Ep 6 - How to Succeed in Volatile Markets: Things Most Won’t Hear From Big Brokerage Firms, Investment Banks and Financial Media (CNBC)

Disclaimer: [: 00:00:00

A copy of Fusion's current written disclosure brochure discussing our advisory [00:00:15] services and fees is available upon request or at www. fusionfamilywealth. com.

re just starting out. Or are [: 00:00:30

Hello,[00:01:00]

ng to have a guest because I [: 00:01:15

Uh, about the volatility in the markets and what they should be doing, uh, to address the volatility in order to protect their portfolios and their wealth. [00:01:30] And, uh, the things I'm going to talk about today are things that you won't hear from the big, uh, investment banking and brokerage firms. or the large financial media complexes like the CNBCs of the world, and I'll explain why.

[: 00:01:45

Most investors and even many professionals I've met, but professionals that I've met define volatility as, uh, in their own mind as sharp, [00:02:15] quick moves down in their financial investments. And that's not at all what it is. Volatility are moves both up and down above the longterm trend. Yeah, of returns. So if the returns are 10 percent a year on average [00:02:30] for US stocks, a volatility means that we're seeing, uh, sometimes sharp, sometimes less sharp moves up and below that trend line.

the first context I want to [: 00:02:45

They're unknowable, uh, but nonetheless, the long term average for the last hundred years has been 10 percent a year. And without volatility creating ambiguity, investors in stocks would, would not be [00:03:15] compensated for putting up with that ambiguity. And everybody would be relegated to making something like 3 percent a year after inflation in bonds instead of 10, 7 percent a year after inflation in stocks.

y. It's actually our friend. [: 00:03:30

But what it really means, correction territory, it means that the S& P 500 was now 10 percent lower, not for the year. Not for where it [00:04:00] started there, but from the highest point it had reached in 2025. So the highest point it reached in 2025 was 6,144. Uh, and now it's at about 50, uh, 700 or so, or [00:04:15] 5,600. So it's down 10% from the highest point that it reached for the year.

So since the end of the year,: 2024

And the reason I say that is the average annual decline in the S and P 500 from its peak to to a trough every year on average. Doesn't stay down this much, but it goes down about 15 percent each and every year since [00:05:00] 1980. According to JP Morgan's quarterly guide to the markets, they reported every, every quarter.

and that the media's goal is [: 00:05:15

They don't know how to advise. They're not competent to advise. And they most importantly have no interest [00:05:30] in advising. They have an interest in increasing their media revenue. As in an old saying in media that says, if it bleeds, it leads. It means you go with the story that's the most gory, bloody and concerning because it lead, it should lead.[00:05:45]

very important to keep that [: 00:06:00

So having said that. Uh, what should one expect going forward this year? Uh, we're down, uh, 5 percent for the year. We're down 10 percent from the highest point that we reached this year. [00:06:15] And so what one should expect is to say, gee, if on average we're down 15 percent during, uh, during every year since 1980 on average, then probably wouldn't be, uh, wouldn't be silly to expect that might.

percent at least, [: 00:06:30

Um, secondly, I get a question frequently during times like this, uh, from professionals particularly who refer their clients to us for, uh, for help with managing their wealth. And the question is in light of the tariffs and the war [00:07:00] and, and, and, and, and, and the geopolitical and political environment, um, what are you, what, what portfolio moves, uh, are you recommending that your clients make?

And my [: 00:07:15

In this case, stocks much more than in bonds because stocks after inflation for the last a hundred years made 7 percent a year and a similar portfolio bonds after inflation made three. So they say, I need to make [00:07:45] that kind of return two and a half times more than I can make in bonds. Um, and, and I, and I made that decision when we did the plan.

oves, or anything else. Only [: 00:08:00

But once you start reflecting those fears by changing your long term portfolio composition, all the lights go out on the probability of reaching your goals, uh, in, in a big way. So with that, I want to share with you a [00:08:30] couple of questions that I got recently from clients, just to give a sense of, you know, everybody's concerned.

'll be helpful. So this is a [: 00:08:45

First of all, I have a big problem with the word plunge. Again, we [00:09:00] have an entry year decline of 15 percent every year. They use this word plunge to attract readers again and, and, and to say if it bleeds, it leads, and that we're going to make it bleed, even if it's not bleeding. And the client then asked me, I'm trying to stay cool, but is [00:09:15] this talk about recession even plausible?

recession is, for those who [: 00:09:30

So it could mean the economy, instead of growing for two quarters in a row, shrunk a quarter of a percent, a half a percent. It's very rarely much [00:09:45] more than that. It's not shrinking five or 10 percent and a quarter. The only time we saw something like that in recent history was during the pandemic where, where, where we had the deepest recession, uh, since the great, uh, depression.

And by the way, the [: 00:10:00

So don't let the word recession cause you unnecessary panic. But my answer to the client was, um, not only is it plausible, but we have had one every, uh, every six years on average since [00:10:30] world war two, given that the last one we had was. March of 2020 during the pandemic, and we're coming into the end of March of 2025.

nce we've had one. So I said [: 00:10:45

We don't [00:11:00] grow in a straight line. Investments in stocks don't grow in a straight line. Company earnings don't grow in a straight line. It's cyclical. And so we need to embrace that. We're used to thinking of a lot of things. I go to work every day and make a hundred thousand a year. That's linear. I spend 30, [00:11:15] 000 a year.

e answers will probably have [: 00:11:30

Uh, it just simply is that we have one, one year in six, uh, on average, and we do, uh, so, so don't let it, uh, don't let it get you to think you should be doing anything at all. And your portfolio [00:11:45] in anticipation of a recession. One last word on recessions in 2022, March, the entire complex of the financial industry from Goldman Sachs, the Merrill Lynch and UBS were their analysts were predicting there's a recession that's coming.

And I [: 00:12:00

Shouldn't we have just acted given that we know all of these things going on are so obviously detrimental and, uh, and we could have saved a million dollars. [00:12:30] And then he said, there has to be a point at which you say, I'm going to sit on the sidelines, put it all back in when things are a bit better. No, why just let it ride?

lient was, There is a point, [: 00:12:45

Because once you start moving out and into the markets based on impulses, which is all this is, I have an impulse that it's going to get bad. So I'll get out. The only way you'll reenter [00:13:15] is when another impulse, uh, get strikes your fancy. And what this person said. When get back in, when things are a bit better, well, guess what happens to the price of stocks when the environment feels more certain to people and things that got better, the price [00:13:30] of stocks goes higher.

t to sell it. And you see to [: 00:13:45

And when it looks like the dust has settled and it's 20 percent higher, as happened after the pandemic decline, went up a lot after the, after the March bottom quickly, no one had a chance to get back in. Many of them are probably still out today who [00:14:00] got out, but, but it'll go back up and you'll get in.

ell low, repeat until broke. [: 00:14:15

Uh, 5600 or so, so [00:14:45] it's a 1, 000, 000 investment is now worth 62, 000, 000 inflation has gone up 10 times. So I needed in order to buy what 1, 000, 000 bought when I was born. We need 10, 000, 000 today investing in equities during my life. We didn't just get [00:15:00] 10 million. We have 62 million. We increased our standard of living relative to inflation sixfold.

the, that equities did what [: 00:15:15

We've [00:15:30] had 10 bear markets down at least 20% from, from recent highs. And, and among the bear markets that we had those 10, there were three Hals or more, 2000 to oh two, um, nine 19, um, 73 and [00:15:45] four, and then 2008 and oh nine and normally. According to Warren Buffett's partner, Charlie Munger, who passed this past year, he said that once in in a 50 or 100 year period, we should expect a 50 percent [00:16:00] decline here.

ghs after each decline as we [: 00:16:15

The biggest risk is the [00:16:30] investor themselves. If they're behaving in a way that leads to reducing the probability of capturing the returns that we get as long term equity investors by staying in. And the biggest risk to money is not, uh, wars and, [00:16:45] and, uh, political, um, people that we're not confident in, uh, or anything like that.

ike it has so far this year, [: 00:17:00

But what's always happened historically. Is the number of dollars that went down not only [00:17:15] recovers, but goes on to new highs. That's what's always happened. And so the number of dollars fluctuating is never a risk. It's only an emotional risk. What really is the risk is the value of each dollar disappearing to the tune of at least 3 percent a year, which [00:17:30] is the inflation rate.

the real risk because bonds [: 00:17:45

And what's worse is The, the bonds not only the principle is frozen, but if you're getting 5% a year in 20 [00:18:00] years, you're gonna need 8% or nine to, to buy when inflation is. And, and the bonds don't do that. It's frozen at 5%. So the income you're earning as long as well as the principle is actually leading to turning our money into wallpaper.

t's the biggest risk we face [: 00:18:15

So, um, having, having said that, one of the, uh, one of the things that's important in, in this kind of an environment. Is to not engage in what I [00:18:45] call confirmation biased searches. What that means is, um, a lot of people this year. have, have caught, um, wind of the fact that Warren Buffett, uh, one of the world's greatest investors who ever lived, [00:19:00] who is 94, has been liquidating some of his portfolio.

people are concerned about, [: 00:19:15

And so they'll only get, um, articles that confirm their [00:19:30] bias, their bias to loss aversion, to disliking or feeling the pain of a loss two times more than the pleasure of a gain. Once you engage in those kinds of searches, that's another exercise that makes all the lights go out. So now what comes back to them is Warren Buffett's going to cash.[00:19:45]

embrace market [: 00:20:00

And in trimming those positions, it did lead him to have What's a record level of cash in his portfolio, 321 billion. He still has about 70 [00:20:15] percent in stocks. And the reason there's many reasons that he, that he trimmed those portfolios. One is when, when a holding in a portfolio gets to grow disproportionately relative to the other holdings, prudent managers will trim the positions, which is what he did.

And [: 00:20:30

So there's [00:21:00] many different reasons here. None of them, I can assure you, and you don't have to take my word for it, have to do with Barr and Buffett suddenly embracing the idea of market timing. So I'm just going to read you what he wrote in his February 2022, uh, 25 rather, recent [00:21:15] um, shareholder letter.

ities. That preference won't [: 00:21:30

And then finally, he says, Berkshire will never prefer ownership of cash [00:21:45] equivalent assets over the ownership of good businesses. Uh, so. Even after his trimmings and so forth of his portfolio at 70 percent equities, my bet is, especially today, he's probably got a much bigger exposure to [00:22:00] equities than most people who are investing.

in order to stick with your [: 00:22:15

And they could become worse, but right now they're less than average annual declines that we've experienced in the S& P. And by the way, if one is [00:22:30] properly diversified as our clients are, where we have not just the S& P overweighted, we have international stocks, Europe is up about seven or 8 percent this year.

to, uh, before we sign off. [: 00:22:45

And so you're investing in great companies and the stock when people think of the stock market, they'll look at the S& P 500 and think that reflects their [00:23:15] portfolio. It shouldn't. One should stay broadly diversified because investment styles like large companies that are growth oriented like the S& P will go in and out of favor over time.

a good example of that. And, [: 00:23:30

So thanks again for listening today. I want to end by saying what one of the most important things people can do. To protect their portfolios during anxiety, inspiring times like this. One of the most important things to do. And also one of [00:24:00] the most difficult things to do for almost every human being because human nature and the way it responds is immutable.

nd wait for it. It's nothing [: 00:24:15

No, it doesn't help it get there faster, but we do have this action bias in investing, um, what I've learned is investment effort. And investment outcomes are very highly correlated, [00:24:45] but the correlation I found is negative. The more we try to force an investment outcome by responding to an environment, the worse we do.

mple. When people during the [: 00:25:00

So people who think, what can I do with these tariffs going on? Maybe I should invest in utilities. Maybe that would work, but that assumes the tariffs will still be on [00:25:30] indefinitely. What happens if Canada and Mexico resolve the tariff issues with our country next month? And the market could go up 10 percent suddenly.

with that last thought. The [: 00:25:45

All right. So signing off, please tune in, [00:26:00] uh, either on your favorite podcast channels or a crazy wealthy podcast. Dot com until next time, Jonathan Blau. Stay tuned to hear Amy's colon for the recap of today's episode.

Amy Blau: Good

Jonathan Blau: morning, honey.

: Good morning. How are you? [: 00:26:15

Another day. Another dollar. I know and especially in this environment. I'm sure as well coached as your clients are. I'm sure you're still getting [00:26:30] calls and texts and emails here and there asking you what you think about what's going on considering

act to these environments is [: 00:26:45

We've only gotten maybe a handful of calls, but whenever we get them, it's the same types of questions. So I thought it'd be a good idea to put out a podcast. For the crazy wealthy, the long version, without an interview, uh, and postpone the next interview another month [00:27:00] because people, I think, will benefit now from hearing some of what I think are the most salient points to succeed when times are volatile.

idea. But in this situation, [: 00:27:15

Jonathan Blau: All right. So now I'm not going to talk to you about the podcast and the guests as we normally do. I'm really going to use you today.

er Jimmy's barbecue. And you [: 00:27:30

Amy Blau: Wow. That is cold. [00:27:45] Bringing up that I was broken up with someone at some point that I made up that story just because I knew that you were going to be the greatest financial coach to ever walk the earth. And that's why I wanted to

at I want to do is I want to [: 00:28:00

So basically, um, In, in the episode, one of the things I didn't talk about cause I wanted to save it to the end is a habit that, that investors really should try to break is they, they tend to look at their wealth and [00:28:15] measure it not from where it was five years ago, 10 years ago, but from where it was five minutes ago and five days ago.

ing is average returns for a [: 00:28:30

So it's an illusion and and uh, People need to really just look at where they were five ten 15 years ago and appreciate the miracle of [00:29:00] compounding through investing. So that's one point that I didn't bring out that I wanted to. The other thing I wanted to say is, is in the, um, in the title of the podcast, we talked about surviving or investing successfully in volatile times and why the big firms and the [00:29:15] big media complexes like CNBC won't tell you these things.

ted in giving them financial [: 00:29:30

From investors on the stories. And there's an old saying in media, if it bleeds, it leads. So get the bloodiest [00:29:45] story and make it the lead story. Cause that's what people's eyeballs are going to hit the most. And that's when our ad revenue is going to go up. So investors need to understand there's a complete conflict of interest.

future and what the media is [: 00:30:00

This is how the financial media makes money, getting a click on these stories, and, and by the way, the, the big financial firms make money not by telling you to stay put and let compounding work, they make money also by getting you to react. And buying more [00:30:30] products from them. So, so those are the two things I wanted to point out.

CNBC to collude with them to [: 00:30:45

Amy Blau: Well, it sounds like Most of the people investing in the market right now are [00:31:00] kind of like me, the what have you done for me lately? You know that I ask you that all the time when you tell me about all the great things you've done. All I say to you is, that's great, but what have you done for me lately?

So that's what's going on with people in the market these days, I would guess.

lately is I used you the way [: 00:31:15

Amy Blau: Oh, okay. So now after 30 years, we're finally even. Everybody have a great day.

Jonathan Blau: You too, honey.

Amy Blau: Take care. Bye bye.

you for tuning in to another [: 00:31:30

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fusionfamilywealth. com.