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There folks uh gotta talk about selling everything getting out of this market the wall of worry all those sorts of things in this video here today i want to discuss a bunch and put it all into one video first thing i want to do is actually react to this video i’m on recession watch this came out a few hours ago and i thought it was quite interesting fast after
That red hot inflation report continue yield reaching two percent the first time in more than two years and k more than saint louis fed president jim bullard is in favor of a more aggressive rate hike path which push markets down another leg let’s get some perspective on both bonds rates and stocks we’re joined now by our friends sri kumar president of street kumar
Global strategies and ryan dietrich he is chief market strategist at lp by the way market’s just about to close here nasdaq’s down over 2.6 so it got a lot worse since this video came out financial research sri it’s great to have you back on uh let’s talk about what something steve leesman just hit on in your mind how much of future rate hikes are are built into the
Markets both stocks and bonds right now the reason somebody asked a question like that is essentially so you can understand like um if there’s more rate hikes in the market maybe the the market sells off a bunch because that let’s say the market’s only expecting um you know and i i think it’s even bad to say this amount of rate hikes because the thing is the fed
Can raise more than a quarter percentage each time right everybody thinks a quarter point is what the fed’s going to raise each time they could easily do a half a point each time as well so i think it’s almost silly i think it should always be like well what what percentage do you think we’re at at the end of the year brian great to be back with you i will begin
By saying there is no saying how much the interest rates are going to increase i would say to you it could be four six eight times from where we are and the reason is it’s effective that might be the new record now this gentleman is saying eight times for fed increases holy smoking has been so far behind the curve in missing the inflation that they have to make
Up for it so my expectation is whether they raise 25 basis points or 50 basis points on march 6 16 it is not going to be sufficient i would ask the question with inflation being red-hot what prevented the fed yesterday from having an emergency meeting stopping bond purchases by the way bonds are still being bought this month the money supply is being increased
They are buying mortgage-backed securities pushing up home prices as president biden is worried about home prices being out of reach this is a federal reserve which is not in touch with reality uh brian so it’s hard to say but the most important point i would say is the bottom line uh a few minutes ago you had the screen showing the 2 to 10 yield curve and that
Narrowed to 40 basis points last night as recently as last friday it was 60 basis points we are heading toward inversion in a hurry i think i am on in on recession watch which i have been for the last six months but now it becomes more urgent wow ryan that’s that’s the thing with the fed right you talk about oh you’re on recession watch but then if the fed’s
Gonna raise rates a lot of folks feel there’s a there’s a high probability of a recession or a major recession if the fed raises rates a bunch so the fed yes they they’ve been lagging on this whole situation i think we all know this they should have been already raising rates however that’s the past the past of the past and so the question is moving forward what’s
The best course of action in a situation like this in just one second i’ve got to follow up with sri on that because some of the smartest people i talk to like yourself sri and others will kind of liken what’s going on now too and i won’t quote who said this to me they said the fed is like the arsonist now trying to put out the house that they lit on fire money
I like that i i like that i i will say i do like that is up 40 qe is still going on rates got cut to a level that we now know they did not need to be cut at does the fed have the ability to put out this fire i mean you can make the argument that inflation is caused by two things the work the problem is the whole house is engulfed now in the flames and it’s like
Okay if the whole house is engulfed is it a little too late reopening at the same time we know that but also are fed and to be fair other central banks all raising their balance sheets cutting rates because and i guess i’ll give them a break on this tree they fundamentally underestimated what was going to happen during the pandemic not realizing that consumer
Demand would go up not down very true i love your analogy brian let me begin by saying that not only do i like it the fed is trying to put out the fire with gasoline so that is essentially what is happening so the fire is going to burn even brighter and bigger what is going to happen your second part of your question can the fed control it no they cannot control
It without pushing the economy into a recession if they raise rates even three or four times forget about six or seven times brian the economy is going to go into a recession just all right so let me push back a little bit there okay this gentleman says if if the fed raises rates even three or four times it’s going to push the economy into a recession okay um i
Think that’s i think that’s being a little aggressive like everybody thinks the only way you can have a good economy is by the fed having interest rates near zero and that’s just not accurate um we we can have a healthy economy and have rates at two three four percent now if you’re talking about ten percent that’s a whole different discussion right um that yeah
It might be harder to have a good economy in that situation but we’ve raised rates um just a few years ago we were raising rates and we were in a rate hike cycle okay and the overall economy stayed fine so i think we give the fed a little too much credit and we think like the only way the only way we can have a good economy is if the fed’s pumping money out there
And as if uh interest rates are at zero or near zero and i just don’t think that’s accurate i think we can have two percent three percent fed funds rate and i think we can have a normal economy and a good economy so i think just people get way too caught up into the oh my gosh it’s the fed has to be the superhero and if it’s not the fed then we’re done we’re we’re
Finished we can’t have we’re going to have high under unemployment we’re going to have a disaster of economy and i just don’t see it like that at all to be honest is the us economy can be strong and can have rates at a two three four percent president biden and democrats are going into the midterm elections ryan there’s nobody out there that’s got more historical
Context than you i lift your stuff all the time by the way for the rbi so thank you on that this is a market that’s facing a multi-headed hydra i mean you’ve got inflation you’ve got the risk of a fed mistake you’ve got housing which may or may not slow down you’ve got geopolitics russia china et cetera i guess maybe do we find some comfort in the fact that you
Know the dow is only down what three percent this year stocks have held up relatively well what do you see happening going forward good morning brian and i liked your dad joke earlier i hope everybody did but i thought that was pretty good um but but you’re right i mean stocks are up this week okay um you know since the low a couple mondays ago yes we’re kind
Of consolidating i know everyone’s worried about yesterday’s reaction to two-year yields big deal but you know s p went up to the 50-day moving average and sold off small caps up to that bottom of the range they were in and kind of sold off so it kind of makes sense i mean look at the economist cover brian it just came out this week it’s talking about like what
To do after the market crash i mean cinema is extremely lopsided and very worried we just mentioned a lot of concerns that are out there but you know what the consumer is still really strong yes come like chipotle they up their prices four percent people are still buying the burritos right i mean eventually there’s a breaking point with that but consumers strong
And earnings are coming over 30 percent year over year those are some real positives still brian so we’re a little more optimistic i think here that they’re they’re still we’re still in a bull market we think and the economy is still strong and we’re going to avoid a recession this year because the consumer’s so strong in our opinion interesting okay no one watches
Shepherd smith come on man um so i want to share some something here i got for you guys um but let me just finish off my thoughts on on that whole video there you know i think this is why there’s always this uh you know this underbelly of like end the fed and things like that because people believe they are so in control of everything and they believe their their
What controls uh basically you know creating stock market bubbles or creating real estate bubbles or creating overall economic bubbles whatever it is right and then they’re looked at as if they raise rates they’re going to cause the entire economy to go into recession which causes high unemployment which causes job losses which causes people to become dependent
Upon the government to get through that time until they get jobs again and until the fed essentially says oh we’re going to pump money in the economy again okay and so this is what is so frustrating to a lot of folks out there and i think that’s where the whole end the fed thing really comes from is this overall frustration that the fed holds all the power and
They dictate whether we’re going to have a recession or not a recession or whether we’re going to have a bubble or not a bubble and all these sorts of things right and so uh the fed is absolutely uh you know a force to be reckoned with and they’re absolutely very very powerful i just don’t think you know there’s a there’s a thought process out there from a lot of
Folks and i’ve heard this that the if the fed raises rates we’re going to recession if the fed raises rate that means the stock market’s going to crash or go down in a significant manner right and i just don’t see it like that to be quite honest i think um i think overall what really comes down to at the end of the day is our business is hiring do people have good
Jobs and usually is inflation at a acceptable level we always know there’s going to be inflation out there but is it at an acceptable level right now it’s not an acceptable level right now in terms of the fed um you know uh pumping money out there and things like that buying bonds you know yeah they should have already been pulling back a while ago they should have
Already been raising rates but that’s you know looking in hindsight now right and so when i look at this from my perspective i think it’s i think we can definitely have a two or three percent fed funds rate in having an overall decent economy in the united states of america it doesn’t have to be booming but we can have an acceptable economy with low unemployment
It’s you know i think this um you know it’s frustrating for me to kind of listen to folks and they think like literally the only way we can have anything positive in the stock market in the real estate market and anything is that the fed has rates at zero or near zero and it’s like it doesn’t really work like that okay so that that’s but i can understand the concept
Of kind of thinking that way though because you know a lot of people have gotten into this ultra belief in the fed and that they are the superhero or the villain and they’re constantly one of those two things okay now next thing i want to talk about here selling everything you know i even saw a few comments you know from from folks in the last video like oh man you
Know i’m just going to get out of this market there’s too much going on right now right you have one is the fed was the fed going to do how many times they raise in rates what how much are they going to raise rates each time there’s that whole worry it’s like they want to be cast as a super hero and they want to be cast as a villain all at the same time it’s it’s
Pretty remarkable actually okay uh you have obviously the russia situation what’s going to happen with russia and ukraine which is a huge worry right now for the markets and that’s kind of causing overall global instability i would call it and that’s causing us into a situation where uh oil could be affected natural gas could be affected pricing on those could
Be affected right and uh russia might not mind if if prices go up for all those things right they cause a lot of worries prices go up hmm i could probably do a whole dedicated video to that if i want it right you have the inflation warriors which inflation still is coming in worse than anticipated cpi cp lie it’s really cp lie right uh cp lie came in uh you know
Above what everybody was anticipating a lot of those numbers were just complete bs i mean if you really look at those numbers like the rent number come on man every other publication you look at that’s that’s uh tracking what rents or have been going up you know they all have them skyrocketing and then in this situation uh the cp lie shows a rent you know barely up
Like give me a break right a lot of those numbers are just complete bs in my opinion and a lot of people’s opinion always know my dad said don’t believe any of the numbers the government puts out and i can understand why it says that when i look at these numbers i’m like come on man so inflation’s going crazy right we have that going on we have a worker shortage
In in this country i mean just about any job out there has workers i don’t care if you’re talking about truck drivers i don’t care if you’re talking about um you know service workers of any kind i don’t care if you’re talking about restaurant workers or fast food like we have a worker shortage in this country in mass right now and you go pretty much anywhere in
There they’re hiring so we have a worker shortage that’s not getting solved anytime soon by the way uh you have amazon and meta and meta report weak guidance you have supply chains are still messy although i will say we’ve heard on several conference calls now that supply chain is getting a little better so that one is starting to flip that’s at least some good
News okay you have no stimulus in 22 and you have companies that are probably going to have low amount of buybacks because of the wall of worry right and so what this is is this is like the great wall of china of worry in front of us right and it’s built brick by brick and we are just looking at this massive and by the way there’s more than this i just wanted to
Cover the big stuff right there’s even more than this and so we have this massive wall of worry and people are are you know saying hey um i i think about just selling everything get out of this market because there’s too much going on there’s this insane overwhelming amount of stuff we have to deal with and like what happens if russia invades ukraine and what happens
If the fed raises uh rates to you know the fed funds rate to two percent by this time next year or three percent by this time next year right and inflation’s going crazy and so you have everybody kind of you know uh thinking like man maybe i’ll just cash out and dip out of this market and things like that right well first thing to understand is when you’re in a
Wall of worry it’s something that holds back the market and that’s what’s holding back the market right now right and we know the russell got hit the worst out of out of everything but the market you know is how can can’t go up right now and the reason the market can’t go up even though companies if you listen to what what’s going on with companies okay you know
Almost all the big companies have already imported earnings we just got small cap seasons still going on okay every single big company out there that i pretty much track is expecting revenue to be up and up quite nicely in 22 versus what they had in 21. almost every company on track is expecting net income to be better eps to be better in 22 than in 21 okay but
With that being said we’re in this situation where people are still scared despite all these companies telling you that their revenues are likely going to be up in 22 and their net income is going to likely be up in 22 right and so that’s causing this wall of worry that’s causing this this market to not be able to go up because there’s all these external things
To worry about what’s russia going to do what’s the fed going to do what’s inflation is it ever going to start coming down no keep in mind although that big wall of worry i gave you right now which is one of the biggest wall of worries i’ve seen since i’ve been in the market and we always go through these time periods essentially okay remember all these things
Are very short-term in nature things right the russia ukraine thing uh whether they invade or don’t invade you know that’s a short-term thing right inflation um you know what happens when inflation ticks the other way when does that happen first off it could be in a month from now could be three months or not six months from now 12 months from now one thing i know
100 for sure is inflation will start ticking down and it’s just a matter of question of like what month does it start taking down so that’s it that’s a short-term thing worker shortages that’s not going to fix itself outside of a massive global recession where you know jobs were lost and so worker you know there were more free workers right the the amazon and meta
Week guidance those companies are are just amazing and so don’t be surprised if those flip from kind of having weak guidance for quarters and things like that to also in the back half of the year flipping to positive you know much more bullish numbers okay the supply chain mess is already starting to get fixed and we’ve heard this from company after company saying
Basically things are getting a little better okay the no stimulus that’s not going to fix itself buybacks are low but guess what as soon as there’s a little more visibility and we get away from this wall of worry guess what companies are going to start buying back their shares left and right and so when you start to look at the big wall of worry in front of us you
Start to realize all this stuff is pretty much shorter term stuff that’s gonna and you’re gonna find that consistently um with the markets whenever we get into a wall of worry it’s it’s all stuff that’s ended up being short term even if we go back to what happened in 2020 with rona right a once in a hundred year pandemic coming out of nowhere to slap us um even
That was a short-term thing right and so all these things are are more short term in nature and so you got to focus on on kind of like you are you making a short term decision try to get out of the market and then you know get back in uh those are tough those are really really tough things to do and it’s like when do you get back in and the thing is when you’re
In this wall of worry you gotta understand the more insanely high the wall of worry gets the more unrealistic it becomes for that wall of worry to get worse and worse and worse and eventually what happens is the wall of worry starts to get torn down and the bricks start falling and everything starts deteriorating and next thing you know you can see out there and
There’s no wall anymore right and then eventually the wall starts getting built up again and then you got a big wall of worry again okay but what i can tell you is this big of a wall of worry is not normal and um the good news is when it when it comes to this is eventually these bricks are going to start falling and then everything’s going to go away and then the
Sun’s going to come out and then guess what the market’s going to make some pretty epic moves and there’s going to be some stocks that make some insane moves up as soon as the wall of work starts to get destroyed brick by brick by brick okay and so that’s why i just continue to stay focused on the long term not trying to time this stuff out and be like oh man the
Russia situation what’s going to happen here let me get out uh you know all the fed i got to get out you know at the name of it at the end of the day for me i stay invested i if there’s great deals that i in stocks i love over the coming years i buy those stocks and i call it a day essentially and all this other stuff i pay attention to and i watch it and it’s
It’s entertaining but as far as it affects the markets in the short term and it causes stocks to go down it causes stocks to not go up but at the end of the day like you know the sun comes out again and next thing you know the the market prospers the russell prospers small caps prosper mid caps prosper and then large capsule prosper again okay and we’re in this
Cycle right now where you know the a lot of the large are kind of getting hit harder and uh you see the russell actually on many days recently it’s starting to outperform to the upside and actually doing better on the downside than the other indexes which is quite interesting kind of tell in the market right now that we have going on hope you guys enjoyed this
Video as always let me know what you’re doing out there in the market make sure to subscribe the channel if you’re not already we got the massive valentine’s day sale going for the private stock group financial fortress right now you want to check that out why that deal is going on before it ends check out pinned comment down there and maybe get some free stocks
From mumu as well i’ll have that as pin comment also much love and have a great day
Transcribed from video
SELLING EVERYTHING. THERE IS TOO MUCH DRAMA ATM By Financial Education