Stock Talk - Stocks Rebound: Have We Seen the Market Bottom?

Starting point is 00:00:00 Investors, this is going to be a short video as hopefully we're ending a relatively uneventful and lower volatility week. When I wrote this script, the market had rallied back in a rare nine straight day rally. April proved to be one of those months that short-term traders probably love and longer-term investors watching their portfolios too closely often hate. So far, early April stock showers have brought Mayflowers. The S&P 500 ended the month of April down a very modest, three quarters of a percent, while the NASDAQ-heavy NASDAQ ended the month up. 0.85 percent. Of course, this doesn't tell the whole story of April as intramount the S&P 500 fell minus 14 and a half percent from its peak to its intraday low on April 7th,

Starting point is 00:00:44 and the NASDAQ also fell the same minus 14 and a half percent. Since happier days at the end of February, the S&P 500 fell minus 18.8 percent from February 28th into April 7th the low, and the NASDAQ fell an astounding 21 and a half percent. over the same period. As of this writing, the SP 500 and the NASDAQ are both down about 4.6% lower over those two months. So right now, it looks like April 7th was the low for the overall S&P 500 index in U.S. stocks. Next to a few periods like the Great Financial Crisis and the popping of the speculative dot-com bubble frenzy 2001 and 2000, which did precede longer and deeper recessions. History says enough damage had been done and many hedge funds got zeroed out on the

Starting point is 00:01:28 lows and many retail investors have been buying their correction. Just to let you know, in my book, minus 20% in the market is not a dip in anyone's book unless you're an online financial media poster, not trading the markets or investing. Here's the chart of the SP 500 since the end of the great financial crisis in 2009 with the approximate channel drawn. Next is the two-year chart of the S&P 500 with a recent three months highlighted, including what looks like the recent V-bottom, followed by the Zweig breath thrust confirmed on April 24th, leaving what many chartists call a bullish island reversal pattern. As of this writing, the SP 500 is nearing its 200-day moving average from underneath. Of course, many bearish-leaning analysts will deem this as a resistance level, and the doomers will likely call for a rollover.

Starting point is 00:02:17 Same strategists who called for a retest of the April 7th lows, at least 500 S&P 500 points lower, where about 10% lower will likely have grown louder. week regardless of their wrong-footed previous calls. Remember, I wrote this on Sunday five days ago. Historically, if we are not entering a prolonged recessionary period, the data would say these calls for a retest will be wrong. We've given you the data of the Zweig breath thrusts, investor sentiment data, and vicks spikes, and retracements in our last two episodes. If you missed those, I'll put the links in the description below. Given that the Fed met a few days ago, investors will probably be inundated with short-term market calls based on Fed in action. We are likely to hear calls from Dumers about higher interest rates or higher inflation and stagflationary bare markets. I'm here to say that in my opinion, as well as the real-time

Starting point is 00:03:08 market data, these calls are likely way off base. Everyone following the Oak Harvest for the last seven years knows that I'm not a big fan of following government data as it's always revised. I find because of these revisions, this data always lacks accuracy and reports with false precision. However, follow trends in the data sets, hence are warning throughout the second half of last year that jobs and economic data were being overstated as too strong leading up to the presidential election. Now, investors, the economy is not as weak as doomers imply. While the job market is cooling, jobs are still growing, with April numbers stronger than expected. Despite worries over the impact of President Trump's tariff and trade policy, non-farm payrolls increased by $177,000, slightly

Starting point is 00:03:54 below the downward revised $185,000 in March, but way above the estimates of 133,000. Of course, all of the previous numbers were revised lowers just had been done during Biden's presidential term. I'll put a link in the description to the breakdown of Zero Hedge, who's been doing the data analysis better than anyone we know for the last three years. So it looks like both administrations like Doverstate the strength in the job market to make their cases for their policy decisions. The better news for financial markets, not workers, in the jobs data, was that wage growth

Starting point is 00:04:27 or more precisely a slowing in it. Hourly earnings rose 0.2% in April, below the 0.3% estimate, and down from last month. On an annual basis, wage growth decelerated to 3.8%, the same as March, and below last months as well. In addition, workers got fewer hours last month as the average workweek was unchanged in April. In manufacturing, the average workweek actually dropped by 0.2 hours to 40 hours, and overtime was unchanged at 2.9 hours. In April, the number of full-time workers rose by over 300,000, while part-time workers increased by 56,000, a long-awaited return to where full-time labor leads.

Starting point is 00:05:11 Okay, one can rationalize why markets have v-bottom since early April on walking back of tariff extremism, the better job data and wage inflation data, but viewers who know me know I like real-time market data. Take a look at the data about what the bond market is saying behind the scenes. In early April, real growth expectations for the U.S. economy, which peaked in July of 2024 on the Biden's sugar high spending, we're heading lower into the election, then literally fell off a cliff starting January 1st as the Trump administration started highlighting trade and tariffs over virtually every pro-growth policy, V-bottomed and had been heading higher all of April. Now, take a look at the two-year real-time real yield of two-year treasuries.

Starting point is 00:05:54 Pick your maturity, the charts and the trends are all similar. Okay, now take a look at the two-year inflation break-even chart over the same time period. Rising inflation expectations all of 2025 until? Yes, a peak in early April and now heading lower, not higher. Investors like it or not, this is what Goldilocks for stocks look like in the bond market. Maybe with less volatility, but the Treasury markets components say it's better to buy gross stocks than hide more boring, stable names. Finally, I'll leave you with an update on how the charts look versus similar period that

Starting point is 00:06:27 was mid.com, not peak.com. I feel compelled to keep showing this, particularly after Charles and I listened to a dozen of technology conference calls over the past two weeks that were positive on the continued AI buildout growth for the next 12 to 18 months. Investors, remember the late third quarter of 1998 when long-term capital management hedge fund collapse during the late.com? Well, at that time, the S&P 500 dropped over 21%. Tech stocks experienced significant declines, semiconductors fell, and the dollar dropped by minus 10%. This was also one of those death-cross periods.

Starting point is 00:07:04 While the situation isn't identical as today, historically, the S&P 500 did see significant gains over the following 12 to 18 months. Past performance is not indicative of future results. Investors should always carefully consider their financial goals and consult with their financial advisor. I know you're saying to yourself, Chris, it's different this time. Yep, well, maybe it is, but so far it looks and feels like a lot like it did back then. The SP 500 dropped about minus 22.4% from peak to trough about two months back, then into a peak global uncertainty and hedge fund blowup and forced liquidation. The S&P 500 recently felt almost the exact same percentage peak to trough using intraday highs and lows. Take a look at the overlays at the S&P 500, the NASDAQ composite, and the very cyclical SOX semiconductor index back then and now.

Starting point is 00:07:55 It'll be fun to see how this plays out over the next nine to 15 months. As much as we've heard that the Fed is on hold and the president is berating the Fed chairman to cut rates, the Fed is on a rate cutting cycle. They're currently paused and not cutting like most of the rest of the world. I don't know what was in Powell's speech as I wrote this five days before this episode was released. But I imagine he mentioned real-time inflation break-evens, flat to dropping, a slowing but stable job market, and hinted at rates coming later this year. Investors have rarely been this fearful and sentiment this negative. And historically, when it's been at these levels, you've been better off to be a buyer and walking away for 12, 18 months than selling.

Starting point is 00:08:38 Okay, some data here per Lance Roberts at RAA here in Houston, net bullish AIA sentiment as low as COVID market lows in 2020, 2022 Fed Taper Tantrum Lows, and yes, near the Great Financial Crisis, first quarter lows in 2009. Looking back, would you have been better off buying or selling with perfect hindsight? Investors, I don't know if we're entering recession or nor does anyone else. I do know that historically, if we're not entering recession, which I don't think we are even, though many doomers have been calling for one for over four years, then the early April lows are the lows, and that's the number one should trade against, that one should be buying and adding to stocks on any stall or bullback. Remember that stock prices don't wait for the clear and good

Starting point is 00:09:24 news to appear. Price bottoms almost nine months before earnings do in a bull market. As long-term investors like to remind newbies, the market usually doesn't wait for you to be emotionless and clear in thinking. Stocks anticipate turns, the market doesn't wait. Regardless of the path for the economy and the financial markets over the next few months, the investment team here at Oak Harvest will be here crewing the ship and adjusting our models where we can. Until next week, have a blessed weekend. If you're a mom, have a happy Mother's Day, 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 your retirement. All content contained with an Oak Harvest podcast expresses

Starting point is 00:10:03 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 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

Starting point is 00:10:52 is not indicative of future results.

Stock Talk - Stocks Rebound: Have We Seen the Market Bottom?

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