A Major Economic Indicator JUST FLIPPED **Spoiler: BAD**

Hey everyone, me Kevin here. In this

video, we're going to cover a bearish

indicator that just turned from yellow

to red. We're going to talk about where

we sit even after the April recovery.

What this indicator usually for stalls,

what it could mean, and I want to give

you a quick update on some of the Trump

tariff numbers. Obviously, we're all

aligning and wait to see what happens

tomorrow with the Chinese negotiation.

My guess is Donald Trump is going to pit

it at a fantastic success and that we

are close to a deal. Well, the reality

is likely that Chinese negotiations are

going to take just as long as they did

in 2018. As history shows, negotiations

took so long in 2018 and throughout

2019, we never actually got a trade

deal. We got a Fed bailout at the end of

2018. Then COVID hit and we still didn't

have a deal and then we got another Fed

bailout. So, in other words, it seems

like we're twice as likely to get a Fed

bailout than we are to get a deal with

China. But with that said, I want to

talk about this indicator because as

much as there's a lot of enthusiasm and

hope coming back into the stock market,

a lot of folks are wondering what's

driving this rally. There are a few

things driving the rally, and it's

certainly not the yellow indicator that

has just turned red. One of the things

that could be driving the rally, at

least per the doomers over at Duneberg,

is quote hope rather than fundamentals.

and that a quote reckoning is coming.

Part of that, they say, is driven by the

enthusiasm compounded by about $240

billion of corporate buybacks that were

announced, which is really good and

comes after Q1. So, it makes sense that

we're seeing that now outside of a

blackout period. And again, very

supportive of an equity rally that's

potentially driven by hope of a deal

with China. We'll see what happens. But

what is this indicator and is it

something that we should really care

about because hey maybe we will get

Chinese tariffs down from uh 145% to 60%

or 80% or who knows TBD. So far we've

got one trade deal in the bag with a

surplus nation and now the question is

what kind of certainty are we going to

get going forward? Well what we have is

a bearish indicator from Bloomberg

Intelligence's proprietary model they

call it. What they did is they went back

to

1996 and they found that the S&P 500 has

averaged a 5.9% annualized loss during

the last seven times this indicator has

turned red. And I pull up this indicator

in just a moment. Keep in mind when you

see yellow, yellow is actually a good

thing as well. Typically, yellow on an

annualized basis can give you anywhere

up to uh a 13 to 20 plus% return. On a

green basis, you could get even more

than that. Sometimes as much as a 16%

annual return or more. So, think about

yellow as like green and green is really

green. Because when I first saw the

model, I'm like, "Oh, okay." Like, you

know, yellow's probably like not that

great, right? Now, yellow is still

smoking great and it makes sense because

like 2004, 5, 6, 7, yellow. Uh, you

know, most of the period here, uh,

between 2010 and 2019, with the

exception of 15, 16, 17 here were

yellow. Uh, of course, the Nike swoosh

recovery from 2022 is perfectly

demonstrated right here. Look at that

beautiful Nike swoosh. If only somebody

told us this beautiful Nike swoosh was

coming. Oh, wait. I did every single day

over here. And people told me that I was

a perma bull and I could never be

bullish. Uh but that's okay. You know,

people have uh opinions that change like

a light switch. That said, you could see

very very aggressive riskon rewards

after uh or returns which are also

rewarding after COVID uh or uh basically

around Federal Reserve U-turns, right?

Uh so really exciting times in markets

when the Federal Reserve is bailing out

markets. Uh and then less so you know

very quick Uturn over here in 2022 when

the Federal Reserve started getting

aggressive right. Uh you also got this

in the mid90s soft landing which is

interesting because that mid90s soft

landing is when they started this

indicator. Uh, and so it'd be

fascinating to see, hey, could we go

into another green regime here after

whatever the heck it is that we're going

to go through, but green is a glorious

time to invest. Uh, and so where we sat

uh since about the since June of 2023

was actually in this yellow territory

and this is just turned to red. Now red

is associated with negative annualized

returns of 5.9 to 7.6% 6% depending on

if you're looking at the S&P market cap

or equal weighted

uh and uh the equal weighted fell more

probably because you know usually the

top components of the S&P 500 are a

little bit more resilient. Uh in

addition to that you have uh an

expectation that over this next 6 months

you shouldn't expect almost any return

in the stock market when it turns red.

It just turned red in March and the

components of it are expected to stay

red for the duration of April. Though

not all the data is available yet to

work out the April data. This works.

They're using a combination of price to

book volume, the 200 day moving average,

year-over-year changes, EPS change

estimates, the changes in the money

supply. It basically tries to put

everything together. And most of the

components that are available so far

indicate that we will still be in the

red territory for April. And you know

again the forward returns for this are

flat at best and worst case scenario

quite well in the red. Now during the

times where this has been positive in

the past at least on a market cap basis

two out of the last three times that we

were red we had nominally green returns.

But during those two times, we had the

Federal Reserve bailing out markets.

That was December of 2018 and then the

COVID U-turn. So the signal wasn't

perfect during those times, probably

because of the suddeness of the Federal

Reserve intervention. And another time

you had a nominally green return was in

a period uh of of 2014 to

2016. Who knows? Not every single

indicator is perfect, but I think that's

really interesting because it's a tool

that suggests, hey, we're in a unique

period of time in the market where

usually we want to be maybe more

cautious when things turn red. And so

what I wanted to look at is how long we

usually get red. And so what I noticed

is we got red in the.com bubble

essentially until April or May or April

or March over here of 2003 which is when

the Federal Reserve bailed out markets.

It looks like we got red until uh about

February of 2009 which is exactly where

the Fed bailed out markets and then we

actually turned green to yellow.

Remember yellow is a really good thing

too.

uh we had this really brief odd period

here in '89 where we had a really short

period of time where things were red.

Not exactly sure now why that is, but

it's possible maybe we'll have the

conditions of the sort of the late 90s

though I think that's probably unlikely

uh given the conditions of the

employment market in the late 90s were

actually substantially improving whereas

when we look at say 27 weeks unemployed

in our employment market things were

actually rotating down. Now, who knows?

We don't necessarily have to have a

recession. Hopefully not because it

would be very bad for a lot of different

people. Losing jobs are terrible. Uh the

entire economy slows down. Everything

good service, everything's painful. But

you'll notice when when you start

pointing out where the Federal Reserve

bailouts are, uh in fact, we could just

do it together. you start noticing that

if you're in an environment where you're

not really close to a Fed bailout,

you're probably looking at an extended

period of red. And so, what I'm going to

provide here are various different uh

Federal Reserve bailouts. You actually

saw one right here, which is kind of a

unique period. That's one of the times

where we actually still saw gains. And

then, of course, you had a Federal

Reserve bailout over here at the

beginning of 2020. So, right about here.

So all of these periods of time where we

had uh red were oops that should be over

here that would be about March of 2009

February 2009 about right there. So you

see that most of the time where we go

from periods of red to yellow or green

it's because of a Federal Reserve

bailout. Now, that was not true in 2022

to 2023, which I also think is very

interesting. Okay, I'm not sure why it

gave me an octagon or whatever that is.

Hexagon, pentagon, I don't know. I

didn't count the sides, but I just

wanted an arrow. There we go. So, now

what's interesting is let's use an

orange one for where we did not have

Federal Reserve support and we had

fantastic returns afterwards. mid 2023

was a period where we went from red to

again I call this a version of green the

yellow uh without the Federal Reserve

you know if anything it was in the face

of the Federal Reserve after sort of the

rolling recession or whatever you'd say

we also did go to yellow in 2016

uh after this this sideways period

between 1516 uh to 17 over here you can

see this was quite an extended period of

time and this was an extended period of

pain as Well, and so absent a Federal

bailout, there's really like a Federal

Reserve bailout. There's only one time

this indicator has really been short,

right? So, let's get rid of the Fed

bailouts. Fed bailout here. Get rid of

this as a Fed bailout. You know, we'll

even leave the arrows. Let's look for

when have we had a short period of red

with no Federal Reserve bailout. And

there's only been one time this period,

this indicator has been red and we went

green immediately after without the

Federal Reserve bailing us out. Maybe we

could make this happen again. It seems

like historically and statistically when

this happens we are in for a long period

of

red because over here 2015 161 17

sideways returns no Fed bailout over

here 18 months of red no Fed bailout.

Those are extended periods of time

without the Federal Reserve intervening.

The short periods of time usually uh or

the end of the periods are usually when

you have a Federal Reserve bailout. So

in other words, we have four cases here

where the Federal Reserve bailed out the

red. We have two cases where markets

returned back to yellow only after 18

months to 24 months of red. And we only

have one example where we had a very

very little short period of time

interrupting our green stock market

momentum. So is there a chance that this

time will be different from all of the

other like the vast majority of the

cases here that the market will keep

going up in the face of no Federal

Reserve bill. Of course, anything is

possible. But at least based on this as

an indicator for whatever indicator it

could be, it does suggest caution. And

frankly, it kind of makes sense. It

makes sense that in a period of FOMO by

the dipping on optimism over trade

deals, which so far have been pretty

lame, uh, the only one that we've had.

In addition to corporate stock buybacks

on the back of Q1 frontunning

earnings and the potential supply chain

reckoning that we would expect to start

feeling by uh let's call it June, end of

May, July doesn't seem like we should

really be expecting substantial stock

market returns going forward from this

point. However, for the last two weeks,

I have been advocating using trailing

stops to everybody in the Meet Kevin

membership. Uh, and while I can't give

you personalized financial advice, I can

say that these trailing stops have

actually been killing it. Uh, and we've

been able to see a ride up with that

downside protection of a trailing stop.

Anyway, if you want to learn more about

House Hack, my real estate startup, we

have an earnings call coming up Sunday

morning at 8 a.m. Look forward to seeing

you there. You want to learn more about

the Meet Kevin membership, join us. Come

over to meet me Kevin.com. Try it out

for 30 days. See if it works for you.

see if it helps you make some money. And

folks, we'll see you in the next video.

Thanks again. Goodbye and good luck. Why

not advertise these things that you told

us here? I feel like nobody else knows

about this. We'll we'll try a little

advertising and see how it goes.

Congratulations, man. You have done so

much. People love you. People look up to

you. Kevin Pra there, financial analyst

and YouTuber. Meet Kevin. Always great

to get your take.