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The Nasdaq and S&P 500 pushed higher to a record close. Amazon, Microsoft and Apple also touched record levels. Payne Capital Management Senior Wealth Advisor Courtney (Dominguez) Garcia, CFP® joined the program to make the case for bonds. “If interest rates do eventually come down, that is going to be a boost for the stock market so you want to make sure you stay invested here, especially in bonds.” said Garcia. “There’s so much cash on the sidelines here and everybody is happy paying that five percent, but the second that interest rates go down, those are going to rate downwards and you’re going to see that safe money go into bonds.” Vital Knowledge founder Adam Crisafulli points out forces are pushing short-term bond yields down and long-term yields higher. “What’s pushing long-term yields higher are the fiscal dynamics in the United States,” said Crisafulli, “which is going to be the dominant theme towards the end of this year and all throughout 2025.”

Transcript

And joining us now is Payne Capital Management Senior Wealth Advisor and CNBC contributor, Courtney Garcia and Vital Knowledge founder, Adam Crisafulli. Guys, good afternoon. Courtney. After this huge first half, we had for the S&P still new highs. Give me your take on this market and why you see opportunity in Europe and bonds. Yeah. And I mean, we've been a great market this year. And really anybody who's participated in that, you're really taking advantage despite the fact there's so much cash on the sidelines right now. So a lot of people are not taking advantage of that right now. But I think the idea is inflation has been the big key in the stock markets. And we continue to get good data recently with whether it's the PCE numbers that came out on Friday, whether it was Powell speaking today. But it looks like inflation is still trending in the right direction, that there's now almost a 70% chance that the federal cut as soon as September, about a 95% chance they will cut sometime. Before December and if interest rates do eventually come down, that is gonna additionally be a boost for the stock markets. So you wanna make sure that you're staying invested here and especially bonds, what you mentioned, there's so much cash is on the sidelines here and everybody's very happy with that paying 5%. But the second that interest rates go down, those are going to rate downwards and you're gonna save money going back into bonds and especially things like munis right now, which we are in a high tax state like New York or California. Those tax equivalent yield right now are very attractive. You wanna get in there now before rates go down, and that's something we're constantly talking to our clients about. Yeah, New Jersey 2 for sure. Well, Speaking of fixed income, Adam, you point out that forces are pushing short term bond yields down, long term yields higher. What should investors do with that? Yeah. So you've definitely seen on on the economic front, you are seeing disinflation. You are seeing the Fed rhetorically prepare the market for a rate cut. It looks increasingly likely they're going to move at the September meeting. But I think upsetting that and what's pushing longer yields higher is the fiscal dynamics in the United States, you know, which is really going to be, I think the dominant macro theme. Towards the end of this year and all throughout 2025 where Congress and Washington will have to make some huge decisions about the whether or not to extend the Trump tax cuts. Now you're already at a very unsustainable fiscal directory. This was something how was asked about today and talked a lot about. He said the absolute level of debt right now is OK, the market can can handle that. But the trajectory, the deficits are extremely elevated and this is at a full employment economy. And that assumes that Trump cuts will expire as planned next year and that's looking. Increasingly unlikely so, and that's creating this curve steepening dynamic where the Fed is pinning short end yields lower, but long end yields are facing upside pressure because of fiscal dynamics.

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