Powell Speaks; Markets Remain Calm

Welcome to the Oak Harvest Market Update and Recap for 8/30/2021!

First of all, our thoughts and prayers go out to our family, friends, and neighbors in Louisiana who are feeling the brunt of a top 5 hurricane on record to hit North America, with sustained winds of over 150mph…

Last week, the S&P 500 advanced 1.5%, closing above 4,500 points for the first time, in yet another new all time high. The S&P has hit more than 50 new all-time highs (ATHs) this year. The Nasdaq climbed 2.8%, surpassing the 15,000-mark and the value biased Dow-30 gained 1.0%.

The S&P 500 has gained slightly over 20% so far this year. More than 10 of the 50 new ATHs were booked in August alone, the very month that some other strategists argued would be a weak month for the markets, based on seasonality, or a potential taper tantrum, or whatever the reason de jour happened to be.

And now, we are about to enter September, generally known as the worst month of any year.  Most of these same strategists are sticking with their negative seasonal calls.  While acknowledging that anything is possible, we still view a correction of 10% as being very unlikely, verging on improbable. For the remainder of the year, grinding upward action with occasional dips of between 2 and 5% seem the more likely outcome in our view. As Chris argued in last week’s Stock Talk Podcast, “Are we there yet? No, we are not.”

And it’s important to not get caught up in the weeds of what is going to happen in any given month, quarter, or even half-a-year. That leads to emotional decision making, fear, and uncertainty. James warns almost non-stop about the dangers of those behaviors and emotions. We have our short-term and mid-term views on the markets, and your portfolio manager certainly incorporates our market views into tactical decision making, but our big-picture investment strategies are based on long-term (5 year + time frames), designed to capture different levels of risk and return over the whole period. When the next correction does finally come around, we won’t be panicking and “going to cash,” Oak Harvest will continue to maintain discipline and a steady hand as we steward our client portfolios.

And our “Fed Watch” update: Jerome Powell’s speech at the virtual Jackson Hole Symposium was decidedly dovish, and Powell spent most of his time defending the transitory inflation narrative. He did prepare the markets a slowing of the Fed’s $120 billion in monthly bond purchases, signaling that tapering would start before the end of the year, though the announcement could be pushed off due to the influence of the Delta variant. Markets responded positively across the board to Powell’s speech.

For the remainder of the year, we view several headwinds that likely contributed to the Q2 chop as now contributing to the likelihood of strength into the end of the year:

• Delta-variant surge peaking
• Inflation headwinds peaking
• Fed taking a dovish tilt due to uncertainty
• Business caution equaling future demand
• Consumer caution equaling future demand
• Advance/Decline in the S&P 500 making “new highs” along with the market

Contrary to what some strategists perceive, participation of stocks in the bull market is broadening, which historically signal continued market strength, which we generally expect in the remainder of 2021.

Stock Talk Podcast (Weekly Market News and Opinion from Oak Harvest):

https://oakharvestfg.com/stock-talk/are-we-there-yet/

The Investor Mindset Podcast (Introduction to Critical Concepts for Investors):

https://oakharvestfg.com/investor-mindset/

 

Weekly market updates contain general information and express the views of Oak Harvest Investment Services. All data, articles, and information cited are believed to be reliable at the time of creation; however, Oak Harvest does not warrant any information contained herein to be correct, complete, accurate or timely.

Oak Harvest provides links to content produced by other websites that OHFG does not control, and Oak Harvest does not necessarily approve or endorse such content and does not guarantee its accuracy. Nothing in this content constitutes personalized investment advice. All charts, indicators, or graphs included or referenced in this content have limitations, and no such material is able, in and of itself, to provide a buy or sell recommendation for any security. Strategies and ideas discussed may not be right for you, and views and opinions expressed may change without notice. Strategies and ideas discussed will not apply to all client accounts or portfolios.

Nothing in this content constitutes a recommendation, or an offer or solicitation to buy or sell securities. Oak Harvest makes no assurance as to the accuracy of any forecast or projection made. Not all past forecasts or projections were, nor future forecasts and projections may be, as accurate as any forecasts discussed. Indexes like the S&P 500 are not available for direct investment and your results may differ. Past performance is not indicative of future results. Investing involves the risk of loss.