Is It a Bull Market? Jarvis® Update June 16, 2023

It's looking like a bull market. What should you do if you're still sitting on the sidelines? We answer that question more on this week's Jarvis Update. I'm your host, Brian Dress, director of research here at Left Brain, joined as always by our CEO and chief, chief investment officer and number one Miami Heat fan licking his wounds, Nolan Langford. Nolan, welcome to the program.

Hey, Brian. Thank you. It's good to be here. And yes, we are— all of us here in Miami are licking our wounds on one hand. But the other thing is, at the beginning of the playoffs, Miami being an 8th seed, we never expected them to get that far and to push a great team like Denver to 5 games. I think we're— we are all celebrating the Miami Heat. So bittersweet.

I have to agree, it was a great season for the Heat. We'd like to ask you to like and share the video if you do find these videos useful. It helps other investors find them. And then ask you to hit the bell for notifications and subscribe. That way you know each time we're out with a video and we're out on a biweekly cadence with these. We wanna start with a preview. Markets again were quite buoyant this week. We've got two topics as we discuss this week's activity. Number one is it's looking like a bull market And then the second topic, what should you do if you're on the sidelines? A few announcements for you before we get started. First of all, again, we have a new website. We're here at leftbrainwm.com. We're happy to have you check that out and give us any feedback you have. Also sign up for our newsletter. The Jarvis newsletter will be out next week with our next edition of the newsletter and looking at some of these topics that we discuss on the video in greater depth. But we also produce the show for the everyday investor, whether you have a 401(k) or an IRA, and if you manage your own money or you work with an advisor, we'd love to be a resource for you. Call us on the number below if you'd like to know how to position yourself for the bull market that does seem to be upon us. Also, if you're an institutional investor, we've got something for you. That's our research service, 6 to 8 full-length reports each month on stocks and bonds. Also, that's— we've got The Chosen, that's our favorite stock and our favorite bond each quarter. And we also have model portfolios available. So we've got a library of hundreds of reports now. So take a look at that if you're interested. We'll put the details down below. Let's start with the market recap. The S&P was up 3.1% this week, led by the Nasdaq. That's the tech-heavy Nasdaq that was up 4.1%. And then the poor old Russell was up half a percent this week. But it's good to see all three. And, and the market— and the markets are showing the type of momentum that we haven't seen since 2020. On Wednesday, we had the Federal Reserve Board meeting, much anticipated. We were looking to see, were they going to stop? Were they going to pause on rate hikes or were they going to continue? They did put rate hikes on pause for the first time in the last 15 months. So investors did like to see that. We've also had yet another month of decelerating inflation. We saw the Consumer Price Index come in around 4%, which is lower than what we've seen in about a year and a half. And then the Producer Price Index came in at just over 1%, which is as low as I certainly can remember it. So, Nolan, with that all as a backdrop, what are your general impressions of what we've seen this week in the markets?

I think it's good. I think it is. I think it's bullish. I think that's really good that now that the Federal Reserve Board meeting's over, the debt limit negotiations are done. All of that is behind us. We can get back to focusing on what really matters, which is how we can position ourselves to profit. So I think those things are really good to have in the rearview mirror.

I like that word profit. Let's move right on to topic 1. So topic 1, we're calling It's Looking Like a Bull Market. So without question, it was a bear market in 2022. We had the Nasdaq down 33%. We had the S&P down just around 18%. Nolan, first of all, I want to help viewers kind of demystify these terms. We throw bull and bear market around liberally. Can you define each of those for, for the viewers?

Yeah, easy for you to say, huh? Yeah, quite simply, you know, bull markets and when things are going up, I think the classical definition is up 20% from the lows. And bear markets are when securities are headed down, and I think it's about 20% from the top is how we define them. So you're right, right now this looks like a bull market. It doesn't matter what the meter says as far as what the returns are. If you look underneath and you look at stock action, it's certainly bullish.

Yeah, I know, Nolan, there's these classical definitions of it, but I think it is a little bit more like you said, kind of a subjective thing where you can see the action in the markets moving more positively. I think that's a good sign of a bull market. In fact, we'll throw out some numbers. Since the low on December 28th, the NASDAQ's up 33%. The S&P bottomed out on October 12th of last year, up 19% since then. So definitely from a statistical point of view, looking like a bull market. With all that, all that, all in mind, Nolan, are you willing to call this a bull market? And if so, why or why not?

I am calling this a bull market. You know, when I take a look at security prices, it's interesting, you know, coming off of earnings seasons, generally companies that don't do well or at least have reports that aren't well received by investors, you see a lot of heavy selling. And negative price action. And what I've noticed this earnings season, even companies that did not do well, where investors were initially disappointed, you're starting to see those stock prices creep up anyway and you start to see those for year-to-date gains. So earlier in the year, I think maybe the first quarter, we kind of dismissed what was happening. There was so much macro news in the foreground and it looked like maybe the stocks that were shorted the most last year and just some general reversal. Last year, winner— last year's losers were winning, and so it's easy to dismiss. But if you look now, it's certainly broadened. So it's not just stocks that were shorted that people are buying, and it's not just a trash rally. Pretty much across the board, stocks are really starting to get purchased. I think that makes a lot of sense, Brian. Think about it from an investor standpoint and think about the alternatives. Cash is trash. Because it still is not paying much. We're gonna talk about people having moved money into CDs and being really excited about 4% on CDs. But if you still look at traditional bank and savings accounts, it still leads with a decimal point in front as far as the interest that you're getting. I think real estate has topped. I don't think anybody's chasing real estate here, especially with mortgage rates being what they are. And the crypto game blew up last year. And even though there was an early renaissance earlier this year, that thing tends to have gone bye-bye as well. If you're an investor and you need your net worth to grow, there's really one game left in town, which is the original wealth builder, which is securities, whether it be stocks or whether it be traditional corporate bonds. And so I think that's where investors should focus.

Excellent. I love the segue. We're going to move on to topic 2. So topic 2, we're saying, what should you do if you're on the sidelines? So like you said, Nolan, a lot of people are on the sidelines. They've got cash in the bank. They may have bought some CDs feeling like they were getting some security. It reminds me of the old adage, the best time to plant a tree is 20 years ago. The second best time is today. So, you know, the markets have been moving over the last few months. Things are doing well, but a lot of people may have not had the foresight to get in and take the risk at that time. Markets have already made a significant move to the upside, and we have actually spoken to a number of investors over the last month. They're asking us, is it too late to put money to work? So, Nolan, can you speak to those investors who have significant cash positions or may have bought a bunch of CDs or have some low-risk bonds in their portfolios right now? How should they be approaching this market?

We always say you want to have whatever you're going to need over the next 3 to 6 months. You do want to have that safe. You want to have that liquid. What we're talking about here are some long-term money that you need to strategically think about how to position yourself. Those are the funds that we're talking about. I don't think CDs are that attractive anymore. You know, if you look out over 1 year for CDs, the rates are still really, really low. You're getting 3% or less. If this is in your taxable account, after taxes, it's still a meager number. So I think that's something to remember. The other thing to remember is just history. Markets have perked up, but it's been fairly recent. And if you look historically, once a bull market starts, particularly after a year we had last year where both stocks and bonds were down double digits, you know, we've said in past series that's only happened 5 times in the last 100 years. And historically, if you look 12, 18, 24 months after that, bonds and stocks are both up meaningfully. If this is a bull market, is the beginning. So investors have not missed anything.

I'm glad you said that, Nolan. I think it's tempting for us when things start to go wrong in the markets to become more short-term focused. And so then you look at the markets doing well for 2 or 3 months and you start to think, well, maybe that's it. You said market history tells us it's, it's anything but that. 18, 24, and 36 months after the bull market starts, certainly you see a lot of really positive action. Keep it in mind for investors that, like you said, we're just getting started. If we can agree on that concept, Nolan, and if investors can agree with on that concept with us, that investing from here is still viable, what is the correct strategy to put that money to work?

I think both bonds and stocks will work. The other thing to remember historically is once the Federal Reserve stops raising rates, and just to level set so we're all on the same page with all the viewers, I think they've raised interest rates 11 straight times, and short-term rates are now at 5 to 5.25%. That's historically very high, and that's one of the swiftest and steepest interest rate rising increases that we've had historically. But after that, history says not only do they pause, but they start cutting rates. And we tend to show that seesaw effect. Remember, if you buy bonds and rates go down, bond prices will move up. And that's why I'm saying I think bond prices will work from here. It doesn't look like we're going to get very— we're at the end of the interest rate increases. The Fed has told us as much and we believe them and the market believes them. If they do at some point start lowering rates, and again, a lot of people are holding back. The people that are probably not investing, Brian, are those people that are saying, well, I know a recession is coming because I heard it on the news. Well, if a recession comes, the Federal Reserve Board is going to lower rates. And guess what that's going to do to bond prices? So I think bond prices can work from here. We're not just saying, you know, hey, if you're cautious on stocks still, We're not. But if you are, I think you can buy bonds and still get very attractive returns, not only from interest in coupon payments, but also for possible capital appreciation. So there's a lot to like.

Those are the viewers that have been following us for a number of months. They know that we've been getting optimistic for the last few months. But again, it's not too late to become optimistic and put your money to work in an optimistic way. We do want to encourage the viewers to reach out. We've got a game plan for for the bull market that is upon us. So again, reach out and we're happy to speak with you and give you some of our thoughts. Nolan, we're going to close it out here. Again, looking much more optimistic in the markets finally after some difficult 18 months here. Do you have any final thoughts for the viewers as we lead them into the weekend here?

Yeah, I do. Investors should be feeling good. You know, it's the summertime, it's vacation time. You can finally stop worrying. Are my statements going up? They're going to be going up. And I think we need to start thinking more long term. Like, if this is a bull market, and we truly believe that it is, we think the next 2 to 3 years can be prosperous. And I think we all as investors need to think about, how can I put myself in my total financial position in the best position to take advantage of the next 2 to 3 years? So there's a few things I think we can think about. One, we've been doing a lot of life insurance reviews and annuity reviews. A lot of investors has purchased life insurance and annuities —pardon the pun—it seems like lifetimes ago. So if you were early career and you were starting a family and you bought a life policy, and now you're like me where you're sort of mid-career or midlife, that policy should be reviewed because the reasons you bought it may no longer exist. And we're doing one with the client now who bought actually a permanent policy that was tied to interest rates. And now the death benefit doesn't work, the premiums don't work, and the index that they're tied to doesn't work anymore. So maybe if you did something that was more of a cash value or traditional whole life, with the bull market upon us, maybe it's time to look at something that's variable, that's tied to the stock market, to take advantage of the upside, both in life insurance and annuity. And the other thing to think about is a lot of clients, a lot of investors have changed jobs a lot over over the last 3, 5, and 10 years. And a lot of clients have just out of apathy just left their money there. And now they see the statements and they see them going up and they're probably more likely to leave them there because they feel they're in a good spot. One of the ways to accelerate the recovery is if you move that money to a traditional IRA, you don't have to sit in mutual funds. You can select individual stocks. And that's a way to catch up because what we've seen, the markets hit a high point in 2021. A lot of stocks are down 50, 60, 70% and they're all not bad stocks. So what you're going to see over the next 2, 3 years, we think the markets will be up generally. But if you can select winning stocks, some of those will be up 100, 200, 300%. Not all of them, but if you select well, some of them will. And that is a way to accelerate the comeback.

I like all that, Nolan. Really useful thoughts for the viewers out there. We want to thank Nolan. For being with us. We want to thank the viewers, and, uh, we want to wish everyone a very happy Father's Day. And it's nice to have a bull market in time for Father's Day. With that, we'll say goodbye, and we'll see you again next time.