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Does The Fed Know What It Is Talking About?

• Boy, howdy, did a lot happen this week!
• Between the potential government shutdown and the Fed, we have a lot to talk about.
• It drives us crazy that having to stay for Christmas break is a bona fide threat to the people in Congress.
• Could you imagine if Marines or firemen thought that way?
• In our view, when you commit to a job like being a member of Congress, you should be focused on doing your job for the country for which you were elected.
• At RPOA, back when the credit rating for the US debt was reduced, we didn’t say, Oh, well, you know what? The government downgraded and it’s the weekend.
• Instead, we stayed up till midnight making a plan for that momentous event to our investments and how to protect our clients from that.
• J. Powell, the Federal Reserve Chairman, gave a press conference this week announcing that they were going to lower interest rates by a quarter of a percent, or 25 basis points.
• Everybody expected it, and yet the market goes down 3%. Why?
• Some people are saying this was the worst press conference by a Federal Reserve Chairman in the last 50 years.
• Basically, he said they would lower interest rates, but next year, instead of lowering 4 times as they had projected, they now project only lowering two more times.
• He said inflation is not coming down as fast as they thought it would and that many members of the Federal Open Market Committee were completely against lowering it this time.
• So many investors hear that news and wonder, do these people even know what they’re doing?
• We think many investors decided that they’d had a great year and to take some profits off the table.
• But if you look at everything from the 30,000-foot level, we had already said that we hoped the Fed wouldn’t lower interest rates because we’re still in a rising inflationary period.
• We’ve said that the inflation would go up over 3% and sure enough, it did.
• We think it’s going to continue into next year, and it won’t be until probably later in the first quarter, into the second quarter, before we start seeing inflation trending down the way the Fed wants.
• The real estate market is slowing.
• Jobs numbers have consistently been coming down over the past few months.
• The economy is slowing and inflation, in our view, is eventually going to come down.
• We just wish the Fed would be data dependent and get out of the forecasting business!
• The market seems to react every time they say they’re going to do something and then change their minds once the data comes in.
• The economy has been a little hot so we think a cool down isn’t a bad thing, and the Fed will lower interest rates next year.
• Overall, it is not a bad picture.
• In addition, Trump is most likely going to extend, if not make permanent, the current tax regime that we’re under which is most likely going to be well received by investors.
• And the government shutdown, in our view, will likely resolve itself without a massive recession as it has happened a million times before, although the market will probably overreact to it all.
• The good thing for us overall, is that we have our Invest and Protect Strategy.
• No matter what we think, the market has a way of making people look very stupid.
• Therefore, we want to have a strategy that if the market falls off a cliff, that we have something to protect you with.
• We hope that gives you peace of mind.

Hello SCWPerS Nation and clients. It is me, your faithful founder and CEO, Ken Moraif, and I am still in bed. I’m being a good boy until this coming Friday, because I was an idiot. I admit it, I overdid a little bit of the stuff I was not supposed to do, and my knee swelled up, and so for my knee replacement surgery, and so my punishment is for two weeks, I’m not allowed to leave bed, and I have to keep my knee elevated above my heart, which is what I’m doing right now. So thank you for enduring the informality of my surroundings and not wearing my tie for you. I want to get into what happened this week, because, boy, howdy, did a lot happen this week. I want to get into that, but first, I’ve got a rant for you. So, you know, I just It drives me crazy, you know, I’m in total disbelief that it is actually a bona fide threat to tell the people in Congress, our senators, our representatives, that if you don’t vote for this on time, then you’re going to have to stay here for the Christmas break. And they’re like, oh my gosh, I gotta vote for it because I don’t want to miss the Christmas break.Are you kidding me? I mean, imagine if we were being invaded by, you know, God forbid, the Chinese and the Marines said, Well, you know, it’s Christmas time, so we’re not going to defend the country against that. We’re going to go home for the Christmas break. Or, what if a building was on fire and the fire department, the fireman or fire woman, they go, No, we’re not going to go over there. We’re headed so time is it? Oh, yeah, it’s Christmas break time, we’re not going to go put out that fire. I mean, no, when you when you got elected, when you decided that you wanted to be a member of Congress, you should have told your family, guys, there are going to be times when there are going to be things that need me to go there and do my job where I will not be home for Christmas, and the family should be okay with that. Otherwise, you shouldn’t have run in the first place. So every time this happens where, oh no, they’re not going to be able to go home for their Christmas break. What? That should not be a threat. It should be, yeah, that’s right, we’re not going home for the Christmas break. We are going to do our job for the country for which we were elected. Now, you know, in our little neck of the woods at RPOA, you know, I remember back when the US debt was they reduced our credit rating, and some of you may remember that, it was a few years ago. Well, this happened on a Friday night. I was actually at the movie theater. I was getting popcorn, and I got a text from one of the senior people on our investment committee, and they said, Ken, have you seen what happened? I’m like, no, what happened? He said, The US debt got downgraded. I was like, Oh my gosh. So this was Friday, seven o’clock. I was ready to go see a movie. I forget what it was. And so I said, All right, forget the movie. I told my wife. I said, You know what? I gotta go. We’re headed. I went back to the office, and we stayed up till midnight talking about what’s gonna happen on Monday. You know, given this momentous event to our investments, and what do we need to do to protect our clients from that? So what actions are we gonna take? So in our world, we don’t say, Oh, well, you know what? The government downgraded and it’s the weekend. So you know what I’m not going to do. I’m going to watch a movie and forget about it, you know? Or it’s Christmas. I’m on vacation right now. No, it doesn’t happen that way. You signed up for this job. You do your job. So anyway, just just me. So let’s talk about this week and something else that kind of, since I’m on a rant, it’s kind of bothering me, and that’s our Federal Reserve. So J. Powell, the Federal Reserve Chairman, had a press conference announcing what they were going to do, which is, they said they’re going to lower interest rates by a quarter of a percent, which is called 25 basis points. Well, everybody expected that it was like 100% chance of that happening. So they did it, and everybody expected it, so they did exactly what was expected, and the market goes down 3% on that news just falls off a cliff. What the heck! They did what they said were going to do, what they said they were going to do, and now you react that way? Why? Well, it’s because of what he said, you know, and some people are saying this was the worst press conference by a Federal Reserve Chairman like in the last 50 years. Basically what he said was, we are going to lower interest rates, yes, but next year, we were projecting we’re going to lower interest rates four more times, but we’re not going to do that now. We’re actually going to project that we’re going to lower them two more times. And you know, and why? Well, because inflation is not coming down as fast as we thought it would. And so therefore, you know, we anticipate that you know, we’re going to have to be more patient and take our time and let let things play out and let the data drive us and, oh, by the way, many members of our committee, the Federal Open Market Committee, the FOMC, were completely against this. So the market looks at this and says, All right, so you guys are all saying that you think inflation’s slowing down or not slowing down as fast as you want. You’re not going to lower interest rates next year as many times as you were telling us you would, but yet you lowered interest rates just now, which is inflationary. What the heck! The market looks at that and goes, these people are don’t even know what they’re talking about, what are they doing? And so I think, you know, as we look at it, what happened was, there’s a, you know, we’ve had a great year. Let’s take some profits off the table. These guys are the Keystone Cops. So let’s back away from it, okay? And let’s, let’s look at the 30,000 foot level, and let’s look at what’s happening. And actually, you know, as we said, I hope they don’t lower interest rates, because we’re still in a rising inflationary period. We’ve said that the inflation would go up over 3% and sure enough, it did. And now, you know, we think it’s going to continue into next year, and it won’t be till probably later in the first quarter, into the second quarter, before we start seeing inflation trending down the way the Fed wants. Now, given that scenario, we have housing coming down. We have so all of these things. Why did they lower interest rates? In our view, they shouldn’t have, but, you know, we’re not on the FOMC, so we have no voting power. But let’s look at the forest and not the trees. Housing starts are coming down. So the real estate market is slowing. The jobs numbers have have consistently over the last few months, been coming down. The economy is slowing. Inflation, in our view, is going to come down. It’s just going to take a little time and and so the Fed will be lowering interest rates next year. My wish is that they would be data dependent and get out of the forecasting business. They have been terrible. I can’t think of a single forecast over the last three years that they’ve gotten right. I can’t think of one. And they’re going to be data dependent anyway, regardless of their forecast, what they’re going to do whatever the data comes in, they’re going to react to that. So why don’t they just say we’re data dependent. We don’t even know how many rates we’re going to cut or not cut. Okay, let’s because now the market reacts every time they say they’re going to do something, the data comes in, and then they say they’re going to do something else. People lose confidence in the Fed, and then they sell. And that’s what we’ve seen. So there you go. Rant number two on the Fed. So where does that leave us? Our view is has not changed. Our forecast for what’s going to happen has not changed. We still think that the economy is going to slow down, but it was a little hot, and that’s not a bad thing, that it does cool down, we do think the Fed’s going to lower interest rates next year. How many times? Who knows? We’ll see the data will tell us. But overall, that’s not a bad picture. In addition, Trump is most likely going to extend, if not make permanent, the tax cuts or the current tax regime that we’re under that was first put in place when he was president in his first term, and so that’s most likely going to be well received by investors. And then this whole thing, with the government shutdown, as it has happened a million times before, will resolve itself without, you know, a massive recession and great depression following, although the market will probably overreact to it all. And as I record this, I don’t know what they haven’t resolved it yet. My inclination is to say that they’re gonna and then they’re gonna get to go home for Christmas. Oh my. So the good, the good thing for us overall, is that we have our Invest and Protect Strategy, because no matter what we think, the market has a way of making people look very stupid. And so therefore we want to have a strategy that if the market falls off a cliff, that we have something to protect you with. And we do. And so I hope that gives you the peace of mind it does me, because after all, I invest right along with you. I’m invested in the same things you are and I I trust our Invest and Protect Strategy to protect me as well. I put my money where my mouth is. I eat my own cooking. Find the cliche that you like, and that’s the one. So once again, make sure you share this video with your friends, your family, anybody that you think might benefit from it. We want to help as many people as we possibly can, and I wish you all happy holidays and Merry Christmas, Happy New Year. If we don’t talk before then, although I’m sure we will 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 

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RPOA Advisors, Inc. (d/b/a Retirement Planners of America ) (“Retirement Planners of America”, “RPOA”) is an SEC registered investment adviser with a primary business location in Plano, Texas. Registration as an investment adviser is not an endorsement by securities regulators and does not imply that Retirement Planners of America has attained a certain level of skill, training, or ability. The “Invest and Protect Strategy” (the “Strategy”) refers to a strategy that Retirement Planners of America fundamentally employs for its clients. Retirement Planners of America previously employed a similar strategy that it referred to as the “buy, hold, and sell” strategy or “buy hold, and protect” strategy. Past performance does not guarantee future results. 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