Stock Talk - Stock Market Update, Friday Aug 1, 2025: Summer Stock Selloff Begins

Starting point is 00:00:00 Investors, it's been an incredible, almost four months with a V-bottom rally in stocks since peak market fears over the economic uncertainty and tariff chaos. Our main takeaway, even amongst this volatility, we're focused on preparing for the summer stall and positioning for a potential rally into year-end in the first half of next year. With earnings season at its peak, our team is determining how to best navigate client holdings in this context. The investment team at Oak Harvest discussed the likely V-bottom and stocks from mid to late April, well before the historic rally took cold, while many others were talking about doom and talking about crashes. The good news is we did a V-bottom, and it happened without the Federal Reserve

Starting point is 00:00:38 intervention and interest rate cutting. More Fed cuts are in front of us. What's their timing? I'm at Treasury Secretary Scott Bessent on this one. I'll let the academic economists at the Fed discuss that one ad nauseum. And I'll let the strategists and financial commentators on TV discuss irrelevant things in my view, such as dot plus. and Fed funds futures. Study after study says the Fed is a momentum investor. Cuts spigate cuts and their timing is much less important than most people think. Direction first. Think investors, we're at new marginal all-time highs up about 5% above previous all-time highs in stocks and the Fed is paused. Think about that. All those barricalls for a market collapse

Starting point is 00:01:21 as the Fed reduced its balance sheet and we're now near 6350 on the cash S&P 500 as I write this and the Fed's balance sheet shrunk by two and a half trillion since they began quantitative tightening. So investors, there's good news and there's bad news. First, the good news. We're in a bull market. Against most recent calls for an inflationary spiral caused by tariffs, we're in a bull market. Plain and simple. If you didn't get scared out or he didn't pull the plug for emotional reasons,

Starting point is 00:01:48 congratulations. You might be with a good planner, might have a strong self-directed plan, or you might have been on vacation. But we're in a bull market. Up and to the right. Breath has been strong. Forget those naysayers who keep telling you, it's only been five to ten stocks in the markets, it's only Nvidia, or Netflix, or Microsoft. They've been wrong, and have likely been wrong for months, if not longer. Short-term volatility has collapsed, and that's without the Federal Reserve

Starting point is 00:02:13 cutting interest rates. Realize volatility is around 7 to 8, spot VIX indexes between 14 and 15, but forward VAL futures remain between 20 and 21, so the cost of forward hedging are very high relative to actual volatility. Last week, we discussed a likely seasonal uptick in inflation and a slowdown in growth coming in August through September as the tariff effect finally takes hold. It's already apparent in gasoline demand this summer, with demand down almost minus 5% year-over-year, while gasoline prices are also down. That's U.S. consumers staying close to home this summer because they're cautious about spending, which leads me to the number one area and most likely reason for a very normal summer stall and likely minus 4 to minus 6.5% retracement sometime between mid-August and

Starting point is 00:03:01 mid-October. What's that? A further slowdown in growth appears to be approaching. Tariff-induced, demand pulled forward, uncertainty uptick, inventory replenished at the normal time when there's almost nothing a bullish investor can do to offset a negative story in bearish swirl. But instead of getting FOMO that's fear of missing out here, how about taking a deep breath, exhaling and slowing down? Even during the dot-com run in 1998 through 2000, there was a period about three months after an initial four-month V-bottom, post-long-term capital markets blowing up, or the overall SP500 churned without getting burned. Here's the updated overlay then and now. Yes, there's maybe two or three percent upside. At the same time, there's a good chance that the market sells off later in September

Starting point is 00:03:47 back down to where we broke out from. That's around 6,1,6150. And the normal time for stalling and falling is fast approaching. Typically, it's almost exactly four months from the lows and three months from crossing back above the 50-day moving average. The historical data triangulates to a summer topping around August 4th through 10th. Here's the historic overlay of the NASDAQ composite during the dot-com and currently. You might not have believed history is repeating, but someone does, or the market overall does. But Chris, it's different this time. People always say that. Politics, geopolitics, debt interest rates the dollar, well, maybe, or maybe not. Here's the same historic overlay of the dollar index represented by the DXY. Remember, just back in December, almost every TVA commentator

Starting point is 00:04:32 was talking about U.S. exceptionalism and the strong dollar, and then what happened? Poof, the dollar topped and it sold off. Now, all I hear is about the dollar devaluation and U.S. weakness or money flooding out of the U.S. And guess what? Right when, historically, the dollar troughs and rallies. Here's that overlay. Guess what the prior overlay of dot? and current times say? It says, yes, get along the dollar for the rest of summer. Why? I don't know. Maybe it's because volatility will uptick and money will flow back to the U.S. Maybe it's because the Fed won't be devish enough and won't cut rates even in September as many think, and rates will stay higher for longer. I don't know. I'm not that smart. Yes, investors, I took all the econ

Starting point is 00:05:11 and finance classes and I have that CFA designation. But investors, the pride chart is the collective wisdom and action of all investors. And I know that unless you're Warren Buffett or a few others, don't get in the way of the market. So for now, my advice to those still watching, take a deep breath. Try not to get sucked in with FOMO, change your allocation to a more aggressive position just because the market is up

Starting point is 00:05:33 and step back for a few weeks and step back for a month or two. Yes, investors, the pattern remains bullish and up and to the right is good. New all-time highs are not bearish historically. However, after rallying for almost four months off the April lows, which would be exactly four months,

Starting point is 00:05:49 been between August 4th and 8th, Do not expect the pace and percentage gains of stocks to continue at this rate. Expect the pace to slow. Investors, we expect a normal late summer pullback in the markets. If this plays out as our team has stuck with our 2025-year-end target of 6,600 plus, even as stock sold off into April, you should have a better time and price to add your favorite growth stocks for a fourth quarter rally and a continuation of the bull market in the first half of 2006.

Starting point is 00:06:16 So, investors, does that mean that you shouldn't add to stocks, particularly if you're a younger and in saving and accumulation mode? No. Why? Because rarely can you pick both the absolute level in price and time, both the buy side, the sell side, and the buy side once again, particularly in high-growth stocks, as we've covered in prior videos. So investors, regardless of the path for the economy and the financial markets over the next few months, the investment team here at Oak Carvers will be here, crewing the ship and adjusting our models where we can. Until next week, have a blessed weekend and know that the Oak Harvest team 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

Starting point is 00:06:56 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 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

Starting point is 00:07:36 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 - Stock Market Update, Friday Aug 1, 2025: Summer Stock Selloff Begins

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