“V” is for “V-Bottom,” not for “Virus”

Join Chris Perras for the7/2/2020 edition of Stock Talk!

Chris Perras: Hey, this is Chris Perras, Chief Investment Officer at Oak Harvest Financial Group in Houston, Texas. Welcome to the July 2nd edition of Keeping You Connected to Your Money. This podcast is entitled V for V bottom, not for virus. The S&P 500 sits this morning around 3125. That’s up almost 125 points from last Friday’s close. When the news channels were filled with dire warnings of virus cases accelerating, even though this trend started way back in late May.

What did we learn during the month of June? When the stock markets went up and down, it didn’t go anywhere [unintelligible 00:00:37]. We’ve learned that listening to 99% of the experts on TV will generally get you nowhere in your financial life. Non-stop opinions from politicians, economists, billionaires, aged, baby boom, money managers who have already made their fortunes and retired, what about those opinions? Well, they’ve been wrong. Since late March, there have been four or five people who have been right on this recovery in the stock market. First, I want to list a few of the notable personalities who have been flat out wrong but are given constant press on their opinions. This is not an exhaustive list, given probably 99% of those people on TV have missed the last four months. Here it goes, though.

No one on the CNBC show, Fast Money, has been right. The closest person to being consistently correct has been Pete Najarian. What does he do? He follows the options market, which is data-driven. No, Jim Cramer has not been right. I will say he has been spot-on the stay-at-home momentum stocks, but he has been fighting the overall stock market rally for four months. In fact, he was probably the loudest voice proclaiming the potential of the coming Great Depression number two.

Hedge fund managers like Ray Dalio, Stanley Druckenmiller, and a myriad of others have been wrong. Warning, like many others, “There’s a coming Great Depression,” or “Here comes a repeat of the 1930s.” How about all those bond kings on TV, like Jeffrey Gundlach and Scott Minerd, who manage hundreds of billions in bonds? No. More opinions that have been wrong and kept investors out of the markets with their dire forecasts. Economists like Mohamed El-Erian, who must have a side deal with CBC for appearances per week? No, he as been of little help to helping you through this period.

A final note is, one often advertised IRA who tactically took all of his clients 100% to cash as the market was headed straight down in late March. He did this somewhere between 2750 and 2800 on the S&P 500. Well, listeners, he was right for about 8 to 10 trading days. Now what is he doing three months later? At around 3125, 3150 on the S&P 500, 10% above where he sold all the stocks, yes, according to his weekly podcast, he’s slowly buying his client’s stocks back. Yes, 10% above where he liquidated everything, he’s now inching his way back in. This strategy hasn’t worked for 11 years. It doesn’t work, plain and simple. Check the math.

Who has gotten the markets right since late March? Who’s been out there publicly and held fast to their opinion? Here’s a very short list. If anyone else has someone to add to the list, please give me a call, I’d gladly do it. Larry Williams from I Really Trade was the first person with the right market call. He actually was talking about this even before March 23rd. Who is he? He’s a market historian and trader who follows data.

Marko Kolanovic from JP Morgan has been spot-on as well. Who is Marko? He’s the head of derivative strategies and sits on the trading desk at JP Morgan, who manages trillions of dollars. He follows how hedge funds are positioned. He is data-driven. Tom Lee and Rob Sluymer at Fundstrat got it right. Who are they? They’re the ones who compiled the list that we’ve shared multiple times over the past three months on the prior 10 V-bottoms. They are data-driven. The team at Strategis, led by Chief Technician Chris [unintelligible 00:04:24] has nailed it and steadfastly stood by his call.

Clients can go ahead and log on to our website and you can see that same chart on V bottoms that we shared with our clients multiple times over the last few months. All of these people share two things in common. First, they don’t manage other people’s money as a business. They are not conflicted or position-biased when they come on TV to voice their opinions. Secondly, all of these people are data-driven first. They don’t base their opinions on gut feel or instinct.

Finally, I have to mention, because the investment team at Oak Harvest has been following the latter group’s opinions and the data they provide, since Troy and I released our YouTube video on March 23rd and my podcast on March 24th entitled Behind The Curtain Early Healing Signs, we have been net buyers of stocks for three months. Even last Friday, when the news channels had finally cut up to the bad news on the increase in virus stats, we released a podcast, where I openly shared with you that, “The official timing of the normal summer rally begins this week.” You probably will not hear about it until mid to late July, which by then close to 75% of the move will have already happened.

For what it’s worth, that summer rally normally extends three to five weeks, which would put it operating until the very end of July as that’s the period when company earnings start to wrap up and we start to enter the very slow August period. Our team believes that the economy is going to be much improved and better than the TV network’s tout in the second half of 2020 and ’21. First, the collective energy of the healthcare intellect is racing to develop antivirals and vaccines for the virus. Pfizer, just this week, announced some really good data on an early trial.

We are not going to bet against science, technology, and the human spirit to find a solution to this virus. We aren’t going to bet against the Federal Reserve who will, as they’ve announced, start to buy corporate bonds. They actually haven’t even started to buy corporate bonds yet. That is a big deal and should create a floor for stocks on any pullback during the summer. This data is publicly available and free. The Federal Reserve is saving their ammo in case it is needed during the summer and during the second half.

At Oak Harvest, we are comprehensive long-term financial planners. What this means is that, as our client, you and your financial advisor should have a financial plan that is independent of the volatility of the stock markets. If you are retired or in the process of retiring, give us a call at 281-822-1350. We are here to help you plan your financial future and help smooth the financial path you have into and through your retirement years with a customized retirement planning. Many blessings. This is Chris Perras, Chief Investment Officer at Oak Harvest. Have a great July 4th weekend. Take a break, stay distanced, and mask up.

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