The Purpose and Benefits of the Oak Harvest Market Outlook Summit

Last Updated: February 19, 2024

As a value-added communication tool for our customers and prospects, twice a year we host a Market Outlook Summit. Doing so affords us the opportunity to share experience, perspective, expectations and insight regarding past, present and future market activity.

Introduction

In an effort to enhance your experience in attending our Market Outlook Summit via our Oak Harvest YouTube Channel, we decided it would be helpful to hear a bit from two leaders of our Investment Team at Oak Harvest – Chris Perras, CFA®, CLU®, ChFC®, Chief Investment Officer and Charles Scavone, CFA®, Director of Investments.

The OHFG investment team brings to the table plenty of Institutional-grade investment management experience. This team is responsible for multiple Four- and Five-star funds, as well as multiple #1 and #2 ranked growth funds over the past 25 years.

So, our goal is to provide insight regarding what a market forecast is, its purpose, why it can be a useful tool, time horizon, things the OHFG Investment Team focuses on, and much more.

Purpose

What is the purpose of a market forecast in general? You see them everywhere. What value should you as an individual investor take from a market forecast?

According to Perras, they are about education. “We use them for client and prospect education, and advisor education. There’s also differentiation between what individuals are hearing on TV and from other news sources. A market forecast is created for the benefit of clients.”

Following up, Scavone had this to offer, “We use it to provide broad brushstrokes. It allows us to say what we are going to do. We then do what we say. It provides outbound communications to our clients so that they have a good top-down view on what we are thinking and what the important factors are in our view.”

Active versus passive forecasts

When it comes to money management there are two primary approaches – active and passive.

The OHFG Investment Team is comprised of in-house portfolio managers with long-term track records who are focused on helping clients prudently manage and invest their money. They are active managers who believe this approach is what’s called for now and going forward. (You’re encouraged to read more about their approach and how you can benefit here)

Scavone explains how passive management teams differ from active advisors. “We (active managers) can relate the importance of creating a forecast that can change because economic and market conditions can all change. This requires active engagement versus something that is passive. Capital markets are dynamic. You can’t just provide a static forecast. You have to remain active, but you do have to remain disciplined.”

He went on to warn that passive strategies are price and forecast agnostic. “They (passive strategies) shouldn’t keep channeling you into strategies which are entirely static. Rigid, formula-based  passive investing strategies where every dollar goes into these stocks, at this percentage, regardless of what goes on.”

Touching on the point Perras made previously regarding advisor education, engaging in the work necessary to produce a useful forecast is educative and useful to the Investment Team at OHFG. Doing so provides them with a critical tool – a roadmap.

“Our purpose for creating a market forecast is that it gives us a roadmap to follow. We are trying to be proactive instead of reactive. Having a forecast gives you a roadmap to follow,” states Scavone.

Continuing, he says, “Sometimes when we create that roadmap it may have different paths, but at least we’ve thought about what we expect to be possible outcomes in the future. This allows us to devise what’s the most expedient route to take, and helps us communicate that back to our clients.”

Time horizon

There is a reasonable time horizon when it comes to the confidence you can place on one.

Perras talks about the fact that for himself he does look further out when assessing the markets, up to 12 to 18 months out. But he keeps his focus at about six months, including for the regular commentary and insights he provides to OHFG customers in the Weekly Market Update, Stock Talk Podcasts and News and Noise video segments that feature regularly on the OHFG website.

“I tend to focus and write about a time frame six months out. Honestly, most things don’t change the forecast. The things I look at don’t change that much,” he says. “People will come up with excuses, but the markets and the economy don’t change as much as many think…Economies are generally very slow moving, so our forecast don’t change that often.”

Scavone concurred regarding a forecast horizon of approximately six months. “I think that’s a reasonable period from both academic studies and our own experience. I would probably tell you that if you’re trying to forecast with any level of certainty more than six months out you’re probably wasting your time.”

Scavone shared this on that subject, ”I agree with Chris…it’s possible  to look out further, but we like to communicate our view six month in advance because that’s where you have greater degrees of certainty. Going out further becomes probabilistic…It doesn’t really add any value. This road map we create looks at what we believe is a reasonable period of time.”

Focus

Both managers spoke about the fact that they constantly make themselves aware of news and events, including the various economic reports provided each month. But they made clear that they limit the weight they apply to such factors in their forecasts because they hold the view that much of that is already priced into the markets.

“I think we differentiate ourselves in that although we’re glad that the government collects a lot of statistics, it’s generally backward-looking data, like GDP. By the time that’s reported, the markets are already focused on six months forward, not what happened in the previous six months,” said Scavone.

He continued, “We spend more time on looking at real-time and alternative data that we have access to. We look at what the markets are telling us…What the capital markets are telling us versus what the Federal Reserve may be saying about interest rates.”

On the same subject, Perras had this to offer, ”We look at real time and alternative data over government and economic data. It takes so long for that data to get through. It’s massaged. It’s wrong, it’s revised. It looks precise, but it’s never accurate, which is a pet peeve of mine. I could put a lot of decimal points on something, but that doesn’t make it accurate, just precise.”

Market history

Both Perras and Scavone shared their belief that being aware of market history is a big deal and an advantage for the OHFG Investment Team.

“I think one of the things that we do well, and that Chris does particularly well, is being market historians,” Scavone states. “You  want to understand what happened previously and under previous situations so that you recognize them when you see them again, because you surely will. I think you would just call that experience. It provides a better framework on how to deal with what you’re seeing in the markets on a day-to-day basis.”

Picking up on the importance of studying market history, Perras had this to offer, “The reason I study market history is because humans are creatures of habit, particularly with their money. It’s the same people managing the same money who expect the same outcomes and make the same decisions.”

He went on to share an analogy regarding Covid-19 and the fact that it was the first major event he had never seen (notwithstanding 9/11) or experienced before. Many people said it was unprecedented, which was true in the modern era, but market history tells another story.

“Covid was unprecedented in my lifetime, but it was not unprecedented in the financial markets if you did your research…Using the Internet I actually spent very little time in the grand scheme of things on researching the 1918 epidemic – Spanish Flu.”

Continuing, he shared the following. “In doing the research what you see almost immediately is what the stock market did…What the bankers and the economy did. It was almost exactly the same. I mean spot on as far as the curves – first, second and third waves… No one expected the government to shut the entire economy down with Covid-19, which was definitely unprecedented, but in fact the markets’ reaction afterward was not. That’s why I study this stuff.”

Technicals

As an investor focused on retirement, you know that day trading or watching the markets daily and being laser-focused on price action is not something you should do. Nether are conducive to your health or

That said, being aware of and using technical analysis and tools is something a good advisor does need to utilize, according to both advisors.

Scavone offered this analogy regarding the use of technical indicators and overall price action. “Balance is key. We definitely hold ourselves out as fundamental investors…However when you go to the doctor and give him a whole series of symptoms regarding your swollen foot… He doesn’t just say, ‘It’s broken, let’s  operate.’”

He continues, “The doctor is going to want to gather additional information before making a decision, such as taking X-rays. Doing so gives him some level of confirmation in what he suggests. You have to pay   attention to what the market is telling you and how that relates to what your overall outlook is.”

Offering a different analogy, Perras shared the fact his spouse is an internal medicine doctor that sees people all the time who tend to downplay or overlook important facts about their health. “She sees people every day who say they don’t smoke or drink, who claim say they are eating healthy and who are 100 pounds overweight, with livers that are about to fail….A picture is worth a thousand words.”

In terms of utilizing technicals alongside the fundamental analysis they routinely perform, the “picture” provided by the technicals and price action will act to tell you you’re wrong at times. “We’re not that big that we have to be stubborn and say, ‘Hey I’m right, I know I’m right on this fundamentally.’ We own a portfolio of stocks held in many portfolios. They are diversified portfolios. You can’t own everything that’s green and sell everything that’s red. You’re going to make mistakes, everyone does…You have to balance the risk/return, and volatility.”

Foreign markets

You hear it every day – we live in a global economy, with companies from all corners of the world interacting with and reliant on others often half a world away. Aside from companies, the economies of foreign countries are now global and largely interdependent.

With that in mind, we asked about foreign investment in the portfolios, and in general. “We (generally) don’t invest in foreign markets, but what foreign economies are doing does affect our investments. So it is a factor we have to filter,” said Perras. We’re not investing in China, but how that economy affects our investments is important.”

Cautionary word on forecasts

When it comes to opinions about the markets, it’s fair to say every talking head on TV and in print media are more than happy to provide their own take. If you pay attention you’ll hear multiple forecasts from different “experts” daily.

Listening too much can actually cause you problems.

“Chris and I look at or listen to other people’s forecast, but we limit doing so. We’re the ones that have to make the decision, so the forecast that we generate is our own based upon our own expectations – not what anyone else may say,” says Scavone. “At the end of the day we really don’t care what anyone else out there has to say.”

A major differentiating factor when it comes to market forecasts is the fact many of those offering them don’t manage money or have to answer to anyone, according to Scavone. “They’re just prognosticators who have no direct tangible link back to the people that use that forecast. We do – we have to answer to clients…We take full responsibility for our forecasts.”

Perras followed up, saying, “Many of the forecasts you see on TV are from economists, newsletter writers and strategists. They aren’t fiduciaries. They can say anything because they’re not regulated.”

He points out that what they engage in is really a form of entertainment. “They can claim the markets are going to crash every month, which works for them because fear sells. They’re getting paid because they sell newsletters and clicks, and everything else.”

And he offers an added word of caution to individual investors regarding those who engage routinely in creating unsupported forecasts. “These people are not stupid…Brilliant careers and brilliant self-promoters, but to think that they’re actually helping anyone manage money in the financial markets…It’s a great business model for them, but it’s not our business model.”

Parting advice

Before wrapping up, Scavone had this to offer investors regarding forecasts. “Data-driven, real-time data, and a six-month focus. This matches the discounting mechanism of the market.”

Perras had this to say, “I would add materiality… Charles was saying data, and then it becomes ‘Is it actionable?’ The final thing is always going to be whether it is material. We can have a forecast and it can be spot on, and it can be actionable, but if it’s not material then there’s no reason to do it.”

Conclusion

There’s obviously many moving parts and considerations that go into market forecasts. Being able to trust what’s being offered is a critical consideration, as pointed out by both advisors.

Is the forecast being caried out and offered for your benefit, or instead to help the pundit or prognosticator profit by getting on TV and selling books and newsletters?

Overall, it’s your money, so it should be important to learn what those managing it actually think.

You would be well served to use a market forecast for its intended purpose. A tool providing insight as to what your advisors think and expect. As Scavone mentioned, a comprehensive forecast will act as their roadmap over the coming period.

That roadmap should be used to help inform their opinions and guild their activities in their role as conscientious fiduciaries who place your needs first as they advise you regarding your retirement savings.

Speaking of retirement, at Oak Harvest we can assist your retirement needs. We can build a holistic, comprehensive retirement plan addressing relevant issues, utilizing strategies that cover taxes, income, spending, healthcare, legacy, and more, customized to your family.

If you are ready to take the next step and talk to a team of retirement planners who can advise on all your retirement needs, and who will put your interests first, Schedule a call today!