Stock Talk - Scenario 3 - Muddling Through 2024, Range r Us

Starting point is 00:00:00 Investors, over the last two weeks, we recap the first quarter of 2024 returns and we covered what the remainder of 2024 and the first quarter of 2025 might look like for the stock markets under two scenarios. First, a continued soft landing outcome like 1995 which would project S&P 500, 5,9,6,000 into the first quarter of 2025 and a second hard landing outcome, as we had in late 2000, early 2001, post the dot-com bubble, when the Fed and economic slowdown induced a recession and the markets dropped minus 30 percent, equating to 3,500, 3,600 on the cash S&P 500. This happens to be where the market was in late October 2022 at the market's most recent

Starting point is 00:00:49 major low. You can find the links to the two prior videos in the description below. I'm biased, but I think they're both worth anyone's six to ten minutes if an investor is interested in economic and stock market cycles. Before we get into the third scenario, which I titled muddling through with a shot of volatility, I want to briefly note that this past weekend's Iranian missile attack retaliating back at Israel does play into a hard landing, an earlier Fed Reserve interest rate cuts this year, which investors most likely would take positively for a while. However, the rapid escalation in fighting in more regions of the Middle East also increases the risk of a potential hard landing outcome that played out in the third quarter of 2000 through 2001.

Starting point is 00:01:35 Investors, that was last week's video. While this outcome would be very rare for the fourth year of a presidential cycle as politicians are busy trying to win votes and the election by keeping the economy chugging along, it did happen in 2000 and 2008. both presidential election years. As we stated in last week's video, the prior low-index-level volatility regime we were in in the fourth quarter of 2023 and the first quarter of 2024, up until the attacks in Iran and Israel the last 10 days, most likely wouldn't last. Well, sure enough, that low-volatility environment didn't last long, with a spike in volatility rising quickly last Friday to 1925 on the spot index up from 12.5 to weeks ago. What would muddling through look like for the rest of the year, it would probably look a lot like a combination of 2000 without the

Starting point is 00:02:26 terrifying ending and 1995 without the party at the end of the year. Given what our team sees in earnings growth, interest rates, volatility markets, sentiment levels, and economic and presidential cycles, it would probably look a lot like a big range between, say, 4,900 on the S&P 500 and 5350 to 5400 on the S&P 500. First level down on 4,900. cash S&P 500, is that level of forward volatility markets that those insurance salesmen who price forward risks say big institutional buyers might look to back up the truck and re-enter the markets in size. In addition to volatility markets looking at that level, normal presidential cycles and seasonal trading patterns also triangulate in many cases to that level. That

Starting point is 00:03:14 4,900 level is where we close January in many years that start off strong returns, go back to their January A levels. Investors take a look at the updated chart on the overlay of the S&P 500 from the dot-com second half of 1998 through 2001 time period compared to the second half of 2022 through where we currently stand. As one can see from the chart,

Starting point is 00:03:38 the S&P 500 fell sharply and quickly in the second quarter of 2000, retracing much of the first three months' gain in the first three weeks of April. However, the markets found a bottom and rallied back towards their all-time highs in midsummer 2000 before finally succumbing to a slower economy and the Fed. Should we muddle through like this, that would equate to around 4,900 down and say 5,300 up before the election.

Starting point is 00:04:05 Take a look at the chart at the cash S&P 500 pre-Monday, April 15th opening. Since this is the chart of the cash S&P 500, it does not incorporate the overnight futures prices. These overnight and pre-market moves can be hundreds of points or significant. percent moves that are never seen in the cash indexes the next day when the markets reopen for trading. Jim Kramer call these pajama traders. I call it trading without guardrails. Investors recall the crazy overnight moves the futures made the night of the presidential election in 2016 as Donald Trump went from losing to Hillary Clinton to projected to win, along with a flipping to the GOP-led Congress. A muddling through might have us pullback to

Starting point is 00:04:49 4,900 now and rally back to 5,300 into the earnings reports for the second quarter in July. Investors, most presidential election cycles have weaker third quarter returns due to pre-election jitters and normal summer seasonal economic slowdowns. This might play out with the S&P 500 retracing a lot of the possible second quarter gain into late October. After the election results are in, a normal subsequent post-presidential Santa Claus rally into the mid-first quarter. of 2025 could ensue, taking the markets back towards 5,400-ish. So all in all, the year of 2024 would look good overall, but post our first quarter, 2024 gains the rest of the year and the first quarter of 2025 would look like a whole lot of noise up close with higher

Starting point is 00:05:38 volatility and a whole lot of nothing big net if one zoomed out on a monthly basis. Investors, those are our team's thoughts on three scenarios for the rest of 2024 and early 2025. If you are interested in discussing which of those outcomes our investment team feels most strongly about, give us a call, set up a meeting with our Oak Carvis advisor and become a client. Our Oak Carvis investment team is right here in the building with the advisors and a company resource and here to help our advisor team best serve you, our clients. Right now our team doesn't see the leading signs of a future recession this year, but we can say that we will have one once again this decade. a recession in the stock market is a minimum of minus 30% down.

Starting point is 00:06:22 Right now, that would equate to a move back to around 3,600 to 3,600 to 3,700 on the S&P 500, back where the markets stood in October of 2022 when we did experience an earnings recession in the market that year. For investors or retirees uncomfortable with a wider range of possible equity outcomes, Gil Carver's team has launched a new strategy that retains the ability to go long stocks, short, stocks as well as buy partial hedges or a shock absorber, a little bit of insurance for a stock portfolio. Information on this exciting new strategy of ours can be found at oak harbust funds.com. For myself, from Eric behind the camera and the whole team here at Oak Carvis, have a great weekend. All content contained with an Oak Harvest podcast expresses the views of the speaker and is for

Starting point is 00:07:09 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 strategies discussed will not apply to all client portfolios.

Starting point is 00:07:53 Investing involves the risk of loss and past performance is not indicative of future results.

Stock Talk - Scenario 3 - Muddling Through 2024, Range r Us

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.