Stock Talk - Navigating the Stock Market Rollercoaster: Doomsday or Just The ”Old Normal”?

Starting point is 00:00:00 Investors, much to the chagrin of Perma stock market bearers, the old normal keeps playing out in 2003, almost to the week and almost to the day. It looks like the bottom and upterm to the fourth quarter rally came right on cue. The markets looked to have made a low on Friday, October 27th, at the end of institutional tax positioning, at the end of the final full week in October. The old Carvis investment team had discussed this likely dynamic for months, all the way back in June and July, and its likely outcome for the markets turning back higher, in very late October and early November. Folks, most everyone on financial TV says, we don't have a crystal ball and then goes on to give their opinion predicting what the future

Starting point is 00:00:39 might hold for the markets, sectors, or individual stocks. Investors, by definition, that's the meaning of behind having a crystal ball. However, nowhere in the definition does it say the prediction seen when looking into a crystal wall will be accurate, particularly when it comes to the financial markets. We do our best with limited information, making decisions based on our experience and knowledge serving our clients in the best manner we can. The future is always hazy and uncertain. Two weeks ago the title for the stock talk was it's make or break time and last week we followed it up with is it really different this time? I put the links to those two videos in the description

Starting point is 00:01:18 below in case you missed them. This week I'm repurposing and updating some of the content and real-time data we watch and we've shared with you over the last four months during the summer correction in the stock markets. For fun, I'm titling this one, Santa has a calendar, and he's got a Bloomberg too. Please take a moment to click on both the subscribe and notification bells so you'll be notified when our investment team uploads our latest content. Or better yet, give our O Carvice team a call at 877-896-0040 to speak to our team and set up an initial consultation with an O Carvis advisor to discuss your personal financial situation. Okay, investors, the S&P 500 traded down and to the right in a very normal seasonal fashion

Starting point is 00:02:01 since the mid-July 4,600 peak. Here's a chart of the S&P 500 since last October, 2022 when we made our lows. Investors, the overall market has gone nowhere since mid-June of this year and closed slightly lower than 200-day moving average a week ago. And of course, that's when the dire 1987 crash calls came out of the woodwork, even though year-to-date, the S&P 500 looks nothing like that. like it did in 1987. While many of those calls were being put out in force by a host of financial TV personalities, the O'Carvis investment team was messaging it was finally a favorable

Starting point is 00:02:34 environment for the market to finally turn up. Why? For many of the same reasons, we've discussed over four months ago in advance of this correction and throughout the summer pullback. First, the end of October comes with it, what has historically been the sweet spot of the seasonal calendar for the fourth quarter rally during the third year of a presidential cycle. I've had those dates circled on my calendar since October of 2022. Yes, for over a year. Investors, historically, the Santa Claus rally that many in the financial press talk of doesn't start in mid-December. I repeat, historically, it doesn't start in mid-December. It starts at the end of October. Investors, Santa Claus, unlike many shoppers who can now use Amazon for next day delivery, Santa Claus shops early.

Starting point is 00:03:20 We've covered the monthly seasonal returns for the S&P 500 many times over the years. But once again, here the daily, yes daily, average return since 1945 from Merrill Lynch. Okay, so if you break out your reading glasses and look closely enough at this table, what you'll find is amazing. It's October 26th and October 27th, the same days as two weeks ago are historically the end of the summer sell-off, not the beginning of a market crash. Of course, history doesn't always repeat and past performance is no guarantee of future result. But so far, so good for 2003 in the beginning of a fourth quarter Santa Claus rally.

Starting point is 00:03:58 Hence, the first part of this week's title, Santa has a calendar. So now not looking at historic data, but rather looking at two real-time data series that we've discussed early and more often than most advisors, which have proven early to tops and bottoms in the market the last few years, we find reasons to support our ongoing fourth quarter stock market rally call. The first is a chart of real interest rates that about two weeks ago, right near their peak, many other financial commentators on TV, after ignoring them for almost 18 months,

Starting point is 00:04:27 finally discovered their significance. For trading in short-term indicator purposes, I've been watching the one-year and two-year real interest rates, and those both broke their uptrends the week of October 13th. For this video, I'm going to focus on longer-term maturity of the 10-year real interest rate, which many other advisors have been quoting is key. You'll see on the Bloomberg chart below

Starting point is 00:04:48 the steep uptrend since July has been broken. That's a great thing. You'll also see from the chart below from the technician Rob Slimer at RBC Wealth the momentum indicators like the RSI have peaked and rolled over for real interest rates. Like when? Yes. Like October 2020 lows in the markets. And that's an incredibly good thing.

Starting point is 00:05:09 I've discussed the importance of real interest rates to stock PEs in the markets for over a year now. Investors, this cycle, a peak and trend change in real interest rates has been an early indicator of good things to come. Similar prior peaks included Christmas of 2018, the COVID-2020 lows, and most recently the October 2022 stock market lows. Investors, this is the first strong indicator Santa Claus has a Bloomberg too, and seems to be a chartist at heart. The second and final real-time data series I want to discuss is the dollar. For this cycle, dollar weakness has been good and dollar strength has been bad for stocks. Why? Because the dollar's strength

Starting point is 00:05:49 hurts U.S. large-cap stocks earnings as they have heavy revenue exposure overseas. Dollar strength marginally hurts the S&P 500 revenue and earnings growth rates, while dollar weakness helps both. Here's a chart of the broad dollar index most investors look at. That's the DXY index. If you overlay a chart of the S&P 500 on the chart of the DXY index, you would see that rallies and selloffs in the S&P 500 would coincide in an inverse way with rallies and selloffs and the DXY Index. While the stock market was selling off at the end of the week of October 20th, few TV commentators were looking at these two real-time data series,

Starting point is 00:06:27 both real-time data series implied that stock markets would be bottoming shortly in their very normal seasonal way. And given the stock market's reaction and strong rally up the week of October 30th, once again, I have to say, Santa has a Bloomberg and is a better charters than many others in the world of finance. As for a template of what a continuation of the old normal, might look like for the remainder of the fourth quarter of 2023 and the first quarter of 2024. I've updated chart I've referenced for about a year comparing the final two years

Starting point is 00:06:57 of the internet buildout in 1998 through 2000 to the current AI cycle buildout land grab that started in October of 2022. To the date, the market's move in asset classes has been eerily similar almost to the day and week. I challenge you to explore this topic and analogy of time periods, on your own research. For now, it remains the Old Carvis investment team's opinion that no, the summer sell-off that we forecasted from July was not different this time, and the seasonal Santa Claus rally starting late October and lasting into late December and potentially extending into a very volatile manner into mid-March of 2024 will not be either. O'Carbis Financial Group manages broadly diversified equity portfolios that balance risk and reward for our clients. The investment tools

Starting point is 00:07:47 our advisors and financial planners use are usually a combination of market-based and insurance-based tools to meet your retirement goals. Our in-house investment team is busy working on new tools for our advisors and retirement planning teams to use in the future. Stay tuned. The future in the stock markets are always uncertain, and that's why our retirement planning teams plan for your retirement needs first and your greed second. Give us a call to speak to an advisor and let us help you craft a financial plan that helps you and your family meet your retirement goals. Call us here 77-896-00-40 and schedule and advisor consultation. We're here to help you on your financial journey into and through your retirement years. From myself and the whole team here at Oak Harvest,

Starting point is 00:08:28 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. 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

Starting point is 00:09:14 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 - Navigating the Stock Market Rollercoaster: Doomsday or Just The ”Old Normal”?

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