Why Volatility Exists In The Market… And How You Can Benefit

Money Tree Investing

Money Tree Investing Podcast

Stockmarket, Valuestocks, Investing, Finance, Passiveincome, Wealth, Business, Personalfinance

4.6 • 658 Ratings

🗓️ 21 August 2024

⏱️ 51 minutes

🔗️ Recording | iTunes | RSS

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Summary

A lot of volatility exists in the stock market right now, but did you know you can actually benefit from it?

Today we talk about how market reactions are driven by expectations versus reality, with surprises like unexpected Fed actions causing significant volatility.

Political uncertainty certainly has an impact on the market and you can't even rely on Wall Street predictions. That's why it's crucial to understand market sentiment and how everyone’s collective behavior influences market trends over trying to predict the market itself!

Today we discuss...

The recent stock market volatility and the aim to understand it without getting bogged down in specifics.
How market reactions often follow Fed announcements, but these are just correlations, not direct causes.
How volatility can also be triggered by political uncertainty, such as the potential outcomes of upcoming elections.
The Fed’s future rate moves and their unexpectedness contribute significantly to market shifts.
Wall Street predictions can be inaccurate, with current expectations showing a high chance of rate cuts in the future despite past errors.
People don't fully realize inflation's impact because it is largely contained.
Personal inflation rates, such as grocery bills or car prices, may be much higher than CPI figures suggest.
The old methods of addressing inflation, like investing in the S&P 500, might not be effective against current "silent inflation."
The currency market is massive, and the carry trade is typically suited for large institutions rather than individual investors.
Lumber prices have dropped significantly, correlating with the housing market and broader economic conditions.
Housing affordability has decreased, with higher income levels required to afford typical homes in many markets.

For more information, visit the show notes at https://moneytreepodcast.com/volatility-exists-635

Transcript

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0:00.0	Welcome to the Money Tree Investing Podcast.
0:04.0	Stock market, wealth, personal finance, value stocks, invest in your life.
0:10.0	Hello, Smart Money Tree Podcasts, and welcome to the show.
0:13.0	My name is Kirk Chisholm. I'll be your host.
0:15.0	And today I'm joined with my good friend Doug Hagerin.
0:17.0	Hey Doug.
0:18.0	Just before we got on here, Kirk said, I'm going to talk for like
0:21.3	five to ten minutes and then you jump on. And then what does he do? Five seconds and he's making me talk.
0:26.4	Good to see it, Kirk. Just playing with you. Happy Friday to you and everybody listening.
0:30.2	Yeah, little does Doug know I was going to talk for 20 minutes and I was just trying to be nice. I hope so. Hey, man, I'm fine doing other little stuff in the background here. You go right
0:38.0	ahead. I can't say anybody listening feels the same, but I'm fine with it. Yeah, we're all good.
0:42.9	We actually got a lot to talk about this week. I know Doug's putting a bunch of charts. We're
0:46.3	going to talk about this week. But one thing I did want to talk about is we've had obviously a lot of
0:51.5	increased volatility in the last few weeks. And I want to explain it so that people understand what happened, why. And I'm not even going to get into the specifics of it. For those of you longtime listeners know that the specifics of it don't matter because we don't truly know why things happen in the stock market. There are correlations
1:12.9	and causations. Correlations are, hey, the Fed sent something and the stock market reacted.
1:18.4	That's a correlation. It's not necessarily a causation. Now, I'm going to explain a concept
1:23.1	that's kind of like two or three levels deep. So hopefully you've had your coffee this morning.
1:28.2	But think about it this way. The Fed makes a comment. And then the market reacts. Well, the market
1:35.2	reacts because basically prior to that Fed comment, the Fed speaks. We know they're going to speak.
1:41.0	The market builds in expectations leading up to that speaking engagement.
1:47.6	So one side of the market thinks the Fed's going to say this.
1:51.1	Another side says the Fed's going to say that.
	...

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