Keep It Simple

There are many mixed feelings about "memes" and their role in the stock market in recent years.

Look up the definition of "meme," and you will find this…

“an image, video, piece of text, etc., typically humorous in nature, that is copied and spread rapidly by internet users, often with slight variations”

That is a pretty good definition!

We will not write about "meme stocks" today but instead share our favorite stock market meme of the last year.

The great thing about a meme is that it can capture a very complex situation in a straightforward image. The best memes are very nuanced despite being silly.

We thought about that when we saw this meme last week…

The picture used has been popular for memes in recent years.

Over the last month, we have written almost a half dozen different notes about this Fed rate cut and its implications.

There was a LOT of “noise” out there in the media about the ramifications.

Last week, we published a note reminding our readers that the media's job is NOT to educate or inform you—and certainly not to make you money!

It is to get you engaged; you are much more likely to be involved if you are worried.

When explaining complex concepts in the markets, we often return to Occam's razor.

The simplest version is that the most obvious explanation is the most likely.

William of Ockham, an English Franciscan friar, theologian, and philosopher, is credited with this idea, but it is also common sense, and it is present in the writings of many others, including Maimonides and Aristotle.

We will say this one more time: Lower interest rates are good for the economy and economic growth. Economic growth is good for corporate earnings growth, which is good for stocks. This means that lower interest rates are good for the stock market.

This is ALWAYS true. The only difference is the timing of how it plays through into stocks.

Keeping it simple also made us think of another post we saw late last week. Here it is…

A few months ago, we wrote a series of notes talking about technical analysis and chart patterns that actually work.

We defined one of those patterns as "Bullish Pattern Breakout—Uptrend." You can read that note here.

The idea is simple.

If a stock in a well-defined upward trend breaks out to new highs, it generates incremental excitement among holders who have profits. They like to add more.

It also attracts new investors who are excited about the prospect of historical returns and new highs. That is its psychology.

It works not just for stocks but for any liquid traded assets. This includes the overall stock market.

This is a very strong pattern that (like lower rates) eventually works the vast majority of the time.

The chart we showed above demonstrates how it has worked in this BULL market, and we think it will work again.

This brings us back to the last post we want to share. One we have shared multiple times recently. Here it is…

We know we have posted this several times, but it is a powerful analysis showing the seasonality of the S&P 500 over the last quarter century.

Our readers know that we have successfully used seasonality to make (and save) money many times. There are real reasons why it impacts the stock market.

We think we are moving into a powerful combination of events in the next few months.

Lower interest rates, less macroeconomic uncertainty, strong uptrend technicals in the stock market, and robust seasonality.

To the point the meme is making, let’s not make life more complicated than it needs to be.

The most obvious path is the most likely one, and take full advantage of this BULL market!