Stock Talk - How to Survive in the Stock Market: Market Timing Made "Easy"

Starting point is 00:00:00 Okay, investors, let's talk about market timing the stock markets. I'm going to be frank. It's the glorious pot of gold at the end of the rainbow. It's the unicorn of tactical stock investing. Investors, it's the Honest Wagner T206 or the Mickey Man all-tops 1952 rookie card of baseball card collecting or that Ferrari 250 GTO of car collecting. For our female followers, it's that black crocodile Kermez Birkenbag. In other words, in the world of investment management, it's often looked at as the holy grail of investors.

Starting point is 00:00:34 But few investors, particularly those in retail investing world, had the skill set or emotional fortitude to achieve it successfully. I mean successfully more than once. Because if it's successfully done once, while profitable, I'd argue that most likely it was luck over investing skill. The quote I often see is, time in the market beats timing the market, was attributable to Ken Fisher, the founder of Fisher Investments, the largest independent RIA in the country, with assets under management nearing $300 billion with a B. However, many other prominent investors in money

Starting point is 00:01:08 management firm executives before him had messaged similar opinions. Before Ken Fisher, Peter Lynch of Fidelity fame, around 1995 said far more money has been lost by investors trying to anticipate corrections than lost in corrections themselves. Jack Bogle, the founder of Vanguard, never wants to mince word, on his opinion said the idea that a bell rings to signal when to get into or when to get out of the stock market is simply not credible. And of course then there's Warren Buffett has been very vocal on this subject many times during his career going so far as to say the only value of stock forecasters is to make fortune tellers look good. I guess he didn't want to disparage economists or weather people either. Overall, I have to agree with them. Why? Just look at our video last

Starting point is 00:01:54 weekend entitled The Most Hated Bull Market Ever, or the week before, the Great Reset and what it Means for your money and total up the returns you would have missed out on if you were scared out of stocks during some event over the last decade or 15 years. Before I continue, if you're new to this channel or enjoy this content but haven't subscribed yet, please click on the subscribe button and set up the notification bell so you will be notified when we upload our latest content. I've been Chief Investment Officer here at Oak Carvis for about seven years. And I want to look in the rearview mirror for a second

Starting point is 00:02:28 and see all the events that have transpired just in that period and the returns, an investor in the overall S&P 500 would have missed out on had they been shaken out during the major events that have happened. This isn't to say that one can't optimize additional investments into the market, but emotionally investing, which usually means getting FOMO or fear or missing out when stocks are rising parabolic or emotional and selling stocks when they're down.

Starting point is 00:02:54 and volatility is high is not the best additive investment program. Here's the chart on the Cash S&P 500 for the last seven years with as many meaningful events as I could recall in their timing circled. So looking back in time, many investors I know claim they long for years like 2017. Back then post Donald Trump being elected in late 2016, the S&P 500 didn't fall more than 1% after August 2017 and didn't drop more than 4% since the presidential election as investors bid up stocks in advance at the passage of the Trump tax plan, which wasn't even signed until late

Starting point is 00:03:29 December 2017. Had you waited until it was passed, you missed most of the move up because come late January 2018, the market peaked and on the back of talk of a looming China trade war and tariff war, setting off what has since become known as Valmageddon during February of 2018 when the S&P 500 dropped almost 12% in less than a month. Post February 2018, the markets recovered the better part of all their losses over the next eight months into the fourth quarter of 2018, but they fell again as Jerome Powell made comments about continuing to raise interest rates, and he caused an almost 20% down move into Christmas Eve 2018. Back then, during Christmas Eve in 2018, that was our first audio stock talk, and we recorded and released it at that time to try to calm our clients' nerves in detail what we were thinking.

Starting point is 00:04:24 about the market direction from then on. By New Year's Eve, 2019, Jerome Powell had reversed course and discussed more Dovish policies and the markets were able to exhale and continue marching higher on stable growth and earnings into late first quarter of 2020 when the truly unpredictable hit.

Starting point is 00:04:42 That was the COVID pandemic. Back then during COVID, global economies were shuttered and the S&P 500 dropped. It's almost spot-on recessionary down move of minus 35% in less than a month. in less than a month before global central banks and fiscal spending came to the rescue to jumpstart and reinvigorate the economy. From April 2020 into late 2021, the S&P 500 gained an heir historic 120%, making new all-time highs near 4825 before growth peaked, and inflationary pressures grew too

Starting point is 00:05:15 excessive, causing the Federal Reserve to begin to message an interest rate hiking cycle was to begin shortly. In late February of that year, flashback and remember the media news stories during this time. A heated 2020 presidential election won by President Biden, conservative media networks opined the stock markets and economy would crash that year. Neither did. Russia invaded Ukraine, and there was talk of $200 barrel in oil. Remember all those calls? Where does oil sit now? Two and a half years later, around $80 a barrel, initially down from a short-term spike of about 120. The most interesting thing to me during that time period is the prescient forecasting ability of the overall market, because by the time the Fed started hiking interest rates in mid-2020,

Starting point is 00:06:02 the S&P 500 had already dropped about minus 25% into early June. The exact same month than inflation reading peaked at over 9%. The rate hiking cycle began, but if you waited this long to sell, there was only about a minus 2.5% downside left in October 22. totaling down minus 27 and a half percent from the early 2022 peak. Investors, the Federal Reserve was outraising rates materially and fast in late 2022 and in the first half of 2003. And what happened in stocks? Yes, they rallied almost 32 percent into the summer at 2023. Markets then sold off in their normal seasonal pattern in October of 2023 as the economy slow. And many media outlets were discussing looming start market crashes, recessions,

Starting point is 00:06:50 and replays of 1987. None of which occurred. The Israeli Hamas war started in October of 2003, and did the stock market tank? Nope. It was already moving down on economic slowing. What happened? Interest rates peaked, earnings started to reaccelerate in stocks. Well, stocks have now returned nearly 40% since that low. This time period includes the presidential candidate dropping out and being replaced, another one being shot at in the horrific war going on between the Israelis and Hamas, escalating in the Middle East and the ongoing war in Ukraine. As I said last week, almost every year, the S&P 500 has gained the last 14 years. I recall hearing from many in the financial media that this is the most hated bull market ever.

Starting point is 00:07:35 But every year, until now, I've disagreed with these calls. Until now, why? Well, if you want to know more, check out our last week's video. I'll include a link in the description below. Investors, yes, this is one of the most hated bull markets over the last 40 years. Market timing is hard and generally not a good idea for investors. Why? Because you must be right twice, getting out and getting back in. And more specifically, you must be right both on price and time multiple times. Investors, I've developed some tools that do help in identifying

Starting point is 00:08:06 risky time periods when one should go slower and in their investing program or better time periods when you should speed up their program. But nothing is perfect. No system is perfect. And no, AI will not be the answer to this question, even with the billions of dollars being spent there. Even with the system, the hardest thing to do is to be patient,

Starting point is 00:08:25 waiting for the stars to align to act or react, and use the system because most of the time, the economy wants to grow, and stocks, or at least the overall broad indexes, want to appreciate. Historically, our economy has grown over years and decades. Historically, the odds are high, that stocks appreciate over three, five, seven, or ten years, and the longer one holds them,

Starting point is 00:08:47 the higher the batting average for a positive outcome. Over time periods measured in multiple years, stocks or ownership and equities have proven a better inflation hedge than most other asset classes as they can appreciate with their revenue and earnings growth, which are functions of both unit growth and pricing growth minus their costs over time. Take a look at this great graphic from Capital Group, showing the longer the holding period measure, in years, not days, weeks, or months for the overall S&P 500, the higher the likelihood of a positive experience in return. This is 96 years of investing through 2023. Looking back in time, the economy shrunk in the first half of 2022 on a real GDP basis in earnings growth and the S&P 500 went from

Starting point is 00:09:33 plus 15% to start the year to almost minus 10% year to year to end 2022. And what happened to the overall S&P 500 during this period? Yep, you guessed it, it declined hard. But overall, we're still in a secular bull market. Warts and all, wars and all, presidential elections, and candidates and all, mistakes by politicians, COVID lockdowns, China slowdowns, quantitative tightening, bank runs in California, office real estate crashes, and all, a secular bowl market. Take a look at the 10-year chart of the S&P 500 during the ongoing secular bull market. Up and to the right in a channel, I stripped out the overshoot in 2021 and the undershoot during the COVID crash. But this is a secular

Starting point is 00:10:16 trend so far. Many investors who panicked out back then have yet to get back in the market because shorter term interest rates have risen and they feel fine with a lot of their money earning around 5% relatively risk-free. However, after we experienced the earnings recession in the first half at 2022 and the economy got back on their upward trajectory, stocks have appreciated higher. That's why The vast majority of time, I have to agree with many of the legends. Time in the market trumps market timing. Investors, if you're uncomfortable with a wider range of possible equity outcomes, the O'Carvis team has launched a new strategy that retains the ability to go long stocks, short stocks,

Starting point is 00:10:54 as well as buy partial hedges and shock absorbers for a stock portfolio. You can go to our website, oakharvestfunds.com and find information on this new strategy of ours. From the whole team here, from Eric behind the camera and myself, have a great weekend. 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

Starting point is 00:11:38 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 - How to Survive in the Stock Market: Market Timing Made "Easy"

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