Government Shutdowns, Market Bubbles, and Your Retirement Strategy

The Tom Dupree Show

Active Portfolio Management for Retirement: Why Market Timing and Risk Assessment Matter for Pre-Retirees

In today’s volatile market environment, pre-retirees need more than autopilot investing—they need personalized investment management with direct access to portfolio managers who actively monitor risk. In this episode of The Tom Dupree Show, Tom Dupree, Jr., Mike Johnson, and Hudson Kemp discuss why active portfolio management is critical for retirement success, especially when the S&P 500 reaches record highs and market valuations signal increased risk.

Unlike large financial firms that rely on quarterly rebalancing and assigned investment counselors, Dupree Financial Group provides Kentucky retirement planning with a team approach that monitors portfolios daily. This episode reveals why understanding what you own—not just how much you have—makes the difference between panic-selling during downturns and confident retirement living.

Key Takeaways from This Episode

• Market Risk Assessment: The S&P 500’s current risk level sits around 8-8.5 on a 10-point scale due to high concentration and elevated valuations
• Active vs. Passive Management: Daily portfolio monitoring beats quarterly rebalancing for pre-retirees approaching retirement
• Income-Focused Strategy: Building dividend and interest income that compounds over 5-10 years provides stability during market volatility
• Value Investing Opportunity: When markets hit records, shifting to treasury bonds and undervalued stocks reduces risk while maintaining growth potential
• The FOMO Trap: Fear of missing out drives investors to buy at market peaks—the exact opposite of prudent retirement planning
• Personalized Portfolio Analysis: Understanding your specific holdings, not just asset allocation percentages, prevents costly mistakes
• Team-Based Research: Access to multiple portfolio managers means diverse expertise on AI sector volatility, food industry compression, and real estate opportunities
• Faith and Finance: Building financial security on something larger than market returns creates peace of mind through volatility

Understanding Market Risk in 2025: What Pre-Retirees Need to Know

With the Dow and S&P 500 reaching record highs despite predictions of market meltdowns, many investors wonder whether to stay invested or move to safety. Mike Johnson explains the current market environment:

“Markets like to climb a wall of worry. You’ve had that since April when value abounded. You could almost throw a dart in April and buy something that was good. The market is up more than 25% since then. But what you’ve had is a shift from total risk-off to now risk-on across asset classes, and it gives us pause.”

This transition from cautious to euphoric investing signals danger for retirement portfolios. As Hudson Kemp notes, the “me too money” piling into markets at peak valuations creates vulnerability that retirees cannot afford.

The 8-8.5 Risk Scale: What It Means for Your Retirement

When asked to rate current market risk on a 1-10 scale, Mike Johnson placed it at 8-8.5- primarily due to elevated price-to-earnings ratios. This assessment drives Dupree Financial Group’s current strategy of profit-taking and repositioning into government bonds and undervalued dividend-paying stocks.

“When you’ve had a period of higher than average returns, you expect the future returns to be less. If you have a stock that was trading at 80 and it goes to 50, is it more or less risky at 50? Typically it’s less risky at 50. If you have a stock that goes from 50 to 80, it’s probably more risky at 80 because it’s priced for perfection.”

Active Portfolio Management vs. Quarterly Rebalancing: The Critical Difference

Hudson Kemp shares a revealing conversation with a friend whose financial advisor makes portfolio adjustments quarterly—a stark contrast to Dupree Financial Group’s daily monitoring approach:

“I have a friend who had a meeting with their advisor two days ago. I gave them some questions to ask, and one was: how often do you make adjustments in my portfolio? That advisor makes those adjustments on a quarterly basis. Compare that to what we’ve just discussed—active portfolio management where we are watching every move in the market and making moves when opportunities arise.”

This difference becomes critical during volatile periods. When China tariff announcements or Federal Reserve decisions move markets, quarterly rebalancers miss opportunities while active managers can capitalize immediately.

Real-World Example: Morning Treasury Buy, Afternoon Market Drop

Mike Johnson describes a recent example of active management timing:

“That Friday morning is when we added to our 30-year treasuries. That afternoon is when the issue happened with China—just a big long tweet—and then the market sold off because of that. Every day you’re going to have something happening, and what we have to be careful of is getting in on the ‘me too’ train just because everybody else is.”

This kind of tactical positioning protects retirement assets while maintaining upside potential—something passive strategies simply cannot deliver.

Income-Focused Investing: The Dupree Financial Difference

While most financial advisors push asset allocation models designed for accumulation, Kentucky retirement planning requires a different approach. Tom Dupree explains the philosophy:

“We’re trying to look through the noise, the day-to-day noise, and not get caught up in the momentum. Whatever the momentum is on any given day. If the momentum’s up, you don’t want to take part in that. If the momentum’s down, that’s when you typically want to be buying. We’re in an environment now where things are going up, so we’re taking some profits off the table.”

How Dividend Growth Compounds Over Time

Hudson Kemp highlights what surprises many new clients during personalized portfolio analysis:

“After five to 10 years, you get to see that income actually surpasses the appreciation and the value of the shares that you own. It’s a long-term play, but it’s amazing to see over time when you talk to clients who have been invested with us for 10 years or 15 years or 18 years—where you can see the numbers laid out that way.”

This income stream “cranks in the background,” as Mike Johnson describes it, providing stability during market downturns that growth-focused portfolios cannot match.

Company Research: How Local Financial Advisors Stay Ahead

Unlike mass-market firms that rely on pre-packaged ETFs, Dupree Financial Group conducts direct research with company management teams. This hands-on approach provides insights that drive better investment decisions.

Learning from Food Industry Compression

The team recently invested in two food companies with different profiles—one international giant and one smaller U.S.-based company that has declined 34% this year. Tom Dupree shares why:

“The food space has gotten very compressed in terms of profit margins. Things related to food have gotten to be a much tougher business. This stock has gone down 34% this year. Will it be an immediate turnaround? Probably not, but it has a decent yield, and your risk at this price is a lot lower versus where it was at the beginning of the year.”

He recalls visiting the international food company’s Switzerland headquarters, where the CFO made a memorable promise about dividend continuity:

“We asked him, would you ever discontinue the dividend? He said, ‘You see that lake out there? They would take me 300 yards out, put concrete around my legs and throw me overboard. I will never cut that dividend.’ People in Switzerland and in Europe live off dividends—that’s why so many stocks over there pay dividends and they pay them faithfully.”

Exploring AI Sector Opportunities with Caution

While acknowledging AI’s transformative potential, the team approaches this volatile sector carefully. Mike Johnson explains:

“We’ve had a lot of calls learning about the AI sector, just trying to get our minds around that. We’ve made a couple small investments—small in terms of percentage of the portfolio—but we’re getting more comfortable with what they do. We also acknowledge and realize the volatility inherent right now in those areas.”

This measured approach contrasts sharply with advisors recommending aggressive AI sector concentration—a strategy that may work for young accumulators but creates unacceptable risk for pre-retirees.

Why Understanding Your Holdings Matters More Than Asset Allocation

One of the most common questions Hudson Kemp hears from new clients during their complimentary portfolio review:

“A large number of the clients I’ve met with leave off the portfolio review with: ‘Why don’t more people do this? Why do more people not understand what you do here?’ Because that’s the largest part of it—the income side of what we do.”

The ETF Knowledge Gap

Many investors hold ETFs without knowing the underlying companies or their valuations. Tom Dupree explains the problem:

“If you’re invested in an off-the-shelf ETF where there’s probably a large AI exposure, who knows what companies are in there, what they do? A lot of times the actual client doesn’t even know what companies they own. That’s what comes back to what we do here—we make sure that you know what you own.”

This knowledge prevents panic-selling during downturns. As Mike Johnson notes:

“One of the biggest compliments that clients can pay to us is: ‘I don’t worry about it.’ Our phones don’t ring off the hook when the market’s dancing around either. Typically the phone calls we get when markets are choppy are people calling in saying, ‘I want to come in’—these are not clients, these are prospects who realize they have risk in their portfolio.”

The Complacency Trap: Why Autopilot Investing Fails Pre-Retirees

Many pre-retirees operate on financial autopilot, hoping everything works out. Tom Dupree addresses this directly:

“If you have no idea what you actually own in your 401k, you’re not alone. We meet with Central Kentucky folks every week who’ve been on autopilot for years. After 47 years in the investment business, I can tell you this: people get most afraid about stuff they don’t understand. When our clients understand what’s in their portfolio and why, they don’t call us panicking when the market drops.”

Proactive Research Beats Reactive Rebalancing

Mike Johnson describes how the team stays ahead of market opportunities:

“Some of the companies we’ve had calls with, we’ve not invested in yet, but we’ve had calls learning about the business. We think we have a pretty good understanding of what they do and what a reasonable valuation would be. The reason you do that in periods like this is so that when you have that period of volatility, you can go back and say, ‘This is company A—it looked a little expensive when we talked to them. Now valuation has come down. That’s where I want to be.'”

This preparation allows tactical positioning that passive strategies cannot match—protecting retirement assets while capturing opportunities others miss.

Sequence of Returns Risk: The Hidden Retirement Danger

One of the most dangerous assumptions pre-retirees make involves extrapolating past returns into the future. Mike Johnson references a critical concept discussed in their evergreen educational episode:

“Somebody averaged 13% over a long period of time, but then they retired, assumed they could take out 10%, and then you got into bad sequence of market returns. That’s why we’ve been pounding the table: when the numbers work for you, assess the risk that’s in your portfolio and make adjustments that fit with where you are in life.”

For a 55-year-old nearing retirement, a 25% market correction followed by slow recovery creates dramatically different outcomes than the same scenario for a 30-year-old with decades to recover.

Asset Allocation vs. Income Focus: The Industry’s Dirty Secret

Mike Johnson reveals why most financial advisors push asset allocation over income-focused strategies:

“The industry is geared towards asset accumulation. Being a conventional thinker—that’s dangerous from an investment standpoint, but from an asset gathering standpoint, that’s a pretty comfortable place to be. We try to avoid that, not just for the sake of being contrarian, but because we think it’s a better approach for retirement investments. It’s more legwork than just doing a risk tolerance questionnaire and putting it in an asset allocation mix.”

Why Asset Allocation Falls Short in Retirement

Tom Dupree explains the fundamental mismatch:

“When you’re in the retirement years, that’s where you get the rubs. You’ve got a certain goal in mind—if it’s for income—but then an asset allocation model isn’t producing income and is more reliant on growth. That’s where the rub comes in. Typically, asset allocation models are heavier on growth buckets and not as much on income.”

This structural problem forces many retirees to sell appreciated shares during downturns to generate income—the worst possible timing.

Faith, Finance, and What Really Matters

In a powerful moment, Tom Dupree addresses the deeper foundation needed for financial peace:

“Money is not everything. Your faith needs to be in something bigger than what’s in your account. We act like our accounts are there forever. Warren Buffett has in his office a big bunch of newspaper headlines where the markets dropped a lot. You need to have faith in something bigger than just what’s in your money. You need to have faith in God. That’s what has caused me to keep moving in this business all these years. I don’t want to go out and preach to people about how great the market is and it’s going to fix all your problems—because it’s not. You have to think in terms of something bigger than money.”

Mike Johnson reinforces this perspective:

“Some of our clients teach us more about the principles we’re talking about than we do them. That’s one thing Hudson does exceptionally well—he listens. Over the years, you listen to the clients and everybody has a different story. Successes, failures. There’s so much wisdom that we’ve been able to gather from our clients. It’s been a lifetime impact from things I’ve been able to learn from our clients.”

When to Make Portfolio Changes: Reading Market Signals

The team provides specific guidance on when new clients should expect their portfolios to be invested in current market conditions:

“If you bring an account to us right now, we’re going to spend some time getting it invested. Depending on what the market does next month, or Monday or Tuesday—you just don’t know. You don’t want to get caught up in the momentum.”

Recent Strategic Positioning: Treasury Bonds and Value Stocks

Tom Dupree outlines current strategy:

“We’ve retreated to buying government bonds. We bought quite a few of them because we do believe over time that the inflation rate is going to come down even lower, and it’s going to bring the price of treasury bonds up. I don’t believe there’s anybody out there who would say this market is perfect and that we’re just going to keep going higher.”

This positioning protects against downside while maintaining exposure to quality dividend payers that have pulled back from recent highs.

The Team Approach: Why Multiple Portfolio Managers Matter

Dupree Financial Group’s team structure provides advantages that assigned investment counselors at large firms cannot match. Tom Dupree explains:

“It’s always good to have new ideas, fresh minds. That’s why we have a team—Hudson, James Clark. They’ve brought ideas. We’ve had a lot of calls learning about the AI sector, just trying to get our minds around that. Hudson was talking about a company this morning in the real estate area. We’re going to schedule a call with them and we’ll learn something. Who knows, maybe we will invest in it, but at the very least we’ll learn about it.”

Continuous Learning Drives Better Outcomes

“The other interesting thing about talking to companies and the research that is done at Dupree Financial Group: oftentimes if we’re talking to a company about what they do, we learn something maybe we didn’t think we would learn, which leads us to think about another path. Then we talk to another company as a result of that path. It’s just continuous learning—it always makes one better. Doesn’t matter what it is you’re learning about.”

Take Control of Your Retirement: Schedule Your Complimentary Portfolio Review

If you don’t know what you own in your portfolio, you need to—and we can help.

At Dupree Financial Group, we provide Kentucky retirement planning with a team approach that puts you first. Unlike large financial firms that assign you to an investment counselor working from standardized models, you get direct access to portfolio managers Tom Dupree, Jr., Mike Johnson, and Hudson Kemp—professionals who actively monitor your investments daily, not quarterly.

What You’ll Discover in Your Complimentary Portfolio Review:

• Risk Assessment: Your current portfolio’s risk level and how it aligns with your retirement timeline
• Holdings Analysis: Exactly what companies you own and whether they match your income needs
• Income Projection: How much dividend and interest income your portfolio generates vs. what you’ll need in retirement
• Strategic Positioning: Where opportunities exist to reduce risk while maintaining growth potential
• Personalized Recommendations: Specific steps to align your investments with your life goals

After 47 years in the investment business, Tom Dupree has learned one critical truth: people get most afraid about stuff they don’t understand. When our clients understand what’s in their portfolio and why, they don’t panic when markets drop—they have confidence in their retirement plan.

Ready to Take the Next Step?

Call us at 859-233-0400 for your complimentary portfolio review, or schedule an appointment directly on our website.

Learn more about our investment philosophy and approach:

• Our Investment Philosophy and Team Approach
• Listen to Past Episodes and Market Commentary
• Client Testimonials: Hear from Pre-Retirees We’ve Helped
• Kentucky Retirement Planning Services: Local Expertise for Central Kentucky Families

Dupree Financial Group: Where We Make Your Money Work for You

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