The Coming Stock Market RESTART.

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meet kevin here in this video i'm going

to break down some reports that we have

about what might happen in 2022

regarding the s p 500 based on wall

street estimates and what could happen

potentially in january as well as some

other thoughts let's just get right into

it so

first jp morgan says the market is

setting up for what they call a strong

january effect and this is an old wall

street theory that calls for big stock

gains in the early part of the year now

i've always thought that maybe people

who took losses in december after the

30-day wash rule are going to hop back

into the market in january but jp morgan

says it's not just a typical sort of

annual pattern but it's that the current

market is set up to look particularly

good for quote high momentum stocks as

these stocks have experienced large

sell-offs recently but nothing has

changed fundamentally now they didn't

specifically go into which stocks but we

can guess all you have to do is like we

talked about earlier on the channel

today

sort by market cap look at some of these

ridiculously oversold small caps and jp

morgan is suggesting that investors are

being too bearish overly bearish than

what they should be it's my belief that

hedge funds and institutions are

shorting small caps because it's just

the easy thing to do right now to hedge

your portfolio so if you're long on the

mega

caps or large caps and your short small

caps you are crushing it in this market

and at this point there's no sign that

this is going to end but when this pain

ends i expect it to flip back quickly jp

morgan believes that we could see this

movement come in january because of what

they call the january effect

look for small caps though that have had

high momentum in the past so momentum

stocks think for example

shift technologies for a period of time

big momentum tattooed chef had a lot of

momentum for a period of time lemonade

had a lot of momentum for a period of

time corsair not so much after it hit

the market after it

had its public offering but uh you there

there are plenty of smaller cap

stocks even uh consider stocks like

arcamodo or fisker that are just

ridiculously oversold

in this market jpmorgan thinks look this

one up quote the january effect is going

to give us a big u-turn here now others

believe wait a minute not so fast what

about the fact that the fed's probably

going to be raising rates first a quick

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free stocks according to crossmark chief

strategist fernandez who appeared on

bloomberg the fed's first rate hike is

actually

unlikely to derail the overall rally

that we're seeing in the equity market

not including small caps just all the

other stuff small caps aside are doing

pretty dang well fernandez said that

historically equity markets keep going

up after a first rate hike and usually

don't actually start being affected

until the fed's second or third increase

now this is really interesting because

if we look at the fed's summary of

economic projections we know that we're

expecting about three hikes in

2022

but the first one with about a 90

percent chance according to

fed futures is expected to come in march

that probably sets us up for the second

one coming sometime uh in in the summer

to

the third quarter of 2022 for the second

and third so look for the summer to q3

of 2022 for potentially the impact at

least according to this market

strategist that march just because we

get our first rate increase might

actually not imply that markets are just

going to sell off that a lot of this

could already be priced in and what's

really interesting is if we look at

market history we see that the s p 500s

average annual return was listen to this

10.5 percent between 2004 and 2006. now

we know that was before the 2008 bubble

but during that period of time the

federal reserve hiked interest rates 17

times folks

17 hikes

in that

you know three-ish year period and

stocks return an average of 10.5 percent

in the s p 500 or the s p 500

the s p 500 also returned 9.8 annually

during 2006 or sorry 2016 to 2018 during

the rate hikes up until of course that

painful crash that we had at the end of

2018 we're finally like that's it enough

is enough stop raising rates jerome

powell you're effing up the market and

of course we had that brief real estate

crash in the summer of 2008 i'm sorry

that was a big real estate crush the

summer of 2018 and about may to june we

saw real estate prices plummet about 12

you could actually go back and watch my

videos from 2018 if you scroll back

through my channel and you'll see me

going oh my gosh something bad's

happening it was crazy but anyway

uh the other thing to note is 13 banks

and financial service forms firms have

put together their 2022 forecasts and

the average return that they're

expecting for the s p 500 for next year

is

4.5

which doesn't hold the candle to the 16

that we got in 2020 or the over now 26

that we've gotten in 2021 so really low

estimates expected for 2022 which kind

of implies that the big caps those mega

caps like the apple microsoft netflix

adobe jp morgan berkshire hathaway tesla

google might not be that big of players

in 2022 who knows maybe 2022 will be the

year of the small cap

wishful thinking at this point

anyway now there's mixed sentiment about

what to expect uh from 2022 obviously uh

i mean morgan stanley is actually

predicting a drop of 6.9 in the s p in

2022 and sees it up 12 so the

average uh is 4.5 but you're seeing

quite a spread

now behrens has also recently come out

saying that the options market is

literally going nuts that we've seen

daily volume of over 50 million

contracts compared to 21 years ago in

2000 during the dot-com bubble era we

had about a million contracts trade on

an average day we're 50 x that

that's insane and they're basically

saying it right now feels like people

are trying to buy lottery tickets saying

that people realize that all they need

is a bullish call with an expiration

date close to an earnings report and

then they nail it to get rich and so

this is dangerous remember call options

especially on small caps right now will

bleed you dry it is painful right now if

you are

holding small cap call options it sucks

okay like a good strategy might be not

financial advice close those and sell

puts

because so many people are buying puts

on them the premiums on sell puts are

beautiful right now because everybody's

shorting them uh anyway

blackrock also published their 2022

outlook by the way i teach things like

this in the programs on building your

wealth link down below uh and of course

check out that link for moomoo link down

below okay now blackrock published their

2022 outlook and this was interesting

now remember blackrock

is uh one of the largest institutional

investors in america their outlook is as

follows positive year for stocks

negative year for bonds they reiterated

that we're probably going to settle with

inflation levels above pre-covet trends

so we're still going to be a little bit

elevated on inflation and that is why

they favor equity over bonds so stocks

over bonds

they do recognize that we're going to be

going through a little bit of a

withdrawal period though of stimulus no

longer coming towards us and that

they're expecting rate hikes but they do

think the fed's going to be tolerant of

inflation much more tolerant than it has

in the past which kind of implies less

aggressive rate hikes than like what we

saw in 2018 when we led to that crash at

the end of 2018 right they do believe

that the fed's going to raise rates in

2022 but not as soon as the market is

pricing in they actually think the fed's

gonna be a little bit slower they're

also expecting a muted policy response

to inflation just kind of wait a lot of

wait and see they do expect covet

strains just future ones and omicron to

delay but not derail the restart of our

economy they're saying

short term they think uh that any slower

growth that we end up having right now

will just lead to more growth in the

future so they're kind of like ah we're

sticking long equities like even if

things take a little longer we'll be

fine we'll have those shares for the

future is what they're saying

they say that we're dealing with this

unique series of events which we really

have no historic parallels for that we

have this unique restart with new virus

trends and this weird central bank

policy that we're going through but they

do prefer developed markets over

emerging markets they're not too

confident in emerging markets and if you

look at emerging markets like brazil 10

plus percent inflation currency

instability in turkey

kind of makes sense so they're

underweight on

bonds for our market but overweight

equities like in other words more stocks

please less bonds and we're sticking to

domestic in 2022

that's for uh blackrock they also

mentioned that inflation is being driven

by an unusual restart of dynamics of the

supply and demand imbalances basically

like hey

we still got massive demand but we've

got a lack of supply but they actually

expect a lot of the issues are going to

resolve in 2022

some companies aren't that optimistic

they're they're telling investors wait

until 2023

which if we do end up

solving our supply chain issues in 2022

then that should be bullish for the

stock market because a lot of the stock

market is not thinking that things are

going to be solved in 2022 i think some

things will get a little bit better but

not great

the fed is also tapering bond purchases

by 50 15 billion dollars uh more per

month they doubled that obviously we

know that blackrock also says that you

can't ignore the fact that china is

slowing down and they hope that china

will loosen some of its monetary fiscal

and regulatory policies to help maintain

growth but right now there's a clear

lack of growth in china and this is

leading to that kind of sell-off that

we're seeing on chinese stocks like

alibaba this is of course compounded by

the fact that you've got a lot of

de-listing fears with companies like dd

and that makes people scratch their

heads okay what does this mean for neo

what does this mean for alibaba so

there's there's a lot of pain here but

overall they're bullish they also think

that a green transition comes at a cost

of higher inflation and again they're

favoring developed markets for that

green transition so we learned a lot of

things in this let me give you a quick

summary people are bullish on the s p

500 on average but barely like 4.6

percent jpmorgan says the january effect

could be a big deal especially for

smaller caps when we look at the first

few rate increases for the fed might not

hurt us that much especially if the fed

is pretty chill we might have already

priced that pain in

and a blackrock not too bullish on

developing countries not too bullish on

china much more bullish on american

stock so this gives you a little bit of

a recap of what's going on here combined

with some thoughts on options and of

course my thoughts on that small cap

recovery i really think we're not going

to see a small clap recovery either

until we get out of omicron because i

think people are using small caps as

their hedge for honestly omicron anyway

my thoughts check out moomoo link down

below thank you so much for watching

this video and folks we'll see you next

one thanks so much goodbye