Stock Market: Summer Stall or Summer Squall?


If you are a client or prospect of OHFG, you might wonder what members of the investment team here do on weekends or even on a holiday like Father’s Day.  This CIO sleeps in until 6AM on Sunday and wakes up thinking about our clients, the markets, and “what’s next”. He then sits down over a few cups of coffee with the preliminaries of Canadian Formula One Race on and writes what will likely be the talking points for the OHFG outlook for the second half of 2023.

Before I get into this week’s content, titled “Summer Stall or Squall”, please take a moment to click on both the subscribe and notification bells so you will be alerted when our investment team uploads our latest content.  Or better yet, give our OHFG team a call at 877-896-0040 to speak to our team and set up an initial consultation with an OHFG advisor to discuss your personal financial situation.

Frequent viewers of our content know that our team was quite bullish on the first half of 2023 heading into the year in spite of the ongoing, almost nonstop, negative rhetoric on TV and in the financial press. Our 1st half outlook, penned in December 2022, titled “The Old Normal” had an S&P forecast of 4300 on the cash SP500 when the markets were trading around 3800. Believe it or not, I have had “Payday” June 15th and option expiration June 16th circled on my trading calendar for many months with a question mark and notation labelled “top? It was exactly 8 months from mid-October 2022 market lows and its pivot higher.

YTD Recap

A little year to date recap of the 2023 markets and some of its milestones.

-The S&P500 index is now up more than 26% from its bear market low in October 2022.

-The S&P500 and Nasdaq, while still near -10% off their ATHs, have both hit 52-week highs and their highest levels since Tax Day in April 2022.

– After a disastrous performance in 2022 for the markets, in 2023, heading into Father’s Day weekend when this was taped, the S&P500 was up 15% on a total return basis YTD and the tech heavy NASDAQ was up over 30% YTD.

-The S&P was up +2.6% on the week and the Nasdaq Composite was up about 3.3% on the week. Their best weeks since March.

-The S&P500 had its 5th positive week in a row. It’s the best since November 2021.

-The Nasdaq was up 8 weeks in a row, its best winning streak since 2019.

So, the big question on everyone’s mind is now what?  Well, that’s a good news bad news story folks. Or maybe I should reverse that and say it’s a bad news good news story.  First, it’s summer!  Historically, our economy slows down in summer as consumers and businesses take a break from their normal activities. With this economic slowdown usually comes a stock market downturn. This is even more likely when the markets are up on a spike, and volatility has crashed, like they are right now.  Here’s the monthly, weekly, and daily charts of the S&P500 I’ve been sharing now for months.  Against the backdrop of almost nonstop, bearishly and negatively biased strategist, economist, and billionaire “guru” commentary, what has happened?  The stock markets have made a series of higher highs and higher lows.

S&P500 Monthly

S&P500 Weekly

S&P500 Daily

So, are you like many investors who recently tuned into financial “news” now experiencing “FOMO”? The “Fear of Missing Out”? Are you now being swayed by billionaire boasts of those like retired “famed” hedge fund billionaire legend Ray Dalio that say now is the time to “buy stocks”, on June 12th, after 800 points up in 8 months?  The same retired legend who deemed “cash is trash” multiple times the last 5 years only to have the markets plunge -10 to -25% the next month or two, including the Covid crash?  Who also reversed course and deemed “cash is not trash” on Oct 3rd of 2022 within day and a few points of the cash SP500 making its closing low for the last 24 months?  If so, please do yourself and your money a favor, turn off the” news”, take a deep breath and keep on watching this video.  Relax.  You most likely have time.

Yes viewers, according to Merrill Lynch, statistically speaking, the S&P500 entered its 27th bull market of 20% or more on June 8th. Having missed the 8-month rally, do you need to panic right now and buy stocks? No!  However, yes, the data is promising for the next 12 months.  Going back to 1929, cyclical bull markets like this one have lasted 33.6 months on average (17.4 median) with an average return 114.4% (76.7% median). The year after the S&P500 enters a cyclical bull market shows the index higher 65% of the time, with an average return of 9.4% and a median return of 14.1%. These returns would equate to 4700 on the S&p500 and maybe even 4900, into June 2024.  FWIW, my model has the S&P500 returning to the level 4700 later this year after a summer stall sell-off and stall.  As for 2024?  I do not know yet.  I can come up with even much higher bullish outcomes than 4900 as well as wildly bearish lower levels.  Let’s see what the rest of 2023 holds first.

It’s summer tme and time for markets to rest.

The cash S&P500 peaked at essentially 4425-4450 last week.  Believe it or not, this was the calculation I had the index reaching based on my volatility model into the first half summer peak, under the most optimistic unpublished case, way back in December of 2022.  So, what’s next? What’s likely after a 8 month run up? Well, more often than not, the markets take 2 to 4 months to digest those gains. Not days or weeks. But months.  It’s very normal to see a 4-5% move down over the next 2 months followed by another 2 months of bouncing around.  Call it -200 to -250 points down in the S&P500. This would take the markets back to where they were just in late April. S&P500 4200-4175.  This level also happens to be where the “Powell Puke” in August of 2022 happened.  You can see all these levels on the charts earlier in my video.

But Chris, you usually present data to support your outlooks, where’s that data? Here it is compiled by the group at Merrill Lynch. Focus your attention on the column heading “250-day” return which equates to roughly a 12 monthly period of trading days.

So for those of you who have made it through this video, that’s a sneak peak of what our team thinks might be instore for the rest of 2023. For now, we are thinking down back to 4200 or slightly lower over the next two months into mid-August, bouncing around into late 3rd quarter and then a strong year end rally back toward, but just short of ATH’s for the overall S&P500.

Summer Expectations

Viewers, while summer is a normal time for investors to get away from their screens and focus their attention on family and fun, I would suggest you take the recent runup in the markets and crash in volatility to get on the phone and give us a call at OHFG.  Set up an initial consultation with an OHFG advisor or if you’re an existing client, schedule a review of your financial plan, goals and objectives, and your asset allocation.

Now is the time to review your goals and objectives, not when things are whipping back and forth, up, and down quickly in the markets. If you are having the thoughts “I need more growth in my portfolio, or I need more income”, making those asset allocation actions are best done when the markets are calm.  But investors remember, there are no guarantees in the markets.  You can’t just turn on more growth or more income in the stock markets. That’s not the way they work. The exact path forward is always uncertain and making asset allocation decisions in your portfolio, be it stock and bond mix or equity style changes, are best made when markets are calm, and emotions are running low. Making emotional decisions when markets are volatile and we are feeling highs and lows as an investor, is the wrong way to invest in my book.

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  or click here and schedule an advisor consultation. We are here to help you on your financial journey into and through your retirement years.