How the market sell-off may impact retirement, rate cuts: Wealth!

On today's episode of Wealth!, Host Brad Smith breaks down some of the biggest stories impacting your personal finances, from the global market sell-off to an interest rate cut in September from the Federal Reserve.

The major indexes (^DJI, ^IXIC, ^GSPC) are slipping as recession fears trigger a widespread sell-off among investors. However, Fort Washington Investment Advisors co-chief investment officer Chris Shipley believes the current downturn shouldn't cause investor panic. He notes the market had "a certain vulnerability" due to expectations of economic growth and lower inflation. Yet, there turned out to be "a little more economic weakness than the market was banking on," indicating the economy is entering "a more substantial slowdown." He views the current situation as an ideal buying opportunity, pointing to companies like Nvidia (NVDA), which hasn't seen low share prices since March or April, noting: "When stocks are on sale, it's time to start taking a look."

Zacks Investment Management client portfolio manager Brian Mulberry argues that the market has been "a little bit overdue for a pullback like this." Amid the sell-off, he encourages investors to focus on companies with high-quality balance sheets, multiple revenue streams, low levels of debt, and good cash flow metrics. He points to consumer staples (XLP) as good investment opportunities.

Some investors are concerned about the pullback's effects on their long-term retirement investments. Vanguard senior wealth advisor Cassandra Rupp, CFP, says, "We can only control what we can control," and breaks down some of the biggest mistakes when managing 401(k) plans: "Everyone's time horizon can be different. I mean, if we're speaking to some of this reporting in 401(k)'s for retirement savings, depends on what stage of your career you're at. We're seeing an increase in participant deferral rates above 4% now. So we're seeing more and more individuals start to automatically save out of their paychecks into these types of plans."

Yahoo Finance Senior Columnist Kerry Hannon adds that if you're investing in a retirement account, you will experience periods where you're buying high and periods where you're buying low. In the end, it'll most likely even out.

In response to recent signs of economic weakness, Wall Street is convinced the Federal Reserve will almost certainly cut rates by 50 basis points at their September meeting. However, with investors believing the Fed may be delayed in rate reductions, speculation is growing about a potential cut even sooner. Yahoo Finance Senior Reporter Jennifer Schonberger breaks down the details, discussing how the Fed can implement rate cuts outside of their scheduled meetings and historical trends that prompted emergency rate cuts.

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 footprints.

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

We got a big show, big story for you today.

The big market sell off.

We are off of the session lows of this morning, but stocks are still down 90 minutes into the trading day there.

You're taking a look at some of these declines on a percentage basis being led by the NASDAQ composite, the Dow and the S and P 500.

Also in the red, the dow is down by about 2.7%.

The S and P 500 down by a little more than 3% right now.

And in just a few minutes, we're also going to talk to a strategist about the moves that you should and should not consider making within your portfolio here.

We've got a lot to dive into.

But before the uh before we get to that, let's take a closer look at the markets.

We've got Yahoo Finance markets and data editor, Jared Blicker.

Hey, Jared Hey, there a little bit of a downdraft today.

Let's put up the Wi Fi interactive behind me.

And I just want to point out the trouble started over in Asia Tokyo down 12.4%.

That is the worst day since 1987.

Uh Korea, which is heavily leverage to the chip sector that's down almost 9%.

And then in Europe, you have stocks down about 2 to 3%.

And then in the US, it gets a little bit worse again.

Here we have the Russell 2000 worst, worse off than the major is actually down 4.5% today.

If I put a year to date chart on, you can see it is now slightly negative for the year.

So we had this huge surge kind of a tease recently to the highest in a couple of years.

And now we have sunk back below the levels that we started the year with.

So pretty big reversal of fortune and that pain trade.

Well, it was a pain trade, that rotation that we saw over the last few weeks.

Now the dow is the best off today, but it's still down 1141 points.

You can see it's only holding on to gains of 2% this year.

Then we'll check out the NASDAQ as well.

That's still up 7% on the year.

Uh But that is a lot smaller than it was on Friday.

Uh So let's take a look at what's going on in the vics.

This is a Fear index.

And what I'm gonna show you now is that we hit 65.

That is the highest level since the pandemic.

Uh the height of the pandemic up way back in March of 2020.

This is a five day chart.

Check out the five year chart.

You can see that pandemic high for the vix was a bit higher, but we are in worse shape.

At least in terms of the Vix.

There's more fear in the market than there was in all of the 2022 bear market.

So I think that says something as well.

Uh Let's go through some of the heat maps and we can see exactly visually how bad the damage is.

We have tech and consumer discretionary.

Both of those down more than 3.5%.

Financials and communication services also down more than 3% least bad.

Uh, in the, in the shop here is real estate that's still off more than 1%.

When you take a look at the NASDAQ 100 lots of red here.

Barely any green A MD up 6/10 of a percent but meta down 4%.

So is Apple Microsoft down three nvidia down seven, but a lot of these stocks are off their lows.

I should point that out.

Let me just show you a two day chart on here is a low this morning.

It was down 13 14% on the open and it's a little bit less bad right now.

But, uh, a lot of the metrics that we're getting, we're seeing some of the worst losses in various ways uh, since 2020.

And so that kind of just skips over the 2022 bear market.

That's a little bit of a cause for concern guys.

All right, Jared.

Thanks so much for breaking that down and also teeing up this next portion of our show here where we're zeroing in on the national that composite here leading the losses today.

Trading off nearly 4%.

The index officially in correction territory and that market close on August 2nd is what put it there.

So what does this all mean?

Well, a market correction happens when an index commodity or Cryptocurrency declines 10% from a recent peak.

Now it's widely accepted to wait until the market has closed for the day to declare a correction.

Taking a look at the NASDAQ composite.

The highest close of late was on July 10th at just above $18,647 at market close this past Friday, the index dropped to just above 16,758.

So when we run the math, that is just over a 10% decline, officially putting the index into correction and today's losses exacerbating those declines and to get out of the market correction, the NASDAQ would have to close higher by 10% from the market.

Close the low actually, we should say.

And if losses actually break above 20% and continue moving lower, that's largely considered the bear market.

So this 10 to 20% range declines is what's the correction territory?

20% or more in declines would be the bear market.

And ultimately, from the low to exit correction territory, we would have to move higher by 10%.

Sticking with the sell off.

We're once again looking at where stocks are trading, NASDAQ leading the losses down over 3% recession, fears continue to push a global stock sell off to discuss how you should consider the sell off within your own portfolio.

We've got here in studio with us, Chris Shipley.

Chris is the Fort Washington Investment Advisors, Co Chief Investment Officer, Chris.

Great to have you here with us in studio today to be here when you look across what we're seeing on the screen right now and people just tracking the ticker at home, hard to find any spots or any green arrows at this point in time.

What are you telling investors and some of your clients that might be calling in today trying to figure out?

Ok, should we be hitting the panic button or should we be looking for opportunities?

We definitely don't think it's time to panic.

I think when you look at the, the overall set up for the market, I do think that there was a certain vulnerability to the market at the levels that we were trading at.

We were really pricing in an outcome that included both durable economic growth and lower inflation, providing the opportunity for the fed to cut rates.

What we're looking at now is a little bit more economic weakness than the market was baking, baking on.

And when looking at it through the lens of bad news is good news, which I think the market was looking at for some time.

Now you've had an accumulation of enough bad news.

The bad news is starting to be bad news.

And we really have to think about whether or not we are entering a more substantive economic slowdown.

I think there's a lot of reasons still to be optimistic on avoiding recession.

But right now, the market is shooting first and asking questions later.

What is the portfolio positioning that people should be considering then for, for bad news actually starting to be bad news?

Well, I think it's some of it comes down to how much bad news do you expect to accumulate?

And I think when we look at the overall state of the consumer, I think it's important to bifurcate the consumer between the two principal categories that we have, which is homeowners and renters.

And the reality is the economic experience for homeowners has actually been pretty good over the last couple of years, when you look at the impact of inflation, it's been much less significant on homeowners as the shelter component of the inflation data that we see has been hovering around the fed's target of 2% for over a year.

And so when you look at things from a cash flow perspective, homeowners have actually been ok. And if you look at it from an asset perspective, home values reach new all time highs in May and we had equity markets that were at all time highs not long ago.

So from the perspective of the homeowner class within the United States, which has twice the median family income of renters, that means that at least 80% of consumer income is being earned by people who are actually having a fairly good economic experience for the last couple of years.

So that should provide a reasonable underpinning to the overall economy and keep the US economy out of recession as a base case.

So with that in mind, I don't think that we need to worry about significantly repositioning for much harsher times.

I got one uncle texting me today saying if the market continues to do this, I might have to go back to work and, and find a job at a golf course or something like that.

Of course, that'd be beneficial to him.

He'd get free rounds.

But at the end of the day, for people who are looking at a sell off like this and trying to figure out how they can continue to maintain their wealth.

How can you build wealth even when you're seeing precipitous declines like this?

Well, again, if you, if you take a long term view, and I think as a retail investor in particular, you always have to have your eye on the horizon.

And what am I positioned for in terms of meeting those long term objectives?

If you're like many institutional investors and you've been underweight this A I trade, for example, if you look at the relative performance of institutional money managers this year, it's been fairly challenging suggesting that they've been underweight that A I trade.

Now, you're seeing those names on sale.

We saw that once before this year when NVIDIA sold off 20% in late March, early April.

And of course, there was an opportunity there that that did not present itself again until just now.

And so I think when you look at some of these factors and you think about where are, where am I positioned and where do I want to be positioned for the long term when stocks are on sale, it's time to start taking a look when we think about some of the stocks that have driven and we're showing it on screen right now with the mag seven trade.

And how much that has really permeated throughout the mind of retail and institutional investors.

Here is the fed pivot now, or at least the the cutting cycle is that the pin that could burst the generative A I thematic trade that we've seen really take on so much luster and fanfare.

I do think that and if you go back to July 11th when we had the CP I print that really started that rotation and you really got a sense as to where investor positioning was on, say small caps or on value.

And you saw those begin to run as the expectation was that the fed would be cutting rates.

I do think that you have to think about some of those exposures.

And right now, the S and P is exceedingly concentrated in these large growth names.

And so incrementally, it appears as though the S and P 500 is less of a broad representation of the US economy as it once was.

And so when you look at areas like small caps, which are under pressure right now, as people worry about the US economy, if there is a broadening of performance with inequities, it does seem reasonable to think that value or small caps are going to start to take a little bit more notice on the part of investors and potentially broaden out this trade beyond just this dominant A I theme that we've seen for some time, where are we likely to see the most evidence of a broadening even as we're looking at some of the declines today?

Well, it's interesting if you look at valuation.

So for the S and P 500 we are north of 21 times.

Not long ago yet, the S and P equal weighted, meaning the median company in the S and P was actually trading right on top of its 10 year average of around 17.5 times.

Now, all stocks have cheapened since then.

So there has been places that you can find value within the equity market if you've been looking for discounted names because there's been plenty of them to buy.

Now, those names are starting to come into favor.

The real question will be if we do see a more consequential decline in economic activity, then maybe we see a back toward these growth names which are more secular and less cyclical and so value small caps, they do tend to be more cyclically oriented.

They tend to be more sensitive to economic outcomes particularly in the US.

And so we'll see how far this this degradation in the economy goes.

Our base case is that we do avoid recession.

And so ultimately, we do think that as some of these stocks come up for sale, that it is probably worth broadening that portfolio a little bit.

Chris Shipley, who is the Fort Washington investment advisors, co chief investment officer.

Thanks so much for taking the time here with us and thank you today.

Important time.

All eyes are on September's fed, meeting everyone over 92% of traders.

They're expecting a 50 basis point cut at that meeting after weaker than expected.

Economic data reignited recession, fears to discuss Yahoo finance's market domination.

Co-host Josh Lipton is here with us in the studio.

Hey, Josh.

All right, Brad.

So investors now have new questions about the overall health of the US economy.

Following that week, July hiring report we got last week that sent the stock market tumbling and the pressure continues in today.

Today's trade, all three major averages deep in the red right now, investors concerned, is the economy just cooling or are we now facing the possibility of more serious economic downturn?

That debate has heated up about the fed's role in all of this.

Of course, with the question being asked, did central bankers wait too long to lower interest rates?

Yes.

Our fed policymakers suggested they could cut in September.

But some economists now think that the FED should cut by a more aggressive half point other than a quarter point as of this morning, markets were pricing in a more than 90% chance that the FED cuts by 50 basis points by the end of its September meeting that is up from an 11% chance just a week prior according to the CME fed watch tool.

I checked in with Joe Brusuelas, chief economist at RSM.

He says the case for a super size point cut has now been bolstered by the market action we're seeing if this continues.

He says, and we get another flat reading in the CP I and or P ce the case even for an inter meeting super size rate cut, he says would be on the table.

What does all this mean for consumers right now, the yield on the benchmark tenure is back well below 4% creating the conditions.

Joe says to support improved lending, home buying and auto purchases.

Also, we know brings down the cost of purchasing durable goods, things like washing machines and dishwashers.

And Joe Points out tends to drive down the cost of variable interest rates on credit cards.

But of course, at the same time, we have a lot of new questions front and center for consumers and investors.

Does the stock market keep reeling?

Does the labor market go from cooling to cold?

The economist Claudia s recently told Yahoo finance, she is, in her words, very concerned that we could tip into a recession.

Brad.

All right, excellent breakdown and conversations with some of the people tracking this closest Josh Liton.

Appreciate it.

Gonna be tuning in for the market close here today as well and market domination.

Everyone coming up later on in today's show and wealth.

We're digging into the biggest mistakes Americans make with their 401 Ks and how you can avoid them.

Plus our personal finance reporter carry Hannon joins for a conversation about how to manage your retirement savings in a shaky market as the selloff continues.

Plus it's the beginning of August and some of you may be sending your kids to school soon.

Some of you may even be going back to school yourself.

We've got some tips for you on how to save money on your back to school shopping.

We've got all that and much more when we return, you might be taking a look at your 401k today.

Feeling a little shocked to say the least as a major sell off continues to ripple through global markets to discuss how you should be allocating to your retirement account.

Despite the recent market downturn, Cassandra Rupp, who is the CFP vanguard, Senator Rupp CFP.

Vanguard, senior wealth advisor is here, Sandra.

Great to have you on the show.

Uh First and foremost, you know, as people are thinking through just today's activity, they're trying to get the sense of what a certified financial planner would be thinking about this and doing even in this.

You know, what are the first things that people should be keeping in mind?

I think we can only control what we can control.

We, we put a plan into place uh regardless of what the market was going to do what those conditions were going to be.

So my job as a, a financial planner is to, to keep my clients on track with those goals um and make sure we continue to follow them.

So we're gonna do that regardless of what type of day the market is having.

So what are the biggest mistakes that people make with their 401 Ks during days like this.

Well, uh uh in general, I wouldn't say always in days like this in any day.

I mean, just not maximizing the savings into these types of plans, not taking advantage of an employer match if we're getting into some of the, the market components um selling out of at the wrong time, not following that long term plan.

You want to take a step back and say, what are my goals?

What are my time horizon and what are my risk preferences months ago when you're setting up the account and not revisit that on a down market day, you gotta abide by that planning.

OK.

So with that in mind, we're taking a look at some of those tips here.

How do you, how do you also pick the right retirement portfolio for yourself?

Sure.

I think, I think it's revisiting those points.

We just discussed, you know, what, what type of investment product achieves those long term goals?

What risk am I comfortable with using something that is at a relatively low cost?

It's not going to consume a lot of the total return.

I'm just making sure again that you're staying focused on uh checking in on that account over time and reassessing where you currently stand and if that still matches with the portfolio, certainly.

And, and so from what you typically are navigating through in that thought process and, and maximizing your savings over time I mean, what is the time horizon that somebody should be keeping in mind while they're also looking to maximize their savings?

I, I think everyone's time rising can be different.

I mean, if we're, if we're speaking to, you know, some of this reporting and 401 Ks for retirement savings depends on what stage of your career you're at.

Um, we're seeing an increase in deferral and, uh, participant deferral rates above 4% now.

So we're seeing more and more individuals start to automatically save out of their, um, paychecks into these types of plans.

We're seeing employers continuing to match these.

If we're looking at average referral rates including the employer match, we're getting an excess of 11%.

We want investors to be focused on about a 12 to 15% savings rate based off of their income.

Are there any key differences that you're seeing in how different generations are preparing and, and saving for retirement?

Because there are some who are closer to retirement and looking at an activity uh in a trading sell off like we've seen over the past couple sessions.

Uh that are saying, ok, well, hold up now because I had, I had banked on things uh remaining less volatile than this.

Uh I think the vanguard way is that we, we were banking on volatility occurring at some point.

Right?

We, we wanna take a step back when we're originally speaking, when I'm speaking with my clients and say what is appropriate for your time horizon now.

So I'm not treating somebody who's in their accumulation years, who has a much longer time to retirement, the same as somebody who's already close to retirement five years out and just uh going to be needing liquidity sooner.

So we really want to be cognizant of that when we're setting up the portfolio, when you're making decisions on what investments to use, so that there's not a panic when we reach this point because it will unfortunately be inevitable.

We are going to see market turmoil.

It's just when that is going to come.

All right, thank you so much for taking the time here with us, Cassandra who is the CFP.

Um and really break down, excuse me.

Uh Cassandra at Vanguard.

Thank you so much for taking the time.

Thank you.

The global selloff continues here.

But if you're nearing retirement, what does the sell off mean for you to discuss what you should do with your retirement savings amidst the global sell off?

Yahoo Finance's very own.

Kerry Hannon is here.

Hey, Carrie.

Hey Brad, great to be with you.

I know it's a crazy day out there for people who are looking at the stock market.

But, but this is a time when you're a retirement saver to kind of take your, take a breath because we see this often, this is, you know, volatility happens in the stock market.

And so it's a time when, if you step back as, as we look at this stuff, um if you're investing for retirement right now and if even as you near retirement, what's happening is you're investing, if you're an employer 401k plan, you're buying high, you're buying low.

So it all evens out markets are down now, but you're still buying shares because you are constantly investing in the market.

So when it's down, when it's up, you're buying it both times evens it out.

Secondly, many retirement account investors are invested in target mutual funds.

So if you're in a target fund, it is automatically rebalancing your portfolio as the stock market shifts around, whether it's soared higher as it has uh in recent months till today or Friday.

So a and as it drops, so it evens it out for you, you don't have to make these decisions.

The target fund just a quick reminder is if you set a date when you plan to retire and the fund gradually becomes more conservative from equities to bonds as you approach retirement age.

But Brad, people who are very near retirement, this is a time to really look at your portfolio and say, ok, maybe I do need to pair off, cut off a little bit from the equity, the stock portion and put it in some cash investments because you want to not worry about the volatility in the future.

So, uh and high yield savings accounts are still uh we're at 5% until we see an interest rate cut.

So move some over so that you have a comfort zone uh to protect you those early years of retirement.

Uh and you don't worry so much about the volatility.

Those are just some important things, but it's really about, you know, staying the course and understanding if your portfolio changes by 7 to 10% of the asset allocation you want to have in terms of your balance and your risk elements, then it is time to make some adjustments.

So Carrie, what should people who aren't retired or, or nearing retirement do?

Yeah, so I want to reiterate for everyone that, you know, even when you're in retirement or very close to retirement stock is equity investment is still part of the program because you have, you know, you're looking forward, you're looking to the future and um as you know, you know, you may have decades in retirement.

So stocks are always going to be part of your portfolio.

Um So don't get spooked by all of this, just be cautious and, and, and uh make no rash moves is what I always say for younger investors and retirement savers.

This is a great time to really, once again focus on that long term.

Don't get all caught up in the day to day.

Um Think about what I mean.

If it makes you really nervous, then then maybe you do wanna shift to a more conservative portfolio but, but the truth of the matter is equities are going to be your friend in the long run.

That's what we've seen, uh, over time and it's still needs to be part of your plan.

And the, the sort of the rough figure we give people is 100 and 10 minus your age is how much should be in equities.

You can push that up a little higher.

Depends on if you're, you're willing to take on a little more risk.

But, but you know, really think about target funds as well.

Again, for people who get squeamish about volatile markets.

If you have a long way to go, that target fund will help keep you on track.

Carrie Hannon.

Thanks so much.

Appreciate the breakdown here.

Thanks Fred, everyone.

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

You're watching Yahoo Finance, we are two hours into the trading day.

Let's take a look at where stocks are moving right now with a quick market check in as we're taking a look at the uh NASDAQ 100 heat map that we've got for you.

Obviously a lot of red on the screen and here's what I do want to point out in some of the specific movers that we are tracking.

We've been keeping a close eye on some of the moving averages, those that have already crossed below the 200 day moving average as of Friday's close here, names like Amazon that you're seeing here on the screen.

Adding on some more declines here on the day for the past two days.

Right now, you're seeing that move by 11% to the downside here today.

Adding on 3/10 of or 3% in a move lower.

Here.

We're also tracking names like Microsoft, Microsoft at this level right now.

It's down by about 2.2% over the day, past two days down by about 4%.

And I wanna pull this back out to a five day period.

You're seeing 6% in declines there.

That's a name where it had already been below the 50 day moving average and was at risk going into that 200 moving day uh or moving below the 200 day moving average here with today's activity, we'll see where things settle by the close here.

But as of right now, uh off of the session lows but still down by a little more than 2%.

And then just lastly here, I wanna take a look at Tesla, of course, another key name in the automotive landscape and tech landscape to track over the past five days down, more than 13% here today down 3%.

That's another name that was in fray here of potentially or on the fringe of potentially crossing below its 200 day moving average.

So that's tech for you in a round up there.

Also do want to take a look at some of the major sector activity that we're tracking here on the day just before we get to our last item here where you're seeing all 11 S and P 500 sectors in negative territory intra day here, the decline is really being led by energy and technology, technology down by about 2.7%.

And then just lastly here, let's go to crypto because we're seeing some precipitous declines there as well.

Earlier today, we saw Bitcoin Cross back below 50,000 for the first time since February.

And now we're taking a look at it maintaining right now above 54,000.

We'll see exactly if we're able to, for a market that doesn't close, maintain some of that level and potentially see a bounce off of that 50 K level here.

I'll give you a year to date chart and then we'll go back into the intraday year to date, still holding on to gains about 23%.

But intraday and here's where you did see that level.

Uh 50,000, uh essentially moved through here.

That's 51,000 over there.

So disregard the line and just pay attention to that red line that I put on there.

That's what's more important.

That was the 50,000.

But ultimately, now back above that 54,000 marker, as we were mentioning, we'll continue to watch that as well as a lot of the other cryptos that are moving lower in concert Ethereum or Ether, whatever colony of your hood.

Call it down by about 14% right now.

Well, the fed is expected to cut rates at its meeting in September given the recent weakness in economic data and moderating inflation.

But did you know that the FO MC can actually cut rates without having a meeting here to tell us how is Yahoo Finance Fed correspondent Jennifer Schonberger?

Hey Jennifer.

Good morning, Brad.

That's white.

Right?

And a weakening job market, a weaker than expected jobs report last Friday has many on Wall Street questioning whether the economy is weakening and whether the Federal Reserve has waited too long to cut rates last week.

The fed opted to hold rates steady but set the stage for a rate cut in September.

That's about seven weeks away from right now though.

And given that length of time that has some floating, the idea of an inter meeting cut that is cutting rates between policy meetings.

The fed will cut rates between policy meetings.

If they're concerned the economy is headed for a sharp recession or an economic shock has hit, that could plunge the economy into recession.

And there are several instances his historically where the fed has done just this.

The last time the fed lowered rates between meetings was March 2020 when the pandemic hit and shut down the economy sparking one of the sharpest recessions on record though.

It was also one of the shortest now before the pandemic.

The last time the FED enacted an emergency rate cut was during the financial crisis in January of 2008 before that in the wake of the September 11th attacks.

And before that in January 2000 following the bursting of the.com bubble.

As for now, could the fed cut before the September policy meeting?

Well, JP Morgan, chief economist Michael Foli says that quote, there is a strong case to act before September, but that maybe F Powell doesn't want to add more noise on the flip side.

Bond portfolio manager, Wilmer ST of Wilmington Trust says the fed won't do an intervening rate cut because they won't want to spook the markets though verro for his part along with many other economists conjecture that the latest jobs report raises the chances that the central bank could cut rates in September by 50 basis points instead of a quarter point.

Powell said last week before the jobs report on Friday that the fed was not considering a 50 basis point rate cut, but that the fed has not made any decisions yet.

Wall Street as a whole.

Now pricing in more aggressive cuts as we go through the fall 50 basis points for both September and November followed by a 25 basis point cut in December.

Now, Brad while this jobs report was disappointing.

Chicago fed, President Austin Goolsbee told Bloomberg television on Friday that the fed is not going to overreact to one report making the prospect of an intervening cut, probably unlikely back to you.

All right, Jennifer, thanks so much for taking us through that.

Appreciate it.

Well, wealth is often lost when it's passed along to the next generation.

According to a study by the Williams group, 70% of wealthy families lose their fortune by the second generation and 90% lose it by the third generation.

So with about $84 trillion in assets, changing hands to millennials and Gen Z in the next 20 years, what kinds of conversations should families be having about wealth?

Joining me now on this, we've got Valerie Kinzer who is the Bank of America, head of the Merrill Center for Family Wealth.

Valerie.

Great to have you here on the show with us this morning first, as families are thinking about where they sit within this $84 trillion that's going to be transferred to next generation, you know, how should they be framework their discussions about making sure that they're building on that wealth that's been accumulated.

Absolutely good morning, Brad.

Um in our experience within the Merrill Center for Family.

Well, we have the privilege of working with over 300 ultra high net worth families.

And what we've seen to the statistic that you shared is while there's a lot of excitement over the success that they've built, there's often a tremendous amount of anxiety and what we find is in a world that is focused on creating strategies, making sure there are plans in place.

All of those things are productive.

What we find the number one thing that could be helpful to any individual, any family is 1st, 1st and foremost, defining what is the purpose of their wealth?

Is it preserving?

Is it, as you mentioned, uh passing along to heirs or other generations?

Is it philanthropy?

Is it supporting entrepreneurship?

We find that unless someone can first take a moment and pause and identify that in absence of that developing strategies becomes much, much more complex.

And, and so with that, in mind, how families are talking about the wealth that they've accumulated right now can also set them up for being able to build upon that.

But what are the key questions that they, they should be asking about what's important and how they've built up that wealth and, and where, you know, that also needs to kind of come back into reconsideration because you know that that same tree that they were perhaps building the wealth upon before is not gonna be the same one that they're gonna be able to draw upon forever.

Absolutely.

And I think what you're hitting with that comment is really this notion of how do you define and manage expectations.

Um Our team just released a report that was the culmination of serving over 1000 rising generation family members.

And one of the first things that we found is that there is a tremendous amount of fear and also some sense of isolation of how do you articulate those questions, right?

How do you determine what the expectations are?

So one of the things that we really encourage both the wealth creator uh generations, but also rising generation members is really to come at it from a sense of curiosity, certainly respecting the financial success that exists and really to try to understand what does success look like?

5, 1020 years from now, what are the assumptions that are being made, whether it's about an investment strategy or a philanthropic strategy?

What are the things that, what are the assumptions that are being made?

And what can the family do today and tomorrow to make sure to put them into fruition?

You know, given how gen Z and millennials, how we've prioritized certain investment classes versus others and asset types versus others.

How might that potentially change the type of investments that see a massive amount of inflow as well post great wealth transfer?

Absolutely.

So individuals and certainly we see this within, you know, a single family, there could be different interests, whether it's to um you know, support more, let's say environmental or socially conscious investments or others.

The one of the key points that we found in working with families is really understanding something I call, deciding how to decide.

And what I mean by that is what is the latitude for decision making?

If you have one individual family member, making that decision today.

And the vision, for example, is to pass those decisions on to his two daughters, his or her two daughters.

What are the decisions that can be made?

What are the areas that they would be comfortable with to your point in terms of the type of investments in terms of the risk tolerance?

And also what are the implications as far as liquidity as far as uh the plans that are based on those assets?

Valerie Galinsky, who is the Bank of America, head of the Merrill Center for Family Wealth.

Thanks so much for taking the time.

Valerie, thank you.

Pleasure to be with you.

Coming up, everyone.

We're heading back to school, get those backpacks ready, family gearing up for another busy school year and that means it might be time to spend on some new gear.

We'll tell you how you can ball on a budget for your school supplies.

That's next class is almost in session.

Families nationwide are gearing up for the upcoming school year.

A new CNET money report shows that families are expected to spend an average of $662 on their back to school shopping this year.

And for many Americans, it's not easy to afford those expenses for more on where you can find the best deals and save big.

We've got DEA Milden who is the money editor at CNET.

DEA.

Great to have you here on the show with us.

So let's, let's dive in first perhaps on what the most anticipated items are to be bought during this back to school shopping season.

Yeah.

So there are plenty as we think about right now, the most expensive thing that we are noticing is of course, technology.

So our tech editor actually found that the good laptops are running about 700 to $1000.

But there are still ways to save for that.

When you think about sales, we found that there are literally sales happening almost every other week.

Even looking in terms of refurbished products, even thinking about some of the coupons and wholesale clubs.

So just because we're seeing that really high price tag doesn't mean you have to spend that DEA I grew up in the era where I mean, we just had one family computer that everybody had to fight over access to are, are kids getting their own laptops these days, there are some families that do opt for having their kids on laptops.

However, when we really start looking at what's needed for back to school, you may find that you need more than one tablet or even more than one set of headphones and that can add up really quickly.

Wow, that would have saved a lot of arguments between my sisters and I growing up all that side though, as we're thinking about how to save big, how can people make sure they're smart shopping as they're getting ready to go back into the classroom.

Oh, yeah, a number of ways.

So we're looking at a lot of sales.

There are a couple of states that are gearing up for tax free weekends.

My state actually just wrapped that up.

So we're seeing that that's one way that people can save.

But the biggest way is number one price comparison, making sure whether you want to go to one store versus the other, seeing where you can get the best deal and then price matching where possible.

Um But those big deals, those big six beings, those are happening now for uniforms and back to school supplies.

So checking out those stores looking into those deals, those are gonna be the biggest ways to save.

And if your state qualifies, of course, tax free weekend can be on top of savings for that.

You got Costco in this, this list of ways to save on some of those high tech items and high ticket items as well.

Here is there one retailer that you expect to win out this back to school season?

Oh, it really depends.

We really gotta start looking at a number of things.

So when we look at refurbished tech being the biggest one, it's really hard to tell whether it's new tech versus refurbished tech.

There's no particular one retailer.

But I will say if you're looking at, let's say a Macbook, you might start at Apple, but you might end up looking at refurbished tech like back market.

You might even see that wot has sales going on until tomorrow.

Um, so even if you're looking at a major retailer, still look at some of those other places too, just lastly while we have you here and perhaps it's just because we're getting close to lunch and I'm hungry, but I'm gonna ask it anyway.

This also means it's a return to families, households having like quick bites, quick snacks that they can toss in the bag and make sure that they're set for whatever the day holds in education ahead for them.

So are there ways to make sure that even the food purchases in addition to the tech purchases that you're making uh can help you save some money over time too?

Oh, yes.

I'm a mom.

I know all about that.

Definitely shop that Wholesale Club.

Um See if you can go ahead and get a membership, split it with another family.

If you can, that can really help you split down the price of snacks.

See if you can do some price comparison shopping there, but more importantly, breaking down that bulk splitting that price and you still have everything you need for your kids bags.

All right now, I'm officially hungry.

DEA Milden, who is the CNET Money editor?

Thanks so much for taking the time with us.

Thank you for having me.

Hey, we've got much more on wealth after the break.

Everyone.

You're watching Yahoo Finance.

Let's end the show where we began stocks selling off this morning, but just off of session lows about 2.5 hours into the trading day here with more on how investors should manage their portfolios.

Amid the sell off.

Let's bring in Brian Mulberry who is the Zacks investment management, client portfolio manager.

Good to see you Brian and thanks so much for hopping home with us.

You know, just as we are kind of ending out the closing portion of the the morning portion of the session here, a lot of investors going into lunch time, just trying to figure out.

Ok, where do they need to continue to pay attention to some of these declines and perhaps where are their opportunities being presented?

How are you evaluating this?

Yeah, we've been a big believer that the market's been a little bit overdue for a pullback like this.

Obviously, it's not fun to go through something like this.

And I think in today's market, you see this type of action that probably would have happened over the course of a week or two, get consolidated into just one day.

And so we've been really focusing on high quality balance sheets.

We like those names that have multiple ways of generating revenue, lowly levels of debt.

So good cash flow metrics and and decent or better than the market earnings growth is possible to achieve with a higher quality balance sheet.

So you're not being dragged down by the higher cost of capital, we're in a still higher for longer interest rate cycle.

I know the market is trying to rationalize that and we're seeing earnings get repriced along those names.

So there are pe places out there where you can go in a little bit more defense of sectors like perhaps a consumer staples and you would want to own things that have those types of metrics.

Walmart, for example, you want to own that probably more than you want to own target.

You wanna own Coca Cola more than you want to own.

Pepsi.

Again, being concentrated on quality is how you're gonna survive this particular sell down in the market.

We do know that it will eventually moderate.

We're seeing we're off the session lows at this point in time.

And so there could be an opportunity to find better valuations now than there was a week or so ago.

I, I was running through some of the large and, and mega cap, I should say stocks that have moved to or through some of their moving averages at core levels.

One of those, I is one of the names that's on your radar and JP Morgan, which is below this 50 day moving average here.

Uh take us into your thesis and your thinking there.

Yeah, JP Ward is a great example.

They just went through a big stress test on the federal level, passed with flying colors, had a really strong earnings season and said things are actually getting better on the investment banking side.

This actual revaluation could show us even more activity, which means more revenue for JP Morgan.

This is definitely one of those buying opportunities for a really high quality company at this moment in time.

So if you were needing to reposition assets and, and you know, I want to certainly point out the fact that we're gonna end this debt still positive for the year on most of these indexes.

And that means a lot of these names could have an opportunity to get a better position, a bigger uh exposure to higher quality names than just buying momentum.

The way this market has been trading over the last couple of quarters, Brian is this the type of sell off where we would see a divergence in tech names and, and reason cases perhaps.

And I, and I say that because you've got some of these names that haven't seen a massive shift at least in the fundamentals.

And, and I'm thinking of a company that we've been talking about as well.

And Invidia, it doesn't seem like there's been a massive shift in the fundamentals.

But then you have names like Amazon that have crossed already below their 200 day moving average, you have a company in Microsoft that I believe might be teetering with it here during today's session.

We'll see where things close out.

So I I is there going to be this divergence between some of those core technology names that have really led the charge here over this last 12 months.

Yeah, I think so.

And the dividing line is going to be, where are you actually monetizing A I?

Because all of those names have been carried by this A I momentum, this wave of energy that has existed for these stocks.

And so the dividing line is going to be what is your business model?

There's been an enormous amount of investment from all of those companies in this type of technology, but who is actually closing the loop and generating revenue from A and we can point to Microsoft at least engaging in a subscription service that allows you to access chat GP T through your Microsoft suite of products.

And that's, you know, $30 a month subscription.

We can now say, ok, how many subscriptions have you sold?

How close are you to getting your investment back and being profitable?

The rest of the A I investment that's been made out there still isn't being monitored ties and the dividing line is gonna be who's actually going to start turning a profit?

And when, and that's what I think investors are starting to ask as we start to get to this point of, you know, uh repricing earnings.

What's gonna be a drag on your balance sheet versus what's gonna add revenue?

That's gonna be a really important question going forward.

Brian Mulberry, who is the AX investment management, client portfolio manager, Brian, great to speak with you.

As always.

Thanks for the time.

Thank you everyone.

That's it for wealth.

I'm Brad Smith.

Thanks so much for watching.

Hey, you need to stay tuned for market domination with Julie Hyman and Josh Lipton that comes up at 3 p.m. Eastern time.

They're gonna count you down to the market close.

We'll see exactly where things settle at the end of today's trading session.

You don't wanna miss it.