Stock Market Bull Run Starting or a Correction?

in today's video we're covering the stock markets and I want you to know that there's a fight going on between the Bulls and the Bears so the Bulls are making the arguments that the stock market has gone up 20 from its bottom therefore the bull market so new bull markets has started the Bears are saying that that wasn't the bottom the economy is going to get worse and the stock market will go down so let me know in the comments down below what you think is more likely to happen whose Camp are you in so I want to fill you in on what's being said out there Bank of America's Equity strategy said the bear Market is officially over the S P 500 has risen 20 percent above its October low Goldman Sachs believes that the S P 500 will likely rally they've raised their year-end Target for the S P 500 to 4 500 but some people are skeptical that a new bull market has started they're saying that for a new bull market to start the S P 500 must hit a new high and I want to share this other perspective with you maybe you heard about this one maybe you haven't some people are saying that we're still in a bull run from 2009 like this is the longest bull run ever they're saying that the market has been going down every now and then but those were not bear markets those were Corrections in an overall bull market so for example the flash crash of 2020 because of kovitz so during that time was that really a bear Market or was it a short-term correction in an ongoing Bull Run since 2009. so you could say the same things well they're saying the same thing about 2022 the S P 500 was down 20 percent last year but was that a bear Market or was that just a correction in this ongoing Bull Run so that's just another perspective that we're still in a bull market since 2009. however however when however you want to coin at Blue Market bear markets I think the better question is will the stock market go up or down in the next few months so I want to tell you about the relevant variables and these include money printing quantitative tightening interest rates the economy corporate profits and valuations so let's get started with the money printing I personally believe that this one has the strongest influence on the stock markets if the federal reserve prints enough money it doesn't matter what happens to the economy the stock market will go up that's just my belief you can have GDP plummets you can have unemployment skyrockets if the federal reserve prints enough money none of that's going to matter because monetary inflation will drive up the stock market I personally believe that that's very difficult for anybody to argue with that the reason why I'm saying that is because we saw this in 2020 GDP fell by 3.5 percent unemployment shot up by 13 well shot up to 13 and the S P 500 went up by 18 percent that's because the Federal Reserve was printing money like there's no tomorrow but right now so the reason why I'm saying that is because you have to compare that to what is going on right now right now the Federal Reserve is performing quantitative tightening this is the opposite of money printing so I want you to know that quantitative tightening is not good for the stock markets okay but if you say well we haven't seen the stock market go down because a quantitative tightening that's because in March the Federal Reserve had to stop they had to stop it because they had the banks collapsing under the Federal Reserve had to go back well temporarily to printing money again a lot of money but now that we have more financial stability with the banks well the regional Banks the Federal Reserve is pursuing what's a Nets tightening effect so they're going back at it so it's been bumpy it's been slow but it's now resumed so in 2023 they've tightened by about 400 billion dollars so there's about 7.6 trillion more to go so they're allowed to tighten well they said that their maximum that they're going to tighten this by 95 billion a month but they're moving at a speed of 66 billion a month so they're taking their time of course that's intentional so that they don't freak out the markets however the important thing to know is that the stock market is not going to get an artificial Boost from the Federal Reserve printing money to like what we've seen in the in the recent past so those days are over those days are over at least for now now when it comes to interest rates I've covered the fomc press conference thoroughly in detail the Federal Reserve is planning on doing a skip they held the FED funds rate at 5.25 percent they're expecting to hike interest rates to 5.75 this year that means two more interest rate hikes and higher interest rates will put more pressure on the economy it's also going to put more pressure on the bond markets residential real estate's commercial real estate the banks and business Investments okay I want to tell you that if you haven't watched the FMC press conference I have a I have a great video about that it's an abbreviated video I would say especially if you watch that you're going to probably say the same thing that's almost certain that interest rates will go higher from here on outs and that's not going to be a good thing for the stock market well it's not going to be a good thing for the economy either okay so here's how this works if the economy gets Hurts by higher interest rates then we're most likely going to fall into a recession a lot of people argue that that's already started but okay we get a recession and that's going to bring down corporate profits so here's some things to keep in mind when it comes to the economy government spending has been propping up GDP after the debt ceiling there are now budget caps so don't expect robust government spending to boost GDP figures in the back half of this year this is not surprising that unemployment is expected to increase and I don't want you to forget about student loan the whole situation with student loans so student loan payments they're going to restart and that means that people are going to have less money for discretionary spending okay so if you have the economy degrading then most likely corporate profits will fall we are currently in Q2 Q2 corporate profits are expected to fall by five percent but here's something Wild analysts are expecting that corporate profits will start shooting up in Q3 that's starting in July and that corporate profits will begin to Surge in Q4 the expectation is that earnings growth will be around two percent year over year in Q3 and nine percent year-over-year growth in Q4 Amazon alphabet meta and Nvidia are expected to be the largest contributors to earnings growth for the S P 500 and Q4 of this year whether you believe that's going to happen or not that's for you to decide basically analysts are being very optimistic that the economy is going to have a soft landing and then we're going to see strong GDP growth in July August and September and then it's going to be explosive economic growth in Q4 now I want to give you my interpretation of the situation and I think that a good place to start is the p ratio of the S P 500 and again this is just a starting point so we're currently at 25. from 1900 to 1980 it's 13. from 1981 to 2022 it's 22. I think the more recent years are more relevant so you probably want to focus on the past few years the modern era Market average is 20 and we're 25. so I interpret the situation as we are not in a crazy bubble but the market is certainly not cheap now you have to take a look at the macroeconomic environment so what is coming our way we have higher interest rates and we have quantitative tightening so I think that this translates to higher unemployments lower GDP and a recession so this means that companies on the stock market they're not going to grow so fast in terms of sales growth so growth companies they're not going to look so hot in a recession corporate profits will fall then the PE Ratio will need to be adjusted and it'll be adjusted downwards and the stock market as a whole will fall and with higher interest rates there's going to be a competition for Investments between bonds and stocks so bonds will be looking more attractive with higher interest rates so I believe that that's how things will play out but I want to give you two surprises one for better and one for Worse so I want to give you a scenario where there's a positive upside surprise and in this scenario it's when inflation just melts away inflation comes out better than expected if this were the case the Federal Reserve can afford to Pivot and cut interest rates sooner rather than later but you have to remember that the Federal Reserve says that core inflation is sticky so there's not much improvements so they need to raise interest rates more and keep interest rates higher for longer to be at below Trend growth but if they actually succeed in bringing down inflation then they will not have to operate at below Trend growth and that's going to be really good news for the economy now here's the negative scenario we're talking about a Black Swan events this is where something breaks it could be the commercial real estate market it could be the regional Banks or it could be the economy just in general if something breaks then the FED pivots will not be enough to save the markets we know that historically in emergency and reactionary pivots out of desperation means more downside in the markets so if you ask me if I'm going bullish my answer is no no thank you I believe that the economy is going to get worse I don't think that I'm making any wild claims Additionally the money printers are turned off for the time being this is all my opinion and my opinion will change when the time comes but for me that time is not right now so I think we need to see more progress with inflation especially core inflation and keep in mind that if you're paying attention to headline inflation the expectation is that that's going to go back up so we need progress in core and I previously showed you the video clip with Jerome Powell saying that there is no progress so I'm patiently just going to wait it out I'm expecting a wake-up call to happen in Q3 of this year so let me know what you think in the comments down below please subscribe I thank you for the support and I wish you a very nice day take care

Channel: ClearValue Tax

Views: 178,285

Keywords: stocks, stock market, stock market news, bull run, bull market, bear market, new bull run, new bull market, stock market update, Federal Reserve, investing, investing 101, graham stephan, meet kevin, recession, recession 2023, inflation, inflation 2023, economy, economics, US economy, stock, NVDA, AAPL, TSLA, tsla, tesla stock, tsla stock, crypto, bitcoin, bitcoin news, crypto news, crypto update, cryptocurrency, bitcoin update, bitcoin forecast, stock market forecast

Id: BCVExjLhMnM

Length: 11min 27sec (687 seconds)

Published: Wed Jun 21 2023