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What's up you, graham it's guys here and it's official, the stock market is backwards. Throughout the last week, news came out that retail sales are jumping company. Earnings are soaring employment, growth accelerated by the highest level in 10 months, and all of that should be fantastic news for the market. But it's not in fact.
The stock market started to immediately sell off, and all of that great news was overshadowed by one of the economy's greatest fears. Wait for it: inflation which increased at a rate of 5.4 percent, the largest move in the last 30 years. That sudden burst of inflation was a lot higher than what the federal reserve and most economists anticipated. Other members of the federal reserve say that now might be the time to pull back and eventually eliminate the stimulus that was put in place to keep our economy afloat and, if that's not done correctly, then the stock market could fall.
That presents a really unique problem for investors right now, where, if you hold on to too much cash you'll lose value if you're invested in the stock market. Well, that could fall once the fed reduces your stimulus and if you just want to drive far far away and pretend like none of this even exists. Well, you can't, without spending 30 more for a used car and 40 more for gas. So we got to talk about exactly what's going on, why the fed issued a warning for inflation, why prices are suddenly rising faster than the temperatures in las vegas and then finally, how you could invest your money moving forward, but before we start it would mean a Lot to me, if you inflated that, like button for the youtube algorithm by giving it stimulus until it turns blue and best of all, if you actually do that, i will do my best to respond to as many comments as i can.
So. Thank you guys. So much and also big, thank you to roman for sponsoring this video, but more on that later, all right! So here's what's going on and what's led up to the point where now the better the economy does the worse, the stock market performs, while everyday prices continue going up higher than anybody expects. Almost all of this begins in march of 2020, when the federal reserve lowered their benchmark interest rates all the way down to zero percent in an effort to help stimulate the economy through the beginning of the pandemic, but alongside lower interest rates, they also did something that Was unprecedented in addition to several trillion dollar stimulus packages that were created to help keep businesses and people afloat, the federal reserve agreed to start buying corporate bonds, which is a really fancy way of saying the fed is injecting a lot of money into the economy directly Through businesses to make sure things don't get too bad now from their end, this is a really calculated move because they theorized that if people felt the economy was going to continue falling, they wouldn't lend money.
We would fall into an even deeper recession. Prices would continue falling and we would be in a much worse position, so instead the fed stepped in and said if anyone needs money right now, not a problem, we'll lend you whatever you need for free, just agree to pay us back and that in turn helped Boost the confidence that, if the fed is guaranteeing all of these loans, businesses will continue to operate and everything will be okay. You know what it worked shortly after the announcement. The stock market began to skyrocket into one of the strongest bull markets in history, but there was a cost. Some people questioned that the federal reserve was ruining the functions of the free market and the role of what was supposed to be an independent central bank. That's because the fed provided an artificial temporary boost to the market that could only go on for so long until eventually it ends and from there the market's going to be going to a level that it could actually support on its own. The issue now is that that moment might be happening sooner than expected. Now, on the surface, here's what the headlines tell you.
Consumer prices rose nearly one percent between may and june, which is nearly double what economists predicted it would be. It was also a whopping 5.4 higher than it was in june of 2020.. Beyond that median rents nationwide also went up another 8 from a year ago, with the concern that now minimum wage is officially not enough to afford rent anywhere in america. In fact, the recent report shows that a worker would now need to earn 24.90 an hour to afford a two-bedroom home at fair market, rent or 20.40 an hour for a standard one bedroom, and that, of course, begs the question.
How much of this is due to inflation and how much worse can things get? Well, most recently, the federal reserve said on record that they believe there are three main driving forces behind why prices are getting so unbelievably expensive. The first one they say is because of supply chain bottlenecks. I would say the best example of this with context to inflation is with a chip shortage, limiting the production of new vehicles and causing used cars to double in price from a year ago, that alone made up for a significant portion of the overall inflation metric and Made it seem a lot worse than it actually was, or in other words, if you calculate inflation without considering used car prices, it's going to look a lot lower. The second.
They say that extraordinarily high demand is pushing up prices higher than normal. This is evidenced by the fact that travel related expenses like gas, fuel and rental cars, are all seeing higher prices, along with increased demand for airfare and hotels. Restaurants are also a lot more busy, while their prices have gone up 4.2 percent from a year ago. The reopening of our economy really just sparked a lot of pent-up demand that wasn't ready for everybody all at the exact same time, and that, of course, is lifting up prices. Alongside with it and third, they say it looks way worse than what it actually is, because we are measuring year over year during a time where our economy was struggling and sure enough. As you could see from the chart, we saw one of the largest and quickest inflation drops in history as the economy shut down. So now, a year later, we're going to appear artificially higher when you calculate it from the very bottom a year ago and in the big picture, when you zoom out over the last 10 years, you could see that overall, inflation is still around an average of 2.2 Percent, all things being equal, but still the bigger question, remains, with inflation coming in way. Higher than expected, they've expressed concerns about dialing back stimulus and the impact that could have on the entire stock market, which is still going down so what's going on.
But before we go into that real talk as it turns out, 87 percent of my audience is male and we're not getting any younger. I don't know what happened, but all of a sudden i hit 30 and boom. Now i need eight hours of sleep every night. I got ta eat healthy.
I got ta push myself to stay active, otherwise you become a potato, but thankfully our video sponsor today, roman, is here to help roman is a digital health clinic for men with daily nutritional supplements to help your body perform its best, and now they got a new Product designed to support testosterone production like as you get older testosterone, begins to naturally decrease in the body, which is why roman has developed products for anyone who wants to help support their body's own natural functions. They use a unique blend of transparent and scientifically backed ingredients designed by healthcare professionals that you can't get anywhere else and best of all, because you smash the like button and you have good taste in youtube channels. Roman is offering 15 off your first order, plus free two-day shipping when you go to getroman.comgram, just go to getromand.comgram, to learn more and get 15 off of your order, plus free shipping link in the description. So, thank you guys so much and now, let's get back to the video all right so in terms of the fed wanting to scale back on their stimulus and the potential impact that could have on the entire market.
Here's what you need to consider right now: the fed is purchasing 120 billion dollars worth of government bonds and mortgage-backed securities every single month to drive down record low interest rates and give you a chance to borrow money at record lows that in turn introduces more money Into the economy and as more money enters the economy, there's the risk that further devalues our money and sends the cost of everyday items even higher, like kind of what we're seeing today. But now inflation is getting a little bit too high and even the fed. Just recently said that upward risks to the inflation outlook are increasing in the short term, increasing the likelihood that inflation surges will last longer than originally anticipated. On top of that, the fed also said that they acknowledge that they might need to respond to higher than expected price pressures and that we have the tools to deal with it, but in ways that are unnecessary or hinder the economic recovery. The wall street journal also reported that it was important to be well positioned to reduce the rate of asset purchases, if appropriate, in response to unexpected economic developments, including faster than anticipated progress, or, in other words, they're. Basically saying that if inflation persists and prices keep rising faster than expected, their plan is to taper back on stimulus, increase, interest rates and hope, that's enough to prevent prices from rising even further, and even though that was originally planned to happen in 2023. Now some say this could happen as soon as the end of this year. On the one hand, if this happens, it is a sign that our economy is recovering and can actually withstand a little bit less stimulus.
But, on the other hand, this could be bad for the stock market, which has largely grown reliant on cheap rates to boost prices, and it's not just the stock market that could see an end of stimulus as of right now, the unemployment boost of 300 a week Is scheduled to end in september the 250 a month, trial, tax credit is going to last through the end of 2021, with the rest of it coming when you file your tax return and after that, if nothing else is passed, then the economy is on its own. So that then leaves us with this, even though they say inflation is going to be temporary due to high demand supply chain shortages and year-over-year calculations from the bottom of the market. If it continues to stay as high as it is now, they're going to have no other choice other than to raise rates and stop injecting 120 billion dollars into the market every month, and if that happens, here's what this means for you and what you could do About it from the stock market's perspective, uncertainty is one of the main driving forces of the market right now, not so much inflation or interest rates. That's because, once the stock market knows the direction we're headed or the results of a highly anticipated earnings report, it could immediately adjust for those factors and then carry on as usual.
But when you have higher than expected inflation, the strong likelihood that stimulus and low rates could end sooner than expected, and the uncertainty about whether or not strong earnings could be sustained without a boost to the economy. Then you have a market that panics in prices in the worst possible case scenario. In a way, the stock market really is backwards right now, because you would assume that good growth, strong earnings and a reopening economy would be great for your investments, but it's not since the market is forward. Thinking. Good earnings and strong growth could already be priced in and now with stimulus, ending. What more is there to look forward to when people have less discretionary income to spend? If anything, the worst news we see right now, the better it is for the stock market, because that means that low rates and stimulus last even longer so really nothing makes sense up is down, and i wouldn't be surprised if we continue to see a lot more Volatility through the rest of the year now that doesn't mean that you should sell all of your investments, but it does mean that you should brace yourself that anything can happen. Nothing is rational and if the market continues to drop just stay the course and buy in as usual. Now from your perspective, the federal reserve has made it clear that they think inflation is going to persist longer than they expect now.
Unfortunately, minimum wage workers are likely to be the ones hit hardest from rising inflation, since studies have shown that inflation-adjusted wages have barely increased since the 1960s, while the cost of living continues to get more expensive each and every year. The fact that a two-bedroom is now unaffordable on minimum wage anywhere in the united states really highlights the severity of persistent inflation and the lack of affordable housing. That just means, as far as what you could do about this from here on out, if you're investing make sure to stick with solid long-term companies that you could hold on to for decades and then don't sell. The entire economy is rather fragile.
Right now and even the slightest little panic can freak everybody out. So don't do that and just hold a recent study even confirms that if you would just miss the 10 best days in the market over the last 15 years, your overall return drops by more than 50 percent and if you miss the best 20 days, your return Drops by more than 70 that's why buying and then continuing to buy in without selling is going to be the best strategy to make the most amount of money long-term. You could also look to refinance or lock in a really low interest rate now before they eventually go up. That's exactly why i've chosen to keep my mortgages for as long as possible at the lowest interest rate i could find now if we do see longer and worse than expected inflation that just makes debt easier to pay off in the future and when my interest rates Are 2.8 fixed for the next 30 years? Inflation above 3 essentially means that they're paying me to borrow money, so i may as well just use that to my advantage, because it's an incredible concept beyond that, though, day to day, it's probably just a good idea to be a little bit more observant in terms Of what you're paying shop around for the best deals and then track your expenses, these are certainly reasonable habits to have at any time and not just today. But if prices do continue going up, then saving a little bit more money never hurt, and you should always just look to get the best deals anyway. Personally, i think we're going to see longer and worse inflation than what the federal reserve expects and that might prompt them to raise interest rates a little bit sooner than expected. But i don't think what we're seeing is permanent. Eventually, things will return to normal and that's why i think the best strategy right now is to keep buying hold as usual and smash the like button for the youtube algorithm.
So with that said, you guys thank you so much for watching. I really appreciate it as always make sure to subscribe and also feel free to add me on instagram, i posted pretty much daily. So if you want to be a part of it, there feel free to add me there. As on my second channel, the gram stefan show i post there every single day - i'm not posting here.
So if you want to see a brand new video from me every single day, make sure to add yourself to that. And lastly, if you want a totally free stock, now worth all the way up to 70 use the link down below in the description and sign up for public and plus, i'm posting all of my own stock trades on there. So if you want to be a part of it, the link is down below in the description. Thank you guys so much for watching and until next time,.
I wish executives realized that if they paid their employees more they would have more money to…… wait for it….. SPEND ON THINGS THEY'RE SELLING AND INVEST.
Not a single mention of the term modern monetary theory? You ought to be ashamed.
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thanks to lemohtools for they got me alot of cash
I know it's better to pay the minimum on a low interest mortgage and invest the rest, but as someone who doesn't make over $100,000/yr but still maxes their: 401k/Roth IRA/HSA every year; I feel like that should be enough, and I choose to pay off my debt faster.
The more stupid boost they do, the higher inflation it will be.
In order to get the $4 trillion into the economy this year, the Fed would need 100 Helicopters dropping a total of 500,000 $20 bills daily, 365 days a year into the waiting hands of Americans.
as a 16 year old girl today’s sponsor was quite fun
I am on my 20s at the moment so I'll come back to romangrant in 10 years
Great video I really liked it! I’m a young investor learning as much as I can right now about the stock market. I invest in DIVIDEND PAYING STOCKS FOR PASSIVE INCOME! My passive income portfolio is up 48% this year!!! I’m a hard blue-collar worker and have always paid for everything myself in life. I believe in WORKING hard & PLAYING hard! I’m very interested in learning more wealth building strategy videos from your channel, any tips? Keep producing great content and I can’t wait to watch your next video.
The Federal Reserve was founded in 1913. Since then the dollar's value has fallen by 96%. The stock market has risen by 3,138,470.95%, Invest your money.
The strategy that's been working wonders for me is not eating dinner. Really reducing that monthly grocery bill!! (not even joking right now lol)
A diverse 60/40 stock/ bond portfolio alongside the S&P500 is generally my ideal investment to hedge against inflation for the average investor it provides safer returns. it has worked out best for me in achieving a million in profits on my portfolio also with the help of a investment advisor handling my portfolio. smart investing is key.
Isn’t inflation due to trade war rather than stimulus? The trade war is causing supply chain bottlenecks and passing tariffs to the consumers.
Even as the virus ravaged the global economy, CEO incomes shot up by 14%. We really need "wage and price controls" during major crisis like a pandemic lockdown to protect a fragile re-emerging economy, it's workers and consumers.
Allowing this unsustainable uncontrolled economic surge we see now after lengthy mandatory lockdowns is highly irresponsible of government planners and regulators.
Oh, and Biden didn't win by the way.
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I’ve worked for three years just to make $20 an hour and if they literally just raised everyone’s pay to match inflation we would all be comfortable. I went to college for
Four years to barely scrape by. It’s all about to crash.
Appreciate these videos more than you know, bud
What you dont seem to understand is that the fed cant raise rates PERIOD!!! No matter how high inflation goes because the debt is too high and any raise in rates will tank the stock market and the economy …period the end.
This channel has become unwatchable. Basically digesting headlines x1.5 speed with click baity titles
Not one word about gold and silver ! Not one word !!!!
Ah yes, the inevitable. Once people loose their jobs, and can’t pay for their new homes 🏡 foreclosures will commence. Banks 🏦 will own more land, and more properties. Then, the super rich 🤑 will swoop down, and buy them all up. Taking what left the working class has left. It’s almost like our system was designed this way?!
In support of Gender Equality we should force women to watch a your channel and smash the like button
Word on the street is bezos is destroying product on a grand scale to help control supply… 🤷
It's amazing to me that guys like Graham don't see and point out the immorality of the entire system. Once you accept the evils of violence and theft to run a country and an economy (they are based on this), anything goes.
LITERALLY.
You need to read (and understand) "The Ponzi Factor"
The real problem is how to find a non self serving way to spend testosterone even when it's high. Why are we pretending not to see the forest for the trees? Geez.
Me: Alright time for me to start looking for my first car.
Inflation:
I’m about to end this mans whole career.
What's up engineerstudent, it's Graham here. Just letting you know I inflated your subscription numbers. I've just recently stumbled across your page, and I've been greatly enjoying the content. A lot of useful information. Keep up the great work!
13.5% inflation is closer to the truth. CPI is bullshit.
Democrats can’t run cities as they are all in deep debt or the country as they are busy doubling the debt
Here's me, the 13% of the audience that's female. Haha.
Economy's greatest fear is inflation. It's second greatest fear is Biden as president..
Hey Grant I love your channel I also live in Las Vegas and Hope to meet you sometime
When they stop giving away free money, and this inflation keeps up… people will soon be putting mustard and ketchup on their shoes, and trying to eat em.