Ep 289: Who (or what) is "The Market", anyway?

Hello everybody.

This episode is coming out in mid to late November 2026.

The midterm elections are over and very thankfully we do not have to see any more of those political commercials.

I don't know about you, but that's a win for me.

But the markets have been up and down.

Your stock market portfolios, your investment portfolios may have had some ups, may have had some downs recently.

Today we're going to talk about some things that you might want to be thinking about, you might want to be doing.

And we're also going to have an interesting chat with our firm's chief investment officer about what the quote markets are.

When people say the markets are up or the markets are down, what are they really talking about?

All right.

I hope that you enjoy this episode.

Welcome to the weekly Wealth Podcast.

I am certified financial planner David Chudick.

This podcast and my wealth management practice are both designed to help the mass affluent to live better lives by how they handle their money.

We talk about financial strategies, prosperous mindsets, and simply how to build true wealth.

So come on and let's enjoy this journey together.

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Welcome to this week's episode.

I wanted to start off and talk about some of the major market and index swings that we've seen over the last few weeks.

So the big one was November 5th.

The S&P 500 was down 4.36% in one day.

The Dow Jones Industrial Average was down 3.44 in a day and the Nasdaq Composite was down 5.52.

Now, November 4th, the S&P was up 1.58%, the Dow was up 3.03 and the Nasdaq was up 1.44.

Now, after the big November 5th sell off and decline on November 9th, S&P was up 2.34, Dow was up 2.15 and the Nasdaq was up 2.74.

So you don't need to memorize those numbers, but I say those to tell you that the markets have been up and down and what does that mean?

What are the markets?

What do those numbers represent and how do they affect you?

So that's going to be a big topic of today's episode.

Let's first jump into listen to an interview that I did with our firm's chief investment officer, Greg Towner, as we talk about the quote markets.

All right, so part of this week's podcast, we have our firm's chief investment officer, Greg Towner with us.

And whenever Greg Towner is in the room, I am at best going to be the second smartest guy in the room, but probably not even that smart.

But I wanted to talk with Greg about the concept, concept of the market.

So, Greg, when I watch CNBC or another channel and they say the markets were up or the markets were down, like last week they were down three and a half percent, what does that mean?

And how should an investor be thinking about the quote markets?

Yeah, that always is pretty interesting.

And I think, David, really it kind of evolves a little bit over time depending on what the media's message is or what investors are hearing.

So what I mean by that is we saw for years that the tech stocks, let's call it the Nasdaq, was the leader.

So a lot of times people would call that the market.

Oh, the market was up this much when really that was just really aggressive tech stocks.

Then people started talking about, oh, the market's up.

And they were focusing on the S&P 500, but that was really being driven by the Mag 7.

And now here, just recently, people are talking about the Dow Jones again going back to the old school market because that's doing better.

So I think media and investors pick and choose what the market is.

But what we're trying to do is build a portfolio of securities that don't necessarily look like at the market, but offer market like returns, ideally with a little bit less volatility.

Now, is it possible theoretically, when the markets are down and again, you saw the CNBC said the markets were down a couple points.

Could somebody's individual portfolio had been up that day.

Right.

Is it possible?

I think people think their portfolios are going to mirror the markets.

Is that what happens or is that not in reality what happens all of the time?

Oh, no, definitely not in any given day.

We don't focus on the short term, but can't help but see what our strategies are doing on given days and depending on the strategy, like for example, recently our dividend strategies have done exceptionally well and there's been many days when those portfolios were up when the market, market and tech stocks were down.

And admittedly there'll be days when the reverse happens as well.

So now that it's you're definitely going to have day to day fluctuations, maybe even month to month fluctuations at points in time.

Now in, in some of the portfolios that you manage, or even portfolios that you don't manage, but they are well structured portfolios.

What are some, and I'm going to just use the term thing like broadly things that people might be invested in that have literally nothing to do with the stock markets.

Let me take it a couple of different ways.

So first back to what people call the stock market.

They're almost always focusing on those big large cap US Stocks.

Right.

If you look at the different asset classes this year and we'll get into more of them, the ones, the two that have done the best year to date are small cap US stocks, so still us but small cap, which I guarantee the media is not focusing on those much.

And then international stock markets, so those are two areas that are still stocks but offer diversification are actually the two leaders.

But beyond that, a well rounded portfolio, depending on the client and depending on their time horizon, might include some bonds, might include some commodities, different types of real estate, there's different securities at any point in time that you can own, natural resource type investments that you really want, things that behave a little bit differently.

If everything goes up at the same time, it's probably going to go down at the same time.

And that's not actually diversified, that's just owning more of similar type behaving securities.

And what is your goal when you're designing portfolios?

What do we want our clients to do or like from an emotional standpoint, what is your goal with how you're designing portfolios?

Yeah, we take a number of steps to try to find ways to reduce the volatility of the portfolio.

That's certainly not to imply that they won't go down.

Of course their stock portfolios largely they're going to have volatility.

But if we can create a portfolio that that has less volatility than again the market, we think it's more likely that the investor is going to be able to stick with that investment through good times and bad and that I love to say that the perfect portfolio doesn't exist.

But what it is, the one that the investor can actually stick with.

Right.

To get the compounding that eventually comes on the other side of market volatility.

That is the perfect portfolio.

And that can change over time.

Right.

We've had a decade and more of what it seems like the markets are just going up and they have very small downturns when there is some volatility.

And maybe your portfolio or my portfolio drops by a fairly reasonable amount of money over the course of a day or weeks.

What do you think are some things that we might be thinking about or some actions that you might want to talk to your financial advisor about when there are some rocky periods in the markets?

Because last week was rough.

We had some pretty.

We had a pretty big dip.

Yeah.

A couple things.

Number one, we always encourage investors to try to avoid the noise.

Don't focus on the headlines, don't look at your accounts much.

But we realize they're still going to do that some.

But have an open and honest conversation with your advisor because risk tolerances for almost everybody change over time.

Right.

Think about when you were, I don't know, in your early to mid-30s, you were probably more aggressive in your investing.

You had a long time horizon.

You probably didn't have all that much money invested.

And now take your typical client that's maybe, I don't know, 55 to 65.

They're in or near retirement.

They have some real money at stake here now.

It's only natural to feel that those bumps much more now.

And so to have an open conversation about what is the appropriate asset allocation now, not as a market timing tool, but as a, hey, I'm at a different point in my life type of conversation.

Yeah.

And I think it's really easy for anybody to say, yes, I'm very risky when the market's growing up.

But when you get that gut check and there's a little bit of a dip and then all of a sudden it is a little bit tough to say that.

That you have a high risk tolerance there.

Yeah.

So I think those are some thinking points for when the market does have some volatility.

Elections sometimes just create some differences in the markets, different geopolitical events.

And oftentimes that that may not mean that the markets are unhealthy.

It just means that there is some.

Some uncertainty.

Right.

Yeah.

We've shown a lot of different charts that show that as 612 months after any kind of election, they're up under any scenario of who won what offices.

Right.

Historically.

Now, that doesn't guarantee they're going to be up the next three, six, 12 months.

But just using history, it really didn't matter who won whatever offices.

And the reality is there's far more important things that impact the stocks every day.

Are we going to have a recession in the next 12 months?

That would be hugely important for any kind of volatility or correction we might have.

Obviously right now we're dealing with a lot of is AI going to keep growing gangbusters or is it starting to slow down?

That is a huge story.

Inflation, interest rates, all these things are far more important for the stock market than say, who won or didn't win any given election.

Yeah.

And one thing that a lot of people ask me, and it's always like an all or nothing people say, should I be invested in AI?

And the probable answer is probably yes to some extent.

But not all of your money should be in AI.

So I think that a great asset allocation will give it, give you exposure to different sectors.

But no, don't put all your money in AI.

But I've heard people, they ask those all or nothing questions and I think a well designed portfolio is definitely going to have some diversification for sure.

Excellent, Greg.

I appreciate your time and I appreciate your expertise.

I wanted, I believe that how we handle our money should positively impact our lives and the lives of those around us.

And, and one of the things that negatively influences our lives with regard to money is money stress.

So some of the ways that we can manage money stress is by having our money invested in a way that makes sense for us individually.

So maybe your money needs to be invested differently than mine.

Actually, I'm sure it is because we're different people.

But when you get your money invested appropriately for you, then you have that sleep at night factor.

Appreciate your time and we'll get to, we'll get you on the podcast again.

All right, So I hope that you enjoyed that talk with Greg Towner.

And Greg made a point and let's put some numbers behind it.

He said when the people talked about the S P being up, a lot of it was being driven by this magnificent seven or the Mag seven.

And here's how real that is.

As of the end Of September, the 10 biggest companies in the S P 500 made up about 39% of the entire index.

The single largest company was over 8% by itself 10 years ago.

At the end of 2015, the top 10 were only about 19%.

When people say just buy an index fund because they're diversified, that diversified index fund that your brother in law keeps bragging about roughly 39 cents on every dollar goes into 10 companies and most of them are writing the same story.

AI Tech, mega cap growth.

That's why a tech sell off shows up on tv.

As the quote market is down, the index is top heavy.

So when the top wobbles, the whole headline wobbles.

And that ties into Greg's other line, which I loved.

If everything in your portfolio goes up at the same time, it's probably going to go down at the same time.

That's not diversification, that's just owning more of the same thing with different ticker symbols.

So your quick gut check, if you looked at your account last week and it moved almost exactly like the headline, it's worth asking whether you are as diversified as you think you are.

And if you're not sure, go to www.weeklywealthpodcast.com Vision Schedule a 10 or 15 minute vision.

Call with me and let's talk about it.

Alright, now let's talk about some headline math, right?

Because we live in a world with news channels and with social media channels and you'll see things that are horrifying, right?

So little headline math because the financial media is in the business of keeping you watching.

And what keeps you watching more than a scary number, right?

So The Dow plunges 700 points, right?

That sounds like the end of the world.

Like we should sell all of our securities and dig a hole and put our money in the back because the sky is falling.

Right?

But points mean nothing without knowing where you started.

The Dow is in the tens of thousands now, so a 700 point day is roughly one and a half percent move.

Now that's not fun.

I don't love that.

But it's not the apocalypse.

Same with the S and P. It closed that Friday around 7377.

So a 100 point drop sounds big, right?

But it's 1.4%.

So when you see those headlines, run it through these questions.

What's the percentage, not the points?

Then ask it, which index is it?

And is that what I actually own?

And then ask number three and does this affect money I need in the next couple years or money that has decades to recover?

Because here's what you don't hear the talking heads talk about.

As you get wealthier, the percentages stay the same, but the dollar amount gets scarier.

So a 2.7% dip on a $50,000 account is 1300 $50.

Yes, that's annoying.

Yes.

I wouldn't like that to happen.

But on a $2 million account that same 2.7% diplomacy is a $54,000 car.

That's a really nice car, and that could be gone in a day.

Right?

So same percentage, totally different gut reaction.

That's exactly what Greg was talking about when he said, once you're near retirement with real money at stake, it's only natural to feel those bumps a lot more.

But here's the key phrase.

So on paper, you didn't actually lose $54,000 unless you sell.

Which brings us to the real question, what money might need to sell Now, Greg also said that volatility is a good time to revisit your asset allocation, not as market timing, but as, hey, I'm at a different point of my life conversation.

And I could not agree more with Greg on that one.

So let me show you how we actually answer that question, and that's what's appropriate for me.

So we want to have three buckets, right?

You want to have your liquidity bucket.

This is money that you might need soon.

This is your emergency fund.

This is the next couple of years.

Anything that income won't cover the roof you know is coming.

The tuition bill, the car bill.

Hey, on my house, we had a tree fall down, and there went $3,500 to cut the tree down and to get it cleaned up.

Things just happen in life, and you need cash to pay for it.

So that money should not be subject to market fluctuations.

That money's job is not to grow.

Its job is to be there.

Now, depending on who you are, you might feel more comfortable having a year or two years worth of cash in the bank, maybe in a money market or some other sort of cash equivalent security, right?

So if you.

What many of my clients feel is, yes, they have some money that's exposed to the ups and downs of the market, but they're okay because they have a year or two years worth of living expenses sitting there that they know can't go down.

And if the market has its inevitable ups and downs, they know that they have a year or two worth of money just sitting there to pay their expenses.

So think about that.

Now you have the longevity money.

This is the money that funds the rest of your life, and that's retirement and the decades after it.

This is where your growth investments live, because this money has time to ride up the ups and the downs.

And then legacy money, this is what you'll pass on, the kids, grandkids, charity.

And it often has the longest time horizon of all.

So here's why this matters most.

During volatility A market drop only hurts money.

You have to sell during the drop.

If your liquidity bucket is full, you don't have to sell anything.

Your stocks get to sit there and recover on their own schedule, not yours.

So people will ask me, should I be in or out of the market?

That is the wrong question.

It's almost never all or nothing.

The right question is, how much do I need out of the market so the rest of it can stay in?

That's not really an investing question.

That's a financial planning question.

That is a how can you sleep at night question.

So here's your homework.

Count up how many months of planned spending you have sitting in cash in safe short term investments.

If the answer is zero, that's why last week felt terrible.

If the answer is way too much, you might be paying a hidden cost in the growth that you're giving up.

Too much cash is a risk too.

It's just a quieter one.

You notice how expensive everything is getting.

If a lot of your money or some of your money's not growing, at least at the pace of inflation, you are losing purchasing power.

And that is not a great thing.

So the goal is that you have enough cash or cash equivalents, that in a bad year or two, stocks never force your hand.

Where exactly that line sits is different for every person.

And that's what good planning figures out.

Now, business owners, you know I have to bring some value and some value bombs for you almost every episode, right?

So I have a special word for you because you might have the most concentrated portfolio of anybody listening.

And you don't even think of it as a portfolio.

For most owners I work with, the business is the single biggest asset on the balance sheet.

Bigger than their 401k, bigger than the brokerage account, sometimes bigger than everything else combined.

And it doesn't have a ticker symbol.

There's no app to refresh.

Nobody on CNBC is telling you what it was worth yesterday.

That doesn't mean that it isn't moving.

When public markets get shaky, it can affect the people who would eventually actually buy your company.

Private equity groups, strategic buyers and lenders are all players in that deal.

Their appetite and what they're willing to pay can shift even if your revenue didn't change at all.

So two shifts.

If your business is your biggest asset, your investment portfolio probably shouldn't be loaded with the same type of risk.

If you run a tech company and 70% of your brokerage account is AI stocks, that's not diversification, that's doubling down and then two, the part of your business value that you can control isn't the market.

It's things like how independent the business is from you, how predictable your revenue is, and whether the place could run without you for a month.

That's what makes a business sellable in good markets.

And if you want to know where you stand, take the sellability score.

It's free and it shows you how a buyer would see your business today.

Head to www.weeklywealthpodcast.com.

Sellability score.

So here's the last thing, and this one is practical.

Down markets near year end can create a couple of opportunities.

But the window on these opportunities typically close December 31st.

So the first thing you have is tax loss harvesting.

If you have investments in a taxable brokerage account.

So this is not your IRA, this is not your 401k that are below what you paid.

Selling them can lock in a loss.

That loss can offset capital gains plus up to $3,000 of ordinary income in a year and any unused carries forward.

The catch is the wash sale rule.

If you buy the same or substantially identical investment within 30 days before or after the sale, the loss gets disallowed.

So you reinvest in something similar, not identical to stay invested.

And the second thing you can think about is Roth conversions.

So when an account value is down, converting part of the traditional IRA to a Roth means you pay tax on a smaller number then when it recovers, and we hope it will recover, that recovery happens inside of the Roth tax free.

Now, two warnings here.

The converted amount is taxable this year and you cannot undo a conversion anymore.

So this is a run the numbers with your CPA move, not a do it yourself on your phone in the middle of the night on an app move.

Neither of these is about predicting the market.

They're about using the volatility and instead of just enduring it.

So let's bring it home.

The market is whatever the media decides to point the camera at this week.

Your money is something different.

It's your allocation, your buckets, your business, your timeline.

Now some of the portfolios that I work with, they may hold some gold, they may hold some REITs, real estate investment trusts, they may hold some bonds, they may hold some private equity investments.

And these are things that are not sold on the S and P or not sold on the Dow Jones.

So Greg said it best when he said the perfect portfolio is the one that you can actually stick with.

And I'll add this, it's a whole lot easier to stick with it when you know exactly which money has to be there next year and which money gets to ride out the storm.

I believe that how we handle our money should positively impact our lives and the lives of those around us, and money stretch gets in the way of that.

The goal isn't a portfolio that never goes down because that portfolio doesn't really exist.

It's one that lets you sleep at night when it does so.

Two Ways to Take the Next Step if you want an honest look at whether your plan fits you, go to www.weeklywealthpodcast.com vision and book your 20 minute strategy.

Call with me and if you own a business, take the sellability score at www.weeklywealthpodcast.com sellabilityscore to see your business the way a buyer would.

Thanks to Greg Towner for joining us.

And until next episode, I wish everybody a blessed week.

The information presented on this podcast is for general educational purposes only and does not constitute financial investment, legal or tax advice.

Parallel Financial is registered with the U.S. securities and Exchange Commission as a registered investment Advisor.

Registration does not imply a certain level of skill or training, nor does it constitute an endorsement by the sec.

All investing involves risk, including the potential loss of principal.

Please consult a qualified financial professional before making any financial decisions.

And here is your bonus content for this week's episode.

Now, we are getting close to the end of the year and people start thinking about charitable contributions to help them to get some tax deductions this year.

So even with the stock market volatility that we've had recently, if you have some highly appreciated stocks in your portfolio, let's say there's a position that you bought for $10 and now it's worth $100.

If you give that stock away to a qualified charity, a 501C3, you will typically get that $100 tax deduction, not the $10 tax deduction.

Okay?

So work with your accountant, work with your tax preparer, work with your cpa, or work with your financial advisor to see if that fits into your personal financial plan.

But gifting highly appreciated stocks from your taxable brokerage accounts can be an incredible strategy for you before the end of 2026.

All right everybody, that'll do it.

Have a great one.