Stock Talk - Stock Markets Setting Up For Fall?

Starting point is 00:00:00 Investors post the strong first half move in the overall markets into mid-July. The overall markets have been trading sideways to down just as our investment team laid out in our late June podcast titled S&P 4300 Plus, it's summertime for a break. We followed it up almost weekly with additional content on how historically normal 2023 has been so far. What, when, and why our investment team expected weakness in the third quarter markets? Risk to the fourth quarter and when and at what? level we expected the markets to finally regain their footing and upward trajectory. The title of this

Starting point is 00:00:34 week's episode is, get ready for fall. Before we press onward, please take a moment to click on both a subscribe and notification bell, so you will be alerted when our investment team uploads our latest content. We're better yet, give our Oak Harvest team a call at 877-896-004-0 to speak to our team and set up an initial consultation with an Oak Harvest advisor to discuss your financial situation. So investors, the S&P 500 has gone net, nowhere. in a sloppy, choppy manner since Wednesday, June 12th. As of this writing, the S&P 500 has been flat for almost three and a half months. As the old Carvis investment team warned clients and prospects in early summer,

Starting point is 00:01:11 we were set to enter a sloppy choppy time frame. Call at a trading range, call it a general consolidation, call it a lull, but history and the data said we were set to frustrate many latecomers to the nine-month rally off the October 22 lows. I must remind investors, this was the day after semi-retired hedge fund, billionaire Ray Dalio, having missed almost 20% plus off the October 22 lows, said, it was time to buy stocks. Here's the daily chart of the S&P 500 for the last 18 months. The short term good news, as of this writing, the S&P 500 was already down over 300 points

Starting point is 00:01:48 and over 6.5% in just under two months. The markets are now getting oversold in terms of price and sentiment is quickly turning dower compared to its mid-July enthusiastic levels. Here's a chart of the cash S&P 500 with a MACD indicator at the bottom. MacD is short for moving average convergence and divergence and is a common momentum and oscillator indicator many traders use. At 4275, we are quickly approaching what our team thought would be support for the markets during late summer and early fall. 423 to 4285 on the cash S&P 500.

Starting point is 00:02:23 This is at the same time we'll be exiting what has historically been the worst 10-day to two-week trading period of the year. That's the second half of September post-option expiration into month end. For all those data nerds who follow this stuff, here's the pure daily return data from Steve Soutemeyer at Merrill Lynch. What I find interesting is, one, that Suttmeyer's data is quite in line with another market historian our team follows. Larry Williams. Yes, the same Larry Williams, who occasionally is referenced on Jim Kramer's Mad Money Show. And the same Larry Williams, who is one of only a few strategists, traders and investors I know, who correctly fore-cars, the timing of the COVID bottom, as well as the upside strength afterward.

Starting point is 00:03:03 So investors, the good news is what we've experienced the last two to three months is seasonally very normal and should be nearing an end. The bad news? I said nearing an end, not over and done with. Even if we are nearing an end on the price declines, which we expected to be in the 423 to 4285, we still have likely more time on the calendar to go before investors exhale and return to quite a normal year-end rally. For what, But it's worth, zooming out on Sutmeyer's work, one zero's in on October 19th, being historically the last of the poor trading days looking back in time. Remember, though, past performance is not a guarantee of the future, and nothing in the stock markets is ever both perfectly accurate and precise.

Starting point is 00:03:46 But I don't want to leave you on a down note, so I want to leave you with this. Year to date, it's been a normal third-year election cycle as one could get versus historical norms. Should this continue to play out post-October expiration, one would be looking back up towards 4,600 into Thanksgiving and back approaching all-time highs into year-end, call it 4750, 4,800, and more new all-time highs, albeit with much higher volatility in the first quarter of 2024. If you want to track one real-time piece of data, keep watching real interest rates. Yes, don't watch inflation rates, but real interest rates. Why? Because inflation and inflation expectations are rapidly dropping, but the stock markets are being held back by hawkish talk of Federal Reserve members, which are keeping real

Starting point is 00:04:34 interest rates, which determines the equity risk premium or ERP and goes into calculating a fair value or fair PE for the overall market. Investors, lower real interest rates translates to higher equity valuations and higher PEs, all else being equal, where the all else is usually. earnings. O'Carver's first half outlook for 2023, which played out as we expected, was based on a realized peak in October of 2022 in real interest rates, peak in volatility, and historic norms for a presidential election cycle. So far, the summer is also playing out as expected and playing out to the tune of normal. It's interesting to note that the strongest year-end stock returns for the markets have come not when the markets are up most through summer, no, not when they're up over 20%,

Starting point is 00:05:22 but rather when they're up between 10 and 20% for the first eight months of the year, like we were this year. The most recent positive 20% or more run in the markets was in 2021. And while 2021 closed strongly and at all-time highs, we know how the first half of 2022 played out. At Old Carvass, we currently manage broadly diversified equity portfolios that balance risk and reward for our clients. We don't concentrate our client funds in only one or two sectors seeking to hit a grand slam. It's singles, doubles, and occasionally a homer if someone makes a mistake and we find a stock

Starting point is 00:05:56 at the right price at the right time. Our advisors and financial planners usually use a combination of market-based and insurance-based tools to meet your retirement goals. Investors, our investment team is busy working on some new and highly unique equity models, models and tools that few RIA advisor teams have access to and few investment teams have the experience ours does. One of these tools may even allow our investment team to express negative views on single stocks, sectors, or the overall markets if we so desire. Stay tuned. The future in the stock markets

Starting point is 00:06:26 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 meet your retirement goals. Call us here at 877-896-0-0-40 and schedule an advisor consultation. We're here to help you on your financial journey into and through your retirement years. From the whole team here at Ocarvis, almost 40 and growing, Have a blessed weekend. All content contained with an Oak Harvest podcast expresses the views of the speaker and is for informational purposes only.

Starting point is 00:06:59 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 and best. 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 00:07:40 Investing involves the risk of loss, and past performance is not indicative of future results.

Stock Talk - Stock Markets Setting Up For Fall?

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