Podcast: Retirement and Investing In A Post-COVID World

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Join Brennan Hollenbeck, AIF®, Wealth Advisor, for an in-depth discussion on retirement and investing in a post-COVID world. In this episode, he shares insights on common trending topics such as interest rate hikes, inflation worries, supply chain issues, and the real estate market.

Listen Now:

For more information, please contact:

Brennan Hollenbeck, AIF®
Vice President / Wealth Advisor
bhollenbeck@muellersolutions.com
312.888.4638

EPISODE TRANSCRIPT:

[00:00:00] Ashley: Hi, I’m Ashley, and you were listening to “Managing Your Wealth: Your Vision, Our Guidance.” Today, we welcome Mueller Financial Services Professional Brennan Hollenbeck to talk about investing and retirement in a post-COVID world. But before we get started, let’s find out more about our guest.

[00:00:24] Ashley: Brendan is an Accredited Investment Fiduciary and Wealth Advisor who has over 13 years of experience providing wealth planning and financial advisory services to high-net-worth individuals, multi-generational families, executives, entrepreneurs, and their closely held businesses.

[00:00:39] Ashley: First off Brennan, thank you so much for joining us today on the podcast.

[00:00:42] Brennan: Happy to be here.

[00:00:43] Ashley: And with that, let’s go ahead and get started. COVID changed a lot of things in people’s lives around the globe. What is the greatest single factor COVID-19 had that will impact the stock and bond markets? And how long will this impact last?

[00:00:57] Brennan: So, yeah, so COVID obviously changed everybody’s lives, you know, completely for a lot of different reasons, but when it comes to the stock and bond markets, I think the, the single greatest impact that it had was on supply chain issues. And because of that, you know, the world completely shut down for however many months, it sent the world into a tailspin when it comes to how we manufacture and move goods around the world.

[00:01:21] Brennan: And that in turn. Has had a huge impact on inflation and what you’re seeing right now in inflationary prices. So whether, you know, you’re a mom going to the grocery store, buying groceries to your family, whether you’re at the gas pump, filling up your car, or whether you’re ordering a new refrigerator or washer and dryer, you’re absolutely seeing the impacts of what inflation can do.

[00:01:43] Brennan: And much of that inflation was caused because of COVID-19. On the bond market side of things, the bond market really wasn’t affected in, in the immediate interim, but because of what inflation has done, the federal reserve has tried to combat inflation. By raising interest rates. That’s one of the tools they have in their pocket and that rising of interest rates, which was the fastest pace in 40 years caused the bond market to have one of its worst quarters in, in, in 40 years, actually.

[00:02:14] Brennan: So that’s the impact on the stock and bond market is inflation, uh, caused the stock market to have some troubles right now. And the fallout effect was the rising interest rates on the bond market.

[00:02:24] Brennan: You know, the fact of how long we’ll be feeling these inflationary pressures is really kind of hard to say, you know, the, the federal reserve thought that inflation was going to be quote unquote transitory. And last, only about six months, I think that, you know, inflation is probably not going to come down until at least the latter half of 2022.

[00:02:45] Brennan: And you’re really probably going to feel the effects into 2023, for sure. When it comes to the bond market, though, most of the price drop that you’ve seen in bond prices. I think that 80 to 90% of that has been flushed out because the federal reserve has given clear guidance on how many times and how much they’re going to raise interest rates.

[00:03:07] Brennan: So the inflation thing is a little bit more, uh, you know, remain to be seen, but on the, the impact on the bond markets, we kinda know where interest rates will hopefully anyway, settle in that.

[00:03:17] Ashley: Given the backdrop of COVID and how it has changed the work place. People now can work from home as an option. Do you see that as a potential catalyst for a bubble in the office space or cause for concern in the real estate market in general post –

[00:03:29] Brennan: COVID?

[00:03:30] Brennan: So COVID did have a really big impact on the real estate market. And I think that the biggest impact certainly was in that workplace, you know, Um, a lot of people realize that business can be conducted from home.

[00:03:40] Brennan: And, you know, we here at Mueller Financial Services, are a great example of that. For the longest time, we were very much a work in the office type of environment. And, you know, even though they’ve, they’ve got us back in the offices, it’s certainly more people are using the flexibility of work from home and still getting their job done.

[00:03:56] Brennan: And I think you’re seeing that around the globe, you know, what would be maybe a manufacturer worker or someone who has to go into an office? I think that certainly COVID changed how that landscape looks. What it did to the personal real estate market is much different. What happened was you stop people from building homes for the better part of six months or a year yet demand really increased in the housing market because a lot of people said, well, heck I want to either, you know, leave these cities because they’re not doing anything for me, they’re shut down, anyway, they moved out to the suburbs in search of single family homes. Or you had retirees who maybe were in that one to two, to maybe three year window of retiring, when COVID hit, they said, okay, if I’ve got enough money saved up, I am just going to go retire.

[00:04:41] Brennan: And if they didn’t have a retirement home, yet they went out and wanted to go, try to find one. So, you’re seeing pockets of the market in Tennessee, Texas, certainly Florida that have just skyrocketed when it comes to real estate. I think that’s real demand though. I think that, you know, people are, are buying these homes because they are wanting to stop renting and, and going to go into that.

[00:05:01] Brennan: But, you know, with interest rates rising, the, the market is probably going to slow down a little bit, but COVID definitely had a really big impact on the real estate market in general. Some of it good, some of it definitely a cause for concern, if you’re investing in office space. So it is really important to think about where are my real estate investments? How am I invested? And then an even bigger part, how does that fit into my overall portfolio.

[00:05:27] Ashley: You just mentioned interest rates are clearly. The yield curve, just inverted, which could signal a recession is looming. What are some things investors should keep in mind during a rising rate environment, and can the bond and stock markets do well in a rising state scenario?

[00:05:41] Brennan: Yeah. You know, that’s a good question and not to get too technical, but the main thing to understand is that rising interest rates have an inverse impact on your bond prices. So when, when rates rise, the bond prices in your portfolio will fall. However, that’s the short-term effect. The long-term effect is that you actually earn more income.

[00:06:01] Brennan: Okay. And that’s the good news is people that will hold these bonds. They actually will make more money on them, you know, down the future. So, you know, the whole yield curve thing, what it means when it says, is it inverted? That just means that the shorter end, if you buy a two or a three-year bond, for whatever reason, that yielded more than say a 10 or a 15 year bond, that’s what we call an inverted yield curve, which doesn’t make any sense.

[00:06:24] Brennan: History tells us that that can, it can be an indicator that a recession is looming. We’ve never had a recession when the yield curve did not invert. However, not all yield curve inversions mean that you’ll have a recession. So if you think about that, it’s one of those, can it happen? Yes. Uh, is it likely, you know, remains to be seen.

[00:06:45] Brennan: So it’s not the only thing that would cause us to go into recession and it’s not the only indicator that we would be watching, but certainly interest rates have a big impact on how everyone lives their daily life. But if you’re an investor out there who has, you know, 40, 50% of your money in the bond market, it means that over the next couple of years, you’re going to get more interest or more payments out of those bonds.

[00:07:09] Brennan: And if you have savings and checking account dollars and CDs and things like that, you will earn more on those as these interest rate environments rise.

[00:07:19] Ashley: The Ukrainian conflict is still ongoing and fluid. Americans are feeling the impacts when it comes to things like oil prices and gas, but what other implications for US-based investors does that have?

[00:07:30] Brennan: Yeah. You know, the Ukrainian crisis is, is certainly first and foremost, it’s a humanitarian crisis and feel terrible for, for everyone over there. Um, but I think it’s, it’s hanging a cloud over any international investment, whether it has direct exposure to Ukraine and Russia or not. And a lot of that is because the majority of Europe gets its oil from Russia.

[00:07:52] Brennan: And that’s that’s one of the major issues is we’ve had this huge spike in oil over there, which has really caused, uh, global shock when it comes to oil. So if, if you’re a US-based investor, you know, we still have a small percentage of our portfolios invested in international equities. It doesn’t mean that the companies are bad.

[00:08:11] Brennan: It doesn’t mean that, you know, we absolutely are going to exit them. We’re certainly not the kind of firm that looks at this situation and said that. Gosh, this is a buying opportunity. We’re very, very cautious when it comes to our international investments. But I think the whole war is kind of just having this overhanging cloud on any investment that has the title of international.

[00:08:33] Brennan: And, and one of the other things is it’s causing it’s causing all of their currency to be weaker against our US dollar, which also makes it so that, you know, it’s less attractive of an investment, but, you know, hopefully god willing, that thing ends at some point. Um, you know, and then, you know, whether or not Europe falls into a recession with kind of the rest of the world and if the US follows that as remained to be seen, uh, but something, something certainly needs to happen over there because especially Europeans are really, really feeling how that Ukrainian conflict is affecting them in their everyday lives. Even if they’re not directly involved with the conflict.

[00:09:08] Ashley: For investors in distribution mode or our retirees, what are some things they need to consider given what we’ve talked about today? And what are areas they can be more aggressive on, and what areas of the market should they be positioned maybe more defensively?

[00:09:22] Brennan: So this leads back to one, of Mueller Financial Services’ founding principles, and that’s that every investor and especially retirees should have a financial plan. It’s the cornerstone of what we do. A financial plan is a blueprint for how you’re going to accomplish your goals and what you’re going to need in order to accomplish those.

[00:09:42] Brennan: So I bring it back to, you know, the retirees are the ones that are living out those blueprints, right? They’ve they’ve built the house and they’re actually living. And sure you’re going to make some adjustments along the way, but certainly there’s things that they need to consider. And the number one is how much actual cash do you have for your distributions that you need when you get into retirement, it’s a cashflow game.

[00:10:03] Brennan: And so if we have a down place and your bond investments are down and your equities are down, How good of a job did your investment manager do setting aside six months, eight months, maybe even a year in cash. We always do that for our clients. We also then recommend that they hold another 3, 6, 8 months of cash in their pocket books, so that no matter what happens in these stock and bond markets, you know, we can ride out at least a year, sometimes a year and a half or even two.

[00:10:32] Brennan: Without ever, ever having to sell anything when it’s down. And that’s, that’s the important thing is stick to your plan, stick to what is, you know, your number that you need try to not be over, you know, overexuberant in, in your spending. When we have these down markets, even if you know, you have something looks like it’s on sale.

[00:10:51] Brennan: You had budgeted $50,000 for a new boat, for instance, and yeah, but look at this shiny one over here is $85,000. Well, that’s pretty far out of your budget range, you know? So those investors in distribution mode, when things get a little Rocky, when things get a little tough, we bring them back to, this is what we plan for.

[00:11:08] Brennan: You said that this was a very sustainable number for you. Let’s just stick with that. During these rough times, we’ve got the cash set aside. Things will come back. We have good reason for that, but, you know, actually it, it really just, uh, stresses the importance of having that. Sticking to it, having those backup buckets.

[00:11:25] Brennan: Um, and then if you have extra cash, truly extra cash above and beyond the reserves, then you can be a little aggressive with that. You know, you can say, okay, the, the US market is having a 15, 20% pullback right now. I’m going to take my excess above and beyond even safe reserve cash and put that, put that to work in the market because then you’ll see, you know, hopefully good returns over the long run.

[00:11:47] Brennan: If you, if you do that, the old adage is. You know, buy low and sell high. So read a little bit of a low point right now, but for certainly for the investors that we work with here at Mueller financial Services, we’ve done a really good job of sticking to their plan and making sure they have their cash on hand.

[00:12:02] Ashley: Well, thank you Brennan so much for your time. And thanks for joining the podcast today.

[00:12:06] Ashley: And thank you for listening. If you’re interested to learn more about investing and retiring in a post-COVID world or about Mueller Financial Services in general, visit www.muellerfinancialsolutions.com. You can also follow the Firm on LinkedIn at Mueller Financial Services, Inc. for more firm updates, insights, and upcoming events.

[00:12:25] Ashley: Securities offered through LPL Financial. Member FINRA / SIPC. Investment advice offered through IHT Wealth Management, a registered investment advisor. IHT Wealth Management and Mueller Financial Services, Inc. are separate entities from LPL Financial.

[00:12:43] Ashley: The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.

[00:12:58] Ashley: Bonds are subject to marketed interest rate risk if sold prior to maturity. The economic forecast set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

Podcast, Retirement, Investment