Don't Fall For It.

Summary

The video analyzes the recent volatility in the stock market, triggered by concerns over Donald Trump's tariff policies. While the S&P 500 has rebounded sharply, the video explores whether this is a temporary bounce or the beginning of a broader market downturn. Key indicators such as the yield curve and the gold-to-silver ratio are examined to assess recession risks and economic trends. The speaker suggests caution, highlighting that while a recession may not be imminent, certain signals warrant close attention. Overall, they remain cautious but optimistic about market opportunities moving forward.

Takeaways

• 😀 The S&P 500 surged by over 10% in a single day after news of a 90-day tariff pause for most countries (except China), signaling a significant market rebound.
• 😀 A 10% move in a single day for the S&P 500 is rare and has only occurred a few times in history, including after the COVID pandemic and the Great Financial Crisis.
• 😀 The recent stock market downturn is primarily driven by concerns over the potential economic recession triggered by tariffs, not just tariffs themselves.
• 😀 Historically, US recessions are characterized by a rising unemployment rate, which has always coincided with major stock market declines.
• 😀 If the economy enters a recession, the unemployment rate is expected to rise through 2025, which could lead to further downside for the S&P 500.
• 😀 Stock market bottoms during recessions typically occur only after the unemployment rate peaks, which could take months to happen.
• 😀 The yield curve, which had been inverted throughout 2023, has recently reinverted, signaling that a labor market collapse may not be imminent.
• 😀 A reinverted yield curve, unlike the steepening seen during past recessions (e.g., 2008 and 2001), suggests that we may not be entering a typical recession.
• 😀 Despite the recent yield curve reinversion, the outlook remains constructive, suggesting that the economy could continue to grow, and the stock market could thrive.
• 😀 The gold-to-silver ratio has jumped 15% in one week, a risk-off signal historically linked to major market declines, such as the 2008 financial crisis and the COVID crash.
• 😀 Bravos Research is cautious about reallocating to stocks until more evidence of a market bottom is seen, though they achieved an impressive 60% return in 2024, double the S&P 500's performance.

Q & A

What caused the stock market to decline over the last few weeks?

The stock market declined due to fears surrounding Donald Trump's new tariff policies, which raised concerns about a potential economic recession.

What event caused the S&P 500 to snap back with a 10% rise?

The S&P 500 rebounded by over 10% following the news that Donald Trump would pause tariffs for 90 days for most countries, except China.

How often has a 10% single-day move in the S&P 500 occurred historically?

A 10% single-day move in the S&P 500 has only occurred a few times in history, including after the COVID pandemic, the Great Financial Crisis, and Black Monday in 1987.

What is the key factor contributing to the fear of a recession?

The key factor is the potential for tariffs to catalyze an economic recession, which could trigger a rise in unemployment rates and further stock market declines.

What does the unemployment rate typically do during recessions?

During recessions, the unemployment rate tends to rise, which has been a consistent characteristic of all U.S. recessions since the 1940s.

How does the yield curve relate to the state of the economy?

The yield curve is a key indicator of economic health. An inverted yield curve has historically signaled the onset of a recession, while a steepening yield curve indicates economic recovery.

What does the reinversion of the yield curve indicate?

The reinversion of the yield curve suggests that the market does not expect the labor market to weaken significantly yet, indicating that a recession may not be imminent.

What has happened to the yield curve in recent months?

In recent months, the yield curve has reinverted, signaling that the economy may not be heading into a recession just yet, despite stock market declines.

What is the significance of the gold to silver ratio's recent spike?

The recent 15% spike in the gold to silver ratio signals a 'risk-off' sentiment in the market, with investors moving into gold (a safer asset) and away from silver, which is considered riskier.

What does the gold to silver ratio historically signal about market conditions?

Historically, sharp increases in the gold to silver ratio have preceded significant market downturns, such as the 2008 financial crisis and the COVID-19 crash.