V-Bottom Recovery: Month 6 – What to Buy. Stock Market Update, Friday Sept 26, 2025

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If you waited on the Fed, you missed out on about 14% YTD gain in the S&P500 and almost 30% gain off the V-bottom low on April 8^th. The Oak Harvest team has discussed for months our belief that we are in V-bottom recovery and in general “no would get in” at prices they really wanted.  We messaged that a retest of those April lows was unlikely to come, and investors time was better used studying the history of V-bottom recoveries and their paths.

The question now is “where do we go from here” and what should an investor buy if the V-bottom path continues to play out as we expect. First, here’s my trusty overlay of the SP500 during the Dotcom/Internet buildout in 1997-2000 versus our current AI buildout which started in 2h2023.  As frequent followers note, it’s been my belief the October 1998 LTCM event driven selloff of -21% on the S&P 500 lined up almost exactly with our recent April 8^th, 2025, event drive Tariff tantrum. Yes, the Liberation Day triggered selloff amounted to almost the identical -21% high to low.

Source: Bloomberg

After such a strong rally, many investors wonder what they should buy if they are still positive on stocks.  Do you buy the leaders YTD and the ones leading since the April lows, or should you hunt amongst the laggards YTD?  History would say that’s its best to stay with the “winning” sectors, groups, and single stocks however we are near that time of year where “bottom fishing” in lagging single stocks, in the right sectors should be on the radar.

Historically, you want to stick with high, or rising relative strength sectors and groups, and those just breaking relative strength downtrends, but you can start to look beyond the top few names in these groups.  Why? Because big institutional selling in lagging names is at or near its peak.  Unlike most individuals, who are on a calendar year tax closure, many institutional shareholders have fiscal tax years ending September or October.  Why is it so early and not year end?  Because it use to take months for their accounting and tax departments to reconcile fund financials for year-end distributions for their individual holding shareholders, whom themselves had tax years ending on Dec 31^st.  Think mutual fund net realized gain distributions or Master limited partnership, K-1 statements to their Limited partners.

Year to date technology, communication services, financials, international equities, and many speculative and emerging thematic groups have led the S&P500 higher.  The AI capex buildout cycle has lifted many names in the industrial sector, technology and semiconductor sectors, and many alternative energy sectors.  Here’s the broad YTD sector performance.

Source: Fidelity Sector Table

Recall back after President Trump was elected in November, many strategists in the media were calling “alternative and clean energy and China markets” that dreaded word, which should draw investor interest toward not away from?!  That word?  Uninvestable.  And behold, while the traditional “energy” sector has been a laggard, these more speculative names in the solar, uranium, and nuclear subindustries are some of the highest returning groups and sectors YTD.  Here’s a list of the top 20 names in the S&P500 YTD.  The top names broadly all have similar characteristics.  Most outside of a few like Palantir started the year with lower PE valuations than the S&P500. Disk drive companies like Seagate or DRAM companies like Micron started the year with valuations under 10x EPS, just as their business accelerated and turned up with AI orders and demand.

Source: Bloomberg

Those are the winners in the S&P500 and here are the YTD losers, the bottom 30 stocks so far.  Many of these names are thought to be AI losers or companies whose unit growth has slowed or declined due to tariffs or a slowdown in demand with the economy in mid-year.  There’s a lot of consumer names on the bottom performing lists YTD.  Restaurants stocks or fashion oriented mid to lower end consumer names hit by deportations, or a slowdown in hiring.

Source: Bloomberg

V-bottom moves and seasonal history says the rally in technology stocks isn’t over. We’ve covered the data the last few months on this. Go check out our prior videos on the topic. Since we continue to mirror the same pattern back during Dotcom almost to the day and week in the S&P500, I’m going to go back once again to the Dotcom/AI cycles overlay and look at sector performance in the 2q99-1q2000.  Recall mapping out a similar move since the V-bottom low in April would project a SP500 target of 7200 ish in 1q26 and 7300-7400 in the 2h2026.

Looking back to months 6-18 post the LTCM October 1998 V-bottom low in the 2q99-1q2000 what the leading sectors for those who weren’t investing, trading or even alive back then.

Back then, as it is now, technology driven sectors and industries led the market higher. Here’s the overlay of the tech heavy NASDAQ Comp index during the 2 cycles.  You’ll notice that it wasn’t until almost over a year AFTER the October 1998 LTCM low that technology stocks went parabolic for 5 months to end what would become known as the Dot com bubble, blowoff and crash.  This analogy and overlay would say that a gently sloping upward trend would be most likely after a choppy end to September during the October through 1q26 in tech stocks.

Source: Bloomberg

Within both the S&P 500 and the NASDAQ comp, some of best-performing stocks were in tech subsectors including:

• Semiconductors and related equipment: Back then these companies produced the essential components for computers and internet buildout driving the “new economy”. Qualcomm saw its shares surge by over 2,600% in 1999.  Yes, NVDA was a recently IPOd company on the back of its graphics controllers for gaming systems.
• Internet and software companies: Many internet companies as well as established software companies saw their stock prices skyrocket during this period on the back of an acceleration in their unit growth and still early mobile phone adaptation
• Communications: Communications and networking companies, such as Cisco, Lucent Technologies, and Newbridge networks experienced huge gains on a boom in early orders for digital communication infrastructure.

Other notable sectors still performed well for more conservative investors as the market seemed to anticipate the other side of spending and a slowdown in the economy post Y2k spending.

• Energy stocks saw a strong year in the 2h 1999, driven by a spike in oil prices as the economy remained strong. This sector’s performance was a barbell between speculation in names like PLUG and BLDP as well good performance in larger names like CVX and others.
• Real estate investment trusts (REITs) and small-cap stocks: Both groups had strong 1999 moves with small-cap stocks, being under owned and “undervalued” versus their larger cap names.  Small caps were helped back then by less regulation by the federal government and talk of a pick up in mergers.  Sounds familiar to day?
• Materials: Finally, a bit surprising to many, materials saw strong returns in 1999. Back then it was just the beginning of 8 years of ramped China spending on infrastructure for the 2008 Summer Olympic games, kind of a coming out party for the country to the Western World, or so it was sold as.

Pretty crazy.  Think about it.  The names have changed, and it was a generation ago, but we continue to mirror that period in investor history. Back then Technology led on the internet build.  Back then speculative energy had its day.  Back then material stocks were big outperformers

Today, the AI buildout is leading.  Today, speculative energy in nuclear and alt energy is having its day.  Today, uranium and gold stocks are ripping and leading the material sector higher.

These high relative strength groups will likely continue to work in the months ahead.  Throw in some down and out software names who have been beating numbers but whose values have been cut in half by AI fear.  Semi equipment names have also been out of favor on the back of Intel order cutbacks and China restriction from the US and others on leading edge technology sales.  They were latecomers that turned into leaders the 2h of the Dotcom buildout.  Why not again this time?  Most tech cycles don’t end until semi equipment stocks become market leaders for 9-12 months+.

Investors why not be prepared in advance of the 4q25, to hear about the “chase for performance into year-end” before it takes place.  Investors, if the V-bottom pattern continues its historical path, which I expect, expect some weakness into Sept month end on repositioning and institutional tax selling, and maybe the first few days of October, which should be bought.  V-bottoms, historically, do not have ended or deep pullbacks on % terms until after the 10th and 11th month as you approach a year holding period for those investors who bought at or near the lows.

For those of you who stuck with your financial plan amongst the Tariff uncertainty in April, congratulations.  Know that 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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