What's up grandma's guys here so between record high inflation, imminent rate hikes and outsized earnings, there's no denying that there's a lot of uncertainty and opposing viewpoints in the market. Right now, on the one side we have some of the most renowned investors warning us about a heightened chance of everything falling into a bear market, while the other side assures us that the worst is over, everything is fine and the prices are headed towards even higher Highs so who's right well, in order to answer that and analyze exactly how and when the next stock market crash will happen, it's important to look at both sides talk about the latest events taking place, and then we can determine which scenario has a higher likelihood of Happening a 20 drop or going to the moon and printing even more attendees. Now this is not to say that we're 100 about to see a stock market crash or a price surge in the next few weeks. But it is about making sure that you think about the current state of the market and that you're invested in such a way that you don't lose everything.

But before we talk about that, i want to say a huge thank you to the sponsor of today's video. The like button for the cost of absolutely free with one gentle tap you'll be rewarded with endless free content that helps the youtube algorithm and as a special bonus. If you hit the like button in the next five seconds, i'll show you this really cute picture of a baby clownfish. So, thank you guys so much now with that said, let's begin to start, let's get some of the bad news out of the way, and that means we should first talk about why the stock market could soon begin to decline.

First, the federal reserve is ending their 120 billion a month bond buying in march, which at this point is only a few weeks away, see throughout the pandemic and up until january, the federal reserve was purchasing 120 billion dollars a month of treasuries and mortgage-backed securities. As a way to ensure that whoever needed money got money, but that was only meant to be temporary and recently the entire market started to panic at the thought that the fed would reduce those purchases faster than expected and, as a result, the market sold off. However, as of about two weeks ago, the fed confirmed that they would be reducing their stimulus by 30 billion dollars a month until by the end of march, they're completely done and don't need to buy anything else. Although there's still very much, this looming uncertainty of what happens when they stop buying bonds entirely well, that term is what's known as a taper tantrum.

The last time this happened was in 2013, when the fed announced that they would reduce their mortgage buying after the great financial crisis and as a result, investors went into a full skill. Panic interest rates spiked out of nowhere. Volatility went crazy, emerging markets, tumbled and now there's the worry that that could happen again truthfully. We don't know the full extent as to what a lack of bonded mortgage buying will do to the markets or, if that causes rates, to rise, which dampens growth and subsequently lowers prices.

But that does make way for a second argument, and that would be rising. Interest rates, here's the thing throughout the last 50 years, interest rates have done nothing but trend lower and lower and lower. Until recently, they hit zero percent. Where, essentially, you could borrow money for free, just as a way to get people to spend.

In fact, during the pandemic rates were dropped to the lowest level ever in history, when they're already at rock bottom, there's very much the consensus that there's nowhere else to go. But up. But with all of that, there is a slight problem when interest rates are zero and inflation is high, the only place that people are able to get a meaningful return on their money is stocks and real estate, thereby causing their values to increase. But when interest rates rise and all of a sudden investors have the opportunity to earn two percent in a savings account four percent in a treasury bill or five percent in a low-risk bond, there's less of a need to invest in growth companies on their future earnings And, as a result, the price of those stocks tends to go down.

In fact, as we could see over time as rates rise, a large portion of the market begins to sell off and with tech stocks. Having seen a meteoric rise over the last two years, they'll tend to suffer a little bit faster than everything else. Third markets could very well be overvalued, see one of the most common ways that people apply. Evaluation to the stock market is what's known as a price to earnings ratio.

This is calculated by dividing the company's stock price, with its most recently reported earnings and the lower the number the more undervalued it tends to be. However, what's unique about today is that the p e ratio of the market is the third highest. It's ever been in history, as you can see the last two times. It's been this high.

We've had the great depression in the 2001.com bubble, and today this p e ratio is largely held up by some of the largest companies who have benefited from low rates and excess online demand. We can also see that, when adjusting for inflation, the market is trading near the upper range of its long-term trend and when you look at the overall return, it's also holding near its all-time high forbes, recently detailed their analysis, suggesting that loose monetary policy combined with low Interest rates have caused stock prices to soar. When you combine that with stimulus and record high inflation, it's a perfect catalyst for what we're seeing today. The issue they believe is that unless earnings growth continues to break records, stocks won't see a continued push higher and, as a result, they could begin to fall.

On top of that 93 s, p 500 companies have issued earnings guidance for the fourth quarter of those companies. 56 released negative earnings, guidance and 37 have disclosed positive earnings guidance. That means more s. P 500 companies are issuing negative guidance over positive guidance for the first time since the second quarter of 2020.

and the ultimate whammy we have the buffett indicator suggesting that the market value is 59 percent higher than the historic average compared to gdp. At the same time, the fear and greed index is moving towards fear. I mean even nasdaq said that there was a 70 chance of a base case coming soon where stocks just flatlined, but those are just the bear cases and to have an even argument. We have to talk about the other side, because maybe stocks could continue going even higher.

First corporate profits are still quite strong. The fact is, even though people are slightly more cautious, there's still a lot of pent-up demands. That's bolstering prices even higher and we've seen that firsthand. Throughout this last week, companies like nvidia amd chipotle, lyft, enthase, microsoft and a multitude of other large companies have all reported strong earnings and a positive outlook, even despite inflation concerns.

This leads people to believe that valuations could be sustained because there's no shortage of people continuing to buy on top of that. Second, unemployment is extremely low, 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 1960s there's also so much demand for skilled labor that there's a shortage of workers. This company scrambled to pay anything they can to get people on board home depot is even offering what they call next day. Job offers for people who apply and want to start immediately.

Much of this was caused by the great resignation as people quit their jobs to retire early work from home or simply find a job with better work. Life balance that left plenty of open positions for people to fill, and they did so with the strong labor markets. Combined with strong earnings, there's no shortage of people continuing to bolster up the prices even more. On top of that, you also have companies like the cryptocurrency exchange.

Ftx who's gon na be giving away up to two million dollars with the free bitcoin during this sunday's super bowl, which is insane whenever they're at airs they're going to be giving away that time in bitcoin. So if it's 9 43 - that's 9.43 bitcoin, if you want to enter just follow ftx and twitter, using the link in the description and when the commercial airs retweet their pinned feature between the time it airs at 11, 59 eastern standard time, then four people will be Chosen to get some of that sweet, sweet, cryptocurrency. Third, we have an interesting argument from tina. No, not that tina.

This tina, the acronym. This refers to an asset allocation, that's less ideal, because there is no alternative like in this case. If you want to make a return, where do you put your money with a savings account in cash? You lose money to inflation with bonds. They pay absolutely nothing with gold, it's underperformed over the last few decades.

So the thinking is that people are going to keep buying stocks in real estates, because what else is there to buy? Of course, over the long term? Being a good investor, isn't just about maximizing returns, but also being able to withstand a downturn long enough to see it through. However, in this case, tina gives us the reality that if you want to grow your money, stocks have historically been the best way to do that, and that is very likely to continue, especially with bond rates continuing to decline. But then we got fourth rising interest rates. Might not be so bad.

Yes, it is true that rising rates do tend to depress the market, but it's not necessarily all bad for all stocks, in fact, historically, rising rates have actually been pretty good for banks, energy, the automotive industry and transportation. In addition to that, since 1994, it was found that the first interest rate hike actually led stocks to increase an average of 7.3 percent in the following 12 months. The reason for this is that generally rates only increase in a growing healthy economy that could handle a higher rate increase, so in a way the stock market would benefit from that type of optimism. On top of that, the long-term trend of rate increases is such that every single rate increase has been unable to reach the level of the one before it, suggesting that we're very unlikely to see a rate increase that the market couldn't already handle.

There's also always the chance that, during the next recession, rates could go negative as they have in other countries like switzerland at negative 0.75 percent, denmark at negative half a percent, japan and negative 0.1 percent in both sweden and spain at zero percent, even though it seems Kind of far-fetched - it wouldn't exactly be impossible. So the moral of the story here is don't fight. The fed and fourth supply chains are beginning to normalize. Inflation is beginning to stabilize, and then we could be left with an economy with low unemployment and strong demand, thereby pushing prices to the moon.

After all, in terms of inflation, the fed believes that prices will begin to come down throughout the next year, pushing inflation to 2.3 percent in 2023 and back down to 2.1 percent in 2024.. On top of that, the wealth of common sense blog broke down the years of highest inflation since the 1940s, and he found that during the highest years of inflation, stocks actually wound up increasing by an average of 9.4 percent, proving that rising prices aren't always correlated with Negative stock market returns same thing goes for supply chains, jp morgan, recently surveyed 600 executives across the country and found that 83 percent have a positive outlook over the next 12 months. It was even noted that when you look at the amount of time it takes for manufacturers to get their hands on raw materials, the supply chain delivery times are starting to shrink again in terms of the numbers, though, container shipping costs from china to the u.s west Coast have retreated 30 percent from their fall peaks and the number of containers sitting idle if the port of los angeles is down 40 since early november, suggesting of course that the situation is only getting better. So in terms of what you can do about this, regardless of what happens, look no further than one of my favorite blogs market sentiment, who researches various investment strategies and decides whether or not it's worth your time and money i'll link to the full article down below.

In the description for anybody who wants to follow along, but he highlights that there's a problem when it comes to investing in that there's, not a one-size-fits-all approach. All of us have a different expectation, different risk, tolerance and different goals. So what might work for? You might not work for somebody else and that's why it's broken down investing into a few main categories. First, we got spy and shill.

This is the belief that the largest u.s companies will continue to do well and so far historically, they have to the tune of twelve point three percent a year. However, since you're a hundred percent invested in stocks weighted heavily towards tech during a downturn, you could see a decline of 40 percent or more like we had in 2008. So this is something to be made aware of the second. We got a 50 mix of stocks and bonds.

The theory behind this is that stocks should go up when the market does well and when the market drops, bonds should hold their value so either way you win right well, even though you would have earned slightly less with a 10 return over 19 years. You also would have only experienced a maximum of a 14 decline during the worst months, essentially making this a hedge against a bear market. The third you could diversify. This example gave us a one-third, equal split between small, mid and large cap stocks and that returned twelve and a half percent annually.

This gives you a little bit less risk, but it's also balanced off by a slightly lower return. Now, if you're not having that, you could do. Fourth, all in tech. Now this in hindsight did the best throughout the last 20 years, with a return of 17 and a half percent annually.

But when times get tough, this portfolio is prone to the largest decline. At a 78 loss during the previous dot-com bubble and there's no guarantee that this type of explosive growth will continue and, finally speaking of growth, we have number five growth. This was associated with the top five companies by market cap, including amazon, apple, google, tesla and microsoft, and surprisingly, it gave a better risk, adjusted return when compared to the s p, 500 and a whopping 15.4 percent. The moral of the story here is that, regardless of what happens with the market, it's really important that you have a strategy that you stick with ahead of time, because eventually there will be a drop.

There will be another sort of crazy crash and it's really up to you to make sure you're in the best position possible to stick through it, make the most profit possible and hit the like button for the youtube algorithm. If you haven't done that already. So. Thank you guys so much for watching also make sure to add me on instagram and to my second channel.

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So let me know what stock you get. Thank you so much for watching and until next time.