Interest rate cuts and your personal finances: Wealth!

On today's episode of Wealth!, Host Brad Smith breaks down some of the top stories impacting your personal finances, covering key areas like your portfolio, taxes, housing costs, and savings accounts.

Stocks (^DJI, ^IXIC, ^GSPC) are declining following the August Consumer Price Index (CPI) report, which met expectations but dampened hopes for aggressive interest rate cuts. This data suggests the Federal Reserve is more likely to implement a 25-basis-point cut rather than the 50-basis-point reduction investors were looking for.

Shark Investments managing director Eric Lynch points out that most investors have grown accustomed to low interest rates, unlike the current environment. "There was a pretty good hope that the Fed could cut 50 basis points next week," he explains. However, with services inflation remaining high and core CPI still elevated, Lynch notes, "The Fed can't cut with impunity," leaving many investors disappointed.

Rental prices are climbing nationwide, as a new Redfin report revealed the largest annual jump in rents since April 2022. This trend aligns with the August Consumer Price Index (CPI) data, which showed a persistent elevation in shelter costs.

Tuesday's presidential debate between Vice President Kamala Harris and former President Donald Trump covered a wide range of national issues, but tax policy received little attention. Gordon Law Tax Attorney and CPA Andrew Gordon highlights a key difference in their tax policies: the future of the Tax Cuts and Jobs Act, which took effect in 2018. This act aimed to reduce taxes for Americans, particularly benefiting small businesses through the Qualified Business Income (QBI) deduction. As the act approaches its expiration date, Trump proposes to maintain it and introduce new deductions — while Harris plans to allow the act to expire in 2025.

As the presidential election lies less than two months away, Wall Street is expecting markets to be wrought with more volatility (^VIX). BlackRock US head of thematic and active equity ETFs Jay Jacobs lays out his tips for investors to navigate market uncertainty: "In two areas I would say, one, a lot of investors are still just trying to lock in yield right now. An ETF like BINC (BINC), which is managed by Rick Rieder at BlackRock, is really trying to capture high yield bonds (^TYX, ^TNX, ^FVX), emerging market bonds, collateralized loan obligations and really lock in some of those yields that can be, you know, five, six, almost 7%."

All eyes are on the Federal Reserve as it kicks off its interest rate easing cycle at its September meeting. Bankrate senior economic analyst Mark Hamrick notes that the higher interest environment is a "tremendous opportunity to prioritize savings." As the Fed will likely initiate a 25-basis-point cut, he believes this is good news since bond yields will come down at a slower pace than if the Fed were to move forward with a 50-basis-point cut. Hamrick also encourages Americans to take advantage of a high-yield savings account to take advantage of a 5% annual yield.

This post was written by Melanie Riehl

Video transcript

Welcome to wealth everyone.

I'm Brad Smith and this is Yahoo Finance's guide to building your financial footprint.

Our community of experts will give you the resources, tools, tips and tricks that you need to grow your money.

Hey, on today's show inflation, we'll be talking about where prices rose and actually where they fell the most last month as well and the effects that it may have had on your wallet, purse, pocketbook, wherever you carry money or cash.

And a new group from realtor.com says October is this year's best time to buy a house.

We'll talk about where mortgage rates are heading.

Plus tax time.

Vice President Harris and former President Trump participated in their first maybe only debate last night.

We're gonna dig into each candidate's tax policies and what they'll mean to next year's filing.

But first, August's consumer price index numbers, they are out this morning coming in mostly in line with expectations.

But if you dive deeper into the data, you'll see that inflation is still sticky in some areas while prices are going down in others.

So where should you expect to pay a little bit more or maybe a little less at the check out these days.

Our own Molly Morehead joins us now to tell us more.

Molly.

Let's start with where prices are rising.

Let's get the bad news out of the way first here.

What are we seeing?

Hey, Brad, um The one that jumped out at me was the cost of eating out.

So going to a restaurant is a bigger splurge uh than it's been in the past that uh index rose 4%.

Uh even vending machine prices, we're, we're paying more for candy bars than we were a year ago.

That's up.

And overall groceries are easing the, the cost of eating at home.

But certain foods are up.

Eggs, which you remember surged a lot in the pandemic.

They're up 28% from a year ago.

Uh And then another big one that just is not letting up is car insurance.

Everybody in every part of the country is feeling this.

It was the, the index was closer to 20% earlier this year, but it's still clocking in at 16 and 16.5% right now.

Ok.

So not as bad as it was, but still very high right now.

It's 6.5% as you mentioned there.

Uh Where are we also seeing prices fall right now?

Some, some reprieve or some retreat in prices.

Uh So a little bit of good news, although that when something is down, it doesn't mean the price is falling it just means it's not growing as fast and where we're seeing that is in use carss, those were also really high in the pandemic.

There.

Uh there that price growth is slowing 10% compared to last year, over 10%.

And then uh cell phones, which everybody likes to get a new cell phone when the new one comes out.

So that, that index is down 9.3% from last year.

Uh And those are significant, you know, those are common purchases.

We're all kind of shopping for cars and trucks and phones a lot of the time and that's getting better.

All right, Molly Moorhead with the breakdown there.

Thanks so much for looking into the data here and pulling out a few nuggets for us.

We appreciate it.

Great to see you.

Good to see you too.

Well, us stocks they are falling today.

The dow right now is off more than 600 points and the S and P 500 NASDAQ are each off on a percentage basis by more than 1% right now.

The sell off it's coming after August CP.

I report fueled bets that the Federal Reserve will cut by 25 basis points instead of 50 basis points here with more on the market moves.

We've got Eric Lynch, managing director at Shariff Investments.

Eric, thanks for hopping on taking the time here with us, help us make sense of this.

It seemed like 25 basis points was largely already priced in.

So why does it seem that the markets are upset at the possibility that, uh, and the probability certainly shifting towards that reality of a 25 basis point cut?

Yeah.

Good to be here, Brad.

Thank you.

So, yeah, I, you know, I think this is a collective giant recency bias in the last, you know, uh, couple decades of low interest rates.

And so, you know, most investors are just so used to rates being lower than where they are today.

Uh, and given some of the disappointing economic prints from the last couple of months, there was a, you know, pretty good hope that the FED could very well cut 50 basis points next week with the fact that, you know, the services, uh, you know, index or pricing was up over your 4.9% in the CP I print IE core CP I is still very sticky.

The FED can't cut with impunity.

And so I think investors are disappointed today.

And so with that in mind, where would investors be apt to really place their attention when it comes to the pathway of rate cuts?

Yeah.

Well, I think, I, I think that's a good question although, you know, whether it's 25 or 50 or, or what kind of time frame is over the next several Fed meetings, I think what's becoming more apparent, Brad is that investors are getting more concerned about the other mandate of the fed, which is full employment.

The fact that it's the fact that while still hanging in there, the economy is still printing, you know, good overall GDP, uh you know, levels in Q two and Q three still is forecast to be 2.5.

Nevertheless, whether it's jobless claims or it's new jobs or job openings, those numbers are, are, are softening.

And so if you look at what's happened since the summer really began, low volatility, stocks are starting to work uh versus kind of momentum stocks that have been leading, you know, previously.

That's because, you know, investors are concerned about what the outcome is for the economy for the first time in a long while.

Yes, certainly.

And so as you're kind of continuing to look through the data points that the fed is gonna be watching, not just going into their September meeting, but even further out, there's been a lot of focus on the employment front as well.

How, how can what we see within employment continue to get the fed towards their larger dual mandate targets here and, and how the markets may appreciate that.

Yeah.

Well, I think FED is already, uh, the fed has already outlined, you know, since Jackson Hole that they're gotten decidedly less hawkish on CP I inflation, uh you know, in today's print, even though core services remains kind of sticky, core CP I remains sticky and that's, that's a, that's a negative for you know, drastic reduction in rates.

It is nevertheless because of gasoline, food moderation, uh things like that, goods continue to deflate that is still taking some pressure.

And so I think the Fed has some ability to keep reducing rates.

What's really going to be interesting, Brad going forward is what's the economy going to do?

Are we really going to have a soft landing right now?

We are still doing all right.

And if, if the fed can just mildly reduce rates, uh and the jobs, you know, remain kind of steady growing, maybe not as robustly but still growing.

Then I think, you know, we're all going to start looking more and more closely at earnings growth, which I think we all need to remember that Q two, we had 11% earnings growth and it was more broad based outside of tech.

So things are not all bad.

I think it's time to focus on fundamentals and, and so with that in mind, and you're right on the, the earnings growth and the broadening that we were starting to see outside of tech.

I was uh noting that actually yesterday with one of our guests per a Black rock Weekly Market commentary that uh they had sent through to our team here.

And so all of that considered where some of the top buying opportunities that even if we were to see further volatility or further pull back, that would initiate some type of larger dip where are those dip, buying opportunities that you're keeping an eye on?

Well, you know, I think this was a period of time, Brad with the laggards could become leaders, you know, 2023 things like, uh, health care and staples and financials did nothing.

Tech was up over almost 50% you know, consumer discretionary communication services, all up over 40 40%.

So you've got this huge kind of valuation spread between, uh tech and and really everything else.

And so what's interesting about Q three is as volatility has spiked since it started and it sector is down 8% quarter to date.

Things like the real estate sector are up, 15% staples are up 9%.

Healthcare is up six.

So it's really, you know, a good time to again broaden out your portfolio without a lot of risk.

These are defensive categories and sectors.

And so even if we have a a harder landing or more softening in the economy that we want, a lot of these businesses are still going to probably produce pretty good earnings and depend of the economic conditions.

And so because the multiples are so low, you're getting a rating.

Uh So I think that's a really good place for investors to look for their equity exposure.

Eric, thank you so much for joining us here today, Eric Lynch Sharp Investments, managing director.

Good to see you.

Nice to see you.

You too.

The shelter is still the stickiest component in the consumer price index, it rose 5.2% on a year over year basis in August.

Meanwhile, if you take a look at data from corelogic price growth has been under 5% for three consecutive months, rising just 4.3% year over year in its July data.

So what is the outlook for home price affordability?

Joining me now, we've got Bob Brooks Smith who is the president and, and CEO of Mortgage Bankers Association.

Great to have you here on the program with us and, and taking the time.

So just help us make sense of what we're seeing in CP I versus what the reading was out from core logic for their July data.

And ultimately what this spells out for the future of the or at least near term perhaps of the home buying reality for so many prospective buyers.

Thanks for having me on Brad and yes, it is true that home prices continue to increase in the low to mid single digits as, as the core logic numbers suggest there.

And that has been a surprise given that you would expect with rates having risen from their lows.

Now we're seeing nice rebounds to lower levels, but still up a good deal from their lows and uh affordability worsening.

You might expect that home prices would fall.

But what that really indicates is this stubborn uh supply gap between the housing that Americans need and the housing that's available.

So that's why you see housing pricing increasing faster than the CP I.

But we are seeing a lot of green shoots with mortgage rates having come down nicely.

And we think with more room to come down farther, you know, it's really interesting.

One of the things within the core logic data, at least they said much of the sluggishness can be attributed to high mortgage interest rates continuing to challenge the housing market and buyers remaining cautious sales remaining low.

However, the highly anticipated cuts from the Federal Reserve this fall may help improve some of the consumer purchase sentiment for the housing market.

To what extent are you expecting some of those cuts to actually lead to more purchasing activity or at least the sentiment to change dramatically here?

Sure.

Well, we've already seen in mortgage rates, anticipation of the fed cuts coming in the short term rates because of course, they control the short end of the of the yield curve, but the 10 year Treasury has fallen nicely and mortgage rates have followed.

We just uh have about a 6.27% interest rate which is down over 80 basis points from recent figures.

And so it is getting more affordable and we are also seeing encouraging signs on the inventory because if there are more people who are willing to put their houses on the market, even though perhaps they have rates that are well below today's rates, you're going to start to see some more movement.

And we're seeing our, our purchase applications increase albeit slightly, but we are seeing a really big increase in refinances.

We're more than double in terms of numbers of refinances today from a year ago.

Now, granted that's from a low base because most people's rates are still low.

But people who've gotten loans in the past year and a half or two now should really look at whether it makes sense to refinance and save on that monthly payment because as I said, the mortgage rates have already incorporated the anticipated or some of the anticipated fed cuts.

And so in last night's debate here, Vice President Kamala Harris touted her plan for the housing market.

I I want to play a clip of what she had to say and then get your reaction on the other side, Bob, we are going to work with the private sector and home builders to increase 3 million homes increase by 3 million homes by the end of my first term.

And so how impactful could the plan be for the housing market and, and affordability more broadly?

Sure.

Well, we think this is precisely the area that needs to be focused on housing supply now to be frank about it.

The president doesn't control as much about housing supply and new building as some of the states and localities do with what can be very onerous permitting and uh cost of compliance before you even put a shovel in the ground.

So we are very encouraged that housing is on the agenda at the federal level.

And of course, the president has a great bully pulpit and there can be carrots and sticks used in terms of federal grants to encourage municipalities to make it easier and more cost effective for builders to build.

But we think focusing on the supply side is the absolutely right thing to do.

And one of the things that we here at the mortgage Bankers Association have championed and just got finished through hud is to make it easier for something called an FH A 203 K loan to get done.

These are loans where you can buy a house that needs to be fixed up and finance the cost of making those improvements.

And we work directly with Hud and FH A to make improvements to that program.

So that's another way we think we can get a productive housing supply back on the market and chip away at this year's long supply imbalance, Bob Brooks Smith, who is the mortgage bankers association president and Ceo Bob.

Thank you so much for joining us here on Yahoo Finance.

Appreciate it.

Thank you, Brad.

Certainly.

Turning now to the rental market Redfin reporting that asking rents rose in August by the most in over a year.

We also saw in this morning's inflation data that rents remain sticky here with the latest, we've got our own very uh very own.

Danny Romero in the newsroom.

Hey, Danny Brad, housing costs remain sticky across the board.

In the inflation picture, Shelter increased half of a percent in August on a monthly basis.

Now on a yearly basis, Shelter came in at 5.2%.

Now this figure is softening if we compare it to when shelter peaked at 8.2% in March of last year.

Now, looking at real time rent data, Redfin reported that the median asking rent price increased 0.9% on a yearly basis in August to over $1600.

Now this is the biggest increase in over a year now while rents are ticking up, they mainly and largely are stable due to the influx of apartment supply.

Economists at Redfin expect that the asking rent price will continue to stay flat for a while as the backlog of these new apartments make their way to the market.

Brad D A mortgage rates have been declining since May.

When is it a good time to buy?

That's a good question.

October according to realtor.com found that the best time is between September 29 through October 5th.

Now buyers can save around $14,000 compared to summer sale prices.

They and there's also a 30 per 37% active listings available than the start of the year.

This also means that potentially less competition.

So home buying season this year has been pretty slow but mortgage rates are set to decline further as there's this expectation that the FED will cut interest rates this month.

Now, remember, the FED doesn't set mortgage rates but its policy moves influence the direction of where mortgage rates might.

And mortgage Bankers Association reported that mortgage rates have hit the lowest level since February of last year.

So overall mortgage rates have been on this downward trend since May of this year.

Brad.

All right.

Yahoo Finance Zone, Danny Romero.

Danny, thanks so much tracking all the data and I guess October October, we'll have to mark off some of those weekends, huh?

All right.

Thanks so much.

We've got all your markets action straight ahead.

Stay tuned.

You're watching Yahoo Finance last night, Vice President Harris and former President Trump faced off in their first and possibly last debate.

The candidates went head to head on the economy, inflation and immigration.

But one topic that didn't get a lot of attention taxes, both candidates just gave a little teaser of the policies that they're advocating for.

I intend on extending a tax cut for those families of $6000.

My plan is to give a $50,000 tax deduction to start up small businesses.

Everybody knows what I'm going to do, cut taxes very substantially.

We wanna explore both Harris's and Trump's tax proposals and compare them.

So, here with more, let's bring in a professional Andrew.

Gordon.

Andrew is a partner at Gordon Law.

Andrew.

Great to have you back on the program.

Let's start simply what do we know about each candidate's tax proposals here?

Yeah.

Well, thank you very much, Brad for having me.

We don't know very much yet, but there are some basic and very impactful differences.

And front and center is the expiration of the tax cuts and Jobs Act, which went into effect in 2018.

And the tax cuts and Jobs Act had several provisions.

But across the board, it acted to reduce taxes and one of the more meaningful aspects of it, also, the QB or qualified business income deduction, which applies to many small businesses.

There are also decreases to the corporate tax rate and an increase to the standard deduction.

While President Trump wants to maintain the tax cuts and Jobs Acts and also apply new deductions as well.

Vice President Harris from all indications wants to let this expire.

And as of now in 2025 the tax cuts and Jobs Act is set to expire.

And so as a result, the taxes that we're used to today, the tax rates that we're used to uh could increase unless there are additional deductions.

And so that's some of the other areas that Vice President Harris is now proposing.

So would filing taxes get easier or harder under each candidate?

No, that's the ironic thing.

Both of them want to reduce taxes although they both want to do so in different ways.

Yet, as we start to talk about additional credits deductions, expirations of certain provisions.

The tax code is getting more and more complex.

In fact, we see all the time that unless you're using professional in some cases, you may not be able to claim these deductions because you just don't know how.

And so by increasing all of these things, we're just making it more complex.

Uh There were previously efforts to try to reduce or simplify the tax code when President Trump was first elected.

But what we've seen over time is really the opposite has occurred.

It's just gotten more and more complicated.

What don't we know?

Where is the gray area still or just the, the black area uh about each candidate's policy that you as a CPA would like to hear more about?

Well, you know, how would it impact the everyday person?

So, uh tax brackets across the board, what we want to know from pre uh Vice President Harris is if the tax cuts and Jobs Act does expire, if you do allow it to expire, how are we going to fill these gaps?

How are we going to allow small businesses to still be competitive?

How are we going to allow corporations uh domestically to compete internationally?

And so it, we know some things, but we don't know uh these fine details just yet.

Certainly.

And then just lastly while we have you here, the biggest changes that may go into effect and, and the timing around them because it's a lot to campaign on and discuss on a debate stage, some of the tax changes that could come forward.

But what is the real implementation timeline typically look like here?

It often takes years for tax policy to impact uh the everyday person.

But one of the things that we do know is the tax cuts and Jobs Act.

The T CJ A is set to expire in 2025.

So if nothing is done, it will expire.

The effect of that will be that there will be an increase in taxes pretty much across the board.

So that is certain and that is happening pretty quickly.

Andrew Gordon, who's a partner at Gordon Law.

Thanks so much for taking the time.

Great to see you again.

Andrew.

Andrew, thank you very much.

We've got much more on wealth after the break.

You're watching Yahoo Finance, we're less than two months away from knowing who will be the next president of the United States and the stakes are high.

Investors are trying to wrap their heads around all of the potential outcomes of November's highly contentious election worried that it could disrupt their portfolios, but ETF S may offer a strategic solution to navigate some of that uncertainty for more on how to position yourself ahead of the November 7th election.

Jay Jacobs, who is the blackrock us, head of thematic and active equity.

ETF S joins us now as part of this week's ETF report brought to you by Invest QQQJ.

Great to have you back here in studio with us.

Appreciate the time as always glad to be back.

Let's dive into this.

Um Because you, you've sent over some really interesting, interesting perspectives here.

First and foremost, there's a bit more sense that we're kind of getting right now about investors appetite to be involved in more active ETF S. Why do you think that is right now?

Well, we've had an incredible run for just index strategies over the last 10 years.

We've seen the S and P, we've seen the NASDAQ, we've seen, you know, really broad benchmark indexes perform very well delivering all the returns that people could really expect from a broad market index.

But now we're seeing more volatility these bouts of major sell offs in the market.

Uh We're seeing a lot of kind of tactical rotations in the market between growth and value back to growth sector rotations.

And frankly, we're just seeing more dispersion across stocks and sectors and all of that really kind of lines up with having a stock picker behind the scenes, able to navigate this volatility and dispersion can really help deliver better returns in the future, especially if broad market indexes can't deliver what they did over the last decade.

And we've been looking at some of those broad market indexes here this morning which have been rattled post CP I print and so with two major events set to take place and one of them gonna be more long for, well, both of them pretty long form, but one of them in the FEDS cutting cycle that is expected to commence here in September.

But then also you have the November election, where have you seen some of the ETF strategy start to line up around those two major events.

Well, in two areas, I would say, you know, one, a lot of investors are still just trying to lock in yield right now.

Uh an ETF like bank which is managed by Rick Rieder at Blackrock is really trying to capture high yield bonds, emerging market bonds, collateralized loan obligations and really lock in some of those yields that can be, you know, 56 almost 7%.

So people can capture this high rate environment and hold on for a bit.

Um The other area where we're seeing more interest right now is actually a little contrarian to the market is looking at value stocks.

So this has been a growth market.

In fact, growth is a huge part of the S and P 500 right now.

Value is only about 22% of the index, the lowest it's been in 25 years.

So contrarian investors are starting to see that actually, when there's less value in the market, there's actually more opportunity within value that portfolio managers.

And you know, Tony Despirito Blackrock with his BL CV ETF can actually make some really interesting moves that are very different from what you see in the broad market benchmarks.

Interesting, you know, we've talked so much at length about A I and all of the different ETF plays that are out there.

And I was trying to figure out what is a more unconventional way that we can really think about access points into artificial intelligence without specifically looking at ETF S that are just based on the teams that are directly impacting chips or uh some of the communications and utilities came to mind.

Is there an A I utilities play that you're seeing start to emerge right now in ETF si I love this question because what you're doing is really thinking about kind of the second order impact of A I.

You have kind of your immediate winners but then you have this whole economy that has to be built and support artificial intelligence, including things like energy and electric electricity production.

So a utilities like ID U and ishares are gonna benefit from growing electricity demand.

In fact, if we go backwards 15 years, electricity demand has not grown in the United States has been flat.

You've seen more energy efficiency, you've seen uh you know, a shift away from manufacturing in the US, which is very energy heavy.

But now you're starting to see that lift up and utilities are gonna make more money as they can sell more electricity.

I think one other area to look at that's kind of adjacent to utilities is in the real estate space which is data centers.

These are companies that have pretty steady cash flows.

They contract out basically renting their warehouse space for cloud computing and artificial intelligence compute for a long time.

And so they both kind of get the stability like a utility of certainty of cash flows.

But at the same time, they, they just get to command a huge premium right now because there's so much A I demand and not enough data center space.

It's interesting you mentioned manufacturing that triggered another thought.

I mean based on the ISM data that we had seen what last week on manufacturing on the at least products side that continues to be in contraction here.

But if investors are looking for a rebound in that, how can they kind of track manufacturing as a theme via ETF S?

So you know, manufacturing had been on the decline in the United States, but we're starting to see some forward looking indicators that this could actually start to reverse.

You know, one is manufacturing construction in the US has tripled over the last four years for reasons like the Inflation Reduction Act, the Infrastructure Investments and Jobs Act, the Chips and Science Act, which is trying to bring more semiconductor manufacturing in the US has really spurred more construction of factories and retrofitting of factories.

So we built a specific ETF called made like made in America which captures manufacturers in the US, everything from auto manufacturers to semiconductor uh manufacturers to, you know, good old fashioned, you know, durable goods as well.

Really trying to benefit from this policy shift in Washington with involving both political parties to support more manufacturing in the US J Jacobs Black Rock US, head of thematic and active equity ETF S joining us here in studio.

Great to see you Jay.

Good to see you guys coming up with a federal rate cut coming.

As soon as next week, we have some money saving tips to make sure that you are prepared.

We've got that on the other side.

Stick around $1000 for young families for the first year of your child's life to help you in that most critical stage of your child's development.

Vice President Kamala Harris referencing her child tax credit proposal at last night's presidential debate.

Financial stress is at the front and center for a lot of young parents in this election season.

As consumer goods prices for things like food and shelter, those remain top of focus as well and high.

So according to a new survey from Mass Mutual, near a quarter of millennials and Gen Z do not plan on having Children with financial constraints being the primary reason and those feelings that may be warranted here.

According to that same survey, over half of parents have anxiety about not having enough money to provide for their family with food and clothing being the two largest sources of stress.

And it's not for lack of preparation either.

Even with 51 son of parents feeling worried about their finances.

Almost three quarters of respondents said that they have financially prepared for parenthood.

According to Paul Lapiana, who is the head of product brand and affiliated distribution with Mass Mutual, these numbers shouldn't come as too much of a surprise as he says, quote, this shift reflects a broader understanding of the importance of financial stability and a dependence in achieving long term goals that every generation must reckon with unquote.

Well, this morning's CP I prints for August largely coming in in line with expectations as the markets continue to expect a rate cut of at least 25 basis points when the fed meets next week.

So how should you prepare your portfolio in anticipation here with some tips?

We've got Mark Hamrick, who is the bank rate senior economic analyst?

Mark.

Great to have you back on the program with us.

So first and foremost, as we're trying to figure out will they won't they go 50 or 25 even though the probability is largely leaning towards 25 right now in outsized fashion.

How should people be and consumers and households be putting their own financial preparedness front and center regardless of the depth of cuts and the pathway of those cuts that we see.

Good to be with you, Brad.

And it's an excellent thing to be considering, uh, because Americans traditionally fail to achieve their savings goals.

That's true of retirement savings bank rate survey about a year ago, found that most Americans, most Americans felt they were not on track with respect to their retirement savings.

We'll be updating that soon.

So stay tuned.

And we know from bank rate surveys over the years that the majority of Americans cannot pay an emergency expense of $1000 or more from savings.

You know, Brad very often when we're talking about this high interest rate environment that we've been in since the Fed started putting that pedal to the metal.

A little over two years ago, the focus has almost always been on the impact on borrowing costs.

And that's understandable because in an affordability challenge environment, you know, the higher cost of credit just is sort of uh throwing another uh challenging log on that fire.

But the flip side of that, which is very consistent with some of the things that we've been talking about literally for decades of bank rate is that this is a tremendous opportunity to prioritize savings.

And while maybe some in the stock market might be lamenting the fact that the CP I didn't make a strong argument on behalf of a rate cut of 50 basis points from a savers standpoint, I would say that's something actually to celebrate because that means that yields are not going to be coming down immediately with the urgency they would have otherwise.

So it really depends on what your investment or savings uh time horizon is to translate that it means when do you need the money?

And with many Americans sort of cash constrained, the primary opportunity in that regard is to take advantage of high yield savings accounts where you can move the money back and forth, essentially from uh a savings account to your checking account in quick order.

Because we need that liquidity.

We need the availability of those funds and this environment you're still able to capture a yield, an annual yield of 5% for high yield savings.

So that's one of my top picks uh for those who can lock in their money for a longer period of time, be it?

Three months, six months a year, five years, that's where C DS come into play.

So with that in mind, I I was taking a look at one of the other tips that you had provided us and that we've been able to kind of share with our viewers here, reducing high interest debt.

What are some of the early steps that people and households can take to make sure that they're enacting that part of the strategy?

Of course, in the consumer environment, what's the highest uh cost uh interest that people typically pay?

Well, that's credit card interest and for new users or applicants of credit cards with the best credit scores, those who have the best track records for paying their bills on time.

Those new offers right now as of today are still averaging about 23 quarters percent.

Now, as the fed begins lowering interest rates, those averages will come down, but that's gonna be falling like a feather, not like a hammer.

So, absolutely.

If you have more than one credit card, take a look at your statement, maybe online, maybe you still get the snail mail version.

Uh know what the highest interest rate that you're being charged involves.

And then prioritize that one.

I think that's the way to go because that's where you get essentially the best return on your money, pay off that high cost interest right away.

Of course, the best way to do this is to use credit cards as a tool where you're really sort of winning on all sides here.

And that is if you have a rewards card, a cash back card, you pay that balance off before the interest charge is hit within the billing period.

And so you're still getting those rewards, but you're not getting hit with the cost, which is the interest charge.

So that's number one for many people.

I still think it's probably wise to forestall borrowing, let's say for a car loan right now.

Uh The situation on home purchase is gonna be so personal that, you know, they are gonna be some people that need to buy a home in the near term.

There are gonna be others that say, you know what, let's sock some cash away for emergency savings.

Because as we all know anybody who's sort of walked over that threshold, owning a home is an opportunity, not to mention demand that you continue to pay for things like repair and maintenance.

I'd rather see people have more in their emergency savings.

So when that HV AC goes out, when the roof needs fixed, when the refrigerator breaks, you have that money in the bank and you don't have to go to those credit cards where all of a sudden you're behind the game once again.

You know, it's an interesting point and it's a great point in terms of preparing for emergencies and preparing for emergencies, even if you're in retirement as well.

I mean, we've seen and un unfortunately, we're tracking very closely yet another, uh, major storm system that could wreak havoc for homeowners and, and hurricane Francine.

And so all of these things considered, how have events like that changed, how people need to assess their financial preparedness.

Uh, knowing that those are things that are out of their control, but perhaps some of the financial planning, they can bring more into the realm of their control as well ahead of those events.

Well, we know that the higher cost of insurance is a direct reflection of the extreme weather and climate events that we're facing on an increasing basis.

And so just in the CP I this morning, checking my notes, motor vehicle insurance is up 16.5% over the past year.

And we know there are some states where folks can't even get insurance for their homes.

So uh these are sort of the costs that are very difficult to forecast, let's say if we're trying to manage our household budget and you know, I think it's really important to think here about the fact that we can talk about and we should and we are the fact that the CP I the consumer price index is coming down more in line with historical norms.

Now.

That's welcome.

That's why the Fed has been in the game of raising interest rates.

But the there are these significant outliers on costs which are almost more structural, whether it's housing, whether it's the, we have the supply chain disruptions that set automobile prices higher, they've begun to level off.

But still we're talking about the average price of a car around 50,000 and most people are not even, you cannot find a new car that's priced at 20,000 or below.

And that's sort of the price point where people want to find.

So that's all about bulletproofing your household finances to have more savings because you know what?

Brad, I have yet to meet anybody who said, you know, I saved too much money.

Boy, that was a big mistake.

Nope, it's always the other way around.

Mark, always a pleasure to grab some time.

With you.

Thanks so much, Mark Hamrick, who is the bank rates Senior economic analysis.

Good to see you.

Thank you.

We've got much more wealth on the other side of the break.

You're watching Yahoo Finance?

All right, Yahoo Finance is continue its coverage at the Goldman Sachs commun CIA tech and media conference.

And I think we're talking a little tech but of course, little stocks right now at Robin Hood, co founder and Ceo Vlad 10 of Vlad.

Always good to see you.

Appreciate you.

Always a pleasure, Brian, thanks for having me.

So let's just stay on the topic of this conference.

A I, how is A I gonna change the business of investing and change Robin Hood?

I think there's two big trends that could change how financial services are delivered.

It's crypto and artificial intelligence and Robin Hood uh intends to be a leader in both.

I mean, to a, to a certain extent, we already are a leader in retail crypto.

We're doing a lot there.

Um for artificial intelligence, the uh opportunity is to deliver the same type of advice and tooling and experience that a high net worth individual can get from a very sophisticated private wealth manager or private banker um and deliver that to the mass market.

And I think that's the really interesting potential for A I and financial services.

It seems like your platform over the past year and a half has had a rebirth.

I mean, it's not, you're not an old company but you're moving very fast and releasing a lot of new products.

What are the brokerages, traditional brokerages not doing, you know, where are their holes and, and where are you taking market share from them?

Yeah.

Um, I think that it, it's really, I mean, you, you put it, well, we have eight businesses now that are generating over 100 million a year in revenue.

So the business has become much more diversified than when we went public.

And when we went public, we were really just a transactional business for novice equity and options traders, crypto as well.

But um now we have our gold product which gives customers uh industry leading yields on their cash, gives them great retirement benefits an awesome credit card.

Um And yeah, I think um Robin Hood is looking less like a traditional brokerage.

Of course, we, we have a big brokerage business, but we aim to be leaders in uh in retirement in wealth management over time.

Uh We think that there's a huge opportunity with uh owning the the financials of an entire generation.

You know, Robin Hood's been very, very popular among millennials um that continues to Gen Z as well.

And we think we can be the place where uh millennials and Gen Z's custody all of their assets and all of their financial transactions can go through through Robin Hood.

How far do you want to push your model?

Over the next decade.

Do we, are we looking at a point where Robin Hood is doing investment banking?

For example, I think that, uh, there, there's two ways in which we look at it.

One is, um, we have a lot of customers, 24 million customers, uh, predominantly in the US and, uh, we can continue to deepen the relationships with them, starting with all of the financial needs they have on a daily basis, spending savings.

We've already got retirement, wealth management.

You know, uh a lot of customers don't want to pick their own investments, they want a little bit of guidance.

We think we can play a big role there.

Um And then of course, there's an addressable market of hundreds of millions of people outside of the US that are even more underserved.

We've been making a lot of progress with our efforts in the UK and the eu to serve those customers.

Um But then the, the third thing to, to your point about investment banking is we're building a lot of these capabilities in house.

And if you think about a business or an institutional investor, they also want access to the things we offer, you know, they want 24 hour access to the equity markets and want industry leading margin rates, a great customer experience.

So over time, I, you think you'll see us branching more out into serving other typess of customers, not just retail, but also businesses and institutions.

And you know, to that end, we um we announced an acquisition of BIT stamp a global crypto exchange.

One of the things that's very attractive about that business is that it's not just international but also institutional gets us access to an entirely new customer base that we're not directly serving today.

I think we can do more and more of that.

Over the next 10 years, we've seen some challenging times in markets, not super challenging, but it's been a weird end of August and September.

I mean, how do you see market volatility playing out as we, as we near our election season?

And what do you think the impact is to a lot of the customers on the Rob Hood platform who own like really these volatile stocks like NVIDIA like a Tesla?

Yeah, I mean, I think there's there, there's two things.

One is we have different types of customers on the platform.

So for our active traders who are engaged in more advanced products like options and margin, um they can they have the ability to take advantage of different types of market environment, not just when stocks are going up, but also when markets are moving sideways and going down.

So we're, we're seeing those customers engage at, at a steady rate um for customers that are more buy and hold, they tend to see uh corrections in the market or volatility as buying opportunities.

Because uh the thesis for these customers is that A I?

Uh and to some extent, Cryptocurrency is a transformative force and you know, that's going to play out over over the long run.

So we announced in August, um we had, you know, around the time of the uh carry trade, unwinding in Japan.

Um stocks got hit very hard, particularly some of the growth names and our customers by and large saw that as an opportunity to get into some of these names at discounted prices.

Our interest rate, I was talking to Goldman's chief economist John Haus here at the conference.

He's looking for that first fed rate cut happening.

September 18th meeting does Robin Hood?

I think, I think some of the street would think that you would make less money when rates decline.

Are they right or wrong?

I think that I mentioned earlier, Robin Hood very diversified business much more than we went public.

Eight business lines that uh eight business lines that are generating more than 100 million in annual revenue.

Uh And if you remember when we went public, it was a zero rate environment.

We had done quite well in, in the zero rate environment, transaction volume and user growth were uh were were progressing really nicely and we were growing at, you know, 3 400% year over year at that time.

And so the question was, will Robin Hood do well in a high rate environment.

And we had to put in a lot of work to diversify the business and to take advantage of the environment that we were in.

But I still think Robin Hood is, is perhaps a stronger company in a low rate environment.

Uh transactions will tend to increase there's more interest in investing the margin rates which you know, we've been doing a lot of investment in our margin product, making sure that's industry leading and we just uh rolled out industry leading rates across all tiers.

Uh I think that'll do well in a low rate environment, credit, which is a nascent business for us.

But um feedback on the credit card from initial users extremely positive.

I I think that will do very well in the low rate environment.

And so I, I think on balance, um the business will continue to do well, perhaps might be, might be stronger with that macro and will continue to diversify.

The goal is really to do well in all market conditions and to really benefit from, from changing market conditions, not be dependent on, you know, low rates or high rates.

And I think we've made a lot of progress towards that goal.

Lot of always good to see you, Robert co founder and CEO.

We will talk to you soon.

Thanks Brian.

All right, much more ahead on yah finance.

Do stick around.

All right.

Thanks to Brian Sazi for bringing us that interview.

That does it for wealth, everyone.

I'm Brad Smith.

Thank you.

So much for watching.

Stay tuned for market domination with Julie Hyman and Josh Lipton that comes up 3 p.m. eastern time.

You do not want to miss it.