Daily Commentary

MarketMinder’s View: Here is a deep dive into an investment scam we think is particularly pernicious, one “selling the promise that it could teach anyone, particularly teens and twentysomethings, how to become a savvy retail investor.” While the hook seems unique, the telltale signs of fraud are all too common, which we think people of all stripes, not just investors, can benefit from recognizing. First, the scam’s perpetrator “flaunted luxury cars, private jets and apartments across continents.” If an investment “guru” is showing off their lavish lifestyle as a promotion, that is a warning sign. Then there are the flashy tactics that fall apart upon closer scrutiny—the flash hides their nonsensical nature. “He studied the stock market and started charging people $5,000 for six months’ access to his easy-to-learn trading strategies, like looking for repetitive patterns in price moves and timing when to sell an asset.” As every investment disclaimer’s fine print says, past performance doesn’t guarantee future results. Another red flag: too-good-to-be-true returns. “‘We have a product that matches the highest-income earners in the arena,’ he said in a video, mentioning the $30 million in yearly bonuses Goldman Sachs traders make.” As always, do your due diligence with any investment strategy/service/product and remember, if an opportunity uses emotion to appeal to you (whether through fear or greed), take a moment and tap back into your logical side—demands to “act now” are another red flag.

MarketMinder’s View: As this article underscores, inflation is the bane of existence for those living on fixed incomes (as many retirees do). Rising prices may force some to withdraw more from savings than otherwise, which risks depleting their funds sooner than desired. But there is a ready antidote: Even with some rough spells when inflation coincides with a stock market drop, as in 2022, over time stocks provide an effective inflation hedge for long-term investors. According to the study highlighted here, “inflation will reduce the financial wealth of retirees in the top third of the wealth distribution by an average of 4.3% by 2025. Those in the bottom third, who rely more heavily on cash and bonds in their retirement savings, are likely to experience an 18.8% reduction by 2025 due to inflation. The wealthiest Americans tend to invest more heavily in stocks.” While we could quibble with the assumptions used to generate these figures, we agree with the general gist. In our view, owning stocks can help investors withstand inflation’s bite over the long run. Yes, stocks can be volatile in the short run, but over longer timeframes, they have historically delivered the returns necessary to close retirement funding gaps—and stay ahead of inflation. For retirees, we think that is a very valuable reward for enduring the short-term risk.

MarketMinder’s View: As always, MarketMinder is nonpartisan, favoring no party nor any politician. We discuss politics solely for its potential market impact. This article makes a big deal about presidential contenders’ economic plans (e.g., protectionist policies, expansive government overreach and unsustainable deficit spending) and their purportedly negative effects. But a few things to note here for investors. First, what politicians say on the campaign trail often bears little resemblance to what they can pass once in office. The victor tends to moderate once in power, as the president must work with the legislature to pass new laws. (Yes, the president can use executive orders and the regulatory apparatus, but court challenges block a lot of it, as we have seen lately with some flagship regulatory changes.) Second, Biden and Trump’s respective policies are hardly secrets, which allow markets to pre-price them, sapping their surprise power. Third, even if some policies do pass, compromising with Congress leads to a watered down result—the changes are seldom as sweeping as promised. Keep these points in mind as election season heats up. Campaign rhetoric often stirs anxiety in the lead up, but as races shape up, uncertainty fades—becoming a tailwind for stocks, which is why presidential election years are frequently positive for stocks.