 50. How much can I put into an IRA this year?
Jason Jacobi, CFP® (02:17.4)
You’re not old. You’re not.
Jason Jacobi, CFP® (02:34.884)
So you can now put in $8,000 this year. It’s gone up slightly from last year. You got that catch up, $1,000 catch up. If you’re under age 50, then you’re looking at $7,000 for this year. Obviously you gotta be careful for phasing out, you know, Roth contribution eligibility. Gotta be looking at that. So it depends on your income tax bracket. Talk to us, talk to your tax advisors. We can help you decipher if you can contribute to Roth IRAs.
And then also there’s a phase out for deducting IRAs if you’re working, but your spouse isn’t Then potentially you can still get the tax deductibility for that spouse depending on income, so Also 401ks, that’s also a big thing. We’re all saving towards that retirement goal 401ks great way to do that 401k 403 B 457s
Jason Jacobi, CFP® (03:30.028)
Uh, 30,500, 30,500 with a max employee and employer contribution limit of $69,000. So that’s all I wanted to touch on. I just wanted to briefly touch on some new updates, obviously with Secure Act 2.0, which, uh, which coach B here, if you have any input on, on Secure Act 2.0, there’s some updates to that, which are important. So you know,
Coach Boyer (03:30.487)
Yeah, barely.
Coach Boyer (03:44.075)
Yeah.
Jason Jacobi, CFP® (03:57.432)
Um, the ways that you can maybe take out a thousand dollars for an emergency situation from an IRA, or even though we advise against that, there are some certain, you know, benefits that secure act 2.0 had instituted in order to, uh, potentially help Americans if needed.
Coach Boyer (04:11.862)
That’s good. That’s good. You know, Jay, I had some questions this week about, you know, just 401k’s. Hey Mark, you know, I got a 401k at work and, you know, I put in 3% and they match up to five and, you know, and, uh, but, you know, I can’t really do that. You know, it’s a little, it makes it a little tight. Just all those reasons. All I could say is, you know, if you have a 401k available to you, uh, or a 403B, if you’re a teacher or a nonprofit organization, um, you,
I can’t encourage you enough to especially if there’s matching, okay, if there’s matching involved at minimum You want to at least give put as much in as you can get a match for okay? So that’s really important because that’s free money That is available to you that you need to take advantage of that so Figure it out make it work cut some spinning if you need to but put that especially if you’re young and you have a long Time to compound your interest, you know longer again
Take advantage of the eighth wonder of the world, compound interest. It’s like, hey, you know, uh, over time, the younger you are, the more that compounds over time and you’ll be very happy when you get to be my age. Uh, you know, that you, that you started young and you were after it. So, uh, definitely, definitely get up to the match and do what you can there. Uh, and take an advantage of retirement. So good, good that we started with this today as we start 2024, always important for us, um, as investors to be looking at our options for what we can do in retirement.
And the other thing is Roth contributions versus traditional IRA contributions in 401Ks. The younger you are, again, highly recommend if you don’t need the tax write-off, and most of the time you don’t, then make your contribution a Roth side, right? I mean, you want to probably put it in on the Roth end of that so that that’ll grow tax-free.
Long-term Roth iris are phenomenal. Yeah That’s like the bell that is the bell going off for the future. So yeah, that’s a beautiful thing and available to you So take advantage
Jason Jacobi, CFP® (06:07.668)
Yep. Ding ding ding!
Jason Jacobi, CFP® (06:19.044)
Some great, yeah, some great points you brought up there, Mark. But let’s dive into some big things this week. Smack dab in the middle of earnings season. We had over one third of the S&P 500 report in earnings this week. But why don’t you give us a little overview, maybe some stocks that we’re watching or ideas or something that we can kind of not hold onto, but ponder for thought this weekend, kind of heading into the next trading week. Next week, we had the S&P notch, another record high.
We had the Dow Jones, breached 38,000 for the first time. So kind of an uncharted waters here, but also we’ve been to highs before and going into election years, we’re obviously expecting volatility. So why don’t you talk us through here some plays.
Coach Boyer (07:01.386)
Yeah. Well, yeah, well, let’s just see where the markets are. You know, the S&P 500 I got on the chart right here. This is a monthly chart of the S&P 500 going back to the early 90s. You can see, you know, markets and how they the S&P is, you know, this is to that early 2000s. This is 08 in here. 07 08, where we had some big drops.
As you move up, you’re going to see that you’re always getting some pullbacks. This is 20, this is COVID right here. And then, and then back here in, in late 2021 when the markets hit a high and then, you know, it’s 22 happened and, you know, we had a significant increase in interest rates and the markets responded there and now, you know, especially here since, since the last few months here, last couple of months, it’s been, you know, back up and so you just see that we’re hitting these.
These highs actually today closed at 4890, which is above this high here. So actually that’s a really positive sign in the sense of that’s breaking some, you know, when you get those, when you get this level here, you know, old highs and you start to break them, you know, and you can stay above them. That’s a positive thing, uh, technically in the market. So you’re seeing that in the, uh,
In the S&P 500, pull up the Dow here. Again, just looking at a monthly chart, you can see the same idea. The Dow here is now, actually the Dow is stronger and has been stronger even than the S&P in the sense of, you know, it broke, it’s kind of a 37,000 mark. We’re now at 38,000 in the last couple months here. We’ve broken through. I go to a weekly chart. You can see it a little clearer on the Dow this last week. You know, we broke through that. So we’re…
We’re in a strong market here with the Dow, which is, you know, the Dow again, isn’t is an index of 30 kind of very large multinational companies overall. So looking very strong. Interesting. The NASDAQ, even though we’ve had this huge, this huge move in the magnificent seven, we talk about it a lot, the tech.
Coach Boyer (09:11.738)
The Nasdaq still has not though gotten to its most recent high and if that was in 2021, end of 2021. So that’s still got a little ways to go there, but you can see that the trend on this weekly chart has been to the upside. So volume’s been up. You know, we’re sort of in this, at the moment we’re sort of in a Goldilocks period it looks like because you know, you’ve got this look that, you know, we’re gonna get a quote soft landing that maybe we don’t get the recession. You and I have talked a lot about this in the past.
Jason Jacobi, CFP® (09:32.036)
Yeah.
Coach Boyer (09:40.214)
You know, maybe we’ve already had the recession in this sense of rolling recessions, but you know, ever since that December report, the Fed has started to talk about cutting rates and the market’s kind of gone. Um, it’s gone. It’s been a lot of money on the sidelines. We talked about all the cash. You can see it starting to roll in here. So it’s, it’s very interesting. Uh, what I like about the market at the moment is that, uh, and we mentioned this before, but you know, we’ve had the magnificent seven going on.
Jason Jacobi, CFP® (09:57.744)
trillions.
Coach Boyer (10:08.894)
Those are now Tesla, maybe they’re talking about Tesla not being a part of that maybe right now because of their drop. But it’s interesting to see what’s up with that, that actually the participation is actually broadened out. And so that’s a good thing. So we talked about, we see our expectations this next year is high single digit returns in the S&P. I think it won’t be without some volatility, but that’s kind of what we’re looking at.
And thus far, I mean, it looks like it, you know, that looks positive. Um, so, uh, it could happen. We just, you know, never, nobody never knows. Everybody’s taken a guess. I heard a guy today say a very respectful economist thinks it’s S and P will go to 5,400, which is another 10% higher from here overnight. So yeah, right in line with what we’ve talked about, uh, when our year in, when we did, uh, our annual review, right? Yeah. For, uh,
Jason Jacobi, CFP® (11:02.096)
Yeah, 68%.
Coach Boyer (11:04.942)
for our outlook for 2024. And so anyway, yeah, it’s good. It’s good. But again, stay cool, calm, and collected. You know, there’s this, when the markets are running, you know, you can get Euphoria, which is usually market tops. I would love the market to go sideways here for a little bit and consolidate. That would be fantastic because it would be healthier long-term. And we’re also keeping an eye on that bond market. Remember the…
The 10 years, you know, interest rates have come down. It’s flirting right in that 4.2%. We’re watching that closely. Still like bonds for this year. So great time just to reevaluate your portfolio and make adjustments for the future. Yeah, good. We’ll see election year two, right? We’ve talked about that. That can be an issue. Yeah, so.
Jason Jacobi, CFP® (11:54.912)
Election year. Yep. Always volatile. Yeah, absolutely. But, uh, but you know, year to day, like, uh, just to kind of give our listeners and viewers here, kind of a synopsis of where we’re at. I mean, Dow is up over 1% S and P’s up over two and a half NASDAQ’s flirting with 3%. So only lagging indicator here for, uh, not a lot of lagging indicator, but lagging index would be the, uh, Russell 2000 year small caps, um, which down
you know, almost two and a half percent for the year, which, you know, still, still bullish on small caps. You know, when you’re coming out of a, an economic slowdown or, uh, where, uh, rate, uh, down draft environments or rates start getting cut. Um, obviously those small companies are the ones that borrow the most money, uh, to raise the most capital. And they got to do that by going private lending or to banks, whether it’s regional or big banks, national, international banking, uh,
but those still look favorable as you’re coming out of kind of a higher interest rate environment. Those companies, those, those indexes, uh, while you have to be selective of what you buy, because I believe it’s upwards of 60% of the Russell 2000 is not profitable in terms of revenue. So, um, again, I’m, I’m. Yep. So the, so a lot of those companies, the majority of those companies are not profitable yet, right? So they’re more volatile, especially in a, in a Goldilocks scenario where things seem good,
Coach Boyer (13:07.266)
The indexes, right? Yeah, that’s an index.
Jason Jacobi, CFP® (13:20.248)
You know, uh, could turn south rather quickly, uh, as we’ve seen in the past, you know,
Coach Boyer (13:25.422)
Well, you got to watch that. You got to, and you got to watch the small caps because that’s kind of the bread and butter, right? That’s the mom and pops and people. I mean, that’s a really important place to watch. Those and the industrials, there’s certain, there’s certain parts of the market you got to watch closely. We’ve had a nice move this week up in the small cap. So that again, gives us more, you know, more confidence in this market to see the small caps participate.
Jason Jacobi, CFP® (13:30.968)
Yeah.
Coach Boyer (13:52.618)
Because if they’re not participating or if the industrial, some of the big brick and mortar organizations or companies aren’t participating, then it’s not necessarily a great sign. So anyway, for this week, again, this is a closing bell for a week. It looks fairly positive. But again, I’d like to see it kind of, I know it sounds crazy. You want to see it go up all the time, up, up. But you need to have…
Jason Jacobi, CFP® (14:03.916)
good day out.
Coach Boyer (14:21.494)
You need to, you need to stop kind of like when you’re hiking up a hill, you know, you, sometimes you guys got to stop and, uh, and take a breath, you know, get a breath and then it gives you more power for the next move up. So that’s kind of where we’re at. Um, you know, it’d be good to, you know, sit down and have some lunch here in a way in the markets, it’s just kind of go sideways, even slightly down to get some, uh, weak, weak holders out. And, uh, and maybe that’s, maybe that helps us get to the next level this year. We’ll see.
Jason Jacobi, CFP® (14:33.092)
Next flag, yep.
Jason Jacobi, CFP® (14:49.524)
And speaking of earnings season, Mark, if you wouldn’t mind sharing your screen, can you pull up Tesla for us here? I just want to talk about them as a scenario. This is why we diversify. This is why we don’t hold specific individual securities above a specific threshold because of, of movement like this, but also just want to touch on before we kind of look at, look at Mark’s chart here. You know,
want to look at a lot of the big tech names, you know, they’ve actually had fantastic weeks, fantastic years, 52 weeks, you know, you’ve had, besides Tesla, you’ve had Apple, you know, which they’re facing their own challenges with softening sales of their hardware, right? I mean, iPhone sales have slowed down. So they’re trying to kind of reposition themselves and how to kind of generate more revenue and earnings per share growth that investors want to see and that they’re paying for in the stock price. So
Um, besides, besides Apple, we had Microsoft, Amazon, Metta, um, all, you know, came in above expectations, top line, bottom line projections, beat estimates, uh, which is great. There were specific sectors, you know, Google had, um, you know, their, their cloud revenue missed, um, revenue guidance, but you know, things like that where they’re kind of trying to grow and innovate in those specific areas. It might take a little bit of time for the train to technically leave the station.
to use layman’s terms here, but yeah, most of the tech, most of those big names, Microsoft, Smashing Expectations, it’s Tesla that with, they’ve kind of missed on the top and bottom line numbers here, as you can see that, that kind of space, that big downdraft there. So is that concerning to you? Is that concerning to you, Mark?
Coach Boyer (16:33.31)
Yeah, down 12%. Couple of days ago, the earnings were down 40%. So, and basically Moss came out and said that it might be a year or two before, they’re sort of in between the gross, the cycle and the EV market. Is it concerning? I’m not surprised, honestly. I mean, I think that’s, the EV market,
You know, there’s always been this argument that there’ll be a limit as to those, you know, the amount of cars that they’ll sell in that place, you know, in that kind of industry, because there’s only a certain amount of people in our world that will buy EV cars or be interested in them. You can argue that all day. But the bottom line is, you know, they’re…
They’re adjusting, you know, this looks like it could be if you’re a long-term holder, you know. It could go lower. I mean, we broke down in here. It could get to the 150s. I mean, that would be a key area. But, you know, you’ve got a lot of support over here. Yeah, I don’t know. It’s going to be interesting. I think if you’re long-term and you’re excited about that industry, this could be a place to nibble and buy. But I might wait until it consolidates and see if it goes lower.
It’s kind of like catching a falling knife at the moment. But again, if you want to nibble in and take some spots, could be a long-term buy. If you look at a weekly chart, it’s not like we haven’t been here before, right? So Tesla’s just moved. We had a bad week. Again, this shows the week performance, the weekly performance here, this big bar. Go back to monthly, it doesn’t look near as ugly, okay? So, you know, just this last…
Jason Jacobi, CFP® (18:27.792)
March.
Coach Boyer (18:28.094)
And yeah, we were we were down, you know, right here early 2023. This thing was at 100 bucks and we yeah, so that, you know, and it moved back. So anyway, we’ll see if it holds. It’s got some, some areas in here that it needs to hold 160, 170. And we’ll see, it’ll probably go there and test it, but we’ll see what happens. But yeah, well, longer term, I think it’s, you could probably buy it and be a good investment.
Jason Jacobi, CFP® (18:56.212)
Yeah. And you know, Tesla isn’t just a car company, it’s a tech company. So they have, you know, diversified operations and just like you had mentioned, uh, you know, Elon saying that this could just be a, uh, not a glitch, but a kind of in between of growth cycles from transitioning from their kind of market domination of EV vehicles. I mean, you look everywhere. Teslas are everywhere on the road. It just drives me nuts sometimes. Cause it’s like, there’s another Tesla. There is another Tesla. It’s just so mainstream these days, right? Uh, that
Coach Boyer (19:20.586)
Yeah. Especially here in SoCal. Yeah.
Jason Jacobi, CFP® (19:26.356)
Yeah, right. Exactly. So basically you have such a market dominant performance per se. Using football terms, you have a dominant performance in this space that sales are going to inevitably slow at some point because you’ve kind of, the demand is going to start to taper off because everyone that wanted a Tesla is either has one or has ordered one already. And so those numbers will come down. So how do you repivot and refocus on AI or
solar or, you know, starlink or whatever, you know, space, whatever your, your next kind of growth phase is and where you see the most revenue potential and growth potential. That’s going to be kind of interesting to see what Tesla does to reposition there. I know Elon was talking about AI and he wants to do more in that space, but wants more of a say. Yeah. And Tesla’s, and Tesla’s decision-making.
Coach Boyer (20:15.83)
robotics too, right? Yeah.
Jason Jacobi, CFP® (20:21.456)
because obviously he’s got a board now that he has to report to. So he doesn’t get to make all the AI decisions. He just wants more of a say of what happens. Cause obviously he doesn’t want AI taking over and kind of creating a mind of its own and causing trouble. Like, uh, some of those, you know, Terminator movies, iRobot or something like that. We don’t want one of those on our hands. So, uh, yeah, so it’d be interesting to see, but, but again, that’s why we diversify. That’s why we look for, um, hedges and
whether it’s fixed income alternatives, other kinds of stocks or, um, opportunities out there. This is just so one of those opportunities that might be a time to buy. Like you said, um, and nibble at as this thing, if it continues to go down.
Coach Boyer (21:03.082)
Yeah, possibly. But there might be other options right now until that thing, until that stock actually finds a bottom. It’ll give us signs of that. So yeah, it’s case by case. And just for the record, we’re not huge holders and have not been huge holders of Tesla here. We do own them in that stock and various actively managed accounts that we’ve had too. So I trust that leadership too and their research.
to determine if this is a buyer or a seller and some of those ETFs where we might hold some Tesla or whatever. So anyway, yeah, it’s the reality of the stock market. Something that’s, things go up, things go down. You just want long-term, you wanna win more than you lose. So diversifications and research is really important. So just make sure you know what you’re doing if you want to individually buy Tesla in here.
Jason Jacobi, CFP® (22:00.292)
So I’m going to make a bold prediction before we move on to economic news. Uh, to focus on there is I think maybe in 10 years, you’re going to see a dramatic shift away from EV vehicles or at least the, uh, the government overreach of mandating them, because I think you’re going to find there are other avenues of achieving, you know, clean energy and clean vehicles, uh, you know, through hydrogen vehicles. So
I’ve heard through the grapevine that the US Navy has a ship, which we just talked about, that basically runs on hydrogen. So it takes the hydrogen molecules from the water that it’s in and then repurposes it and uses it as fuel for its engine. So basically it never has to refuel on land, which I found remarkable. And I saw a hydrogen vehicle. So when I lived in Telluride, Colorado back in eighth grade, this was 2004, I think it was.
We had a hydrogen vehicle pull up and they talked to us about how it worked. And they’re like, Oh, this is the future. And this was way before even like EV vehicles were big, right? But this, these people were kind of like a, uh, a United States tour, like promoting, Hey, like hydrogen, like this is the way to go. It’s like self-cleaning and you know, it’s, it’s easy to use and it’s, it can be mass produced and, uh, it’s found everywhere. Hydrogen’s like, I think the most bioavailable molecule, uh, element out there again, I’m not a scientist, please don’t judge me.
I’m butchering all of this. Okay. But basically it’s readily available is what I’m trying to say. So that’s my prediction is that there’s going to be other forms of cars in order to generate revenue and growth for those specific companies too. So it could be an area to look out for.
Coach Boyer (23:28.93)
What’d you heard?
Coach Boyer (23:41.186)
Yeah. And that sounds great. It all sounds great. But I’ll just say that the reality of where we are in this world and the efficiencies of dealing with disease and water, you know, that’s was bad. Fossil fuels has helped us come a long way. So, I’m good with all these alternatives. And I think it’s fantastic to try to figure out how to do things in a cleaner way. That’s a great.
fantastic goal. But I guess for me, I just don’t want anybody to tell me what I have to do. There’s mandates and with Tesla and what’s happening in the EV market right now is a lot of these companies are finding that demand. They got Ford and a lot of the American automakers they jumped in full go live into the EV market and now they’re sitting on all these cars they
Jason Jacobi, CFP® (24:16.172)
Right, absolutely. Yep.
Jason Jacobi, CFP® (24:33.06)
We have.
Coach Boyer (24:40.766)
You know, it begs the question that, you know, like in a state like here in California, where they’re telling us that, you know, there’ll be no more, you know, there won’t be, you won’t be able to buy a fossil, you know, gas guzzling car here, what, in 2030 or something like crazy. I mean, you know, and then, yeah, so it’s going to be interesting. So we’ll just wait and see the politics of it. I just, I hope, I hope we continue to innovate. That’s fantastic. We got really smart people doing it.
Jason Jacobi, CFP® (24:56.5)
at 2035.
Jason Jacobi, CFP® (25:04.408)
Yeah.
Coach Boyer (25:07.222)
But then in the economy, the way it should work is that, let the public decide what they want and what they don’t want. Yeah, free market, don’t tell me what I have to do because you got some agenda. So anyway. Preach it. All right, moving on.
Jason Jacobi, CFP® (25:12.804)
free market.
Jason Jacobi, CFP® (25:17.44)
Yep, absolutely. Amen to that preach preach. So let’s, let’s talk, let’s talk economic news here. So obviously we had some big economic news that came out this week, which is quite fantastic. We’ll kind of talk about Goldilocks scenarios, what it could mean, but, uh, but GDP, we got our first reading of, of Q, uh, Q four GDP. And it came in a lot hotter than expected at 3.3% and
last quarter, obviously you’re back in the holiday season, consumer spending, the consumer spending on services and goods plays a major portion in generating GDP. So people are still spending money and that growth exceeded expectations. So, you know, thoughts on that? Is there anything specific that like is concerned is concerning? I mean, you got people spending, but we talked about the credit card usage and how delinquencies have gone up.
Coach Boyer (26:06.306)
Yeah.
Coach Boyer (26:15.274)
Yeah, I mean, I think that, you know, we said that the fourth quarter was going to be fairly strong. I mean, it came in this number wise stronger than anybody expected. Actually helped the market somewhat. It was interesting to watch the bond market because, you know, you would think that if you had higher GDP, that the bond market would have reacted really negatively and yields would have really spiked. And it’s interesting that they didn’t, which tells you that I think the bond market.
still is believing that longer term, we’re probably, you know, that it’s not gonna affect the idea of cutting rates in the future. That’s out there. The other thing is, is that a couple of things. One is, I think there’s a chart up on this, you know, the question I have on all this is that, I got two things that I saw. First is government spending, okay? So how much of that is government increasing spending, the GDP? I know people are out there spending money, they’re in services, they’re going on trips.
Jason Jacobi, CFP® (26:57.08)
Yeah, on the newsletter.
Coach Boyer (27:12.002)
Those areas are still very strong. I think technology, especially for businesses and IT, different things. But the question I have is, even though we knew it was gonna be higher, how much of this increase is in, how much is the government spending to make these GDP numbers seem higher? And then also, and also, here’s the other funny thing.
The history has been in the last year or so in this administration, which again, in politics, it’s unfortunate, we give politics even in the Fed, but the question that, you always get this higher number, you know, hey, GDP 3.3%, it’s kind of that headline number that everybody jumps on and goes, whoa, we’re killing it, we’re going forward. And then the next revision or the next time there’s talk of this again,
There’s actually, it’s been consistent recently in recent months and quarters that the revision number comes down later than nobody talks about. So that’s an interesting deal. So it’s like, how much is the government approach, you know, growing, you know, spending to increase this? And so anyway, all that to say, I love an increase in GDP, but those are big, those are questions that are out there.
Jason Jacobi, CFP® (28:17.207)
Mm-hmm.
Jason Jacobi, CFP® (28:32.144)
Good, good question. So I have the answer for you and I’ll share it. Yep, I have the answer. So, I’m gonna break down the select components that make up GDP and we’ll talk about the overall change from quarter four of 2022 to quarter four of 2023, our most recent reading, okay? So if you look at the average overall GDP of 2023, it was 3.1%, okay? Decent number. So,
Coach Boyer (28:34.742)
Yep. Wow. Where’d it go? Pepper.
Coach Boyer (28:49.398)
All right.
Jason Jacobi, CFP® (29:00.588)
I’m going to break down the highest amount of change down to the lowest amount of change based off of these select components that we pulled out of the GDP report. Okay. So number one drum roll, please. I’m just kidding. Don’t drum roll. So number coming in at number one is what you said government spending. Yep. That’s the highest, uh, highest change in, uh, in GDP kind of percentage. Um, as it was a
Coach Boyer (29:14.604)
RRRR
Coach Boyer (29:20.618)
Who are we? What’s the hi?
Jason Jacobi, CFP® (29:30.912)
a component of overall GDP growth. A majority of it was government spending. So our average, again, GDP growth is 3.1. Government came in at over 4.3 ish, 4.4 ish. So, uh, so it’s beating that the overall average already right there, um, coming in second at still over a little bit over 4%, which is non residential investment. So I think like the creation of factories or
Coach Boyer (29:43.3)
Mmm, there we go.
Jason Jacobi, CFP® (29:57.972)
Spending money on like non-residential buildings or infrastructure, whatever it may be that came at the second highest and then the third was one of the two parts of consumer spending consumer spending on goods came in at Roughly three point four three point five percent. So still above the three point one average for overall GDP Services came in quite a bit lower for the for the change year over year from 2022 to a quarter for 2023
Coach Boyer (30:02.798)
truth.
Jason Jacobi, CFP® (30:26.756)
came in a little bit over 2%, exports came in a little bit over 2%, residential investment flat. So home building, homes, things like that. And then imports actually saw a negative change. So it’s actually more like a little less than negative 1%, but still negative in terms of GDP.
Coach Boyer (30:46.306)
So interesting, so services are actually 2%, you said? Year over year, I bet you if we did that quarter by quarter, especially the last few quarters, it’s probably been up most in those, and that’s probably gonna increase. That’ll probably continue to increase. I mean, the more people, clients that I talk to, especially in retirement, whatever, it’s like, hey, I wanna travel, I wanna travel. I mean, that’s still out there. People wanna go do some things.
Jason Jacobi, CFP® (30:51.916)
Yeah, a little over two. Yeah. Yep. Correct.
Yeah.
Jason Jacobi, CFP® (31:12.513)
Yeah. Yep.
Coach Boyer (31:15.402)
And so that’s probably going to stay high too. So yeah. All right. Well, there you go. Government is in there and we’ll see where the next one comes on the next GDP report and see how much, how much this one gets revised down if it does.
Jason Jacobi, CFP® (31:28.456)
And we still think that the economy is probably going to continue to slow down. GDP might not be upwards of 3% for the next few quarters, you know, projecting one to 2% GDP, maybe, right? We’ll see. Interesting to interesting to talk about, but also, so let’s talk about the conundrum here, right? Well, let’s talk about, uh, PCE, uh, personal consumption, expectant, there’s I guess expenditures, excuse my English, uh, feds preferred inflation gauge, right?
Coach Boyer (31:38.722)
Yeah.
Jason Jacobi, CFP® (31:56.132)
The headline inflation numbers came in and remain steady at year over your basis, 2.6%. And then when you strip out volatile energy and food prices, it actually decreased to 2.9%. So we got a spot reading below 3%. So that’s all trending in the right direction here. So that begs the question here, Mark. Fed? Probably not lowering rates. Excuse me.
this next meeting here at January 31st. What about March? What about the March meeting? What are we thinking here?
Coach Boyer (32:33.962)
Well, I think the market is thinks if they’re going to cut rates, it’ll start in March. I think there’s a lower these numbers probably, probably drops the chance of that happening now in March. So you know, it may not still think that they’re going to still think they’re going to drop rates going forward because, you know, there’s enough underlying, you know, underneath the headline numbers to say that things are slowing down. Again, what we just got with the GDP was, you know,
it’s a backward looking, you know, it’s looking backwards. So, you know, we see, but now going forward here, we talked about this early January, the first quarter will be this quarter is going to be really key to see what’s happening. So think to slow down if any will, you know, we either level off or maybe slow down in here, coming, going forward and the key on the inflation is that, you know,
Disinflation, remember we talked about that, is the fact that inflation’s just dropping. Doesn’t mean things are getting lower in price. It’s just the rate of inflation’s going, not increasing as much. That seems to be the case, and that’s what’s happening here. So the numbers look to be, even though it’s a little bit higher, it still is going in the right direction as you look at it kind of in a longer version, which I think you have to do with the inflation. So yeah, it’s gonna be, so what about March? So March.
Jason Jacobi, CFP® (33:38.416)
slowing down, yeah.
Coach Boyer (33:57.726)
I would say there’s a smaller, there’s a, you know, 25, yeah, less likely chance probably to have a drop at that point. You got to remember though, that’s, that Powell is, is walking this fine line. So the long-term view of the Fed is that they’ve been, they usually can’t land a soft landing and right now they’re actually looking good. Okay. So the Fed is looking like, wow, they’re actually pulling this off. And that.
Jason Jacobi, CFP® (34:01.644)
Less likely.
Coach Boyer (34:27.554)
that they’re getting this soft landing. So we’ll know here by more numbers in February and then March, but you could get Powell thinking even if the numbers aren’t necessarily where they want it, they continue to be flat or down, they might try to preempt over tightening too long, and they might cut rates in March. So that’s going to be interesting to see because they might, you know, show us, you know, because again,
Jason Jacobi, CFP® (34:49.912)
theory.
Coach Boyer (34:54.926)
Usually they do it too long. He might try to say like, okay, we’re not going to screw that up. We’re going to, we’re going to lower it, you know, even though, you know, anticipating as it continues to go in the right direction, that’s, that’s the one, that’s one issue. But again, you know, this inflation numbers, um, you know, I was reading too today and we didn’t bring it up, but I know this whole thing in the red sea with what’s happening with shipping right now is, uh, is that’s a big deal.
Jason Jacobi, CFP® (35:17.653)
Yeah, that’s crazy.
Coach Boyer (35:20.606)
And so they’re actually shipping costs are ramping up tremendously over there because companies are doing new contracts for the future saying, Hey, we can’t go through this area anymore because of the danger, we got to go this long way around and that’s going to cost more. So it’s going to be interesting to see what that does to inflation, even in that supply chain. So I don’t know, it’s a really interesting thing. There’s a lot of moving parts.
Jason Jacobi, CFP® (35:21.188)
Big deal.
Jason Jacobi, CFP® (35:45.732)
Good point.
Coach Boyer (35:49.494)
The other thing that we got to talk about, the other thing, a part of that is just a side note is, is you and I had talked about this election year, right? So if they do lower rates, what is, the fact is they don’t typically do 90 days prior to an election. So that puts a little bit, it closes the window potentially for what they want to do. I don’t know. I don’t know if that’s accurate, but that’s, that’s been, that’s been a historic, historic kind of thing to watch.
Jason Jacobi, CFP® (36:01.356)
90 days.
Jason Jacobi, CFP® (36:09.753)
Got it.
Jason Jacobi, CFP® (36:15.084)
Yep. Historic. Yep. Historic numbers. They just don’t want it to be seen as like trying to influence the election. So they, they usually, you know, pause any kind of campaign three months prior to, uh, election day. So, but I really liked your point on, again, it’s, it’s a very interesting time because again, you got GDP growth, which you look under the hood, a lot of it’s government spending, there’s no ifs, ands or buts about it. That’s just what it is. Uh, but consumer still spending retail sales were up, you know, 0.7%.
the month of December, you know, beating the consensus estimate of 0.4% for the month. So you got spending going up, which obviously drives inflation higher, but you got the core PCE and the PCE headline, PCE numbers coming down in the right direction. You got GDP going up again, just reverting back to that. So you kind of got this like paradigm of, okay, that makes it look
Jason Jacobi, CFP® (37:13.904)
could scare them to like, oh, let’s wait and see if spending continues to stay strong, which could refuel inflation in the US we’re talking about. But then you look macro at global with what you’re talking about supply chain. And it doesn’t affect the US as much because we don’t get our supplies through the Red Sea as much. You usually use that route for China or Eastern Asia to get through to like the Mediterranean to get through to…
the European country, European Union and Great Britain, the UK. So you start putting pressure on that, not only fuel prices, which affects everything, not only goods, services, whatever it may be, things become a lot more expensive, take longer to get there, which means prices are going to go up, which means inflation could rear its head over there more so than the US. So I like that was a good point that you brought up. There’s a lot bigger picture and story that’s kind of developing here.
on the global scale.
Coach Boyer (38:14.258)
So bottom line is we don’t, obviously it’s a great question, but we don’t really know. You know, there’s a lot of things still to see here in the next few months. But longer term, it definitely looks like regardless of when they do, you know, the Fed has indicated, and this is what the market’s banking on, is that there will be as much as, you know, over the next 12 months or so, at least 100 basis points of cuts by the Fed.
which comes back to again, and that’s what, so if there’s a surprise to that, that would not be necessarily great for stock market or the bond market, especially because the bond market right now, and we’re one of them, is that we feel that, you know, it’s a great place to be right now in mid duration kind of fixed income, because if they lower rates like that, we can get some real appreciation. So anyway.
Yeah, a lot of good things going on. It makes it fun trying to put a game plan together in this crazy time. Yeah. So good stuff. Good, good.
Jason Jacobi, CFP® (39:16.289)
Yeah.
Jason Jacobi, CFP® (39:22.136)
Well, that’s it for this week. We’re always here to arm you with financial food for thought for the next week or so, and you can just bet your bottom dollar to use Annie. Remember Annie, is it the show Annie, right? Sun Will Come Out Tomorrow, is that right? She used to say, bet your bottom dollar or something like that. The sun will come out tomorrow. Bet your bottom dollar that tomorrow, there’ll be sun.
Coach Boyer (39:39.574)
Yeah, I think so. You won’t want to sing it. Why don’t you sing it for us?
Coach Boyer (39:47.947)
Never mind, don’t sing. Okay, I didn’t mean to say it, never mind.
Jason Jacobi, CFP® (39:52.728)
And that is it for your closing bell cut. We’ll finish it right there. We’ll see you next week. Coach Boyer, Salt and Pepper, Jason Jacobi. See you next time.
Coach Boyer (40:01.518)
God Bless, bye now.
