Minimum Wage and Inflation: What Higher Labor Costs Really Mean for Your Portfolio

**SPEAKER_1** (0:01)
This is Invest Talk, from KPP Financial, helping investors make sense of the markets one day at a time. Here's your host, Justin Klein.

**Justin Klein** (0:17)
Good afternoon, fellow investors, and welcome back to Invest Talk. This is a Thursday, June 25th, 2026 edition of Invest Talk, and we're back for another episode. Markets are moving in a new way than they have for, really since the bottom, in March. And that tells you we are under new leadership. It's some big moves in the Mag-7, the downside, but the rest of the market held up nicely. So very interesting times we are now living in.
This means a lot to your portfolio, to your indexing, because obviously you are very heavily weighted towards those big Mag-7 names. Or maybe you hold them directly. What type of exposure do you have? This is something you have to always grasp. What does your portfolio look like? Where are the risks that you know?
You should always know what risks are out there, whether that's some sort of cyclical risk in markets, whether that is some change in the way a certain sector you're exposed to is operating. Could be multiple expansion or contraction because of interest rates. There are a lot of different risks that are out there, but also rewards. Inflationary environment, prices go up, earnings go up. That tends to help most sectors, some more than others, which is something we're going to talk about later a little bit, which is about inflation and the wage, all of that.
But I'll get to that a little more in a bit. Just a reminder that this show is about you. I can talk about what it was on my mind.
Obviously, risk is the top of my mind right now, but what is on top of yours? That's what's most important. We're going to be answering your finance and investment questions. We're going to bring you data and perspective so that you can make better decisions with your money. Speaking of data and perspective, our new wealth webinar is almost here. It's coming up next week, Tuesday, June 30th, 12 to 1 PM Pacific Time, just five days away. The title is Beyond the Yield, How to Invest for Your Income Needs. It's free, but you must register over at investtalk.com. Now, in just a bit, we'll talk about today's market performance as always and run down the show topics for the hour, but let's tackle this first caller question now.

**Rosario** (2:47)
Hi, Justin and Luke. This is Rosario from Central Valley in California.
I would like to know your long-term look on PSX, Phillips 66 Thank you.

**Justin Klein** (3:03)
PSX, this is Phillips 66 This is a name I believe Warren invested in some years ago. It was a big holding. It fell out of bed in 2024 and 2025 when... Let's see. Let me go to a weekly chart here. It had a pretty big drawdown. Yeah. From a high around 172, 173, all the way down to a low in the spring of last year to about $90 per share. It's a pretty big drop, nearly 50 percent. But it's rallied since. Now we're up to 171, kind of back to those highs. Recent high, though, was all the way up to 190 and change. So it's starting $17.74 this year, and then there's 17 and change next year. So growth is certainly slowing. But $171 stock, well, you're talking about a 10 times multiple, which historically is relatively cheap. The issue, though, with Phillips 66, for everyone out there, is it's businesses up and down. Now, what do they do? They process, transport, store and market fuels and other related products. So they have midstream business, chemicals, refining, renewable fuels, et cetera. This is something I talked about, I think it was, I don't know, this was in the last week, I believe, about how I'm starting to think about energy names and oil names in general with this lack of a spike in oil prices, is that the real value, the real good businesses within the oil supply chain, the petrochemical supply chain is actually in these types of businesses, refining, refined products, transporting the end product or the, actually the oil from the well or the natural gas from the well.
Those tend to be better businesses than those big E&P companies, exploration and production companies.
So this is the type of name I would like. Now, my biggest issue here is, they do have a bit of debt, the return equity 14.5 percent, which is good. It's below their five-year average, about 17 percent. So historically, they're kind of under earning a bit. So I like to buy companies that are under earning, but getting back to longer-term profitability. So I think that's good. The amount of shares outstanding, continue to go down. They're buying back shares with that cash flow. But I would like them to repair that balance sheet a bit. So that's my biggest worry is that they have about 20, it's at 21, 22 billion dollars in net debt on the balance sheet, on a 68 billion dollar market cap. Not crazy, but also not nothing either.