A Warning to Stock Investors.

hey everyone we kevin here you might

remember back in 2019 when we had

something crazy happen called the

inversion of the yield curve and that

sounded really terrible

especially in the tone i just said it

but it was a big deal

back in april and march of 2019 we were

really concerned

that the inversion of the yield curve

which was basically a time when all of a

sudden

10-year bonds are trading with a lower

yield than two-year bonds which is

really weird because you think if you

put money away

longer you would make more money but

that was opposite for a moment that

inversion

was seen as a big signal that a

recession was due

within 12 to 18 months

that is also kind of spooky given that

12 months later we had the pandemic in a

recession but

let's just call that a fluke in the

meantime we have

a recent shift happening one that

really started after jerome powell

opened his

yabber trap again yesterday

and it's right here take a look at this

it is

the fives and thirties in treasury

yields

all of a sudden crashing this is

a collapse or narrowing of the spread

between the two

and this is a pretty dramatic plummet

here you don't see those plummets really

anywhere else

on this chart going back this last year

here this is a

pretty big move to the downside in fact

when i take a look at the quote as far

as exactly what bloomberg says about

this

they said quote a significant narrowing

of yield curves is a strong indicator of

an impending recession

while we are a long way from inversion

the narrowing curves are indicative of

an unhealthy

outlook and folks this got me really

interested in trying to determine

what the heck is going on and what does

that mean and what is

what this means have to do with what's

happening in the stock market today

because

poyo boy today is one of those days i

wish i had been live streaming because

we have a little bit of a start of

something happening here but we're going

to talk about it

in this video right after i mentioned

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folks let's talk about

what this 5 30s thing means all right

so i realize that most of us probably

aren't

bond traders and treasury enthusiasts

especially since

most of us are like oh how much can i

get paid on a five-year treasury

oh point eight four percent yeah well

that makes sense

not but anyway there are reasons banks

do it and companies do it risk-free

asset blah blah blah whatever

but why practically does this happen

like why all of a sudden did we see this

plummet

and what is its signal okay so here's

how this works

the more we fear short-term inflation

the less valuable five-year treasury

bonds are going to be

this makes sense because five years

generally

kind of short term so if we have more

inflation the value of those five-year

treasury bonds is going to go

down which drives their yield up

does the opposite yields and prices

right so the more fear we have for

short-term inflation the more five years

get punished five-year bonds get

punished

the less we fear long-term inflation the

more

long-term treasuries get rewarded like

the 30-year

so in other words 30 year goes

up in price five year goes down in price

and when we look at yields we flip that

and we get an inversion okay

now that might be complicated don't

worry about it basically means

five year yields going up

30 year yields going down

more people moving into the longer term

bonds

now this signals something in the market

but it's important to know where this

came

from it came from jerome powell

basically jerome powell said we're

acknowledging more short-term inflation

this was a change this is something that

we've been waiting for jerome powell to

say

we've been waiting for the real talk of

jerome powell going yeah inflation

actually is worse right now and it's

worse than we expected

but jerome powell reiterated that he

believes we have more of a risk

of seeing disinflation or less inflation

in the long term and so that's

potentially why we're seeing this all of

a sudden big

drop in that yield curve but there's

another thing

this signals it signals a potential

real economic slowdown remember how

bloomberg was quoted to say that a

narrowing in the curve

implies a slowdown or maybe even a

recession once you get towards inversion

or it implies just slow growth and a not

so positive outlook

well where do we go and where do we flee

or what do we flee

when we expect less growth well make it

very simple

recovery stocks like retail and

restaurants and travel

have done very well since the vaccine

came out

but since then we believe that stimulus

and the vaccine

have almost priced these companies to

perfection

at the same time we've seen a massive

run in commodities prices

like lumber copper metals and these

other commodities

that historically just haven't done so

phenomenally well

so these two sectors that usually aren't

like too

hot have done very very well for about

the last six

to eight months in fact take a look at

copper right here and well this is

actually commodities in general

you can see that they've been declining

for really the last about 20 years

almost here

18-ish years and so we've been in this

declining pattern but we've recently had

this

bullish breakout which is really

positive for commodities

but what's been actually happening

within the last couple of weeks

specifically today we've started seeing

commodity prices

rotate down we see the same thing

happening at copper

and at lumber copper and lumber have

started to rotate to the downside

this is really their first rotation to

the downside in

basically a year i mean this is a

one-year chart so in a year

and we've started to notice the same

thing happening with recovery stocks

today take a look at recovery stocks

right here

we've got today red robin dave and

busters

down four to five percent we've got

citigroup and jp morgan chase

industrials

like capital are down we've got uh

here's jp morgan here's

carnival we've got a lot of recovery and

financials here's credit suisse down

today

on this fear about a potentially slower

growing economy

so commodities are chilling out the

dollar is getting stronger

financials like banks are having a

little bit of a weaker time although

they do have

stress tests coming up next week which

we expect to be very good for the banks

because they got a crap ton of crack

cash

so we don't think the stress tests are

going to be a problem at all for the

banks which should be bullish for the

banks

but as a longer trend this potential

narrowing of this

this 530 treasuries and a signal of

potentially slower growth

could weigh on commodities and recovery

stocks

that is we could see commodities and

recovery stocks trade

down and now here's something

interesting that happens

when commodities and recoveries trade

down

guess what usually does really well

think about

human psychology if all of a sudden the

sectors you're in like commodities and

recovery

stocks start slowing down and the entire

economy slows down

but you want some growth like growth at

all costs so to speak you got to have

some growth

where do you go to get growth well

usually

you go to growth stocks and what's crazy

is

at the same time as we have that big

narrowing in the 530s

that yield curve i showed you take a

look at what kicked frickin

butt today now keep in mind i'm going to

mention amc here as well of course amc

did phenomenally but take a look at what

did so well today

we had electric vehicle companies do

very well today sun power do well today

twilio

tech do very well end phase do well

cloudflare duel

trade desk pinterest square redfin

nvidia sofi tech lemonade

zillow it's the higher multiple more

textile stocks

did very very well today and it's

possible at least this is what's being

talked about

that because tech has really suffered

for the last six to eight months

because there have been other

opportunities we could be rotating into

a period where

all of a sudden tech comes back into

favor

and so in other words if that narrowing

yield curve

is a sign of the economy slowing down is

a sign of folks being a little bit more

nervous about short-term inflation but

not worried about longer-term inflation

then we might see a stock market

rotation between now and

mentioned this before september and

october into

tech and growth as other aspects of the

stock market begin to slow down

now this is great news if you're in tech

but if you're not in tech yet it's not

too late in my opinion you've got some

relatively cheap opportunities to get

into especially if you look

at their future pes some of my favorite

cheapest companies i'm looking at and

investing in right now

when i look at their 2025 forecasted pe

ratios price to earnings ratio

the cheapest ones google amd by far the

cheapest

uh then you've got shift technologies

which is really only a growth play

because it's

so over so rather undervalued it's so

darn cheap

otherwise it's more of a value play but

then you also have

etsy pinterest and amd google

and amd sitting around 13 to 14 times

future earnings

you've got etsy pinterest apple those

sitting around

the low to mid 20s and if you want to

mix in a little bit of a higher

valuation you could look at companies

like

airbnb peloton nvidia tesla end phase

matterport and trade desk

those are some opportunities as well and

personally i'm

really eyeballing coinbase though i'm

mostly looking for the bottom of kryptos

to jump in to coinbase more heavily so

i'm going to exclude coinbase from kind

of like the tech world right now

and instead we're going to be looking at

some of these others now this is also

very important for me to pay attention

to

because i have a lot of money in leaps

for

tech and what i'm looking for is a big

rally

that comes very very quickly in tech and

what i'm going to do when that big rally

comes is i'm going to dump my options

and i'm going to turn them into shares

now i've been

waiting for this moment since april 20th

i don't think it's around the corner

but it might be so we got to pay

attention to it and what jerome said

and how the bond market is reacting is a

big sign

that what i've been talking about for a

few months could be coming to fruition

now even though i'd like to be right so

that way i can remind you all to always

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i want to be clear this is so far just

today

all of this could unwind tomorrow and it

can be back to attack bashing

so you never know but

i'm going to pay attention to the

narrowing of the fives and thirties

that chart i showed you at the beginning

of this video and i'll pull it up one

more time

just so you can know exactly what to pay

attention to as well

because if we continue to see this

narrowing it's seen by wall street as a

signal that growth is slowing if growth

is slowing like

overall economic growth is slowing down

which actually if we look back at a

video that i posted two or three days

ago about a rotation coming to the stock

market

i showed that google search trends were

not really growing anymore for people

spending money they were kind of

flatlining

then then this could really all be

reiterating everything else

that okay we started reopening people

spent money

but now people aren't spending like

excessively

more than they have been spending in the

last few months so

search volumes are flattening in terms

of changing search volumes

people have taken the foot off the gas

so to speak we're seeing

bond yields narrow here which is not a

very bullish indicator

it's a slow growth indicator and that

could lead people to get out of

the potentially overvalued commodities

or potentially perfectly priced

recoveries

and rotate back into those tech stocks

now we'll see

again don't have a crystal ball but

these are some very important indicators

to watch

for i want to say the next six months in

the stock market

for me 2022 is the year of crypto that's

that's when we're going to the freaking

moon

but for right now i want to ride this

tech wave that i think is coming

and i'm all in on it right now so we'll

see what happens i'm paying attention to

it make sure to subscribe to get more

content like this thank you so much for

watching check out the programs link

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we'll see in the next one