Stock Talk - Presidential Election Cycles and Other Factors Affecting S&P 500 in the First Half of 2024

Starting point is 00:00:00 First off, investors, Merry Christmas and Happy Belated Hanukkah and any other holiday you might be celebrating this time of the year. And on a second note, I want to thank our viewers who wish me well in my recovery on my eye surgery. Don't have the eye patch this weekend. That doesn't mean I've fully recovered. My doctor just said, don't wear the eye patch, so I'm doing what he said. Okay, so on tour our content. Frequent Oak Harvest Investment content, consumers know I love data, and I love to study the history of stock markets and economic cycles. Why? Because it's largely a real-time view into behavioral finance and investor emotions.

Starting point is 00:00:34 The 2024 market outlooks by strategists are out across the media outlets, and most of them read quite opposite the negative herd that entered 2003. Many entered 2023 calling for recessions and or lower stock markets. From what I've seen, most strategists this year, who missed the big rally in 2023 are now out talking much higher targets on the S&P 500. at least 5,000 on the S&P 500, and some in the mid-5,000s already. The investment team at Oak Harvest did not forecast a bad 2023 way back in December of 2022. Many well-known financial personalities called for investors to gorge on stocks at 3,000, or called for months at least a retest of the October 22 lows at around 3,500, 3,600 on the S&P 500.

Starting point is 00:01:22 But stocks rallied into the first quarter of 2003. Of course, looking back, none of the first. of these events to the downside happen. No 3,000, no retest, no October 1987 crash replay. Investors, our second half outlook for 2023 had a year-end target of about 4730 to 4,800 near all-time highs, pretty much where we stand right now. Not only that, we called for a summer sell-off in advance of the down draft, and also called the near-exact timing for the October lows as well. Our second half-2020 Outlook was released back in July and called for a down then up. You can find the link to the outlook in the description below.

Starting point is 00:02:03 In fact, I got to pat ourselves on the back here at O'Carvis. Troy Charles and I did a YouTube live stream on Thursday, October's 26th, right in front of the seasonal upterm in the fourth quarter. We talked about it in advance. Here's the link in the description below. Many market strategists who are absent or very late to the 2023 rally in stocks are now citing the present. are now citing the presidential election cycle year four as a big reason for their now bullish positions and much higher S&P 500 targets. So investors, I'm here to curb your enthusiasm for stocks here into year end.

Starting point is 00:02:35 Nearing all-time highs of 4730 to 4,800 if your strategist is only now discussing the presidential election cycle as a positive factor for stocks. Today's episode is titled First Half-2020 Outlook, Part 3, Presidential Election Cycles Year 4, the grins that stole Christmas. Investors, the presidential election cycle has been a real thing in the markets for the decades. It's been a consistent winning strategy time and time again, regardless of which political party is in control of the White House. Here's the data summary compiled by the quant team at Bank America, Merrill Lynch, and Steve Sutmeyer's group. The data is the data, and yes, it does seem positive for 2024 based on the presidential election cycle. However,

Starting point is 00:03:20 However, many strategists now touting it failed to weigh this strategy in October of 2022 when we first entered the sweet spot of the cycle, and in my opinion, they're now weighing it way too heavily for 2024, just to back up their forecasts as they seem to be trying to play catch-up to the markets. Let's look at the monthly data for year three historically the most bullish for presidential cycles. Investors, I only know a couple of strategists who strongly messaged this factor or pattern in late 2022 when the markets were on their lows as positive for stocks in 2023. And of those who did, I know even fewer who also message a summer pullback in October of

Starting point is 00:04:00 2023 would create a big buy for the fourth quarter rally. For what it's worth, Oak Harvest was one of these firms. Unfortunately, while I do believe this will be somewhat helpful factor for 2024, I don't share the others' enthusiasm for how much the normal monthly pattern for the year of four will hold in 2024. Furthermore, as we exit 2023 near all-time highs, I can't find this factor helping the markets exceed S&P 500,000 in the first half of the year. Hence, first half, 2024 owed to REM, S&P 500 greater than 5,000, I can't get there from here. Take a look at the monthly returns for every fourth year presidential cycle since 1928, along with the average in median returns in the lower table. The average monthly

Starting point is 00:04:47 return profile argues for the S&P 500 doing absolutely nothing during the first half of 2024. It equates to about half a percent up for the first six months of 2024. Investors, the median monthly return profile argues for a first half, 2024 return of just four and a half percent from the current level when we're filming this video on Monday, that would equate to about a 5 percent return at the end of the second quarter of 2024. Unfortunately, when looking at the finer detail of the last 100 years in comparing our current cycle that started in October of 2022 to previous ones, my work continues to say

Starting point is 00:05:26 we are currently still mirroring a prior cycle that most investors would rather forget. October 1998 through March of 2000, the internet.com bubble. In late 2023, Jerome Powell is talking quite similarly to Ellen Greenspan in late 1999, as both are trying to calm the bank market for year-end and give the banks better year-end liquidity and balance sheet mark-to-market positions.

Starting point is 00:05:52 Should we continue to trade on the top of this pattern, let's see in late January or late February of 2024, should the markets fall 7% to 10% rapidly, which happened in early many of these years, how many sell-side strategists step up bullishly? Let's see if volatility doubles to the low to mid-20s, how many of these strategies step up, citing presidential election cycles,

Starting point is 00:06:16 as a reason to buy the dip, buy the pullback, or correction for targeting new all-time highs in the late first quarter or second quarter of 2024. Historically, most strategists won't do it. Most of the time, you'll see most of these people cut their targets in a down market and increase them in up markets. As for now, that's not what Oak Harbis is planning on doing on any swift and sharp down move in the markets lower in the first quarter of the year. Investors, for now, our first half outlook for 2024 remains, as it has been alluded to for almost a year. The first quarter of 2024 should usher in a year of heightened volatility. This volatility should present itself almost immediately in the first few weeks of the year and throughout the first half at

Starting point is 00:07:00 2024. That's the bad news. The good news, new all-time highs in the S&P 500 are likely coming in the first half, most likely late first quarter, and the S&P 500 can near 5,000. That level is not inconceivable at all, just more of the old normal returning to the equity markets for 2024. However, listeners, investors, exceeding and sustaining levels above 5,000 on the cash S&P 500 for the first half of 2024, well, investors, sorry to say, I can't get there from here. This is why our investment team believes that more active and tactical investing and trading strategies first buy and hold ones will likely be a better way to invest for a couple of years. for more on that topic in the weeks and months ahead.

Starting point is 00:07:47 Investors, I want to personally thank you for tuning in to this channel over the year. I hope it's been educational. And clients, I want to thank you for trusting in Oak Harvest to help you manage your financial future. From myself, from Troy, Jessica, the whole team here, the whole family at Oak Harvest, have a blessed new year. All content contained with an Oak Harvest podcast

Starting point is 00:08:06 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,

Starting point is 00:08:32 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.

Stock Talk - Presidential Election Cycles and Other Factors Affecting S&P 500 in the First Half of 2024

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