The stock market will crash, it's happened time and time again. That's the exact statement i made three months ago, but what's currently going on is far far worse than even i could have imagined, hi guys, it's mark. So it's about time. I address this.

The markets are going, wild fear is at an all-time high and even safe stocks. That was seen as too big to fail like facebook and paypal are getting destroyed. What a time to be alive, i mean facebook, otherwise known as meta lost 230 billion dollars in value. In the biggest one day drop in us history, honestly, i'd expect that from bitcoin, but not from a huge company like facebook, but here's the good news, there's finally enough data to break down the reasons behind the mayhem and if we understand what's going on, then we'll Be able to make smarter choices with our money, which should lead to making more profit.

It's only right to kick this off with inflation, as it's increasing at a scary rate. If the stock market was superman, then its kryptonite would be inflation. Whenever superman is exposed to kryptonite his powers start getting drained. This is exactly what inflation does to the stock market as it eats away at your returns.

The u.s inflation rate in january came in at a whopping 7, which is the highest inflation we've seen for the last 40 years, with a sudden increase in kryptonite, like that, even superman will be struggling. A perfect example of inflation is this big mac that i just happen to have right here. This is because it's made with the same ingredients and sold in the same way for many years in 1986. It would have cost me one dollar and sixty cents, but today it cost me five dollars and sixty five cents.

So inflation is the reason you can buy less and less with your money over time, but to be fair, they do still taste good. If you ever get the opportunity, ask your grandparents how much their house cost or how much they used to spend on a pint of milk. It was insanely low. I can tell you that for sure, how much did you use to spend on a pint of milk? Then i don't know, i think it's about 4p or 4 pennies should we say really of course, 100 years ago money was harder to earn and you didn't have to be a millionaire to be rich, as everything was so much cheaper but as the years go on And more money is printed, the cost of goods and services rise, so it's only fair people should earn more money.

I bet you can see where i'm going with this. It's a cycle of things costing more and people wanting more money to counteract it. A consistent rate of inflation is actually seen as a sign of a thriving economy, and it only becomes an issue when it starts increasing rapidly and getting out of hand. The economy is a really delicate thing and we saw the consequences of hyperinflation in 1923.

I remember it well when, at one point 4.2 trillion german marks was worth just one american dollar. They actually started burning money to stay warm, as it was worth less than the paper that it was printed on. Now, i'm not suggesting we're in a dire situation like that. However, one of the biggest issues at the moment has to be the clogging of the supply chains simply put due to the virus.

The speed our products can be supplied at is much slower than before. For example, the computer chip shortage issue we've seen over the past few months, which makes digital goods harder to produce. Even in my business, i can't get enough computer chips for my radio control models. This means a lower quantity of products are available, creating higher demand leading to higher prices, and these higher costs mean people need to make more money to afford the things they want, which then causes a cycle that is hard to escape from wow.

That's a lot to take in, but stay with me as this is what they don't want you to know. On top of this, there's been a lot of new money printed and pumped into the system and whenever there is more of something it becomes less valuable than before. But here's the big question is the rapid inflation temporary or is it here to stay? If there's one thing, people don't like it's the unknown, which causes them to panic, this fear is contributing to a very up and down stock market, which is eroding the returns of many investors. If you don't have any stocks being eroded at the moment and now could be a good time to jump in while prices are low, luckily, you can get a free stock worth between three and a thousand dollars when signing up to the investing act.

Public.Com i'll leave that link in the description just remember with investing your capital is at risk in unprecedented times like this, we have to put a lot of faith in our governments, as they are the experts right and should know exactly what they're doing. Well, unfortunately, they seem to be making mistake after mistake, which is understandably causing them to lose a lot of credibility. Just take this headline. For example, biden calls inflation skyrocketing to a 40-year, high, elevated and again insists it's temporary.

It seems like governments are worried and in an effort to calm everyone down, they're, making wild guesses and presenting them as facts. It doesn't help that there are also many benefits to the governments of reporting, lower inflation, such as eroding the value of their debts. Inflation is calculated by something called the consumer price index. This figure is created by tracking the price movements of 650 items, which represents a basket of goods and services typically bought by the average household 650 items in a basket.

Where do they get a basket big enough for that? But secondly, there is a lot of room for error and manipulation. It is heavily dependent on the items inside the basket. These items are also changed over the years based on the average spending habits. However, not every family buys the same thing, so not everyone is represented.

Equally, the figure also takes into account changes in quality. This makes sense, as the new iphone is certainly more functional than the original one. However, at the end of the day, you're still paying more for your phone. This means the figure is highly subjective and vulnerable to manipulation.

I'm not saying this is definitely happening, however. Some people believe it is. This therefore just adds to the fear and uncertainty in the stock market, so the governments need to find a way to fight this rapidly. Increasing inflation introducing the fed taper.

If you cast your mind back to early 2020, everyone was freaking out over covid and there was a genuine fear that our entire economy would collapse. I myself was extremely concerned, especially for the young people, with low savings. All those working in the travel and hospitality industries because of this the fed stepped in to save the day and lowered interest rates, allowing people and businesses to gain access to money, as well as implementing things like stimulus. This seemed to work like magic as a stock market bounced back from the abyss.

The fed achieved this by purchasing 120 billion, yes billion a month of treasuries and mortgage-backed securities, which essentially means money was available for people who needed it. However, as we know from many fantasy tv shows, when you cast powerful spells, there is always a price to pay when it wears off. That price is the highest inflation we've seen in 40 years. With all that said, it makes sense that the fed have to do something about this high inflation without crashing the economy.

This is known as the fed taper i like to think of the economy like an athlete a bit like myself and the fed as their coach. Every athlete tapers before a major sporting event. What this essentially means is that they reduce their training weeks before the competition so they're able to perform at their best ability and not be too tired to compete. When was the last sporting event you did, then it was a big mac eating competition.

I had to taper down to just one a day before i competed in that, but i won. This is exactly what the fed have attempted to do with the economy by slowly. Reducing the amount of support that they're giving it this makes sense, because if they were to just withdraw all of their support at once, then everything would just fall apart. Any fear, uncertainty and doubt surrounding these types of things almost always causes some sort of crash or downturn, as people just don't know what's happening.

However, the fed have released their plans to the public at last and informed us that they are decreasing amount support by 30 billion dollars each month ending in march. The fed has also said it is likely to hike interest rates in march as well. The overall impact of this could still result in a downward trend, as people are still scared about the taper and interest rates going up. It's gotten to the point where interest rates have been so low for so long that it feels strange that they're likely to be going up.

The fear is, as interest rates increase and money becomes more expensive to borrow, people will spend less, which will lead to a decrease in company earnings further fuelling the downwards trend in the stock market. That brings me on to my next point: slowing demand with 2020 being such a crazy year for many companies such as apple zoom and peloton, it's almost inevitable that this demand would have to slow down. Eventually, their growth during the pandemic was not sustainable, as the environment was artificially inflated in their favor. Many of these businesses acted like this growth would happen forever and made major decisions with that in mind.

This has caused many of these stocks to crash due to missed earnings. Reports linked to slowing demand for their products. Peloton have even halted production of their fitness equipment, which just shows the lack of demand. I mean it does make sense that during the pandemic, people needed tools they could use at home like video calls and home workout equipment.

The only thing you use the home workout equipment was to hang your clothes on dad. That's true. So, unless something crazy happens again, we aren't going to see growth like in 2020 for a while, which means the share price is too high. Therefore, prices are still correcting, so we're all doomed and we should sell everything right.

The end of the world is nigh. No don't get me wrong, it's definitely a bad situation, but in my opinion, if the company has good long-term potential, then they will see gradual growth. I believe kovi just accelerated where the world was heading anyway. Money became more accessible to a lot of people during the pandemic, through loans, grants and stimulus.

Many chose to start investing, which meant the stock market was pumped with lots of money. Now the fed is easy in support and increasing interest rates. It's left consumer debt at a record high, as many people have taken on mass amounts of leverage, with the hopes of putting that money to work in the markets. The goal is to achieve higher returns in the stock market than the interest rates on the loan, which, to be honest, with the interest rates as low as they were, wasn't too much of a problem.

However, lots of people have taken on the maximum debt that they can handle, which leaves less cash actively being pumped into the market. The issue of high consumer debt is definitely something i'm paying close attention to. In addition to this lots of people investing at the moment with borrowed money are probably beginners and inexperienced, which means they may not have trained their mind like a true investor and could be panicking at the state of the market, causing them to sell off their investments. To top this off, we have staff shortages which are heavily impacting the stock market.

The usa and the uk are still down on pre-pandemic employment levels, which means there isn't enough people applying for the available jobs, therefore we're in a labor shortage. This is just because everyone's got lazy, or is it all the boomers sitting on their backsides? Well, there are four main reasons for this: generous income support schemes, less mothers, working and mismatching job opportunities and less older workers. So i was only slightly joking about the boomers. Firstly, many people are quick to blame high unemployment on the financial support given to people during the pandemic.

While this may have slowed job applications, as people could be more picky about what jobs they went for, i don't think it's the biggest factor. Secondly, it makes sense that less mothers were able to work during the pandemic due to the constant school closures and issues with child care. This should be less of an issue now due to the schools getting back to normal, the schools never shut down. When i was there, i could have done with a break from school.

Thirdly, the job landscape has certainly changed a lot with jobs that require in-person interactions, such as in restaurants, hotels and entertainment being hit extremely hard. This could very well mean there's a bit of a mismatch between the unemployed and the job opportunities that are actually available. However, the biggest reason for unemployment is the decline in older workers. Data shows that workers aged 55 and up accounted for around 35 of the outstanding employment gap versus pre-pandemic levels in both economies.

Yeah. It's all these boomers on youtube, rather than actually working, isn't it. I don't think so. I never stop running my businesses.

This could be temporary due to health concerns surrounding the virus or more long-lasting, as during the pandemic, real estate values skyrocketed and they may have been able to take early retirement. This staff shortage means that companies are forced to entice potential employees with higher pay, which means the cost of their products must go up to fund. This pay rise further fueling inflation, which then negatively impacts the stock market. With all this said, i see these factors as short-term pain and in the long-term game.

I'm betting, that this stock market crash is just a small blip on the graph, although i don't believe in time in the market, i'm holding a bit more cash on the sideline. So i can buy the dip all the way down and then all the way back up again. I also never like to time the bottom. However, i do like to catch the bounce.

This is when i will start investing more aggressively so that i can ride that wave all the way back up, so i'm going to leave the next video up there, but don't click on it just yet make sure to subscribe. If you want to grow your wealth. Okay, i'll see you over there.