Voiceover Audio: Welcome to the Enjoy More 30s Family Finance podcast.

The only podcast dedicated to making life more enjoyable for young families by hitting on the financial topics that tend to weigh on us, stress us out, and distract our focus from simply enjoying life.

Joseph Okaly: Hello, and welcome to the next series here on the Enjoy More 30s Family Finance podcast, REMIX for Rising Rates.

In 2022, there have been significant declines across pretty much every major asset class through October.

With rates rising significantly for the first time in a long time, it can be a very unnerving experience.

This series is going to attempt to help you with that going back and re-mixing a number of past episodes to help you emotionally navigate what have been very turbulent times.

Each week, I'll be re mixing a different episode bringing what I would say is a timeless concept into the focus of this present day situation.

As always, before I begin, please share in like please leave reviews.

I'd love to reach and help as many young families out there just like you.

Today's episode is the Stocks Lead, Don't Follow REMIX, building off of our Unknowns are Scary REMIX from last week, where we touched on how these words inflation and interest rates could actually connect to influence your portfolio in the way that they may have so far this year.

Now, when I was a kid, I really looked up to my older cousins, they would teach us a lot of really cool interesting things.

And some of those were great; family, unconditional love and support and then you know others let's say not so much.

For example, if you break the glass in mom's fancy shelf clock, what do you do?

Well, you just take out the glass and you throw it away.

Now it just looks like a really clean clock.

You don't get into trouble.

Really excellent advice.

We avoided problems from my mom when we broke her clock for I think it was around 15 years.

So anybody out there take that glass out just looks crystal clean, you just keep going on.

However, we also learned some other tricks from my cousin's like Saran wrap on the toilet seat as a really funny haha prank.

Not funny at all.

Really just a horrible, horrible piece of advice.

Pee all over the floor is not funny.

So some well deserved punishments off of that one.

So circling back around when it comes to stocks, it can be much the same way, especially during emotional times, like what we're dealing with right now.

There are a lot of saran wrap ideas out there that could potentially get you into trouble.

The stock market, if you remember is what they call a leading indicator.

Basically, what that means is that it acts in advance of what people think is going to happen.

So if Apple earns say 100 billion in revenue, instead of the expected 110 billion, the price of the stock subsequently goes down.

The company still made money, so it's not about making money or not making money, it was already higher than it was because it was expecting 110 billion of revenue, not 100 billion.

That was that leading indicator, that leading piece of information that was already baked in.

And as you can probably then guess when they feel like they have no idea what's going to happen next, so extreme uncertainty, the market tends to drop dramatically.

Think the 2008 mortgage crisis or 2020 COVID.

There was very little clarity at the time on what was going to happen next.

And that uncertainty is what drove the volatility.

Once more clarity returned, who's getting bailed out, vaccine timelines, what have you for each situation?

That is when it started to reverse course.

So how does that apply to the current situation of 2022?

Here we have inflation and the Fed's reaction to it, which is rising interest rates.

If you want to know why that is the reaction to trying to control inflation go back into the last episode 10.1 where I more fully explained it.

The "we don't know what's going to happen next" this time is we don't know when interest rates will rise enough to bring down inflation to a satisfactory level according to the Fed.

When the market went down in January to start this year, it wasn't because companies were now earning less profit, it was because they said we're raising interest rates and the market said we think as a leading indicator, where this is probably going to lead is to less in profits overall.

So again, that leading indicator status.

Now if you look in July what happened, there was some perceived good inflation news.

July 2022, the market went up over 9%.

The leading indicator again in the stock market was saying "hey, we just got some what we think is pretty good inflation news.

We may be over the hump here" and stocks were bought up again leading what we think is going to happen in the market.

However, in August and September those sentiments changed course quite a bit and the market went down over 13% during those two months.

So it's really a great example of how the stock market is trying to take the current information and projects what that current information means going forward.

Again, that leading indicator status.

So what you can do is really the hardest thing sometimes and that's just not touching it.

You are probably reacting off of past information.

"Hey, everything just went down, or hey, it all went up." If you react after hearing this, then you most times are trying to catch the wave that's already past you towards the shore.

If you heard, for example, that the market went up 9% in July, and then invested more, well, you would have been greeted with a 13% loss on that new addition by the end of September.

If you are maintaining a well diversified account, you can listen to episode 1.6, Investments Should Be Boring if you need a refresher, then you should be positioned appropriately for you for the long term.

If you have an advisor using a diversified managed account model like we do for our clients, they are likely rebalancing through these times to potentially take advantage of the ups and downs along the way.

So if we accept that things are going to move ahead of time, that leading indicator before we will have a chance to generally react, then we can potentially avoid some of the big mistakes that too many investors make by pulling out when things are already low, and generally not adding money back in until things have significantly rebounded, leaving them with much less than they ought to have had, if they just not touched it throughout the ride.

Again, is seeing your account go down fun?

Absolutely not.

It sucks to be quite honest.

At the same time, you want to be making the best decision we can now at this point in time going forward.

So reminding ourselves how the stock market tends to work, how it is a leading indicator, can be a really helpful emotional refresher course.

And if we assume that inflation does level out at some point, that it doesn't just keep going forever that it does have a stopping point.

And at that point, raising interest rates further wouldn't be necessary.

Asking yourself what you think this leading indicator the stock market may do could very well be a fair questioning to consider.

And next week's REMIX, You May Already Be a Future Millionaire, we're going to step back and remember to look at the long term path we are on.

Okay, our counts may be down.

But what does that really mean for us long term?

Are we still on track for our goals?

If we're still on track for our goals, shouldn't we be factoring that into our perspective, so our accounts are down, but does that mean our goals are no longer attainable?

Or maybe we're still in a very good path to still reach them.

As always, please remember to review and share for others.

And if you need any help, don't hesitate and reaching out.

I probably have helped someone just like you until next week.

Thanks for joining me today and I look forward to connecting with you again soon.

Voiceover Audio: The conversations on this show are Joe's opinions and provided for general information purposes only.

They do not constitute accounting, legal, tax or other professional advice for your specific situation.

You should always seek appropriate advice from a financial advisor, accountant, lawyer, or other professional before acting upon any content or information found here first.

Joe is affiliated with New Horizons Wealth Management LLC, a branch office of TFS Securities, Inc., and TFS Advisory Services an SEC Registered Investment Advisor Member FINRA/SIPC.