Are We There Yet?
Has the stock market reached “the top?” Is it a bubble? Is it time to sell everything and go 100% to cash?! Oak Harvest addresses this question and more on this edition of Stock Talk!
Chris Perras: Hey, Happy Friday. I’m Chris Perras, Chief Investment Officer at Oak Harvest Financial Group. We’re an investment management and financial advisor here in Houston, Texas. Welcome to our August 27th Stock Talk Podcast: Keeping you connected to your money. It’s summer and the S&P 500 just hit another new all-time high of around 4,500 earlier this week. That makes it over 50 new all-time highs of the year. Now, this is a much-valued statistic, which once again, was repeated on TV by most strategists as negative.
New more all-time highs, man, I hate that as an investor. The title of this week’s podcast, Bull Market Top, Are We There Yet? My answer like it has been all year in my opinion and analysis, no. Why would we be? Almost every week for the past 15 months I’ve been asked by prospects, clients, friends, and family, “Chris, are we there yet?” Like I know, or anyone else knows exactly when the markets will peak. I don’t know. They ask implying that the stock market is overvalued, irrational, or in a bubble. This question is almost always cashed with a very skeptical tone that is code for certainly, the market has peaked, stocks can’t go up anymore from what I hear on TV and read on the newspapers and see on the internet.
When are you going to pull the ripcord and go to cash? After looking at our data and tools, my response has been, one, that’s not how we manage money at Oak Harvest and so don’t expect us to go completely to cash when we do see turbulence on the horizon. No one is that good at market timing, including us at Oak Harvest. This is how we do it here at Oak Harvest. If and when our forward-looking indicators say there’s increased risk in the markets, we purchase securities more slowly and gradually.
If and when these indicators say there’s much higher volatility or lower returns on the horizon over a longer-term horizon, say six months, 12 months, even two years, we will be upping our defensive positioning by way of holding additional cash for buying opportunities as volatility rises. Two, owning more, not fewer companies for broader diversification. Three, owning more slowly growing, less economically sensitive names.
I frequently get asked my thoughts on gold and precious metals as investments by prospects at Oak Harvest. My response hasn’t changed. Both make super nice jewelry and my wife loves when I give them to her. To me, I don’t see how gold helps, it’s bulky, has high transaction costs, is expensive to insure, and produces no future cash flow. I get told all the time by those hawking it to me that it’s an inflation hedge. I can’t get there.
These individuals point to seven to eight years in the late 1970s into 1980, right after the US went off the gold standard under President Nixon in 1973. That entire time period gold was being bought by central banks around the world. What they choose to admit is that gold went nowhere from 1980 to around 2001, that’s over 20 years. Then the Chinese started buying and building for the 2008 Olympics. They started buying every commodity known to man, copper, aluminum, coal, and yes, gold. 21 years of sideways to down in gold prices in the US economy was still rising. That’s supposed to be an inflation hedge.
How did gold help a retiree over those 20 years? I can’t get there. For now, our toolset continues to say the same thing it’s been saying for months and quarters. We aren’t there yet. I’m looking everywhere I can for those early signs that signal “Danger, Will Robinson!”. It’s different this time. Slow the boat down. While a few of those signals have finally appeared in the last few months, I repeat the few that have shown themselves are not coincidence indicators. They’re leading indicators that lead by at least a year and sometimes even more.
Those calling for swoons or tantrums are still likely to be wrong. So far, against almost all pessimistic projections and emotionally driven calls, it continues to be a very normal bull market for this cycle. To answer the question once again, are we there yet? No, not in our work. At Oak Harvest, we’re comprehensive wealth management and financial planning advisor located right here in Houston, Texas. Give us a call to speak to an advisor at 281-822-1350. Hopefully, we can help you with a financial plan that is independent of the volatility of stock markets. God bless and have a great weekend.
Speaker: All content contained with an Oak Harvest Podcast 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, indicators, statistics, or other sources are not guaranteed. The views and opinions expressed herein may change without notice. Strategies and ideas discussed may not be right for you and nothing in this podcast should be considered as personalized investment, tax or legal advice, or an offer or solicitation to buy or sell securities.
Indexes such as the S&P 500 are not available for direct investment. Your investment results may differ when compared to an index. Specific portfolio actions or strategies discussed will not apply to all client portfolios. Investing involves the risk of loss and past performance is not indicative of 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.