Goldman Sach's Market Crash Prediction | When & How Much.

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kevin here goldman sachs thinks the

market could roll over and they give

three scenarios

they start with number one what if

inflation is not transitory this is

obviously hotly debated

half of us in my audience tend to

believe that inflation is here to stay

and the other half of us tend to believe

that inflation is transitory it's kind

of as bad

as being as picking aside in terms of

democrat or republican like you either

believe it or you don't

and you're on the totally opposite side

of the spectrum

usually it's it's pretty incredible it's

like a new label you're an inflationist

or you're not

all right folks uh what they mention

here is that if inflation is

not transitory the big danger will be

defending

profit margins folks there are plenty of

companies right now that are working to

defend their profit margins

specifically because of inflation being

here now

we know that inflation is here now there

is no there's no doubting

inflation is here now prices have gone

up

it has become more expensive to ship

there are companies slowing down the

innovation

process because of a lack of microchips

with supply chain issues end phase is a

perfect example of this

which i think is artificially putting a

lid on the growth of a company like

enface which could create for outsized

returns in the future

but anyway you've got an incredible

increase of prices that we've seen

recently not just in assets but in

commodities and individual goods

although commodities are recently

rolling over as well lumber's plummeting

which

kind of expected that commodities would

roll over but anyway

let's focus on this if we get inflation

to inflect downwards hey great

now that pressure on companies margins

or their bottom line goes away

and we're good if inflation keeps going

up prices are going to have to go up and

that's going to lead people to

spend less on products on goods and

services potentially

at the same time as leading to less

profit from companies

now in the short term higher inflation

expectations could lead people to spend

more to try to avoid those long-term

inflationary aspects

which just compound short-term supply

chain issues it's a disaster basically

so bottom line here is if inflation is

not

transitory you probably don't want to

invest in companies that are going to

suffer

from supply chain issues or their

margins going down

and goldman sachs believes the best

companies to invest in

are or industries to invest in are

industries like healthcare

energy real estate and consumer staples

because they believe that these

outperform in an inflationary

environment they say that these are

industries with

pricing power now the second thing is

and this is where they

also give us an idea as to how much they

actually think the market might roll

over

goldman sachs forecasts that the 10-year

treasury will go up to 1.9

by the end of the year it's currently

sitting around 1.5 percent

and it's been trending down that

downward trend is actually

very very important because the more it

trends down the less we actually think

we're going to see

rates go up faster to combat higher

inflation

and again the trend has been down let's

look at the trend year to date to get a

visual of this

and that would be right here there we go

this is the year-to-date visualization

uh for 10-year treasuries and you can

see we've got a solid

downtrend here from peaks of around 1.7

1.72

down to about 1.48 now we've actually

fallen as low as 1.45 recently

1.38 very very briefly we fell

but during this period of time right

here where the 10 years went up

all you have to do is overlay any kind

of tech stocks starting around

february 19th when the market started

realizing oh my gosh treasuries are

going up

and you basically see tech stocks go

down as fast as 10-year treasuries

went up so yeah you want to pay

attention to this but right now the

trend is

not in favor of tech selling off the

10-year trend is actually

in favor of tech and in favor of lower

rates and in favor of

less inflation coming than expected

in the future months some sort of

inflection point to the downside

expected which is good

but then going back to goldman here

goldman mentions

what if interest rates fall or rise more

than expected

and the answer here is they believe

that if rates are to overshoot goldman's

forecast of 1.9

and finish the year at 2.5 they believe

the s p

500 could potentially drop 17

in my opinion this leads to the

potential for november and december pain

in the market

and the s p 500 rolling over in this

kind of scenario

in my opinion has approximately a 10

chance totally my opinion

it is not something you want to trade

off and if you lose money

it's your fault don't sue me bro i am a

dude sitting here with a green rubber

straw in his coffee mug and a runescape

a fire logo on it and also running for

governor in california

so take it for what it's worth okay now

they do mention well obviously the

inverse would be true here is

if we do not see the 10-year inflect up

to

2.5 by the end of the year then we would

expect potentially the s p to continue

to roll on

now there is a middle ground here where

the s p potentially stays flat

now why would the s p 500 stay flat in

my opinion

it could stay flat if tech and tech

stocks and consumer discretionaries

rotate up so you get tech and consumer

discretionary rotate up

but at the same time you end up getting

recovery stocks

stocks rotating down which recovery

stocks have been the big reason the s p

500 has been going up

the beginning half of the year it's not

just recoveries though it's industrials

right it's it's

okay some of the consumer cyclicals real

estate related stocks

these stocks with the exception of the

tech ones like cylindrican these

companies have been doing very very well

and they've been offsetting that tech

decline but if you get that rotation

back and you get more of a sell-off in

recovery it's possible you could have

either a slow growth

or no growth s p 500 for the year

and tech ends up doing very well so uh

probably the safest place to be is just

in the middle

which is s p 500 index fund if you want

to take a

side if you believe inflation is coming

you

probably want to be in those consumer

cyclicals the real estate the healthcare

right

if you don't believe it's coming and you

think the 10-year treasury will end

below 2.5 at the end of this year

you probably want to be in tech and i

personally think tech

is here for at least the next four

months now i

am going to be cautious about this

potential for november december pain

because i think this is when we're going

to start pricing in q1

and q2 of 2022

earnings q1 and q2 earnings in 2021

start two are gonna be really

interesting because they're gonna do

year-over-year comparisons

to 2021 and the reason that's going to

be a problem comparing 2022 to 2021

is i expect 2021 numbers to have

created such massive profits and such

massive

growth especially for tech companies

that's going to be really hard to beat

those numbers in 2022

i think the numbers might be slightly or

possibly even rotate down

so we could see some shrinkage in

companies especially tech companies in

the first

half of next year which in my opinion

means

you probably if you've got options on

tech you probably want to take advantage

of a rally sometime between now and

three months from now

get out of your options get into shares

and then ride the roller coaster

some thoughts okay now another one

scenario number three

what if tax reform doesn't pass well we

know

that joe biden has proposals to increase

the not only a capital gains tax on

individuals

making more than a million dollars a

year but also increasing the top

rate to 39.6 for those millionaires

that would also apply to dividends and

there's also talk about a corporate

tax gains hike from 21 to 20

25 so far we don't know if biden's

actually going to be able to get this

in now if biden gets the soft

infrastructure plan in with tax hikes

solely using democrats which a lot of

folks believe they're going to use

budget reconciliation they're going to

squeeze this through they're going to

get some tax hikes through

then yeah we might see some neutral

pressure on the stock market because i

think a lot of the tax hikes

that were proposed by joe biden are

already priced in

because joe biden has made these plans

very very clear over the last few months

starting especially in january february

and that's kind of helped lead the stock

market to push down

on tech and high growth stocks however

if for some reason these tax plans do

not end up going through

they just don't end up getting the votes

they don't get the full 50 votes with

democrats somebody like

joe manchin or kirsten cinema say you

know what i don't want these tax changes

then goldman sachs and this is an

interesting estimate goldman sachs

believes that if we don't end up having

the tax reform

we could end up seeing stocks or the s p

500 that is

bump up by 5 which is kind of cool to

see them

value the tax reform at about

five percent on the s p 500. so pay

specific attention to the likelihood of

joe manchin or kirsten cinema voting for

a soft or social infrastructure package

and that's very very important because

well clearly here

we know that if we don't get tax

increases we would expect to see some

kind of bump

in tech uh specifically tech as well

because tax

tends to have larger gains uh and as a

result you

tend to have higher uh uh higher gains

baked in to people's uh

to people's portfolios which means at

the end of the year

you could end up seeing december pain if

tax rates do go up

because people might want to dump and

realize some of their gains this year

because selling this year would almost

create a little bit of a tax coupon for

them

because you'd be selling stocks at a

lower tax rate so

what we got here is uh the three things

consolidated

what if inflation is not transitory well

if inflation is not transitory

guess when we're going to know that

inflation is not transitory by

november to december i personally think

we're going to see the inflection point

in september and october that's we're

going to see the inflection point

china's already seeing the inflection

point downwards bank of england's

already seeing the inflection point

downwards we expect the inflection point

to come

if it doesn't come by november december

it's going to be a problem

what if interest rates go up more than

expected and we end up overshooting the

tenure at the end of the year

november december payne what if tax

reform ends up going through

and we don't get the support boom we end

up getting december

pain as people dump so you could

potentially set up for a rollover

towards the end of the year based on

these three

particular items to watch in the market

so as always

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you updated on exactly what's happening

with these three different things you

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in the next one