How to Sound Smart Talking About Money This Holiday Season

It’s time to break out phrases like “soft landing” and “long-term growth potential.”

As families gather for the holidays, it’s inevitable that someone’s going to bring up the stock market or economy, especially in a year as volatile as this one. Maybe it’ll be your weird uncle still trying to convince you to invest in an obscure crypto token or your sister-in-law who’s just joined a multi-level marketing company. Perhaps Sam Altman or Binance will come up, or even inflation and the Federal Reserve.

Regardless, there’s lots to discuss. Stocks are doing well, thanks mostly to hype over artificial intelligence and big tech. Bonds had a rough few months but are recovering, and the Federal Reserve’s rate hikes are boosting returns on cash savings. But there’s potential trouble ahead, as policymakers try to keep rates just high enough to curtail inflation without tipping the economy into a recession.

And along with worrying about your portfolio, there’s opinions from your relatives to contend with.

“Thanksgiving combines two things that make people anxious — money and family,” said Mariana Martinez, senior lead family dynamics specialist for Wells Fargo.

Maybe you’ve been busy and haven’t had a chance to brush up on the latest developments. Here’s a quick guide, so you can sound smart and informed in any awkward family discussion.

Stocks

A solid year for the stock market has been a welcome relief after 2022’s plunge. The S&P 500 is up about 18% for the year, with megacap tech names like Microsoft Inc. and Nvidia Corp. fueling much of the gains. Predictions that artificial intelligence will transform the way we work and live has spurred a massive rally in stocks of companies involved in the sector. The tech-heavy Nasdaq 100 has gained a whopping 45% this year.

At the same time, there’s a long-list of threats that could ruin the party: inflation, rate hikes, geopolitical tensions, and a potential recession. In its latest meeting, the Federal Reserve took a pause on raising interest rates, but left the door open to more. Inflation is slowing according to the latest measures, leading some to speculate the Fed will start cutting rates in the first half of next year.

There are also worries that the frenzy in artificial intelligence is overhyped, creating the risk of a correction. The recent turmoil in OpenAI isn’t helping.

If you’re looking for investment opportunities, we’ve got some ideas here. Experts we surveyed were interested in defensive stocks in sectors including infrastructure, nuclear energy and medical technology.

Bonds

The past year has been filled with drama for bonds.

The yield on the benchmark 10-year Treasury is at about 4.4% after briefly topping 5% in October for the first time since 2007.

For consumers, a higher yield on the 10-year can mean higher interest rates on credit cards, mortgages and business loans. But yields have also risen on short-term Treasuries, meaning money stashed there and in money market funds has been beating the rate of inflation.

Many market-watchers don't expect the recent rally in bonds to last unless the economy descends into a deep recession. But sentiment leans more heavily toward a soft economic landing, at least for now.

The Fed isn’t expected to significantly lower interest rates anytime soon — which would theoretically spark a rally. Rather, rates are expected to stay higher for longer. What to watch for: signs that the labor market is weakening (it’s been cooling recently), and that inflation is nearing the Fed’s 2% target (the consumer price index for October rose 3.2% compared to a year ago).

Crypto

Get ready to talk about Bitcoin’s surge.

In 2021, Thanksgiving marked the top of a giant rally that pushed Bitcoin’s price to nearly $70,000. Then last year, crypto enthusiasts faced an “I told you so” moment from skeptical family members, as crypto prices plunged in wake of the FTX scandal.

This year’s twist? Another rally, just as FTX co-founder Sam Bankman-Fried is found guilty of seven counts of fraud and conspiracy. Bitcoin is currently trading around $37,000, more than doubling since the year started.

Much of the optimism is due to hopes that a spot Bitcoin ETF will finally be approved in the near future, which proponents say will make it easier for more people to invest in crypto. And it’s not just Bitcoin — smaller coins like Solana and Ripple are also notching big gains.

Should you buy in? Depends on your risk tolerance, financial advisers say. It’s still a volatile space — just this week, Binance Holdings and its Chief Executive Officer Changpeng Zhao pled guilty to criminal and civil charges.

But allocating up to 5% of your portfolio to Bitcoin might provide diversification, according to some wealth strategists. Also a potentially smart move? Avoiding making investing recommendations to family this year.