Fast Money: Right Back Where we Started From

Investors let’s call last week what it really was, fast money. I remind viewers that these videos are scripted on a Sunday, filmed early Monday morning, edited and reviewed by compliance during the week, and released on Friday afternoon. A lot can happen in 5 days, both good and bad.

If you were paying too much attention to the markets, watching the moves hour by hour and day by day, you were likely running high-blood pressure or at least very anxious for the last two weeks of July.  However, If you were on vacation, without news or a stock quote service, or just watching the Olympics, if you weren’t “fast money”, you probably are wondering what the big fuss is as the markets a back to near spot on flat since July 4^th holiday, and actually marginally up for the month of August as of this writing.  Views, we are near, right back where we started from.

As quick recap, stock markets Made and ATH of 5669 in middle of July and then sold off violently in the second half of July and the SP500 cash index opened Monday August 5^th down another -3%+ to take the index down -9.7% peak to trough over about 3 weeks or 14 trading days. The exclamation point for the thumping came on Monday, August 5^th when the Japanese markets took a tumble of -11% waterfall decline dragging down global stock markets  The cause for that Monday’s decline? An unprecedented blowing up and unwind of the Yen carry trade. For two weeks, we discussed that these moves down in price and up in volatility are quite normal for summertime, particularly late in an economic cycle.

Last week’s video, titled “Markets in Turmoil: Yen there, done that before, August 2007” took on how historically similar the current move down in stocks and up in volatility was to the summer of 20007 and almost the same week in August of that year when the last Yen carry trade implosion happened.  The main message from that video was “is it time to panic”?  Our answer was that history said no.   An investor shouldn’t panic even though the Fast money was and volatility was spiking. Our message with the markets down, was there should be a better selling opportunity coming from higher later in August and maybe all the way into September.

For those of you who didn’t see our last two videos, or without access to historic charts and data, here is a chart of the SP500 back in 2007.

As one can see, the early 3qrd quarter summer peak was near the same time as this year, and the % decline of the cash SP500 peak to trough closing low? Nearly identical on a % basis at about -9.5%.  Even back then in mid-2007, which of course we know with hindsight was the beginning of what would be come the Great Financial Crises and a recession in 2008 and 09, the stock markets rallied strongly over the rest of the 3^rd quarter.  Many investors forget that stock indexes went on to make a marginal new all-time high in early October of 2007.

The other time we’ve referenced all of 2024 for being eerily similar to now is 2000 during the early internet capex buildout. Once again here is a chart of the S&P 500 for 2000.  Near the same time for the mid-summer selloff back then.  Near the same % down as 2024. Near the same time for the August rally to begin, and even back in 2000 the S&P500 went on to clear its mid-July high before topping for good for years.

Investors, why do these 3 periods all look very similar when it comes to stock markets, returns, rotations and sector and stock leadership?  Because all three periods come after the Fed has been raising rates trying to slow the economy, lower inflation. and hit a soft landing 10.0 Olympic score which has historically been rarer than throwing a perfect game in major league baseball.  The Fed is trying to recreate the 1995 economic outcome of a mid-cycle slowdown followed by a longer-term low growth, low inflation economic expansion.  Not too hot, not to cold, but just right.

The markets are on edge because they are struggling with are we mid-cycle, which would say stocks have years more of consistent gains ahead.  Are we late cycle? Where stocks would be ok returning to investors for maybe another 12-18 months? Or are we at the end of cycle, where stock markets are topping and rotating into safety sectors because they are forecasting a downturn in the economy and earnings in 2025? We still can’t definitively answer that question but do believe that over the next few years active stock management will begin to reassert itself and be rewarded relative to passive investing.

Since the markets have rallied strongly the last two weeks back to near 5555 and volatility has subsided lower, now is a great time to meet with your financial advisor or planner if you have a relationship beyond just an investment account with them.  While the Oak Harvest investment teams second half outlook hasn’t changed, its best to make financial decisions when markets are calmer as your anxieties are likely to be as well.

 

 

In both prior cases of 2000 and 2007 the markets rallied strongly in August as they have already.  In 2000, the markets made a marginal new high versus its mid-July high into Labor Day weekend.   In 2007, the S&P 500 rallied over 10%+ off the August lows to make marginal new ATHS into October.  Such outcomes if repeated, and that’s an if, would take the markets back toward 5700- 5750 and yes maybe even 5800 over the next 2-10 weeks. Inconceivable to some only 2 weeks ago, when we first referenced this data. Will that happen? I don’t know.  Can it happen?  Sure, why not?  We have a good labor market with decent employment numbers which means strong 401k payday flows every 2 weeks.

The Fed is starting to talk dovish into Jackson Hole which is ongoing this weekend, and they are likely to throughout much of September into the Fed meeting.  I would think the Fed will look to continue to calm volatility in both stock and bonds and any exhaling of anxiety will likely lead to performance anxiety and stock chasing in stocks back to the upside now that many leverage players were forced to sell and who are now lagging in their 3rd quarter performance.

Investors, the Fed is too tight. The bond market knew it weeks ago, and the stock market is struggling with it.  We’ve seen this play before.

Before you panic, remember these prior periods before the Fed found QE, quantitative easing and many other programs they used to dull or delay economic and market downturns. During both these prior periods, the markets did not cascade lower from there in a straight line While the previously discussed 2000 and 2007, the cutting cycles did end in recession. They were pre-QE and characterized by a lack of liquidity. Quantitative easing in significant size has been implemented since then, and you know what that has historically done to tame volatility in markets.

So, as we’ve messaged for the better part of the 3^rd quarter, If over the years you have found yourself reacting emotionally in your portfolio to Presidential elections and their uncertainty, or when volatility is high like it is now, now is the time to step back, take a deep breath, give your advisor a call and talk walk through your long-term financial plan.

If you have a good relationship with your advisor, and not just an investment account relationship. Get on the phone and give them a call and see what might work for your longer-term financial plan.  Do if while the fast money has been sidelined for awhile and volatility is calmer.  Do it when the markets have bounced, and we are near right back where we started from.

If you are uncomfortable with wider range of possible equity outcomes, the Oak Harvest team has launched a new strategy that retains the ability to go long stocks, short stocks, as well as buy partial hedges and shock absorber “insurance” for a stock portfolio.  Information on this exciting new strategy of ours can be found at OakHarvestFunds.com.

Viewers, for those of you who made it this far, I want to give a shout out to the entire OHFG team as last week, USA TODAY, ranked us as one of the Best Financial Advisory Firms 2024. The award is given to top registered investment advisory (RIA) firms in the United States based on two key criteria:

• Recommendations from individuals from among 25,000 financial advisors, clients, and industry experts
• Growth in Assets under Management (AUM) over 12 months and 5-years, respectively

I personally am looking forward to helping us move up this list over the coming years by taking care of our current and future client base. From the whole team here, thank you and have a great weekend.

Do you need a retirement plan that goes beyond allocating funds to truly fit your needs? We can help you create a retirement life plan customized for your retirement vision and legacy. Call us at 877-896-0040 or fill out this form for a free consultation: https://click2retire.com/Connect