The Wealth Fix

As financial planners, The Wealth Fix has received bad money advice over the years. In this episode, we share the worst investment advice ever given to The Wealth Fix.

Learn more about our show, The Wealth Fix:https://thewealthfix.com/

Links and resources: https://thewealthfix.com/we-got-bad-money-advice/

Ryan A. Hughes and Peter Campbell are financial professionals at a fiduciary financial advisory firm, Bull Oak Capital, that provides wealth management services to retirees, working professionals, and business owners across the United States. 

Learn more about Bull Oak Capital:https://bulloakcapital.com

Want to know where your income and net worth stand compared to others in your age range? Use our free calculator and download our free report PDF:https://bulloakcapital.com/where-do-you-stand-calculator-report/

Want a free financial consultation with trusted financial professionals? Get it here  ⁠https://bulloakcapital.com/get-started/⁠

An HSA (Health Savings Account) is the most tax-efficient account on the planet, even more so than the Traditional IRA and the Roth IRA. Yet, most people do not take advantage of this account. Ryan A. Hughes and Peter Campbell discuss how HSAs work, how to use them optimally for the biggest tax break, and pitfalls to avoid.

Links and resources: https://thewealthfix.com/we-explain-how-hsas-work/

Want to know where your income and net worth stand compared to others in your age range?

Use our free calculator and download our free report PDF: https://bulloakcapital.com/where-do-you-stand-calculator-report/

Learn more about The Wealth Fix: https://thewealthfix.com/

Learn more about our fiduciary financial advisor firm, Bull Oak Capital: https://bulloakcapital.com/

Want a free financial consultation with trusted financial professionals? Get it here  ⁠https://bulloakcapital.com/get-started/⁠

We think it is safe to say that TikTok's financial advice can be pretty awful. Put all your savings into Bitcoin because it is going to be $1,000,000? Buy an Indexed Universal Life Insurance policy for your 16-day-old baby? Cash Value Life Insurance is "off the radar" of the IRS? Ryan and Peter react to some outrageous and terrible financial advice on TikTok.  

Links and resources: https://thewealthfix.com/financial-advisors-react-to-tik-tok-advice/

Learn more about our show, The Wealth Fix: https://thewealthfix.com/

Ryan A. Hughes and Peter Campbell are financial professionals at a fiduciary financial advisory firm, Bull Oak Capital, that provides wealth management services to retirees, working professionals, and business owners across the United States. Learn more about Bull Oak Capital: https://bulloakcapital.com/

Want to know where your income and net worth stand compared to others in your age range? Use our free calculator and download our free report PDF: https://bulloakcapital.com/where-do-you-stand-calculator-report/

Want a free financial consultation with trusted financial professionals? Get it here  ⁠https://bulloakcapital.com/get-started/⁠

For the first time in recorded history, California's population has declined. Perhaps you have moved or are considering moving out of the state. If so, it is extremely important to change your residency correctly to avoid California state income tax.

Show note, links, and resources: https://thewealthfix.com/how-to-change-california-residency/

Want to know where your income and net worth stand compared to others in your age range? Use our free calculator and download our free report PDF: https://bulloakcapital.com/where-do-you-stand-calculator-report/

Learn more about The Wealth Fix: https://thewealthfix.com/

Learn more about our fiduciary financial advisor firm, Bull Oak Capital: https://bulloakcapital.com/ 

Want a free financial consultation with trusted financial professionals? Get it here  ⁠https://bulloakcapital.com/get-started/⁠

The Federal Reserve is crushing stocks. And bonds. And gold. And just about every other asset class out there. Inflation is raging and the Fed is doing everything it can to bring it under control. We discuss how the Fed accomplishes this and what it means for your portfolio. 

Show note, links, and resources: https://thewealthfix.com/the-fed-is-crushing-stocks/

Want to know where your income and net worth stand compared to others in your age range? Use our free calculator and download our free report PDF: https://bulloakcapital.com/where-do-you-stand-calculator-report/

Learn more about The Wealth Fix: https://thewealthfix.com/

Learn more about our fiduciary financial advisor firm, Bull Oak Capital: https://bulloakcapital.com/ 

Want a free financial consultation with trusted financial professionals? Get it here  ⁠https://bulloakcapital.com/get-started/⁠

Have you ever wondered where you should be saving your money first? In this episode, we break down where to save your money first to ensure that you maximize each dollar.

Show note, links, and resources: https://thewealthfix.com/sequence-of-savings-9-places-to-save-your-money-first/

Want to know where your income and net worth stand compared to others in your age range? Use our free calculator and download our free report PDF: https://bulloakcapital.com/where-do-you-stand-calculator-report/

Learn more about The Wealth Fix: https://thewealthfix.com/

Learn more about our fiduciary financial advisor firm, Bull Oak Capital: https://bulloakcapital.com/ 

Want a free financial consultation with trusted financial professionals? Get it here  ⁠https://bulloakcapital.com/get-started/⁠

In this episode of Solid Financial Advice, Ryan Hughes discusses the factors behind the 2020 market performance and a preview of 2021. 

Between COVID, Black Lives Matter protests, intensifying political divisions, the climate crisis, and more, 2020 has been very challenging. These difficulties were exacerbated by the fact that we were all forced to stay home. Compound this with your kids forced to attend school online (now you’re a teacher too), the fear of you potentially losing your job or your business, and the risk of losing your wealth due to market instability, it is no wonder why we are all stressed out.

Despite all of this, the market has delivered an impressive return this year. In fact, we have reached new all-time highs. As I write this, the S&P 500 TR is up 14.35% YTD, far better than any of us would’ve predicted in March, the peak of the hysteria. 

A lot of people are quick to compare the recent stock market performance to that of the economy — “It doesn’t make sense that the market is doing performing so well when half of the economy is shut down, and the people continue to lose their jobs.” 

Yes, GDP levels have dropped significantly, and the unemployment rate spiked to record levels. However, the rebound thus far has been pretty impressive. 

These rebounds show that the economy is continuing to recover. History will show that the 2020 recession is the deepest since the Great Depression, though one of the shortest on record, possibly the quickest ever. Because both the Unemployment rate and GDP are lagging indicators, they confirm what has already happened, not what is yet to occur.

The stock market, however, is neither a lagging nor a concurrent indicator. It is instead a forward-looking-indicator that is continuously attempting to price in probable future equity cash flows. The minute-by-minute, day-by-day moves in the stock market act as a price-discovery tool, digesting new information as it arrives. 

When news of COVID-19 cases began to spread in February and March, the stock market reacted accordingly. The S&P 500 fell fast, the fastest in history. At the time, we did not know what COVID-19 was or how deadly it can be. Were we looking at something similar to the ebola epidemic that killed 11,000 people or the bubonic plague that wiped out over half of Europe’s population in the 14th century? (LiveScience) Are we talking tens-of-thousands or tens-of-millions of deaths in the US? The stock market began to price in a worst-case scenario. The downside risk of a significant pandemic has the potential to cause us to lose a large number of human lives and the possibility of a major reversal of human progress.

Once we began to understand this disease’s true nature, our worst-case fears started to dissipate, and the market reacted accordingly. Yes, COVID is extremely serious and deadly. Both of my grandparents are currently battling COVID, along with many other family members in my home state of Colorado. I am not downplaying this virus. However, it is not as severe as our fears indicated earlier this year.

Unprecedented action by the Federal Reserve and Congress has also had a significant role in the stock market reversal. The total SPX drawdown from its February 19th peak to its March 23rd valley was -34%. It could’ve been much worse if the Fed did not act swiftly and boldly.

The trillions of dollars in fiscal stimulus combined with the Fed’s actions acted as a catapult for the market. It only took five months before the S&P 500 broke above its all-time high. 

While the major averages have rebounded impressively, this rally has been extremely uneven, with tech growth stocks leading the way. The top 5 YTD SPX performers are five stocks that nobody would’ve predicted earlier this year. 

More importantly, though, this is the year of innovative stocks. COVID has accelerated technological growth and its subsequent adoption. Businesses that have been reluctant to embrace digital transformation or those that are unwilling to be flexible during these times now find themselves in severe financial trouble.

A post-COVID world will be one where society has embraced remote work, digital content consumption, platformification, and digital health solutions. Cathie Wood, the founder of Ark Funds, states it best – “As is typical during periods of turbulence and fear, consumers and businesses are willing to think differently and change their behavior. As both look for cheaper, more productive, or more creative ways to satisfy their needs, we believe that disruptive innovation will take root and gain significant market share.” This is why we see those companies that offer faster, cheaper, more cost-effective, and creative products to their customers are gaining significant share. They are the prime beneficiaries of this radical change we are living in today. 

Instead of going to a physical retailer to buy goods, people purchased their items online. Instead of meeting up with family or friends for dinner and a drink, people would order takeout and eat and drink at home. Instead of going to a movie theater, people are streaming their content. People are still consuming goods and services; they are only consuming them differently in this environment.

We believe that 2021 has a fantastic set up as there are significant tailwinds for equities. Life will likely never return to how it was in 2019, but 2021 will undoubtedly be better than 2020. Here are our most significant equity tailwinds for 2021:

Not a surprise to anyone, the most critical catalyst for equity returns is the deployment of the COVID vaccine. As enough American’s receive a vaccine, and as we approach herd immunity, we will begin to open our economy once again fully. Restaurant owners, bar operators, tourism employees, and others can finally return to work.

However, I suspect that the economic reopening plan will be lumpy and chaotic. Many Americans will opt not to receive a vaccine, many employees will prefer to work from home, and many businesses will have already closed their doors for good. The COVID shutdowns have done irreversible damage to many individuals and business owners, and some of them will not come out of this whole. However, those that have survived this will likely be stronger and able to capture more market share. This, in its simplest definition, is capitalism — survival of the fittest. 

The economy continues to recover from the March economic shutdowns, and I believe that we are at breakaway speed / terminal velocity. The latest economic shutdowns will likely impact our employment figures, but it will not be enough to derail the recovery. Consumer demand looks very strong. Inventory numbers indicate that companies are having a difficult time keeping up with consumer demand. Leading Indicators continue to show robust economic strength. All of this points to a continued strong recovery. 

The Democrats have secured the House of Representatives with a 232-197 advantage. The Senate currently stands at 50 Republicans and 48 Democrats. We are still waiting on the Georgia Senate runoff election results on January 5th, 2021, for the two remaining seats. If Democrats win both runoffs, the party will control the chamber because Vice President-elect Kamala Harris would break any ties.

However, if Republicans win one of the two races, they will maintain control. I don’t know how it will turn out, though it seems likely that this will be the case. Still, we will know very soon. If the Republicans maintain control, then we have a split Congress. From a capital markets perspective, this bodes well for near-term equity returns. There will be no changes to the tax code, and President-elect Biden will find it difficult to undo a lot of the deregulation President Trump has enacted over the previous four years. Again, from a capital-market perspective, this is good. Capital markets perform best under these conditions. 

At some point, we will have to pay for the fiscal deficit spending we’ve seen this year. The CBO currently projects a $3.3T deficit for FY2020. Are we only going to print more money to pay for this (this is inflationary and akin to MMT), or will we have to raise taxes at some point in the future? Who knows. We’ve been kicking this can down the road for decades, and I expect us to continue to do the same. 

We also have to keep in mind that the markets and the economy are fluid and ever-changing. What we see now and what we expect to see in the future will change. Having an open mind and a willingness to change is the key to success. If 2020 has taught us anything, it is that life will place roadblocks in front of you. Be nimble and recognize that you can overcome them.

In this episode of Solid Financial Advice, Ryan Hughes discusses the recent changes to the American capitalist system and how fiscal and monetary policy has influenced the markets. 

No longer is the Federal Reserve only using interest rates as a lever to spur or temper economic growth. With interest rates at all-time lows, they are now using more radical tools at their disposal. Monetary policy (the Federal Reserve’s actions) is having a more direct influence on economic growth. The YTD money supply in the US is up nearly 20%.

The Fed’s balance sheet has increased by 70% during this same period. 

During the COVID slowdown, fiscal policy (government spending and tax policies) has also implemented extreme measures this year, though it was mostly necessary due to economic shutdowns. The COVID recession would likely have been much worse without intervention. These measures, though, come at a price. 

A government issues additional debt when its net revenue does not fully cover its spending and the interest it owes on existing debt, creating a deficit. The year-end deficit is projected to be $3.3T, triple the shortfall recorded in 2019. Of course, this deficit is added to the country’s debt, and who knows when we will pay this debt down.

According to the Congressional Budget Office, Federal Debt held by the public is projected to be 195% of GDP in 2050 (Congressional Budget Office)

This activity resembles money printing, and some liken it to Modern Monetary Theory (MMT), an alternative to mainstream macroeconomic theory. MMT states that because the US government controls the money supply, the government can spend freely as they can always create more money to pay off their debts. 

MMT has become an increasingly popular economic theory in some left-leaning circles in recent years, in part due to its extreme change from our current policy. Progressive politicians like Senator Bernie Sanders of Vermont and Representative Alexandria Ocasio-Cortez of New York are among the most vocal MMT supporters. However, the single biggest problem with MMT is the devaluation of the USD and the subsequent inflation. If the government will print more money to meet it’s spending needs, how is this strategy sustainable?

Deficit spending will likely continue past this COVID crisis. Policymakers no longer feel compelled to allow the free market to determine asset prices, but instead are determined to guide it themselves. Capitalism, as we know it, has changed.

Furthermore, depending on the election outcome, taxes will likely rise next year, further complicating this new environment.

What does this mean for you all? We think there is a new game afoot and the rules have changed.

The direct influence of both fiscal and monetary policymakers will benefit equity prices going forward, especially on a relative basis.

However, with interest rates near all-time lows, we have a hard time believing that money printing will keep interest rates low and bond prices high. The risk/reward ratio for most bonds look meek at best. The question is, “When will rates rise again?” Your guess is as good as mine. Inflation drives interest rates and trying to predict inflation is near impossible. Inflation levels can rise next year, in three years, in five years, or even longer. While Money Supply is increasing, price discovery via online companies like Amazon has helped to keep inflation levels low. So, it is a battle between these two powerful forces.

More importantly, though, is that the Federal Reserve can remain solvent much longer than any of us. Trying to ‘trade’ off of these developments is risky. Though, what we do know is that interest rates cannot go much lower. Adjust your portfolio accordingly.

While asset prices are high and tax rates are low, we urge you to devote time to your planning ahead of the year-end. We are here to assist, as always.