What's up guys? It's Graham here. So originally I had another video that was planned to post today, but with everything going on, I felt like it would be more appropriate to address everybody's concerns and share my own thoughts about what's actually happening in terms of what to expect and how to prepare going forward. After all, there is a huge disconnect as to whether or not we're going to hit an upcoming recession, if inflation is slowly going to come back, and if it's even worth it to invest at today's prices. That's why we got to break down the latest data objectively and determine if it's as bad as they say it is or if it's a whole bunch of crap.

Because I Have to say this information will absolutely impact you as an investor. whether you're all in sitting on the sidelines or dollar cost averaging, Just give this video a chance and I promise if you make it to the end, you're going to be glad you did. Although before we start I want to say a huge thank you to the sponsor of today's video the like button because as soon as you hit it, the video will start soon. As you do that any minute, just give it a quick thank you thank you so much And now let's begin all right now.

to start, one of the largest drivers of the market is inflation, and in terms of the latest data, it's quite surprising. On the surface. inflation increased slightly from three percent in June to 3.2 percent in July and even though this sounds like inflation is still going up, it was less than a jump than expected. So it's overall kind of good news, but it is worth noting that this is the first jump in inflation since the peak of 2022..

of course, in terms of where this inflation is coming from, it's certainly not an energy prices because that's down 12 and a half percent year over year, and use car prices are down 1.3 percent in the last month. Although the real driver of inflation today is coming in the form of shelter meaning how much you're paying for housing and rent and that is still up 7.7 percent from a year ago, This means there's still a chance that we see another rate hike or two by the end of the year, although we're probably not going to have that much of an indication if that's going to be the case until the next Fed meeting, which is scheduled for September 20th. But in terms of how this is going to impact the the stock markets, you're going to want to hear this. First of all, in terms of the bare case for stocks, we got to talk about the U.S credit downgrade, because in a way, this became the Catalyst to our recent descent downwards.

See, for those unaware, since the United States largely operates and functions off borrowed money, their issued a credit rating that demonstrates their likelihood of paying back their loans. In fact, every single country has a rating like this. and for the longest time, the United States was considered to be the safest, not only because they held the world's Reserve currency, but also because they had a perfect track record of paying back everyone on time, in full, as agreed without any drama. However, on August 1st, the credit agency Fish downgraded the U.S in terms of their future outlook, going from What's called the Triple A rating to double A Plus and once that happens, the market immediately began selling off.

Why? Well, not only was this the second time to ever happen in history, but if the US is considered to be a higher risk, they must pay out a higher interest rate to investors. And that basically means more money out less money. In, as they say, this reflects the expected fiscal deterioration over the next three years, a high and growing General government debt burden, and the erosion of governance compared to other countries with similar debt ratings. And to be honest, they're not exactly wrong.

Like just a few months ago, the United States was within days of a government default. Our national debt is over 32 trillion dollars in climbing interest on the national debt is only growing larger, and it seems as though there's too much of a political divide to come to a reasonable solution. even though the United States has never defaulted on their debt, and they probably never will. In 2011, they faced a similar event where the S P downgraded them from Triple A to double A Plus and several other agencies issued a negative outlook as the debt crisis continued to get worse.

Following that announcement, all three stock indexes immediately fell five to seven percent in a day, and it took about a year to recover. However, in hindsights, that probably would have been a pretty good buying opportunity, and today this is something that Warren Buffett isn't even worried about about it all. Although that then takes us to the second bear case and that would be credit card debt. That's because For The First Time Ever credit card balances have exceeded one trillion dollars according to the Center of Economic Research.

If we start to see credit card spending slowing down, that would indicate that some consumers are getting maxed out and we may be in for substantial slowing consumption in the second half of the Year. This is also worsened by the fact that in May 57 percent of consumers lived paycheck to paycheck. and this is all happening at a time where credit card interest rates are at their highest levels in the last 30 years. Or basically.

the concern is that if consumers are running up high amounts of debt, it's a signal that they can no longer afford those purchases. and if they begin to scale back, the entire economy falls into a recession. or will it. Well, even though one trillion dollars is a lot of money, there's one aspect that's often overlooked and that would be delinquency rates.

This tells us how many people are flat out just not making their credit card payments. And if we look at this based on percentage of disposable income, it's actually near the lowest levels that we've seen since 1990. Meaning, debts are high, but people are paying them off so far. Second, if you look at this debt as a percentage of disposable income meaning how much money they're spending versus how much they make, we're at some of the lowest levels in decades by a fairly wide margin.

And finally, third, we have to consider inflation. Remember, in 2018, credit card debt just surpassed 870 billion, which if you adjust that in today's numbers, works out to just over one trillion dollars. This means that credit card debt for the most part is pretty much unchanged over the last five years Now, Don't get the wrong idea, because carrying a credit card balance is never going to be a good thing, but the headlines only ever tell you one side of the equation kind of similar to the banking system. See, just like: could downgrade the US credit system.

Moody's could downgrade the industries that they believe hold the highest amount of risk. and lately that's been Banks That's right on Tuesday August 8th. Moody's issued a downgrades signaling 10 banks that they believe were at risk, including some banks that I'd never heard of like M T Bank Pinnacle Financial Bok bank and Webster Financial. Basically, here's the explain like I'm five version of what's going on when Banks take your money, they allocate a portion of that and lend it out in the form of mortgages, auto loans, and personal loans.

They could also use some of those deposits to buy treasuries, which then get paid back to you as the customer in the form of Interest. However, today's a quite different Market Banks are making less money because they're receiving less money and paying more money out because interest rates are higher. As CNBC says, banks have been forced to pay customers more for deposits at a pace that outstrips growth and what they earn from loans. Because of that, Banks without proper liquidity could have issues with profitability and that would squeeze them even further into potentially failing even though the US government has said that they would step in to bail out customers which could make all of this a non-issue to begin with unless of course, you're buying Regional banking stocks, In which case, there's always going to be more of a risk if you do that.

And finally, speaking of stocks, we've got earnings. For those unaware, this refers to a company's profit, revenue and Outlook issued at the end of every quarter, and this tends to be the key in terms of whether or not the Market's moving up or down. Usually all of this is built on a mountain of expectation, hype, excitement, and fear that drives price is higher and lower by the minute. And up until recently, analysts believed that all the earnings were going to be bad.

and by bad I mean horrible. For example, in June, investors believed that earnings would fall seven percent during the second quarter, but instead profits only dropped by 5.2 percent, and on average, they topped Expectations by 7.2 percent. Now, yes, that does mean that revenue is down the most since 2020, but that's also partially because revenue is so high during the pandemic, so anything else that comes under is going to look equally as bad in proportion. Of course, don't get the wrong idea because declining revenue on its own is never going to be a good thing.

and it's not like losses that came in less than expected is going to be celebrated, especially when those stocks go down by half a percent after two days. But it does pay the picture that the markets right now have really low forecasts and it's yet to be determined exactly how much is already priced in. Anyway, if you want my take on this, frankly, it's too difficult to keep up because we're getting conflicting reports on pretty much everything. For example, JP Morgan says there's not going to be a recession, but U.S Leading indicators point to a recession.

A few months ago, they warned of the S P hitting 3 500 by summer. Now others say it's 4 700. the whole thing is a mess. That's why, instead of following all the noise, I've just lived by these eight principles which have served me really well over the last 10 years and this is what they are: One always keep a three to six month emergency fund.

This way, you're not going to need to sell your Investments and the chance that you lose your job, you see a reduction in income or something comes up during the time the market is down. The second, you should also diversify your Investments throughout as many different Industries as possible. The thing is, the more you spread out your money, the more you reduce your risk and volatility. And that way, also, if one market Falls, you'll have something else to fall all back on.

Third, speaking of investing, it's usually a wise idea to keep buying it. Study after study shows the best strategy out. There is just a dollar cost average on a regular basis and hold for as long as possible. Not to mention it's shown that missing the 10 best days over 30 years lowers your market returns by half, which then brings Pete to number four and that would be Don't Panic sell.

What I've seen so many times is that the psychology that pushes you to sell is often the exact same that holds you back from buying in when the market actually does start to recover and overall, unless you time it perfectly, you're probably going to be wrong. Next fifth, always do your best to keep a steady income. This is going to allow you to continue buying in as the market drops or just to pay for living expenses so you don't have to sell anything off. Six: If you're extra paranoid about it, keep more cash on hand.

I'll admit, statistically, this is probably not what you should be doing, but if it helps you sleep at night I Don't see the issue with it, especially now that you have treasuries sometimes paying more than five percent seven. you should also stay at a March in debt and leverage I Think it's pretty safe to say that you're playing with fire if you borrow money to invest in the stock market, especially if it's something volatile so it's not worth the risk. And number eight, if you need the money in the next two to five years, I would question if it's actually worth it to invest. The thing is, a few years is usually not enough time for the market to recover.

If something were to happen, and there's often times up to a decade or more for the market to get back to where it used to be. That's why the shorter your investment time frame, the less likely you should be to want to invest that money. Oh, and also, if all of this stresses you out, Number Nine, make sure to have the proper life insurance coverage with Policy Genius. Okay, Policy Genius sponsored a prior video of mine, but I'm just a big fan of their service.

so if you're interested I do have a link Down Below in the description. They have no idea I'm talking about them like this, but I just genuinely like their service. So if you're interested, more details are down below. Anyway, the way I see it: following these steps is going to help you become profitable in the market over the long term, regardless of what happens.

and for me, I've been following this for quite some time and it's not let me down yet, so let me know your thoughts. Down Below In the comment section, as always, make sure to hit the like button and subscribe. And don't forget that you can get all the way up to a few thousand dollars when you make a deposit using the link Down Below in the description I Got a paid affiliate link there. If you guys are interested, that link is down below.

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