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Episode 31 - Navigating Summer Stock Market Trends

In this episode of the Blue Money Podcast, hosts Jim Donnelly and Kevin McGarry, along with guest Frank Pizzichillo from Valley Financial, delve into financial topics such as the "sell in May and go away" adage, economic indicators, and summer stock trends. They discuss historical market performance, particularly in election years, and the impact of geopolitical events on investments. Corporate earnings, inflation, and sectors like tourism and technology are also covered. The hosts emphasize the importance of seeking professional advice before making investment decisions and remind listeners that investing is a marathon, not a sprint.

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Episode 31 – Navigating Summer Stock Market Trends

Jim Donnelly (00:00:20) – I want to welcome everyone back to the Blue Money podcast. This is your host, Jim Donnelly. I’m here with my co-host, Kevin McGarry. Jimmy, it’s off today. Your special guest. Someone from the office. Someone from the Valley financial family. Please introduce our guest, Frank Pizzi.

Kevin McGarry (00:00:38) – Frank Pizzichillo, he’s been with us two years. He’s an associate, a financial advisor. Frank does a lot of, you know, research for us. and also financial planning. He’s doing a great job here. We wanted to invite him on today. Welcome, Frankie.

Frank Pizzichillo (00:00:54) – First time. Long time, guys. Thanks for having me, Frank.

Kevin McGarry (00:00:57) – He’s a big West Virginia fan. Right, Frankie?

Frank Pizzichillo (00:01:00) – I did.

Frank Pizzichillo (00:01:00) – I attended West Virginia University. God bless West Virginia.

Kevin McGarry (00:01:04) – And you’re not a big fan of University of Pitt, is that correct?

Frank Pizzichillo (00:01:08) – We are bitter rivals. I’m not a fan.

Kevin McGarry (00:01:10) – So in the show notes, Jimmy put Frankie’s, email.

Jim Donnelly (00:01:13) – And I think a lot of Penn State fans, we don’t have too many Pitt fans out there. We have.

Kevin McGarry (00:01:17) – Some Pitt.

Jim Donnelly (00:01:18) – We’ll be all right. barely.

Kevin McGarry (00:01:19) – You like Penn State, Frankie?

Frank Pizzichillo (00:01:21) – We play them week one. I’ll be at that game.

Kevin McGarry (00:01:23) – Who do you think wins?

Frank Pizzichillo (00:01:25) – It’s in Morgantown this year.

Kevin McGarry (00:01:27) – I think Penn State rolls.

Frank Pizzichillo (00:01:28) – Yeah. Come on.

Jim Donnelly (00:01:28) – I scheduled Lugo oh. Won the first game they scheduled him.

Frank Pizzichillo (00:01:33) – That’s true. I’ll call that a layup.

Kevin McGarry (00:01:36) – Give me. All right. Go ahead.

Jim Donnelly (00:01:38) – so, Kevin, this podcast we’re going to speak about that old financial saying we used to hear Sallie Mae and go away. And that’s been around for years for everyone that never heard it sell them and go away. Basically, it comes specifically from the Sp500 index has shown an average return of 2% annually from May to October since 1990, compared to an average of approximately 7% from November to April.

Jim Donnelly (00:02:02) – So, I mean, there’s some kind of validity to it. I get the point. Obviously, we don’t believe in that kind of vesting. It was that easy to gurus. We’ve been doing it invest for six months to take off six months. It doesn’t work that way. But we’re going to have a little bit of fun with it. So Kev, what do you think of it now?

Kevin McGarry (00:02:15) – Like you mentioned the Stock Traders Almanac that they’re probably trying to be catchy. You know, a little sales ploy there. like you said, there are some like points behind it. You know, if we’re looking from November to through April, the markets historically have performed better than May through October. And if you go back from 1950 to now, you know, May through October is averaged 1.8%. But the last ten years it’s returned 4.4%. So it’s gotten better.

Jim Donnelly (00:02:44) – Another positive. I saw an election year where, you know, an election year are usually, you know, pretty bad at all for a market.

Jim Donnelly (00:02:50) – And in 19 years of a presidential election in the summer, it has doubled and it gained about 3.7 over time. So obviously the summer is coming, but it’s an election year, so it’s positive. It’s a positive thing. Historical shows that don’t mean it’s going to happen again, but it’s a good indicator that it could happen.

Kevin McGarry (00:03:06) – But summer rallies are particularly common in election years, and the election year has historically been well for stocks.

Jim Donnelly (00:03:15) – So with all the things we’ve got to look at Kev out there, let’s look at the economic temperature. Let’s take a look at that. Frankie. Any feedback on what’s going on in the world?

Frank Pizzichillo (00:03:22) – Inflation has been slowing down, which is a real positive. Even though when you go to the grocery store, you still might be spending a little more than you like.

Kevin McGarry (00:03:30) – What’s the one thing that you get shocked by? What you buy? Chicken.

Frank Pizzichillo (00:03:34) – Chicken, chicken or eggs? Yeah.

Kevin McGarry (00:03:37) – Mine’s milk. Milk through the roof.

Jim Donnelly (00:03:39) – Bacon.

Jim Donnelly (00:03:40) – Man, my kid eats his bacon.

Jim Donnelly (00:03:41) – Bacon. Expensive. Oscar Mayer two.

Jim Donnelly (00:03:43) – Really? That’s a cheap bacon. Cheap. Thanks, man.

Jim Donnelly (00:03:46) – Through the roof.

Jim Donnelly (00:03:47) – All right.

Frank Pizzichillo (00:03:49) – Inflation slowing down, like I said. And obviously that’s trending in a positive direction. Hopefully we can get to a point soon where the fed agrees with inflation being in check. And we start to bring down interest rates. But until we get inflation completely in check they’re not going to do that. What else I have I have here we looked into the corporations and how much they are leveraged. And right now they don’t seem to be at the same highs that they usually are at when we get into turbulent markets in the past. So like in 2008, 2009, corporations were pretty highly leveraged. And that’s what led to, well, one of the factors that led to the kind of financial crisis that we had there and the turbulent stock market. So that’s another thing that we looked at. And then one other interesting note is that there are $6 trillion on the sidelines, which means that there’s a lot of in the bank cash in the bank.

Kevin McGarry (00:04:48) – If you really think about it, like if once the fed believes inflation is in check, right, or the economy is slowing down somewhat and rates start to come down, you know, in the past you have seen that cash get employed into, you know, the stock market. So that could really benefit the stock market when money gets in motion.

Jim Donnelly (00:05:11) – The other thing we’ve got to look at is corporate earnings come out in the summer. So that’s usually the second quarter report. What do you what do you think that what do you see out there.

Kevin McGarry (00:05:18) – I mean the earnings reports. You know a lot of the S&P 500 companies beat their earnings estimate. But that’s not an indication that the stock market is going to go up from here. No I think there’s other indications we like to look at. And I mean, you know, right now if we look at the first hundred days of the year, that was the last week, the mark has been up. The index has been up by over 10.4%, best since Jimmy Dolly’s birth year in 1976.

Kevin McGarry (00:05:44) – You know, historically, when the markets have seen such robust performance in the first 100 days, it tends to finish higher 85% of the time, with an average gain of 9% for the remainder year. That’s the first thing. So it’s pretty strong. The other thing we have to look at for this year is April was not a great month, and it blew up a streak of five consecutive positive months of returns. And when we go back since 1950 and that that’s happened nine times, guess how many times it finished positive, right. For the rest of the year out of those nine times nine nine. Great guess Frankie is your research Virginia education. There you go. An average return lucky 13%. So you know you know earnings is it was good you know strong I mean but I think there’s other things out there that indicate hey we’re an election year. You know April was bad. But if we look at history after that it’s turned out good. First hundred days of the year been really strong, followed that strong.

Kevin McGarry (00:06:49) – And the other thing is, if you look at this over the past last 15 years, the S&P 500 has averaged 3.7% return from Memorial Day to Labor Day.

Jim Donnelly (00:07:01) – The Magnificent Seven is still doing well. The tech stocks collectively they’re up 24% this year. That’s still you know anyone I don’t know magnificent seven. It’s Microsoft, Apple, alphabet, Amazon, meta, Tesla and Nvidia. Nvidia is always through the news right now. It’s through the roof. It’s really taken off. It’s an AI company that does a lot of the chips. So that’s looking strong. Just keep keep an eye on that. When they talk about the corporate earnings 37 that everyone really monitors and watches that can really fluctuate the market. So Frankie, what about the geopolitical events out there. Anything that we should be watching out there for that.

Frank Pizzichillo (00:07:37) – Always a ton of things happening in the world. Obviously we’ve seen over the last couple of years a few wars happening, Russia, Ukraine, now Israel, Palestine. So there’s there’s definitely concern there that as we move forward, just keeping an eye that it’s not going to escalate further is our strategy.

Frank Pizzichillo (00:07:57) – And just making sure that we’re prepared for if it does and we’re positioned in a way to recoup, some of those gains, because when when war happens, money is made and when money is made, stocks move.

Jim Donnelly (00:08:11) – Yeah.

Kevin McGarry (00:08:11) – I think the big thing here is like Frankie mentioned is there’s. A lot of volatility potential volatility in an election year. Going into the actual time the election occurs. But we’ve been through wars before. Tons. there always seem to be a war or something harsh happen in the world, and the markets have gotten through it. So unfortunately, wars are to be expected.

Jim Donnelly (00:08:36) – Now some people jump on like buying individual stocks or whatever. They look at the sector specific factors such as like tourism, energy, technology, retail. Because in the summer months I can go through. So Kevin, you have any feedback on some companies that people like to watch in the summer? Because a lot of it’s a lot busier.

Kevin McGarry (00:08:50) – I mean, you know, typically we don’t make stock calls, but historically, you know, vacations, alcohol, travel, if all done, you know, well, in summer months even like Frank Wright, ice cream stocks.

Frank Pizzichillo (00:09:03) – Ice cream stocks always seem to do a little bit better in the.

Jim Donnelly (00:09:07) – Summer. What’s your favorite kind of Frankie?

Frank Pizzichillo (00:09:09) – Favorite kind of ice cream?

Jim Donnelly (00:09:11) – it seems like a.

Kevin McGarry (00:09:12) – Cookies and cream guy. Jimmy.

Jim Donnelly (00:09:13) – That’s it.

Frank Pizzichillo (00:09:14) – That’s a great, great flavor. I don’t know if it’s my favorite. You know, this might shock you. I like vanilla bean.

Jim Donnelly (00:09:20) – Vanilla bean.

Frank Pizzichillo (00:09:20) – Classic.

Kevin McGarry (00:09:21) – What’s yours? Jimmy.

Jim Donnelly (00:09:22) – You just said it, man. Cookies and cream. Really? Yeah. What do you got? Something weird.

Kevin McGarry (00:09:28) – I mean, I love coffee.

Jim Donnelly (00:09:30) – coffee. I just have a cup for closers.

Jim Donnelly (00:09:34) – I know everyone knows they’re all ice cream flavors out there. So, Kev, what else do you want to wrap this up with the podcast?

Kevin McGarry (00:09:39) – No, I think listen takeaways. This podcast is is something out there here sell me you know go away right. The reason why you hear this. We just got to understand, like before, you’re going to do anything in your portfolio or purchase anything or change your allocation or your financial plan.

Kevin McGarry (00:09:59) – Talk to somebody because you got to dive into the details. And once you dive into details, what you’ll find in most of the time it’s only noise.

Jim Donnelly (00:10:08) – No, I couldn’t agree more. Kev and Frank, I want to thank you for being on the podcast for all of our listeners out there. Like Kev just said, I just hit upon it. This is this is a marathon. I’m saying sprint. Don’t get caught up with just because the summer months might not be great investing one’s going to go to cash my portfolio. Don’t do anything like such sudden without speaking to someone in professional. Just don’t make your own determinations out there without really knowing all the ins and outs. So I want to thank everyone for listening to the Blue Money podcast that’s going to wrap up this. Everyone’s information will be in the show notes. If you guys want to reach out about any questions about this podcast or any portfolio reviews that you might need. So thank you for listening and be safe. Be safe.

Announcer (00:10:46) – Thanks for listening to Blue Money.

Announcer (00:10:48) – To learn more about Jim and Kevin, or for a free financial assessment, visit Valley or click on the link in the podcast description or show notes. Until next time safe investing. This material is intended to be educational in nature and not as a recommendation for any particular strategy, approach, product, or concept for any particular advisor or client. These materials are not intended for any form of substitute or individualized investment advice. This discussion is general in nature and therefore not intended to recommend or endorse any asset, class, security or technical aspect of any security for the purpose of allowing a reader to use the approach on their own before participating in any investment program or making any investment. Clients, as well as all other readers, are encouraged to consult with their own professional advisors, including investment advisors and tax advisors. Valley financial can assist in determining a suitable investment approach for a given individual, which may or may not closely resemble the strategies outlined herein.

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