Cliff Notes: SIGNS OF A RECESSION

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Let's get into this.

So do you you talked about they curve a lot, the yell curve inverted this past week? What does that mean for the economy and the stock market? A Do you want to just explain what the yell curve is?

Yeah?

So, when the so let's say if you have a two year bond and a ten year bond. Normally, what happens investors will put more money into the ten because the longer term investment usually pays or yields gives more. And when it inverts, when the two year begins to pay more, that's when we.

Know there's a sign of a recession.

So last year, ironically enough, on a marked keeping episode, which is one year from last week, we talked about that being the second most important indicator. So the top three indicators are quantitative easy from the Federal Reserve that's gone away, Number two, the inverted yell curve, and then number three holding in the market for twenty years. So the two curves that matter the most, please write this down the two year and ten So that's one pair

To kick in.

But when I did my analysis, I have it at eleven months before we hit potential recession area in the market, So please keep your eye on that.

But those are the two that mattered the most.

Now I know, Jamal this week talked about the three month and the eighteen month is less reliable. It's like the equivalent of trading like on a one minute chart. It's like it can flicker. Is not the most important, but if all three hit, you have a one hundred one hundred percent guarantee for a recession. But I look at the two and the ten and five and the thirty, those are the two most two parents of the R curve.

Yeah, that's interesting because you said that most people say twelve to eighteen months, and so there's there's plenty of analysts who are saying that this year could still be a positive year, right, And even if you count that right, there's still eight months left in this year, so that can still happen and we can still be headed toward recession.

Territory.

So you're saying that's going to get worse. You think the ecomomy is going to get worse.

I think we're gonna spike up.

And we can segue from one of your favorite conversations with politics. And then after we have the midterms, because Biden's approval rate is solo, the probability of the Democrats keeping those seats right now is less than probably thirty percent. And then usually I want you to we talked about it maybe last year, but does do we have a greater chance of going into a recession if we have a republican lead or democratically? Historically it has been republican.

All Right, So, I mean Friday was the beginning of the second quarter. So let's just I'm going to give you some statistics, really crazy so people understand how what we look like for the first quarter this year. So the DAD was down four point six percent, SMP was down five percent, and you know our favorite, one of our favorites, the nastack was down nine percent for the first quarter. However, however, April is historically the best month of the year for stocks.

Now March kind.

Of brought us backward. That we were way lower than nine percent, five percent and four point six So the S and P has averaged over the past since World War Two, a one point seven percent gain in the month of April. So that's seventy percent of the time on average, it has about it in April, depending on how the first quarter went. Now, the interesting you brought thing you brought up just now was the midterm election.

Then the third quarter.

Now, so these are this conflicting indicated.

But it's interesting.

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Because usually, like we said, April is the best month, and we kind of saw that last year a little bit, and then May kind of you know, went down, and we saw a June there was a spike again, so interesting to keep your eyes on.

Yeah, and if you're looking at the short term horizon, that may be scary, but if you're looking at the long term one year, two year, three, you're going to be fine. Also, hedge funds had an inclination to buy in the middle of March and towards the end of March, so that's why we started to see a ramping up where January and February it felt like who was just like falling off of the empire built state building, and

Towards the end of that quarter cycle.

That was some of the reason we got some of the ramp up, like wants to fear and stuff went a way, but you keep your eyes over the next couple of months. If you're new to investment, I know this may be scary, but please just hold.

For the long term. We have to.

We have the same considerations and concerns during uh the election with Trump and Biden, and everyone was worried and then we just took off to the upside. So if you hold for the long term, it really won't matter. Yeah, these next three or four months will be pretty interesting, to say the least.

Yeah, the most most analysts are predicting anywhere between point seven to one percent increase in the SMP. Well some people even saying that, you know, they could end at fifty one hundred by the end of the year. But that's still like you said, if recessions are lacked and they go anywhere from twelve to sixty eighteen months out, we can still be in that. So just everybody just be mindful of that. And so another thing, another thing. So I know a lot of times.

People like can be time, When when should we invest? What's the best time to invest?

If you invested, I believe it was February twenty fourth or twenty twenty two this year when NASA, I know the S and P got to it though, you've actually made an increase on so you know what I mean. Like when we talk about watching charts and then just get your points of when you're gonna buy in, this is exactly what we're talking about. So you could be having a great year right now based on everything that

Absolutely, And anytime anyone panics, it is your chance to profit as long as you get in at a good price. So for example, like that amazing hoodie with shot has on and we' on sale for nine bucks, the upside is infinite because I'm sure it's retelling for one fifty two hundred. Everything is about the price that you get in plus length of time that you're willing to hold. So if you better bought that bad price, you've got destroyed.

Yes, so let's let's go into this. What are some other signal for a recession to look out for when things are getting bad?

So number one, when valuations the startups are being cut. So like, for example, instacart, the value got about thirty eight percent on March twenty fifth.

The business model of Instacart hasn't changed.

And let's be honest, if you looking at top line revenue or bottom line revenue, that hasn't changed much. But people were chasing. So same with momentum stocks. Everyone was chasing at a high. The same thing was happening in VC and Angel and the other indicator.

That have a Federal Reserve probability recession model that you look at.

If you just go to Google, you can just put recession probability model and updates the thing every two months. But they'll tell you the probability in which we have a chance of going into a recession. So if you compare that two year and ten, five and thirty and if you look at the startup vehicles and see how many are increasing in value or decreasing. Plus with this probability model and listening to market mondays, you should.

Never get confused when we're going to hit a recession.

But those are like the main four that I will look at to tell if we're going to have like a full on collapse in the market. My graduates from my school being force Bag, drop Bag, Drop Mike, drop Bag, drop Bag Drop.

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