Stock Talk - From Panic to Peak: Why Markets May Hit New Highs This Summer

Episode Date: May 23, 2025

The April 7th low marked a major turning point for the stock market and today we talk about how history, technical signals, and market breadth indicators support a bullish outlook going forward. I explain the significance of recent breadth thrusts, including a rare combination that has historically led to strong market gains, and why most investors missed this “V-bottom” rebound. We also discuss the market’s reaction to the recent U.S. debt downgrade by Moody’s and compare it to similar events in 2011 and 2023. You'll learn why I don't expect a major pullback this time and what patterns suggest we could see new highs this summer. Watch to better understand where markets may be heading and how to position your portfolio accordingly.   About Chris Perras, CFA®, CLU®, ChFC®, Chief Investment Officer: As CIO, Chris is the lead investment strategist and director of research at Oak Harvest Financial Group. Chris develops the firm's core market outlook, putting his decades of experience and expertise to work for our clients. He hosts Oak Harvest's podcast, "Stock Talk," available on the website with new episodes each week. He completed his undergraduate studies at Georgia Tech, and went on to obtain an MBA from the Harvard Business School. Driven by a desire to maximize his knowledge and skill set, he acquired financial planning and investment management qualifications, becoming a Chartered Life Underwriter (CLU®), a Chartered Financial Consultant (ChFC®), and a Chartered Financial Analyst (CFA®).   Stock Talk is a weekly vlog/podcast dedicated to discussing the Oak Harvest Financial Group Investment Team's perspective on what's happening in the market. Hosted by Chief Investment Officer Chris Perras, each episode brings you our views on stocks, the market, and the economy — with a little education thrown in for good measure. Listen each week and help stay connected to your money!   Do you need a retirement plan that goes beyond allocating funds to truly fit your needs? We can help you create a retirement life plan customized for your retirement vision and legacy. Call us at 877-896-0040 or fill out this form for a free consultation: https://click2retire.com/Connect   Important disclosures: Content of Oak Harvest podcasts expresses the views of the speaker and is for informational purposes only. Oak Harvest believes that any data, articles, or information cited are reliable at the time of creation, but does not warrant any information contained herein to be correct, complete, accurate, or timely. References to third-party analysts should not be seen as an endorsement of their views or recommendations, and you should do your own research before investing. 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 constitutes 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. Any 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.

Investors, in our last video, V bottoms and stocks no one gets in, we repeated what we've been discussing for weeks in our videos. Looking back, April 7th was that our team thought that was the low for the S&P 500 index in U.S. stocks, much to the dismay, those calling for crashes, retests of the lows, trading range is lower or worse yet, those blown out on margin at the lows, where investors who panicked and went very late to cash late in the move. In our prior four videos, we discussed that X a few periods like the Great Financial Crisis in 0708 and the popping of the speculative dot-com bubble frenzy in 2001, history had said enough damage had been done and many hedge funds got zeroed out on the lows and many retail investors have been buying the correction. The Zweig breath thrust on April 24th created the first big technical indicator, which made us more

convinced in our prior call for a bullish move hire. The tariff deal with China three weeks later over the weekend created the reason most needed to finally cover shorts or desperately try to get back in the markets, gaping up over the 200-day moving average like it was nothing. Here's another interesting breath threats indicator that was recently triggered that I've never heard of before, but looks very interesting if you look at the data. It's based on the percentage of stocks hitting new 20-day highs. I believe it's called the DeGraph indicator after Jeff DeGraph from Renmac, who also, often appears on CNBC.

When you combine these two breath indicators, they've only hit together within one month, eight times in history. Here are the results for those seven prior periods whose outcomes we already know. A 16% gain would be the S&P 500 over 6,800 by around Christmas, and a 26% gain would be the S&P 500 over 7,400 a year out. I know, history was already on the side of the bulls,

saying calls for a retest of sub 500 blows would be wrong. Investors, like it or not, this is what Goldilocks for stocks looks like in the bond market. Rising real growth and stable to falling inflation break-even interest rates. No, not surveys or Fed speeches. The components inside the Treasury market were saying it's better to be buying gross stocks than hide in boring stable names. And boom, a new story hits that corroborates what the real-time market data has been saying if you're watching closely. Of course, last Friday's post-close with the S&P 500 features nearing 6,000. Post-May expiration, a new story hit the tape that has longtime bears and doomers circling like sharks again.

What's that story? It's the rating agency Moody's downgraded the U.S. debt from AAA. Their move dropped the country one notch down. The company, of course, was already years behind its rivals, who did this years ago. Blame the successive presidents in congressional lawmakers for ballooning budget deficit, it said, showed little signs of narrowing. Adam Koo of Piranha Profits gave us a quick data recap. cap of the prior to debt downgrades in 2011 by S&P and 2023 by Fitch. Back after August 2011, after that debt downgrade, the S&P 500 dropped minus 10.4% in 41 trading days. Of course, 12 months later, it was up 36%. Then 12 years later, in August to 2023, Fitch did the same thing. The S&P 500 dropped

minus 10.3% in 58 trading days. And after that, of course, what happened to the S&P 500? 12 months later, it was up 37%. If the markets behaved in a repeat fashion, that would have the S&P 500 dropping to around 5,400, and then rallying to over 7,200 in 2026. Investors, I don't expect the S&P 500 to fall back anywhere near minus 10% on this news story. Why? Because both prior downgrades took place during the summer in August, which is historically weak and ill-liquid seasonal time for stocks. Right now, the markets have V-bottom to start the

the second quarter, the data says most big investors were not ready for this rapid rebound and were already lagging their benchmarks by a big margin for the second quarter in year today. I mean, how many TV personalities did you hear calling for a V-bottom back in the first few weeks of April? Hedge fund billionaires? No way. I heard only retested the lows coming, or lower lows coming, or were overvalued. For four straight weeks, most sell-side strategists, No, they were cutting their targets for the first 800 points of the rally. I titled my prior video, V Bottoms, no one gets in, because historically speaking, if you didn't buy the first 10 trading days after the lows in April 7th or 8th,

you missed your best chance during the sell-off. Off the early April lows, the market has behaved almost exactly as it has the last 15 years during event-induced sell-offs. They reach bare market levels without the likelihood of an earnings or economic recession. like the one we had in 2022. What's that? We spent exactly two months to the day, breaking the 200 day moving average,

then regaining it. Count the days, and go back to our previous comparison in late 1998 with long-term capital market, October 1998, blowing up and count the days. Two months to the day. And yes, investors, now that we've extended above 5,900 in the S&P 500, it would be quite normal to digest these gains this week or next

and pullback in a very minor way. However, I wouldn't expect a big percentage decline, hoping to buy lower in the second quarter. Historically, these rapid V-bottom moves lead to frustratingly bullish, lurching grind higher for almost three months before the market finally sees significant sellers emerging. What would that look like based on prior cycles? That would be cash S&P 500 above 6,000, someplace in early June, above 6,100 around July 4th, and a summer top adder near a new all-time high, or maybe even 6,200 in early August, followed by a summer sell-off end of third quarter earnings reports. Investors, you most likely won't see those low levels in April again for quite some time, if at all, this year. Many institutions got too bearish nearing the April lows and de-risked,

and are already but way behind the performance curve in the second quarter. Does that mean you shouldn't add to stocks? No, because rarely can you pick absolute levels in both price and time, particularly in gross stocks. If you're interested in gross stock investing with a twist, you might want to look into our strategy. It's a new hedged equity strategy. Our team at Oak Carvest has put a twist on a growth stock portfolio that we think many investors will be interested in. Regardless of the path for the economy and financial markets in the next few months, the investment team here at Oak Harvest will be here, growing the ship, adjusting our models where we can.

Until next week, have a blessed Memorial weekend, and know that the O'Carvis team is doing what we can to plan for you and your family's future. regardless of what stage you are at in your career or in your retirement. 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. 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.