Stock Talk - More Normal? Summer Rally? Stock Market Forecast Analysis

Episode Date: May 17, 2024

For investors frequently following financial news on CNBC, Fox News, or Bloomberg, the prospect of the S&P 500 approaching all-time highs again might seem implausible, especially after widespread recession predictions for early 2024 that never materialized. Despite the market’s substantial rise, many commentators who have consistently forecasted downturns remain pessimistic, often reframing their incorrect predictions as being "early" rather than "wrong." In this video, we'll explore historical stock market patterns, particularly how markets often stall before breaking out to new highs, and what this might mean for the coming months. We'll examine the predictive work of analysts like Larry Williams, compare current trends to notable years like 1995 and 2000, and discuss the potential for a summer rally.   #economicdata #sp500forecast #summerrally   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. 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.

For many investors, tuning in to CNBC, Fox News, or Bloomberg all too often, the idea that stocks and the S&P 500 could be nearing all-time highs again is inconceivable. Wasn't there near unanimous agreement in the third quarter of 2003 that we are heading for a recession in the first half of 2024? Alas, we didn't, and stocks are much higher, almost exactly 1,100 S&P points higher from the late October bottom. But even after such a run, many of those same personalities who got to be able to get to be. it wrong for their followers for the better part of two years are still on TV, preaching doom and downside. While their theories may one day be proven correct, exactly how many months, quarters, years,

or even decades in the case of Jeremy Grantham, do they get for being early? Investors, being early is a polite way of trying to disguise being wrong, but not admitting it. Even the greatest investors like Jim Simmons of Renaissance technologies who just passed away last last week are far from perfect in this business. But at some point, even the greatest investors have to admit they're wrong, not just early. Before we continue, I'm going to give a shout out to the entire Oak Carvest team because USA Today ranked us

is one of the best financial advisory firms for 2024. The award is given to the top registered investment advisory groups, that's RIA for short, in the United States based on two criteria. First, recommendations from individuals among 25,000 financial advisors, clients and industry experts, and second, growth and assets under management over 12 months and five years, respectively. I personally am looking forward to helping us move up the list over the

coming years by taking care of our current and future client base. Investors, so far, the old normal has played out for 2023 and year-to-date, 2004. What would more of the old normal look like the next few months? Well, historically, the last couple of weeks aren't the best for stocks. So with the stock markets near all-time highs and volatility now back down around historically low bound for over three decades of around 12.5 spot VIX index, X that 2017 Goldilocks year, I would expect some sloppy stock behavior in the coming weeks. It's quite rare for stocks to break out meaningful new all-time highs on the first attempt, as many traders who bought late in the move are happy to be back to break even, and sellers tend to pick up their pace. Take a look at the daily

chart of the S&P 500. One can see the market lows in October of 2022, March of 2023, late October of 2023 as well, and most recently, mid-April option expiration Friday, the 19th of April. Looking back, an investor can also see prior times in the last two years when the market stalled for two to four weeks before breaking out to new all-time highs. Take a look at the same S&P chart for the second quarter of 2023 and mid-fourth quarter of 2023 highlighted in gray. These are the times of prior stalls we made right before breaking out to new highs. This timing for a stall would also coincide with the work of Larry Williams. Here's the Larry's best fit pattern for 2024 into 2025.

Remember, investors, Larry's work was published in early January of this year. So far, Larry's work has been spot on since the COVID lows of 2020, and it's been a good divining the future path of overall markets, including twist and turns along the way. The models our investment team has been following for quite some time have two very different outcomes for late 2004 and early 2025. But they both agree with Larry's work currently. Yes, believe it or not, the Goldilocks soft landing, Greenspan-induced cycle of 1995, as well as the bursting of the dot-com bubble in 2000, both played out in similar manners in mid-year with a very normal summer rally.

Take a look at the chart of the S&P 500 in 1995 when Alan Greenspan orchestrated when a little bit of of the only extended soft landings in our country's history. That year, the S&P 500 was up a little over 15% year to date, near in a straight line into May. It paused for the month of May and bottomed close to the lows the last Friday in May, May 26th to be exact that year. The overall stock markets then went on a significant summer rally of almost 7.5% from there into the end of the July, call it the beginning of August peak. What asset class outperformed the S&P 500 back then, by a wide margin, the Russell 2000 gained almost 11% over that two-month period, besting the S&P 500 by almost 50%. Take a look at the chart of the Russell 2000 back then. The really impressive

part of this chart is the blue line in the background. That's the relative performance of the Russell to the S&P 500. While the Russell had been going up all of 1995 and making investors money, it was dramatically underperforming the S&P 500 until, yep, you guessed it, the last day in May. I bet you're asking yourself, why would Chris discuss the Russell 2000 in the years 1995 and 2000 in the same video? Goldilocks one year in 1995 and the dot-com bubble bursting in 2000? In that order? Well, because believe it or not, the Russell 2000 did near the exact same thing in late May 2000. What's that?

It troughed the last Friday in May, market unclose, and promptly rallied 13% into late July, vesting the S&P 500 during a summer rally, few investors recall because most were licking their wounds from the initial wave down in March and April of 2000. Which brings me to this week's lesson in the main point of this video. Investors historically stocks rally in the summer. Why? I don't know. But if you're interested in looking for a summer rally, keep an eye on the Russell 2000 into late May. For investors or retirees uncomfortable with a wider range of possible equity outcomes, the Ocarbus investment team has launched a new strategy. the ability to go long stocks, short stocks, as well as buy partial hedges and shock absorbers for stock portfolio.

The information on this exciting new strategy can be found on our oak harvest funds.com website. The whole team here, I hope you had a great Mother's Day. Thank you and have a great weekend.