Ep. 229: Jeffrey Hirsch: Can Investors Expect More Bullish Action This Year?
Aug 10, 2023
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Jeffrey Hirsch of the Stock Trader's Almanac reviews the market and discusses stock market trends during the presidential election cycle. They analyze market trends in July and August, explore stock market cycles and patterns throughout the year, and discuss following seasonal trends and technical analysis for investing. Hirsch also shares insights on timing the stock market and short-term bond investments.
Hitting the January trifecta (January performance, Santa Claus rally, and the first five days of the year) has historically indicated a bullish year with positive returns.
The four-year presidential election cycle can impact market trends, and although the current trend suggests potential sideways movement, a bullish rally is expected in the fourth quarter.
Considering alternative investment options, short-term bond ETFs offer stable returns around 5% and provide investors the opportunity to wait for better opportunities in the stock market.
Deep dives
Bullish indication for the year based on trifecta
The podcast discusses the January trifecta, a concept from the stock traders Almanac that looks at the performance of January and three indicators: January performance, Santa Claus rally, and the first five days of the year. When these three factors align positively, it's seen as a bullish indication for the year. Historical data shows that hitting this trifecta has resulted in bullish years with high accuracy ratios, indicating positive returns for the rest of the year.
Secular stock market cycles and the current trend
The podcast explores the four-year presidential election cycle and its impact on the stock market. It looks at how different stages of the cycle, such as the pre-election year, can affect market trends. The current trend is shown to be in line with historical patterns, indicating potential sideways movement and a possible choppy market ahead. However, the overall trend is still seen as bullish, with expectations of a rally in the fourth quarter.
Interest rates and alternative investment options
The podcast highlights the significance of rising interest rates, providing an alternative investment option to stocks. Short-term bond ETFs are discussed as a potential choice for investors, offering a stable alternative with annual yields around 5%. The strategy of staying in cash and earning a reasonable return is seen as a position in itself, allowing investors to wait for better opportunities in the stock market.
Sector rotation outlook and potential shorting opportunities
The podcast mentions the sectors of biotech and technology as areas of interest in the sector rotation strategy. Seasonal trends suggest these sectors could perform well in the upcoming months. Additionally, potential shorting opportunities in the transport and industrial sectors are highlighted. The importance of technical analysis and support levels for executing short trades is emphasized.
Stocks election process and cautious approach
The podcast briefly mentions the stocks election process, which involves a fundamental screen to identify potential investments. It emphasizes the importance of cautious decision-making, considering entry prices, stop-loss levels, and continuous monitoring of trades. The approach focuses on trend-following, letting winners ride while selling losers short. The significance of cash as a position and waiting for quality opportunities is highlighted.
Jeffrey Hirsch of the Stock Trader’s Almanac joins the “Investing With IBD” podcast to give his mid-year review of the market—and what investors should expect for the rest of the year. Hirsch also discusses stock market trends during the presidential election cycle and how to handle your portfolio when major news events occur. Plus, we take a look at Hirsch's current sector plays, including: iShares Short Treasury Bond ETF (SHV), iShares 0-3 Month Treasury Bond ETF (SGOV) and iShares Biotechnology ETF (IBB).