Stock Talk - Fast Money: Right Back Where we Started From

Starting point is 00:00:00 Investors, let's call last week what it really was. What was that? It was fast money. I remind viewers and listeners that these videos are scripted on Sunday, filmed by Eric and his crew on Monday morning, edited and reviewed by our compliance team during the week and released on Friday afternoon. A lot can happen in five days, both good and bad. Suppose you are paying too much attention to the markets, watching the moves hour by hour and day by day. In that case, you are likely running with high blood pressure, or at least very anxious for the last two weeks of July. However, if you are out on vacation, without any news or quote service, or just watching the Olympics, if you weren't fast money, you're probably wondering what the big fuss is on the markets,

Starting point is 00:00:40 as they are spot on near flat since July 4th holiday, and actually marginally up for the month of August as of this writing. Investors, we are near right back to where we started from. Investors, as a quick recap, stock markets made an all-time high of about 56, 69. in the middle of July. They then sold off violently into the second half of July. The S&P 500 cash index opened Monday, August 5th, down another minus 3% to take the index down minus 9.7% peak to trough over about three weeks or 14 trading days. The exclamation point of the thumping came on August 5th, Monday when the Japanese markets took a tumble of minus 11% on a waterfall decline, dragging down the global stock markets. The cause for Monday's decline, an unprecedented blowing up of

Starting point is 00:01:33 unwind in yen-carry trade. For two weeks, we've discussed these moves down in price and up-in volatility are quite normal for summertime, particularly late in an economic cycle. Last week's video titled Markets in Termole, Yen There, done that before August 2007, took on how historically similar the current move down in stocks and up in volatility was to the summer of 2007, almost to the same week in August of that year when the last Yen-carry trade implosion happened. The main message was from the video, was it time to panic? Our answer then was, history said no. An investor shouldn't panic even though fast money and volatility was spiking.

Starting point is 00:02:12 Our message with the markets down was that there should be a better selling opportunity in the coming months from a higher level, later in August, maybe all the way into September. For those of you who didn't see our last two episodes or without access to historic charts and data, take a look at the chart of the S&P 500 back in 2007. Investors, as one can see, the early third quarter summer peak was near the same time as this year. And the percent decline of the cash S&P 500 peaked or trough, closing low, nearly identical on a percentage basis at about 9.5% down. Even back then in mid-2007, which, of course, we know with hindsight, was the beginning of what would become the great financial crisis and recession in 2008 and 2009. The stock markets rallied strongly over the rest of the third quarter.

Starting point is 00:02:56 Many investors forget that stock indexes went on to make a marginal new all-time high in early October of 2007. The other time we've referenced all of 2024 for being eerily similar to now is 2000, during the early Internet KAPX buildout. Once again, take a look at the chart of the S&P 500 for 2000, near the same time for the midsummer sell-off back then, near the same percentage down as 2024, near the same time for the August rally to begin, And even back then in 2000, the S&P 500 went on to clear its mid-July high before topping out for good for years. Investors, why do these three periods all look very similar when it comes to stock markets, returns, rotations, and sector and stock leadership? because all three periods come after the Fed has been raising rates, trying to slow the economy, trying to lower inflation, and hit a soft landing 10.0 Olympic score, which has historically been rarer than throwing a perfect game in the Major League Baseball. Fed is trying to recreate the 1995

Starting point is 00:04:00 economic outcome of a mid-cycle slowdown, followed by a longer-term low growth, low-inflation economic expansion. Not too hot, not too cold, just right. The markets are on edge because they're struggling with. Are we mid-cycle? Which would say stocks have years of more consistent gains ahead. Are we late cycle? Where stocks would be okay for a while, returning investors for maybe another nine to 18 months? Or are we end of cycle, where stock markets are topping and rotating into safety sectors because they are forecasting a downturn in the economy and earnings in 2000. 25. Well, we still can't definitively answer that question, but we do believe that over the next few years, active stock management will begin to reassert itself and begin to be rewarded

Starting point is 00:04:48 relative to passive investing. Since the markets have rallied strongly the last two weeks back to near 55-55 and volatility is subsided lower, now is a great time to meet with your financial advisor or your financial planner, if you have one, if you have a relationship beyond an investment account. While the O'Carvis investment team's second half outlook hasn't changed, it's best to make financial decisions when markets are calmer and your anxieties are likely to be as well. In both the prior cases of 2000 and 2007, the markets rallied strongly in August as they've already done. In 2000, the markets made marginal new highs first its mid-July high into Labor Day weekend. In 2007, the S&P 500 rallied over 10% off its August lows to make a marginal new high into early-offer. October. Such outcomes, if repeated, and that's an if, would take the markets back to 5,700 to

Starting point is 00:05:42 5,750, and yes, maybe even 5,800 over the next two to 10 weeks. Inconceivable to some, only two weeks ago, when we first referenced this data. Will that happen? I don't know. Can it happen? Sure, why not? We have a good labor market with decent employment numbers, which means strong 401k payday flows every two weeks. The Fed is starting to talk doveish into Jackson Hole, which is ongoing this weekend, and they are likely to talk dovish throughout much of September into the Fed meeting. I would think the Fed will look to continue to calm volatility in both stock and bond markets, and any exhaling of anxiety will likely lead to performance anxiety and stock chasing, stocks chasing them back to the upside now that many leveraged players were forced to sell

Starting point is 00:06:28 and who are now lagging in their third quarter performance. Investors, the Fed is too tight, in my opinion. The bond market knew it weeks ago, and the stock markets are struggling with it. We've seen this playbook before. But before you panic, remember these prior periods before the Fed found QE, quantitative using, and many other programs they used to dull and delay economic and market downturns. During both of these prior periods, the markets did not cascade lower from where they were in a straight line while they were previously discussed the years 2000 and 2007.

Starting point is 00:07:02 Investors, I repeat, during both these prior periods, the markets did not cascade lower from where they were in a straight line those years 2000 and 2007. Those were cutting cycles that happened after that. They did end in recession, though. They were pre-QE characterized by a lack of liquidity. Quantitative easing in a significant size has been implemented since then, and you know what that has historically done to tame volatility in the markets. So as we've message for the better part of the third quarter, if over the years you found yourself reacting emotionally in your portfolio to presidential elections and their uncertainty, or when volatility is high like it was a few weeks ago, now is the time to step back, take a deep breath and give your advisor a call so they can walk you through your financial plan. Take out your phone, give them a call, and see what might work for you for your longer term financial plan. Do it while the fast money has been sidelined for a while, and volatility is calmer. Do it when the markets have bounced, and we're right back where we started from. If you are uncomfortable with a wider range of possible equity outcomes,

Starting point is 00:08:07 the Oak Harvest team has launched a new strategy that retains the ability to go long stocks, short stocks, as well as buy partial hedges and shock absorbers for your stock portfolio. Information on this new strategy can be found at oak harvestfunds.com. For myself and the whole team here at Oak Harvest, have a blessed weekend and a happy labor day. All content contained with an Oak Harvest podcast expresses the views of the speaker and is for informational purposes only. It is based on information believed to be reliable when created, but any cited data, indicators, statistics, or other sources are not guaranteed. The views and opinions expressed herein may change without notice.

Starting point is 00:08:48 Strategies and ideas discussed may not be right for you, and nothing in this podcast should be considered as personalized investment, tax or legal advice. or an offer or solicitation to buy or sell securities. Indexes such as the S&P 500 are not available for direct investment and your investment results may differ when compared to an index. Specific portfolio actions or strategies discussed will not apply to all client portfolios. Investing involves the risk of loss and past performance is not indicative of future results.

Stock Talk - Fast Money: Right Back Where we Started From

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