Geopolitics, Market dips, & More: Cut Through the Noise

Geopolitics, Market dips, & More: Cut Through the Noise

This week on Cut Through The Noise: Geopolitics, Market dips, & More

In this episode of Cut Through The Noise, Anthony Saffer, CFP®,CKA® and Alex Okugawa, CFP®, CEPA®, CKA® tackle the hottest topics in financial markets, financial planning, and life, including:

War & the stock market

► Market dips

► San Diego becomes the least affordable city in America

► Canada asset freeze

Watch here:

Show Notes:

Full transcript:


Anthony Saffer & Alex Okugawa

Alex Okugawa 0:00
Hello there, and welcome to our segment Cut Through the Noise where today we answer your questions that we’ve been hearing throughout the month. Today we’re talking about Russia, Stock market dips, the San Diego housing market, and Canadian asset freezes. Stay tuned.

Okay, Anthony, let’s get into it. So obviously, the Russia and Ukraine situation is pretty serious. And it has a lot of people worried about what’s going on with the stock market.

Anthony Saffer 0:28
Yeah, we don’t know what’s gonna happen with that and how it pertains to investing the market could fall further it has to some extent, or it could be not much of anything. And that’s the thing is that geopolitical events, happen quite often. And sometimes the stock market doesn’t react or it does initially, and then bounces right back. So we have to be careful with extremes.

Alex Okugawa 0:48
Yeah. So let’s put a chart up here. Because I think this illustrates a really good point, what you’ll see in this chart here is the different Start and End Times to different wars. And what you’ll see is the blue line is the s&p 500. The main takeaway for me when I look at this chart is there’s no direct correlation right here. And again, when we look at the situation with Russia and Ukraine, these geopolitical factors, rather than trying to prognosticate about what the future might hold, because it’s completely uncertain, I think it’s a better situation to stay grounded in true investment and financial principles. And also look at history. How is this typically played out? History doesn’t always repeat, but it often does rhyme. All right, let’s dig into the second one here, which is stock market dips, which we’ve seen year to date.

Anthony Saffer 1:42
Yeah. And this plays into the even the first part of it with the Russia, Ukraine, right, is that market dips happen quite often. So the market goes down about three times per year on average of 5%. Okay, so those types of dips are very, very common, even when you get down to 10% or, or more, which is considered a correction about once a year.

Alex Okugawa 2:01
Now, as often as these happen, I think, what is happening, at least to the investor psyches, we’re coming off of a year like 2020, right, where we’ve seen like zero volatility, meaning ups and downs, we only saw straight up. So I think what’s happening is you’re having this recency bias where people go, that’s a normal stock market. And that is not 2020 was not a normal stock market were just kind of completely ripped up. After the bottom in March, you saw 2021, very little volatility. So now we’re seeing choppiness and people are freaking out. It’s like this happens a lot. It does.

Anthony Saffer 2:35
We have to remember the volatility is the price of admission, if we’re going to own stocks as the growth aspect of it, we need to be willing to put up with the cyclicality of it, there’s going to be the ups and downs, we have to ride the roller coaster to some extent. And then that’s where financial planning needs to be brought in. As far as do I have my emergency reserve or my short-term conservative assets to meet near term?

Alex Okugawa 2:55
Do I have it there to create the income that I might need, if I’m in retirement, or I’m nearing retirement, and if I’m not near retirement enough to kind of buffer that, because if I can’t stomach, big drawdowns, it rather it’s better to have a good investment plan that you can stick to that a great investment plan that you can’t stick to? All right, let’s dig into the third piece, which is San Diego becomes the least affordable city in the US to buy a home.

Anthony Saffer 3:17
Yeah, we’re based in San Diego, so the top of the list with the least affordability. And it doesn’t just mean the highest valuations on a property, but it also takes into account income. And you know, I mean, you just have to think I don’t know, I mean, can it sustain itself at these levels?

Alex Okugawa 3:31
I know there are a million ways that you can look at the housing market because you can look at stats and go Well, here’s the outstanding home supply. There’s just not enough supply, the demand is high. So that’s why we’re seeing skyrocketing prices. The other thing too is that we’ve had historically low mortgage rates. So you combine that with low inventory. Yeah, we’re probably seeing skyrocketing prices. However, now that you start to see mortgage rates start to creep up, I can’t help but feel we are soon going to hit this affordability wall. Right because if you have high, high home prices, but low mortgage rates, maybe you can kind of swing it when you have high home prices and rising mortgage rates it’s going to make that monthly payment very unaffordable. I think a lot of people are going to get priced out. Just my personal opinion.

Anthony Saffer 4:14
I’d like to know what people think that are watching what they’re doing with home affordability, whether they already own a home if they’re in San Diego or wherever their cities, their cities.

Alex Okugawa 4:22
Especially new homebuyers, right if you’re a new home buyer or you’re on the market for a home, how’s that experience been? All right, the last point here is what’s going on in Canada specifically with the asset freezes.

Anthony Saffer 4:35
So I start to immediately think beyond the situation when people ask like, Hey, what happened, you know, what do I do for this particular thing? You know, the government shuts down accounts like they are and that’s when it gets to the type of planning where it’s saying okay, you know, diversification, but it’s not enough just to put you know, in different brokerages. Maybe at that point, you want to have some cash on hand. If you’re talking about precious metals, holding a gold ETF In your 401k is not going to help in this situation. So, if you’re going to own gold for something like this, then you own it in a safe, you know, even in small increments where it can be used to transact.

Alex Okugawa 5:12
Yeah, and in a situation like this, I don’t think it’s a bad idea either when we’re talking about this, you know, having things like food, supplies, things for shelter, water, things for self-defense, I mean, this can become important, if you are concerned about it. Those are the types of things that you can do. Because let’s face it, let’s not be naive and say this will never happen in the US, in my opinion, it very well can.

Anthony Saffer 5:34
Yeah, it’s pretty, it’s a pretty scary situation to think of, like how far-reaching it is to not only those who are involved but even those that gave to a certain cause. I mean, we’ve heard stories of people giving 50 bucks towards a cause whether you agree with it or not. It’s kind of beyond the point right?

Alex Okugawa 5:50
And now let us know what you think. How are you managing your finances through uncertain times like this with Russia, the stock market, even the potential for governments to come in and freeze assets? Leave your comments below. And if you enjoy today’s video, please like and subscribe for more. Thanks for watching.

Want tax, investment, and planning strategies like this right to your inbox? Subscribe below!

We will keep your email safe. You can unsubscribe at any time.

Retirement Recap.

Join the 1,000+ other retirees and receive weekly articles and videos to help you retire with confidence.

Subscribers also gain access to our exclusive monthly client memo that we don't share anywhere else.

We don’t spam! You can unsubscribe at any time.