Stock Talk - Sometimes: You Gotta Close Your Eyes and Buy (or Laugh)

Episode Date: April 18, 2025

In this podcast, I take you through what has been one of the most unexpected and chaotic starts to a presidential term in modern market history—what I’m calling “Trump 2.0 meets economic whiplash.” You’ll learn why the markets went from optimism and strength to panic and selloff almost overnight, how the surprise implementation of global tariffs reshaped investor sentiment, and why historical market cycles—like Dot.com and LTCM—may offer a blueprint for what could come next. I share insights from decades of market experience, draw powerful parallels between past and present, and show how volatility often creates opportunity, not just anxiety. Whether you’re a long-term investor or someone just trying to make sense of the headlines, I’ll explain why sometimes you just have to laugh at the madness and stay focused on the bigger picture.   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. References to third-party analysts should not be seen as an endorsement of their views or recommendations, and you should do your own research before investing. 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.

While the economy was slowing for the second half of 2024, the markets thought Trump 2.0 would lead off with some pro-growth and pro-deregulation in November of 2024 post-election. Those thoughts quickly morphed into a second half of February through last week's bare market sell-off and the thought of a potential growth collapse. The markets had already corrected minus 10%, which is quite normal in the first year of a presidential cycle in the first half moved down due to economic slowing. This slowing had been ongoing since last July, but it slowed more post Christmas into the new year. Markets were pricing in about 10% across the board global tariffs into Liberation Day. The Navarro plan that was presented was nothing like anyone had seen, and it appeared to be drawn up on the back of a knacken a few hours before the president's speech. The bad news is that the tariff announcements were far worse than expected, causing a sharp drop in the market.

The Trump calculation substituted goods trade deficits for tariffs. I'll drop a link to the last week's video on the topic in the description below. Frequent followers know that I'm a student of market history. While I'm still under 60 years old and have experienced a number of major economic cycles, stock market crashes, and bull market runs, I haven't experienced anything like this ever. But those kinds of historic studies helped Okarvis Financial Group's clients be guided and almost universally not panic during the COVID market collapse as our team studied the historic pandemic response to the 1918 Spanish clue.

We studied the ebbs and flows of prior virus, what our leaders did to stimulate the economy and what the financial markets did back then as well. Remember, the public financial markets are the summation of collective behavior of investors. Investors are human, and regardless of whether you're generation boomer, Gen X like myself, Gen Z, millennials, or others, humans tend to have similar behavior and emotional responses time and time again. Financial emotions ebb and flow from greed to fear and back again throughout our lives, throughout economic cycles and hell during weeks like last few, even day to day. So investors, why did I title this episode? Sometimes you just have to close your eyes and buy,

and sometimes you just have to smile and laugh. I want you to sit there and think back to almost the entire universe of financial profits that were saying and spewing just less than six months ago. What were the headlines back then? U.S. exceptionalism. The U.S. was the only financial market worth investing in. The dollar was too strong and interest rates would rise due to the economic stimulation of the new White House. People were dropping that term around because unlike most other countries, investors' money had been treated best here in the United States. We have rule of law. While we do have government interference and regulation in our economy, it tends to be much less than in other areas of the world.

Overall, investors enjoyed less friction in their investments and business owners enjoyed less. less government interference for decades. And then the Trump tariff plan hit. However poorly, it was structured and initially implemented. And in the span of what? Three or four weeks, the U.S. and its financial markets went from exceptional to toxic in the minds of strategists and global investors. The dollar went from too strong to a joke.

Our treasuries went from Safe Haven to lit dynamite that investors were tossing around so as not to blow themselves up with. The U.S. technology stocks went from the bright of the ball to uninvestable in just a few months. Take a look at last year's chart for the S&P 500. It calmly went up and to the right into the election, a little short-term euphoria right after, and even though the data was saying the economy was already cooling and on the way to having a growth scare, a normal earlier pullback into first quarter earnings cuts, and then wham. Navarro drops the global reordering trade and manufacturing bomb on everyone.

The U.S. goes from relatively smooth and orderly rules to where we are the friction capital of the world. Trade barriers were imposed, walls lifted, rules change, and business had had a week to figure it out. No wonder the markets tanked and earnings visibility vaporized overnight. Revenue visibility vaporized at the same time and costs looked to have increased. Hedge funds and other traders and investors on margins blew up and were forced to sell. At what price, it doesn't matter. Those are the rules of the game. It's got me thinking, have I lived through a prior period looking like this, resembling this

time? My first thought was, of course not, as history never repeats exactly. I don't think that our president has ever tried sweeping global trade reorganization like this since the 1930s. But for the last two years, my mind has kept coming back to the dot-com growth period in our current AI investment cycle. Dot com was the internet build-out. The generational technology change in KAPX investment from 1995 through 2000,

This was a period of decent economic growth, followed by a tightening cycle in the mid-1990s, a pause by Ellen Greenspan around 1996, a soft landing, a thrown-in short-term financial crisis in the middle in October of 1998, which was then long-term capital, and then another two years of growth as the Federal Reserve eased interest rates. So I want you to look at the chart of the S&P 500 during the first half of the dot-com buildout from 1997 into long-term capital in October, 1998. and then onward. This is the overlay with the current AI KAPX buildout into last week's volatility shock and mass hedge fund liquidation, into the markets run toward safety and cash and gold and out of stocks and bonds and other risk assets.

I know you're saying to yourself, Chris, this time it's different. Maybe it is, but so far it looks and feels a lot like it did back then. Back then, the S&P 500 dropped about minus 22.4% peak to trough in about two months. Global uncertainty and hedge fund blowups happened and forced liquidations as well. The SP 500 has currently fallen almost exactly the same percentage, peaked to trough, using intraday highs and lows. Hey, but Chris, I'm sure back then, with the dollar being the world's reserve currency, there was a flight to safety in the U.S. dollar.

Everyone wanted to hoard dollars, and I'm sure the DXY Index rallied back then. Well, investors, the answer was, no. It played out nearly exactly the same, and the dollar declined almost exactly. Exactly, minus 10% back then during long-term capital blowup. Right now, the DXY declined about minus 10% peaked to trough into Friday, April 11th, low hysteria of the dollar demise talk when only three months ago, all I heard in the financial news was how strong the dollar was and how it would hurt companies. I have to laugh. A strong dollar is bad three months ago, but now, three months later, a weak dollar is bad as well. Okay, back then, back during dot com, growth was great.

I'm sure commodities were doing well. I'm sure oil was fine, but now it's been dropping for almost a year. Big difference, Chris, right? I know you're thinking that. So I looked it up. Take a look at the overlay of oil in mid.com buildout versus mid AI buildout right now. Pretty much the same. It declined into a long-term market cycle low in October of 1998,

troughing just did long-term capital blow up. It seems to me Friday, April 11th, was the likely low in oil for the next 9 to 12 months. Semiconductors, Chris, those have been total dogs now since July 2024. I'm sure they were booming in 1998. I thought so too. I looked back. Nope, they were tanking. It was only in the second half of the dot-com buildout that semiconductors went on wildly higher. But Chris, here we go. AAI bubble has already popped and Trump tariffs were the final needle that popped it. I mean, Microsoft is already cutting back on data centers. Others will too. Maybe, but when I hear things

like demand for new eye consumer apps like video creation is already melting in video GPUs due to the demand for inferencing and computational power, I find it hard to believe that the spending is about to collapse. Maybe Microsoft just decided to let some of the AI startups spend up front as they let their own cash flow grow for future AI investments. This is one of the most interesting things I heard last week on CNBC. I can't recall which tech investor said this on TV, but he said, cloud capacity has no natural borders, referring to borders of countries that are affected by tariffs. Outside of a few countries, do most U.S. companies really care where their data is hosted? Do they care if the data

sits in Germany, Japan, Mexico, Canada, or the U.S.? He hypothesized, I believe rightly so, that if on-premise technology costs in the U.S. skyrocket due to tariffs, don't you think this will actually accelerate cloud usage and demand more as U.S. companies defer high-upfront CAPEX for additional outsource cloud storage and usage. Yes, I know that earnings visibility is almost non-existent in the short term right now. But remember, stocks are discounting mechanisms that are looking forward into the future. There's a great chart from Josh Brown and another from Michael Battenick and their relevant investor that reminds investors how far in advance stocks bottom before the economy improves and before earnings visibility returns. Historically, stock prices bottom

almost nine months before their earnings due during bull markets. As long-term investors like to remind newbies, the market doesn't always wait for the all-clear. Just look back at COVID or 2022 earnings recession for recent examples. In fact, post-COVID, the S&P 500 was almost 50% higher than its pre-COVID high before S&P 500 earnings bottomed and turned up. If you wait for the all-clear on COVID, you are late by 100% of the COVID lows and 50% late on the prior COVID highs. stocks anticipate turns. We hear a lot from prospects that the markets are too volatile right now. I'm going to wait until things settle down.

I get it. When things move fast, it feels horrible. However, historically, this is exactly when individual investors should slowly add to their long-term stock allocations and not retreat. Why? Because time is on your side. Volatility is ramped up because many traders are being forced to sell at lows, being de-risk or being blown out by taking excessive risk at the

wrong time. Take a look at this great chart from Jay Capell at sentiment trader on 10% five-day trading ranges, historically marking lows, not highs in the market. As I like to say, they don't liquidate hedge funds at the highs. Investors, regardless of how you look at it or how you're feeling, historically buying the S&P 500 and walking away from weeks like April 11th, you had over a 80% chance at generating an average return of over 17% over the next 12 months. And one final note, on volatility creating opportunity for longer-term investors, that is, not hedge funds being zeroed out at the lows. My friend Chris Gallipo and Wuch at Franklin Templeton Research, according to their research, since 1950, the S&P 500 had dropped more than 10 percent or corrected

38 times. Those are both recessionary periods and non-periods. Investors, on average, those corrections lasted only 44 training days before the bottom was found and the recovery began. If you don't engage O Carvis investment team to help you manage your portfolio besides the S&P 500 index, what would history say you should do? Most likely buy technology stocks and growth stocks that have been suffering since mid-last year when real growth expectations peaked. Why? Because President Trump just reversed a large part of his draconian tariffs, they were going to technology and semiconductor businesses and had been crushing their stocks year to date. A reminder of the percentage of sales outside the U.S. by the index.

Meg 7 tech stocks, almost 50% foreign sales. The NDX, Technology Heavy Index accounts for almost 46% of its sales overseas. Whether it's foreign government purchases of U.S. technology goods or services or foreign manufactured and source hardware backed by American designed IP, think about Dell and Apple, almost 50% of technology sales are made outside the United States. More specifically, in relation to recent announced technology smartphones and electronic exemptions, According to government data, the U.S. imported almost 390 billion of semis and computers last year, including 100 billion or 23% of total imports from China.

According to Ran China research, the biggest category related to China is smartphones. Last year, the U.S. imported phones worth roughly $41 billion. Smartphones alone accounted for almost 9% of total imports from China. Thank you, Apple. Computer hardware also accounted for. for $36 billion in 2024. Think of the likes of Dell, HP, and other AI boxmakers. Altogether, the new exemptions cover semiconductors

and consumer electronics worth almost 22% of all Chinese imports last year. Take a look at another great table from Jay that shows the returns from the NASDAQ 100 Tech Heavy Index after the VIX index crosses back below 45 like it did Friday, April 11th. Yes, you're reading those numbers correctly. a 94% one-year win rate with a 42% average return

and a median return of 46.6%. Yes, a very high hit rate. And yes, investors, that does include the long-term capital blowup time period of late 1998 during dot com, like we previously noted. I'll leave you with some more historical data that we shared before the lows late in the week of April 11th that said this was not the time to panic

and sell out of your portfolio stocks, particularly if you're working with a financial advice, and have a long-term financial plan that has been stress-tested for economic downturns, recessions, and hopefully one-off events like this one. Remember, if you're not working with the financial advisor or you're not happy with the advisor you're working with right now, give us a call. Investors, historic volatility spice like we just saw are buy-and-hold points, not pull the Rickcord and eject points.

Charlie Beello and Creative Planning are always out with great data showing historic one-year through five-year forward returns on VIX spikes like these. As we've tried to message many times over the last seven years, periods of super-high volatility have historically been that time individual investors should be investing, not retreating from the long term. Periods measured in years, adding to some stock slowly and walking away

for dollar cost averaging as your best percentage returns historically have come when putting money into the market during recessions or other economic downturns such as these. No, there hasn't been a lot of good economic news out there from the screens we're seeing. These are definitely the times that are stressful for investors and those cared with managing other savings and financial plans. Can the markets go lower? Of course, they can.

There are no guarantees in the stock market. But extreme levels of volatility historically, equities being long-term assets whose returns are measured in years, not weeks and months, it's better to add to investments slowly rather than panic and pull the risk. court. Investors, regardless of the path for the economy and the financial markets over the next few months, the investment team are at Oak Harvest will be here, brewing the ship and adjusting our models where we can. Until next week, have a blessed weekend, a happy Easter, and know the Oak Harvest team is doing what we can to plan for you and your financial future, regardless

of what stage you're at in your career or your retirement. All content contained with an Oak Harvest podcast expresses the views of the speaker and is for informational purposes, 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.

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.