• According to Bloomberg, the day after the election was the biggest up day in the history of days after the election.
• The market has received potential policies under President Trump as favorable and so the market’s starting to price in what life could look like.
• One of the things that potentially could have happened under Harris was the Trump tax cuts might have expired, which would have been a big increase in taxes.
• As you guys know, we think that profits drive stock prices and higher taxes result in lower profits.
• One of the areas that has really shot through the roof is small cap stocks.
• Small US companies are a very important gage of where the market is, their pricing growth and optimism or negativity.
• Most Americans are employed by smaller companies.
• We think that in addition to Trump’s potential policies, if interest rates still have a path down, cost of capital goes lower, and that’s very healthy for small companies.
• We have a diversified portfolio, and we hold small caps.
• Small companies are like the proverbial canary in the coal mine.
• They’re more sensitive. And if, if people are feeling confident, then small companies are where they want to invest in because they have the potential to have the highest returns.
• On the bond side of things, when you buy a US government bond, it has an interest rate or yield that it pays.
• The fear is that the tariffs Trump has talked about could cause inflation to come back up.
• So, the market started bringing yields back up.
• The price of bonds are also part of the bond equation.
• In the last quarter, we saw bond prices move up as yields come down.
• But, as yields have come back up, prices have gone back down.
• Basically, it looks like the aggregate bond has settled back down close to where it started the year.
• Do we think you should sell your bonds and go all into stocks since it appears that’s the momentum now?
• No! Bonds are a supportive mechanism day to day because there’s a lot of volatility with stocks.
• We also think the Fed is going to continue to pull rates down so there’s probably more upside there.
• Ready for a fun history lesson?
• Looking back to 1901, what happens on average to the Dow under different administrations based on who is holding the presidential seat and how Congress is divided?
• Having a Democratic president and a Republican Congress, historically speaking, happens about 10% of the time and the market returns 5.21%.
• A Democratic president and a Democratic congress, historically speaking, happens 33% of the time but you get a 2.8% return.
• A Democratic president and a split Congress is a very healthy environment on average with an 8.68% return, but it only happens 4.58% of the time.
• A Republican president and a Republican Congress tends to be a very healthy environment for stocks with a 7% return and it happens around a quarter of the time.
• What about technology stocks?
• A lot of people have bought technology stocks and they’ve gone up crazy amounts!
• Historically, though, growthier sides of the market like technology tend to underperform in the first year of a presidency because the market gets excited about new economic policies and money tends to leave the old winners and go to new ones.
• So, it might be a good time to diversify if someone is concentrated in technology stocks.
• Overall, we feel pretty good about where we go from here.
• The economy should hold and interest rates may continue to come down.
• We are in a very healthy environment for the stock market and the bond market.
• But as we always say, when things are rolling along too well make sure you’re not actually rolling downhill.
• It’s certainly possible that sometime next year we could have a big, bad bear.
• The market could get way ahead of itself, or some new event happens.
• Having a strategy to protect against that, especially if you are over 50, retired, or retiring soon, is really important in our view.
• But overall, we remain optimistic and we hope our Invest and Protect Strategy gives you confidence as well.

Ken Moraif: Hello everyone, and welcome to our Market Alert video for today, which is November 8, 2024, and I think we have a few important things to talk about, maybe the election, maybe something that might even be more important to the financial markets, and that is the Federal Reserve decision. Did you guys even know that happened? I almost forgot to watch the press conference. I was so into what happened in the elections. So we have that to talk about. We have a ton to cover. But before we go anywhere, let me tell you who I am. I am Ken Moraif. I’m the founder and CEO of Retirement Planners of America, and we are a firm that specializes in retirement planning. We work with people who are over 50, who are retired or retiring soon. So if that’s you, this video is designed for you. I encourage you to subscribe. Click on the button below. And so I want to bring our Chief Investment Officer on with me, Jordan, would you care to join with us?
Jordan Roach: Hey Ken.
KM: Hi. How are you doing? I hope all is well.
JR: We’re doing great. It’s always a good week. We got a bunch of stuff to think through.
KM: Think through, and when the market’s up too. That’s always a good that’s a good one. That’s a good one as well. And I think if I understand the what I read or heard on Bloomberg the day after the election was the biggest up day in the history of days after the election. So the very well received election, it appears, so far, any thoughts on why that’s the case?
JR: Yeah, I think it’s I think it’s really interesting. I mean, I think right now, I mean, the market is looking for reason that, you know, what can do at this point where the economic, where the economy is to continue it moving forward, there were a few signs that there might be a little bit of caution, you know, underneath the hood there. And I think the market has received, you know, potential presidential Trump policies as favorable as a big tailwind. And so right now, the market’s starting to price into what life could look like. You know, the good news, I think, for the market too, is they have an idea what does policies look like, because we’ve been here before. So all those things right now are just, I think, a lot on the market, just to positively digest things and start carrying us forward.
KM: Yeah, that’s very true. Investors like to have confidence when they invest. And you know, one of the things that potentially could have happened was the tax cuts, the Trump tax cuts might have expired, which would have been a big increase in taxes. So there were some things that potentially were detrimental to profits. And as you guys know, we think that profits drive stock prices and higher taxes result in lower profits. And so that being the case, you know, it probably is a great deal of the reason as well. So let me see if I can give you control here. Why don’t you share with us what you’re seeing in the market and what’s going on and where you think we’re going to go from here.
JR: So, you know, again, like you allude to, I mean, the initial reaction certainly leading into election and the day of and the day after, very positive. So, you know, one thing you always want to see is not just the reaction on the day itself, because sometimes it’s a head fake, right? Is, do we see follow through the day after? And what we’ve seen, you know, on Wednesday, Thursday, and even early trading this morning, is market continuing to move up. And so that’s super positive. If you look here at the chart of the S&P 500. This goes back a couple years here, what you’re going to see is largely an uptrend, right? We’re going to have pull backs of correction along the way, but it’s an uptrend. And you see that red line on there, the 200 day moving average continue to move up. So all this is super, super positive. If you look at where we are right now, we’re trying to march, you know, towards that $6,000 price level, and that’s a very important level. Every increment of hundreds of a 1000s is very important. So it’s it’ll be interesting to see today, if we can get there, if get to that close. But either way, everything is very is very positive early on in terms of the market reaction.
KM: And one of the areas that. Is really shot through the roof on the news, and probably it’s a combination of the election, but also the lowered interest rates. And that’s small cap stocks, right?
JR: That’s right. So if we look at, if we look at us, see if I can go to the next screen here, we look at, you know, if you look at small caps as an asset class, so small US companies, you know, it’s a very important gage of where the market is, their pricing growth and optimism or negativity, because on average, when the market’s getting excited about things to come, small caps tend to perform well. And what we saw at least intraday on Wednesday, you know, small caps were up over 5% so, I mean, that’s just very much confirming what large caps are telling to us, that the market is excited about things to come. And like you said, for two reasons, I think, I think some of President Trump’s policies will be very supportive for economic expansion and small caps. I mean, most US Americans are employed by smaller companies. And then the other side of it is going to be interest rates, if interest rates still have a path down, and we don’t know how far down, but if we feel like, you know, the Fed cuts that started, you know, back in September, if those can continue through next year, cost of capital goes lower, that’s very healthy for small companies. And so, you know, obviously for us, we have a diversified portfolio, and we hold small caps. For this reason, at times as good, where you get that part of the portfolio showing some positive momentum. So it’ll be interesting to watch to see if this continues.
KM: Yeah, so, so small companies are like the proverbial canary in the coal mine. They’re more sensitive. And if, if people are feeling confident, then small companies are where they want to invest in because it, you know, they had the potential to have the highest returns, and as we’ve seen, they’ve really skyrocketed. So I’m going to throw a curve at you and have you skip over the next slide that we planned on talking about to go directly to the bonds and what’s going on with the bond market and, you know, and interest rates.
JR: Sure. So I think go to that slide prior. I think we had a there. Ken, let’s show the price. Let’s show the yield first. I think that’d be interesting to look at just as a mechanism. So here we’re looking at the 10 year yield or interest of US government bonds. So when you buy US government bond, it has an interest rate or yield that it pays. And here what we’re seeing is, you know, over the over, since late 2023 interest rates been moving up and down as everybody’s pricing in where the economy is going to go and where short term interest rates going, and usually the 10 year yield, or where it’s set at, is going to be a function of two things, how excited is the market over future economic growth, and what Are inflation expectations? And so what you’ll see here, especially coming kind of in mid-September and forward into the election, you actually saw interest rates yields for the 10 year go up. And I think that is, you know, the market is very smart, and that’s getting marketing to get an expectation that maybe Trump does win this. And if that’s coming there, there are largely things that are supportive in his policy for economic expansion, but the fear is that, you know, tariffs that he’s talking about could cause inflation to come back up, or at least maybe persist. And so the market started bringing yields back up. And really, what we’re looking for here, and that’s not inherently a bad thing, that’s just a repricing. What we’re really looking at is, do we get to that 4.5% level? That’s the level at least in the last two years, is when we get up to those levels. That’s where the stock market tends to find a little problem. You know, back in April, we had a little bit of a pullback. That’s where the yield marched over 4.5% if you go to October of 2023 that August to September, October level market went down 11% that’s when yields moved back over four and a half percent. So that’s really the thing we’re watching here, just to see there. And right now, we went a little bit higher, but we found some support, and then yields have backed off in the last couple days.
KM: So this is that what interest rates are doing on on the 10 year treasury, and so they’ve risen, and you’re saying that 4.5 looks like if it gets to that, it tends to bounce off of that come back down. And so what does that mean to the price of bonds? So this is the interest rate the bonds are paying. But what about the price of bonds? Because that’s also part of the bond equation.
JR: sure. So if we look at the price, it’s going to do the opposite of what this this chart’s showing. So this is actually going, you know, this is a longer look back here. This is kind of a three year look back, just to kind of give you an idea where the bond market prices have gone on average. And so, you know, really, you look here that recently, in the last quarter, we saw Bond prices move up as yields came down, but as yields have come back up in the last month or so, prices have gone back down. Right? That’s that’s naturally how that’s going to work on average, is they’re going to move opposite to each other. But what we’re finding here is prices are finding a level of support just over the 200 day. That’s good. I mean, naturally would. Unless something that’s really surprising happens short term, naturally, as you come down, in an orderly fashion to the 200 day, you start seeing buyers kind of support things, as long as something’s not, you know, inherently really surprising. So for us, you know, I think we look at bonds saying, Okay, we’re being we’re being paid to be patient. We’re collecting yield as prices have come back down. But unless there’s a wild surprise on inflation in the near term, I would say it’s probably unlikely that prices slice their way to through the 200 day, slice their way through this level that we held for basically 12 months, and then we just, we kind of go from here and see how policies play out.
KM: basically, it looks like the aggregate bond has settled back down close to where it started the year. But the good news is that interest, the previous slide we looked at showed what the interest we’ve been paid, you know, investing in the 10 year would have given us. So like you said, we’re we had a fun ride, and we’re getting it, but we’re back to where we got on the ride, but we’re getting paid. We got paid while we were for being on the ride in the first place. So, so if somebody were to say, Well, should I sell all my bonds and buy stocks? You know, since stocks look good and bonds are kind of treading water and maybe earning 4% or something, should I just sell all my bonds and go into stocks, since it appears that that’s the momentum now?
JR: Yeah, so I think it’s a very interesting question, and that’s going to come down probably to, you know, some level of like a planning overlay, and what, how people are thinking. But, you know, it’s two ways here. You know, bonds for us is we want them to be a supportive mechanism day to day, because although we’re optimistic on stocks, we also know that there’s a lot of volatility there day to day, week to week, and so bonds for us right now are, you know, to pay us to be patient, help us buffer day to day movements. And we do think you know short term. And what I’ll define short term, let’s call it end of the year to some point in the first quarter next year. We still think, as the Fed is continuing to pull rates down. There probably some upside there. Okay, and so that’s we’re thinking.
KM: So what about people who, what about people who have cash, you know, what do you think they should be doing, you know, right now?
JR: So I think this is interesting question. So, you know, I think we’ll talk about, you know, what history tells us, or where the market could go with Trump and President, with the Republican overall government. But from everything we’re looking at, and that’s, you know, economic signals, technical signals, I think probabilities are pointing towards, we’re optimistic. We’re pointing towards. It would not be wild to say stocks right now are excited, the market is excited, and we’re likely to move up, not in a straight line, things can change, but the odds, I think, point to positivity. So what I would say is, you know, there’s always noise risk on the outside of saying, Well, I don’t want to put money in here, but you know, the funny thing is, we have two things working for us right now. One early signs the market is digesting things well, right? So that’s a always a good sign, because the market is a beacon of truth. Of saying, Here’s what I believe, here’s some prospects, and being at towards all time highs, historically speaking, is more positive than it is negative. Usually gets all highs, and people get scared there, usually all time highs. We get more all time highs, yeah.
KM: And you also have the Federal Reserve that’s on a trend of lowering interest rates.
JR: Yeah. The market’s been waiting for that since, you know, March of 2022, basically.
KM: So let’s have some fun, and let’s go and look at what has happened in the past when you have different administrations and those kind of things. So kind of walk us through this particular chart right here.
JR: Okay, yeah, this, this, this was a very interesting exercise, because, you know, we get questions a lot of you know this person in the seat of that person when you know this is definitely going to happen. So what we went through is an exercise early in the week, to say, historically, based on who’s holding the presidential seat, how Congress is divided, what tends to happen with the market, just to give us some historical context. And so what I did is I went back basically to 1901, and we looked at the Dow, because back then there was no S&P 500. There’s the Dow, you know, not as many companies out there. And I wanted to see what just happens on average. And so, really, you know, going into Tuesday and certainly waking up Wednesday, we had six things that could have played out Okay, six different variants. So we could have had, would have been a Democratic president and a Republican Congress. You know, market would did not view that as a completely unlikely event. You know, historically speaking, if that would happen, if that happens, the market returns 5.21% during that regime, okay? And that happens about 10% of the time. So it’s a fairly healthy market environment. And it happens not infrequently, 10% of the time. The next thing that could have happened is we get a Democratic president and a Democratic Congress, right? So Democrats are holding both the Senate and the congressional side. Now that is not, historically speaking, market does not tend to perform as well. In that environment. You get a 2.8% return, and that happens about 33% of the time. So it actually happens a lot. It just doesn’t tend to yield as positive market results. Then you have a Democratic president and a split Congress. So a split Congress. So split Congress again is where you have Republicans on one side and you got Democrats on the other. That is actually a very healthy environment historically. So on that, in that regime, on average, you have an 8.68% return. But that’s a very unlikely occurrence, 4.58% of the time. So if we look at this historically, we just saw this, or we’re in it right now. Should we? Should we say, right? So we’ve seen this under President Biden, under Obama, we had this same situation on the second term, and then before there, then I’m pretty sure the last time this happened was Grover Cleveland, something like that, in the 1800s I mean, Grover Cleveland, we don’t even think about him as a president, like he didn’t come up in history books too much. That’s that would be kind of the last time.
KM: think he’s the last guy that had that got reelected with a gap in the middle. I think that’s the last time. Was like, yeah, so yeah, it’s a long time since that’s happened
JR: Long time since that’s happened. So that’s favorable, but it’s very unlikely. So now we have to what we just what we just got, right? What everyone voted so Republican president and a Republican Congress, that tends to be a very healthy environment for stocks. So in that side, you usually get a 7% return, pretty good. Yeah, it’s not infrequent either.
KM: Yeah, it looks like it happens one fourth of the time, but certainly, because it just happened for us. It’s 100% of the time that’s right, that’s right. And so, yeah, so this bodes very well looking into the future. So what do we take from this we talked about, you know, it’s probably an opportunity for somebody who has cash to to look into, you know, maybe putting that to work. Bonds, we said, look like they might kind of stay at this level, but we’re getting paid the interest to sit and watch that the potential for growth is there. What about technology? A lot of people you know have had bought technology stocks, and, you know, they’ve gone up 2,000% or something. What about those people?
JR: Yeah, those people have been living high on the hog for a while. I mean, you’ve been paid to be in those I mean, it’s been a wild ride, but you’re paid for it. So another thing I looked at historically say, what parts of the market tend to do well in a first year of a presidency, regardless who’s in the seat, and certainly, if I look back at Trump’s, you know, first presidency, what happens? And actually, technology and growth, or growthier sides of the market, tend to underperform in those in those regimes for a number of reasons, a lot of times, because the market gets excited about new economic policies that can bolster things. And so money shifts to value the cyclical names and money leaves kind of the old winners and goes into new ones. And that’s we’ve seen that pretty regularly. And so I would say, you know, I don’t think it’s unlikely to look at a history that people start taking money out of the technology names and moving it to other areas of the economy that will benefit, with lower rates, with expansionist policies, lower taxes, all those types of things.
KM: It might be a good time to diversify if someone is concentrated in technology stocks. And you know, I think Bernard Baruch, who was the Warren Buffet of the Great Depression, he said, you can never go broke making a profit. So if you diversify out of your tech stocks, you probably have a lot of profit there, and you’re not going to go broke doing that. So yeah, so it right now, it sounds like what you’re you’re looking at, is that we, we feel pretty good about where we go from here and and, you know, it looks like the economy should hold and interest rates may continue to come down. That’s a very healthy environment for the stock market and the bond market. But as we always say, you know when, when things are rolling along too well make sure you’re not actually rolling downhill. It’s certainly possible that sometime next year we could have a big, bad bear. You know, the market could get way ahead of itself and or some new event happens, or, you know, the policies that people think are going to be good turn out not to be, and then you have a big bear market. And so having a strategy to protect against that, especially for the people that we work with, right, that are over 50 who are retired, retiring soon, that’s really important.
JR: I think that’s right. I mean, for us, you know. Yeah, ultimately, when we build, you know, our strategy, and we look at things, we’re building a strategy where we’re playing the odds. That’s all we’re doing. We’re playing probabilities, not absolutes, not guarantees, and everything we’re looking at points to probabilities being higher than not that the market continues. And if we look at how the markets already reacted, I mean, there’s a lot of positivity there. And so at the end of the day we say, Okay, we have a lot of things going for us. Things can change. But if I can’t, you know, put things forward and have confidence in this environment, it’s gonna be hard for me to find environments where I am. So that’s one and the second thing would be, yeah, is at the end of the day, markets Correct. Markets move down. And so having that, that sell mechanism that’s following us, and actually, right now, the cool thing is, our sell mechanism is following us as the market moves up, so it’s always right back behind us to help lock things in if the market ends up being wrong about all this stuff. Um, so hopefully that will give people confidence to continue to be invested, reinvest and move money.
KM: Yeah, and our strategy, we, we’ve, you know, Invest and Protect Strategy is, there’s a time to invest and there’s a time to protect. You know, it’s kind of like Kenny Rogers famously said, Right? There’s a time to hold them and a time to fold them, yes, and so that’s always important, all right? Well, Jordan, it was, it was great visiting with you. Thank you for your insights. And again, please subscribe to this video. You guys don’t want to miss any of this delicious content anytime, any week. Well, thank you guys for watching, and we’ll talk soon.

Please note: transcript has been modified after the time of recording. 

Economic indicators and stock market performance cannot be predicted. Opinions expressed regarding the economy and the stock market belong solely to Ken Moraif on behalf of Retirement Planners of America and may not accurately portray actual future performance of the economy or stock market outcomes. Opinions expressed in this video is intended to be for informational purposes only and is not intended to be used as investment advice for individuals who are not clients of Retirement Planners of America. All content provided is the opinion of Ken Moraif, CEO and Founder of RPOA Advisors, Inc. (d/b/a Retirement Planners of America ) (“Retirement Planners of America”, “RPOA”). ©Copyright 2023