Navigate the economic twists of 2024 with us as we unpack the latest insights from Gene Goldman, Cetera Investment Management’s Chief Investment Officer. Prepare to grasp the intricacies of the Federal Reserve's potential rate cuts and the implications for a market thirsty for good news. We'll dissect the strength and resilience of crucial sectors that could dictate whether we'll face a mild recession or achieve the coveted 'soft landing.' As volatility becomes a staple in financial markets, Gene and I will guide you through adapting your investment strategies to thrive in this new, dynamic environment. And for those wondering if the time-tested 60-40 investment portfolio has made a comeback, we've got the lowdown on its resurgence in the face of shifting economic tides.
The dance between risk and reward in the stock market gets especially intricate when geopolitical tremors shake the scene. In the face of looming uncertainties from global conflicts to presidential elections, diversification isn't just a strategy—it's a necessity. We'll peer into the crystal ball of offshore betting odds for a unique perspective on the 2024 election, questioning the reliability of traditional polls and what history tells us about market performance in election years. With a long-term investment horizon in our sights, join Gene and me for a candid and critical exploration of the factors that could sway your portfolio and the wisdom in staying the course through the market's ebb and flow.
Navigate the economic twists of 2024 with us as we unpack the latest insights from Gene Goldman, Cetera Investment Management’s Chief Investment Officer. Prepare to grasp the intricacies of the Federal Reserve's potential rate cuts and the implications for a market thirsty for good news. We'll dissect the strength and resilience of crucial sectors that could dictate whether we'll face a mild recession or achieve the coveted 'soft landing.' As volatility becomes a staple in financial markets, Gene and I will guide you through adapting your investment strategies to thrive in this new, dynamic environment. And for those wondering if the time-tested 60-40 investment portfolio has made a comeback, we've got the lowdown on its resurgence in the face of shifting economic tides.
The dance between risk and reward in the stock market gets especially intricate when geopolitical tremors shake the scene. In the face of looming uncertainties from global conflicts to presidential elections, diversification isn't just a strategy—it's a necessity. We'll peer into the crystal ball of offshore betting odds for a unique perspective on the 2024 election, questioning the reliability of traditional polls and what history tells us about market performance in election years. With a long-term investment horizon in our sights, join Gene and me for a candid and critical exploration of the factors that could sway your portfolio and the wisdom in staying the course through the market's ebb and flow.
You're listening to Finance Roundtable, a podcast focused on demystifying money. The hosts, professor Jacob Gold, michael Koshell and Kelvin Gold, will educate and entertain you in all areas related to money. Sit back, relax and enjoy the show.
Speaker 2:Every new year. Everyone, welcome back to the Finance Roundtable podcast. I'm your host, professor Jacob Gold, and today we have a special guest. He's the Chief Investment Officer of Cetera Investment Management. It's Mr Gene Goldman. Gene, welcome back to the program. How are you doing today?
Speaker 3:Thank you Great, great to see you. Thank you, professor, thank you team.
Speaker 2:It's great to have you back. You came on last year and we're so grateful for that. I know you and I saw each other when we were in Nashville at a conference a few months back. What have you been busy doing recently?
Speaker 3:Obviously, the markets never change Every day. Markets are up, markets are down, so watch and carefully. Unfortunately, I did get the flu on Christmas Eve through a couple of days ago, so I'm a little congested but I feel a lot better. You can't hear it. Apologies if my biotemperature goes up and down during our podcast. You're a true professional, you sound great.
Speaker 3:But the highlight was I did go before Christmas. The week before Christmas I went back to Boston where I'm from, got to see the Patriots lose to the Chiefs, so that was fun. And I got to see Taylor Swift she was in A-Sweet I can look up and see her in A-Sweet.
Speaker 2:Oh, that is too good. The last time you were on, you mentioned Taylor Swift again. I'm starting to sense a theme here.
Speaker 3:I got my wristband.
Speaker 4:Yes, I put that one on your radar.
Speaker 3:Huh, yeah, you totally did, thank you.
Speaker 2:Well, Gene, it's 2024. Now. There's new opportunities, new risks on the horizon. What do you foresee in 2024 from an economic perspective?
Speaker 3:Sure, I think that's a great start. You know, obviously we're about a week in, a week and a half into the year. So what we laid out our three key themes for 2024 are, at the end of the day, they're pretty optimistic. So I think number one is that the Fed goes from foe to friend. So what that means is that the Fed last year raising rates, you know, slowing down the economy in order to reduce inflation. This year, given the fact that inflation has come down pretty quickly, given the fact the economy is slowing down, that we do believe the Fed will cut rates this year. We can talk about this a little bit later. But the Fed has said we will cut rates three times as our base case scenario. But the markets today are saying something different. They're saying six times, 150, 1.5%. So at the end of the day, the Fed is going to be our friend. That's good for the markets.
Speaker 3:Our second theme is that the economy cools into a soft landing. So soft landing is just a world on the same page. Soft landing is when the Fed raises rates but does not put the economy into a recession. We think you know I hate saying this, I don't usually say this, but the Fed is actually doing a great job. They've raised rates just right to slow the economy down. I think the key point is that even if we have a recession, it's going to be very mild. And the reason I say this is because you look at areas in recession today housing, manufacturing, autos they've all stabilized or even starting to bounce back a little bit. Building permits are picking up. Auto sales are picking up. You know. Also, you're seeing manufacturing, which is sort of in the doldrums for the last 14 months. It's stabilizing, though at low levels.
Speaker 3:And our third and final theme, which kind of ties everything together expect a lot of market volatility. The Fed is going to need to guide this airplane down in the soft landing economic airplane. There's going to be a lot of turbines, a lot of volatility in the market. But the good news and this is the theme the good news is that even if we have a lot of volatility, there's going to be a lot of great opportunities for long-term investors. We think market breadth is going to widen. That means more stocks are going to do well in upward market as the Fed cuts rates. We also think the earnings recession is over. That's good news for stocks. Yes, valuations are a little high pricing in near perfection. But if you have lower inflation, lower interest rates, all good news which should support valuation. So we're pretty optimistic between 2024.
Speaker 2:That's so great, gene. And with interest rates possibly coming down, we recognize that bond prices can come up and obviously that presents an opportunity for equities as well. I know the last few years a 60-40 mix portfolio has been poo-pooed a bit in the media, but I would say, with this forecast, the strength of the 60-40 portfolio 60% equities, 40% bonds that seems to be a good middle-of-the-fairway type of approach. Would you agree with that?
Speaker 3:I definitely agree. I think, generally speaking and something we've done some analysis on before generally speaking, stocks go up, bonds go down and vice versa. But the last few couple years we've seen both stocks going down and stocks going up, along with bonds going down, both going up. So it hasn't been pretty consistent. That's just a very rare anomaly, I think. Having exposure to stocks and bonds, depending on your investment objective, it's a great way to be diversified. Little exposure to different parts of the market. Last year was a weird market. It was a magnificent seven. There was those seven key stocks driving technology, driving growth. That's not a normal market. In a normal market, you see different parts of the market doing well, some doing poorly. The way you survive this type of market is diversification.
Speaker 2:Yeah, and you mentioned too. I mean you're right especially in the large cap growth arena. Those P-E ratios are, compared to historical averages, a bit high, but there's opportunity in small caps. If you look at the P-E ratio of small caps, it's below this last 50-year average, would you say. There's opportunities outside of the mega caps.
Speaker 3:Definitely. I mean, everyone loves growth. Growth is good. People love growth and you pay up for growth. That's why valuations are high. But if you look at valuations compared to averages, I think the P-E ratio, the price earnings ratio of, let's say, large cap growth is around 33. The long-term average is around 20. I think 22 or 24. If you look at other asset classes, like value, small cap international, they're close to the long-term averages, around 13 or 14. Good opportunities in other asset classes especially and this is the key point growth tends to do well as the economy starts to slow down. We probably had that last year. If, on the other hand, the economy is avoids the recession or the recession is mild and we start to price it in recovery, what does well, small caps value those other areas, those more economically sensitive sectors of the market.
Speaker 4:I got a question for you Back in 2020, COVID was not on our radar this time of year. Three months later, in March, it's everywhere. It's the biggest thing In 2024, how do we properly prepare ourselves for what's unexpected in the year to come?
Speaker 3:Sure you can never predict exactly what's going to happen. I mean, all you can do is just try to be safe. Have your portfolios consistent with your long-term objective. I think the safest strategy to do is what we talked about earlier diversification. Don't just bet on one part of the market. Have exposure to different parts. It's like the old adage don't put all your eggs in one basket. Be diversified. But again, the key point is that you want to be diversified to your long-term objective. You don't want to be too aggressive or too conservative. That's why you need to sit down with your financial advisor, with Professor Jacob and Kelvin and the rest of the team together, just to make sure you're aligned with your long-term objectives.
Speaker 3:But a side question related to your question is what are some big risks that we see this year to look at? I mean, obviously no one could have predicted COVID, but some risks that we see are number one valuations for the stock market are a little pricey. They're pricey and perfection, I think. Number two you can look at maybe we do have a recession. Maybe I'm wrong, maybe most people are wrong. I mean, you look at key recession indicators, like the leading economic index, which is 10, indicators which are have a great way of potentially predicting recessions. Every time it's at this level, which is very negative, we've had a recession. You can look at it historically. Every time this level, we have a recession within, say, a year or so. So maybe we have a recession. The other thing is that the yield curve is inverted another potential recession warning light so maybe there is a recession.
Speaker 3:The thing that we're watching carefully and I touched on this earlier is that the Fed today is saying no recession in 2024, but only three rate cuts. What the market is saying is no recession, but six rate cuts, and there's a big disconnect and that disconnect is going to create some volatility. This is why we saw stocks start off the year pretty poorly because of this volatility, this disconnect. Who's going to be right? Hard to say. We think that it's going to be somewhere in the middle that the Fed will need to raise rates, cut rates, excuse me, a little bit more than they expect, but not as much as the markets anticipate, because the economy is a little bit stronger than the markets are pricing in right now. So those are the key risks that we see.
Speaker 2:And what are your thoughts about the war in Ukraine, as well as the war in the Middle East? Does that play into our economy here in the United States, or how should investors look at this global conflict that exists? Great question.
Speaker 3:So geopolitical risks are always concerning. First of all, our hearts are with those people who are affected. We see here talk about the financial markets, but those living the war. It's awful, especially if you have friends, family, loved ones there. Our perspective, though, it, depends on what happens in each region. So let's say Russia, ukraine. We saw the surge in fuel prices. We saw the surge in food prices. We saw the surge in natural gas prices In the Middle East. Seemingly, the war is contained right now. No one really wants to escalate that, and the reason you can see this is that oil prices are down around $70 a barrel. If this war were to escalate, you would see oil prices surge dramatically. But even when we saw it over the weekend, saudi Arabia cut energy prices. So clearly there's a lack of demand right now for oil, which says that the economy, the global economy, is slowing down. So you have to watch these wars because there's always ramifications to what could happen.
Speaker 3:One of my first books I read in the industry is a book called Liarist Poker. Great book, it's a great, great book. What I loved about the book? Not about the demise of Solomon Brothers, but more importantly, about how something happens across the world and how it affects the financial markets here. So something could happen like a war or an event or something, and then you'll see there's an impact on, let's just say, copper prices down the road. So it's a great book to read. It's a light, easy book. It's the same guy that did the Blind Side and Moneyball Michael Lewis, right, yeah, michael Lewis. Yes, so I'm terrible at names. So, michael Lewis, thank you. But again, you have to watch these instances very, very carefully. But again, this is why diversification you are diversified, having exposure to different parts of the market.
Speaker 2:Yeah, so there you go. And now, what about also the presidential election in this year, 2024? That can obviously, and is, creating some gyration out there. How should investors look at the presidential election? Should they just look beyond it? Should they take into account certain factors? What are your thoughts on that?
Speaker 3:I would look beyond it. I mean, I hate to say this, but look beyond it just because we did some stats. So in the 16 presidential year since 2020, sorry, since 2000, and I'm looking at my notes right here the stock market has that year of the presidential election has been positive in 14 of the 16 years and the average return for the S&P 500 is about 10 and a half percent. So the only time the stock market was negative was in 2000. We had a recession. We had a tech bubble in 2008 where we had the housing you know the housing crisis but generally speaking, the markets ignore the presidential election question is who's gonna win? I don't know.
Speaker 3:But my only advice to all of you listening is don't listen to the polls. The polls are Worse, getting worse and worse and worse. In terms of who's gonna win, the best thing to look at would be sort of the offshore Betting odds, where they're taking it. All the information get that perspective. So I'm not gonna say who's gonna win. You know, at this point it's a coin flip. At the end of the day, look at the offshore betting odds, don't look at the polls. Polls have been completely wrong.
Speaker 5:Interesting stats. Yeah, that's interesting because most so many clients fear the election years. But when you look at stats, they're actually been quite quite good during those years and I think enough. As I always have clients at fearing all elections right around the corner. What do I need to do? But Statistically they've done quite well.
Speaker 3:Yeah, it's funny. So you look at a year, like you know, people will say, okay, stock market, if we have a you know Democrat Congress and Democratic president, that's good news, because we have a blue wave. But then they'll say, okay, if we have a Republican president and a Democrat Congress, we have a mixed government, so nothing gets done, that's great news. Or if we have Republican Congress and Republican president, it's a red wave, it's all great news. So it's it's funny. It is always the initial shock, but at the end of the day it doesn't matter. I mean, it really doesn't matter. Stocks tend to do pretty well. Nothing's a guarantee, of course, but stocks tend to do pretty well.
Speaker 2:That's solid advice, because I think so many people just they get caught in that that storm of information, that noise out there, and and they think that they can crack the code and have an advantage, when in reality, like we talked about you just got to look beyond it. You got to look at your objective and what your goals are and to not be jaded by. You know the, the, the noise out there, exactly exactly.
Speaker 5:I'll jump in. I have a question to run by. You guys throw all these questions at you and always appreciate your insights and thoughts. I Get this question quite a bit from clients, other professionals and over the years it's come up quite advanced, relating to the housing market, primarily Residential and so forth, which there's been so many variables, slightly from interest rates to house pricing, valuations to Inventories, and it seems like the dust has settled a little bit. And, with that being said, do you think there might be a little bit more consistency that we might see in the housing?
Speaker 5:Because I find that clients, it's difficult to make decisions, buying a house or not and that sort of thing. A lot of it's the fear of like I don't want to buy and it's way high, don't want to buy when rates do. There's so many variables these days. But there was a period of time where there was more consistently, where you could feel like that's a pretty solid and Investment decision or even as a primary resident, do you feel like there might be a little bit more consistently going forward now that things have settled a little bit?
Speaker 3:Yeah, I definitely think so. I think your point is a really good point because part of the volatility we've seen in housing and housing prices in In just people finding houses, is basically COVID, and during COVID we lost about 1.8 million households. What happened is that the the recession started, covid happened and basically people were afraid of how long was COVID gonna last? What would be impact? So people moved in with their parents or they took on roommates because they were unsure about how long the recession would last. And then, you know, six, nine months later the vaccine came out. People realize, okay, this coat COVID thing is, maybe it's slowing down, maybe we can get back out there.
Speaker 3:So people started getting out there in renting and but they started buying homes. But home prices searched 31% in about two years, pretty fast, pretty quickly. So they got priced out. So they started renting and rent serves dramatically. All this create all this volatility. And then now you have mortgage rates much higher where people don't want to sell homes. So this volatility is gonna be with us for a while. But to your point, if you look at new homes a new home construction and building permits those are both surging dramatically. That's gonna factor its way into homes, into inventories, into pricing. So we think there'll be much more stabilization right now and, plus, with mortgage rates, start to pull back a little bit. It might be, it might be better you know, right now.
Speaker 3:Last salad I saw was that lives at like 65% of a homeowner's value is owner's equity and that's a pretty high level. So therefore, home prices going up, going down, there's not that much incentive, not much need to sell out of a home, not like the 2008 crisis where we're at about 30%, 32%, where people had to sell homes pretty fast, pretty quickly, because values dropped. So I think housing will be stable. Obviously there's gonna be bubbles here and there, but the end of the day, housing will be stable. Yeah, good to hear. Thank you for that. So if you look at home builder sentiment, home builder sentiment is pretty strong and home builder sentiment is a very forward-looking indicator.
Speaker 5:Well, with rates going up, you think that might deter that, but not really. My first mortgage was 8.5%, so honestly, to see what we're seeing here it's not new to everyone. Some people have experienced, I guess call it the regular mortgage rate, compared to what it was for years. So that's good to hear that home builders and building are still continuing to move forward.
Speaker 3:Yeah, my mom's first mortgage was back in 1980. I think it was June of 1980. It was 17.4% or something outrageous, and then she refinanced at 16.3%. So back in the day.
Speaker 2:Thank you, I appreciate you. Yeah, gene, you bring a lot of great perspective to the conversation and we really value your expertise, your leadership here at Cetera. And, once again, thank you so much for joining us on Finance Roundtable Podcast. We look forward to having you return at some point in the future and we wish you all the best. We see you on all the different shows, from CNBC to Fox Business, and whenever I see you on those shows, I'm always rooting for you and you always represent us really well. So thank you for all that you do for us.
Speaker 3:Routing, you're like rooting, don't mess up Gene.
Speaker 2:No, we have all the faith in the world in you.
Speaker 3:Thank you Well, thank you so much and thank you for the opportunity Again. 2024 should be a good year. Can't guarantee anything, but the best strategy is diversification and for those of you listening, please stay in contact with these guys. You've got to make sure that your portfolio is aligned with your long-term objectives, because volatility is going to be the keyword this year volatility fluctuation to the market.
Speaker 2:So, thank you Good advice. Thank you, gene, we really appreciate it.
Speaker 3:You have a wonderful day. Okay, you too. Bye everyone. Thank you so much, Thank you.
Speaker 1:Bye. Thank you for listening to Finance Roundtable. Make sure to check out our episodes at wwwfinanceroundtablepodcastcom. We also encourage you to explore wwwjacobsgoldcom to find articles, research videos and more from Jacob Gold at Associates Inc. If you have a question for the show, please email jacob at jacobatjacobgoldcom.
Speaker 2:Jacob Gold and Michael Koshell are financial advisors offering securities and advisory services through CITERA Advisor Networks LLC, doing insurance business in California as CFGAN Insurance Agency LLC member FINRA SIPC, a broker-dealer and registered investment advisor. Citera is under separate ownership from any other named entity Jacob's California Insurance License 0E55425,. Michael's California Insurance License 0K90130. The views depicted in this material are for information purpose only and are not necessarily those of CITERA Advisor Network. They should not be considered specific advice or recommendations for any individual. Neither CITERA Advisor Networks nor any of its representative may give legal or tax advice. Kelvin Gold is a marketing associate. Registered address is 14850 North Scottsdale Road, suite 255, scottsdale, arizona, 85254.
Speaker 2:Citera Investment Management LLC is an SEC registered investment advisor owned by CITERA Financial Group. Citera Investment Management provides market perspectives, portfolio guidance, market management and other investment advice to its affiliated broker-dealers, duly registered broker-dealers and registered investment advisors. Citera Financial Group refers to the network of independent retail firms encompassing, among others, citera Advisors LLC, citera Advisor Networks LLC, citera Investment Services LLC, marketed as CITERA Financial Institutions or CITERA Investors, and CITERA Financial Specialists LLC. All firms are members FINRA SIPC. Citera Financial Group is located at 2301 Rosecrans Avenue, suite 5100, el Segundo, california, 90245.