Episode 41 – Will 2024 Bring a Change to the Investment and Economic Climate?
44:50
Todd Pisarczyk & Nik Miner
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TRANSCRIPT
Welcome everybody to the Momentous Wealth Podcast, where we discuss current issues in the world of finance and break them down into understandable terms to further your education. Momentous Wealth Management is a financial planning and investment management firm based in Washington. We've been serving clients for more than 20 years, and on this show, we take that experience and put it to the microphone in an effort to educate investors in the complex world of finance and financial markets. Hey everyone. Welcome back. Today is episode 41, and it is hosted by myself, Nik Miner and Todd Pisarczyk. Check. How are you doing today, Todd? Great. Excited for the, for the day, for the episode for the year. Yeah. We're recording this year in January. Yep. It should be, it should be a good episode. Today we're gonna be talking about kind of general forecasting, what we think about this coming year and how we think about really any future time period. So it should be a great topic. So, Todd, how about you kick us, kick us off kind of what you're thinking. Yeah. Well, the, there's actually a second reason why I think this is gonna be a good episode today. 41. It's our 41st episode, and that is the title of one of my favorite songs, actually, by, by, well, I'm, I was gonna ask you, do you know who my favorite band is? I'm gonna, I, I do, I think it's Dave Matthews Band. Yeah. Boom.
They have a song called Number 41. It's unique. Okay. One of my favorite songs. Wow. Who's your favorite band? I think the audience would be excited to know. It's, they're called Watch House, formerly known as Mandolin Orange. They're an American folk band. I love him. That's awesome. Nik introduced me to folk music on one of our road trips to see clients up to Seattle, actually, Seattle, Eugene, I can't remember which trip. So yeah, it's good stuff. Yeah. So, no, today, you know, it's the beginning of the year and we're a little delayed because, you know, we were snowed in all last week. Yep. But what's interesting is, you know, I think as we start the year, you tend to get inundated with all these investment firms, you know, calendar year, like this is our, our guess of what we think is gonna happen this year. You know, this is our market forecast, whatever. And, you know, we, we try to shy away from that, from doing calendar year forecast because, you know, frankly, we talk a lot about the fact that it's just, it's really hard to guess what's gonna happen to the market.
I think if there's anything that last year taught us 2023, you know, I, I, I know that at the beginning of the year, most people, you know, and I don't have any stats to back this up, but, you know, every time you turn on the news, it seemed like people were talking about recession. Yep. Right. And I, I think I did see a poll of economists, again, can't cite the poll, I don't remember exactly what it was, but it seems like the bottom line is most economists last year were forecasting that we were gonna have some form of economic recession, and, you know, it really looked like things were headed that way. And, you know, we just never could have guessed. I mean, if, if you go back to the beginning of 2023, and if you think about all that happened, right? Yeah. Like, I mean, it seems like forever ago, but it was less than a year ago that we had the, those banks failing, right? Yep. And who'd have thought that the market, you know, the s and p was up, what? Something around, you know, 24% percent. Yeah. 25 on the calendar year of 2023, you know, if you would've looked at all the things like, let's potential government shutdown. Yeah. Yeah.
I mean, if you had a crystal ball that told you that, Hey, we're gonna have potential government shutdowns, we're gonna have this bank crisis, we're gonna have all these crazy things happen geopolitically. Yeah. And oh, by the way, we think the market's gonna go up 20 something percent. So we tend to shy away from short term economic forecast just because one, they're tricky. And two, you know, it's year by year, it seems like we just learn over and over that you can't time the market, you nobody can predict what's gonna happen, right? Yeah. So the way I think about this is, it's kind of like the weather, right? And I will say we do think it makes sense to look at the overall climate and have a longer term discussion of kind of just the overall investment climate. Yeah. And, and that's what we'll focus on today. But think of it like, and I'll just say like, when I was in high school, I wanted to be a weatherman that was like, that was what I was gonna do. Yeah. Okay. Tune into our last podcast, we dive a little bit in that. That's right. Oh, I forgot we already talked about this dude. A little bit. That's all right. So, but, but economic forecasts I think are a lot like the weather. Okay.
So if you were to come out here today and say, okay, I'm, I'm the best weatherman ever, there's no way that I could predict, like, like I know it's gonna rain in the northwest this year, right. But it would be really hard for me to predict exactly what days it's gonna rain and even how much rainfall we're gonna get. Yeah. Right. So forecast like that, they're really tricky. And, and oftentimes they, they can just be a guess, frankly. Right? Yeah. Kind of like with this big snowstorm we had, oh, you we're gonna get 10 inches of snow, and then it's just little twinkles all day long. Yeah. Yeah. But, you know, I I, it does make sense if you look at the climate, right? So, you know, think of it this way. We can't predict exactly how much rainfall we're gonna get, but in general, it's pretty easy to look at the calendar year and say, Hey, look, typically winter looks like this in the northwest summer looks like this. You know, obviously summer tends to be warmer and drier than winter. Yeah. The springtime, you know, we get a lot of rainfall here. Normally, you know, falls tip tend to be beautiful, but, so you can look at seasons and the overall climate and, and make some kind of guesses about in general how things might look. Sure. Right.
And if you are a farmer, you know, again, nobody could come to you and say, Hey, Mr. Farmer, here's exactly what's gonna happen. Here's exactly the days it's gonna rain. But they could come to you with a decent amount of accuracy and say, Hey, you know, we, we think in general, summer looks like this. Winter looks like this spring, fall, whatever. Right? Yeah. And so that's, that's what we're gonna do today. Now, again, e even that we don't know for sure. So I will say like, we, we don't know for sure what's gonna happen. We never know. Yeah. But I think there's some things happening that really would suggest that the climate might be shifting. Okay. So, and again, this is our belief, but, but our belief, and we'll share why today, is that I think that we're, we're switching climates. Yeah. And that's not necessarily good or bad. Okay. You know, a good example, my, I love the summer in the Northwest. I mean, I think it's amazing. Yeah. My wife not so much, she loves the winter, the spring, the fall, really anything over summer. She doesn't mind summers, but that's not her favorite season. Right. I think the Northwest is an example, like every season kind of brings its own pluses and minuses. Right. And, and that, that's where I see the economic climate right now is I do think things are shifting.
And I think it's important for investors to know, is it good or bad? Neither. It's just different. Yeah. You know, it's like saying, which is better, the, the rain and the snow seasons are the Sun Seasons. Exactly. Yeah. Yeah. But enough about, yeah. Let's, let's step away from weather analogies, Mr. Weatherman. And Yeah. Let's, let's talk a little bit more specifically what we're thinking about. All right. Good idea. Yeah. Okay. Okay. Well, so we did a podcast on this almost exactly a year ago. So episode 24, we did a podcast and it was called The New Normal Might Look Like The Old Normal since that podcast was released. I think some more things have happened that, that we can solidify and we'll talk about today. And then also, we're gonna be referencing a lot of information that you know, Charles Schwab. So we, we, we work with Schwab quite a bit. They just put out a article called Say Goodbye to The Great Moderation. It was done by Lizanne Saunders and Kevin Gordon over at Charles Schwab. Wonderful article. It's available on their website. But a lot of what was in that article work, some of the same things we talked about in our podcast a year ago. And, and again, we're gonna kind of refresh that today. So the bottom line is this Okay. Getting away from the weather. Sure. All right. Yeah.
If you look back at the period of the Great Recession through Covid, right. So the, the Great Recession or the period of the global financial crisis. Yeah. So like 2008, yeah. 2008. So it started October of 2007 is when the market peaked. The market bottomed out in 2009. The Great Recession occurred in 2009. And then if you look at that period of 2009 through 2020, when the Covid recession hit, okay. For a lot of investors, that's, I mean, that's a long time, if you think about it, 2009 was 15 years ago. Yeah. And, you know, 2007, 17 years ago, that's, you know, for a lot of investors, that's the, that's their entire investment experience, or even clients that we have and investors like myself that have been investing since long before that, because that was so long ago. It's kind of hard for me to remember anything else. Right? Yeah. So think of it like, again, gotta use one more weather analogy, Nik. Sure. Okay. Okay. One more. It'd be like in the northwest, let, let's just say hypothetically, you, you were born in May and your only experience is like spring and summer in the Northwest, and you never experienced a winter. Yeah. It, for someone like that, it would be really hard to explain what winter's like. 'cause they never experienced it. Right.
Or let's just hypothetically say, man, we just had like the longest, most beautiful summer ever in the Northwest, and it's been so long that for those of us that have experienced many winters, you know, there's been so much time that's elapsed. I kind of forget how cold and wet Yeah. And how dark it gets so fast. Yeah. Yeah. So that period of 2009 through 2020 was really not normal for a lot of reasons, if you compare it to the history of the markets and the way the economy was functioning before that. Yeah. So the point of today is I want to go over why that was abnormal and what normal, like, you know, what I'm, what I would call normal looks like. Yeah. Okay. And again, it's not good or bad, I just want y'all to know like, this isn't like a gloom and doom. This, you know, there, there are a lot of things that I think frankly will be better for investors. Yeah. Okay. So what, what was, what was not so normal about that time period? Well, the first thing is the amount of market volatility we had was actually extremely low. So, according to figures from s and p 500, since 1928, the stock market has had a correction on average every 1.6 years. A correction is when the stock market falls 10% or more. Sure. Okay. So, historically, if you go back to 1928, we've had a correction every 1.6 years.
If you look more recently, and again, this is according to s and p 500 and an article that Money magazine did. If you look at that same number since World War ii, we've actually averaged a correction every 10 months. Wow. Okay. Yeah. And then a bear market, which we experienced a bear market in 2022. That was fun. Yeah. Well, if you go back to 1928, the stock market has had a bear market on average every four years. Okay. Well, if you look at the time period of 20 2009 through 2020, again, average market correction every 10 months or every 1.6 years, depending upon, if you're looking back to World War II or since Sure. The beginning of time, no. Yeah. 1928. Well, during that period, we actually only had seven of the 12 market years. So 20 2009 through 2020, that's 12 calendar years of the stock market. Seven of those, we had a correction, and five of 'em we had, we, we'd had not a single 10% decline. And again, if you look back to recent history, and you look and say, okay, since World War ii we've had a correction about every 10 months. Yeah. Over a 12 month period, you would expect something like 12 to 15 corrections. Right? Sure, sure. We, we only had five, or I'm sorry, seven. Okay. So we had about, you know, half the corrections that you would normally expect.
And again, that's just a 10% decline or more. If you look at bear markets. So again, bear markets historically have happened every four years. So over a 12 year period, you'd expect something like three bear markets. We had zero. Wow. Yeah. During that entire 12 year period, we did not have a single bear market. It took Covid. Right. We didn't have a bear market until Covid happened. And we had that massive bear market in 2020. But it recovered like seemingly instantly because of, you know, so what you're saying is like, if you're a investor that hops onto this scene, let's say 2009, and you're like, I'm gonna start investing, sure. Things are at the bottom, but you know what? Buy low and you decide to, to give it a shot. And if you've been an investor from there, and let's say until 2020 things are rosy red. Yeah. Like, there's not really much of a downturn significantly at all from what it sounded like if Yeah. You were comparing yourself to like maybe an old man who had been investing since the Great Depression, he'd be like, oh, this is nothing. You're just in the summer. This is, this is great. I've done this. Exactly. Yeah. Yeah. It's, it's almost like, again, I'm just gonna keep going back to the weather 'cause it's such a great analogy, but it'd be like, yeah, in summer, you know what, we have rainy days, right? Yeah.
So it was kinda like that, it was like this ongoing summer that every once in a while we had a rainy day, but not very many of them. Yeah. So, yeah, you're exactly right, Nik. The second thing that was really abnormal was we had this 0% interest rate policy. Hmm. And I, and I just, I love the acronyms we come up with. In our industry, they, they called it erp, zer erp. Wow. We had erp, ERP obviously is abnormal. Yeah. But no, for that, in response to the global financial crisis, you know, one of the things the Fed did is they lowered interest rates to 0%. And we, we kept them there. You know, we had 0% interest rates. As you know, a lot of us obviously have seen rates go up and we're like, wow, this is different. But really that 0% interest rate policy is not normal. Okay. So we had, if you look at that entire time period of oh nine to 2020, the fact that the Fed had interest rates at 0%, you know, along with some other factors, means that we had really, really, really low interest rates for that entire time period. Right. Abnormally low, way lower than normal. So we all can look at mortgages. Right. And, you know, obviously that's obvious.
We, we know that during that time period, if you're someone who bought a home, you're like, wow, like mortgage rates were so low, I was getting a 3% mortgage or a 4% mortgage. Something like that. But the other thing is that, you know, the downside to, to those 0% interest rates were the fact that, you know, during that time period, if you were to put your money in CDs at the bank or in a savings account Yeah. Or buy bonds, you weren't really getting paid much on those either. There was actually a brief period during the financial crisis where the interest rate on the 10 year treasury went negative. Like so you had to pay them to Yeah. Interesting. Yeah, it was, people got so worried about everything crashing that it was like, I would rather guarantee myself a minor loss in a treasury Yeah. Than to put my money anywhere else, including a bank. Yeah. Yeah. But we had that time and so, you know, car loans, mortgage loans, credit cards, HELOCs, everything like interest rates were really low, meaning it was really easy and cheap for us to borrow money to do things. But also if you were somebody buying bonds or putting your money in cash and CDs, you also didn't get paid very much. Yeah. Did that low interest rate environment contribute to that lack of recessions that we saw in the, in the stock market? Yeah.
It, it's hard to say for sure, but a lot of people think Yes. That basically the Fed kept interest rates low to keep the economy stimulated because we were just so worried about recession. Yeah. You know, but Good point, Nik. 'cause guess what? My next point, what was also abnormal? Are you looking at my notes? No, no. I can't even see 'em. My eyes are closed. What was also abnormal about that time period is the fact that we had no recessions. Yeah. So you're, you're right on. I mean, again, no one knows for sure. Nobody knows for sure how recessions start, but yeah, in general, when the Fed keeps rates low, it does tend to keep the economy more stimulated. And so therefore, we actually had the longest expansion in the history of our economy. Yeah. We had a, an expansion. And really an expansion just means that the economy's growing and not shrinking. So if you're in recession, that means the economy's shrinking. When you're not in recession, you're in expansion. We had the longest expansion ever, 128 months with no recession. Wow. Yeah. So really abnormal, calm market, calm economy, and that, you know, no recessions during that time period. The other thing that was abnormal, and part of the reason why the Fed was able to keep rates low is 'cause we really didn't have any inflation to speak of. Yeah. Right.
So what we saw happen in 2022 is you saw the Fed start to raise interest rates because that's kind of the trade off. The Fed knows like, Hey, if we raise interest rates, it's gonna potentially slow down the economy, but it's our best tool to fight inflation. And we started to see inflation come up, and that's why the Fed said, Hey, we're gonna raise interest rates to fight inflation, even though we know that it could cause the economy to slow down or go in recession. Well, during that time period of oh nine to 2020, inflation stayed really, really low. So the Fed was able to leave interest rates, low inflation was around for most of that time period. And again, this is according to data from the Bureau of Labor Statistics. You can go right to their website. It's really cool. They have, you can put in time periods and it'll tell you what inflation was. But I, I looked at that and inflation for most of that time period, not all of it, but most of it was around 1%. Hmm. The highest it ever got was just over 3%. And that was in 2011. And actually in 2015 it was barely over zero. But really like inflation, if you look at the numbers, it stayed right around this kinda one to 2% range for that entire time period while the Fed had interest rates at 0%.
And then the last thing, and this is a little technical, and I just want to kind of mention this, it, it, it's, it's technical, but I think it's important to understand, and, and this is the last thing that we're gonna talk about before we move on to what we think is more normal and what maybe investors can expect. Mm. Yeah. But we had positive correlation between stocks and bonds. So what does that mean? Basically what it means simply is that stocks and bonds would move together. Yeah. And that's, that's not normal. Normally an investor diversified between stocks and bonds is a really good move because, you know, typically when the stock market goes up, bonds, you know, can stay flat or even go down a bit. But typically when stocks go down, investors sell stocks to put their money in safer instruments like bonds. And so you actually tend to see bond prices go up or be at least stable when the market's going down. Not, not, it's not the first time it ever happened, but I remember, you know, in 2007, that was a fun period to be in our industry. Yeah. You know, our clients with these nicely balanced 60 40 portfolios that tend to be more stable, you know, I mean their, their stocks are going down like crazy, but so were their bonds. Yeah. And it was like, man, like there was just nowhere to hide.
And that's actually historically not, it, it doesn't tend to be how it plays out. Now that played out again during Covid. We also saw stocks and bonds with that positive correlation. But there's some signs that that might be changing. And, and again, this is all referenced in the article that we, that we said say goodbye to the great moderation by Charles Schwab. One of the things they talk about is the fact that they believe that, you know, we could be returning to a time period where things have normalized. And we go back to seeing that negative correlation between stocks and bonds, which basically just means that, you know, stocks go up, bonds go down, vice versa. So having that diversification can be a, a really good thing in your portfolio. So, yeah. Okay. So what's normal, what do, and again, rather than tell you, Hey, what do, what do we think's gonna happen? What day is exactly, is it gonna rain? We don't know. Right. Nobody knows. But what we can tell you is these are the things that, that tend to be normal. Okay. So those areas I just addressed, what we believe is that we could be going into a time period where it looks more like the historical norm. Yeah. Okay. So again, not good or bad, just different change in seasons. Okay. And so what's more normal?
Well, for one, we talked about this already, but market volatility already spent a lot of time on this. But just as a refresher, what's normal, if you go back to 1928, we tend to see corrections about once every 1.6 years according to s and p 500 data. And we tend to see bear markets, which was in the market, goes down over 20% about every four years on average. Yeah. Okay. I, I don't have the exact numbers in front of me, but I think there is some evidence to say that having kind of those corrections in the market, as much as we think we're like, oh no, our account value went down Yeah. That most investors returns come from the rebound after a, a recession. Yeah. Where it's like, you know, if you're putting more into a down market, it's going to rebound a little bit higher. Yeah. And that it's kind of like, it's, it's that season mentality of like, sure, it may be lower, but it doesn't necessarily mean that that's like a black and white bad thing. Right. That having this kind of normal, there can be opportunities in that, that provide Yeah. Some difference that aren't just necessarily like, oh my gosh, terrible. Why would we ever want a recession or a correction? Yeah. I, I couldn't agree with you more, Nik.
I think that people get scared of volatility, but at the end of the day, if you're, if you realize like, hey, it's just part of being an investor, that's where the opportunity is. I mean, we all know buy low, sell high. Yeah. Right. Well, buying low means you have to buy during times of market volatility. Right. When things are down and rebalancing your portfolio, you know, if you have a good long-term plan, oftentimes rebalancing your portfolio during those times of volatility can be a good thing. 'cause you're taking advantage of prices being low. If you're an investor that is saving money, let's say you're someone who, you know, you're participating in 401k, you're adding money on a regular basis, those times of volatility can be great. 'cause you're buying price, you know, you're buying things on sale. Yeah. Right. So Yeah, absolutely. I think, I think you're totally right. You know, it's like, again, it's like the rain. No fun to have a rainy day, but we all know rain is good. Yeah, totally. It seems like the only people that wouldn't benefit from a recession in some way would be either someone who has no plan or somebody who is, you know, using their money day to day. They're trading stocks, you know, they're constantly watching the ups and downs, but there's, there's ways to diversify and benefit off of it. Yeah. Yeah.
The other area of opportunity, we feel like, so if you look at interest rates, right? So again, during that oh nine to 2020 period, we had 0% interest rate policy. The Fed has raised interest rates a lot. We addressed that on our last podcast about bonds. I'd encourage you to take a listen to that one because we actually dive into this subject in great detail. But in, in February of 2007, this is according to data from the St. Louis Fed website, the Fed funds rate was at five and a quarter percent, which is really close to where they are today. Right. So it's interesting is when people look at rates today, and they think rates are really, really, really high. They're actually not, they're not that far from the historical norm. We're at the, roughly the same place we were back in February of 2007. If we go back further than 2007, this is interesting. In 2000, so in, in, in the year 2000, again, according to this is all according to data from the St. Louis Fed website rates were six point a half percent. And in 1990 they were over 8% like the Fed funds rate. Wow. So, interest rates where they are today are not historically crazy high. They're, we don't know what's gonna happen. I'll just say it right now. Like, we're not trying to predict this.
There's a lot of people predicting that at some point this year or next year, we're likely to see the fed lower rates at some point, we don't know. Yeah. You know, hey, in my own personal opinion, just guessing, yeah, I, I would ex wouldn't be surprised to see the fed lower rates a bit from where they are here, but we don't believe that they're going back to where they were. So if you're sitting there thinking that the interest rates we had during the 2009 to 2020 period were normal. So for example, if you're somebody, I'm gonna wait to buy a house until rates go back to where they were in 2019. Yeah. It might not happen. Like Yeah. Things would have to be interesting for those rates to go back to where they were. We're not going to erp. Yeah. So rates where they are today, more normal. And again, unfortunately, if you're, you know, if you're someone looking to buy a house, a car, putting money on a credit card, whatever, you're gonna pay higher rates. But the opportunity is, if you're an investor who, you know, wants to put money in a bank account, like we've talked about, again, I'd encourage you to listen to our last podcast, but interest rates are really attractive now, more attractive than they've been since prior to 2007. If you're a, someone looking to buy bonds and put money in cash and everything else.
So in other words, during that time period of erp, you are really getting paid nothing to put money in cash and bonds and other quote unquote safe instruments. Whereas now the climate's different. Right? Yeah. Now you can actually get paid money to put money in bonds and other things like that. So it might be something that you want to consider, you know, having in your portfolio or again, talk to your advisor. We're not trying to tell you what, what you should buy. But again, those other instruments are much more attractive than they've been in a very, very, very long time. Yeah. Which I think from, from a planning standpoint too, is really beneficial. Because if you follow the premise that if you have a short term goal, you don't want to be invested in stocks, but you're in a ERP environment where stocks are the only thing that are getting you a return, you're kind of outta luck. You're like, well, I guess I'll just sit this on cash and out and inflation's gonna outpace me. I'm not really doing much. Whereas if we have kind of these higher interest rates at a cash and money market level, you can, you can more strategically plan and say like, okay, short term goals, I may not be getting long term as good as stocks, but I'm gonna be getting something in the meantime.
Yeah, you can, you can diversify, which means that you're gonna be planning a lot better, I think. Yeah, exactly. There's just, and there's a lot more options. Totally. It's really, it's really great. Okay, so the other thing, recession. So we addressed this, we had no recessions during that time period, 128 months of expansion the longest ever in history. Again, just as a reminder, you know, if we go back to World War ii, this is according to data from Kiplinger's Magazine, they actually just did a article on this kind of roughly same kind of subject. Yeah. They were talking about the fact that, you know, we might be headed for a recession again. That was their, the point of the article. The article was released in November of 2023. But what they point out in that article, and this is data from that Kiplinger's article, we've actually had 12 recessions since the end of World War ii. Okay. So on, on average, we've had a recession every six and a half years, and we went 120 months without one a hundred twenty eight months. Yeah, yeah. And so almost 11 years. And so the average was about every six and a half years. But actually that's the average since 1928. If you go back to World War ii, we've actually had 12 recessions since World War ii. Yeah. And I think that that average is actually skewed by the fact that in there you had the longest expansion ever too.
So if you take that out, it would be on average way more frequent. But the point is that recessions are normal. Right? Yeah. And we just got used to no recessions. And in fact, the only recession we really had, I mean, even to this day, so here's the thing that the streak ended because of Covid. But even that, a lot of people, like, they don't look at that like, like people kind of forget that we had a recession. So if you, if you think about it, what's really interesting, I think, too, about this recession notion is a normal recession tends to be not super scary. Yeah. Like, it's part of the normal business cycle. And it's, you know, all the stuff you talked about with regards to market volatility and corrections and bear markets, I think you the same thing can hold true just for recessions in general. It's, it's just a really good time for the economy to kind of take a breather and, you know, just kind of reset. Yeah. Right. Yeah. Yeah. But what's interesting is if you go back and you say, okay, we didn't have a single recession during that entire hundred 28th month expansion. Right. But the, the streak ended because of covid. Right. So a lot of people look at that recession, it's like, that didn't seem like, like people didn't even really count that as a recession.
'cause it was like the world just ended for a little while and then it like reopened. Yeah. It was also a, it was a very, very drastic recession, but it was extremely short. Yeah. Short-lived. And then the one before that was the Glo, the Great Recession. Right. And that was a, I mean, it's called the Great Recession because that was like the worst recession we've had since the Great Depression. Yeah. So even that wasn't normal. So even if you look back at a lot of investors and just people's perceptions of recession, it's a little skewed. Yeah. 'cause it's like, well, yeah, I can remember Covid and I can remember the goal of financial crisis. Like Yeah. Recessions are like the end of the world, right? Yeah. It's like, well, those were abnormally bad, you know? Yeah. So if you're interested to learn more about recessions, we're doing a lot of plugs for our podcast. It's great. I love it. I forgot we you did one on that, huh? Yeah, we did one on recessions a while back. And one of the things that I thought was interesting when doing the research on that was, I think it was that most recessions aren't longer than 18 months. That they're o they're, they're pretty quick, even the normal ones. Yeah. Where again, if, if you're planning, if you've, you're thinking long term with your investment and saving strategies. Yeah.
If, if I was to tell you like, Hey, over the course of the next 30 years, you're gonna have a period of 18 months that you're gonna have a, a decrease, you'd be like, okay, so what? Yeah. Yeah. 18 months in terms of, you know, years and years. It's, it's not really that big of a deal. And then you couple that too with this idea we're talking about that with recessions come opportunity, it's like, great. Bring back this normal, there's some things here to be, to be gleaned from it. Yeah. Nik, you know, this just brought up a question for me. As you're talking about that the, the stats from the previous podcast we're, we're required, like when we talk about statistics and where we get data, you know, we have to cite our sources. Yeah. Are we allowed to cite a previous podcast episode as a source? Probably. Can we say like, according to Nik, according to myself, the, the unofficial expert, according to myself, six months ago, you know, you have to cite if you're saying a fact. But what if you just say like, I'm just making this number up. Can then you just say anything you can, 'cause I've, I've done that a few times on this episode. I'm like, I heard, I don't remember the exact source, so I'm prefacing it. Don't quote, don't quote me on this, but, you know. Yeah. Okay.
So two more things we think are gonna be a little bit more normal. Okay. Inflation. So I think this is a key because again, during that time period, you know, everybody's like all worked up right now about inflation. And I think it's really important to understand two things about inflation right now is that right now we have inflation that's kind of in that three to 4% range. Okay. The, according to the, the Bureau of Labor statistics from, I'm gonna quiz, I love quizzing Nik on the podcast. Yeah. Especially when you gimme no heads up. That's good. Yeah. 1960 through 2022. What do you think the average inflation rate was during that time period? 2.3. 3.8%. Woo. Wow. And, and I think the answer you said is probably what, pretty close to what most people would say. Yeah. Because again, during that time period that we keep talking about, you know, inflation is really low, people are waiting for it to go back to that, well, it might not because the long-term average is actually 3.8%. That's more normal. Wow. Okay. The other thing we have to understand is people keep, I keep hearing people talk about the fact that like, oh, you know, everyone's telling me that inflation's under control. Right. We have inflation under control, but I'm going to the grocery store and it's not cheaper. Right. Like, yeah, my milk is still whatever. Okay. We can't even say it's never getting cheaper.
You know what's funny is like, everybody talks about the fact that like, oh, you don't even know how much a gallon of milk costs. Well, here's the problem now, like people talk about that like, you know, X, y, z, so-and-so running for president, so outta a touch, they don't even know what a gallon of milk milk is, right? Yeah. Yeah. There's so many kinds of milk now. It's like you got organic and knot and whole and 1% and almond milk and soy milk, and maybe who knows what a gallon of milk costs. It depends what kind of milk you're trying to buy. Yeah. I'm gonna make a claim and maybe people, someone's gonna listen to this and be like, well, you're saying that from a place of privilege, so maybe I am. But there's so much talk about, oh, the price of eggs are going up. Yeah. I'm like, from what, 75 cents to a dollar 25? I'm sorry. Hey, it's like the cheapest food you can think of. Like, why aren't we talking about like real, I, I helped my wife with a ClickList order last night and they were out of the regular eggs we buy. Yeah. So I was like, oh, well here's some. And apparently 5 99 for a dozen of eggs is outrageous. Sure. If you're buying the bougie eggs and you're worried about inflation, that's fair. For me, I'm like, okay, great. Here's a couple extra dimes every month.
I don't even, I will say I don't know how much eggs cost. Yeah. But so, but back to the inflation story. It, we have to understand that by, in so inflation is a rise in prices. Right. By inflation being under control or or becoming more normal, we'll call it, it doesn't mean that the price of your eggs or your milk are going back to the way it was before 2022 when we had inflation start. Yeah. It's deflation. Okay. Yeah. And we, I tell you, it sounds nice, but deflation is, is not good for an economy. Yeah. Like, that's horrible. But you know, it just means that things are still getting more expensive. They're just getting more expensive at a slower pace. So we're not, you know, if prices aren't going back to where they were, I mean, I will say hopefully, because I know it would be really nice for all of us if things got cheaper, but the point is overall for the markets and the economy, it actually wouldn't be good if prices went back to the way they were two, three years ago. Deflation is really not good for the market. Yeah. It would be interesting, maybe we should do a podcast on this, on aspects of the economy that do face deflation regularly, like to gas, for example. Yeah. Like it, we see that inflate, but also deflate all the time. Right, right.
And I bet there's other things too that are, that we're like, okay, it deflated, which was good. Yeah. Or inflated, but are a lot more Yeah. Variable because you got things like OPEC and Yeah. I mean, yeah, there are assets that are extremely volatile. You're right. I'll nerd out on another episode on that. Yeah. The last thing is negative correlation between stocks and bonds. And again, this is according to an article that Schwab did the say goodbye to the great moderation article. You know, Schwab and others think that, and, and you know, I, I would tend to agree, I'm not gonna argue with Charles Schwab. I mean, you know, nice guy. There's smart Yeah. Just guy. I haven't met him, but I've been at a several conferences at Schwab Impact where he spoke, so, Hmm. He does seem like a nice guy. I never met him. But if we go back to the, if we go back to this negative correlation, I'll just put it that way. We're not trying to make any projections here, but I will just say, if we go back to that, which historically is a little bit more normal, really what that means is, you know, if you have periods of volatility, so let's say that we talked about the fact that, hey, the market could be more volatile, right? What the long-term average suggests that the market could be more volatile then what it was from oh nine to 2020.
Well, here's the good news with that. If we go back to this negative correlation between stocks and bonds, well, that means that even though the market's more volatile, if you're an investor with a balanced diversified portfolio, you might not actually feel it as much because during those times of volatility, your bonds might go up to cushion the losses in your stocks. And, and then again, everything we talked about with rebalancing and potentially taking advantage could, could, could be a big win for you. Right. Yeah. So, so that's it, you know, what does it mean for investors as we move on? You know, I, I just want to, in, in wrapping up, just say like we've been saying over and over on this podcast where we're going, we don't think is good or bad, it's just a different season. We do, we do. And I believe, and again, this is according to Todd, so who knows if it's Right. Okay. Yeah. Not, not saying we know anything for sure it does appear. And, and I believe that we are shifting seasons, and I just think as investors, I just think the reason this information is important is not because we're gonna tell you, Hey, you should try to time the market and you should like, change your whole investment strategy and all that. Right? Yeah. It's just, it's helpful to understand what's going on. Yeah. Right.
I mean, it's like when we're in the midst of, it's really kind of funny to like, you know, you're sitting there on these days in the spring, you know, I coach, coach a high school baseball team, and it's funny to like, you know, we're sitting there and we're on the field and it's just pouring rain. Right? And all you, you can't see anything but the rain, right? But you pull, you know, I pull up the, the Weather Forecast app, and I look at the radar and it's like, oh, you can see that this shower's actually gonna pass pretty soon. Well, you're in the midst of that rain shower and it's just coming down there. There's no way. It's like, it feels like the world's ending. Right? But if you just kind of understand and you take a broader view and say, Hey, this is just a shower overall, the forecast is pretty darn nice, and it's gonna clear up here. If you have that perspective and you kind of just understand what's happening, it can be a little bit easier to get through. Yeah. So that's what we really wanted to do to, is just provide this insight of like, Hey, this is what the seasons look like. It does look like we're changing. It's not good or bad, but if you just kind of understand what's happening, it can make it easier to stick to those long-term investment plans that you have. Yeah.
I will say this too, that like we've been saying, there's a lot of opportunities that persist with having a change of, of what's normal. Right. But that doesn't mean that the same game plan may necessarily work in the same way. Like, so let's use your baseball analogy. Let's say the rain's coming, you know, it's gonna end, but you might have to play ball a little bit differently because I, the guy I started is actually terrible at pitching in the rain. Yeah. Yeah. And, and you may say, okay, you know, bring your outfielders in or, you know, adjust based on how that ball's gonna play differently in the rain. Yeah. And I'd say with all the different opportunities and changes that are gonna come into the economy and the markets means that there's gonna be some changes in how you approach something. So if you're expecting to have the same performance in this kind of market where from 2009 to 2020 there's no recessions and you've got low interest, and really you can play a little bit more of dartboard stock picking, where by nature, a lot more stocks are going to do well. Yeah. Yeah. But if we pivot into this environment where interest rates are higher businesses, it's gonna cost a little bit more, you're gonna need to be a little bit more selective about who you're investing in, what types of companies. I think the principles are still gonna be true. Yeah. Yeah.
But there's gonna be, there's gonna be a little bit more, I think, winners and losers depending on, on how people play in this new normal. So there's still, I think, a lot of great opportunities, but a little plug for us, there's, it's gonna come with some technicality too, of saying like, well, how do you diversify with, with high interests? Yeah. Yeah. How do you find those companies and funds that are doing well when things are a little bit more challenging? Yeah. You know, you're not playing on a, on a bright, sunny day. Yeah. Yeah. It's a good thing. Nik has all those answers. Yeah. Not Well, thanks. Thanks for joining us today. I'll just, you know, since we're going plug crazy today. Yeah. If, if you, if you like this podcast, we would've really appreciate you giving us a rating so you can go into your podcast app, give us a rating. That'd be, that'd be really helpful. And, you know, just like it, follow the podcast. We'd, we'd love for you to get notification every time we release a new one. Our, our goal and our schedule is to release this podcast every two weeks. Yeah. So thanks for joining us, and we appreciate your continued support of the podcast. The opinions expressed in this podcast are for general informational purposes only, and are not intended to provide specific advice or recommendations for any individual or specific security.
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