• 2 months ago
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Transcript
00:00So my buddy Frank Cappellari did this chart.
00:02I thought it's kind of summed it up.
00:03I mean, we just, I'll get into Monday,
00:06kind of the big drop and September and the green day,
00:09you know, go away in September.
00:11But let's just put things in perspective.
00:12Oh, that's a cool chart from Frank.
00:14You know, we just had over a 10% uninterrupted rally
00:18virtually off of those lows, you know,
00:20early August until just recently.
00:21So one could say, well, maybe we're just due for a bad day.
00:24Well, we had a bad day, we had a bad day.
00:27And it's interesting because yesterday, or sorry, Monday,
00:29Monday was the bad day,
00:30but even the best years see a couple bad days.
00:34I'm looking at 2% drops.
00:35Okay, you gotta have a cutoff somewhere.
00:38Your average year sees six of them.
00:39Now let's be very clear.
00:41No such thing as average in this world, right?
00:44It's my old statistician joke,
00:45but it's head in a bucket of ice, feet in the oven.
00:47It's how do you feel?
00:47He goes, well, on average, I feel pretty good.
00:49You know, that's my, that's the only joke you'll get.
00:51I promise.
00:52Um, but yeah, you know, it's, you know,
00:56I've used it once or twice, but nonetheless,
00:59we've had three, 2% drops.
01:01You can see here, you know, some years have a whole bunch,
01:03but usually your best years do not have many,
01:06but still just put some context around the fact that,
01:08hey, we're up, I think 14 or 15% on the S&P for the year.
01:12We're close to 20, you know, this time on Friday,
01:15but then obviously Monday had something to do about that.
01:17Let's talk about Monday for a second.
01:18So again, over 2% drop on the S&P.
01:20We know a lot of it was what Nvidia was down 9%.
01:23Tech did really poorly.
01:24Semiconductors, I think they're down five or 6%.
01:26One of the worst days they've seen in a long time.
01:29But what got us,
01:31I might've talked with you last month about this,
01:33when we had all that volatility in August,
01:35was the action we saw in the U.S. dollar.
01:37The U.S. dollar on Monday was up 10 bips,
01:39all right, 10 basis points.
01:41If it was a true risk-off scenario,
01:43if it was a true end of the world is coming,
01:45like they keep telling us about,
01:46we would have expected the dollar to get more of a bid.
01:49It didn't.
01:50And then really incredibly to me was,
01:52it has been the last two days,
01:53the action in high-yield corporate bonds.
01:57It's on the right there.
01:57High-yield corporate bonds are like higher
01:58than it were on Friday, okay?
02:00They had a good day yesterday.
02:01They were down only 30 basis points or so on Monday.
02:04Again, these are just little clues.
02:06It doesn't mean we can't have continued weakness
02:08in September, can't have continued volatility.
02:10But these are things we're watching in August
02:11when we had all the scary stuff happen in August.
02:14Sonu Varghese, really smart guy,
02:16worked with our team was like, look at the dollar.
02:17Like the dollar has been weakening.
02:19The Mexican peso was strong during that sell-off
02:23last August.
02:23Do you think that's consistent
02:24with kind of an end of the world scenario?
02:26We would say no, right?
02:27So we're following these things.
02:28And so far this look to us looks like
02:30your typical pre-election jitters,
02:32your September jitters, whatever you want to call it,
02:35nothing out of the ordinary.
02:37Let's be very clear also, the S&P everybody is only been,
02:40this is interesting, I think,
02:41only been down one month this year.
02:44It was in April, historically like the best month.
02:46So that kind of spins things on its head.
02:48But the S&P has been higher nine of the last 10 months.
02:51And now here we are coming into September,
02:53maybe we are due for a break.
02:55I mean, that's not the end of the world,
02:57but the action we're seeing in the credit markets
02:59and with the US dollar to us again,
03:00suggests any weakness will be fairly contained.
03:03Let's call it five to 8% right at the most
03:05and probably a buying opportunity
03:07for eventual new highs later this year.
03:09This is kind of cool.
03:10When you have a bad first day of a month,
03:12like we just did down 2%, the rest of the month,
03:15that's not the full month, let me be clear.
03:16So it started on day two,
03:17the rest of the month has been higher the last 13 times.
03:21I don't know, I don't make it up.
03:22It is what it is.
03:23Now here's something for everybody.
03:25The two worst rest of the months ever
03:28after a bad first day were, take a guess, September.
03:31It's a 74 and 2002.
03:33You can see I kind of bolded those
03:35where the wheels fell off.
03:36So you got something for everybody,
03:37but just be aware that a bad first day,
03:39just simply by itself, the last 13 times,
03:43we have seen higher markets.
03:45I shared this with you probably the last couple of times.
03:47Bad stuff happens, right?
03:48I'm not a trader, I'm an investor,
03:49I'm a strategist, an RA that manages a lot of money
03:52for a lot of investors.
03:53Just bad things happen, scary headlines happen,
03:55bad days happen, even in your best years.
03:58Just important to remember that.
04:00Were there any clues?
04:01I mean, this is one I've dusted off.
04:02I'm sure I've shared it with you before.
04:04When you're up 20% in pre-election year,
04:06the election year has never been lower.
04:08Sure, maybe you can argue relatively small sample size.
04:10I get it, but that's still something
04:12that I think was there.
04:13Also, I took a look when you're down in a midterm year,
04:18like we were in 2022, all right?
04:20The last 17 times you had an election year
04:23or a pre-election year,
04:24that's again, after you're down in a midterm year,
04:26like we just were, you're higher.
04:2817 times in a pre-election or election year,
04:31you're higher after a down midterm year.
04:34So just something to think about there.
04:36And this is what I share with you, I know a lot.
04:38Summer rallies are perfectly normal,
04:42perfectly consistent with what you see in an election year.
04:45We've said a while, I came on and saying,
04:46don't sell in May, go away, buy this May,
04:49or at least buy this summer.
04:50Let's put it, let me put it that way.
04:51And you can see here, the best three months on average
04:54are June, July, and August in an election year
04:56of almost 7.3%.
04:58Take a wild guess what we just gained the last three months,
05:017.1% higher every single month.
05:06Now I know, okay, well, barely in some of those cases,
05:09but nonetheless, higher three months in a row,
05:11actually we're higher four months in a row,
05:12but higher during those three months.
05:13So once again, things played out,
05:15but then we are coming into, did anyone hear this yet?
05:17September's not that great.
05:19Yes, it's true.
05:20The last 10 years, only month that's down on average.
05:22Last 20 years, it is the worst month.
05:24Since 1950, it is the worst month.
05:26I call this the, it is what it is.
05:28There's a lot of reasons and people guessing why.
05:31I don't know, I could throw out the same reasons.
05:33I just know September can be that banana peel month.
05:35So let's just be aware of that,
05:36but then take a note how strong November and December
05:41tend to be, especially election years, which is this chart.
05:43And people worry about September, sure,
05:45but just be aware October is the worst month on average
05:48in an election year.
05:49So I've come on here for a long time.
05:51Say we're bullish, we still think stocks were higher.
05:53I'm still in that camp, but what we've done actually,
05:55I think I come with you last time,
05:56we actually added some treasuries.
05:58We had high yield for a good amount of time,
05:59which really worked well in the fixed income world.
06:01Maybe almost three months ago now,
06:03when everyone was talking about rate hikes,
06:04remember that?
06:05People were actually talking about rate hikes
06:06three months ago.
06:07We added some treasuries because we thought inflation
06:10is going to come back and we expected bonds much better.
06:12So that's worked out.
06:14But then you fast forward where we are right now,
06:15just two weeks ago or so when we had that bounce,
06:17or maybe last week, we had the bounce back to new highs.
06:20We added some low volatility ETFs,
06:22because how do you do better in a high volatility world?
06:25You go low volatility, not a recommendation,
06:28but like SPLV, if you look there,
06:30we know there's some defensive stuff in there.
06:31What surprised us a little bit,
06:33but then when you look into it,
06:34there's a good amount of industrials and financials
06:38in some of these low vol instruments that are out there.
06:40Those are our two favorite groups.
06:41We've liked financials all year.
06:42I mean, banks just yesterday,
06:44some banks are at an all time high.
06:45So that's been working.
06:46So that's kind of where we're still overweight equities,
06:48yes, but we are kind of switching things around
06:50a little bit in the money we run,
06:51expecting potentially your standard
06:54September, October volatility.
06:56And then if we get,
06:57we're already talking to our team right now.
06:58If we get a six, seven, 8% correction,
06:59what are we going to do?
07:00We're going to go back into some of these risk assets.
07:02We don't think we're quite there yet,
07:03but just be aware of that.
07:04Also be aware of the second half of September
07:07is when the trouble tends to come.
07:09And it's funny, it's funny.
07:11September 19th is when you peak, okay?
07:12That's my son's birthday.
07:13That's the only reason I remember this.
07:14But September 19th is also talk like a pirate day, matey.
07:17So when we start to see the weakness,
07:20it'll be talk like a pirate day, just goofy stuff,
07:23but easy to remember.
07:24Again, sample size of one.
07:25So just take this with a serious grain of salt,
07:28but boy, this year looks a lot like last year, doesn't it?
07:30I mean, that is amazing how similar these two years were.
07:34And again, last year we bottomed into October 27th,
07:37right at the lows, 10.1% correction.
07:39Everybody said the end of the world was near.
07:41Your average year bottoms on October 27th.
07:43So just kind of be aware, again,
07:45that we're in that timeframe.
07:46I've shared this with you, I think, every time.
07:47So I've shared it again.
07:48Election years, when you have a president,
07:50I recall, sorry, a new president,
07:52and I know what's happened with President Biden
07:54stepping down, so this kind of maybe
07:55has a major asterisk next to it.
07:57But you're up the last 10 years, 12.2% on average,
08:01and you have a new president.
08:02So it was lame duck years
08:04where things get a little squirrely.
08:05Now, technically, we don't have a lame duck president.
08:07Right now, our president is not running again.
08:09I'm aware of the schematics here,
08:11but still just something to think about,
08:13just a couple more.
08:14Big picture things, August 19th, we saw,
08:16this is the data from our friends at Ned Davis Research.
08:19We had, which one was my share?
08:21Oh, this is a 10-day moving average.
08:22So we had over 90% of stocks
08:25above their 10-day moving average recently,
08:27but just less than two weeks before is less than 15%.
08:30So that buying thrust, everything's oversold,
08:32everything's overbought.
08:33October 19th was a big deal.
08:35You see the returns there.
08:36Higher a year later, what is this?
08:3822 out of 24 times.
08:40That's not too bad.
08:40With some pretty solid returns there.
08:43So just some things to think about.
08:43Also, we had a 90-90 day two Fridays ago.
08:46And again, this is using, I think, what's it called?
08:48The multi-cap.
08:49Oh, no, okay.
08:50Common operating companies only.
08:52Again, this takes out preferreds and bond-like proxies,
08:54again, from Ned Davis.
08:55But again, 90-90.
08:56What's that?
08:5790% of the stocks were up.
08:5890% of the volume was up a couple Fridays ago.
09:00It is what it is.
09:01You see it there.
09:02These tend to resolve higher.
09:03Sure, a month or two, who knows what's gonna happen?
09:05Maybe we do see some volatility
09:07and pullback or consolidation,
09:08but these are big picture things
09:10that, again, suggest to us
09:12why we're still overweight equities,
09:13why we still like industrials, financials.
09:15Our biggest overweight all year,
09:17if I'm talking about this, is mid-caps.
09:18Quietly, no one's really talking about them.
09:19They're doing pretty well.
09:20That was just small caps and large caps.
09:22It's like the Yankees and the Red Sox argument.
09:25Mid-caps just quietly kind of going higher.
09:26The Jane Brady group, if you will.
09:29We like that.
09:29Just a couple more, and out of my bingo cards here.
09:32On the left, I know this is the F word, fundamentals,
09:35so more of a trading show,
09:36but we'll just quickly talk about this.
09:38CBO did a projection before the pandemic.
09:42Of what the economy's gonna do,
09:44the economy by that GDP in the U.S.
09:46Our economy is growing faster than what the CBO predicted.
09:49That's before 100-year pandemic,
09:51before we shut down the economy,
09:52and before the most aggressive Fed
09:54and generational high in inflation.
09:55We're still growing faster than what they expected.
09:59That is why we're at all-time highs.
10:00And on the right, real incomes.
10:02Yes, inflation's higher than anybody wants,
10:04although it's coming back.
10:05It's come only for a while, saying that.
10:06We think inflation is last year's problem.
10:08We started saying that in February.
10:10Nonetheless, real incomes continue to increase.
10:14There are cracks in the consumer.
10:15There are more delinquencies out there.
10:17Lower income people are clearly,
10:19lower incomes are clearly struggling in a lot of cases.
10:21But the honest truth is if you look at the top,
10:24you know, 30% or so, a lot of people employed,
10:27still getting good raises.
10:28A lot of people are still spending.
10:29Maybe you're not spending as much, right?
10:31We wouldn't be surprised at all
10:32if we start to see some pullback in spending.
10:34It doesn't mean you have to have a recession.
10:36We think it's more of a mid-cycle slowdown,
10:38and those rate cuts are likely coming.
10:41And that can kind of continue to help things.
10:42Oh, there we go, rate cuts.
10:43I shared this before, but, you know,
10:45we call this more of a, like two more, I think.
10:47A normalization cut, kind of like 84, 95.
10:51And honestly, 2019, people go to 2019, things are good.
10:54Fed cut a couple of times
10:55because they hiked a little too much in 2018.
10:56The economy wobbled, didn't fall over.
10:58You see the returns there.
11:00Historically, you're up, you know,
11:01good deal after normalization cuts.
11:03As if they're cutting before a recession, and I get it.
11:05Nobody knows.
11:06Are we headed for a recession or not?
11:08We continue to think we are not headed for a recession.
11:12The consumer is still spending.
11:14Just this morning, the employment backdrop,
11:15we had that big spike in claims, oh, five, six weeks ago.
11:18Claims are coming back.
11:19You were not seeing any layoffs.
11:20We saw a jump in hiring last month in the jolts.
11:22Now, I know there are still some cracks in labor market,
11:24but overall, we still do not see a recession.
11:27One other cool thing about this,
11:28the Dow made a new high on Friday.
11:30I took a look since 1900.
11:31Six months later, the S&P, I'm sorry, our economy,
11:34has been in a recession 9% of the time,
11:37six months after a new high in the Dow.
11:39What in the world does that mean?
11:40Well, since 1900, we've been in a recession 22% of the time.
11:43And I know there's a lot more recessions earlier
11:45in our country's history.
11:46But when you look, it's extremely rare
11:49to fall into recession within six months
11:50after an all-time high.
11:51Yes, before COVID had happened.
11:53Yes, in 2007, it happened.
11:55So those times didn't work.
11:56But majority of the times, the best indicator we have
11:59for how the economy's doing is the stock market.
12:01So let's just kind of remember that.
12:03Bull markets last longer.
12:04You think this one's almost two years old now
12:07from October of two years ago.
12:08The average one lasts almost five years.
12:10Who knows how long this will last?
12:12We've been saying it for a long time now.
12:14Be aware of this cycle.
12:15Could go more than you think.
12:16Also, your average, this is the stuff we talk about
12:18with advisors and our clients.
12:20This is interesting.
12:21Your average up year is 19% on the S&P, okay?
12:23So when you're up, any of the up years since 1950, up 19%.
12:27Sounds like a really big number.
12:28It's actually perfectly normal.
12:30But then you're down, it's 14%.
12:31Your average is right around seven or 8%.
12:33So just some big contextual things.
12:35The consumer is still strong.
12:36This looks at, I don't wanna get too into it,
12:38but all of the balance sheets, right?
12:40There's a lot of debt out there, yes,
12:41but there is a lot of assets.
12:43There's a lot of equity.
12:45People own houses, people own stocks.
12:47They've created a lot of wealth.
12:48And in a lot of cases, the balance sheets of consumers,
12:51this makes people mad when I say it,
12:52are in the best shape they've been in 25 years, okay?
12:55Because again, this is something we look at there.
12:57Last one, I think, I shared this before,
12:59but it's from our friends at Bespoke.
13:00If you invested $1,000 under Democratic presidents,
13:04you have 61,000 bucks right now,
13:051,000 bucks under only Republican presidents.
13:07Since 53 in Eisenhower, you have 27,000 bucks,
13:10but took that same 1,000, invested the whole time,
13:131.7 million dollars.
13:15Don't get too worked up about the election
13:18when it comes to your investments and politics.
13:22All right, I'll stop sharing.
13:23I'll take a break.
13:24That was fast, I know.
13:25I came out swinging today.
13:26That's like a six-week course.

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