Stock Talk - Sweat the Summer Market or Sit Back? What We Expect and How to Handle Your Retirement Portfolio

Starting point is 00:00:00 Summer seasonality in the stock market is historically a real thing. We've discussed this many times over the last five years. We started previewing the summer seasonality for 2023 as far back as the third quarter of last year, due to the third year election cycle dynamics. Back then, the rational reasons seemed to be that inflation would decline symmetrically from its 2021 high. The Fed would slow the pace of interest rate increases. In our book, we had already been through an economic and recessionary stock decline in the first quarter of 2022. So the strong rally seemed the easier path. And what happened? The rally came

Starting point is 00:00:36 when and where it was supposed to and even stretched slightly higher than our forecast for a few weeks in July of this year. With that, it should come as no surprise to investors. The stock markets have consolidated and sold off since July 19th, call it July 20th, which was the week of July options expiration about five weeks ago. Do you think it's time to add to your stock positions? Let me know in the comments below. And later in this episode, I'll tell you what our team thinks. Before we press onward, please take a moment to click on both the subscribe and notification bills so you'll be alerted when our investment team uploads our latest content.

Starting point is 00:01:09 Or better yet, call our O'Carvice team at 877-896-0040 to speak to our team and set up an initial consultation with an O'Carvice advisor to discuss your financial situation. Post the strong first half move, we've entered what should be three or four months of some negative monthly returns and higher volatility at worst or sloppy choppy-choppy-side behavior, a general consolidation and net little to no price appreciation in the S&P 500 at best. Since the July 27th intraday peak of 4607 on cash S&P 500, the S&P 500 has fallen back a little more than minus 5%. Had you been perfect selling that top, which of course, no one is.

Starting point is 00:01:49 The tech-heavy NASDAQ composite peak at 1446 on July 19th, which is Wednesday's Volatility Expiration Day. For you dot-com bubble historians, guess what date the first half of the dot-com bubble peaked during the summer of 1999? Yes, you guessed right if you guessed July 19th. Peaked atroff on Friday 18th optioned expiration, the NASDAQ composite, which led our 10-month rally, declined almost 8.9%. Had you been a perfect seller on July 19th, which, of course, no one is. Except a few unmentioned C&BC contributors seeming to claim they do it time and time again.

Starting point is 00:02:27 much like the summer of 1999, the NASDAQ roundtrip both its June and July upside move in about three to four weeks. Take a look at the chart in the NASDAQ composite, that's the CCMP index, for the last 18 months. You'll see the strong rally since mid-October, Thursday, October 13th, 2022 to be exact. I'm using the NASDAQ because it seems to be the focus of so many people nowadays due to technology investing, but the S&P 500 looks almost identical, albeit with lower voluble. volatility in lower returns. No fourth quarter 2002 recession, no first quarter, 2003 recession, or second quarter, 2023 recession. No lower lows, no crash. No 1987. Just a very normal fourth quarter to first half rally in the third year of a presidential cycle,

Starting point is 00:03:16 where the party and power in D.C. is spending money trying to keep the economy strong into the fourth year election. Here's the same chart of the NASDAQ composite in 1998 through 1999, the first leg up of the internet bubble. October 8th, 1998, third quarter low, followed by a huge rally extending about 195 days to a July 19th, 1999 summer peak, followed by three to four week decline into mid-August that round-tripped the returns for both June and July. This was followed by a very normal kick-save summer rally to save the third quarter returns the second half of August into mid-September, followed by a sell-off into Halloween. What people really remember, about the internet bubble and the end of the decade was the five-month move from Halloween 1999

Starting point is 00:04:02 through mid-March 2000 that was mainly triggered by two factors. First, Federal Reserve Chairman Alan Greenspan and others were deathly afraid of Y2K causing a calamity in the banking system and the economy. So in mid-October of 1999, he came out dovish during a period of high liquidity, fiscal spending, and economic growth. And second, money in the form of capital expenditures was pouring, I mean literally pouring into the buildout and expansion of everything internet related. Computer capacity, semiconductor capacity, logistical capacity, real estate capacity, everything, which peaked out the U.S. marginal return on invested capital and growth at the same time the lag effects of prior Federal Reserve rate hikes were about to hit. Well, the same thing happened

Starting point is 00:04:48 in the fourth quarter of 2003 through 2024 in both our economy in the stock markets? I don't know. things are lining up eerily similar to back then. However, what we can say is that regardless of what 2024 holds, no one can ever tell with certainty, including the team of O'Carvis, that year-to-date, the path in both the economy and the stock markets has been very normal for a third-year presidential cycle, and our team expects more of the same in the third quarter. A whole lot of normal, which would mean a big fat summer trading range for three or four more months. Our investment team remains positive on the total return outlook of the S&P 500 into year-end, particularly with the S&P 500 having sold off over 5% over the last four weeks,

Starting point is 00:05:32 and the NASDAQ, almost 9%. We would use seasonal weakness throughout the next three months as an opportunity to add to stock positions or find new names for your portfolio in a late year-end rally. While many other equity strategists, advisors, and newsletter writers have been calling the stock market a bubble for years, we still see good investment opportunities in the public markets. True bubble-type equity action. popping, in our opinion, would come from higher levels in the stock market later in the cycles. Now that we've sold off and round-trip to a few months of returns, the charts in the cycles we discussed should make bears very cautious in timing your shorts for a big secular collapse

Starting point is 00:06:08 in the markets and in tech names. Where do we stand? It's summer. And so far, the markets, the S&P 500, the NASDAQ, or the Semiconductor index, they're all acting in very normal fashion. Will we continue to act normally over the next few months? Our investment team sees it that way. Are we in an AI bubble that many are calling for? Almost all who missed the move up in tech stocks since last October? I don't know. But if it is, history says we are likely in the pause that refreshes and refueles the bubble, not at its peak. At Old Carvass, we currently manage broadly diversified equity portfolios that balance risk and reward for our clients. We don't concentrate our clients' funds in only one or two sectors seeking to hit a grand slam. We try to hit singles, doubles,

Starting point is 00:06:51 and occasionally a home run if someone makes a mistake and we find a stock at the right price at the right time. For those investors who are less optimistic and don't like taking risk, those seeking higher dividend income that grows, those investors willing to forego some potential price appreciation in favor of lower volatility,

Starting point is 00:07:07 we have a dividend growth equity model. For those investors who are more in the optimistic camp, seeking higher long-term price appreciation, which does carry higher expected volatility without the focus on dividend income, we have a blue chip growth equity model. The overall tools or advisors and financial planners use

Starting point is 00:07:24 are usually a combination of both market and insurance-based tools to meet your retirement goals. Our investment team is busy working on some new and highly unique equity models for advisors to use as tools for our clients in the not-so-distant future. Stay tuned. The future in the stock markets are always uncertain. That's why our retirement planning teams plan for 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 877-896-00-40 and schedule an advisor consultation. We're here to help you on your financial journey into and through your retirement years.

Starting point is 00:07:59 From the whole team here at Oak Harris, have a blessed weekend. 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

Starting point is 00:08:34 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 is not indicative of future results.

Stock Talk - Sweat the Summer Market or Sit Back? What We Expect and How to Handle Your Retirement Portfolio

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