stocks bonds ETF straight out of downtown Chicago. This is Zach's market edge. Welcome to Zach's Market Edge, the podcast about investing in your life. I'm your host, Tracy Rinek.
And this week I'm joined by Zach's stock strategist Brian Hayes, who is making his first appearance on the podcast. So he's new to Zach's and I thought it'd be fun to get his insights about what's going on on the stock market. And for all of you to hear someone new on this podcast instead of our usual crew. And Brian, welcome, welcome to the Market Edge.
Thank you, Tracy. Thank you for having me. It's a privilege to be able to do this and speak with you today. Yeah.
And I thought maybe you might want to share a little bit about your background with the listeners since you are new to the podcast. And some of them who are on sex.com, I'm sure have seen some of your articles that have been showing up the last couple of months on sex.com. But they may not be as familiar with what your trading or investing background is. So I thought maybe you can give us a short little, you know, soundbite kind of thing on what draws you to investing and why you love it.
Oh, so my career has been centered in the investment industry. So prior to joining Zacks, I co-founded an investment subscription firm that provided clients with portfolio solutions. We also offered a weekly newsletter as well as a series of educational content. So, you know, fairly similar, at least to our part of the Zacks business.
Before that, I worked for a few well-known financial firms. And I've always had a passion for the financial markets. The strategic and risk management aspects were always what intrigued me. And that's what originally drew me to the markets many years ago.
I've been trading stocks and options for over 15 years now. And I've developed my own unique approach, which I'm sure I'll shed some light on in our talk. I joined Zacks last year. And it's been great working with you as well as the rest of the team.
And I'm looking forward to what lies ahead. Excellent. So you must have been fairly young when you're buying your first stock was that just something that caught your eye. Like I'm always kind of intrigued on what draws people to buy their first stock.
Right. So I actually remember exactly where I was and what I was doing. I was attending college at Carnegie Mellon at Pittsburgh. And I was really just starting to get into investing.
This was back in 2005, 2006 or so. And the first stock I bought was MasterCard. I still remember it. And you know, like so many others, you know, sometimes you have to learn the hard way and wish I had held onto that one all these years.
But I was going to ask if you had, but I guess not. That was the IPO. Did you buy the IPO or close to the IPO? Close to the IPO, yes.
Okay. Now why MasterCard? You know, it was a company I was familiar with. And I didn't have nearly the type of analysis and depth research in terms of my process that I have now.
But you know, I felt comfortable with the stock. And unfortunately, you know, I ended up selling it when the bear market hit in 2008. Yeah, that's a good kind of lesson. I should, I've done podcasts on this in the past, but I really should do another one.
Maybe I'll have you on since you have this experience. But I've talked with a lot of people over the years about why I can't find anyone who bought like Amazon at its IPO and held on all this time. There's people who bought, you know, well after that have held on for like 15 years. And I'm talking about like non employees, just like a regular person walking around who didn't work at the company.
But it's really hard to hold on to a stock in like a major bear market correction like that one was in 2008, 2009. Like you think you can. And you're like, Oh, it's no big deal. Sure.
I'll hold on to that. But you really don't do it. You just don't. And so depending on when you buy it, obviously, but it's hard to hold on.
But maybe we're going to see some of that here because we had a lot of IPOs last year. Now we've had this kind of bear correction again. And it's been severe in some of the stocks. So I guess we're going to put this to the test of how many people are going to hold on to the stocks they bought last year on the IPOs.
And we'll see if you know they're in it five years from now. But okay, so that's for another podcast however. So let's share back to the topic. We want to talk about this week.
And that is what's going on in the stock market now this rebound rally that we've had. You know, we've seen a big strong recovery in the tech and the growth stocks. I'm personally expecting the S&P 500 to probably bust out to new highs again, maybe in the beginning of this upcoming, you know, first quarter earnings season that's beginning in just a couple of weeks. We're recording this on March 29th.
So first quarter earnings season starts about mid April. And we're going to get the fangs, the big caps that will drive the S&P 500 higher, I believe, to start there in April. But we're also seeing a lot of other kind of bullish things returning suddenly on this rally, including a lot of the speculators as I like to call them our back, the memesters, the Reddit guys, cryptocurrencies on the move higher again, a bunch of them are all moving higher. And we're seeing nothing happening in gold, even though that should be an inflation play here.
And so it's getting kind of interesting, Brian. So I was taking a look at GameStop and AMC, those are the two big needs for stocks. And again, I'm recording the Sun March 29th. And when I went to go look at them, they were actually halted for volatility, because they opened just kind of crazily, they had to be halted.
I don't remember the last time both of these were halted. It had to be a year ago when it they would really took off. And so we're back to this again, GameStop and AMC both, you know, have in all this crazy volatility. And I took a look to see what those two are doing.
I know they're up big in the recent days. So GameStop over the last five sessions is up 45%. AMC is now up 85% in five sessions. Those are the traders coming back in there.
And over the month, they're up 60. GameStop over the month is still up only 45. But they've really turned it around after the sell off here. So what do you make of these moves in GameStop or AMC?
Is this throwing up any red flags for you about this rally or do you see this is a good sign like, hey, we're back. We're back to 2021 kind of market conditions. Well, you know, with this type of strong rally, I think it was inevitable after such a steep decline to start the year that we would see the return of these meme stocks as bullish investors really pile into names like GameStop and AMC. I'm taking a look at the chart of GameStop right now.
And through early March, the stock had declined around 50%. And now it's climbed higher on the year. AMC, it's a similar situation where it looks like the stock fell over 50%. So these names went through some severe drawdowns.
And this could just be a lot of short covering as the stocks start to make some higher highs here. I also found quite interesting that some of the fang stocks have really shown some strength. And in terms of drawdowns relative to a lot of technology, they have held up fairly well. Apple Google Amazon, relatively speaking, have all held up fairly well through this.
And you know, I know that Apple, I was just taking a look at this yesterday. Apple is now 7.1% in terms of weight in the S&P, which is the largest weighting we've seen for any individual company going back to 1980. So I thought that was interesting. Wow.
What was the highest in 1980? I'm not sure. Yeah, I'm a, I would guess without actually looking it up, given what was going on in the late 70s that maybe it was Exxon or maybe mobile or maybe even a Chevron because those Exxon and mobile were too separate. But the energy stocks were about 30% of the S&P 500 by the end of that second oil shock.
Everybody, everybody wanted to own on speaking of which of first time stock buyers, my dad actually bought mobile oil in like 1976. And it was hard to buy stocks back then. But even he like dove in because that's what everybody was buying. He did not hold it all those years, by the way.
So that's what I would guess. So it is interesting that now it's Apple after all this time. And one of the guys, what is that? That's a lot right there.
So do you think Apple is going to be busting out to new heists then, when it has its next earnings, it's not far off, right? Again, from testing those heists. Right. Yeah, it's only about a few percent from the high that we saw, I believe in early January.
So it's right there. And we've seen a lot of buying in terms of the volume over the last few weeks. So I do think that some of these tech leaders that have held up well will at least test if not make new highs. Okay.
So our conviction to stay in the sure things as I like to call them the thing man stocks was correct. Like it has been true over the last five years or more that as long as you just kept holding on to these stocks that you would be fine in the end. Yeah, I mean, these are some of the best companies in the world, right? They're even further sized.
They're still growing at a staggering pace. You know, and with the earnings picture still looking okay, albeit slowing earnings growth. You know, I think these companies have acted as sort of a safe even in the stock market. Does valuation on any of them concern you at all?
Like Apple, I was thinking, oh, it may pull back enough to get down to like 22 times forward or something because its growth has slowed, but it has not gotten that cheap. It was down only about 26 times. And now it's reversing and going the other way. Yeah, you know, when I talk about valuation, to me, it's all relative.
I try not to really dictate any decisions solely around valuations. In my experience, stocks can climb a lot higher even with high relatively high valuations. So, you know, to me, I wouldn't, I would say if I were looking at an Apple or an Amazon or Google investing solely based off, if I believe that the valuation is too high is not something in my wheelhouse. Okay.
What do you think about the meta platforms here? Obviously, it's the one that's been beaten up the most out of the fangmans. And it's actually pretty cheap on a forward PE basis. The cheapest has been since, you know, it IPO'd and then crashed down.
So should investors who are interested in these sure thing types stocks, should they be looking at meta, trying to add it here? Yeah, there's actually two stocks that sort of fit my criteria. So when I'm targeting new trade initiations, there's two trains of thought. One is we can stick with this year's leaders.
So obviously, energy and related sectors have done well, oil industries, shipping industries. So names like Chevron, I did a bowl of the day, the other day on Global Ship, Lease, shipping company or container shipping. So we can set the ground on the GSL. Okay.
GSL is a ticker on that one. So, you know, the first train of thought, we can stick with the leaders that have not only held up well, but steadily advanced through the start of the year, or we can target names that have gotten very oversold, but are still good solid companies that are starting to show signs of strength and starting to show signs of a turnaround, a name like Facebook or a name like Square, obviously completely different businesses. But when I'm looking at the price action, I'm seeing a lot of similarities. And despite some short term weakness that I think will likely come in the next week or so, I do think that these names will have a solid April and that the rally will continue throughout that month.
So backing up a little bit and, you know, in terms of what to expect in the short term for this rally that has taken hold over the last few weeks, we're at a point now where we're really testing some of the prior levels that marked some strong resistance back in early February. So right about $45.95 on the S&P, we've actually broke through that today. But there's still a few hours left in the trading day and we've come down off the highs. So you caught me on a good day, Tracy.
It's a very interesting, very interesting day for the markets. And, you know, if we were to close in the red today, I think it's a sign of some short term weakness and just have a few stats here for you. So looking at the last three to four trading days of March, over the past 32 years, and this is courtesy of Jeffrey Hirsch, Stock Traders Almanac, over the past 32 years, the Dow has declined 21 times in advance 11 with an average loss of 75 basis points near the end of March of 0.75%. The last three to four trading days of March, excluding the advancing years, excluding those 11 years where we advanced, the average decline is right around 1.5% for both the Dow and S&P.
And with this recent rally and the strength that it's shown, I'd expect to see some short term weakness here and a retest of some of those prior levels that we broke through in recent weeks. And looking at next month, April's a very good month historically. It's the best month in fact, for the Dow since 1950, averaging about a 2% gain. And notably, April's been up 16 straight years and it's rarely been a quote unquote dangerous month.
So the signs are pointing to, in terms of seasonality, the signs are pointing to some short term weakness here in the next week or so, and I continued rally into April. Thought that was fairly interesting. Yeah, I didn't realize April has been that strong, but that makes some sense since we're supposed to sell a May and go away. Right.
And that's another point is the NASDAQ in particular tends to see its strength begin to fade at the end of April. Now, in recent years, May hasn't really been, the sell a May and go away hasn't really come to fruition, right? Stocks have done well throughout the year. But this year could be one of those years where selling in May might be the thing to do in terms of short term trading.
And as we zoom out of it here and get away from the next few days or the next few weeks, we're in a midterm year, right? And midterm years on average, going back to 1950, this is courtesy of LPL research, we see an average pullback of about 17%. So we've already seen a pullback in that realm with the NASDAQ entering a bear market for a limited time. And after a year, like last year, that saw very limited drawdowns.
It's not surprising that we were due for some volatility. But again, going back to 1950, there have been 18 midterm years with that average pullback of about 17%. And a year later, the S&P was higher every single time. And the median gain was over 33%.
So there's that old market adage, the stock market is the only place where things go on sale and people get scared. But I think history has shown us that these types of pullbacks are buying opportunities for the long term. And when you can get a Facebook trading historically cheaply and on the way back up, it looks like here, it's a net positive for investors. So you mentioned just a little bit ago that you have the two different trading strategies like you'll stick with this year's leaders in some cases.
And then you mentioned Chevron. Should people be looking at energy still? It has had the big run. And then even over the last month, even with the Ukraine war and crude up above basically WTI been above $100 for most of the last month, the energy stocks really haven't gone anywhere during the last month.
They have here today, but not during the last month. Should people be sticking with the energy trade here heading into the spring? It's a great question. And looking at the price of oil, I mean, you sort of see this upside down V and in the past that type of pattern has marked a top in commodity prices.
So energy has had a heck of a run. And I think in terms of entering new positions, I would be fairly cautious. It's also been interesting to see that metals haven't really, as you alluded to earlier, gold hasn't really acted as that inflation hedge and hasn't really broken out apart from that early move in earlier March. It sort of moves sideways, same with silver.
They were down a lot actually earlier today and they've come up well off the lows. So maybe retesting that breakout level from a few weeks ago. And we'll see what happens in the short term. But in terms of your question, in terms of the energy plays, I would be fairly cautious here.
I think you might see a short term bounce, but I would be much more apt to target some of the technology names and semiconductors are showing a lot of strength. Some of the cybersecurity names are showing some strength. So I think in terms of new trade initiatives, that's what I would be targeting. And should people stay away from the meme stocks?
Or if they're so inclined, should they be getting back in that game? And if so, is there some kind of separation between some of the meme stocks? So whenever I think of the meme stocks, I only look at GameStop and AMC, but there have been in the past a couple of other ones like Bed, Bath and Beyond was one. And I was surprised to see that it's up 61% over the last month.
And I don't believe that was based on its earnings at all. So they're back in that one too. So if I do want to do like a meme stop thing, should I only be in the two biggest ones, the GameStop and AMC? You know, I think the risk level is very high, right?
And stocks and I wouldn't necessarily limit it to any individual stock. Obviously, for investors out there, you still want to do your homework. But when I'm viewing these charts, the action looks very bullish on above average volume and these stocks are starting to break out. So there is likely some upside ahead for the investors out there.
You may want to limit your exposure because they are susceptible to some strong downside moves. But to me, it certainly looks like there is some upside left for the move. Yeah, I don't feel like there's real investors in any of these three. Right, right.
Mostly the traders in there, at least I should hope that someone isn't actually investing in any of these. But I did think that this less earnings calls on all three of these might have put the end to the memesters that they would, you know, close shop and move on to something else. But that is clearly not happening. They are back.
They're back in a big way in these three. And I guess if it's not broken, you know, don't fix it. Just stay in that game until it is completely gone. And it clearly is not.
So I do have to, you know, give kudos to the ones that did get back in and get that 85% gain on AMC in the last five days. Good for them if someone is trading that because everyone on this podcast knows my type of trading is based on the fundamentals and you know, investing longer term investing. And I've never touched at least GameStop and AMC. I have been in bed, Beth and beyond in my insider trader portfolio.
But that was a couple of years ago kind of before it became a meme type stock. So yeah, I haven't, I don't even normally look at these. But when they're halted for volatility, you got to kind of take a look and see what's going on with these. So good for those traders because that's what their game is is to trade it.
And the rest of us, I guess we'll take a look at some of the fangmans and see, you know, if there's some buying opportunities there, it sounds like you think there is, I think there is. And it should be interesting earnings season coming up here in April. So absolutely. And you know, another interesting point that I think we chatted about yesterday, Tracy, was that the VIX has really plunged in another sign of market strength.
And you know, it actually peaked in early January. It had its closing high for the move in early March. But since then, it's fallen nearly 50%. So it's a sign that market participants are expecting price ranges to narrow in the short term and volatility to subside.
Earlier today, I was taking a look and the VIX was trading under 19. It's been a while since, it's been at that level. It's my thinking, and I'm not in the habit of making predictions, but it's my thinking that it's likely fallen too far, too fast here, highly unlikely that this rate of drop will continue. And in line with that late March weakness, I refer to in the market, I'd expect the VIX to pop back up here a bit in the coming days.
Okay, we'll be watching that as well. So I'm going to wrap it up, but just wanted to comment that we did not talk about the Fed at all on this podcast in our analysis of what's going on with the stock market and that unto itself is also an interesting little side note, given everything that's going on out there. So there is a lot going on, and you want to be sure to stick around listening to all this ex-market edges as we move through earnings season. There's going to be a lot of discussion about what is happening with earnings and the outlook for the rest of the year.
And then the Fed will be back in the game as well this spring. So let me recap the tickers we talked about. There was GameStop, ticker GME, AMC, which is AMC, Bed Bath and Beyond, BBBY. We talked about Meta, ticker FB.
I own it in my own personal portfolio. Apple, AAPL. He mentioned Chevron, CBX, then Global Shipping, GSL, Block, which is still the SQ because someone else has their ticker, they're not giving it up yet. So still SQ on that one.
Someone has the Block ticker, some ETF has it. So they can't unlike Meta, which is switching to the Meta ticker because they did manage to convince those guys to give it to them. But so far, Square or Block is still on its own. I think that's about it.
That's what we talked about. Do you own any of these stocks in your own portfolio, Brian? I do not. Okay.
So neither one of us are in these meanster stocks. So our loss is the gains that they're saying but good for them. And as always, I will see you next week with some more stocks on the market edge.