Naysayers and Bears Capitulate, but Armageddonists Remain Steadfast
On this 1/10/2019 edition of Stock Talk, CIO Chris Perras discusses January action in the markets, what we expect for the next few weeks, and whether or not “Armageddonist” calls for a repeat of February, 2018, are warranted.
Chris Peras: Good morning. My name is Chris Peras. I’m Chief Investment Officer at Oak Harvest Financial Group in Houston, Texas. Welcome to the January 10th, 2020 edition of our weekly Stock Talk podcast. Keeping you connected to your money. We’re sitting at another new all-time high in the S&P 500. As of this morning, it’s about 3,275. The team at Oak Harvest will be live streaming our first half 2020 outlook, which we released about 10 days ago, by way of YouTube Live Stream Saturday morning at 10:00 AM Central.
If you want to listen, just google the following, “YouTube live streaming Oak Harvest market outlook summit.” Getting into our podcast, given our busy weekend, this podcast will be another short and sweet in content and time. The title of this week’s podcast is The 2019 naysayers and bears finally capitulate, but the armageddonists remain steadfast. We’ve started 2020 right where we left off the last three months of 2019. That is, we’ve started strongly.
As we laid out three months ago, the pivot up in the overall market was October 2nd through 4th of last year. These initial moves last almost exactly four months and provide few dip opportunities to buy. Case in point, earlier this week, I rain fired a series of missiles into military bases in Iraq targeting US troops. In the overnight trading session for stocks, stock futures fell almost exactly 2%, the investment team that Oak Harvest laid out as a normal down move for early January.
By the time the cash S&P 500 Market opened in the morning for trading, the broad market was already flat, and two days later, the market is making new all-time highs. As we stated in early October of last year, we expect this pattern of behavior in the stock market to continue into early February of this year, as most active investors missed the turn in the market in the second half of 2019. They are under-invested in the market, particularly offensive minded groups, and they are now upping their stock exposure.
Moreover, the hedge funds and bearish advisors that were pontificating 1930s economies, 50% to 60% recession odds, and that 10 to 20% corrections that were supposed to mirror the fourth quarter of 2018, are now panicking to cover their short positions. In 2020, the team at Oak Harvest continues our consistent and constant theme of 2019, Federal Reserve easing is easing and the path of the stock market remains normal for this cycle.
With this in mind, I want to preview what I’m pretty sure listeners will start to hear from the financial news outlets over the next few weeks. With the markets up strongly in January, I can see the news outlets and bearish strategists out en mass pontificating and forecasting a repeat of February 2018 market sell-off. Recall back then after being up over 200 points, and 7.5% in one month of January of 2018, on the back of the euphoria surrounding the Trump tax cuts, the stock market as represented by the S&P 500, dropped to almost 350 points, which was close to 12% in a few weeks.
All told, we retraced the entire fourth quarter 2017 return in the month of February 2018. In the coming weeks, we will likely get calls on TV for repeat of this move down. As we have said for months, while we do expect a mild pullback in mid-first quarter in the range of 3% to 4%, we do not expect anything like a repeat of 2018. What you won’t hear in the financial press and from these strategists on TV is that the majority of the February 2018 move lower in the stock market was caused by the blow-up and forced liquidation of a $1 billion ETF volatility product that should have never existed in the first place.
Just to let listeners know, a similar move lower, unwinding the fourth quarter of 2019 returns, would yield a move down in the S&P 500 to around 3,000. I repeat, the team at Oak Harvest does not expect this to happen. Moreover, any weakness in the mid-first quarter of 2020 should be viewed as one of the few buying opportunities investors will get in the first half of 2020.
If your investment advisor liquidated your holdings mid December of 2018 on the way down because he saw something bad coming, only to then four months later say things were starting to look better if the market was up already 10% from where he sold, give us a call at 281-822-1350. If you have some free time, join us tomorrow morning at 10:00 AM Central time by way of YouTube live in stream. Once again, if you want to listen, just google the following, “YouTube live streaming Oak Harvest market outlook summit.” Give us a call at 281-822-1350. We’re here to help you on your way to retiring and staying retired with a customized retirement planning. Many blessings. This is Chris Peras with Oak Harvest Financial Group.
Announcer: The preceding content expresses the views of the speaker and is for informational purposes only. It is based on information believed to be reliable and created, but any cited data statistics and sources are not guaranteed. Content, ideas, and strategies discussed may not be right for your personal situation and should not be considered as personalized investment, tax or legal advice, or an offer or solicitation to buy or sell securities. Investing involves the risk of loss and past performance does not guarantee future results.
CFA®, CLU®, ChFC®
Chief Investment Officer, Financial Advisor
Chris is a seasoned investment professional with over 25 years of experience working with some of the most successful money management firms in the world. Chris has made it a point in his career to adapt as the market landscape changes, seeking to utilize the appropriate investment strategy for a given market environment. His transition from managing billions of dollars at the institutional level to helping individuals and families retire is guided by a desire to see first-hand the impact he is making in the lives of clients at Oak Harvest.