Today we’re talking about whether or not the market can continue going higher, the downsides of the market, and if a recession is possible in the next 12 months – Enjoy! Add me on Instagram: GPStephan – FOLLOW FTX ON TWITTER: https://twitter.com/FTX_Official
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BEAR CASE:
1. REDUCTION IN FED BOND BUYING
We don’t know the true extent to which a lack of “bond and mortgage buying” will impact the markets – or, if that causes rates to rise, which dampens growth, and subsequently lowers prices.
2. RISING INTEREST RATES
Over time – as rates rise, a large portion of the market begins to sell off, and – with tech stocks having seen a meteoric rise from a worldwide shut down – they tend to suffer, the faster rates increase.
3. OVERVALUED MARKET
What’s unique about today is that, the PE ratio of the market is the THIRD HIGHEST it’s ever been in history. The last two times it’s been this high, we had The Great Depression and the 2001 Dot Com Bubble…and, today – this PE ratio is held up by the largest tech companies by market cap who have largely benefited by low rates and excess online demand.
https://www.multpl.com/shiller-pe
BULL CASE:
1. STRONG EARNINGS
The fact is – even though people are slightly more cautious – there’s a LOT of pent-up demand to bolster stock prices even higher – and, we’ve seen this FIRSTHAND throughout the last week.
2. LOW UNEMPLOYMENT
As of today, we’re nearing an all-time record low unemployment rate…just barely above where it was prior to the pandemic, and lower than any other time since the 1960’s.
3. TINA: THERE IS NO ALTERNATIVE
In this case…where you do put your money if you want to make a return? So, the thinking goes: people are going to keep buying stocks and real estate…because, what else is there to buy?
4. INTEREST RATES MIGHT NOT BE BAD
Since 1994…it was found that the FIRST interest rate hike led stocks to increase an average of 7.3% in the following 12 months.
5. SUPPLY CHAINS AND INFLATION ARE NORMALIZING
The FED is expecting prices to slow down throughout the next year, pushing inflation down to 2.3% in 2023…and, back down to 2.1% in 2024. On top of that, the WealthOfCommonSense Blog broke down the years of highest inflation since the 1940’s…and found that, during the highest years of rising inflation…stocks actually wound up INCREASING by an AVERAGE of 9.4%…proving that rising prices aren’t always correlated with negative stock market returns.
https://awealthofcommonsense.com/2021/10/inflation-vs-stock-market-returns/
So, in terms of what you could do about this – REGARDLESS of what happens – look no further than the analysis from one of my favorite blogs…Market Sentiment…who researches various investment strategies and then determines whether or not it’s worth your time…and money.
https://marketsentiment.substack.com/
The moral of the story is that, regardless of what happens in the market – it IS important to have a strategy that you stick with, ahead of time – because, eventually – there will be a drop – there will be another crazy crash…and, it’s up to you to make sure you’re in the best position possible to make the most of it…and smash the like button for the YouTube algorithm.
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