Money Life with Chuck Jaffe

Ed Campbell, the founder of Red Hook Phoenix Investment Partners, says that key shifts in the economy triggered by advancements in artificial intelligence and automation, changes to the financial situation, shifting geopolitics and more will make it so that markets and economies don't get so far off-kilter that they create boom and bust patterns. He says recessions and downturns will continue, but that the market will act more like it has in recent years, where it has climbed the wall of worry to new heights overcoming stumbles but avoiding crashes. Todd Rosenbluth, head of research at VettaFi, acknowledges that the government shutdown and other current conditions have made investors nervous, so his ETF of the Week is a pick with built-in downside protection to calm the nerves. In the Market Call, Adam Coons, chief investment officer at Winthrop Capital Management, discusses how he uses ETFs for a core-and-satellite investment approach that currently is neutral to market conditions, meaning that he believes investors should be rebalancing portfolios to return to planned asset allocations.

Jeff Blazek, co-chief investment officer of multi-asset strategies for Neuberger Berman says that "valuation becomes less important when you have high conviction in sustained growth of earnings, economic growth and high return on equity," which is why he's focused on the earnings portion of price/earnings and is plowing forward with stocks even with the markets near record highs. Blazek acknowledges that valuations are stretched, but says that is much more important during times when there is less confidence in the economy continuing to grow and power solid earnings. Blazek likes the looks of international investments — particularly Japan and China — because they have better valuations at a time when global growth appears likely to pick up. David Busch, co-chief investment officer at Trajan Wealth, says he is worried that the impact of the government shutdown could be felt most in delayed economic numbers, which could impact what the Federal Reserve does next. When it comes to the market, Busch is in the same camp as Blazek, thinking the earnings power has the potential to make valuations less important, though he notes he will be looking for that trend to change when third-quarter earnings are released soon. Ivana Delevska, founder of Spear Invest — which runs the Spear Alpha ETF — brings her approach to industrial technology to the Market Call.

Kristina Hooper, chief market strategist at Man Group, says that investors need to "keep on dancing" while the music is playing, but she says the tunes are about to change or stop, with valuations setting the market up for a decline of up to 20 percent that could might take a while to get here but which could show up this year if the market has a bad reaction to the Federal Reserve cooling on rate cuts. She notes that the rate-cut cycle could cut short the current small-cap rally, contributing to a down or sideways period. Hooper isn't backing away from domestic markets, but says investors should rebalance portfolios and lean into the better valuations available in foreign markets. She's not the only one expecting the market to take a breather or more here, as Mike Passante, director of financial planning at Focused Wealth Management says that technical indicators show that the stock market may be hitting resistance levels now, which could lead to a small pullback as the market resets and refreshes itself. Passante says the market has room to rebound to levels that are slightly higher than today, but he notes any more significant gains this year would require a big increase in investors' animal spirits near year-end. In the Book Interview, Victoria Bateman discusses "Economica: A Global History of Women, Wealth, and Power," and introduces us to some women whose roles helped to make the world rich but whose exploits have mostly been ignored or forgotten by history.

With a potential shutdown of the federal government loming on Tuesday — which would result in hundreds of thousands of workers being furloughed — the stock market enters this week on edge. Dominic Pappalardo, chief multi-asset strategist at Morningstar Wealth, has examined how the market has responded to past shutdowns, and notes that the impacts typically are short-lived, though the longer any closure continues, the greater and more long-lasting the likely impacts. Chuck follows up on the theme by noting that watching such a large number of workers potentially going through a personal crisis should trigger everyone to take a financial stress test, effectively simulating what would happen if they were furloughed and missed a pay period or more. He says that putting personal finances under strain helps set priorities and may also show that a saver has the ability to save more and differently. Brian Thorp, chief executive officer at Wealthtender discusses a survey done by the firm which shows that 25 percent of Americans with $100,000 or more in assets would use artificial intelligence for financial advice or to find the human adviser who they would trust to help with their finances. Thorp says the results show that investors still value human advice, but they are using AI to bring some measure of control or order to the process of getting assistance. David Trainer, president at New Constructs, reaffirms buy-now/pay-later provider Affirm Holdings as belonging in the Danger Zone, despite a series of management moves that raised cash and got the company off the list of zombie stocks while also pushing the price higher. He says investors who buy the shares now will, indeed, be paying later for the purchase, unless the company can find a way to generate profits out of taking on the risk of retailers, something it has struggled with since New Constructs first put it in the Danger Zone in 2021.

Jim Besaw, chief investment officer at GenTrust, says that the market is pricing everything as if all artificial intelligence ideas are going to come through and deliver revolutionary change and profits, and that investors are ignoring the risks that come with the technology. That could be setting them up for a fall, although Besaw is neutral on the market rather than negative, and is also neutral on asset allocations, noting that he's not leaning into specific sectors or markets -- with the possible exception of favoring international markets slightly to domestic -- and is instead at baseline levels trying to remain calm and patient while headline risks play out and signal the next moves. Steven McKee of the No-Load Mutual Fund Selections & Timing Newsletter discusses how his timing models are bullish right now, across all asset classes. While the headline risks have captured investors' attention, he says there is not much on the horizon right now that could turn the timing models bearish quickly. John Cole Scott, president of CEF Advisors, looks at business-development companies, which have been in the news lately as industry watchers have questioned whether the high yields could be luring investors into a sticky situation when rates start falling and business conditions tighten. He draws on history and times when BDCs have been whipsawed by the market to look at whether a collapse is driven by the situation or by the system itself.

Nate Thooft, chief investment officer and senior portfolio manager at Manulife Investment Management, says that he's still leaning into equities despite stock valuations being stretched, noting that the fundamentals support modest gains and aren't signalling a bubble or crisis. Thooft does worry that the market may run out of momentum and may lack a catalyst for further gains by the time 2026 rolls around, but for now he says there are plenty of reasons to keep investing and not to be scared off by high prices.  Mark Hamrick, senior economic analyst at Bankrate.com, discusses the site's latest retirement savings report, released Wednesday, which showed that nearly 60 percent of workers are behind on their retirement savings. Hamrick noted that the problem is partially about failing to make set-asides, but it is also caused by a lack of financial planning and common misperceptions about how money grows over time and how much it takes to afford a comfortable retirement.  Todd Rosenbluth, head of research at VettaFi, makes a Fidelity fund his pick as the ETF of the Week, but this selection is about the investment-grade assets the fund holds, and how they are an interesting actively managed change-up to more conventional fixed-income funds. Plus, Chuck answers a question from a listener whose wife wants to buy a new car and who wonders if it ever makes sense to buy new when he could save money on a quality used car.

Mark Fleming, chief economist at First American, says rate cuts are not a panacea for the housing market, especially because Americans got used to nearly 50 years of declining mortgage rates until they moved from the 3% level up to their 6% range over the last few years. Now — with consumers feeling like they have golden handcuffs in older, low-rate mortgages — Fleming says gains will be slow, because improved affordability will need to be driven by income growth among consumers, and paychecks will have to increase at a rate faster than home-price appreciation to overcome rate concerns.  Dan Wiener, former chairman and chief executive at Adviser Investments (now RWA Wealth Partners) — the long-time editor of The Independent Adviser for Vanguard Investors — discusses the piece he wrote for Barron's this week, "I Learned the Hard Way: Private Investments Probably Don't Belong in Your Portfolio," and discusses why he thinks that recent law changes that make alternatives more accessible in retirement plans are good for financial companies but bad for consumers. Research analyst Matt Zajechowski discusses a recent study showing that consumers recognize that it is their spending habits, more than inflation and market conditions, that is behind financial woes. Nearly three-quarters of Americans blame themselves for credit card debt.

Phillip Wool, chief research officer and lead portfolio manager, Rayliant Global Advisors, says "there are places where valuations are so stretched I find it hard to explain," but he notes that is more in certain sectors and certain themes, but he says the global economy is in a good place, which makes him optimistic about the future for stocks, just cautious about how much investors should set expectations. He notes that when valuations get this stretched, future returns tend to be muted. He also discusses why he believes there is still time for investors who have missed the foreign stock rally this year to get involved. "This is not something that has played out," he said, "there's still room for this international outperformance to continue." Ryan Jacob, chief investment officer of the Jacob Funds — who was the first portfolio manager of an Internet fund when they first emerged in the 1990s — talks stocks in the Market Call, but also focuses on the similarities between the artificial intelligence boom that's powering the markets today and the Internet bubble that ended so badly with a market crash in 2000. Plus, Chuck remembers longtime Wall Street Journal columnist and personal finance educator Jonathan Clements of HumbleDollar.com, who passed away over the weekend after a battle with lung cancer. Clements — a long-time contemporary of Chuck's in the personal finance journalism world — was last on the show one year ago today, discussing his diagnosis and leaving behind lasting lessons.

Dec Mullarkey, head of investment strategy at SLC Investments, says that the market's earnings power is enough to keep pushing it forward, overcoming obstacles like increased tariff impacts and sticky inflation and leading to an optimistic outlook for next year  while acknowledging the headline risks that have investors' attention, Mullarkey said that earnings growth could extend to small caps — particularly after government deregulation efforts take hold — to broaden out and extend the current run. David Trainer, president of New Constructs says a recent rally in shares of Snap Inc. doesn't change bad fundamentals. While Trainer said the company has moved out of "zombie stock" status, it's still dangerously overvalued and due to resume its fall. Charles Rotblut, editor at AAII Journal, discussed how the market at record levels and imminent rate cuts contributed to bullish sentiment jumping dramatically last week in the latest AAAII Sentiment Survey, with neutral feelings dropping to particularly low levels. Rotblut explained that the low neutral sentiment tends to be more of an indicator — an alarming one — than the spike in positive vibes. Plus, Chuck gives an update on the funds that hackers stole from an online savings account and his efforts to get the money back. 

Edward Yardeni, president and chief investment strategist at Yardeni Research, says "there's a lot of funky stuff going on in the labor market," and that reduced interest rates may not change conditions but could instead impact the market and contribute to a melt-up that helps the bull market roll on. While melt-ups do tend to be followed by a regression, Yardeni does not see the market reversing too sharply; he's not currently worried about a recession and instead says the current decade is a new Roaring '20s, though he notes that this go-round is unlikely to end in another Great Depression, and instead thinks that current conditions can also turn the next decade into the "Rolling '30s." Jason Brown of The Brown Report — the host of the "Five-Year Millionaire"podcast — says that the technicals are giving him "a lot of reasons to be bullish" without "much to slow it down" on the horizon. That should have investors digging deep on A.I. stocks, especially on any pullbacks or declines, where he says the long-term potential of the new technologies will reward investors who are able to remain patient through volatility. Axel Merk, the head of Merk Investments and the Merk Funds, but also chief investment officer of the ASA Gold and Precious Metals Fund, says there is no real end in sight for the current gold rally, due to the start of rate cuts, a weakening dollar and persistent geopolitical risks, including tariffs. ASA Gold, which invests largely in junior mining companies, is up more than 100 percent year-to-date — compared to roughly 40 percent gains for physical gold ETFs — but still carries a double-digit discount; Merk explains in "The NAVigator" why that unusual situation is logical given current market conditions.