07.01.2019 – Goldilocks Invites China to the Party

By Chris Perras, CIO.

Equity markets were mixed last week, alongside a wave of weaker economic data and China trade uncertainty. The S&P 500 slipped 0.3% but the index closed just below a record high.   Banks and financials were last weeks best group.  Semis and tech did well too.  Market “pundits” remain cautious on the group due to concerns over the yield curve.

Small capitalization stocks, as represented by the Russell 2000 index, surged on the week as pension funds reallocated money to the asset class at quarter end as the asset is at multiyear valuation low versus large-caps.

I want to mention the now obvious “leak” of the positive President Trump and China trade negotiations with about 15 minutes left in last Fridays trading session.  With a few minutes left in the trading day last Friday, June month end, and second quarter, and no other stock markets open and available for trading in the world, the SP500 suddenly and inexplicably burst to the upside by almost 15 points.  Today, the SP500 will open up almost 30 additional points on the back of positive trade talks that concluded Saturday.  We pride ourselves on having a system of government where no one is above the law, not even lawmakers themselves. However, in my opinion, it sometimes seems they may be.

Elected congressmen have historically done a lot better in the markets than the average investor has.  How is this possible?  Are they better stock pickers?  Are they smarter at investing?  In my view, it is possible that this out-performance is made possible by the widespread and technically legal practice of congressional insider trading.  By the letter of the law, it is illegal for representatives to trade on inside information.  However, unlike corporate insiders who have to disclose their trades electronically online, our elected officials’ trades are documented “old-school” in printed form in a basement in a building in Washington D.C.  Have fun down there in the basement combing over their financial records when every other person in America has to file these records electronically so they are tracked by the SEC and our tax officials.  Just saying.

We reiterate, as we have for over a year, the cycle of 2018-2019 is playing out almost EXACTLY like 2015-2016.

The official version of our second half 2019 outlook has now been released and is available on the website at https://oakharvestfg.com/2019-second-half-outlook/

Moreover, we provide our readers an early look into the Optimistic and Pessimistic cases for 2020.  The “Goldilocks + Go-Go-dilocks+ melt-up” scenario for the market for 2020 and early 2021 should our growth and stock market focused President Trump return to those goals and get re-elected in November of 2020.  Alternatively, the “3 Bears Return” pessimistic scenario is also addressed.

Weekly market updates contain general information and express the views of Oak Harvest Investment Services. Data and information cited is believed to be reliable at the time of creation, but is not guaranteed. Content should not be regarded as personalized investment advice. Views and opinions expressed may change without notice and do not constitute a recommendation, or an offer or solicitation to buy or sell securities. Indexes are not available for direct investment, and real returns may differ. In addition, Oak Harvest makes no assurance as to the accuracy of any forecast made. Past performance is not indicative of future results. Investing involves the risk of loss.