It’s about that time again! Jackson and Noah recently sat down with Dave to ask some updated questions about the market, as well as other insights.
NW: The Fed just raised rates for the first time in over three years and signaled another hike could come before year-end. How do you think this could impact the market?
DM: The fact that the Fed raised rates last week probably won’t impact the markets significantly on its own. Markets are very forward-looking, and the biggest reactions usually happen when there is a surprise. If there’s an unexpected rate increase, a geopolitical event, or something else the market wasn’t anticipating, that’s when you tend to see larger movements. As long as the markets can see what’s on the horizon, they can gradually make adjustments. That said, the Fed has historically had a difficult time predicting exactly how many rate increases will ultimately be necessary, so what actually happens could look different from what is currently being projected. Overall, I think the recent increase is largely priced into the market. If there aren’t major surprises and the underlying fundamentals remain strong, I think the markets can continue to handle it.
JB: We’ve seen some major AI CEOs discussing potential risks and harms associated with AI. As we continue to see investments in AI grow, and as AI remains a major driver of market growth, do these concerns change how you think about long-term AI investment?
DM: I’m not overly concerned about the risks and potential harms surrounding AI from an investment perspective. There are certainly going to be negative things that happen with AI, and there may be moments where we look at something that happened and wonder how it was even possible. We’ve also seen some high-level executives make very specific predictions about AI, including statements about a percentage chance of AI causing human extinction within a certain number of years. I think statements like that are often designed, at least in part, to draw attention and raise awareness around the issue. What is clear is that AI is advancing incredibly quickly. The progress we’re seeing today, whether in solving mathematical problems, processing information, or developing new capabilities, is happening much faster than it was even a few months ago.
I don’t think the recent warnings will significantly slow AI investment or development. I do think some level of oversight is appropriate, but ideally that oversight comes from people who truly understand the technology. The challenge is making sure we create thoughtful oversight rather than simply adding regulation without a strong understanding of how AI actually works.
NW: With people wanting to retire earlier and earlier, what would you say is a good blueprint or structure for someone to follow, whether they want to retire earlier or later?
DM: Thankfully, there isn’t one hard-and-fast formula for how much money someone needs to retire.
A lot of people come into the office saying they’ve read that they need $2 million or $3 million to retire, and they’re worried they haven’t saved enough. But retirement is heavily dependent on your individual standard of living. There isn’t a magic number everyone has to reach. What matters more is understanding your resources and your expenses. Reducing consumer debt and debt tied to depreciating assets before retirement can certainly help. You also have to consider income sources such as pensions. A lot of people underestimate how valuable a pension can be. I’ve had people come in with a pension and a relatively modest 401(k) balance who assume they’re not in a strong position. Once we complete the retirement analysis, however, their situation can look very different because of the value of that guaranteed pension income. So there’s no universal formula. You have to really drill down into your standard of living, expenses, income sources, and assets. Obviously, the earlier you want to retire, the more resources you typically need, whether those resources come from pensions, retirement accounts, investments, or other income sources.
JB: A major concern for most people is rising inflation. With increased gas prices and record diesel prices driving up the cost of everything, where do you see inflation headed over the next few months?
DM: That’s where I’d have to pull out the crystal ball a little bit. There are a lot of variables that could influence inflation over the next few months.
We still have geopolitical uncertainty, including the ongoing war, along with other economic and political events that could affect inflation and interest rates in either direction. There are simply a number of things happening that are difficult to predict or control. What we do know is that inflation has remained a problem longer than many originally expected. After the large amount of money that was injected into the economy during COVID, there were predictions that inflation could become an issue. Initially, inflation was described as “transitory,” meaning it was expected to be temporary. Instead, inflation remained elevated for much longer than anticipated. We’re now seeing the money supply and other economic factors begin moving back toward more normal levels, but inflation still has not fully returned to the roughly 2% levels we were accustomed to before COVID. So over the next few months, there are too many variables to confidently predict exactly where inflation will go, but it remains something investors and consumers should continue watching closely.
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