Is a Massive Shift Finally Here?

What’s on the Menu 🍴

Things are heating up…

So let’s jump right in!

• What To Watch This Week 👀

• What Is Corporate Earnings Season Telling Us? 👂

• The “Financial Advisor” Debate 🤨

• Chart of the Day: Crypto Market Cap 📈

Today’s newsletter is a 4 minute read.

What To Watch This Week 👀

Strap in for the ride because we’re entering the busiest phase of Q3 earnings reporting season in the stock market!

This week we’ll get financial updates & future guidance from:

Microsoft, Google, Meta, Amazon, Visa, Ford, GM, Exxon, Chevron, Coca-Cola, Chipotle, Boeing, Snapchat, and more.

Last week we saw big gap ups (Netflix) and big gap downs (Tesla, Solar Edge, Regionals Financial) after earnings reports.

Other items on this week’s menu include:

• UK unemployment data

• European Central Bank meeting

• US Durable Goods Order data for September

• US Personal Income & Spending reports for September

• A speech from Federal Reserve Chairman Jerome Powell

Throw in ongoing war in Europe & the Middle East, skyrocketing long term bond yields, and uncertainty in Washington DC over the House Speaker appointment and we have a recipe for more volatility!

Amidst all the fear & uncertainty, gold and bitcoin have been unsurprising winners lately.

We’re keeping a close eye on Bitcoin just under the $30K level as rumors of a spot ETF approval continue to circulate.

Other areas we’re watching include:

📈 Rising Recently

• Energy (XLE)

• Gold (GLD)

• Uranium (SRUUF)

📉 Declining Recently

• Banks & Financials (KRE)

• Long Term Bonds (TLT / ZROZ)

• Real Estate (XLRE)

• Solar & Alternative Energy (TAN)

• Homebuilders (XHB)

• Airlines (JETS)

• Biotech (XBI)

What Is Corporate Earnings
Season Telling Us? 👂

3rd quarter earnings season has kicked off and is in full swing.

Although we still are in the early inning of the season, there’s a theme that we’re noticing going into the end of the year:

2023 full-year earnings are not going to be as terrible as people feared in the beginning of the year.

Into the end of 2022, earnings expectations for 2023 were pretty low as recession fears set in.

Article after article showed analysts confirming the sentiment.

RBC had one of the higher earnings estimates of $227, but, noted other analysts coming in much lower, at $210 earnings per share.

JP Morgan strategists even had a rock bottom estimate of $205 earnings per share.

For reference, the S&P 500 saw $218.09 earnings per share in 2022.

So, said another way, many analysts were expecting NEGATIVE earnings growth in 2023.

The good news is, 2023 is shaping up to not be as bad as feared.

As we move into Q3 earnings season, analysts are expecting 2023 full-year earnings per share to GROW 0.7%. Not robust growth by any means, but, not negative growth.

If it’s not an earnings decline, we can see how the market may end up satisfied with the outcome.

What happens from here and how the S&P 500 will price, depends a lot on 2024. Oddly enough, analysts are expecting robust earnings growth in 2024.

If 2023 was supposed to be the year of negative growth and we avoid that outcome…now what?

The risks of recession haven’t disappeared, so it’s certainly hard to figure out why analysts are SO bullish on growth in 2024, but they are.

It simply appears that the worst might be in our rear-view mirror unless the Federal Reserve keeps hiking interest rates (which many feel this is unlikely as the lagged effects ripple through).

The good news is that higher interest rates are actually giving investors more choice on risk and reward (5% risk-free rate? Yes, please).

Take advantage of it while it lasts!

The “Financial Advisor” Debate 🤨

Many people get to a point where they feel like they need extra help with their money.

This is where a financial advisor can come in to help.

There are debates around what a financial advisor even is.

An insurance sales person may call themselves a financial advisor (but, they are not).

The other major argument that has been made famous by financial personality Ramit Sethi, is that the fees for assets managed will suck away a lot of your wealth:

He’s not wrong.

A common fee structure is AUM (assets under management, aka: a % of your investment balance).

The fee is typically 1% to start and then decreases as you build more assets with the advisor.

1% can become a lot of money after many decades, especially if your advisor has you in high cost mutual funds.

So, Ramit’s argument is one worth discussing.

BUT…

There’s a big difference between someone who is only managing your stocks and bond portfolio versus a financial planner who manages your entire LIFE!

Also, if someone isn’t going to manage their money themselves, the efficiency an advisor can bring may end up netting someone way more wealth, even with the fee.

The argument should shift from “don’t get an advisor that will charge a percentage of your assets” to “what suite of services is the advisor providing?”

Let’s break down the types of “financial advisors” and services so you can tell if they’re worth the money. Financial advisor as a term alone doesn’t actually tell us much.

1. Investment Manager: Investment managers will only be focused on your investment portfolio.

   They may pick stocks for you, manage your mutual funds or ETF’s, and re-balance your portfolio regularly. They typically don’t do full on financial planning (find out the scope of financial topics they’ll work with you on).

   They may be motivated to put your money into higher fee mutual funds if they work at a big investment firm. So, beware of WHERE your advisor is coming from and check the investments they put you in!

   Finding an independent investment manager who isn’t beholden to big investment firm sales pressures is ideal.

2. Financial Planner: A financial planner can also be an investment manager, but they also do a heck of a lot more. This is the ideal person you want managing your financial life.

   They look at your budget, cash flow, your insurance coverage, your retirement plan, any investments you have, they handle advice on home purchases, education savings for your children, strategize taxes and do estate planning.

   This is where Ramit may be missing a big point: AUM fees alone don’t tell the story.

   It might be worth the AUM fee if it’s including all of this planning within the planners fee.

   Again, you can find an independent financial planner who is a fiduciary and has to put your best interest above theirs. They’re less likely to be making money off of commissioned products.

3. Insurance Agent: Insurance agents are often calling themselves financial advisors, but, they’re not regulated the same way actual investment advisors or financial planners are regulated.

   It’s important to understand that their job is to sell you insurance and possibly even put you in high cost insurance contracts that require high-fee mutual funds.

   Be on high alert when it comes to buying insurance and make sure it’s truly a need and a good fit.

   Ask for an in-force illustration with FEES INCLUDED on any whole or universal life policy you plan to buy.

So, the financial advisor argument can have some nuance.

• First, what kind of financial advisor are we talking about?

• Second, what are the services provided, and is it worth it?

There’s a lot of money managing that you can do on your own, but, when your situation gets a little more complex, it’s nice to be able to rely on a professional.

Hopefully now, you feel more equipped to pick the right one!

Chart of the Day:
Crypto Market Cap (Excluding BTC & ETH) 📈

Crypto has been beaten like cake batter for almost TWO YEARS (since the highs of November 2021)…

But are things shifting?

The TOTAL3 Chart is showing a very interesting picture for either:

1) A Breakout above $350 billion market capitalization

or…

2) A rejection at resistance for a continued bear market

And with bitcoin testing a breakout above $30k again, all eyes are on crypto this week!

What do you think?

Pop or flop?

Food For Thought 🧠

“The best time to buy is when everyone has packed up, gone home, rage quit, and sworn the markets off as a scam.”
- Nikki Dunn

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.