Stock Talk - Moving on Up- V-Bottoms: Stock Market Update, Friday Aug 15, 2025

Starting point is 00:00:00 Investors, we skipped last week's video because the Okarvis Financial Group's investment team was busy producing, which should be the first in a series of monthly investment videos covering our long, short, hedged equity strategy, our moves in that strategy and its outcomes. This is a very unique alternative growth equity strategy. If you want to know more information, search oakarvis funds.com. Also, starting in September, we're probably going to change some of our video editing for Stock Talk, so Eric can spend more time on other Oak Harvest video productions. Expect our content to remain the same, but the look and feel might change just a bit.

Starting point is 00:00:37 Investors, it's been an incredible four months, with a V-bottom rally in stocks since peak market fears over the economic uncertainty caused by the Liberation Day tariff spreadsheet chaos. We're still in the earnings reporting window for second quarter reports, so our team is trying to sort out the good from the bad and figure out what and when we might want to make changes to our clients' holdings for the remainder of the year. year in 2026 as well. I'm getting right to the point. The last two weeks in the markets have even surprised me, I'll be it in a good way. We had the V-bottom in stocks from mid to late April well before the historic rally took hold and while many others were talking about doom

Starting point is 00:01:13 and crashes. However, I had expected a summer stall and a pullback in stocks of a little over minus 5 percent, call that back down to 6100, 6,150, and while that is still possible, it's looking a little less likely that we drop back to those levels. Why? Here's what I'm seeing. Over 2025, our team has discussed and compared the current economic cycle, uncertainty, and outcomes to a couple of other time periods. President Trump, in his second term, we've discussed Trump 2.0 versus 1.0. He came out and threw us a curveball this year focusing on frictionary economic policies such as tariffs, trade, deportations, and all things that raise costs and slow growth, And then, secondly, focused more recently on investor-friendly policies like lower taxes, lower regulation,

Starting point is 00:02:01 and targeted government spending. In 2025, he pretty much flipped the script on his first term in 2017 and 18. The second time period we've repeatedly pointed out is the late 90s.com internet infrastructure buildout, Y2K period, versus our current AI infrastructure and Federal Reserve cycle. Specifically, back then, minus 21% S&P 500 drop caused by by long-term capital markets blowing up in October 1998, early mid-to-com buildout. With the minus 21% S&P 500 drop early in 2025 caused by Trump's tariffs and Liberation Day,

Starting point is 00:02:37 this is appearing more and more likely to be mid-AI cycle, not late. Take a look at the updated overlay of the SP 500 back then and now. We're still mirroring the same pattern almost to the day and week. Looking back in time, the percent dropped the first stall after the long-term capital management v-bottom four months out was only

Starting point is 00:02:57 minus three and a half percent in the s mp 500 one uses that as a drop from our high on 731 one gets 6202 on the cash s and p 500 the low print for the second half of 2025 so far has been right at 6200620 and on august 1st the first day of august it was 6212 so far almost exactly 3.5 off the top. Investors, given what I'm seeing in earnings, sentiment, seasonality, and cycles, institutional positioning and volatility markets, as well as Fed interest rate cuts to come, I think that it's likely that the fourth quarter of 2025 in the first half of 2006 will bring higher stock markets than most think.

Starting point is 00:03:41 The pattern in the dollar index looks remarkably similar to back then and now, with most people now bearish on the DXY, just as the charts say they should be otherwise. investors are still worried about interest rates. Many are coming up with wild theories that foreign selling will cause a massive bond market sell-off, sending long-term interest rates much higher. Investors, these theories have been out there for years now, and while foreign holders have been net sellers for years, it's unlikely that it's made much difference from overall yields. More likely, the higher secular inflation here in the U.S. from overspending and money supply is causing higher interest rates, not foreign sellers. Investors, additionally,

Starting point is 00:04:21 Think about most baby boomers who are near or in retirement and still control close to 75% of the wealth in the U.S. I bet you they would relish higher rates to stash some of their wealth after earning next to nothing net in bonds for the last eight to 10 years. Investors volatility looks to be in a downtrend, both stock volatility and probably more importantly bond volatility. Both the realized and implied components of cost of hedging stocks two to six months out are almost, two to three times as much as expensive as actual realized volatility. Looking over in the bond market, the Move Index, which measures bond market volatility, has now broken below 50. And regardless of what you hear on TV, it's declining, not rising.

Starting point is 00:05:07 This has historically been a great thing for uptrends and stocks over months and quarters. Take a look at the chart of the Move Index. We've talked about this one in the past. Remember that lower bond volatility is the key to leverage players buying more assets, as Treasury bonds are the lowest risk collateral in the financial markets. Think investors, we are at marginal new all-time highs, up about 5% above previous all-time highs in stocks, and the Fed is paused. Think about that.

Starting point is 00:05:37 Think about all the bare calls for a market collapse as the Fed produced its balance sheet, and we are near 6350, 6, $6,400 on the cash S&P 500. As I write this, the Fed's balance sheet has shrunk by $2.6 trillion. since QT began. Investors were in a bull market. Against the most recent calls for an inflationary spiral caused by tariffs, we're still in a bull market. Short-term volatility has actually collapsed,

Starting point is 00:06:03 and that's without the Fed cutting interest rates. Realize volatility is around 78, Spot Fix Index is around 15, but every time that gets to around 21, the sellers come out in those markets and buyers flood into buy stocks. The cost to forward hedging stocks is very, very high relative to actual volatility. After a slowed in the pace of gains for the next few months,

Starting point is 00:06:28 what's likely to lead? I'd look no further than what led during the second half of the dot-com run, technology, financials, housing stocks, and even eventually energy stocks. Here's the historic overlay of the SOX semiconductor index during dot com, and currently for those who are still watching. If you believe in this model, sure, a sideways summer is a very keen possibility as inventory and stock gains get digested. Then, followed by a big pickup into the fourth quarter of 2025 and 2006, as orders and stock price performance go up. You might not have believed history is repeating, but someone does, or the market overall

Starting point is 00:07:07 does. Yes, investors, the pattern remains bullish, and up and to the right is good. New all-time highs are not bearish historically. While breadth is narrowing a bit over the last four to six weeks, expected to widen materially if and when the Fed cuts interest rates. Maybe be prepared in advance of the fourth quarter of 2025 to hear about the chase for performance into year end before it takes place.

Starting point is 00:07:31 Investors, even small-capped stocks, tend to work and lead for a while in most periods when the Fed starts cutting rates because many institutions are behind their benchmarks like they are this year. I titled this video, V-bottoms, moving on up, because while I continue to think the pace of the gain slow over the next two months. I also believe that on the other side, come late September or early

Starting point is 00:07:55 October, most of those S&P 500 targets for year end and for 2026 are likely moving on up, higher, not lower, for the fourth quarter and beyond. Investors, regardless of the path for the economy and the financial markets over the next few months, the investment team at Oak Carvests will be here, crewing the ship and adjusting our models where we can. Until next week, have a blessed weekend and know the Oak Harvest team here is doing what we can to plan for you and your family's future, regardless of what stage you're 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

Starting point is 00:08:38 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,

Starting point is 00:09:19 and past performance is not indicative of future results.

Stock Talk - Moving on Up- V-Bottoms: Stock Market Update, Friday Aug 15, 2025

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