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Episode 33 - Midyear Report: Inflation, Interest Rates, and Housing Market Impact

In this episode of the Blue Money podcast, hosts Jim Donnelly and Kevin McGarry discuss the midyear market trends for 2024. They begin by acknowledging the recent shooting of a Philadelphia police officer, expressing their support for law enforcement. The conversation then covers inflation, which is at 3.3%, interest rates, and the housing market, including median house prices and supply issues. They also explore the potential impact of the upcoming elections on the market. Emphasizing patience, diversification, and financial planning, Jim and Kevin offer valuable insights for investors and invite listener engagement.

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Episode 33 – Midyear Report: Inflation, Interest Rates, and Housing Market Impact


Jim Donnelly (00:00:21) – I want to welcome everyone back to the Blue Money podcast. This your host, Jim Donnelly? I’m here with my co-host, Kevin McGarry. What’s up Jimmy? Not much. Before we get started, Kev, I just want to let everyone know out there our thoughts and prayers are with the Philadelphia police officer that was shot on Saturday night. from the 25th district. I know he was in the hospital fighting for his life, so I just want to acknowledge him. Everything that the law enforcement officers do out there for us on a daily basis, or thoughts and prayers are out there, with the Philadelphia PD and all the enforcement, very.

Kevin McGarry (00:00:50) – Brave people out there protecting society. And we got to support these people and back them.

Kevin McGarry (00:00:55) – Yeah. No.

Jim Donnelly (00:00:55) – Absolutely. Kev. So with that, Kev, I thought this podcast we talk about 2024 midyear report where we’re at Mark strong. It’s been driving pretty good for this year. So what do you have what do you have on the market Kev I.

Kevin McGarry (00:01:08) – Mean it’s been crazy. I mean the markets have seen 30 new all time highs for the year. I mean so that’s a really good pace. I mean they’re on pace to to have 66 all time new highs for the year. It’s a lot. It’s a lot. And when you have over 30 historically the market’s averaged over 20% for that year.

Jim Donnelly (00:01:25) – So the first thing that we look at when we’re talking about markets is what’s driving the market is the inflation. So we first look at inflation so far this year in 2024 inflation is about 3.3%. The next meeting we’re going to have is July 11th. You know typically they’re trying to get around inflation to that 2% mark. So what do you have inflation Kevin how’s it looking.

Kevin McGarry (00:01:43) – The CPI remains around 3.3.

Kevin McGarry (00:01:45) – What’s keeping it elevated. It has come down different components of it is shelter. Shelter is really driving it. And you know shelter makes up around 35% of the basket. And what’s driving this shelter is the rents out there. The rents, remain high. But here’s one thing for the listeners to remember rents are lagging indicator. So they’re not right now it’s numbers for the people to understand. And at the end of the day, if you look at it, the next three month projection of CPI is around 2.8%. If you remove shelter, it falls to around 1.7% from that basket.

Jim Donnelly (00:02:25) – And that’s the number of shooting for, right? We want to get down about 2%. If we look back historically, the last four years of 2020, the inflation rate for the year was 1.2 and 2021 was 4.7. 2022 is 8%, which was high. We had to come down from that. So in 2023 we got it down to 4.1. So we are on pace. We’re on the right direction of bringing inflation under control, keeping in check.

Jim Donnelly (00:02:48) – The next thing that we need to look at is the interest rates. You know rate cuts starts going to be four more meetings this year July, September, November December. So right now since March 2022 and January 24th, there’s been 11 hikes. it paused this year so far. the interest rate cuts. what do you see, Cav? Do you see them? The four more meetings. Do you see any cuts? And they don’t have a crystal ball or anything like that. But what do you think? What’s it looking like?

Kevin McGarry (00:03:15) – Right. I mean, this is definitely crystal ball call. I mean, you know, getting back to inflation, it’s starting to you know the fed paused on on rates. Right. And now they definitely you can tell they want to come out and cut rates. they’re looking at a bunch of data. But I can tell you this is their projections changed a little bit in in March when it came out a little hot inflation and they went from 2.6 to 2.8 and trying to get inflation by the year end.

Kevin McGarry (00:03:45) – But I think the big thing here is, you know, inflation is starting to creep down as we just spoke about. I think the other big thing is the one thing the fed hasn’t changed is their projection to get the federal funds rate down to three, three and a quarter by the end of 2026. They’re still looking at nine. Cuts just may not happen as quick as they were expecting this year. But because of inflation starts to slow down you potentially could see 1 or 2 rate cuts.

Jim Donnelly (00:04:13) – Yeah. Especially with the four more meetings I have I don’t see it happening early in July. September is probably the best chance because November, that meeting is going to be very prior to the election. that might not happen from stuff I’ve been reading. So we’re looking at September. December might be the quarter, but we’ll see. Like you said, we don’t have a crystal ball for it. The next thing is the housing market and us. One thing I read that was, jumped out at me. In the US, median house prices have increased by 5.8%.

Jim Donnelly (00:04:39) – The current median home is 419 K. It’s the highest on record. So what are you seeing? The housing market? Cav well, how do you feel about it.

Kevin McGarry (00:04:47) – Yeah I mean again crystal ball I mean calling the market. But I think the thing that’s driving and has been driving the housing market is you have a lack of supply in the US. Number one, number two is. 30 year mortgage rates are pretty high. So, you know, when rates start to come down, you could see more sales and more competition for these homes as we get, you know, more potential buyers.

Jim Donnelly (00:05:12) – Yeah, that’s the thing. And the other thing I saw, about the most expensive state to buy a house, the median Hawaii 856 K. I mean, we always know Hawaii’s expensive. Yeah, the cheapest one to buy a home. The median was West Virginia, 160 K. So has anyone lost in the last couple podcast? That’s Frankie P went to college there was that West Virginia.

Kevin McGarry (00:05:34) – So yeah couldn’t get B become a what’s a what’s Hawaii’s nickname warrior rainbows rainbow Warriors.

Kevin McGarry (00:05:40) – And then West Virginia is is the, West Virginia’s nickname Mountain Mountaineers. Yeah. So yeah, I mean, I take, you know, West Virginia numbers are pretty low, but compared to the national averages. But yeah, I mean, that’s.

Jim Donnelly (00:05:56) – Lie, man. I’d rather be in Hawaii and in West Virginia, right?

Kevin McGarry (00:05:59) – Yeah, I guess, yeah, it depends. Right. But here’s what I would tell you though, is if you if you think about it, like how many of these people getting out of college and school can afford these homes.

Jim Donnelly (00:06:10) – I can’t it’s the problem.

Kevin McGarry (00:06:11) – It’s the problem they have. There’s issue out.

Jim Donnelly (00:06:13) – There, wealthy parents or grandparents to help you out. There’s a lot of inheritance. Not you’re renting, bro. lastly, let’s talk about the one thing that we always talk about, just winning this election year, about how the elections are going to affect the market. I mean, so how do you see that forecast? And, Kevin. Yeah, before.

Kevin McGarry (00:06:29) – I dive into that, just think about the markets this year. Market’s done fantastic. Right. And it started off really strong. You got a strong job market out there. Numbers came out in you know for May. And there’s 272,000 jobs posted. First they expected around 180,000 right. The historical average from March April May has been around 166,000 jobs. On average. They averaged over 240 this year. So people are working. Yes. Unemployment’s up to around 4%, but the age demographic between 25 and 54 people making money, they’re working. I mean, the numbers are over 80% total and the highest ever for women at 75.7%. So people are working and they’re making incomes. So people are making incomes. The consumer makes a high percentage of the economy they’re spending. So if you have a strong job market, Jim. Right. It helps incomes grow, incomes drive earnings. Right. And in earnings drive stock prices. That’s what we’re seeing here right now. You mean corporations the index of strong earnings.

Kevin McGarry (00:07:40) – Yes valuations are higher than the average. But you know that’s why we believe in broad diversification you know be diversified. Because a lot of the market returns over the past few years been from a few companies. But we’re seeing the markets broaden. And if rates come down, it’s historically been really good for small caps and make caps in your portfolios. So stay diversified. That’s the.

Jim Donnelly (00:08:06) – Key. What about the elections have.

Kevin McGarry (00:08:08) – Yeah I mean historically election years have been positive for markets people. They don’t you don’t see it in material or marketing but people are trying to get reelected. Yep. You do you think the Biden administration wants the market to go down right now? Absolutely not. Do everything in their power.

Jim Donnelly (00:08:22) – Not that that’s.

Kevin McGarry (00:08:22) – Right. I mean, so historically, election year is being really solid in returns, but a lot of that return happened in the second part of the year. Right? You know, we have to go back to 1976 where a good year for you, right.

Jim Donnelly (00:08:37) – That’s right.

Jim Donnelly (00:08:38) – Was born.

Kevin McGarry (00:08:38) – Right. So 19. So 1976. Over 15% in every turn was in the first six months. The next 3% happened in the next six months. So you know it’s usually flip flop. So we we expect this year to finish positive unless something you know black swans out there that we’re not seeing. But you know the market should remain strong for the rest of the year.

Jim Donnelly (00:09:00) – Yeah. I mean everything that you just discussed, everything that we discussed, it looks positive. It looks promising for the markets. It looks promising for the economy. It looks like we’re going in the right direction. I mean, only time will tell. Like we said, we don’t have a crystal ball. So what do you want everyone remember from this podcast as we wrap it up?

Kevin McGarry (00:09:15) – Listen, first of all, for the police officer that was shot in Philly, we’re thinking of you. second of all, have a great summer. Enjoy it. You know, time flies. And we’re already in June for this year or the end of June.

Kevin McGarry (00:09:28) – I think the other big thing is, you know, when it comes to the markets, be patient, be diversified, have a plan.

Jim Donnelly (00:09:34) – And overcommunicate that’s going to wrap up the Blue Money podcast. If anyone has any questions about this podcast or anything about the portfolio or investing in general, please don’t ever hesitate to reach out. That’s why we’re here. Thank you for listening. Enjoy your summer. Be safe out there. Be safe.

Announcer (00:09:52) – Thanks for listening to Blue Money to learn more about Jim and Kevin, or for a free financial assessment, visit Valley Financial. Dot com or click on the link in the podcast description or shownotes. Until next time safe investing. This material is intended to be educational in nature and not as a recommendation for any particular strategy, approach, product, or concept for any particular advisor or client. These materials are not intended for any form of substitute or individualized investment advice. This discussion is general in nature and therefore not intended to recommend or endorse any asset, class, security or technical aspect of any security for the purpose of allowing a reader to use the approach on their own before participating in any investment program or making any investment.

Announcer (00:10:34) – Clients, as well as all other readers, are encouraged to consult with their own professional advisors, including investment advisors and tax advisors. Valley financial can assist in determining a suitable investment approach for a given individual, which may or may not closely resemble the strategies outlined herein.


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