Giving Thanks

Chris Perras: This is Chris Perras, Chief Investment Officer at Oak Harvest Financial Group, with February 1st edition of Keeping You Connected To Your Money. Each week, we try to recap the week’s events and share with you our views and thoughts on what’s going to happen in the markets in the weeks and months ahead. I’m going to title this week’s edition, Giving Thanks. Now, we’ve been trying to do a better job of communicating our thoughts on the markets by way of this email and audio podcast. We’re going to start putting this up on the website. We think we’ve been doing a little better job.

We received little to no, I received no panicky calls during the volatile months of November and December, as well as January, from our clients. Hopefully, our messaging is helping. Hopefully, we are removing some of the emotional angst that can happen during periods of these high volatilities. We personally at Oak Harvest want to thank you for listening to these audio calls.

It would have been really easy to turn on the financial press, turn on CNBC or Fox News, listen to the headlines in December, and hear it’s the worst Christmas Eve since the Depression. That was 80 years ago. None of our clients I think were alive at that time, but it sounds great. Now it could be equally as emotional listening to the ridiculous headlines on CNBC and the other financial channels. “January, up 7.9%, it’s the best month in the market since 2015, it’s the best January since 1987.”

Those are all headlines that are trying to get you emotionally involved in the market and what we’re trying to communicate and what we are trying to do for our financial planning clients is remove that emotional angst that comes during periods of high volatility. As we said on podcasts weeks ago, volatility is an opportunity even in your retirement so long as you have a good financial plan and you have some cash available to take advantage of those sell-offs.

The EPS season is starting to wrap up. This was the peak of the season. Most companies have already reported they beat expectations. Now, granted, they beat very reduced expectations. Earnings estimates have been cut since last February when they peaked on the Trump tax cuts which were very beneficial for earnings estimates, and they’ve been going down for almost a year.

We had some big wins by buying some stocks in December when they were, I hate to say on sale, but when they were selling off. We bought a large position in Apple for clients who did not own it, bought a position in Facebook for clients who did not own it only a couple of weeks before they reported their stocks were both up big on their quarters. We’ve been buying semiconductor stocks in front of everyone else in the momentum that’s transpired over the last month or so, bought Home Depot for clients when people were talking about how bad the home building business is. Our leading indicators for those businesses are saying that business is going to pick up dramatically in the second half of this year. We got to buy Home Depot in the low 170s, mid 170s I believe was the price.

Now, we hit some misses on the quarter of the conference call DowDuPont, which has sold off dramatically over the last year on rising costs. They had a miss in earnings as far as their outlook for the first quarter, that stock sold off to back where it was a couple of weeks ago. Then AbbVie, which is a big drug company, one of our larger holdings that we’ve held, it’s been an up and down stock for the past year and a half, has a great dividend, great position in the market, just that they have one drug called Humira, which is a large portion of their business that people worry about, so that stock sold off on the third quarter.

We expect it to rally pretty considerably here in the remainder of the first quarter, second quarter because it does have a big dividend. They’re going to have another stock buy-back. We’ll probably look at trimming it later in the second quarter.

Going forward, we think this rally has another three to six weeks to go. However, about 80% of the price move has transpired, only took four weeks. That’s what happened when volatility goes from being overpriced to 50%. I think that’s another podcast in the past that we’ve talked about, to being a normal volatile market structure the way it is right now.

Buybacks will start to slow at the end of February and then people are starting to get worried about the economy again. We think there’s a period probably in March through July 4th where there should be three to four months of consolidation and pull back from whatever high we make here in February. People will get concerned that the Federal Reserve is going to raise rates in the second half. They’ll start making up reasons. That’s what happens.

We’re going to use that as an opportunity to continue to shift the portfolio some more towards growth mode because we think the second half of this year is going to be a resumption of the bull market. We actually think the December lows could be the lows that are going to be in the market for the next five years plus. That’s our outlook, and we’ll continue to update it over the weeks and months ahead.

In conclusion, I have two requests for you. First of all, now that the market has recovered, if you’re still uncomfortable with volatility in the market, give us a call, make an appointment with your advisor, let’s talk about it. If you’re uncomfortable with market volatility and uncomfortable with the way your financial plan is structured, we can change it just so long as it doesn’t change the outcome of you reaching your financial goal. You make changes to your plan when things are calm, you don’t make changes based on emotion when things are highly volatile.

The second request is, if these audios are at all helpful and do know anyone who’s succumbed to the fear-based marketing that we talked about last week, that’s those pitches that we can get you out. We’ll get you out and we’ll get you back in. As I spoke in the past, if those managers are claiming that, which there’s a lot of people out there that are claiming that for the last 10 years, they have not been successful at anything more than pretty much, selling people stocks when they’re down and buying them back when they’re up. If you know anyone who has succumbed to that fear, send them these emails and try to get them involved with what we’re saying in trying to take the emotion out of the process.

If you want to, you can refer them to us, have them give us a call. We’d love to sit down and make an appointment with someone new. We appreciate all the referrals we can get. Once again, this is Chris Perras with Keeping You Connected To Your Money. Many blessings

Speaker 2: The content contained within this Oak Harvest podcast is for informational purposes only, and is based upon information current as at the time of recording. It should not be considered an offer or solicitation to buy or sell securities, nor is it tax or legal advice. Investments involve risk. Unless otherwise stated, particular investment returns are not guaranteed.