Stock Talk - Friday Fights and Stock Flights

Starting point is 00:00:00 Investors, I forgot to warn all our followers that I was taking a few days off in New York City late last week and most years. When I do this in February, the market's sell off hard. Well, it looks like history repeated as the S&P 500 sold off in a near straight line down last Friday, over 100 S&P 500 points, or almost 1 and 3 quarters percent on weaker economic data and higher consumer inflation concerns. The worst data point last week was the University of Michigan survey showing the consumers' long-run inflation expectations. expectations rose the most in nearly four years to the highest level in almost 30 years. We've discussed this near-exam economic weakness and ongoing slowing fast trend two to three weeks ago in our behind-the-scenes what many on TV won't tell you.

Starting point is 00:00:46 The economy is slowing fast video, giving numerous reasons, including the ending of the Biden fiscal stimulus sugar high, as well as the increased uncertainty and economic concerns by the Trump-Doge programs causing increased unemployment and dropping consumer sentiment and retail spending. Take a look at the updated chart on the two-year real-time, real interest rate. As we've mentioned for the last few months, down into the right means, we're growing, but slowing fast. As you can see, there was a summer peak last year in growth expectations,

Starting point is 00:01:19 right as the Biden fiscal spending plan peaked in front of the election, and it's been down ever since. slowing until late December when the rate of dissent picked up steam. Yes, it's most likely that this rapid slowdown in growth has been caused by the weekly Trump administration shock and off policies, usually on Thursday afternoon or Friday, on tariffs and government job firings. Whether one agrees with these policies or not, from an economic perspective and from a stock market perspective, they cause short-term uncertainty for our U.S. consumer-led economy,

Starting point is 00:01:54 and spending slows along with corporate investment plans. These plans usually slow until companies know that the set of rules are set and won't change week to week. At the same time that growth forecasts are slowing, real-time inflation expectations have steadily risen since the Trump administration took office. Take a look at the two-year real-time break-even inflation rate chart. I guess it took me leaving town to New York for others to show their concerns and sell stocks hard at the end of last week. Also, a trend we've previously mentioned happened time and time again under Trump 1.0 after

Starting point is 00:02:28 2017, when the GOP moved beyond a tax cut agenda to many other priorities, often announcing them on Thursday afternoon or Friday near the end of the week. As we've previously mentioned, soft landings in the economy do not guarantee no volatility in the stock markets. This time around, the Trump administration seems to be going for the early shock and awe, which financial markets do not relish. The good news, investors, we're quickly getting oversold and historically speaking nearing what is normally a low in both economic growth expectations of the first quarter and a seasonal low in the stock markets, and yes, a seasonal high in inflation concerns. Investors, as we've previously discussed historically and seasonally, February tends to be a lower return, higher volatility month for stocks, particularly in the first year of a presidential term.

Starting point is 00:03:18 2025 is proving this statistic true once again, and maybe a combination of tariff actions and Doge government firings for this year's excuse. I don't know. Take a look at the historic data on monthly seasonality from Steve Settmeyer's Data Group at Bank America Securities. As you can see, while February has historically been down for first year of a presidential term, that down has historically been the best buying opportunity to late summer and preceded five to six straight months of positive returns in stocks.

Starting point is 00:03:49 Historic data, of course, there are no guarantees, but since our team coined the term the old normal back in late 2022, yes, stock markets have performed quite normal ways for historic economic cycles, which we are marrying. Soft landings, however, rare they are. For now, it's been a bull market, we're in a bowl market, and however choppy things appear on your TV screens, we advise you to continue to run with the bowls, and that's the bad news for the bears.

Starting point is 00:04:17 Investors know that regardless of the path the economy and the financial markets take over the next few months, the investment team here at Oak Harvest will be here throwing the ship and adjusting our models where we can. We expect 2025 to be a very active year for active stock management. Until next week, have a blessed weekend. 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.

Starting point is 00:04:52 The views and opinions expressed herein may change without notice. 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 - Friday Fights and Stock Flights

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