On this morning’s Trey Ware Show, Karl & Trey discussed the savings crisis in America. Karl believes it starts with financial literacy, which is missing in schools.
Trey Ware: Karl Eggerss is joining me on the Stephens Roofing Newsmaker Hotline to talk about the economy and talk about the markets and all that. Really strong job number on Friday, Karl.
Karl Eggerss: Yeah, it was a little relief for a lot of people, but you did see the market kind of pull back a little bit, and it may today as well. And if you’re wondering why that is, we’re in this period of that good news is maybe bad news, where investors really want the Fed to cut rates, not only in July, they want them to continue to cut them. And a good jobs number lowers the chances of that. So we’ll probably get a rate cut in July of 25 basis points or 0.25%, a quarter of a point. But some people were hoping for a half a percent cut, and those hopes were kind of dashed on Friday when we got the good jobs report.
So it’s kind of a weird deal trade in the stock market. Investors always want their cake and eat it too. The fact that they want the Fed cutting rates, they want a good economy, and right now we have a slowing economy but still okay, no recession in sight, and so the Fed’s probably going to cut, but just not as much as people think.
Trey Ware: Is the President right, though? I mean, could the stock market really be on fire had the Fed not been so aggressive last year and early this year?
Karl Eggerss: I don’t think it would be up 10,000 points.
Trey Ware: Right.
Karl Eggerss: But would it have not gone through the December sell-off? Remember the stock market fell in the fourth quarter of last year by 20%. Now it’s recovered all of that and then some, we’re at all-time highs again. So it kind of reversed that and it was because the Fed changed their tune. It was very, very clear that when the Fed said, “You know what, maybe we’re not going to keep raising rates, and in fact maybe we might cut them,” that’s when the market just took off. And so he is right about that. I just don’t think it would be 10,000 points higher.
Trey Ware: Does it bother you or scare you or whatever that they make these decisions, the market itself and investors, traders, make these decisions based on something that somebody said rather than what they did? I mean, they just say-
Karl Eggerss: Oh, absolutely.
Trey Ware: “We might do a rate cut,” or, “we might go up on the rates,” or, “we might do this or that or the other,” and man, it’s reflected throughout the market instead of waiting to see what actually happens.
Karl Eggerss: Well, and the market’s always a forward-looking indicator because people are trying, it’s like a chess match, they’re trying to anticipate the next move. What’s interesting is, you’re right about that, because data shows that the market’s clearly wrong most of the time.
Trey Ware: Right.
Karl Eggerss: So whenever we hear, “Well, they’re going to this,” it’s usually wrong. And the Fed’s wrong as well. But that’s always the way it’s been and I think a really good point, though, for investors to not get distracted by a tweet or some quick news event, because the markets will knee jerk reaction one way, and sometimes they’ll turn around, sometimes intraday, and go the complete opposite direction. So you got to stay focused on a little longer-term, but a lot of these news events will drive the day-to-day movement, but over the long-term, as we’ve said, it’s going to be bigger things like corporate profits and things of that nature [crosstalk 00:03:04] actually what happens, like you said. And what we know, what happens is in the rearview mirror sometimes, and that’s why it’s very difficult, because everybody’s trying to anticipate and get ahead of everybody else.
Trey Ware: What are your thoughts on-
Karl Eggerss: [crosstalk 00:03:17] do this in the future, we want to make that move now.
Trey Ware: What are your thoughts on fewer Americans saying that they’re going to be able to retire, that they just don’t have the finances to be able to do that?
Karl Eggerss: Trey, this, to me, this goes all the way back to early education. We do not have near enough financial literacy being taught in schools. What we are getting taught, if at all, for our kids is they’re getting play money to invest in the stock market for a three month period of time. And so what they are teaching them is actually bad habits of… I have tons of kids call me and go, “Hey, can you give me five stocks for the next three months?” You know?
Trey Ware: Right.
Karl Eggerss: I mean, that’s what the kids are learning. So not only are they not getting financial education, anything they are getting is wrong. And so I think we have to get financial literacy in the schools. I’ve talked to principals before that say, “We just don’t have time in our schedule. We don’t have the room for it because of everything else.” But if it starts there, then you will see a generation that has a different savings mentality because it is a huge, huge problem. And we’re going to see workers working into their eighties not too long from now consistently.
Trey Ware: And it’s going to take another probably 50, 60 years to turn that around if we start today with the education that you’re talking about. All right, Karl, thank you very much. Karl Eggerss joining us here on KTSA ever Monday morning at this time.