Dear Valued Client,
Aloni Goh Wealth Strategy Notes:
If you’ve ever gone on a vacation with a big, extended family, you know one of the worst parts is trying to get everyone moving in the same direction. Even if all the restaurants and day trips were agreed to and booked beforehand, there are invariably those who change their mind at the last minute.
(We should shun these people, but they’re still family so we put up with it. Sometimes.)
Chaos typically ensues, feelings are hurt and grudges are formed. By the end of the trip, however, everyone goes back to their everyday lives and things are normal again. At least, before the next big family trip.
Now, imagine the family trip is about following interest rates and the extended families involve all 12 districts of the Federal Reserve. Last year, things were going (relatively) swimmingly – the growth of inflation seemed to be slowing and rate cuts were anticipated in 2024. The markets didn’t know how many cuts there would be, just that the Fed would be cutting. Even Fed chair Jerome Powell noted as much, suggesting as recently as April 3 that “the recent data do not, however, materially change the overall picture.”
Fast forward to the next day and Neel Kashkari, the president of the 9th District of the Fed in Minneapolis, floated the idea of zero rate cuts in 2024: “If we continue to see inflation moving sideways, it would make me question whether we needed to do those rate cuts at all.”
Markets tumbled on Kashkari’s comments, highlighting once again the highly speculative nature of the markets. Rate cuts have been priced in – in other words, current stock prices reflect the anticipation of rate cuts. Markets dislike uncertainty, which manifests into extreme volatility.
Rate cut or no rate cut, our primary job is to ensure you get a more predictable and stable rate of return relative to your exposure to the markets and your risk appetite. We focus on blue-chip equity positions that pay a dividend and fixed income instruments that pay interest. These returns tend to be more stable than market returns, which can fluctuate wildly on a single comment. We remain steadfast in holding high-quality equity and fixed income positions, ensuring that we can ride out any short-term volatility, such as the one we’re experiencing now.
Further Reading:
A Catholic priest, a Jewish rabbi and an AI walk into a bar. The bartender looks at them and says: “What is this, some kind of interfaith outreach program?” – ChatGPT
This was an actual joke ChatGPT came up with when a user asked the AI program to tell a joke. Needless to say, while AI certainly presents the potential of a paradigm shift in civilization, it’s still very much in its early stages.
The full use of AI is not only unknown, it’s also unknowable. In this article from Vox, even the scientists who build and program AI don’t fully understand how it works. How does a computer that “thinks” (ie. operates) in numbers create thoughts or words on a page? We are dealing with something that’s new, with very few who truly understand it. It’s also ripe for exploitation from deepfakes to bots. We tend to gravitate towards the shiny and new – that’s just human nature – and it’s showing in the markets with AI driving much of the speculation in the tech industry. Such euphoria can also destroy hard-earned wealth in an instant when things markets go sideways, and it can be fast and violent.
The solution? Understand your tolerance for risk. Understand what you’re investing in. Understand that investing for the long term in mature, blue-chip companies and higher quality fixed income products may be the more stable and suitable path to your investment goals.
Check out the video from The Daily Show where host Jon Stewart discusses the false promises of AI.
If you are interested in speaking with Aloni Goh Wealth Management regarding your current financial situation, or perhaps know someone who we may assist, we would be pleased to help. Referral of friends and family is the greatest compliment you could give us.
Please visit us at alonigohwealth.com or contact call us by phone 604-658-3056 or email raloni@leedejonesgable.com.
Best Regards,
Ron Aloni / Alan Goh / Jason Chen
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