Now we got to talk about similarities between the 2001 recession and today in: The Uncanny Warning that the 2001 recession gives to us today and why you should probably pay for hand a very specific part of your portfolio though even though I am a licensed financial advisor, run an ETF sell programs on building your wealth, link down below and run what I hope in the future will be a TENS of multi-billion dollar real estate startup hashtag no guarantees I cannot provide you personalized Financial advice telling you to sell what you're about to hear a massive warning on. But what we're going to do is we're going to jump into BC Alpha's research hold on the recency bias and comparison to the 2021 cycle I Tell you this is a very, very unique report and so we're going to go through this report uh and uh. And then we'll summarize it. So ready for this? Here we go.

All right. So first, the market has disappointed both bowls and bears. and the reason the market has disappointed both bulls and bears in the opinion of BC Alpha is because the Market's kind of trading sideways like we're not making new lows. So the Bulls are disappointed and we're not rallying anymore or sorry.

So the Bears are just we're not rallying anywhere. so the Bulls will disappointed. Yeah, the market. So the market has disappointed both groups, and the S P 500 has been in a trading range since basically May of 2020 22..

Now that's actually kind of remarkable to think that the S P 500 has essentially been in a trading range range since uh, since March or I'm sorry May of 2022. let's go ahead and zoom out and look at May of 2022 on screen here. this is Weeble and if we go to May of 2022, that is kind of eerie. Uh, so if you go ahead and jump over here and just draw a couple uh, trend lines over here, let's draw.

Uh, let's just get a parallel trend line over here. Uh, okay. we'll just grab this over here so we go over to May. Here's essentially your top in May and we'll just draw something that's mostly flat.

I should have just grabbed the horizontal line, but whatever. Uh, and let's do it again. Over here, we go to roughly about our bottom in June. Oh yeah, I Mean, we're well, well off of that, right? But I Think this is roughly what they're trying to suggest.

That this is the trading range that we're in very well. Okay, what warnings do they have for us? We believe that many investors suffer from recency buys, and they're using 2008 to 2021 as a guide for their Equity Outlook. The Bulls assume that any considerable drawdown would be followed by a large rally, as this is exactly what's happened since 2009. This is basically the buy the dip mentality that has worked extreme really well since 2009.

Bears However, presume that poor fundamentals should produce a crash in share prices just like they did during the Great Recession. However, this report suggests that the Market's trajectory this time will likely be different. Instead of a one-off collapse in share prices like in 2008, the S P 500 will probably be in an extended Bear market for the first time in 20 years. In fact, the S P 500's pattern and trajectory have so closely so far closely resembled the behavior of equities in 2000 and early 2001..

First, the U.S Bull Market peak of 2000 occurred after a decade-long exponential rally in technology, media, and telecom stocks. TMT The same is true for the 2021 stock. Apex Here you go. here is that chart on the right side: you can see this drastic peak in TMT market value as a percentage of sort of the total market value the Msci total Equity market value.

basically the entire Market Uh, And then on the right side, you see that similarity. Interestingly, at the Zenith of the bubble in 2000, TMT stocks accounted for about 40 percent of total market cap. The same was true last year. Okay, over here, historically massive retail investor buying occurs prior to Major Market tops that are Then followed by large bear markets, and the latest retail frenzy occurred in 2019 and 2020..

this is very similar to what happened in the 2000s recession and then the subsequent 2000s crash. and they talk about this decoupling between no new and old economy stocks temporarily during the initial 2000 to 2002 Bear Market as it became clear that the U.S economy was in a major downturn. Basically everything ended up rotating down and they believe that today we see a lot of those similarities in other words, non-tmt technology, media, telecom stocks and TMT stocks first decoupling and then basically everything crashing. So let me make that clear in English they're basically saying in the.com Crash first you saw TMT stocks fall and then everything fell and they think that's the same thing that's actually happening this time is First you've seen a crash in a lot of SAS companies and tech companies and the next leg down is basically the S P 500 Because the same thing that happened in the.com Crash is going to happen now that the Spy is preparing for a massive leg lower and this is a very large warning, they make another correlation and say that there was a correlation between stocks and bonds and basically usually what you find is that in early January until October 2000, the S P 500 exhibited a negative relationship with 10-year treasury yields.

In other words, Stocks up yields down and that negative correlation was still exists today, but is weaker in 2000 than it is today. And that's probably because we have a substantial set of inflation today. However, what ended up happening was in the first phase of the market, you had a negative correlation. Let me just say this in English to simplify this.

Okay, so basically the first phase of the crash in the.com Era yields up stocks down. In the second phase, you actually had yields up stocks up and that was seen or yields down stocks down. So you had a correlation. Positive correlation means they're going in the same direction, yields up stocks up, yields down stocks down.

That's positive, right? Negative is the opposite. And what they're saying is at first we had a negative correlation, and then we went to a positive correlation as the crash worsened. Well, guess what's happening today, folks. We were negatively correlated, yields up stocks plummeted.

Now we're turning positive, yields up socks up. That is actually what they're saying. A massive red flag and potentially a sign of a massive crash to come. They also talk about how profits often lead employment.

They talk about this idea of basically employment being a lagging indicator. Look, we've known that employment was a lagging indicator forever. I've regularly talked about it even as early as January of 2022, and it was actually one of my reasons for selling that the conditions of a wage price spiral existed in January of 2022. They don't exist today.

That's good, but it takes a while for all of that information to show up in data anyway. Uh, so that's how they see similarities. So they see massive similarities in the correlation of bonds in the peak of TMT and uh in employment. They see very, very similar, large similarities to 2001 and They think we shouldn't be focused on a 2008 style crash.

We should actually be looking at an S P 500 bear Market just like in the 2001 crash. So big warning. Now, they do give us some differences. They say that even though there are massive similarities to 2001, obviously today, the genie of inflation is out of the bottle and it might be very, very difficult to put the genie of inflation back in the bottle.

Uh. and so they make some arguments here that we've had this massive rise in productivity uh, during Uh during the.com era, but today we actually have a massive plummet in productivity. Now, some of that could be explained Away by uh, you know, the changes of the pandemic leading to sort of this misallocation of resources and a lack of prime of productivity. However, the employment costs index today has basically looked much more wage priced spirally than what we had in the.com Era Now let me just explain.

The left side of this chart is 2001. The right side is today I Wrote the words higher triangle. Let me explain that in English Well, first, that means higher Delta and in English that means stuff is going much faster today than it did back in O1. In other words, stuff getting worse today, faster than it did back then.

We are accelerating faster today than it was back then right higher Delta higher rate of change. The derivative is higher whatever. Same thing for labor costs. although it does look like the employment cost index has peaked.

Now we're waiting for labor costs to Peak and the leading indicators are that they are. but these are actually differences that don't make today more bullish. They actually say what this report is trying to say is, look, the similarities are bad news for the S P 500. the stuff that's actually different today is just more bad news for the S P 500.

Okay, so here's the bottom line. The cause of the bear Market of 2000 to 2002 was a large drop in corporate profits. The same will probably be true in coming months. So when we talk about a hard or soft Landing Our bias is that the economic recession in the U.S will likely be a mild one.

However, the market will experience a large drop. Look at the confidence they have in this: I Don't know if they're just like a frustrated bear, but they're really confident that even a small decline in GDP will lead to a massive compression of the S P 500. during the 2001 recession, real GDP barely contracted and household spending was actually positive. Interestingly, the measure of real private demand then was almost as weak as it is today.

Even though you barely had contraction, you ended up seeing a massive collapse in prices because earnings per share were down about 60 percent. And so they say in a nutshell, the S P 500 dropped 50 in 2000 to 2001, even though nominal GDP never contracted. That basically means the recession was so shallow it took even like one or two percent inflation to make it negative, right? The latter will likely suffer considerably more than the former. And so what does that mean? Corporate profits are likely going to substantially suffer, and we're going to see a massive margin squeeze at S P 500 Companies.

In other words, companies are going to take it in the margin. And the problem here is that if consumers accept higher prices so that companies can protect their margins well, then inflation goes up and stocks go down. If companies push back against higher prices, so inflation goes down, then stocks go down because earnings go down. And so even though they think bond yields are going to roll over and bond yields will come down, which will be good for the real estate market, they think that S.

P 500 companies operating EPS will contract by 21 from a year ago, and the S P 500 risks a 50 percent Decline And so this Equity bear Market will likely be drawn out, much like the 2000 to 2002 period. And in short, despite the healthy balance of consumer balance sheets and a robust banking system, you are going to see a profit margin squeeze that will destroy S P 500 companies by about 50 percent, and we're facing a major sell-off ahead of us in global stocks and another spike in trade weighted US dollar. Basically the Emerging Market outperformance still has another leg down. That's basically what they're saying.

So what says Kevin says this is exactly why I think the S P 500 is a bad investment hashtag not personalized Financial Advice: It's also exactly why I Think Pricing Power PP Stocks are a very good investment right now. I Think that pricing Power stocks companies that actually have the ability to maintain the strongest margins and even in the face of price Cuts can expand revenue and continue to show EPS growth I Believe these stocks will perform the best. This is why I think personally investing in the S P 500 is a bad idea right now and I think focusing on pricing power stocks is the best idea because they've sold off the most and in my opinion have the most resilience in the face of this uh, basically margin crush the taking it in the margin that we're expecting here. This piece in my opinion is basically and this.

this just came out a couple days ago here. Uh is is really just a selling piece for the idea that get out of the S P 500, find yourself some pricing Power Stocks. Uh and like I think maybe they're being a little bit more bearish than they need to be because I personally think still think we're in a Nike Swoosh style recovery. but uh, so I'm not as bearish as these folks.

But you know, if we're going to look at the S P 500 which is heavily weighted too yes, some technology, but also substantially Staples Yeah, I think Staples are going to take it in the margin. Hardcore retail Staples restaurants, hotels, they're all going to take you to the margin. So yeah, I'd be very, very concerned for that and I completely agree. This is the kind of stuff we also talk about in the course member live streams.

When we do our fundamental analyzes, we look for large PPS Like we want to find large pricing power stocks. that's very, very important. Buy take, see what you think. Leave a comment down below.