A Massive, *SUDDEN* Market U-Turn | The Coming -20.5%.

wow now this is a big U-turn there's

this Investment Bank that's pretty well

known on Wall Street and they have a new

call that I think is worth analyzing

some details to but rather than only

give this perspective what I'm going to

do is I'm going to give you this

perspective but then I'm going to

balance it with the opposite point of

view from another Investment Bank so

that way we can kind of try to see okay

who's got some arguments here let's take

a look at this because some of the

takeaways here are absolutely

phenomenally interesting for what's

going on on the market and what to

expect going forward Beyond of course

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oh boy take a look at this particular

report over here this one is a little

overwhelming

when you first look at it but don't

worry I'm gonna break it down for you so

first of all the their first argument is

that the FED has really rushed to raise

rates they call this the FED being in a

hurry and in their view what they find

is when the treasure yields increase the

S P 500 price to earnings multiple

decreases and remember when we see a

decrease in multiples when we see

multiple compression we obviously tend

to see the S P 500 full and so what they

argue here is that as long as the FED

stays the course of hitting this sort of

peak level of tightness and they don't

get tighter than the level of tightness

that they're at now then peak real

yields may already have been achieved

which means the only direction would be

down and when treasury yields real

treasure yields go down price to

earnings ratios go up for the S P 500

and this is actually bullish for stocks

and they'll tell you exactly which

stocks as well in just a moment but to

reiterate their argument in terms of why

they're making this call now they say

that you shouldn't fight history

fighting history is like fighting the

fed and over the last 60 years the S P

500 has returned almost nothing

absolutely nothing between May and

October wait a minute how is that

possible because over the last 60 years

the S P 500 has always been sort of

returning somewhere between seven to ten

percent how can it return zero between

May and October well that's because they

argue that between November and April is

actually when you get most if not all of

your cumulative returns in fact they

have a chart that breaks this down for

you take a look at this if you invested

only in the periods between May 1st to

October 1st your Returns on an original

hundred dollar investment

uh from 1962 to today 2022 would

literally grow from about a hundred

bucks to a hundred and eighteen dollars

that's it and if you only invested

between November 1st and April 30th you

would essentially be over here at the

green line and then actually being fully

invested outperformed look at that fully

invested always outperforming no

surprise here generally time in the

market beats a timing the market now I'm

just gonna make a quick side note there

because some people think yeah but Kevin

you try to time the market dude I saved

a lot of money in getting out of stocks

that would have done terribly in a

recession you have to reallocate your

portfolio Okay that doesn't mean you're

trying to time the market it just means

you're repositioning to prepare and then

you Diamond hand through whatever pain

you set yourself up for but anyway

really incredible chart here so when we

go back to this sort of denseness of

what they try to tell us they say that

basically hey look once the markets

realize oh man we might actually be at

Peak yields then people might rush to

buy treasuries now I don't know if we're

actually going to see that just yet

personally because there's a lot of talk

that Peak yield might actually be five

percent for the 10-year treasury but

I'll tell you today bonds are rallying

which actually means yields are falling

take a look at the tenure today sitting

at

4.125 falling off of its four and a

quarter level seeing sort of potentially

at least intraday this sort of bouncing

off of these highs again are getting

rejected by these high yields again and

uh essentially some say starting to

price in Peak yields again many say no

no no peak yields or when these hit five

percent but going back to the argument

of this bullishness remember we're going

to balance this with with some counter

arguments here in just a moment moment

as well they argue in this report that

CPI that is a consumer price index

inflation right has essentially only

been two percent on an annualized rate

over the last three months now really

what they're doing here is they're

taking the the actual number of CPI and

they're kind of taking this little chart

that we've had that looks something like

this where we kind of hit a peak and

we've kind of been bouncing down well

when you take that sort of average fine

you could say we only have a two percent

annualized rate of inflation but look

nobody even believes that as far as you

could throw it right now because we've

seen too much broad-based inflation

spreading to too many different sticky

areas especially rental and housing

inflation and services like health care

which really aren't expected to Peak

until probably sometime early uh to mid

next year but they go on to argue anyway

that you know what we've got an

employment cost index report coming out

here on the 28th that's just in a few

days folks that's in three days and that

is going to be a critical moment for

determining hey are wages

escaping in the pattern of a wage price

spiral or are we actually at Peak

inflation Peak yields Peak quit rates

which means uh you you no longer have

people saying oh I'm going to quit my

job because I can get more pay a

different job instead people are staying

put so you see quit rates come down

which actually reduces inflation right

all these arguments are that oh

inflation will come down and eventually

they suggest that yes sure there's a lag

in shelter inflation but maybe we'll see

that Peak about nine months later they

argue that uh it will quits peaked in

December of 2021 they don't give us an

idea as to when they think shelter may

have peaked I personally think shelter

or and rents peaked somewhere around May

and June for rental prices

but they make this argument that we'll

probably see a like the actual like

recession like where even Joe Biden's

like yup yup we're in a recession now in

the third quarter of 2023 but they

actually think the bottom of the market

could be now and that in the near term

the S P 500 actually has the potential

of hitting a peak before we get into an

official recession even though come on

you and I know we're already in

Obsession right two quarters of negative

GP that's all I need to know okay this

sucks I don't need the nber to tell me

what a recession is I don't need Joe

Biden and White House to redefine

whatever sessions what is it a first

action okay and that's okay but take a

look at this argument they argue that

the S P 500 could actually rally to 4

300 from the about 3 800 where it is now

that'd be about 13 uh boost peaking in

April of 2023 and they think for the

rest of the decade we Act actually think

that we could see earnings per share

double over the next decade however

price to earnings ratios will be cut in

half so we're just not going to see that

sort of Rich overvalued bubbly

stimulative valuation anymore for the

market but because of earnings doubling

we'll actually still see some decent

returns investing in the S P 500 between

now and the end of the decade which is

obviously very very motivating for

potentially buying the dip now they do

say a risk factor here could be rallies

in Commodities if we're in a secular

bull market for Commodities basically uh

higher highs and higher lows for

Commodities over the next 10 years

that's going to hurt us a little bit but

uh if if if if if we do have Commodities

rally value might be what you want to

invest in if Commodities do well value

would be things like energy plays

utility Place Banks real estate Autos

not including growth Autos like Tesla

that's more of a growth and cyclical

stock Proctor and Gamble might be

another style of value but if

Commodities actually come down

we could actually see growth outperform

so it really sort of depended on what we

see happen now one of the things that

they point out is that we still have not

seen the inversion of the 10-year

three-month curve and they think this is

going to happen by January signaling

that we'll actually have a recession in

September that's what they believe but

they also believe that this recession

will be very very similar to World War

II where we spent a lot of inflationary

money on World War II right here this

green chart in the spike which matches

sort of the covid war spending which led

to this delay you could see sort of this

Gap over here this Gap in Peaks over

here between the green line which is

spending in blue line which is inflation

and this being sort of your Peak

reopening inflation and then what

happened after the war boom inflation

just plummeted and that's actually the

trajectory that we're on right now now

I'm going to give a little bit of my own

kind of counter argument to this and

just say that hey look The Five-Year

break-even rate which is something that

I generally watch for a decline in

inflation has been trending down

substantially okay very very clear

evidence that we're expecting inflation

to come down but I'll tell you in the

last week or so uh maybe even three

weeks here it's really been coming back

to life uh you know I was really hoping

for more of a sustained downtrend now we

do tend to have these sorts of moves

back up so that does happen with break

evens but it's something we want to pay

attention to because the FED watches

this and if this continues to spike up

especially if we get to that dreaded 3-0

number again the fed's going to have to

go dirty on us again so uh very very

optimistic here from this company now I

do want to talk about a flip side

argument and and some projection so

we're going to pull up some projections

here from a flip side argument now the

flip side argument comes to you from

Barclays okay this isn't like this isn't

an ad from Barclays or whatever it's

just a flip side argument from this

other Investment Bank that we've been

looking at what is an ad is the coupon

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voice shout out to them anyway okay so

what does Barclays think okay well so

here's Barclays Barclay says

the data is not actually suggesting that

we're having any kind of meaningful

decline yet in the labor market or

inflation and it is way too early to

suggest that oh things are absolutely

game on to be bullish in fact they go in

and say here that economic data has been

surprising to the upside initial jobless

claims have fallen recently which is the

opposite of what a slowing economy would

suggest quite frankly earnings have been

coming in pretty damn decently Coca-Cola

beats UPS maintains guidance right we're

actually still seeing strong earnings

come in with exceptionally some

companies that just suck like well okay

I'm not gonna mention them but um you

know I'll just uh snap anyway probably

Facebook too oh gosh I shouldn't have

said it anyway uh job postings on the

private platform indeed have risen

recently indeed how crazy is that we're

expecting to see less job openings yet

we're getting more job openings

according to indeed at the same time

less people are filing for unemployment

which is just a sign that we potentially

could still see a wage price spiral come

which is a dirty rug pull uh that we

will then get from the Federal Reserve

which which precedes a dirty rug pull

that you'll get from the FED they will

never stand for a wage price spiral I've

been talking about that since January I

sat with a Federal Reserve somebody who

used to work for the Federal Reserve and

I told him dude I'm worried he works at

JP Morgan now I'm like dude I'm worried

about wage price spiral back in January

and he's like

and now now we're talking about it again

and it's like uh-huh yeah worst thing

that could happen wage price spiral and

look at this this right here I don't

know that doesn't make me very

enthusiastic here initial claims I'm

gonna cross that one off I think this

fluctuates so much week to week doesn't

so much matter

this job postings thing on indeed that's

interesting I want to start paying

attention to to what indeed is uh is up

to but uh you know they make this

argument here that look investors are

getting over excited about this idea of

a Fed pivot coming and really here are

kind of the following scenarios that you

have for 2022 the uh you know we've got

three scenarios here a bull case which

is a soft Landing shallow recession and

normal recession uh being the bear case

and they believe that in 2022 we

basically still have straight up

downside uh even in like the soft

Landing we're still down 10 and in the

hard Landing we're down 20 with 14.6 in

between they do believe that for 2023 in

the soft Landing scenario we could see a

12 upside but that's balanced off by an

over 16 and a half percent downside to

the S P 500 next year in the event of a

real recession where we do continue to

see earnings actually collapse one of

the big problems we face now is we keep

expecting that earnings are going to

collapse but they're just not yet and so

we kind of keep kicking the can down the

road it's like oh well eventually

earnings will collapse right and then

it's like uh okay well it wasn't q1 it

wasn't Q2 and now it's kind of like is

it going to be Q3 maybe not so we kind

of just keep kicking the can down the

road it's like okay well why don't we

actually gonna get the recession in it

that's where you do have a you know some

folks on one side of the arguments and

well by the time companies are actually

ready to be in a recession and consumers

are like okay yeah I'm officially out of

money maybe inflation will have started

coming down now that could just be the

rosy hopium scenario where it's like oh

yeah as soon as people run out of money

all of a sudden we just won't happen to

have any inflation anymore and that'll

happen right after the election too okay

whatever anyway there's a whole lot of

cynicism that we can have towards the

market the reality is look inflation's

either going to go down or it's not if

inflation goes down you get all in on

this Market you go long growth uh not

Financial advice I am a financial ad

advisor but I can't give you Financial

advice because I can't provide a generic

or impersonal Financial advice on on a

YouTube video uh and so we're not doing

that here but we just want to be very

clear like obviously if we start

meaningfully seeing inflation come down

you kind of want to move along quickly

in the meantime

you haven't been getting punished

sitting in cash and waiting on the

sidelines as painful as that is to say

and uh there are a lot of fomo folks who

are saying no no no you got to be in but

you gotta be careful because fomo

can hurt when it turns into well sadness

yeah forget fear it just turns into

sadness and regret

Romo Romo regret of having gotten in

rahome whatever anyway I don't know

folks what do you think whom do you

agree with do you agree with the first

argument that hey we've got some

bullishness coming up and we're

basically at Peak yields as long as the

FED doesn't have to get more aggressive

to fight a wage price spiral we should

be on the up because history says

October to April is game time this is

where selling may go away comes from

after all right or do you think Barclays

is more correct that hey like whoa whoa

whoa whoa not so fast still not actually

seeing the data the fed's looking for

let me know what you think make sure to

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