What You Need to Know
- He's focused on the market long term but on the trajectory of the pandemic short term.
- Ritholtz says clients are asking about housing prices and inflation and he's focused on their purposes for their money.
- He understands blockchain but is hesitant about crypto.
Barry Ritholtz, the co-founder and chief investment officer of Ritholtz Wealth Management who’s also well known for his blog, The Big Picture, opinion columns on Bloomberg and for hosting that news site’s Masters in Business podcast, spent some time recently talking with Thinkadvisor about the financial markets and economy, federal tax hikes and the concerns of the clients of his $2 billion firm.
In a wide-ranging interview, Ritholtz brought his no-nonsense, practical views on some of the top issues and questions facing financial advisors as they serve their clients, always adding context to the discussion.
Here are some highlights.
What Ritholtz Is Hearing From Clients
The two biggest questions he’s hearing in 2021: Is there a housing bubble and is inflation rising?
Housing prices are rising because there is not enough supply, Ritholtz says. Builders have been focusing on multi-family units but not on single-family homes. “Nothing is available and prices are going up,” he says.
Higher lumber prices are adding to that pain. But he says homebuilders are now shifting from building apartments to building homes. They did build out in the exurbs in the early 2000s believing that people would tolerate a longer commute to the city to work, but maybe the lesson from pandemic is that people don’t need to commute.
“I don’t expect to see much inflation. … Every generation fights the last war,” he says. “If you’re 60-something today you have a vivid recollection of the ’70s’ stagflation. Inflation was up but wages were not… Nor was job availability. The ’70s left a scar on a lot of people, but in my expert opinion we’ve been in a deflationary environment for three decades.”
He continued, “I don’t care about core inflation because the Fed took rates so low …. physical goods are cheaper, labor is outsourced. … But health care and college costs keep going up — markets where consumers have no say.”
Ritholtz also noted that in housing and other markets where supplies are in short supply, short prices are rising, but those hikes are will last maybe six to 18 months and then normalize.
Ritholtz on the Markets
“I don’t care about the next month,” he says. “Next month is only relevant because Memorial Day is a three-day weekend.”
He continued, “Our clients understand they put money in the stock market because they’re investing for long-term goals,” such as paying for college and retirement and giving to charity. “You have to think in those long-term concepts when investing for the long term.”
Over the course of the pandemic, the U.S. stock market experienced its fastest selloff and one of its fastest recoveries, breaking even in five months, Ritholtz said. “Once you get that recovery the market has a trend behind it, the wind at its back … and starts to attract a different type of buyer.
“There are all sorts of signs of froth, frothiness that normally would make me nervous, but these aren’t normal times. People have been stuck at home, bored, and so the market is a new casino for them … Who cares about GameStop … [The runup in the stock] “is just bored traders entertaining themselves.”