A very bullish episode 120 of Plan For Life Now starts with Dave’s review of his trip to Japan. He’s bullish on Japan, especially the toilets ( That, my friends, is what we call “a tease!). Steve then makes a strong case that we are not going into a recession, followed by a more existential discussion of the psychological reaction people now have towards the stock market. The Wall Street Journal says, “Episode 120 has a truly positive vibe, one of our favorites!”
*The Wall Street Journal did not say this. They don’t even review podcasts.
Steve:
Welcome to Plan for Life now episode one 20. We are sitting here in the final days of May and I said to myself, we have not done a podcast since the day after Liberation Day.
Dave:
Yeah. And a lot is, it’s amazing how the money world, I guess the world, but the money world changes so dramatically from an emotional standpoint in short periods of time.
Steve:
You are not kidding. Dave, how are you doing? By the way?
Dave:
I’m basically in the podcast version of playing basketball with a torn ACL because I went to Japan. I don’t want to sit here and talk about it forever. It’s not what the I think
Steve:
We, yeah, people would like to hear your stories. You went to Hiroshima, Kyoto.
Dave:
We went to Tokyo, Kyoto, Hiroshima. It was a two week trip to Japan. I highly recommend it highly because a lot of people, Japan’s getting popular, but a lot of people who are listening to this because they’re retired, they’ve been all over the world, or at least you’ve traveled to Europe and other places. A lot of you, but a lot of people haven’t gone to Japan and it is just a totally different culture. It’s a lot of fun need to get. I think you should get a travel agent for this one. Someone who helps set up the trip and some guides, but I would say don’t do guides for everything. We did a little bit, a lot of exploring and stuff on our own with another couple. It was just a lot. It was great. Time changed, brutal 13 hours ahead. It took me about eight days. It took days when you get there and it took, but you’re on the high the trip. But it took a good week to get back and I got the obligatory cold on the last day of the trip
And was one of those people. I’m like, I will wear an airplane on a mask. It’s tricky. I’ll wear a mask on an airplane when I’m the one sick. I’m doing a service to those people. Fortunately, I didn’t have this car, so now I don’t even have the cold anymore, but I have the cough. This is where it’s like the ACL tear of playing basketball, doing a podcast. I’m going to have to be very adept with the mute button when I’m about to have a coughing fit. So when this recording comes out, it’ll seem like I’m fine, but I’m giving you all behind the scenes how I’m gutting this podcast out.
Steve:
I don’t know the reaction of everybody out there listening, but I’m already anticipating the laughter from our office manager, Amy, as she usually listens to these as she prepares them for the website and you saying that it’s like playing with a torn ACL. She’s going to be laughing hard, but I think I told you this, but I actually went to Japan. I’d love to go back again, but I actually went to Japan when I was in fifth grade at 11 years old. My uncle was working over there, so I would love to go back. Obviously that was 30 some odd years ago, so I’ll put that on my bucket list of got to do that at some point.
Dave:
One thing, this is not cultural well, it is for them. Every toilet. Every toilet in Japan has a bidet system, and I’ve never used a bidet until I went there in my life.
So I did it for the first time, and I’m going to recommend, if you’ve never done it and you go to Japan, A by the end, you’re going to wish you had a bidet and B, when you start this process, make sure you find out where the stop button is. So the first time I didn’t, so that’s my hint on that. But I Wow, their toilet system, everything they have there, their train system. You take these train rides, that would be like a 6, 7, 8 hour car ride and these bullet trains, you’re there in three hours.
Dave:
Two nd a half hours. So all the travel within the country is by train. It is. I would really say because most of the people listening to this are retired, they have the opportunity to do these trips. Hopefully you do. Anyway, I’d highly recommend that.
Steve:
All right. Drop everything head to Japan only what, a 14 hour flight or so?
Dave:
Yeah, 14 hours. Yeah, you might want to upgrade on that.
Steve:
All right. But that is actually not what we’re here to talk about, although some people would say it’s more interesting to talk about travel, but what we’re here to talk about is what’s going on in the world of investing, retirement planning, all of that. And I don’t think we could start this conversation without talking about tariffs and everything that’s gone on so far this year. So let’s start the story all the way back at the election. So of course Trump got reelected a lot of excitement in euphoria. Okay, we’re going to have a Republican president, Republican everything House and Senate, so we’re going to roll back regulations, we’re going to be crypto friendly. And there was some euphoria for a couple of months there after the election. And then starting in around mid-February of this year, the market started to wake up to this idea that Trump has long said how much he loves tariffs. He campaigned on tariffs, and it turns out he actually meant what he said. And so we saw sort of mid-February, there was a lot of discussion around Mexico and Canada and will they, will there be tariffs? Will we postpone them? And then that all led up to what’s called liberation day and Liberation day. What was the exact date, Dave? Was that April 2nd? I know
Dave:
I thought it was April 2nd. I’m not a hundred percent. It was the second or the fourth. I dunno,
Steve:
Second or fourth. Yeah, I know it wasn’t April 1st because then everybody would’ve brushed it off as this is just an April fool day joke
Because that’s what it felt like to a lot of people. The big game show like board of here are all the tariffs for all these different countries, even if they’re only inhabited by penguins. We’ve got tariffs and the stock market sold off pretty hard, and I think we’ve talked about this in the past, but you had one of the worst two day declines in market history right after that announcement. And yeah, we kept going down for a few days. It was pretty scary. We did a podcast at that time. We also did a webinar zoom meeting, whatever you want to call it for all of our clients and basically said, look, yeah, things are bad. I don’t know how it resolves. I don’t know what’s going to happen. But historically the market bounces back from these types of things. So here we are, end of May had to get this podcast in May, so we could say we do one once a month and the stock market went down 19% and it’s back up 19 since the lows.
Dave:
You know what our Liberation Day podcast, they say some things would age well ours, that one has aged well quickly.
Steve:
Yeah,
Dave:
That one you go at that’s like, oh, I’m glad I recorded that one. But in all fairness, we record everyone and leave them up. We don’t just pick and choose, but that one has already aged really well.
Steve:
So the stock market is still a little bit below the all time highs that we reached in early February or mid February. Really interesting point, Dave. As I was putting together some charts and slides that we go through with clients, I was going back and I was looking at some charts that we put together in 2020. Obviously COVID time, big declines in 2020, the stock market peaked out for the first part of the year on February 19th and here in 2025, the stock market peaked out for the first time, hopefully on February 19th.
Dave:
So just interesting,
Steve:
Weird coincidence, totally meaningless, but thought that was interesting. So like I said, we’ve recovered, bounced back quite a bit, not entirely to those highs, but interesting to me. We are above the level that we were at before liberation Day. So what that’s saying is the stock market says, okay, all of these tariffs that Trump has announced, if those were to go through those would be incredibly bad for the economy. So the market’s kind of looking through those and saying, all right, well we don’t actually expect those to stay in force. They’ll be negotiated or they’ll be pushed down the road or whatever. So it’s interesting to me that the market’s actually higher than it was on Liberation Day, but I’m going to leave that to the collective wisdom of the markets being smarter than any one individual person.
Dave:
But there’s still a lot of volatility. To me it’s just surrounding the tariffs. Just like the other day there’s a 50% tariff announced on the European Union. Markets come down a lot. Oh no, that’s not happening now. The negotiation’s getting better. The market goes up a lot. I mean as long as we have that stuff going on, we’re going to have a lot of the day-to-day, week to week volatility. I remember, I don’t remember all the years start to blend together, but we’ve had podcasts where we say it’s amazing how little volatility we’ve had. 20, 25 is not that year.
Steve:
No, I think that’s one of those where you could say, well, I don’t think I’m going out on a limb saying that we’re going to have more volatility. I mean that’s kind of the easy one when people ask for predictions. Well, what do you think is going to happen the rest of the year? Well, I don’t know where the market will end up, but I’m guessing a lot of volatility. That’s a pretty easy one to predict there. Now, what lies at the heart of all of this volatility and market movement and all that, even beyond just saying tariffs is ultimately this idea of will we go into a recession or won’t we? And if we go back and we’ve rewind and we go back to 2022 and we talk about what was going on in 2022, well wasn’t that long ago we can remember we had really high inflation.
Remember inflation basically was at a 40 year high back in 22. We had the Federal Reserve raising interest rates really aggressively. And you had towards the end of the year, everyone was, I don’t want to say in agreement because kind of hard to get everyone in agreement, but the consensus was, we’re going to go into a recession, it’s going to happen. And then 23, 24 went by, no recession. So now we’re back there in that situation talking about a recession again, the catalyst this time being the tariffs. But I listened to a lot of these economists and market, I don’t want to call them market experts, that almost sounds a little derisive to say, oh yeah, you’re a market expert.
Nobody can truly be a predictor of the markets. But I listened to a lot of these people and one of the ones that I listened to in the past, this guy Dave McGarry from First Trust, and he talks about why he doesn’t think we’re going to have a recession, and I’m just going to tick through these things very quickly here. A strong labor market, it’s really hard to have a recession when everybody has a job. If you’re still working, you’re still able to buy things and that makes it pretty hard for an economy that’s whatever, 70% consumer base to go into a recession. Interest rates are normalizing. So we saw some pretty wild fluctuations in interest rates. Those have calmed down a little bit. We’ve talked about this in the past, Dave, where part of the reason why the Federal Reserve raised interest rates is just so that they have the ammunition, the room to lower interest rates when things get bad. I mean, if interest rates stayed at zero, well there’s nowhere to go.
Dave:
We would not have gotten out of the great recession without the ability for the Fed to lower those interest rates and help us in a long sort of based way get out of that.
Steve:
Yeah, totally. And I mean some people even argue that they under did it coming out of the great recession, the financial crisis that given how bad that was, more stimulus would’ve been warranted. But you’re right, they need to have that room to do it, and they do. Right now, L energy prices are lower. I’m just going to have to trust him on that. Gas prices a little lower. It looks like stock market projected to grow 9% this year for whatever that’s worth. Banks are well capitalized. I think that gets glossed over with a lot of people. And a lot of the big bank presidents, Jamie Diamond at JP Morgan in particular, they love to complain about the reserve requirements that the banks have to keep.
I mean, just every quarter, Jamie Diamond, well, all the reserve requirements and the regulation really hurting our earnings. Well, I don’t think it’s hurting too much. They’re making plenty of money and those reserve requirements are much stronger than they were back in oh 8, 0 9. So I don’t think you have to worry about the banks in the same way as you did in the past. And stock buybacks, I didn’t dig into this one, but he talks here about how companies are allowed to do more stock buybacks that supports the market. I know that people like Elizabeth Warren will rail on stock buybacks because they view it as well, you’re just propping up the share price instead of paying workers or reinvesting into factories or, I dunno, whatever else you would do, but from a shareholder perspective, stock buybacks are a good thing. You’re buying back your stock, increasing the value there, decreasing the number of shares outstanding. Nothing bad about that from a shareholder perspective
Dave:
Perspective. It’s also just part of free market capitalism. So start changing free market capitalism, which has worked pretty well so far, probably doesn’t make sense.
Steve:
Exactly.
Dave:
Back to those reserve requirements. There’s all these regulations and then there’s all the hype about regulation, whether you’re for or against it, but there’s certain regulation that’s just critically important from our perspective. And one is on the banks to know that they have that money there no matter what. And the other is on the insurance companies that they’ve always had regulated by the states, which protect life insurance no matter what and your annuities and long-term care insurance and stuff like that. I’m always comfortable. I don’t want you and I deal with a lot of regulation that might be unnecessary within the administrative realm of our business, but it is what it is. But those regulations are critically important for the long haul.
Steve:
Well, yeah, and you’ve talked about that for years. I mean, that’s something I remember 20 years ago you talking about with insurance companies in particular or specifically about how their regulated their reserve requirements. And that totally played out as you said it would through the financial crisis, that life insurance annuity, long-term care insurance companies, they didn’t have any insolvencies or defaults. And it’s not because they’re smarter or they’re really nice or whatever, it’s because they were required to hold these reserves,
Dave:
Right,
Steve:
Because of the
Dave:
Rule.
Steve:
If they’re not required, then the executives at these companies are going to push to take more risk to potentially maximize more return, which is what they’re supposed to do. But obviously that can get you into trouble.
Dave:
You just can’t have anything. I can’t buy a life insurance policy in 1993 and then I’ve been paying this thing forever and then I die in whatever, 2031 and it’s not there. This can’t happen. And that’s the rules they made on that. And then quite frankly, 2008 on the other side, making sure these banks are capitalized, that that’s the one thing that comes out of the biggest lesson out of the great recession that helps us going forward.
Steve:
Absolutely. Okay. So that’s one particular person’s take on why we’re not a recession is not imminent. And like I said, I listen to a lot of these and some people will talk about, well, it’s a 50 50 chance of recession. And a lot of the time when they talk about, well, what is that 50% recession scenario? It’s basically saying, well, as things stand right now, we don’t see a recession, but we could be subject to one of these external shocks, which quite frankly could be Trump deciding, you know what? I do like these tariffs and I’m going to stick with the hard line and I’m not going to negotiate. I mean that could do it. Or as we’ve seen, there could be a variety of different things, whether it’s an oil price shock we’ve seen years ago or a health scare like in COD. Those are the types of things that you just can’t predict. You don’t know exactly when that’ll happen.
But one of the other things I wanted to talk about is there is evidence that the declines that we’ve seen in the stock market, and we can just rattle off some of the more recent ones, this one so far this year, going back to COVID or even in 22 to 23, that we see these stock market bounce backs much more quickly than we’ve seen them in the past, that they’re not as drawn out and dragged out. And is that sort of a fluke or is that a function of changing investment behavior? And there is some evidence to say that retail investors are trained, for lack of a better term, to buy the dip every time. And what we mean by buy the dip is stock market goes down. Well, retail investors are not going to say, oh, okay, I’m scared I’m going to sell my stocks. They’re sort of trained to say, Hey, stock market is down. That’s a good buying opportunity. Maybe I’m going to put some money to work there. And I think you’re seeing evidence of that because we’ve seen so many of these quick decline, quick recovery there that the retail investors, which used to be called the dumb money, actually are there to buy the dip every single time.
Dave:
What do you think about a theory, this is my theory, not a quote, expert’s theory that 2008 and COVID may have emotionally, wow, those were real and we were okay from that. It emotionally may have helped as helped retail investors and then everybody a little bit dealing emotionally with something that’s not of that magnitude, a psychological theory, but that does require actually thinking about history in the past, which I usually don’t give the American public any credit for, but still the investing public.
Steve:
Well, I think if you divide things up and you say, I graduated from college in 2001, went to work, got into this business in 2002, I graduated in the teeth of a brutal bear market in technology stocks for a couple of years there, markets started to recover, got back on its feet, and then we had a brutal bear market from the financial crisis. So I would say that a lot of my investing philosophy and feeling was, for lack of a better term, sort of scarred by those early experiences investing. Now change that to somebody who graduated from college in 2015 and they didn’t have any money in the tech bubble. They were in kindergarten or whatever, they still didn’t have any money in the oh eight crisis. They were in high school. Now they’re actually making money and their investment lifespan has been a lot of these quick decline in recoveries. And I do think that that just changes people that you will be more likely to say, okay, I’m going to keep investing here and it’ll bounce back quickly. Now, what I’m curious to see is what if we do have a prolonged bear market, something like the tech bubble in the early two thousands, will that change investor behavior or are things just different? Everything moves faster now.
Dave:
Yeah, that’s a hard one. Another good question. Hard to predict with technology the way it is and life, the way it is leaning towards everything moving faster now, could be, I don’t know. We’ll see. It’s an interesting theory.
Steve:
And the other part of this that I’ve heard kicked around, I don’t know if there’s any real research about this, is we talk about, and we’ve talked many times about the transition from defined benefit pension plans to define contribution plans. So define benefit pension plans means you work for a company for 40 years, you retire, they give you 5,000 bucks a month index for inflation, and you get that until you die. Defined contribution is your 401k, 4 0 3 B where you contribute five, 10, 15% of your pay, your employer gives you a matching contribution, and then it’s up to you to invest. And I’ve heard it theorized, but like I said, I don’t know of any real research that simply the fact that we’ve had this transition over the last 40 years to where everyone now, not literally everyone, but most people have the 4 0 1 Ks, that because we have this automatic buying mechanism, people don’t change. That market goes down, they just keep doing the same percentage of their paycheck that maybe that has made some of these recoveries. I mean, it doesn’t prevent them. We’ve still had plenty of declines, but maybe that has made some of these recoveries happen a little faster.
Dave:
Yeah, I think that’s a super valid theory today. I was reading something about Ted Cruz was writing an editorial in the post. It was about his idea for something to throw into the big beautiful bill was give every child, newborn child a thousand dollars that’s invested in the stock market in the s and p 500 or whatever. Or I guess you have a few investment options. And then over time, the theory, his theory is that basically not only will it grow as they get older, but they’ll be involved in its growth, learning about business, learning about the stock market, learning about going back to what you’re saying, this is now the catalyst, the vehicle for your wealth
Dave:
Stock Market for your retirement, et cetera. It’s all leading towards that theory that, which I think you spelled out pretty quickly. Pensions are gone for the most part, and this is how you support yourself for the rest of your life. So you got to look at it a little bit differently.
Steve:
Alright, so let me bring this back just real quickly to what we actually do because all of this stuff, talking about the market, by
Dave:
The way, this has been a bullish conversation. Underlying theme of this whole little chat has been pretty bullish when you think about it.
Steve:
I mean, I think I’m always kind of long-term bullish in the short run. It can be scary. And I mean, believe me, even doing this every single day, knowing all the market history that we know, when the market was going down, whatever it was six weeks ago, I wasn’t sitting here and saying, you know what? Just give it till the end of May. It’ll be back. I was thinking, okay, this could be dragged out. This could be a year or so of market doing nothing or flat, and then maybe we recover. But bringing everything back, yes, it’s fun to talk about the markets and yes, we need to pay attention to it, but the bigger picture, the broader picture is you put that plan together where you’ve got enough money not invested in the market, and you don’t have to worry about the day-to-day or even year to year market fluctuations. You’ve got a plan where you can ride out some of the worst market declines and you’ll be okay. And if I had to summarize in a minute what we try to do, that’s it right there is, yeah, we want to get all the growth in the market long term, but we don’t want to worry about it in the short term.
Dave:
Yep. I think that’s exactly it. Kudos to me for making it through this whole thing without you, the listener hearing one cough, one phlegm hack up, nothing.
Steve:
It was impressive. I could see every time you muted yourself and your timing was impeccable there, you never let a cough slip through. So thank you for that. All right, thank you to everybody out there listening. Hope everybody has had a good month and we’ll talk to you again soon.