H1 2020 Recap and H2 Teaser

Join James McFarland for the 7/17/2020 edition of Stock Talk!

James: Hi everyone. This is James McFarland, Senior Portfolio Manager and Investment Specialist for Oak Harvest Financial Group. Chris Perras is out for today, so I’m happy to welcome you to a very abbreviated episode of Stock Talk for today, July 17th, 2020. Today we’re just going to do a quick recap of the week’s market action, touch on our short-term view for late summer headed into autumn, and then do a quick teaser related to the presidential election which we’ll touch on towards the end. I’m recording this on 7/7/2020 at 9:30 AM, Central Time. The S&P currently trades at about 3200. The S&P opened up Monday at 3147. It proceeded to trade down to a low of about 3120 on Tuesday, before rallying back up to 3230 on Wednesday, slightly dipping back to 3207 on Thursday, and now trading just under that level, up about 1.6% for the week.

This, in other words, has been a somewhat range-bound week in the S&P 500. On the upper side of that range, the S&P is bumping right up against the prior June 8th high of about 3232. On the lower side price has been constrained by 3120 to 3125-ish. Now, those two it’s the six-eight high that carries more significance in my view. To go higher, the S&P will need to break and close above that level, or we could see a bit more sideways to down action in the broader stock market. This is in line with our general view of nearing the end of the normal summer rally. We believe the market does have a bit more upside left through the end of July. After which in August, we tend to think we’ll see the normal summer slowdown in the economy with reopening schools in some fashion or other and the upcoming election in November. That means we’d expect to see some consolidation, sideways trading, and backfilling into October.

That will take us right into the election. Now, of course, we don’t know who’s going to win the election. Some intelligent people are making the case that Donald Trump is going to win, with some even going so far as to claim that the Trump slide is incoming. Other intelligent people are arguing that Biden is well-positioned to swoop in and capture the presidency, that the pandemic, the ongoing trade war, the civil unrest, and this recession is all just too much for Trump to claim victory in his re-election bid. We’ll all find out together what happens in November, and the only political message I’ll tell you is to vote and vote for the candidate who you feel is going to represent your interests the best. But putting that aside, I know that one of the questions that’s going to be on everyone’s minds is, what impact is the election going to have on the stock market, on the economy? If Biden wins, does the stock market crash? Is my retirement and financial plan going to be okay?

These are not only fair questions, but important questions to have answers to. I like to remind people that talking about the stock market as a whole is a fun and very useful exercise. But what matters, even more, is your particular investment portfolio, your total wealth allocation, and your financial plan that you’ve put together with your advisor. We, of course, can’t control the outcome of the election, but building a financial plan based on your specific circumstances is something we can control. Having a plan in place is just one of those things that allow all of us to deal with potential market-shaking events from a position of strength rather than one of fear.

How about the election? Well, Oak Harvest will within the next couple of weeks be releasing our official second-half outlook for the market and the economy. As you might expect, it deals extensively with the potential impacts of the election. I’m not going to spoil too much here regarding what’s going to be in the second-half outlook, but just as a teaser, quick teaser, let me quote from one paragraph of the second-half outlook.

“Historically, it has not mattered who has won presidential elections. Election years have historically been good years for stocks. In fact, according to a 2019 Dimensional Funds report, the market has been positive overall in 19 of the last 23 presidential election years, from 1928 to 2016, only showing negative returns four times. It hasn’t mattered whether it’s a republican or democrat winner. It is positive. Now we can discuss and even argue, what if Biden wins or what if Trump wins or what if this happens, or what if that happens? But historically, it hasn’t mattered. A presidential election year has been a positive returning year over 80% of the time.”

Now, that’s an interesting thought, isn’t it? We all already know that the financial media on TV, online, and in print are going to be going into full-on hype/panic mode, probably cheerleading and spinning as hard as possible for one candidate, while trashing and blasting the other candidate on a daily basis. I have no doubt whatsoever, that this will also include telling people disaster is coming in the markets if whichever news outlet’s preferred candidate doesn’t win. What if- for the stock market at least- it doesn’t really matter who wins. Again, I’m not going to go into any more spoilers for the second-half outlook, but this is something we talk about in-depth in the forthcoming second-half outlook.

Keep an eye on your inbox as we’ll be sending it out soon and also publishing it on our website, and most likely devoting one or more episodes of this very podcast to discussing the second-half outlook. With that, we come to the end of today’s episode of Stock Talk. Thank you very much for joining me for this quick look at the markets and teaser for the second-half outlook. If you enjoyed the show today, please share it around. As always, I encourage you to stay safe, stay positive, and remember your investment and financial plan. If you have any questions or would like to find out if we can help you with your portfolio, give us a call. Our number is 281-822-1350. Once again, this has been James McFarland. This has been Stock Talk. Have a wonderful weekend, and I’ll talk to you again soon.

Speaker 2: The preceding content 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 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.