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Guidance For Economic Disruption with Mark Biller

Faith And Finance / Rob West
The Truth Network Radio
January 21, 2025 3:00 am

Guidance For Economic Disruption with Mark Biller

Faith And Finance / Rob West

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January 21, 2025 3:00 am

Major changes are likely coming for the U.S. economy. Will you be ready for them?

We have a new president who’s pledged to overhaul the economy. How will that affect investors and the markets? Mark Biller joins us today with a plan for managing “anticipated disruption.”

Mark Biller is Executive Editor and Senior Portfolio Manager at Sound Mind Investing, an underwriter of Faith & Finance. 

Learning from the Past: Market Trends in Review

Before diving into predictions, it’s essential to recognize the value of reviewing recent market trends. Forecasting is often unreliable, so Sound Mind Investing focuses on building robust portfolios that can withstand a variety of market conditions.

Key Observations from 2024:
  • Strong Stock Market Performance: 2024 was a banner year for stocks.
  • Struggles in Bonds: Higher long-term interest rates created challenges for bond investors.

Rather than predicting, SMI uses trend-following strategies, aligning portfolios with market behavior to enhance resilience against uncertainties.

What Could End the Bull Market?

Bull markets typically end due to two primary catalysts:

  1. Federal Reserve Rate Hikes: With recent rate cuts, a pivot to hikes seems unlikely.
  2. Economic Recessions: Despite fears, current conditions—strong GDP growth, low unemployment, and robust balance sheets—make a near-term recession improbable.

However, investors should remain prepared for routine market corrections (10-15%), which are typically short-lived and not worth major portfolio adjustments.

Trump 2.0: Policy Changes and Market Impacts

President Trump’s second term brings both optimism and uncertainty. Business-friendly policies like tax cuts and deregulation are expected to boost growth, but his stance on disrupting global free trade could create volatility.

Key Policy Areas to Watch:
  • Immigration and Tariffs: Potential economic implications tied to trade disruptions.
  • Deficit Reduction: Balancing growth-oriented spending with inflationary risks.
  • Energy and Taxes: Initiatives that may shape inflation and economic growth dynamics.

Wall Street’s response will likely depend on how aggressively these policies are implemented. While markets thrive on stability, Trump’s approach could introduce significant fluctuations.

The National Debt: An Ongoing Challenge

Reducing the national debt remains a pressing issue, but Mark is skeptical about achieving a balanced budget in the short term. Growth-driven strategies may help manage deficits, but cutting government spending poses immediate challenges for economic momentum.

Staying the Course Amid Uncertainty

With many moving parts, confidently predicting cumulative economic and market outcomes is impossible. However, investors should:

  • Stick to long-term plans.
  • Maintain proper diversification.
  • Continue regular contributions to retirement plans.

The focus should remain on steady progress toward financial goals rather than reacting to short-term disruptions.

For a deeper dive into these topics and actionable strategies, read Mark’s full article, “Trump 2.0: Using Objective Investing Models to Guide Us Through Anticipated Disruption.” This article offers a clear framework for understanding the potential market impacts of Trump’s second term while encouraging a disciplined investment approach.

On Today’s Program, Rob Answers Listener Questions:
  • My husband and I are researching long-term care options as we prepare to retire. We've considered long-term care insurance or an annuity with a long-term care rider, but we're having trouble deciding which is best for our situation. Do you have any recommendations?
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Remember, you can call in to ask your questions most days at (800) 525-7000. Faith & Finance is also available on the Moody Radio Network and American Family Radio. Visit our website at FaithFi.com where you can join the FaithFi Community and give as we expand our outreach.

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This faith and finance podcast is underwritten in part by Soundmind Investing. For more than 30 years, do-it-yourself investors have relied on SMI for proven strategies and trustworthy guidance. SMI helps people build wealth so they can provide for their families, prepare for the future, and give generously. Learn more at soundmindinvesting.org Hi, I'm Rob West. We have a new president who's pledged to overhaul the economy.

How will that affect investors and the markets? Mark Biller joins us today with a plan for managing anticipated disruption. And then it's on to your calls at 800-525-7000.

That's 800-525-7000. This is faith and finance, biblical wisdom for your financial decisions. Well, our guest again today is Mark Biller, executive editor at Soundmind Investing and underwriter of this program. Mark's here to give us some investing insights to guide us through Trump 2.0. Mark, welcome back.

Glad to be here, Rob. Mark, with the inauguration of President Trump for his second presidential term happening yesterday, a lot of folks would like to know what you and your team are thinking about what might lie ahead for investors. But before we dive into your thoughts about the future, what clues can we glean from a quick review of last year? Yeah, that's actually a great place to start, Rob, because SMI has always cast a skeptical eye on trying to forecast the future. And one of the benefits of doing this for 35 years is we've seen how poorly forecast tend to perform.

So instead of forecasting, SMI teaches our members how to build a robust portfolio that can withstand a wide variety of market conditions. And a big part of that for us is using trend-following strategies to keep our portfolios aligned with what the market is actually doing instead of trying to position ahead of time for what it might do six or 12 months down the road. So that's a very relevant thing to ask what the recent market trends have been. It's not to say that these trends are going to continue forever, but it's usually a better starting point than a forecast. So having said all of that, 2024 was a very strong year for stocks.

It was a very poor year for bonds. And that was a continuation of the same trends that were true in 2023. Now, there are a number of reasons to think that those trends may continue, particularly the longer-term trend toward higher long-term interest rates, which is a direct headwind for bond investors.

Yeah, that's well said, Mark, and I think very helpful. And it's worth pointing out that higher interest rates have been a stumbling block for the stock market at various points over the past few years as well. What factors are you watching, then, for the stock market? Well, Rob, there's an old market saying, you've probably heard, that bull markets don't die of old age. And the point of that is simply that we shouldn't get nervous just because a bull market has lasted a while because most bull markets end due to a specific catalyst.

Now, those catalysts typically come from one of two groups. Bull markets normally end due to either rate-hiking cycles by the Fed or economic recessions. Now, at present, despite strong economic growth, inflation running above the Fed's target, and low unemployment, the Fed just spent the last quarter of 2024 bending over backward to lower interest rates. They were doing rate cuts, not rate hikes. So pivoting to rate hikes seems really unlikely, and it's probably safe to take that off of our short-term worry list in terms of it killing the bull market and stocks. All right, so if rate hikes are unlikely to end the 2025 bull market, what about a recession? Yeah, well, we unpack this in more detail in the article, but the short version is it's hard to have a recession when nominal GDP is growing at 6%. The federal government is running a deficit of 7% of GDP. The Fed is already cutting interest rates.

Unemployment is historically low, and business and personal balance sheets are collectively stronger than they've been in years. So given that we're already in a rate-cutting cycle and the odds of a near-term recession seem pretty low at present, we think that investors are more likely to miss out on gains by fearing a near-term recession than they are to suffer losses as a result of being caught off guard by one. And that doesn't mean, of course, that we couldn't have a relatively routine 10 to 15% market correction sometime this year, maybe even soon. But historically, those types of market corrections are typically not worth trying to position for in advance or, honestly, to change your portfolio in response to even once they occur.

Boy, that's really helpful. Well, Mark Biller's here today. When we come back, we'll talk about Trump 2.0, what changes might be coming for the economy in the near future. Mark Biller, back with us after this. Stay with us.

We'll be right back. Faith in Finance is grateful for support from Soundmind Investing. For more than 30 years, they've offered financial wisdom for living well.

SMI provides step-by-step guidance for do-it-yourself investors, from those just getting started to those getting ready for retirement. More information, including a short video webinar on profit and peace of mind, no matter what's happening in the market, is available at soundmindinvesting.org. Great to have you with us today on Faith in Finance. Well, with the inauguration of President Trump for his second presidential term happening yesterday, we know a lot of you are wondering what that might mean for the economy and for investors. We've certainly had some insights just throughout the campaign and even more recently about what's on President Trump's mind related to the economy. But let's talk about how that might play out as this presidency kicks off.

So, Mark, what changes do you all foresee? Well, given the framework that we just laid out, Rob, that the major threats to the market are one, higher interest rates and two, recessions, that's how we're evaluating the likely Trump policy changes. In other words, are they significant enough to cause a recession and over what time frame?

That's where we see the bear market risk line. Now, it's easy to see why investors and business people are excited over certain aspects of a Trump presidency. Things like tax cuts, deregulation, lower energy costs, these are all staples of conservative politics that are generally good for business. But we really shouldn't forget that those policies really weren't the primary focus of Trump's campaign. And in many respects, Trump is the antithesis of traditional Wall Street globalist thinking, which for 30 years or so has really focused on the benefits of free trade. Now, on the contrary, Trump seems to believe that those policies have been the root of a lot of America's problems. And the appeal of Trump to many voters was the idea that he will at least disrupt if not completely dismantle this global free trade system that's been erected over the past few decades.

Interesting. So how do you think, Mark, Wall Street is going to respond if he moves forward with that promise? Well, it seems that at this point, Wall Street doesn't believe he'll actually follow through on it because of the audaciousness of the goal. You know, during Trump's first term, we were told to take Trump seriously, but not literally. In other words, Trump is always negotiating.

He's always looking to make a deal. So if he threatens big tariffs, it's not that he actually intends to impose them, but rather it's just a negotiating tactic to get what he really wants. And in fairness, there were plenty of examples of that during his first term.

But while that was largely true of Trump 1.0, there are a lot of clues that Trump 2.0 has a different playbook in mind. Now, global free trade has been great for capital and by extension good for investors. For decades, companies have been able to lower their costs by hiring cheaper labor overseas while enjoying more growth by having access to new international markets. So corporations and investors have profited from this, but labor share of those profits has steadily declined, and Trump 2.0 appears to be more focused on ending that trend, prioritizing workers over owners' profits, and reversing the perception of these longer-term individual and societal fallouts from these types of policies. Now, so far Wall Street seems to be focused on the business-friendly policies of Trump like we just were talking about, but to the extent that his priorities drift more toward disrupting the global free trade system, Wall Street's probably going to become less enthusiastic. Now, one of the key points of the article is simply this, that after two years of huge gains, the stock market today is priced for perfection. And what we mean by that is high future growth and low volatility. But we just elected a man who views his mandate as, among other things, breaking the free trade globalist world order that's been erected over the last few decades. Now, I don't know about you, Rob, but that sounds like anything but a low volatility environment, so there definitely could be some market fireworks along the way.

Yeah, that makes a lot of sense, Mark. All right then, what specific Trump policies should we be on the watch for? Well, we focus on six specific policy areas in the article, and those six are immigration, tariffs, deficit reduction, deregulation, energy production, and taxes. Now, each one of those has specific implications for both economic growth and inflation. Now, it's going to be really challenging because President Trump wants to enact significant changes, but a lot of the time the actions that will boost economic growth are also likely to boost inflation, and the flip side of that coin is the actions that will reduce inflation are likely to also reduce economic growth.

Those are the two levers that we're really focused on and the interplay of economic growth and inflation. Mark, we've talked before just about the growing national debt and just how challenging that's going to be for our economy moving forward as it continues to climb so rapidly. Obviously, there's been a lot of talk about Department of Government efficiency and Musk and Ramaswami, and I'd love your thoughts on what could be done there, because if you take defense off the table, you take entitlements off the table, we've got to pay the interest on the national debt. Is there enough left to make a meaningful cut such that we could balance a budget and actually turn the direction of the debt down? Yeah, I don't have any hope that we're going to be anywhere near a balanced budget for the reasons that you just mentioned. There just isn't enough that's really discretionary in the spending to be able to get there in the short term. Really, I think that Trump's emphasis, even though this has become the Doge Department and Elon and Ramaswami have become a talking point, and I do think they're going to be able to enact some changes, I think Trump's emphasis is on trying to grow the economy at a rapid enough rate that that growth is the tool that gets us out of these deficits. So I think that reducing the deficits is certainly on the table, but we've got to keep in mind that one of the reasons that the Biden economy is credited for not flipping into recession were these big deficits.

So if you reduce the government spending, that is a short term hit to economic growth and the speed of the economy, even if, by most accounts, that's certainly the right thing to do. Yeah, that's helpful. Well, the article unpacks each of these six areas in detail. If you want to read more, you can check it out at soundmindinvesting.org.

Mark, just about 45 seconds left. Sum this up for us. Well, a key point is there are way too many moving pieces involved to confidently predict what the ultimate cumulative impact is going to be on the economy or markets. If we give President Trump the benefit of the doubt and assume that these policies are going to ramp up the U.S. economy, then we've got to consider the possibility that inflation comes back to some degree, too, because those are often tied together. And right now, markets are not priced for a resurgence of inflation. So that's a key area to watch. Of course, for most investors, the best plan is stick with your long term plan and your goals, stay properly diversified, continue to contribute to retirement plans and stay the course.

Absolutely. Well said, Mark. Hey, thanks for stopping by, my friend. Always my pleasure, Rob. He's Mark Biller, executive editor at Sound Mind Investing.

You can read a lot more about today's topic, Trump 2.0 using objective investing models to guide us through anticipated disruption at soundmindinvesting.org. What's most important to you when it comes to choosing your financial advisor, someone who's aligned with your biblical values? How about someone who will take the time to explain your options? Certified Kingdom Advisors are professionals who meet high standards in competence and integrity, and have been trained to offer biblical financial advice. To find a Certified Kingdom Advisor in your area, visit faithfi.com and click Find a CKA. Do you feel like your hands are tied with debt, preventing you from serving God? If you have credit card debt, Christian Credit Counselors can help.

Through our debt management program, we can get you out of credit card debt about 80% faster while honoring your debt in full. For more information on how Christian Credit Counselors can help, visit christiancreditcounselors.org. That's christiancreditcounselors.org, or call 800-557-1985. 800-557-1985. Thanks for joining us today on Faith and Finance.

I'm Rob West. You know, as we think about our role as money managers for the Lord's resources, this is a really important calling that we've been given. And money is a good gift from God, so long as we don't allow it to compete with our hearts for devotion to Him, full surrender to Him, but when it's a tool to accomplish His purposes, to enjoy and to provide and to give and even to invest for human flourishing and to solve the world's problems, it can be a real blessing. And we want to help you get that right, have a healthy relationship with money and that it doesn't ever become a wedge between you and the Lord or you and the loved ones that you have in your life. But it's a blessing, something that can be an extension of your faith.

And I would say even one of those tangible expressions of your faith walk with the Lord on a daily basis, one of the most tangible. The question is, does the story your money management is telling reflect what's truly important to you? And we want to help you think through that on this program each day and tackle those very specific questions you're wrestling with. If you have a question for us, there's still time to get in on today's broadcast. 800-525-7000.

Let's head down to Ocala. Hi, Pam. Thanks for calling. Go ahead. Hi, Rob.

Thank you for taking my call. My husband and I are getting ready to retire within the next probably year and a half. And we've just started looking a little bit, we should have looked sooner, but into long-term care insurance. But then we both have some health issues and it is a little pricey. So we were also presented with either a fixed or a variable annuity where you take so much of our money and place it in the annuity and then start drawing a monthly amount from that to use towards long-term care. And we've been preying on this, but we just can't figure out which way is the way to go.

Do you have any recommendations? Yeah, it's a great question. And I think a lot of that is going to come down to your health status because as you said, depending upon what your health challenges are, those are going to limit your ability to qualify for or the premiums that you're going to be paying, depending on whether they will determine that that's going to lead to potentially higher long-term care costs or for a longer period of time. And so those high premium costs and the increases that you have with age and as insurers charge more in the aggregate across all policyholders, those things, even though they start out expensive today, can become increasingly expensive as you see increases over time. Now, the benefits of the long-term care insurance is, you know, it really is designed to cover those expenses that you're going to have, which can be substantial. And it can allow you to preserve your assets without putting into, you know, in your case of an insurance product, and they can even offer some inflation protection, which is really helpful. Now, with the fixed annuity, you're going to have obviously simpler health qualification because if you get an annuity with a long-term care rider, they often have less strict health underwriting than traditional long-term care. But let me stop there and ask, were you considering just a straight annuity or were you going to bundle it with a long-term care insurance rider?

You know, we've looked at a couple. The one somebody showed us was a variable. The other one, I believe, was a fixed with a long-term care rider. Okay.

Yeah. So that's a good option for you because there's less health underwriting there. So with you having health challenges, that may actually be the better product. It's going to provide that predictable income, which can help to cover the long-term care and then could actually kick in and provide additional assistance if you qualify based on the activities of daily living. So it's a dual purpose product, if you will. You still benefit from the income stream or the death benefit, but you get the protection against long-term care, which is one of the downsides of long-term care insurance.

It's use it or lose it. If you never require long-term care, you won't benefit from the premiums paid unless you have some sort of hybrid policy like we were talking about. And then there's some customization options as well. Now, it does require that significant lump sum investment upfront, and you have to understand that it's going to be less comprehensive coverage often than just a standalone long-term care insurance product. And depending on interest rates, although they're higher right now, they can offer you lower returns than you might find just in a straight investment product. But I would say at the end of the day, these hybrid policies, like you're describing the annuity with the long-term care, really are best for people with health issues who might have higher premiums with traditional long-term care. They want both the income and the long-term care protection, and they're looking for a stable low-risk investment, and it sounds like those probably line up best with you.

So I would say, just based on what I'm hearing, that would be more appealing to me, the hybrid option, but they're not all created equal, and so I would have a trusted advisor really help you explore which of the products are best for you. Not the one that's going to pay the most commission, but the one that's truly the best for you and your husband. Right, but you're saying like a fixed annuity with a long-term care operator.

Yes, or it could be a life insurance policy with a long-term care insurance writer, but I think in your case, if you're looking for that income stream and you have the ability to do the lump sum upfront, if you could solve to meet your lifestyle needs through the monthly income and know that you've got the additional protection there from the long-term care insurance writer, that could be the best of both worlds. Do you all have an advisor, Pam, or are you just talking to an insurance agent? No, we do have an advisor.

We do, and we did speak with one actually through Dave Ramsey program as well. Okay, and what was the advisor's advice on that? He was the one that actually introduced us to the annuity, and then our advisor was more persistent with the long-term care, which I went ahead and applied for, but we're looking at over $8,000 annually for a $200,000 long-term care plan.

Yeah, and that's just the starting point, and it can go up from there, and I think a lot of that may be driven by your health status. So I think in this case where you have health issues, that's where these hybrid products can make some sense. I will say, going back to your earlier question, you can do the long-term care insurance writer on both the fixed or the variable annuities.

I think the difference is, are you looking for that predictable income and growth based on that fixed interest rate, or do you want to have your funds grow and you don't need the income right now, but you get a higher potential return? I think that's where the variable can be better, and so depending on your situation, that's what I would talk through with the advisor. So I like this option a lot.

I know a lot of people are concerned about just the increases that have been happening with long-term care insurance premiums, and if you're already starting out on the high side, that would give me some pause just because of your health status. So I think you're headed in the right direction here, Pam, and I appreciate your call today. If we can help in the future, don't hesitate to reach out. God bless you. Big thanks to my team today, Devin, Autumn, and Taylor.

Couldn't do it without them. Thank you for being along with us. Hope you'll come back and join us tomorrow. We'll see you then. Bye-bye.
Whisper: medium.en / 2025-01-21 04:16:35 / 2025-01-21 04:25:32 / 9

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