An Update for Our Clients With Student Loans

Transcript:

Hi there, I'm Clint Carpenter, an investment advisor here at Eckman Wealth Management. I just wanted to lead you through a personal financial matter at this time surrounding the student loan situation. It's been in the news lately that the Supreme Court has been taking up this case as to whether President Biden's administration's plan to forgive some student loan debt is lawful.

Just last week, they have announced that it is not. So the Supreme Court is effectively striking down the proposal that would have forgiven $10,000 to $20,000, depending on income limits, and some other past benefits history, for student loan borrowers. So, as you know, if you have student loans for the last three years, payments have been deferred and interest has not been accruing. It's been kind of a nice break, a way to catch up with some of the cost of living increases that we've all been facing and sort of adjust to this era that we're in right now. So student loans are set to resume minimum monthly payments in just a couple of months.

So a couple of quick dates just to know:

September 1st interest will start to accrue again on student loan balances. That's an important date to know.

The next one is October. Just a month later, monthly payments will resume. So, you know, good chance to take some time, make sure that your student loan service provider has not changed over the last three years, many of these loans change hands pretty often, kind of like a mortgage does - they're bought and sold, so you have a new place to make payments. So take some time over the next few weeks to log in, make sure that you're prepared for that.

There is sort of a transition period here that Biden has announced, President Biden, over the next 12 months. Once payments start up. If you miss a payment, it's not really going to hurt you. There aren't any penalties. But keep in mind that interest is still accruing. So if you can afford to make your monthly payments, you should do so.

We'll see. You know, the administration has announced they're pursuing other opportunities to pursue this loan forgiveness plan. But honestly, I think they could take a lot of time. They are likely to be challenged again, and this is just the reality that we're faced with now that payments are resuming in the next few months. So it's a good time to get prepared for that to resume.

So if you've got any questions, you know, student loans, they're different for everyone. Everything I've been talking about here today applies to federal student loans, not, you know, certain private loans. So if you have any questions either way, please reach out to us. We know quite a bit about this topic, and we're certainly happy and prepared to help you.

You can leave a question down in the comments if you've got one, or please feel free to reach out to us directly through email or even just give us a phone call. Happy to walk you through it. But for now, thanks for listening.

Domestic Economics

Clint Carpenter, Kris Venezia, and Daryl Eckman of Eckman Wealth Management reveal what the real estate market and consumer spending can tell us about the possibility of a recession.

Portfolio Management

Watch here: https://youtu.be/8OWyj2n7iok

Listen here:

Below is a transcript of our conversation:

Daryl Eckman, President

Hi, everybody. My name's Daryl Eckman. I'm CEO of Eckman Wealth Management, and today I've got Mr. Clint Carpenter, Director of Operations and Chief Market Strategist, Kris Venezia and we're going to do something a little bit different today. We're going to have the usual updates on what's been going on with the markets. Clint will be giving you the numbers. Kris will join in and talk about what he's observing, the hot buttons and then what we're going to sort of have a casual conversation letting you in on some of the things that we talk about almost every single morning, Monday through Friday.

So we may as well just go ahead and get started. So I will bring it over to Clint and Clint, you can sort of give us where we're at, what we've been doing.

Clint Carpenter

The indices are always a great place to start. See where we're at year-to-date. And it's been a little bit of a surprise. I don't think anyone would have predicted stocks would have done as well as they have over the last five, almost five and a half months since January. But S&P 500 is up 12% year-to-date.

The Dow, a little bit of a return so far. It's up 2% year-to-date. And or sorry, the Nasdaq is up about 27% year-to-date, which is astounding. That's almost as much as it was down last year, it's up this year. There are, I think, many reasons for that. You know, the Nasdaq could be doing so well.

One of them is just that, you know, it's very tech heavy, right? Some tech is very sensitive to higher interest rates, inflation. You know, these are companies that are borrowing a lot of money and growing and making a lot of money, too. But borrowing a lot of money, putting it back into growth. And when that borrowing costs goes up because interest rates have gone up, that eats directly into their profitability.

So that's just kind of this old, you know, old adage, if you will, that when interest rates go up, sell tech, go away and hide out from it. But these days, tech is everything. I mean, everyone's a tech company almost. So that might be maybe a little bit of a thing of the past. I think another reason could be that, you know, so many of these tech stocks have been expensive for a really long, so now they look like really great bargains that people just start to buy into them because of that. You know, "I can get Apple at this price when last year it was it was this - So I'm going to start buying into it now." Apple's right back up to pretty much all time highs.

Then I think just maybe the third reason and I'll open it up to you guys here but I think if tech has just done so well in the past, people remember that. I think after the last year, year and a half, if you will, of volatility and kind of sitting on the sidelines and waiting, people get impatient and they want to just start to buy into the market because that's what gives them good returns. So they just start investing even when there's really no good economic data out there to support that, people just start buying stocks.

So a couple of maybes on why the Nasdaq is up so much. We'll see if it continues. But I am curious what you guys think.

Kris Venezia, Market Analyst

Yeah, so I'll pick it up off of that. Clint nailed most of the tech trade. You know, it's a combination, I think, of rates maybe not going as high as some people thought. And then some of it, tech’s almost become, as crazy as this seem, big mega tech. Think Apple. Think Microsoft. Think Amazon, Google, Meta, which is Facebook.

They've become almost a safety trade now. And that started really during the pandemic where you have investors that are saying, well, you know, I don't maybe want to buy bonds because I'm worried about rates going up and losing money there. And they don't want to buy the financials because of bank stuff. I don't want to buy industrials in case there's a recession.

I know Apple's a big company and I know people buy iPhones, so I'm just going to buy Apple stock and you kind of get that that sort of momentum build on top of that as other people see Apple go up. Now, I want to own Apple. So much of the stock market is driven by momentum. Clint, I think one of the things I'll ask you about that you brought up and it's something I'm certainly looking at, too, but rates and we certainly get a big picture of rates on the advisor side and all sorts of different categories municipals, corporate bonds, Treasuries, CDs.

But in terms of the rate side and how you know, we all talk about this in the morning, but, you know, when you're looking at rates, what's kind of your perspective and how are you looking at rates in judging, you know, the relationship between fixed income products and adding them to portfolios?

Clint

Yeah, it's for the most part, rates have gone straight up. We saw in the last couple of months rates kind of take a little bit of a dip as people bought in, but then as we had this debt ceiling problem, as we have the bank failure problem rates just kind of moved around a little bit. But for right now, they're mostly close to heights that we've seen.

I mean, one year Treasury paying over 5%, 5.1%, depending on where you're looking. The longer term rates are going up a little bit. Still definitely less than short term, short term bonds. And when I say long term bonds, I'm talking really more intermediate term bonds, you know, seven, ten year in duration, nothing close to 30 years. We're not even really looking at those.

But it is something we're considering. You know, we started adding some of those longer term bonds into portfolios because there is some potential for capital appreciation once rates go down. And even if that doesn't happen overnight, it's still a nice rate to lock into for a nice period of time for a conservative portfolio. We haven't been able to get anywhere close to 4% on these kinds of bonds in a long time.

So you've got to think if you buy a ten year bond right now that's paying close to 4%, if two years from now, all you can get is a ten year bond, paying 2% would be pretty happy that you have this bond paying four, or you might be able to sell it or you will be able to sell it for a profit.

So, yeah, rates mostly since last year have just gone up since the Fed started hiking. Certainly people know that mortgage rates are going up and car loan rates have been going up. Credit card interest rates, it's all high. But on the bond side, it gives us an opportunity to buy something very safe and relatively risk free Treasury bond and make a nice yield.

Daryl

So I would concur also with you guys. I think you're you're right on the money with what's happening. The thing I can say is a lot of the old rules that I've lived with in this industry for going on 40 years, a lot of those have just been thrown out the window. We it looks to me like everybody's talking about a recession coming.

Almost everyone this has been going on for quite some time. You can't turn on the radio or the TV on a business channel and [not] find that somebody is saying, hey, it's just around the corner. And we've been hearing that for quite some time. So I think you're right, Clint. People are just getting impatient. And that happens. That absolutely happens.

Clint

Yeah. Most talked about recession. That has not yet happened in quite some time.

Daryl

Yeah... and truthfully, I thought that this was going to happen a year ago or even more. Yeah, but one thing that I have and just reading the numbers top down but also bottom up, there still is a lock up in the supply chain. It's it's undeniable. From brake pads to farm equipment to heavy machinery to even high tech. And also there seems to be a kind of a whispering labor problem you can see for hire signs all over the place.

Especially in the service industry, restaurants and food service. So we're trying to figure out all these things. We're on it, but we're almost having to throw out the playbook that we've been going with for all these years. We’re staying on it. But I think our predictions, I think, are we're going to try our best, let's put it that way.

So I still think that there is going to be a recession. It still looks like it's coming. It doesn't look like it's going to be a severe recession. They're one of those one of the sell signs, I will say, that has triggered me for years is when everybody says that we're in for good times and there's nothing but optimism out there.

That's the sell signal. So we don't have that now. And that's one of my biggest for right now. So that's one of the reasons why we're, we do have stocks in the portfolio that you might want to pass it back to you. And we can talk about how you're allocated. And Kris, you can follow up then.

Clint

Yeah, I think, you know, I hate to say it because I think I've been saying it a lot lately, but cautious optimism is kind of the mode that we're in and not even really optimism necessarily for the stock market to just take off. That's not really what we need. It's more optimism that maybe we start to get some clarity on what shape the economy really is in, because truthfully, over the last three years since the COVID 19 pandemic started, it kind of started this whole volatile period of time.

The economy's held up really well. I mean, it adds hundreds of thousands of jobs every month. The unemployment rate has been very, very low. Corporate earnings up until right about now have mostly been strong. Those are starting to falter somewhat. We'll see how deep that gets. But I think inflation has not moved down as quickly as the Fed would have liked.

Certainly. But it is responding to rate hikes and that's where we see corporate earnings start to decrease a little bit because that's what's supposed to happen when the Fed is raising interest rates to slow the economy down and slow inflation down. And it's working. So it's kind of nice to see that, you know, some of these things do still work as they're supposed to.

We'll see if that continues. Of course, that can change. So with that sort of cautious optimism, augmented with those those variables, we're just still staying pretty conservative. You know, most of the accounts that I manage are retirees. People may reaching retirement. It doesn't pay to take a lot of risk. Right now. There seems to be momentum for the market to kind of stay where it is potentially go down from here.

Then momentum for the market to just ratchet even further than it is now. So staying right on stocks, like I said, it's great to have the opportunity to buy into the Treasury market right now. That hasn't been an option for the last 10, 20, maybe even longer years to actually build a foreign portfolio by hand and kind of have some clarity on what rates are doing.

So it's nice to lean on that, take some risk out of the portfolio, but, you know, not just hide out in cash. So we're definitely doing that. We're whittling cash positions down, but also keeping cash because we want to be able to do some buying as we see fit on the stock portfolio. So that's that's kind of more of the conservative portfolio allocation for now.

Kris I think you're pretty similar there. I guess what would you say to Daryl’s question?

Kris

Yeah, I think the biggest thing right now, which has been unusual, if you go back, you know, really from before I started doing this or like post 2008, let's call it 2011, put a start point on it. Rates have been were so low from 2011 up until, you know, late 20, 2023 that you were kind of pushed more into stocks.

Right. And you saw the stock market reflect that with gains. But there just wasn't that sort of ability to go out in the Treasury market, the muni market aggressively like the opportunities present themselves, now. When it leads it to is it's just so much more individualized. So if you have questions, reach out to us. I had that conversation yesterday with a client and just saying more than ever now, our portfolios are really differentiated in asset allocation because it really does depend.

There's more we can do. We can be more flexible with the portfolio and especially for retirees. It's fantastic because, you know, ten years ago we wouldn't be able to do some of the things that we can do now for retirees in terms of how we can build a more diverse portfolio because those opportunities just weren't there for us and those opportunities are going to continue to get better as we get, you know, one, two, three or four years down the line, because you can extend outside of Treasuries and CDs into areas where you're going to start to see, you know, corporate companies are going to have to go back to, you know, to issue debt and so you're going to get more opportunities for retirees there. But I put the bow on it by saying very individualized. And then just to put the bow on really the economy, the simplified version right now is we kind of have two things. We have a central bank globally, you know, global central banks raising rates, trying to tighten things and the U.S., it's going up against the savings.

People in the US just accumulated so much savings over the pandemic, especially the middle and upper class American. And the fight right now is between higher rates and this effort to slow the economy down, to curb inflation. And Americans that frankly, they want to travel, they want to go on cruises, they want to see people, and they have this savings built up.

And that's the clash. When you really look at the economy right now, it's those two things butting head. Something is going to get at some point. Either the consumer is going to, you know, that savings is going to dwindle and certainly that's going to slow down that economy even more. Or you're going to see a Fed that says, you know, inflation's at a point we're comfortable with.

We're going to stop hiking rates, so we're going to start cutting back on rates. And that's, you know, I call it the win for the consumer. And that's sort of the fight you have right now. When you look at the economy, it's really a very summarized free version. But that's really the fight you have right now in the US economy.

Clint

Yeah, I don't envy the Fed. It's a tough job, but they signed up for it.

Daryl

So now I think that is a good synopsis of where we're at right now. I think we're standing on as solid ground as we possibly can. We're being vigilant, maybe even hyper vigilant of what's going on because we're looking for any kind of signs that is going to give us some kind of clue as to what it looks like out there.

And we'll be doing a series of these videos that should help you out. If I wasn't fidgeting too much, I've got a farm and I was out on my farm and my poison ivy is starting to creep up. Anybody got, if anybody's got a good remedy for invasive, invasive poison ivy, I'm all ears. Please let us know.

Clint

I will before we take off. Just really quick. You know, we've been talking about the transition over to Schwab from TD Ameritrade. Mostly, we've been telling you there's nothing new to do. That's still the case. But as we get closer, you're going to start to get letters and emails from Schwab just kind of keeping you apprized of the process.

So we want you to hear that from us first to basically it still is nothing to do. You know, the transition doesn't occur until Labor Day that we can do September 5th or September 5th is the first business day after that weekend. That's when all of the assets will be at Schwab automatically. There's nothing for you to do if you have things like your checking account connected to your TD Ameritrade account already that just moves over.

So monthly contributions distributions all stays the same. You'll have a new account number at Schwab. But like we were just joking. Who really memorizes their account number anyway, so that shouldn't be too difficult. You know, toward the end of this month, Schwab will send a letter just kind of confirming what's going to happen. When it's going to happen.

There's no need to respond to it. It will just take place. And then about two months. I think the only thing you will have to do if you want to is just to up to set up your Schwab log in to start viewing your accounts there once the transition takes place so you can set your login up. The accounts aren't there yet, but you're ready to go on September 5th when the accounts transfer over.

So that's about it. On the Schwab front, Kris, do you think I'm missing anything there? Anything important?

Kris

No, no. You mentioned kind of everything they're looking out for the letter. And certainly you have questions on anything, don't hesitate to reach out to us. We can answer any questions you have.

Clint

Yeah, I'll say I think we're all honestly, we we like TD Ameritrade. We've liked working with them for the last decade plus we expect the transition to go smoothly. We're looking forward to the new technology that Schwab has. You know, TD was always sort of the tech leader for a while. It seems like they kind of fell behind a little bit there.

So Schwab has more resources for us as advisors for you on the client experience, viewing your portfolio and your positions. So we think you'll like it. It gives us more research resources as well. So we're just we're not regretting it at all. And we look forward to the transition late this summer and hope that you guys do too. Daryl anything?

Daryl

And just one more thing. We always encourage you all to email us, call us responding with anything that any questions that you have for opinions, thoughts, and we very much like your feedback and I'm serious about poison ivy. I mean, sleepless nights.