MOVEing on Up-Wall of Worry….: Stock Market Update, Friday Aug 15, 2025

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Investors we skipped last week because the OHFG investment team was busy producing what should be the first in a series of monthly investment videos covering our long/short, hedged equity strategy, our moves in that strategy, and its outcomes.  This is a very unique alternative growth equity strategy and if you want more information on it search OakHarvestfunds.com.

Also, starting in September we are probably going to change some of our video editing for Stock Talk so Erik can spend more of his time on some other Oak Harvest video productions.  Expect our content to remain the same, but the look and feel to change a bit. 

It’s been an incredible 4 months, V-bottom rally in stocks since peak market fears over the economic uncertainty caused Liberation Day tariff spreadsheet chaos.  We are still in the Earnings reporting window for the 2q reports so our team is trying to sort out the good from the bad and figure out what and when we might want to make changes to our client’s holdings for the remainder of 2025 and 2026.

I’m getting right to the point, the last 2 weeks in the market has surprised even me albeit in a good way. We had the V-bottom in stocks from mid to late April well before the historic rally took hold and while many others were talking about doom and crashes. However, I had expected a summer stall and pullback in stocks of a little over -5%, call it back down to 6125-50.  And while that is still possible, its looking a little less likely that we drop back to those levels.  Why?  Here’s what I’m seeing.

Over 2025, our team has discussed and compared the current economic cycle, uncertainty sand outcomes to a couple of time periods.  With President Trump in his second term, we have discussed Trump 2.0 vs. 1.0.  He threw the markets a curveball this year focusing on frictionary economic policies first, tariffs, trade, deportations all things that raise costs and slow growth and then secondly focused more recently on investor friendly policies second, lower taxes, lower regulation, targeted government spending. He pretty much flipped the script on his first term and 2017 and 2018 in 2025.

The second time period we have pointed out repeatedly is the late 90’s Dotcom/internet infrastructure buildout/Y2k period versus our current AI infrastructure, Federal reserve cycle. Specifically overlaying the -21% S&P500 drop caused by LTCM blowup in October 1998 early to mid Dotcom buildout with the -21% S&P500 drop in  early April 2025 caused by Trumps tariffs and “Liberation day” which is appearing more and more like early to mid AI cycle buildout.

Here is an updated overlay of the S&P500 then and now.

We are still mirroring the same pattern almost to the day and week.  Looking back in time, the % drop during the first stall after the LTCM v-bottom 4 months out was only -3.5% in the S&P 500.  If one uses that as the drop from our high of 6427 on 7/31 one gets? 6202 on the cash S&P 500.  The low print for the 2h of 2025 so far has been right at 6200 and on 8/1 the first day of August was 6212 so far.  Almost exactly 2.5% off the top.

Given what I am seeing in earnings, sentiment, seasonality, cycles, institutional positioning and volatility markets as well as Fed interest rates to come, I think that it’s likely that the 4^th quarter of 2025 and first half of 2026 will bring higher stock markets than most think.

The pattern of the  dollar index looks remarkedly similar then and now with most people now bearish on the DXY just as the charts would say otherwise.

Many investors ar worried about interest rates.  Many coming up with wild theories that foreign selling will cause a massive bond market selloff sending LT rates much higher. These theories have been out there for years now and while foreign holders have been net sellers for years, its unlikely that it has had much impact on our overall yields.  More likely that higher secular inflation here in the usa from overspending and money supply is causing higher rates not foreign sellers.  Additionally, I think most baby boomers, who are near or in retirement and control close to 75% of the wealth in the USA would relish higher rates to stash some of their wealth after earning next to nothing net in bonds for the last 8-10 years.

Investors, volatility looks to be in a down trend. Both stock vol and probability more importantly, bond vol.  Both the realized and implied with the cost of hedging stocks 2-6 months out is almost 2-3x as expensive as actual realized vol.  In the bond market, the MOVE index has now broken below 50 and regardless off what you hear on TV it is declining not rising.  This has historically been a great thing for uptrends in stocks over months and quarters.  Heres a chart of the MOVE index.

Remember that lower bond vol is the key to leveraged players buying more assets as Treasury bonds are the lowest risk collateral in the financial markets.

Think investors, we are at marginal new ATH’s, up about 5% above previous ATHs in stocks, and the Fed is paused. Think about it, all those bear calls for a market collapse as the Fed reduces its balance sheet are near 6350 on the cash SP500, as I write this and the Feds balance sheet has shrunk by $2.6 Trillion since they began QT.

Investors, we are in a bull market.  Against the most recent calls for an inflationary spiral caused by tariffs, we are in a bull market. Short term volailty has collpased and that’s without the Fed cutting.  Realized volailty is around 7-8.  Spot vix index is around 15 but every time it gets near 21, sellers coming into those markets and buyers flood in to buy stocks. The costs of forward hedging is very high realitive to actually vol.

After a slow down in the pace of gains the next few months, whats likely to lead? I would look no further that what led during the 2^nd half of the dotcom run.  Technology, financials, housing stocks and even energy eventually.

Here’s the historic overlay of the Sox semiconductor index during Dot.com and currently for those still watching.

If you believe in this model?  Sure, a sideways summer is very possible as inventory and stock gains get digested, then followed by a big pickup in 4q25-2026 orders and stock price performance.

You might not have believed history is repeating but someone does.  Or the market overall does.

Yes Investors, The pattern remains bullish and up and to the right is good.  New ATH’s are not bearish historically.  While breadth is narrowing a bit over the last 4-6 weeks, expect it to widen materially if and when the Fed cuts rates.  Maybe be prepared in advance of the 4q25, to hear about the “chase for performance into year end” before it takes place.  Investors even small cap stocks tend to work and even lead for awhile most periods when the Fed cuts rates and many institutions are behind their benchmarks like 2025.   I titled this video, “V-bottoms, moving on up” because while I continue to think the pace of gains slows over the next 2 months, I also believe, that come the other side?  Come late Sept and early October, most of those S&P500 targets for year end and 2026 are likely “moving on up” higher not lower for the 4^th quarter and beyond.

Regardless of the path for the economy and financial markets in the next few months, the investment team at OHFG will be here manning the ship and adjusting our models and long/short, hedged equity fund where we can.

Until next week, have a blessed weekend, and know that the OHFG team is doing what we can to plan for you and your family’s future regardless of what stage you are at in your career or retirement.

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