A New Year

0:00 Welcome to something more with Chris Boyd. Chris Boyd is a certified financial planner, practitioner, and senior vice president, financial advisor at wealth enhancement group. One of the nation's largest registered investment advisors. We call it something more because we'd like to talk not only about those important dollar and cents issues, but also the quality of life issues that make the money matters matter. Here he is your fulfillment facilitator, your partner in prosperity, advising clients on Cape Cod and across the country. Here's your host, Jay Christopher Boyd. All right. Welcome to a new year and another episode of something more with Chris Boyd. Thanks for being with us. I'm Chris Boyd.

0:41 I'm here with Jeff Perry and Russ Ball. We are of the AMR team and the firm is wealth enhancement group. So glad to have you joining us and glad to talk about let's, let's start by looking back and looking ahead this year. It is the time of year when people make resolutions and one of them oftentimes is thinking about their financial life and all that goes into that. Maybe a little bit of their portfolio review, maybe a reset their financial plan. Um, we certainly can be a resource to you if you should have any needs along those lines. Uh, don't hesitate to reach out to us. Um, we're, uh, that's what we love to do.

1:21 We're a resource for that kind of thing. So, uh, in any case, uh, for those who are, uh, interested, you can, uh, connect with us by reaching out to our email, amr-info at wealthenhancement.com. We are, um, regularly we provide a complimentary consultation. Um, we usually work in a two-step process where we like to take a look at, um, getting to know you. Get to know all your priorities, all your, um, details. And then we, uh, follow up with a followup meeting to, uh, do some assessment to some analysis, present what we found and how we would suggest you do things.

2:04 So if that's something you're thinking this time of year, you'd benefit from, don't hesitate to reach out to us. Uh, again, that's, uh, amr-info at wealthenhancement .com or 866-771-8901. Um, so guys, let's, let's start by looking back and then looking ahead. Um, I was thinking about, um, performance data and looking at a couple of different articles that we're talking about, uh, what's been happening with the, uh, the performance of the markets. Um, I'm sure you guys have some of this too. Anybody want to chime in with, uh, some of the data, the S&P 500 perhaps?

2:46 Uh, been another banner year, 2024. Another banner year, 23.31% in 24 after a 24.2% to back-to -backs. So 23 got 24 and 24 got 23. Huh? Is that basically what it is? Yeah, that sounds pretty good. A two-year gain of 53%. That's kind of astounding. Of course it had been a down year the year before. I know. Hey, I'm trying to, I'm trying to celebrate. Yeah. Sorry. But no, that's pretty amazing. Um, that's, uh, the biggest gain, biggest two -year gain since 1997. It's amazing. Yeah. Um, it is, uh, it is after the pandemic and the, you know, yeah, bad years for the stock and bond market in 2022, which was really driven by the feds, um, jump in interest rates that took a toll on both stocks and bonds, uh, at that time because of the severity of the dramatic change in, in the nature of that.

3:48 Um, that being said, um, look, I, I think, um, you got to celebrate, like you said, it's, it's exciting to have those kinds of returns. Um, it, it's, um, naturally a time where you start thinking, well, can that continue and, you know, you look to other periods of time and, um, although we tend to say, oh, the average is, you know, two years up, one year down, you know, that kind of thing. It's, uh, not necessarily sequential that way. Um, one year down, two years up. Well, however, um, as you look at it, right. But, um, you know, you look to the 1990s, uh, the 1980s and nineties, really there were prolonged periods of, um, upswing and, um, you know, prolonged upswings.

4:36 Uh, so it's not necessarily, um, something where we have to be thinking, oh, the other shoe's going to drop, you know, that kind of thing. But, uh, just while we're talking about it, do you want to, uh, anybody want to make any predictions? What do you think? What should we expect? So in the, uh, well, in the CNN article, they said, uh, wall street forecast reviewed by CNN show most strategists expect double digit percentage growth for the S and P 500 in 2025. That's not me though. More moderate than in 2024. Analysts expect that I'll just share this S and P 500 to rise 14.8% in 2025, according to facts that, um, I'd love to know what they predicted for 2024, but I know you don't have that data, but yeah, everyone up their predictions as they go.

5:28 Right. Yeah. Well, Santa Claus didn't think we needed any more at the end of 24. Oh, my wife believes in Santa Claus and the Santa Claus rally. And she got excited at the end of the year. Like, Oh, we're going to get a, we're going to get right after Christmas. And Santa Claus was very good all year, but he did not give us the rally. So would you like my prediction? I would, I see Russ thinking about it. So I'll go first. I don't mind. Well, first I'll say something that didn't happen in 24. And that is that we did not have a correction, which is a normal part of the market, 10%, you know, broad based and the averages.

6:09 So my first correction is that we, my first prediction is that we have a correction and my end of year prediction for the S and P is 6,200 after the correction, uh, 8% gain for the year. So I'm optimistic, you know, yeah, I'm not running to the Hills. Um, that's a realistic kind of a way to look at it. Um, but that's, that's good. So an 8% gain is your, your estimate. I was going to start with a thousand point gain, but that includes the 10% correction coming back from that. So I think we're going to have, you know, end of the year, 6,200, roughly 8% gain, you know, moderation kind of sector rotations coming on, maybe value being more appreciated.

6:59 Maybe that, maybe the, you know, the high flying techs, AI stocks might have a neutral year, but at the end of it, when everything balances out, I think a modest gain of 8% after the correction is how I see it. Well, I have a stat to share. That's kind of in line with that. I read this morning that, uh, after two consecutive years of 20 plus percent, uh, returns, the average was about six, I think it was 6.7% for the ensuing year. So that's pretty close. That sounds in line with, yeah, that kind of thing. Thank you for the affirmation, Russ. Excellent. Um, that's interesting. And I think, um, you know, your point about a correction and so forth.

7:42 I'm, I'm feeling in line with that. Look, I would just start out by saying, uh, predictions like this are really of no value to anybody. It's just, it's fun to do. Mine has any value. Yeah. Right. I mean, you know, so, uh, that being said, uh, I I'm more cautious. I think, you know, we'll be, uh, just a little bit positive or a little bit negative when year end comes. And, um, floating through the year or with a correction and recovery. No, I think there'll be, um, I mean, I think there'll be a downturn at some point, you know, you look at, we're a little overextended when it comes to, uh, PE multiples at 22 times or thereabouts.

8:24 Um, maybe a little less than that today. I don't know where it is exactly today, but, um, and we're recording by the way on January 2nd. Um, and then, you know, when, uh, when you look at, um, the high, uh, prospects for a government showdown, uh, when it comes to, uh, the debt ceiling been pushed off to what March at this point, uh, uh, when you think about world events, uh, geopolitics, uh, uh, you know, I don't know. It seems it would be surprising to me if we didn't have a correction. Like you were saying, uh, you know, last year we didn't say though, we had a, um, a downturn of what was it around 8% at some point during the year, but not, um, a full 10% correction.

9:10 And, um, I just, and I just think the likelihood is high that we'll have some disruptions and some volatility reenter the, the experience. Um, and I think it's probably likely, you know, we'll end the year a little bit positive, but, um, I don't think it'll be, uh, uh, another banner year that way. Not going to give us a number for the, I didn't put, I didn't put a calculation to it, I'll go 2%, uh, if that's helpful, 2% higher. Okay. So you're 59, 50, maybe. All right. That's pretty pessimistic, I think. But, um, at the same time, you know, after you have, um, a couple of years of banner numbers, like, you know, it seems to be surprising to me that we just didn't have some sort of a slowdown a little bit.

10:01 I'm going to, when I go ahead, Russ, sorry. Yeah. I have another stat. So, um, only once has S and P had more than more than two years consecutive 20 plus percent. So, and then I think it was in the nineties, so only one time ever of three. I'd be very happy to be wrong and have another record. I'm fine with that. Absolutely. Absolutely. Well, let's talk about some other, um, stats in terms of the, the year. Um, let me just see if I can find some of these details. Uh, was I thought that I saw gold in the numbers, but let's look at the treasury. Treasury had this wild fluctuation from, uh, yeah.

10:44 Well, I just, at one point, just a few months ago, we were down around. Uh, 3.65 or something like that on the yield and went up to about 4 .65. Uh, that's a little bit off that, but, um, it's what, around four and a half, maybe on the yield somewhere there abouts four or five, seven, four or five, seven. So, um, you know, that with that, keep in mind as yields go higher, uh, prices tend to fall, so you have some disruption in performance there. Uh, but the year started what with the, uh, treasury around 3.9 and, uh, ending higher, um, and, um, what else could we share as interesting stats and just like sifting through this article?

11:37 Um, you got anything, Jeff, you want to share? It's my least favorite thing to talk about, but cryptocurrency, you have to, you know, you have to give credit where credit is due because we're critical when it's not there, but cryptocurrency returns specifically Bitcoin had a heck of a year, primarily didn't have a heck of a year, had a heck of a couple of months after the election, you know, president Trump was, uh, reelected or elected, however you want to frame it. And his, uh, posture on policy is different than that of president Biden. Well, on the expectation, he's been pretty critical of, uh, uh, the SEC chair.

12:17 Right. Kenzler is it? I can't think of his name and he's leaving and he's getting rid of him in a hurry and, uh, put in someone who's more friendly to crypto, which, uh, crypto markets have been very excited about and the prospects of, um, uh, the performance of, uh, crypto is pretty appealing from that perspective. Um, I think that there was an interesting article in the wall street journal yesterday about the topic of cryptocurrency and some of the changes that would, should be helpful to, um, to, uh, the outlook for a digital currency.

13:01 Correct. And whether or not that's baked in, you know, the efficient market theory, right. Is, is all this baked in all the favorable stuff brought forward, which happens a lot in markets. Yeah. Are markets too overly optimistic in crypto or AI or, you know, pick one. Right. Um, not, not long ago, I was thinking of this this morning when I was thinking about what we talked about on the show, but for a period of time, um, e electronic tokens, what was it? Those, uh, tokens that you bought of artwork or the original. Yeah. Um, and NFTs. Yeah. They were the rage tokens.

13:42 Yeah. They were the rage and people were spending crazy money to, you know, buy the original image, uh, original digital image. Or then we have this period of people buying real estate in the metaverse and paying ridiculous, you know, I did, that's an adjective that I'm choosing. Some may say investing for their future. Um, yeah, I have a cold, so excuse my coughing, but maybe my cold is affecting my word choice as well, but buying these things that are trendy and socially popular, and they last for a little while and then they just kind of disappear. So they're very speculative. And for me anyway, I still put cryptocurrency, it could change.

14:26 Uh, I still put cryptocurrency in that highly speculative bucket. Well, we would encourage people to treat it that way in their investing. If they should use crypto in some fashion, some of the things that have changed over the year, uh, we did see the introduction. It was, I don't know if it was last year or even before that, but it was, it was recent that, um, ETF, uh, access to crypto, um, became more widely accessible. Uh, similarly, we've seen, um, platforms, uh, embrace the ability to provide, uh, like brokerage platforms start to begin to give, um, acceptance to the idea that they're going to make, uh, it available to buy, uh, through a, a platform like a brokerage platform.

15:14 Fidelity, I think already does this. Um, Schwab I think is in the process of doing this. There might be others, but, um, that makes it more widely accessible as opposed to having to go through a digital wallet and trying to find, you know, you know, which, which platform is legit, which is which ones, you know, we saw the FXT, uh, uh, was that the one that was the, uh, blew up with, uh, Oh, Sam. Yeah. Bank fraud. Yeah. So in any case, um, his name is Sam bank fraud. I mean, if you say it quickly, almost, almost, um, that's not original content.

15:58 I stole it from Saturday night live. I think that's pretty funny. Uh, so anyway, but my point, uh, ultimately is that, you know, you're seeing this greater acceptance of, and, um, easier engagement, uh, that also, uh, has helped this, the price go higher, faster as more people, you know, have the opportunity to access this more readily, uh, through these various, uh, channels, uh, ETFs and now brokerage platforms. Uh, so, you know, all these things kind of, uh, uh, lead you to think, okay, maybe it's gonna still have some, uh, involvement that's easy if, as opposed to a regulatory environment that was very skeptical and made it more challenging and, uh, so forth, you know, a lot of the obstacles have been, you remove some of that regulatory, uh, there was a, you know, how, how will this be regulated?

16:56 Um, where is it regulated as a commodity? Is it a commodity like gold or silver or something? Is it a, um, um, a currency? Is it, uh, not a currency. I'm sure it's not a currency. So is it a capital gains treated, you know, like all this, well, the IRS says it is now you have to report your transactions. Yeah. So, um, you get my point that it just, it's a, it's a, a challenging, you know, for, okay, it becomes more, um, accepted, but there's still things that, you know, investors need to be mindful of being tuned into. Um, but if you're going to be speculative, that is say money, you're willing to lose a significant, have significant volatility, which could be attractive at times, but it could also be.

17:45 Uh, unattractive at times where you could, you know, lose significant amounts, uh, in very short period of time. Uh, if you're willing to tolerate that kind of volatility, then that's how to think about these kinds of investments. Yep. Um, so in any case, uh, did we find, I didn't find the Bitcoin, uh, returns for last year. I didn't find them. I just, but they were, they were, um, uh, enormous, um, phenomenal hundreds of times, um, multiple, um, uh, it was 500 times. It might've been even greater. We'll, we'll find it in just a minute. Uh, I'll, I'll, I'll look that up. One sector of the economy that didn't have a great 24, um, is the real estate sector, whether it be, uh, you know, perhaps stocks that you own in the real estate sector or a REIT maybe, um, or you're looking at the value of your home, depending on where you live.

18:36 It was not a great year for real estate. So, I mean, that's in my mind, you talk a lot about Chris, about reversion to the mean, and I think real estate was affected, you know, the first thing people say is it was higher interest rates, right? So that's relevant, certainly, but also we had such a boom year years during the pandemic where so many people bought second homes or moved or did whatever they were going to do. I think a lot of that business was brought forward and it was time for maybe a correction anyhow, in the real estate market prices were going through the roof, building permits were through the roof, and so you throw on 7%, 30 year mortgage rates on that.

19:19 And they really, sorry. Just, uh, I was, I was incorrect. It was about 116%. It looks like Bitcoin specifically over a one year period. Okay. Still a great year, right? But yeah, but I mean, that's, that's, I mean, that's doubled, you know, so went from, I think around, I want to say it was around 44, 45,000 up to 97 or something. Yeah. So in any case, um, maybe it's a good time to trade in your Bitcoin and buy some, uh, real estate. Yeah. So continue with your point about real estate, the reversion to the mean you were saying, yes, that's all. I think I was done with my comments basically, but I think several factors in addition to the real estate, uh, the interest rate on mortgages, the market needed some time to breathe.

20:09 Prices were getting out of hand and people had handled, you know, done what they were going to do. So builders were in full steam. And whenever that happens, if the market slows down, builders often get caught with a little bit of inventory and that slow additional inventory slows down prices. So I think it's a normal thing. Part of the market, part of the reversion to the mean, just like stocks can't go up 30% a year forever, 25% forever, house prices were going up double digits also for several years. That just puts people out of range. And, you know, would be buyers just rest. You've talked about this before would be buyers just say, I'm, I can't buy anything, right?

20:49 Yeah. Yeah. I mean, a lot of, uh, people in my age group, or at least peers that I talked to are not even educating the possibility of buying a home right now, just feeling like it's prices are too high rates are too high rates are higher and there's, you know, there's just not a ton of options in the market right now where they look. I would, um, say that, I mean, what, what are, uh, interest rates, uh, on mortgages around 7%, 30, 30 year, around seven, give or take, depending on credit and all that kind of stuff, 15, you know, six and a half. I don't think that's a historically high. Um, it's just, we're so used to the very low, uh, but that makes it challenging.

21:34 Um, I would argue are though, it's more like historically high. Yeah. Yeah. So them coming back or at least the, the percentage of increase that people catch up, I saw a statistic last night that the average age of the first time home buyer is the highest it's ever been in the United States and it's 39. That's very, that's, that's goes right to Russ's comments though. I mean, yeah, I bought my first house at, um, 24. Yeah. Yeah. I think I thought I was overpaying. It was a hundred thousand dollars.

22:16 Nope. Um, we, uh, I was a similar age. I think I was a little older, maybe 26 or 27, something like that. But, um, yeah. Um, I think it was a little easier. Uh, well, the, the price was a similar, it was like 125,000 for when we bought our first house, uh, same time our income was nil, of course, but, but it worked. The math worked. You could, you could buy a, it was a ranch. We bought a two bedroom ranch and it was great for us in Plymouth actually. And, uh, we could afford it. Yeah. I don't think it brings you to the whole thing about student debt and, you know, the, uh, all, all these variables that go into health insurance costs and, and so forth, uh, you know, all these, these related considerations.

23:11 Um, but I think, I think it's, you know, we get back to this notion that, um, there was a supply, uh, problem, if you will, in the, uh, housing, um, and. Prices went up dramatically. Uh, people didn't want to give up their low interest rates. That's going to continue to create a lag on, um, supply, uh, for a while. And I think that's probably going to be the case for a while. Still supply is so regional though, like in Florida, where I am, where there's a lot of building probably, um, the supply is up because these builders were, you know, I have staff they're building and three years ago, two years ago, you couldn't buy a inventory home because they were so behind the building homes that people wanted.

23:59 Now you can't in certain parts of the state. Um, you can buy an inventory home at a price that was substantially less a couple of years ago. So it depends where you are. If you're in Cape Cod where you gentlemen are, it's, there's not a lot of building going on, so that's not impacting the real estate market, I would think. That's a good point. Um, so, I mean, I guess as investors, you got to be thinking about these kinds of, uh, back and forth and so forth was, I think where you were going with that, Jeff, uh, the, um, the, the pullback per se or whatever that, you know, prices seem to have had a little bit of a decline. Yeah. I'm just in my head comparing like you're often comment about reversion to the mean, and that's, it's normal markets go up, they go down.

24:49 Um, that's why you have a financial plan. That's why you review your plan. That's why you talk to your advisor so you don't get swept away in whatever sector that's getting your attention in the temporary situation, you have a longer term vision and a plan to get you where you, where you want to be. Yeah. Good point. Good point. Um, it does, and it does bring us to this, uh, bigger question that we, we won't deal with today, but this, um, you know, this ongoing challenge as a society that we face the question of, um, how do we deal with the fact that. Uh, there's some inequity, uh, in terms of people with lesser resources, have lesser ability to acquire a home as an example, whereas people who have a wealth have greater ability to continue to grow their wealth.

25:40 Um, and so it really becomes essential for every investor to every person, you know, to be thinking in terms of that, they need to have the ability to be in a position where they can live below their means, uh, so that they can accumulate some resources to be part of the wealth class and not just part of the wage class, because if you're only in the wage class, you're not participating as fully in, uh, the opportunities of the way our society seems to be working. You know, and part of that is the government, but part of it's you as a person, I think that's what you're saying, right?

26:23 Yeah. It's partly one has to strive to cultivate that extra, that little bit, little bit extra to invest, whether it's in your work plan or whether it's, uh, you know, like a 401k or whether it's in your own savings and investment, uh, outside of that, uh, one thing that's interesting, I will add to our conversation just before we look to kind of wind down, uh, was how, uh, ETFs. We talked about this not long ago that ETFs have taken on a greater, uh, participation in, um, the, uh, choice of selection of how people choose to invest, um, 30% growth, um, in the use of ETFs last year, uh, bringing, um, the investment in ETFs to $10 trillion, uh, last year, um, pretty significant.

27:17 Uh, that's U S E T a U S based, uh, uh, stock exposure. And as we talked before, some are a lot of that money is coming out of mutual funds, I assume. Yeah, it is. And I think, um, it's interesting too, that we, you know, we talked about this, that a lot of this tends to be index based. Um, I saw some interesting stuff from Jeff Patak. We should probably see if we can get him back. He was talking about how, um, active managed who's a morning star, uh, person. And, um, he was talking about actively managed how they're not really all that different in terms of that top heavy exposure, um, to the, the, the mag, you know, seven or, um, you know, the top 10 holdings tend to be a lot of the same heavy weight that indexes have.

28:08 Uh, it's, you know, not as, um, different that, as you might expect, but it's grown quite a bit. Yeah. Yeah. Did you see some of this too? It was a 40% of the mag seven make up the S and P that's off the top. Yeah. I think it's, I think it's, uh, even, I think it might even be more, but I don't remember now, but yeah. My, and then this was interesting that, uh, you know, his kind of point was, uh, you're, you know, if you're thinking active management's getting you a broader diversification or, uh, it's not as different as you might envision. And I think that's maybe an, an important opportunity for managers to be recognizing or thinking about if they're really going to provide, um, active management and, uh, benefit, uh, to maybe somehow differentiate from the index.

28:59 Um, and more, yeah, anyway, interesting stuff. Uh, when it comes to, um, the year ahead, lots to think about, um, you know, whether markets will go up or go down, you know, the, the issue for most investors is to be a long-term investor, uh, we don't know whether markets will go higher or go lower in a given year. It's all, you know, prognosticating. It's just, uh, take it with a grain of salt. Really the, the reality is we want to be invested for the long-term because we want to participate when markets go up and we don't know from one moment to the next, whether we're positioned to go higher or go lower, we can all have an opinion, but that doesn't necessarily define what the market will do.

29:43 And, um, I think the big picture is, uh, you know, we can be modestly tactical here and there to try to, um, adjust our allocation, but we might either miss out or take on too much risk or whatever may be. If we try to be too, too, um, active in that tactical, uh, get me in, get me out kind of mindset. So the best thing to do ultimately is to have a long-term view, find the allocation that's a good fit, uh, be invested in that allocation and some modest adjustments, uh, about what's, which sectors represent opportunity, uh, where, or where, where there's opportunity within the market, how to be structured within the market where you have participation, but, um, you're going to ultimately benefit, uh, by the longer term directional movements of, uh, exposure to the market, which over time, if we expect the economy to continue to grow, uh, we would expect to benefit from now, if we find, you know, that, um, we really do have, as an example, uh, mass deportation, uh, or dramatic, um, tariff increases.

30:58 Some of the things that people worry about, uh, in the article, what's been articulated with the political perspective of, you know, often what drives a lot of our listeners to have anxiety. Um, if those things do actually materialize, then we want to maybe position a little bit more defensively to say, oh, how do we, how do we position for these kinds of things? But there's a big difference in rhetoric and application of policy, right? So let's, let's see how things develop, see how things go, because there's also the potential for, uh, less taxes of, uh, when it comes to corporate taxes being, you know, low, low rates extended and less regulation, less regulation, all these things that would benefit businesses as well.

31:39 So you really have to be a measured kind of approach and see how we do. Yeah. Um, anything to add? It's going to be another interesting year. It sure will. All right. Well with that, everybody, um, if we can be a resource to you, as you think about your own planning, don't hesitate to reach out that you can connect with us. Um, and as I said, uh, uh, opportunity for, uh, uh, financial planning and portfolio management, we offer a complimentary consultation and would love to talk to you along the way. Until next time, everybody keeps striving for something more. Thank you for listening to something more with Chris Boyd.

32:22 Call us for help, whether it's for financial planning or portfolio management, insurance concerns, or those quality of life issues that make the money matters matter. Whatever's on your mind. Visit us at something more with chrisboyd.com or call us toll free at 8 6 6 7 7 1 8 9 0 1, or send us your questions to AMR dash info at wealthenhancement.com. You're listening to something more with Chris Boyd, financial talk show, wealth enhancement, advisory services, and Jay Christopher Boyd provide investment advice on an individual basis to clients only proper advice depends on a complete analysis of all facts and circumstances. The information given on this program is general financial comments and cannot be relied upon as pertaining to your specific situation.

33:05 Wealth Enhancement Group cannot guarantee that using the information from this show will generate profits or ensure freedom from loss. Listeners should consult their own financial advisors or conduct their own due diligence before making any financial decisions.