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unfortunately there's a big lie going on
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right now in the stock market and as a
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financial adviser for over 20 years I've
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seen this happen three or four times in
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the past and unfortunately people get
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hurt and I don't want to see that happen
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to you so I want to share with you what
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it is but first we need to lay the
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groundwork and talk about where we're at
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today as I record this the September
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jobs report just came out and it was
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great news the market is posting new
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all-time highs this article by
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CNBC um praises the Federal Reserve the
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Federal Open Market Committee I should
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say for what looks like being able to
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pull off a soft Landing which is super
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hard to do the title says the fed's
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close to pulling off The elusive
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economic soft Landing in 2024 after a
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great September jobs report and
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September's report was really an upside
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surprise for everybody the article says
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the outside's payroll boost takes the US
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economy Out of the Shadows of recession
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and gives the Federal Reserve a fairly
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open Glide path into that soft Landing
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super hard to do it's almost never done
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when the economy starts overheating when
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inflation takes off when the Federal
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Open Market Committee has to start ra
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raising interest rates to slow things
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down unfortunately that usually puts us
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um in a in a recession but uh the CNBC
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article goes on to say if that sounds
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like a gold goldilock scenario it's
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probably not far from it even with the
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lingering inflation concerns that are
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straining all of our wallets okay so so
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what's to worry about what's this big
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lie let's let's keep going um the the
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jobs count uh from this report from CNBC
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was better than almost anybody was
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expecting it to be people were expecting
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new jobs to be
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150,000 and it ended up being over 75%
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I'm sorry over 50% higher than that it
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came in at
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$254,000 then the other ,000
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$254,000 new jobs and the other nice
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piece of information is the unemployment
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rate fell to
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4.1% which is down one10 of 1% and it it
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showed a even stronger picture there
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with a gain of 430,000 jobs this is the
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s&p500 over the last 12 months and you
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can see the year to-day change is
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20.5% and the one-year change is almost
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35% in over the past 12 months the S&P
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500 is up almost 35% that's a big big
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number okay so what's the LIE what's the
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worry what's the thing that I want to
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make sure that that you're protected
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from and and not hurt by and that is we
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get led into this false sense of
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security when the stock market is doing
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well when it's done well for a a long
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time the last decade has been extremely
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strong in the stock market and it's
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super important particularly as we get
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older and the our account balances are
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increasing it's super important that we
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look at our asset allocation we look at
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how we're invested and make sure that
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the way we're invested is not
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necessarily for this Goldilocks outcome
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right because all of us can hang on and
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and can enjoy being invested in stocks
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when they're up almost 35% in a 12-month
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period but what what we need to do is
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make sure we have an asset allocation
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that we we enjoy having both in good
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times but also in bad times so let's say
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that you've saved up
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$500,000 you know what I what I like
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telling people is anything that can go
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up by$
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35% can also go down by
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35% so you know how would you you feel
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if in your next quarterly statement the
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one that's going to come uh in early
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2025 your quarterly statement from from
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your stock broker from your the
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custodian that your money's uh held at
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right the stock market just went up
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35% so if let's just call it a third 33%
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so if you had
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$300,000 now you have
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$400,000 but what if the market goes
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down by a third right now you've lost
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$120,000 and that can be very painful so
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the the caution in the LIE is kind of
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this siren song that things are going
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well that the economy's doing fine that
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the Federal Reserve is going to uh bring
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us in for a soft Landing that maybe
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official intelligence AI is going to be
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a nice Tailwind for companies they're
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going to be able to continue to do
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things better faster cheaper than
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they've ever done it
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before and maybe all of that plays out
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maybe over the next 12 months we get
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another positive 35% return I don't know
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I don't have a crystal ball but what I
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do know is the Market's not going to
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continue to go up forever trees don't
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grow to the Moon you know if I've got a
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tree in my backyard and it grew a foot
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last year it doesn't mean it's it's
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going to continue to grow a foot a year
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forever and grow to the moon at some
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point the tree is going to stop growing
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and it's the same thing with the stock
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market at some point there's going to be
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a negative surprise I mean there's
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clearly a lot of scary things out there
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right now uh the the conflict in the
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Middle East being one of those the
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conflict between Russia and Ukraine
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being another one there's there's
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there's definitely some shoes that could
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fall and right now the stock markets at
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a fairly High
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valuation um Warren Buffett uses
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something that I call the Buffett
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indicator and it looks at what's the the
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value of the stock market over what's
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the United States
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GDP and right now that number is almost
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2X and so on its own 200 it's 200% on
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its own it's 200% good it's 200% bad
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well if you look at this chart here
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it'll show that not only are we one
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standard deviation above where where the
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the the mean would be but we're actually
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two standard deviations above that or
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close to it so we want to be careful we
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want to make sure that that our asset
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allocation is right I live in a ski town
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we have a saying there don't get in
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front of your skis too far in front of
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your skis that's where you can get hurt
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don't be overly optimistic don't be
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planning for everything to be perfect
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because at some point you're going to
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hit a bump in the ski slope and you're
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going to end up on your heels and you
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might wipe out and I don't want if that
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does happen and we all fall but I want
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you to be prepared for it and one of the
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things people don't think about enough
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is the importance of their asset
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allocation there was a study done it's
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called the Brinson study in the the mid
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1990s and they asked ask people what are
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the things what are the factors that
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influence the type of returns that you
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get when you invest in the stock market
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and the study came back that people
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thought that almost 2third of their
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return was based on stock picking and
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and people thought that less than 10% of
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their returns was based on their overall
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asset allocation what percent of your
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portfolios and stocks what percent of
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your portfolios and bonds but actually
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it turns out that almost
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95% of your long-term results are based
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on your asset allocation so thinking
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through that getting that
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right it's it's something that's
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important enough that if you're not
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working with a financial advisor at
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least to figure out your asset
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allocation I really encourage you to
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think about hiring somebody that's a
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fiduciary to you 100 100% of the time
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somebody that's fee only is the term uh
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fee only financial advisor to help you
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think through what your asset allocation
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should be and so making good decisions
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is really critical and one good decision
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that I want us all to have is we only
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get this journey once in our life and
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that's why I made this video up here
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that talks about eight things to stop
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doing in our 50s and 60s in order to
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enjoy our journey more thanks for
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watching this video I'll see you in the
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next one bye-bye
