Transcript:
Tom Vaughan:
I’d like to start talking about the markets themselves. And kind of what I saw this week. And what I felt was really important, sort of a summary for the whole week as far as that goes. And so it’s been a really interesting week, of course, as usual, you know, we’re in the middle of an epic timeframe, really, from the stock market standpoint, because of this virus that’s running around, and what have you, too. So let me share my screen, and I’ll tell you a little bit about what I’m seeing. So obviously, the first thing we start with, and I’ve started with this the last several weeks is the virus itself, it is having some potential impact on what’s happening with the market. And we’ll talk about that. And you can see what’s going on here, we’ve had this big run up, that’s happening, you know, via the Delta Variant. As far as that goes, there’s some hope that this thing will peak out at some point in time, and, you know, maybe come back down. And if you look, it’s kind of interesting. What happened here, in India, for example, they had this ginormous, you know, run up here, and then it came back down and flattened out and what have you.
So if you look there, that was 11 weeks from their lowest point to this high point here. You know, so if that was true, 11 weeks for us would be the first week of September, so it’s coming up, we’ll see what happens. Then, if you look at what happened here in the UK, also a Delta Variant surge, they had a 10 week run up between, you know, that low point, but they are getting a little bit of a bounce here. So we’ll have to wait and see what happens as far as that goes. But it’s a it’s an ongoing piece of the story for what’s going to happen, you know, potentially with the stock market as far as that goes. This is one of the things that came out this week, this is the US Retail Sales Report. And you can see going back over a year here, we had this giant run up here after March. And basically what’s happened now, though, is that we’ve seen a little bit of softening in the retail sales. And that wasn’t expected, it was expected to do better. But here’s a couple things I’ll point out that I think are really fascinating about this number one, if you look back at where it was in September, versus where it is now, that’s an amazing movement, upward, huge movement. And the biggest concern back at the kind of second quarter of this year was really inflation. And it was because of this, when if this kept going.
And we had a tremendous run of you know, retail sales and all the other things that were happening, you were going to have a potentially high inflationary environment in the market was struggling with that concept. And so that’s probably the good thing about what’s happened so far with a little bit of softening. So for me, when I look at this in a different light than maybe the markets looking at in the short term number one is I see that retail sales are up a lot over the last 12 months. And but they’re not up so much to create a huge inflationary spike. So I think that’s important. The Delta Variant has, though, impacted consumer confidence. And so this is a survey that’s done. And you can see it kind of peaked out here back in about roughly the same time that the US retail sales peaked out, and it’s come back down. So this is what people are feeling about the economy, their jobs and those types of things. And so that’s starting to weigh on what’s going on as far as that goes. And really, you can kind of see that here in what happened with the stock market, right. So here’s the last five days, every one of these little bars is 10 minutes, this blue line here is the average of the last 210 minute increments. And so you can tell just follow that blue line there that we’ve had some softness this week where the markets have come down. Now, one thing that’s interesting, this is an all time high, you know, the S&P 500 goes back to 1957. That’s the highest it’s ever been. So that’s a good thing. And then we fell off of that high down to here back in early on Thursday morning.
So here’s a couple things I’ll point out number one, this big drop off that happened at the end of Wednesday’s trading day had to do with the Federal Reserve releasing the minutes on their meeting. So they met a couple weeks ago. And the minister basically show what they talked about. And there was an awful lot of conversations about cutting back on the bond purchases at the end of this year. And so that’s kind of an interesting piece. And that’s something that the markets a little bit nervous about, especially considering the fact that retail sales are softer and expected consumer sentiment is softer, expecting cetera. So here’s what I’ll say, first of all those minutes are, you know, before all those reports, and you know, they’re just talking about it, and we’ll see what actually does happen. But I’m not too worried about that aspect of it. I think they’re doing a good job of communicating as early as possible, what’s going on. But the other part that’s very fascinating here is this run up that we’ve had, and this is as of a couple of minutes ago, altogether, and what this is showing right now is that we ended up kind of people coming in and buying the dip, this is only a two and a half percent drop from the highest point to the lowest point and then money started to come in kind of held up yesterday, more or less sideways and in a really good So far today. So, you know, it’s very fascinating. There’s an awful lot of money sitting on the sidelines that keeps coming in to buy the dip. And so that’s a big piece. And here’s what’s happened in the last 12 months. And again, you know, these are the last two bigger downturns that we’ve had in the last 12 months, every one of these bars is now a day.
And this is the 200 day moving average. So you can tell we’re in a really strong upward market. And a matter of fact, today, at the moment, it’s green. It’ll be 200 days, since we’ve had a 5% downturn or more. And so that goes back to the beginning, you know, here and which is the end of October, all the way to today, 200 trading days, that is only happened, including this time, eight times in total since 1957. So that’s pretty rare. And I look at that in a couple different ways. Number one, it could go a lot longer. The longest is 404 days, that happened back in 2016, through 2018. So it could go a lot longer before we have another downturn of 5% or more. The one thing that I do like I kind of like to see some of these little bigger downturns because I look at this like pressure, you know, so if you keep going up and up and up, earnings got to keep up with that, if they don’t, you could get the scenario where you know, basically, the price gets too far ahead of the earnings, you could get a much bigger downturn, and sometimes those bigger downturns people get scared, and it turns into something even bigger than that. So I like to see these little pressure relief valves. But it does look like that, you know, we did get some good buying coming in here.
And we really don’t know for sure if when this is over, I would say one of the key criteria I look at is if it breaks into a new high, it could be over. And that could happen. But oftentimes you get a little bounce, and then it’ll go down a little bit lower. So you know, we’ll see what happens. But the buying on the dip has been a really big deal. And money just keeps coming in and buying. It’s been amazing to watch actually. And then just to put this in a little bit of perspective, here’s the last 25 years. So each one of these bars is a month. Alright. And if you look, the S&P 500 is up 545% just on price appreciation in that 25 year period, even though we had the second biggest downturn in history, which was the 2008 financial crisis. And the third biggest downturn in history, which was the.com bubble in 2000. And so you know, overall, basically, if you look at the market and the long term aspect, it’s a pretty phenomenal investment vehicle as a whole, even if you did have to survive through some of these bigger downturns. I just show this here, as is kind of interesting. This is an Elliott oscillator that I look at on a monthly basis for a long term, you know, trend signal, it’s only gotten read twice in 25 years, once would have been right about here.
So it’s kind of a signal of, hey, things could be going sideways here. And another one was right about here. So both good signals. You know, if you look at this right here, this is the COVID downturn from last year, which doesn’t look that bad. In hindsight, obviously, it was a pretty dramatic move in that it happened so quickly. But with all the stimulus money that came in, things did start to recover quite well. But if you look at that, Elliott, you know, oscillator now, it’s nowhere near being read now. So altogether, things are, you know, in a decent spot. And I think, you know, again, we should see some softness here, at different points in time, things are slowing down, the Delta barons coming up, that’s creating some concerns for people, rightfully so. And maybe some people are pulling back on some of their purchases, just in case that type of thing. That’s not a bad thing. I think inflation is really the biggest, you know, piece that we really have to watch out for. That could still happen. Maybe it happens next year, or what have you. This slows down that inflationary drive. So again, I think this is a nice place for the market to to be able to grind out some new highs here at some point in time. But again, I wouldn’t be surprised to see it go down a little bit more here in this particular downturn that we’re now but again, I see that as a good thing as far as this goes. So, so that’s where things are right now. You know, I look forward to talking to you again next week about it.