Episode 329: Mid-Year Markets and Investments Check-In with Melissa Joy, CFP®

As we move into the second half of the year, Melissa Joy, CFP®, takes a solo deep dive into five major themes shaping the current investment landscape. From artificial intelligence and IPO cycles to persistent inflation and the resilience of employment, Melissa unpacks what is actually happening in the markets and what it means for your financial life.

Rather than reacting to pessimistic headlines, Melissa walks through the data behind recent market performance, explains why earnings growth matters as much as price, and offers a grounded perspective on how to stay disciplined through uncertainty. This episode is a reminder that a sound financial plan, paired with a diversified investment strategy, is still the most powerful tool you have.

What You’ll Learn

• Why artificial intelligence continues to drive market concentration and what that means for your portfolio
• What to expect from high-profile IPOs like SpaceX and Anthropic as they enter public markets
• How corporate earnings growth is affecting valuations even as prices reach all-time highs
• Why inflation remains persistent and what factors are keeping it elevated
• What current unemployment data reveals despite widespread concerns about AI-driven job displacement
• Why diversification is working again, including gains in mid-cap, small-cap, and international equities
• How to think about bonds and interest rates in this environment
• The importance of keeping your financial plan current alongside your investment strategy

The previous presentation by PEARL PLANNING was intended for general information purposes only.  No portion of the presentation serves as the receipt of, or as a substitute for, personalized investment advice from PEARL PLANNING or any other investment professional of your choosing. Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy, or any non-investment related or planning services, discussion or content, will be profitable, be suitable for your portfolio or individual situation, or prove successful. Neither PEARL PLANNING’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. PEARL PLANNING is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or accounting advice. No portion of the video content should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. A copy of PEARL PLANNING’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https...

Transcript

Welcome And What We Will Cover

SPEAKER_01 0:00

Welcome to the Women's Money Wisdom Podcast. I'm Melissa Joy, a certified financial planner and the founder of Perl Planning. My goal is to help you streamline and organize your finances, navigate big money decisions with confidence, and be strategic in order to grow your wealth. As a woman, you work hard for your money, and I'm here to help you make the most of it. Now let's get into the show. As we kind of go into our mid-year phase of the calendar year, I thought it made sense to talk about investments, markets, and kind of what's going on in the economy. It is really built on the narratives that we tell ourselves and each other about what's going on in the world. And I thought it was important to talk about some of the most popular themes, which are often quite pessimistic right now when it comes to the economy, but also what's happening under the hood in your investment accounts. And then some of the things that you may not be aware of that are also happening at the same time. So today is going to be just all about like kind of current events when it comes to markets and investments. You know, when I set the stage for this conversation, I know that for many people, there's a lot of focus on inflation back above 4% as of the numbers from May that were published in June. Unemployment remains in the low fours, but that's kind of in a time frame where people are very skeptical about lower employment numbers and feel like there's a real impact when it comes to AI impacting jobs. And then at the same time, you have productivity up and earnings higher. And so all of that adds up to an economic story that doesn't seem to show recession right now. And also we've had a lot of pessimism when it comes to investments, but also when you look at the results, and I'm recording this episode in early June, you have positive returns when it comes to all types of stocks, big companies, smaller companies, international companies, and emerging markets are leading the way. So let's talk about some of the themes that I think most people are thinking about themselves. I've narrowed it down to five themes. And the first one that I would mention would be alter um uh artificial intelligence, AI. So we have so many narratives and stories about how AI is changing everything from the emergence of Chat GPT back in the late part of 2022 to today. It's gone from something that almost none of us thought

Why The Economy Narrative Feels Dark

SPEAKER_01 2:55

about to really impacting both our um state and local um worlds and communities, as well as something that is pushing the needle when it comes to markets and economy. Data centers are top of mind. If you live in Washjong County, that's been a big um and contentious, the building of a data center um here locally, and that's happening all over the country. Um, you also have AI adoption happening, and there's a um speculation. And when people prognosticate about what the impact of AI, many think that that might impact the accessibility of jobs in the future. Meanwhile, when you look at the companies that are becoming the top um concentration in the economy, many of them are closely tied to the AI. And if you include the Mag 7, um, you know, your Meta's, Google's, um, Amazons, they are closely tied to the emergence of AI. There's a whole nother cohort of companies that are equipment for AI, and semiconductors have had a highly volatile but very positive appreciation timeframe, um, really stunning numbers in terms of how big they've become in terms of being a part of um the S P 500, as well as just their returns over the last year-to-date period as well as um one year period. The second thematic that I know is on everyone's mind, and it's kind of sucked the oxygen out of other conversations, is initial public offerings and most um importantly, SpaceX as well as um anthropic, which is likely to come later in the year. So IPOs kind of are cyclical, and we've had more and more companies getting larger and larger while they've remained private. And so they've delayed their initial public offerings and stayed private for longer. And hence, when we have some of these IPOs, they're

AI Hype Data Centers And Concentration

SPEAKER_01 4:55

coming out with valuations that are much, much higher than um public issue in the past. What you'll see when, and there's a lot of conversations about um several things, one of them being um how is this going to impact investments in the stock market when people put um introduce those IPOs, particularly SpaceX at the moment, into indexes, and each index is handling things a little bit differently. You also have more retail investors getting access to these, and so that's something that is impacting things. And then you have a conversation about can everyone afford to take on trillion-dollar valuation companies. Of course, in the case of SpaceX, which will likely have had their IPO by the time this episode comes out, they are not releasing every share kind of into the open system. Much of it is owned by institutions that will be locked up from selling it for a period of time, although that time is relatively short. And only less than 10% of the overall valuation of the company, quite a bit less than 10%, is actually going to be issued as shares. Um, but there's um conversations, both, you know, how do I get in on this opportunity as well as how do I avoid the costs of this coming to market in terms of its impact on my portfolio? And what I would mention is that typically with IPOs, there is initial exuberance, but there's often um pullbacks after that. And so don't consider this to be, you know, kind of a stable um story. It's often that there's a lot of frenzy initially, and then there may be kind of gravity and things coming down to earth over time. Um, but this may be the um advent of a time where we have more companies becoming public, um, which I don't think would necessarily be a bad thing in terms of accessibility. There's often a lot of cost when it comes to private investments as well. And so just something to keep in mind is that this may be kind of a new phase where more companies kind of get on board to take their um their valuation and and the way they do business out of private markets and into public markets, especially for those that are related to AI and robotics and kind of future-leading technology. A third theme that I think is important, and it may be less on people's minds, but I certainly think it's on the minds of um or in the narrative of the story of what's happened so far this year in terms of investing in markets is that earnings continue to go higher. And so there's positive surprises when it comes to what companies are saying they're able to earn. They're consistently beating expectations in terms of what is predicted for earnings versus what results are each quarter. And what I've noticed over the last um two or three quarters is that there's tends to be exuberance at the beginning of a quarter when you go into earnings season, which typically mostly happens in the first two months of a quarter, um, and companies announce how they did in the quarter before. And then as the earnings kind of die down, then markets get a little jitterish and um concerned. But those positive surprises where more and more companies are saying when they look in the future in terms of how they're going to be earning money, they see positive revisions higher for the future as well, um, have to have a place when it comes to thinking about the expense of the market. And one of the interesting things that you may want to consider is that there are two parts of an equation when you consider um whether the market is too expensive. One of them is the price, um, which we know has gone higher. But the second factor, um, when you think about valuation, it's most traditional traditional sense of price and earnings is how much a company is earning, what they're making with the business that they're doing. And interestingly, right now, um earnings are coming in higher. And then there's adjustments in terms of companies saying they think that they will be earning more in the future. So while the price has gone higher as well, that um price earnings ratio in some cases is actually staying the same or going lower because those earnings are also getting bigger at the same time. So just when you're thinking, hey, this doesn't feel good because things are at all-time highs, they shouldn't be this high. Keep in mind that under the hood, um, companies, individual companies are kind of aggregating up to put painting a rosier picture than they expected to have in 2026 and actually looking into the future over the next four quarters as well. And so that is a part of the story about why things are looking so good when it comes to your statements, at least as a date of recording, um, which like I said is about 10 days into June. Um, and so when you're like looking at other indicators where, you

IPO Fever SpaceX And Private Markets

SPEAKER_01 10:10

know, war, inflation, et cetera, and saying, I don't see how things can be this good, um, the market just doesn't read headlines of newspapers. It looks and reacts to um earning reports much more. It doesn't care how um, you know, kind of frustrated and concerned you are with the state of affairs. It's more of an equal opportunity um participant that doesn't have as much of feelings. And um, that is certainly playing a factor in what we're seeing today. Now, a fourth theme that I think is really um important and um we you uh are feeling in most cases, I hear this every day, is um inflation just continues to be persistent and higher. And you can't just point to one thing. First of all, public officials cannot run for office and say, I will control for inflation, um, because there's so many factors that contribute. But it seems like many of the factors are adverse when it comes to the cost of things today. You have the cost of technology, which is being repriced based on ever-changing and more modern um materials and hardware that are necessary for technology. Um, you have actual shortages when it comes to compute. Then you look at the insertion of a war in the Middle East with the US and Israeli war with Iran, um, which has significantly impacted the cost of energy in a time where energy was already becoming more scarce because of the emergence of artificial intelligence. Um, and then you also have um employment numbers that have remained strong and an economy that seems to be working, which can add to inflationary pressures. And so inflation numbers came out in June, indicating um that in May the um change in inflation was 4.2%. And fours are never good when it comes to inflation numbers. Um people can see this at the pump, they can feel it in the price of um when they check out at the grocery store. And um, if there's anything we've learned over the past five or six years, having lived in relatively low inflationary environment for much of the last three decades, inflation is persistent, it is difficult to get rid of, and it is um not a friend. And so nobody likes inflation, and that's certainly impacting the mood of the American consumer, which is also the American investor. So while some things are indicating positive or mixed messages, um, the persistence of inflation is welcomed by no one. Um, it's also not easily fixable with things such as the resolution of a war in Iran, um, interrupted supply chains or ability to move energy around the world is difficult to fix right away. And also not everything has to do with the war when it comes to persistent inflation. The narrative of the White House has been that with a changing Fed tier, there will be lower interest rates, which might help with the cost of living or the ability to borrow, might kickstart a housing market. Um, but it's going to be very difficult to do that when you have these higher inflationary numbers, just because fighting inflation is often typically done by raising interest rates, not lowering them, um, or if not raising them, keeping them at the same place. And then theme number five might be a surprise, but um, you know, forecasts have been increasingly pessimistic when it comes to unemployment. And yet, unemployment, while ticking slightly higher, is really um staying at a nearly fully um employed economy. There is always gaps between employment, but more jobs are being posted. Um, and the unemployment rate in additions to um job numbers have remained above 100,000, anywhere from 115,000 to 170,000. Um, and unemployment is seeming like it is not, you know, kind of getting away from us. So that goes in the face of the narrative that AI is taking everyone's jobs, who is to tell over time. Um, but it is certainly something that is also um, you know, hand in hand with that inflation, um, something to keep in mind that we don't see um absolute pessimism or deteriorating numbers at least as much as what many people had predicted. Um, one of the though disappointing things

Earnings Growth And Valuations Explained

SPEAKER_01 14:45

that is happening um where this unemployment is, you know, saying relatively stable is we haven't seen jobs and wages, we haven't seen wages increase in the with the pace of inflation. And so that goes back to a story of why it may feel much more difficult to pay the bills day to day, month to month, even when you're relatively successful in terms of your balances on your investment accounts, um, your cash flow may seem and feel much, much tighter. And so in times of persistent inflation, I encourage people to look at things with an open mind and flexibility in terms of how they approach things. Also, if you have any wiggle room when it comes to bonuses coming in, um, extra cash flow, you may want to stock some money away and bolster your emergency reserves because of the repricing due to inflation of typical goods and services that um you may need over time. So I wanted to spend the last few minutes talking about a few things that are thematic that you may not be thinking about and also how you may be feeling when it comes to this market. One of the things that I would mention that I hope is encouraging is that diversification is working. One of the things that has been an ongoing conversation is how most of the market performance has been with the biggest companies over the last um few years. And yet the um the 493 companies that make up the S P 500 is not an exact 500 companies, I should say, but um those other companies have been a big contributor to performance more recently. Um, and that's something that's worth noting. Also, mid and small cap companies had had have had a moment in the sun, and international and emerging market companies continue to also have competitive returns relative to US large companies as well. And so I think that's encouraging because um if you're someone like us who has a disciplined, diversified investment process, there's some validity to those processes in terms of managing through current market environments. When it comes to bonds, I would also mention that rates have been marching higher with many indicators, even if the Federal Reserve isn't raising rates. And so that can be a dampener on bond returns, but it's been much less harsh than when we saw um interest rates going up in 2022, because we have a nice base of um, you know, kind of baseline income coming through as well. And so that's something to keep in mind. Um, you may have had more attention on your stocks than your bonds because those investments team tend to price every day and are much more volatile. Um, but it's it's important to note that you won't have those severely negative numbers in all likelihood with interest rates rising that you did in 2022 because you're coming off of an income base that is much higher and can dampen some of that um harsh penalty for the price changing. Finally, like it is so easy to feel like you can predict the future. It's so easy to say, I just feel like things are too expensive. I want to opt out. But there are so many more narratives and more complex considerations going on under the hood. And I really encourage people to have the marriage of two things when they're looking to have a long-term strategy that works when it comes to your money. The first would say, I would say, is that your invet your investing strategy without a financial plan is really exposed to a lot of risks. And so make sure you're keeping your financial plan fresh, make sure you're keeping the cash on hand that you'd need for emergency reserves, keeping an eye on your cash flow and budgeting, um looking at your retirement savings and making adjustments, either up or down to stay in tune with your needs and the times and planning for a retirement, whether it's expected or unexpected due to an unforeseen job interruption. I would also say that with your investment strategy, it's so easy to feel like you see what's coming next or you see risks everywhere and everything's negative. But um the market is built on um, you know, kind of uh layers and fun layers of stories that seem so pessimistic and yet optimism often prevails when it comes to investing. And so having a disciplined investment process that incorporates risk management and doesn't shoot for the stars, tries to hit singles and doubles, not homers for every at bat, can be really powerful rather than choosing to be all out or all in at once. We'll see what the second half of the year brings to us. I think it'll be really interesting as it always is. Um, but I just wanted to give you some perspective that hopefully feels less like a scary headline and more like a realistic um, you know, kind of comment on what's going on in the world. And I hope if you have questions that you would follow up with me or talk to your financial advisor so that you have the right perspective for yourself, your life, and your needs. Um, as that's always important as you consider um considerations for your investment strategy. And with that, have a great week.

SPEAKER_00 20:07

Thank you for listening to the Women's Money Wisdom podcast. If you found value in this episode, the best way that you can support the podcast is to forward an episode to a friend or leave a review. Go to ProPlan.com and the podcast link to get all the resources and links mentioned. This presentation by Pro Planning is intended for general information purposes only. No portion of this presentation serves as the receipt of or substitute for personal investment advice from Pro Planning or any other investment professional of your choosing. Copies of Pro Planning's current rent and disclosure brochure and form CRS discussing our advisory services and fees are available upon request or on our website platform at Perlplan.com. The information that we share is meant to educate and inspire, not serve as personalized financial advice. Everyone's situation is unique, so be sure to consult with your own financial professional for guidance that fits your life. And just so you know,

Persistent Inflation And Rate Reality

SPEAKER_00 21:05

the opinions shared in this podcast are Melissa's own and those of her guests. They don't necessarily represent any organizations with which Melissa is affiliated. For more important disclosures, please go to our webpage at proplan.com.