Market Volatility and Retirement Income: Chaos or Opportunity?

Market volatility has been hard to ignore lately. The Nasdaq fell almost 5% in two weeks. Telecom stocks dropped on headlines about Elon Musk’s SpaceX. The 10-year Treasury yield ran from just under 4% to 5.3% and then pulled back below 5% in about a week and a half. If you’re retired or getting close, it’s natural to look at all that and wonder whether your income is at risk.

Here’s the short answer from this week’s Financial Hour of The Tom Dupree Show: for a patient, income-focused investor, volatility is usually more opportunity than threat. That holds as long as you know what you own, why you own it, and what risks come with it. Tom Dupree, James Dupree, and Mike Johnson spent the hour explaining why.

“The chaos doesn’t really scare us or bother us in the sense that it creates opportunities.” Tom Dupree

Tom opened the show with a song from Sierra Hull, the mandolin player from Livingston, Tennessee, playing with Molly Tuttle and Béla Fleck. (Tom wondered if she’s kin to Cordell Hull, FDR’s Secretary of State.) Then he got down to business: when markets get choppy, Dupree Financial Group uses that time to take a hard look at what it owns.

Can Starlink Really Replace Your Cell Phone Company?

The first example was close to home. AT&T and Verizon are holdings for DFG, and both have been rattled by SpaceX’s push into wireless. In early October, SpaceX agreed to buy nationwide low-band spectrum, the kind that travels farther and gets through walls better, and telecom stocks slumped on the news. This week, Bloomberg reported that SpaceX is in talks to access roughly 80,000 U.S. cell sites for a service called Starlink Mobile. AT&T, Verizon, and T-Mobile all fell again, while tower owner Crown Castle jumped.

Whether satellites can replace cell carriers remains to be seen, Tom said, and some on CNBC think the phone itself may become a dinosaur. But he knows who he’d bet on.

“I would put him up against 10 telecoms because he’s just a smarter guy, works harder, does more, and is just more resourceful.” Tom Dupree, on Elon Musk

Tom’s bigger point was about how the carriers have treated their customers. In his view, customer service has been low to nonexistent at times, which is how a company behaves when it thinks it doesn’t have to do anything but collect your bill. James agreed: they’re begging to be disrupted. If these were impenetrable companies, he said, they would have prepared for a competitor like this. Instead, they act like they never saw it coming.

What Is Headline Risk, and Why Does It Hit Slow Stocks So Hard?

James explained the investor’s problem in two words: headline risk. Verizon has fought back after each SpaceX announcement, but you always risk another headline, and then the stock is down 5%. That matters more than it sounds.

“Verizon really doesn’t move that much. So if Verizon goes down 5%, that’s like a tech stock going down 20%.” James Dupree

This isn’t new territory for the show. Back in February, when the U.S. engaged with Iran and markets were in upheaval, investors fled to quality and Verizon ran up about 20% from January to mid-February. James noted DFG took some profits at that time. The tower companies are a different story. They’re the landlords in this fight, so a SpaceX deal is good news for them. For years, the carriers had a moat, a protective advantage, because building a competing network was nearly impossible. Then along came an operator with SpaceX’s financing and willingness to think outside the box. Even if SpaceX never gets as big as the big three, Mike said, that still means lost market share and squeezed profit margins over time.

Analyst reports Mike has read say the build-out could take five years. But the market looks forward and prices it in early.

“Even if you think that the market’s wrong, one thing that I’ve learned is you gotta respect what the market thinks.” Mike Johnson

Verizon’s last two months show it. Mike said the stock fell from the upper $40s to about $42 when the SpaceX speculation started, rallied to $51 as investors rotated into quality, and has since settled back into the mid to upper $40s. Meanwhile, money keeps moving from one side of the boat to the other: tech, then not tech, then back. Those swings, Mike said, create chances to add to positions or pick up companies you’ve been watching.

Why Do AI Stocks Rise and Fall Together, Even When the Fundamentals Differ?

The big driver behind all of this, James said, is artificial intelligence. But “tech” isn’t one thing anymore. Are you talking about the hyperscalers, the giant cloud providers? The neoclouds, newer companies that rent out AI computing power? Or the picks and shovels companies, like connectivity firms, that supply the build-out? They’re all technology and all tied to AI, yet each sub-sector trades in its own basket.

That creates a pattern James has learned to watch for. When one company in a basket gets hit, the others usually get hit with it, even when their own news is good. A company can post a solid earnings report and still get sold off along with the group. He watched it happen five or six times before deciding to act on it. Often the market takes a few weeks to digest the report and then bids the stock back up.

CoreWeave vs. Nebius: Same Basket, Different Balance Sheets

James gave an example. CoreWeave and Nebius Group are both neoclouds. As James understands it, CoreWeave raises nearly all of its capital through debt, while Nebius has less debt and relies more on convertible notes that will eventually turn into shares. That gives Nebius, in his view, less default risk and more access to capital. Yet when CoreWeave sells off, Nebius tends to fall right along with it.

We covered CoreWeave’s bonds in recent episodes. The secured debt actually wasn’t bad, Mike said. It was the unsecured debt that the market punished. If you believe in the AI build-out, as James does, these basket sell-offs can bring a stronger company’s price down with a weaker one. That’s his view of how the market behaves, not a recommendation, and every one of these companies carries real risk.

What Sparked This Week’s Tech Sell-Off?

Mike asked James about Meta’s announcement this week. Meta is creating a new non-voting Class C stock, distributed to all shareholders. James explained the backdrop: California voters will decide on a proposed 5% wealth tax on billionaires, and the new share class would let Mark Zuckerberg sell stock to cover a potential tax bill while keeping the voting control his existing shares give him. Meta’s bond yields also rose after its earnings report. James wasn’t sure the two were connected, but the market turned a critical eye on tech, asking where all the capital for AI will come from. Amazon dropped significantly on Thursday, too. The sell-off hit the neoclouds and the hyperscalers alike.

James said some smaller AI-related companies have now fallen 30%, 40%, even 70% from their highs, and are being priced as if they might go to zero. Some will, he acknowledged. But if demand for AI is real, he thinks most will have a use case, because bottlenecks will force customers to go wherever capacity is left. He expects the market will eventually accept that the build-out is happening, and that the cost of capital could come down, possibly after the midterms.

Tom saw something encouraging in the sell-off. What he’s read describes it as letting some air out of the balloon before something pops. The market is looking at this with a critical eye, he said, which is not something it did in the late ’90s. It isn’t just blindly throwing capital at anything with “AI” in the name.

Hot Hands, Leverage, and Why You Need to Know What You Own

Someone in the DFG office asked this week whether the “Leopold effect” was back. James explained that Leopold Aschenbrenner, a former OpenAI researcher, runs the hedge fund Situational Awareness LP. James said Aschenbrenner has recently bought $14 million in CoreWeave call options and added more Intel calls. In September, a large anonymous call purchase widely attributed to him paid off as Micron, Intel, and CoreWeave rose 20% to 30%, though his more recent buys have not fared as well. A call option, James explained, gives you leveraged exposure for the price of a premium, but it loses value as its expiration date approaches. In July, the fund was forced to unwind its public stock positions after steep AI losses, and the selling rippled across AI stocks. James doesn’t like how quickly people pile on someone who is simply acting on a thesis.

Mike sees a familiar pattern. Money poured into Cathie Wood’s ARK funds, and the Fairholme Fund before that, until the hot hand turned cold. Capital chases performance, and then managers can’t stick to their old process with all that new money, or the market changes underneath them. James added that even a single post from a well-followed research account on X can move a $140 billion company like Arm Holdings 17% in minutes.

That’s why Mike keeps coming back to one rule: know what you own. When Situational Awareness unwound, it knocked over other leveraged bets, including the triple-leveraged and single-stock ETFs that, as the hosts noted, are popular with investors in South Korea. FINRA and the SEC have warned since 2009 that leveraged and inverse ETFs carry risks many investors don’t fully understand. Silicon Valley Bank’s collapse, tied to interest rates, was another event that shook a whole sector. Sometimes you hold steady, Mike said. Sometimes you buy more. And if something fundamental has changed, you make a change.

How Do Rising Treasury Yields Affect Dividend Stocks?

How does this touch DFG clients? Tom explained that tech is the growth part of the portfolio, and growth doesn’t always grow. Sometimes it declines. Other parts produce dividends, which have been fairly reliable.

In recent weeks, though, rising Treasury yields pushed the prices of some dividend payers down in sympathy with bonds. When bond yields rise, bond prices fall. The SEC’s investor bulletin on interest rate risk walks through why in plain English. The result, Tom said, is that some dividend payers became cheaper in price and higher in yield. DFG has been adding to some of those, and the higher yields can help offset losses in the more growth-oriented names. The firm also owns retail-related companies driven by consumer sales rather than AI.

When Growth Zigs, Income Zags

Mike walked through the rate move. From mid-August, the 10-year Treasury went from slightly under 4% to 5.3%. Starting the week of October 12, yields began to fall, and on Thursday the 10-year dipped under 5%. You can follow the daily 10-year Treasury yield in the St. Louis Fed’s free FRED database. That’s a big move down in about a week and a half, and a lot of dividend investments that had fallen in price rallied on the same day the Nasdaq fell 2.6%.

“That’s why it’s so important to have exposure to both in the portfolio, because a lot of times when one thing zigs, the other zags.” Mike Johnson

The weighting between the two, Mike said, is more art than science and has to fit each client’s needs.

The Textbook Answer, and Why Markets Don’t Always Follow It

James asked the question many listeners probably had: when Treasury yields rise, don’t dividend stocks become less attractive, since you can get a higher yield on a Treasury? (Tom’s deadpan reply: “I don’t know what you’re talking about.”)

Mike gave the textbook answer first. A higher interest rate means future cash flows are worth less today, so prices fall. The longer an investment takes to pay you back, the more it should fall. By that logic, growth stocks that pay no dividend should fall the most, because dividend payers return your money sooner. But that isn’t always how it plays out. What shocked the market, Mike said, wasn’t the level of the 10-year yield. It was how fast it got there.

Today’s Treasury rates are historically average, Mike said, and markets have done well in environments like this. If the economy is strong and the AI build-out is real, you’d expect higher rates. James has noticed that lately, on days AI stocks go up, rates go up, and vice versa. Mike called it a market full of cross currents.

What Higher Rates Mean for Private Equity Firms and Mortgage REITs

Mike gave two examples of how rates show up inside specific holdings. DFG owns shares of the world’s largest private equity firm. To be clear, that’s the publicly traded stock of the firm, not a private placement. A private equity firm has two sides to its business. One brings in new assets and earns fees on them. The other is realizing, or selling, companies it bought and turned around. Those sales depend on interest rates, because buyers usually finance them. When rates rise, valuations drop and buyers’ financing costs climb.

That showed up in the firm’s latest earnings, Mike said: realizations were so-so, new assets very strong. Tom noted new assets don’t help much if they can’t be put to profitable use. That’s the market’s debate, and you can see it in the stock price, which Mike said started the year around $110, climbed to about $150, fell back to about $118, and rallied 8% the day rates dropped. If rates simply stay in a range of roughly 4.9% to 5.2%, he thinks the firm can still do well.

The same is true of mortgage REITs, which own portfolios of government agency mortgage bonds. When yields went up, the prices of those bonds went down. But Mike said spreads are very attractive now, and leveraged positions on newly purchased bonds can earn in the range of 18% to 20%. That leverage cuts both ways, and mortgage REITs can lose value quickly when rates move against them. Mike also noted that oil, which led the rise in rates in the first place, was up the same day rates fell. The hosts had said not to be surprised if the two stopped moving together.

“Every asset that you own has a risk to it, and you just wanna be aware, mindful, and balance those risks appropriately inside of the portfolio.” Mike Johnson

Even a money market fund has a risk, Mike pointed out. It’s inflation.

Why Volatility Can Be Your Friend When Your Cornerstone Is Income

Here’s the reframe that runs through the hour. Most people experience volatility as something that happens to them. Mike sees it differently, depending on what your portfolio is built to do.

“Volatility can be your friend. And it should be, especially if your cornerstone is income. If it’s pure growth, then volatility can work against you.” Mike Johnson

If your plan depends entirely on prices going up, every drop is a setback, and you may be forced to sell at the wrong time to pay your bills. If your plan is built on dividends and interest you can see and collect, a falling price can mean a higher yield on the next dollar you invest. Your income keeps arriving while the market argues with itself. Dividends are not promised, and any company can cut one, but that’s the core of what Tom has built at Dupree Financial Group for more than 47 years. You can read more about it on our investment philosophy page.

“Even though this appears to be a really super chaotic investment environment, it’s full of opportunity if you do your research and drill into what you’re looking at doing.” Tom Dupree

Research is the part you can’t skip, Tom said. Know what you’re buying, understand its characteristics, and go in knowing the risks. That target always moves, so the work never ends.

What Should Retirement Investors Do When the Market Gets Choppy?

The hosts closed the hour with a warning about the “set it and forget it” approach, especially in a typical 401(k) asset allocation or mutual fund. If you set it up and stopped contributing, Mike said, it’s still invested for a goal you had years ago, which has almost certainly changed. Tom added that it isn’t tailored to where you are in your life, and it may carry more risk than you need.

Then Mike made a point that surprises a lot of people. If you set a mix of stocks and bonds 15 years ago and never touched it, your portfolio now has a lot more embedded risk, because the stock side has grown much larger than when you started. The SEC describes this in its explanation of rebalancing: over time, some investments grow faster than others and pull your portfolio away from the mix you chose.

Here’s what that looks like in practice:

1. Pull your latest statements. Gather every account, including old 401(k)s from prior employers, and list what you actually own. You can’t judge the risk of something you can’t name.
2. Separate growth from income. Mark which holdings pay you dividends or interest and which you own only for price growth. Then compare that split to what you need your money to do.
3. Check how far your mix has drifted. Compare your current stock and bond percentages to what you chose when you set up the account. If stocks have grown well past your target, your risk has grown with them.
4. Name the risk in each holding. Headline risk, interest rate risk, leverage, inflation. As Mike put it, every asset has a risk. Write one sentence for each holding about what could hurt it.
5. Look under the hood of anything “hot.” If you own leveraged or single-stock ETFs, or funds that have attracted a flood of money after a big run, make sure you understand how they work and what happens when the trade reverses.
6. Revisit your goals, not just your returns. Your needs while you’re still saving are different from your needs at retirement or 20 years into it. As the hosts said, you constantly go back to why you are investing in the first place.

Tom put it simply in his message during the break:

“Inflation doesn’t retire when you do, and a volatile market doesn’t care about your timeline.” Tom Dupree

A Local Financial Advisor With Direct Access to the People Managing Your Money

At many large national investment firms, you’re assigned an investment counselor working within a mass-market process, and your account runs through the same model as everyone else’s. At Dupree Financial Group, you sit down with a local financial advisor in Lexington, Kentucky. The people you hear debating rates, REITs, and AI stocks on the radio every Saturday are the same team doing the in-house research behind client portfolios, so you don’t have to work your way up a large firm’s hierarchy to get an answer. That’s what our Kentucky retirement planning services are built around. We’re a fee-only fiduciary, which means we don’t earn commissions on the products we recommend and we’re structured to minimize conflicts of interest. You can hear what others have experienced on our client testimonials page.

If you don’t know what you own in your portfolio, you need to, and we can help. A personalized portfolio analysis is the place to start. Call us at 859-233-0400.

Volatility will come and go. The investor who knows what they own, and why, is the one who gets to use it.