Stock Talk - Slowing (fast) but Growing Bidenomics Mirage?

Episode Date: February 14, 2025

What most financial media outlets either don’t know or won’t tell you: The American economy is slowing rapidly after the holiday-driven consumer boom, and I dive into the real data—beyond the short-term government reports—to explain why. We’ll look at how job growth has been overstated, where the real hiring has been happening, and why government employment trends matter for investors. I also discuss how policy shifts from the new administration—such as government layoffs, tariffs, and immigration changes—are creating short-term economic uncertainty that markets don’t like. Plus, I’ll show you the real-time financial data I’m watching and explain what it means for stocks, bonds, and economic growth in 2025. If you want an investor’s perspective on what’s really happening and what to watch next, this video is for you.   #marketupdate #americaneconomy #jobgrowth #governmentemployment   About Chris Perras, CFA®, CLU®, ChFC®, Chief Investment Officer: As CIO, Chris is the lead investment strategist and director of research at Oak Harvest Financial Group. Chris develops the firm's core market outlook, putting his decades of experience and expertise to work for our clients. He hosts Oak Harvest's podcast, "Stock Talk," available on the website with new episodes each week. He completed his undergraduate studies at Georgia Tech, and went on to obtain an MBA from the Harvard Business School. Driven by a desire to maximize his knowledge and skill set, he acquired financial planning and investment management qualifications, becoming a Chartered Life Underwriter (CLU®), a Chartered Financial Consultant (ChFC®), and a Chartered Financial Analyst (CFA®).   Stock Talk is a weekly vlog/podcast dedicated to discussing the Oak Harvest Financial Group Investment Team's perspective on what's happening in the market. Hosted by Chief Investment Officer Chris Perras, each episode brings you our views on stocks, the market, and the economy — with a little education thrown in for good measure. Listen each week and help stay connected to your money!   Do you need a retirement plan that goes beyond allocating funds to truly fit your needs? We can help you create a retirement life plan customized for your retirement vision and legacy. Call us at 877-896-0040 @or fill out this form for a free consultation: https://click2retire.com/Connect   Important disclosures: Content of Oak Harvest podcasts expresses the views of the speaker and is for informational purposes only. Oak Harvest believes that any data, articles, or information cited are reliable at the time of creation, but does not warrant any information contained herein to be correct, complete, accurate, or timely. References to third-party analysts should not be seen as an endorsement of their views or recommendations, and you should do your own research before investing. The views and opinions expressed herein may change without notice. Strategies and ideas discussed may not be right for you, and nothing in this podcast constitutes personalized investment, tax or legal advice, or an offer or solicitation to buy or sell securities. Indexes such as the S&P 500 are not available for direct investment and your investment results may differ when compared to an index. Any specific portfolio actions or strategies discussed will not apply to all client portfolios. Investing involves the risk of loss, and past performance is not indicative of future results.

Investors, I'm here to break some news most on financial TV or in the media don't know or don't want to tell you. What's that? That's America economy is slowing, which is normal after the consumer-led holiday season. However, it's slowing pretty rapidly. As usual, I'll give you a little real-time data as well as warn investors away from focusing on or even believing the short-term government data releases that's so many in the media, most of whom have never actually managed money, but rather, reported on it seem to like to focus on. The data is pretty straightforward. Whether you believed in Bidenomics and the prior administration's horribly named IRA spending program nearing $900 billion, it provided a short-term economic stimulus in 2003 and the first half of 2024 in front of the presidential election. While grossly overstated, I'll come back to the real data in a bit. The job market has been relatively good and stable. The unemployment rate has

stayed near historic lows over the last two years. While every job counts for our economy, and we would rather have more people employed than less, the types of jobs and the employers matter significantly in the economy's strength. Looking at the data behind the data, you know, the real data that comes out 12 to 18 months after all the revisions and government adjustments,

you'll find that the vast majority of jobs over the last two years have been in three to four areas that are not really private sector dependent, and instead, mostly subsidized by taxpayers. The biggest job gains outside of the service and travel area and leisure sector have come from government hiring, education, which is also taxpayer funded and healthcare,

which for the most part is also taxpayer reliant as Medicare and Medicaid spending drives so much of our nationals health care demand and costs. We've discussed for the better part of 15 months the overstatement of the strength of the US job market by the Department of Labor. Once again, we'll reference the tremendous work that Hedge Eye is done on this subject.

First, job openings, released in the widely discussed Joltz report, have been revised lower 14 out of the last 17 months. Take a look at the chart on that weakening trend. That while, while the short-term data, that 221,000 job opening increase showed is a beat on, yep, you guessed it, government job openings, which as investors know, are taxpayer funded

and create little actual long-term economic output. Of the 221,000 increase, 179,000 or 81% were government openings. We really need more government employees for what? Here's the data on the explosion in government job openings and rapidly declining strength in the private sector openings. Over the last three years of the prior administration's term, the month three payroll revisions have been in 2022 from 441,000 to 380,

2020, 231, to 217, in 2024, from 186,000, to 166,000 per month, with 2024 still having more time to be revised lower. Followers know that I was no fan of Bidemics, however, as an investor, our job is to ascertain if these policies would help or hurt the economy in stocks. In late 2022, our team thought that even though they were more debt-fueled policies, that they would actually help overall economic growth and earnings in 2023 and 24 and drive stock prices, material higher as it happened. Currently, the Trump administration is looking to reverse a lot of these policies of overhiring

at the federal government level, as well as allowing open borders. While I might agree with these policies in principle, an investor's job is to determine what, if any, effect these might have on our economy and on the financial markets. Currently, the pace and randomness of the policies coming out of DC are creating huge, short-term economic uncertainty. Remember, investors, our economy is 72 to 75% service. And whether you think it or not, our federal government is widely overstaffed, those employees earn a wage, pay mortgages, buy food, goods and services, and yes, recycle these taxpayer dollars back into the economy. The rapid firing of government employees,

while long-term saving taxpayer money, short-term, takes consumers out of the market for new purchases. At the margin, they will hurt economic growth, growth that was already slowing and missing estimates due to the trailing off of the IRA fiscal impulse. At the same time, the new administration has changed the tariff rules on two consecutive Fridays. Investors in financial markets hate policy uncertainty. Financial markets hate friction, whether caused by actual government actions like higher regulation or higher taxes or just public brainstorming. Investors, tariffs are friction.

Financial markets hate friction. tariffs or taxes, financial markets and your stocks hate higher taxes. Right now, whether you like the policies coming out of D.C. or not, the markets see those policies, be they tariffs, doge, government employee firings, and even deportation as friction and are having a tough time digesting them as they see them all lowering economic growth and hurting, not helping revenue earnings of most companies. As always, where we can, we come back to real-time data in the financial market. if we can find it. Long time Oak Harbis followers know I love to watch real-time, real interest rates.

In real-time, real break-even inflation charts, the two components of nominal treasury yields. Here's the one for two-year real-time real interest rates. Higher for mid-2020 on the back of the fiscal stimulus of the IRA spending and maybe some AI spending in the private sector, and down into the right slowing trends since last summer, with that downside slowing picking up, since late December of last year, post-election, when the concerns over policies on tariffs, government employment cutbacks, and deportations have taken center stage.

Whether you like these policies or not, they are anti-growth in the short term, and the bond market sees it and the stock markets have started to wobble on their own concerns. Real interest rates are now down and to the right, which means growing but slowing down. It means the risk of a Fed making a policy mistake

by staying too tight for too long is increasing, To me, as well as the markets we are watching behind the scenes, the economic risks are not of rising inflation, but rather lower growth rates caused by two things. First, the runoff of the Biden spending from 2023 and 2024, which created a bit of a sugar high, right as the second one, Trump administration implements fiscally restrictive policies like mass government firings and deportations. Remember, investors, this is not a commentary on whether I agree with any of these policies are not, but rather, their effects on the economy and on the financial markets. As we previously

mentioned, soft landings in the economy do not guarantee no volatility. This time around, the Trump administration seems to be going for the early shock and awe which financial markets do not relish. They're attacking tariffs, immigration, and government employment and waste, hard from the first week. The economic surprise index is slowing and an already fragile consumer confidence due to higher inflation under Biden is already stunting economic activity. Seasonally, February does tend to have lower returns, higher volatility month for stocks, particularly the first year of a presidential term, and maybe the tariff actions and the doge firings are this year's excuse. I don't know, but take a look at the historic data of the monthly seasonality from Steve Settmeyer's data group

at Bank America's Securities. Regardless of the path for the economy and the financial markets in 2025, the investment team here at Oak Carbass Financial Group will be here, crewing the ship and adjusting our models and tools as we can. We expect 2025 to be a very active year for active stock management. Investors, until next week, have a blessed weekend, and have a happy Valentine's Day. All content contained with an Oak Harvest podcast expresses the views of the speaker and is for informational purposes only. It is based on information believed to be reliable when created,

but any cited data, indicators, statistics, or other sources are not guaranteed. The views and opinions expressed herein may change without notice. Strategies and ideas discussed may not be right for you, and nothing in this podcast should be considered as personalized investment, tax or legal advice, or an offer or solicitation to buy or sell securities. Indexes such as the S&P 500 are not available for direct investment, and your investment results may differ when compared to an index. Specific portfolio actions or strategies discussed will not apply to all client portfolios.

Investing involves the risk of loss, and past performance is not indicative of future results.