Stock Investing – It’s a Marathon, Not a Sprint in Retirement Planning

The OHFG investment team laid out our first half out look back in late 2022.  Back then, the rhetoric was “inflation was out of control”; we were headed into a 1h23 recession; and the S&P500 would retest its October 2022 lows, call it 3500, shortly.  Strategist after strategist proclaimed the recession was eminent.  We disagreed with this viewpoint, calling our outlook “the Old Normal, Economic cycles return”.  We published a first half 2023 target of 43877-896-004000 when the markets were trading around 3800 at the end of 2022.  Back then our investment team got a lot of pushbacks on this outlook as the negative headlines around inflation, Federal Reserve Hawkish rhetoric, the headlines of war in Ukraine, and Covid lock downs in China were rampant on CNBC, Bloomberg TV, and Fox News.

Here’s a weekly chart of the S&P500 as of May 26^th going into Memorial Day weekend. So far, October of 2022 has remained the market’s low for the last 2 years.  There has been no lower low.  There has been no retest.  The S&P 500 made a series of higher weekly lows and higher weekly highs to rally back to 4210.

Here’s a monthly chart of the SP500.  It’s been rocky road since Dec 2021, but we held the uptrend that’s been intact since the 1q 2009 GFC lows, and the US markets are trying to regain the upward momentum.

Viewers, would you be surprised if I told you that the S&P500 is around where it was in June of 2021, two years ago, flat.   Would you be surprised if I told you the S&P500 is also sitting about where it was at the end of May last year in 2022, around 4200.  Spot on flat for a year and flat for 2 years? Interesting to note?  The Nasdaq composite is basically flat for both the 1- and 2-year period as well, albeit with more volatility along the way.  And guess what other index is flat for both the one and 2 year period, yes, the more value biased Dow Jones industrial average has essentially churned sideways now for 2 years, albeit at lower volatility than the tech heavy Nasdaq.  Hence the title of this video, being “it’s been a long road to flat, it’s a marathon not a sprint”.

If you listened to those strategists’ opinions on CNBC or worse those writing newsletters for $99/year, you might have “gone to cash in the summer or fall of 2022 when the markets were near their lows.  If so, you are likely still sitting on the sideline waiting to put your savings back into the markets at lower levels.   Well, we have now regained about half the losses from 2022.

As of this writing, opposite 2022 when the market was led by both energy stocks and safer, slower growth defensive names, 2023 has been led by a group of higher growth technology and communication stocks recovering from disastrous 2022 returns.  Most of those names are heavy weights in the NASDAQ Composite index.  Here’s the monthly chart of the NAZ composite.

Many bearish commentators, who have missed the rally, have made valid observations that much of the markets move YTD has been helped by a few large cap names.  This observation is true. Although it is not unusual for this dynamic to happen during rallies or bull markets.  Particularly frustrating year to date has been the wide dispersion in sector returns.  Here’s a table showing how dramatic the difference between groups has been.

As of May 26^th, the best performing sectors of YTD are technology and communication services, both sporting over 30% returns for the year.  That’s outperforming the S&P500 by over 20pcntpnts.  Technology has tripled the S&P500 YTD return of about 9.7%.  The worst group, Energy, was the best group in 2022.  The energy group is collectively down over -8%, trailing the overall market by almost 20pcntpnts.

If you sold near the market lows in 2022 and “went to cash” should you panic back in now?  I don’t think so, the summer season almost always gives investors a chance to find attractive stocks at better, lower prices. Likewise, should you just give up on 2023 because the S&P500 has rallied off its October 2022 lows and is up over 9.5% ytd?  The data says no, you shouldn’t write off the rest of the year.

In fact, according to data from LPL financial a strong first 100 trading days for the year, has historically been a positive sign for the returns for the rest of the year.  No guarantees of course, but here’s the stats according to LPL.

Through the first 100 trading days of 2023, May 25^th, the S&P500 was up 8.1% in price appreciation.  Since 1950, when the S&P500 has been up 7% or more during the first 100 trading days, the average gain for the rest of the year has been 9.4%.  This is almost 2x the average year from trading day #101 on.  Here’s their data.

Also interesting is the consistency in this data.  After strong starts, the S&P500 gained further in 24 out of 26 years, or 88% of the years.  Only in 1987 did stocks experience a material decline after a strong start to the year. Recall, 1987 included “black Monday in October”. Recall back then stocks were up almost 40% year to date going into that October crash, and they still finished the year with a positive overall return.

Viewers, investing in public equities is a marathon not a sprint.  There are often periods of time when the stock markets go nowhere net.  They might move up and then might move lower back to where they started for quarters or even years.  This is the world of equity investing.  There is no perfect investment philosophy, there is no perfect trading tool, that is all weather, outperforming every stock cycle or in every economic environment.

At Oak Harvest, we have many tools that our advisors use to help our clients meet their retirement goals and objectives. These tools are both market based and insurance based, that we can use to meet your retirement goals. The future and stock markets are always uncertain and that is why our retirement planning teams plan for your retirement needs first, and your greed’s second.

Give us a call to speak to an advisor and let us help you craft a financial plan that helps you meet your retirement goals. Call us here at 877-896-0040 and schedule an advisor consultation. We are here to help you on your financial journey into and through your retirement years.