The Market Is About To Drop - Again

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All through Last We the market Fallen a and When you see portfolio Day, it's hard not to feel like your money isn't Just being flushed down the toilet. While it evaporator now says that the market is even crazier than The do combust. SO today We got to talk about exactly What's Going On, the biggest mistakes that investors are making right now. Dive into some of These articles that have come out In The Last Week, Warning that the market is poised for another Drop, and then We're going to Look at this objectiv to determine whether or not It's Full Of.

The Goal of this video should not only Make You a more well-balanced investor but also, if you listen to it, it's hopefully Going to end up making You More Money. It also helps to control Yourself to Drop a like on the video for the YouTube algorithm by making it Turn Blue. That's it, especially If you want me to do more Cinematic intros like this Where I flush Motion Picture Money down the toilet, so just Let me know if you Enjoy that. Thank you guys So much for watching and also a Big thank you to policy Genius for sponsoring this video, but more On that Later.

All Right, so first I know I always preach the AG saying buy and hold, Don't time the market, time in the market Beats timing the market. The Stock Market is not the Economy, and the market can remain a Rational Longer Than You could remain Solvent. But You Can't Deny that at least Right Now There are some really interesting factors at Play that affect All Of Us as investors in the short term that are worth taking into consideration. Because, at the very least, It's entertaining to learn about. At the very best, understanding These concepts Could Help Save you some more Money.

So, in terms of Why The Stock Markets down, We Can't talk about this Without mention Omicron, or Omicron. I have no idea How to pronounce It. It is what it is. This is a new Variant, recently discovered in South Africa, that lately has been making its Way Across the United States. Upon Learning about its existence, The US placed a travel Ban Within several countries. Additional Travel restrictions were Put in place, Germany Locked down its unvaccinated Residences, and as you would expect The Stock Market went into a tailspin.

Within The Last month, Airline and Travel Stocks have been at or near a bear Market. Tourism-based businesses are bracing for the worst, and everything seems to be dependent on the severity of a new Variant that's unlikely to probably be contained. But we can say that in relation to the Stock Market, The One Thing it hates more than Anything is uncertainty. Even though The prognosis seems to be optimistic so Far, The concern is that We don't have enough Data at our disposal to determine how much of an issue This is.

If It's more or less worse than other variants, How Bad symptoms Might be, or if it proves resistant to a vaccine. It's a whole bunch of question Marks that Just require More Time and testing. And When the Stock Market is Left to its Own devices, it tends to price in the worst Possible Case scenario. Of course, All of This is Wild speculation, using What IFS.

And what's Unique is that It's Not Just Travel and retail Stocks that are dropping, but instead, It's also tech and Energy, which should theoretically be doing even better If People are staying home. So why are they Falling? All Of that is Due in part to What's known as The Federal Reserve tapering. In the beginning of the Shutdown, The Federal Reserve lowered their Interest Rates All The Way down to Pretty much Nothing in an effort to stimulate the Economy.

The thought was that If borrowing becomes Free or at least very close to IT, companies would borrow more Money. They would spend more Money. People would make more Money, and the Economy would Grow. But as a Side Effect to that, We got an Investment Market that Skyrocketed to all-time highs while inflation skyrocketed to its highest level in over 30 years.

Now up until Now, The Federal Reserve assured US that These Price increases were Simply Due to Supply Chain bottlenecks and labor shortages during a time where demand was increasing. But throughout Last Year, inflation has proved to be a lot Longer Lasting and a lot Higher than Anyone anticipated, to the Point where now The Federal Reserve No longer Calls it Transitory, and instead They Want to take quicker actions to make sure Things Don't get too out of hand.

They've said from the very beginning that They have no intention of raising Interest Rates until They reach What's called maximum employment, which is basically Just a Fancy way of saying the maximum employment of an Economy that's not in a Boom or bust, Just coasting along. Now This is really important to mention Because on Friday, The US announced that the unemployment Rate dropped to 4.2, meaning We're getting very close to the point of maximum employment where They Could begin raising Rates Again.

Quick, everyone should Quit their Jobs in this Case. If Interest Rates increase, then tech and growth Stocks tend to decrease, because Higher Rates take away from Future cash flow. As a result, as you would Guess, the hand up Falling. That is Why nearly everything in Kathy Wood's ARC Fund is in a bear Market, except For Two. When the expectation is that those Interest Rates are about to increase, those Stocks Will Fall.

However, it is really important to Note that Interest Rates Are Not increasing Right Now, and the Plan requires it to be Done very Slowly. So most likely it'll be Over The Course of a Year. Regardless, though, Stocks and High Interest Rates are very much like Vampires and garlic. So a Sell Today is largely in anticipation of What's probably going to soon Happen, but Only Time will tell.

But The Bigger issue on the list is Something that I have yet to talk about Here on the Channel, and That would be the potential delisting of Chinese Stocks on the US stock Market. But Before we go into that, listen, I'm sure You're aware we are Now Days away from the New Year, and now is the time to make sure you have the Proper life insurance coverage to Help The People you care about the most.

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And with that said, Let's Get Back to the video. Of course, there's a bit of a Background. China and the US have had a Unique relationship over These Last few decades. On the Surface, China would Help The US with goods and Services, and Wall Street would Help China with Global finance. But in recent Years, China has become more strict with their publicly traded businesses, and by doing so, they've attempted to place more regulation Within their Economy.

However, this really began to boil over a few Days ago with the Chinese ride-hailing Giant Didi. The Company IPO in the US on June 30th, but alleged Chinese regulators Were Not Happy About the decision and now they've announced They Will delist from the US stock Exchange in favor of the Hong Kong Stock Exchange instead. The concern at this Point, though, is that if it Starts Here, Where exactly does it end?

There are a multitude of Chinese companies Trading on the US stock Exchange, with Alibaba being One of the biggest, with A $300 Billion valuation. As Anyone can see, shares of the Company have been Trading downward the moment its founder, Jack Ma, spoke Against the Chinese government, went missing for a stretch Of Time, and since then has rarely been seen. If a Company like this gets delisted, which is certainly a possibility, We Could expect US investors to begin losing a lot of Money.

On top of that, the SEC made it Clear that It's Serious about delisting Chinese Stocks from US exchanges If The companies Don't follow its Financial disclosure rules. This was the result of Chinese publicly traded companies like Luckin Coffee, who was accused of falsifying financials, raising Money in the US, and then collapsing once those numbers proved to be unsustainable.

The SEC claims that for Chinese Stocks to be tradeable on a US Exchange, they must agree to be fully audited and verified on a regular basis to ensure their accuracy. Otherwise, they're Just not going to be allowed. The Goal is to basically prevent a situation Where companies report erroneous Numbers, US investors buy them up, and the loss is at the expense of the investor, If and When These Numbers are Revealed to be False.

China, however, says that they're reluctant to let overseas regulators inspect local accounting firms due to National Security concerns. So, given this New audit and ruling, it's estimated that more than 200 companies Could be kicked off the US stock Exchange, and that would serve as a Major Warning to Any US investors buying Chinese companies. Now obviously, If this resolves itself, it Could be a good Opportunity, but you also Take a Massive risk in the Event Things get worse.

For that Reason, investing In These Stocks Right Now Is to take the Chance that They Will comply and not delist, which at this Point is up in the air. Although if you think Bitcoin and cryptocurrency is going to save you from a drop in price, not quite. Over the weekend, Bitcoin dropped $10,000 or 17% in a few Hours as $1.4 Billion was liquidated from the market in a sudden Flash Crash.

So, CoinDesk explains that 1500 Bitcoins were Sold in a single minute, and that triggered a massive Sell Event. All caused by One Major issue of cryptocurrency, and That would be leverage. One way of calculating This is through What's called Open Interest, which represents The number of Open contracts on a single Investment, or in more Simple terms, How many people have options to buy a specific Investment by a specific date in the Future.

In Stocks, One option Contract is a Contract to purchase 100 shares, so in Theory, your money is leveraged by 100 Times, giving you, of course, The Power to either make a lot of money or Lose a lot of money depending on Which way the market Goes. In this Case, however, CoinDesk mentions that Bitcoin-dominated Open Interest has remained above $365,000 for more than a month.

This could suggest the market is Currently over-saturated with leverage, and When that happens during a sell-off, we're very likely to see a Crash exactly like this. Just Imagine one person Selling a large amount of Bitcoin causing The Price To quickly Fall, but that Drop causes These traders to be Margin called, and their positions are Sold away to Cover their Loss.

However, that Selling Pressure causes more Margin Calls, which causes more Margin Calls and More Margin Calls, and All Of a sudden, The Price crashes further. Just Because the price is crashing further, all of a sudden, Now everyone with stop losses gets liquidated, and in minutes, You Can Have a situation Where the price Falls substantially out of Nowhere.

On the bright Side, this can reset the market in terms of leverage and provide a Fantastic Opportunity to buy The Dip like El Salvador, who Cheers every time it Drops to the Point Where They Could buy more. He even mentioned that he missed The Dip by a few minutes, but others also speculate that If The Stock Market Drops, People tend to Cash out of other risk Investments as a way to Raise Capital, and cryptocurrency Tend to Fall into that.

Although, with All Of that said, It's Still very important Just to zoom out for a little bit and realize that Bitcoin is up 150% over the year, and this is the type of Drop that happens on a regular basis for many Times, seemingly No Reason at all. To me, this Just Comes with the territory, and That's Why It's so important Only to Invest Money Here that You're comfortable watching drop in price.

Now for cryptocurrency, it makes up less than 6% of my overall portfolio, so if it Drops, I don't panic, and I just Keep buying more. I also Just Throw it over to BlockFi because At least they're paying me Interest on Something that I was planning to hold anyway. Of course, If Anyone Wants up to $50 with a Free Bitcoin, feel Free to use My link at BlockFi.com or use it Down below in the description If you want to Sign Up.

This is a Platform that I've been using Myself now for about a Year, and so Far been really Happy with them. Although, like I said, In The Big Picture, this is a normal occurrence for Bitcoin, so I don't see any Reason to panic even If The Price Falls further.

So, nothing to see Here! But in terms of How Common It is to see a Drop like this in the Stock Market, rest assured it actually happens Way more than you would think. In Fact, since 1920, The S&P 500 has on average Seen a 5% pullback Three times a Year. On top of that, Market corrections, which are defined as a Drop of 10% or more, happen on average every 16 months.

Throughout the last 20 Years, this kind of Drop happened 11 Times. Plus, if you're Anything Like Me and you enjoy averages, the average Drop so Far has been 15.6%, and it Lasts for 7.6 Days. Now bear Markets, on the other hand, are defined as a Drop of At least 20% or more. According to data, this typically happens every 7 to 10 Years, and when it hits, it tends to hit Pretty hard.

During a bear Market, The Stock Market Drops an average of 33.8%, and it Falls over a period of 363 Days. Although Any Drop more than that is actually Pretty rare, like throughout the entire market, a Drop of 40% or more has Only happened Four times in the last 100 Years.

Once in 1929, again during the 1970s, once Again during the.com Crash, and then Again in 2009. That's it. So even though It's Possible, it's certainly Not Common. All of This is to say that honestly, What We're seeing Right Now in the Stock Market is Nothing Special. It's Not Unique.

And If History shows US Anything, It's that this happens on a regular basis. In terms of What You could do about this, though, the saying "riches are made in recession" is a perfect Motto to live by. The Fact is, had you invested in the March 2020 Bottom when everyone was worried about The Collapse of the Economy, you would have Made a lot of money.

It's Kind of funny, but the best Times to buy are usually The times Where everyone Else thinks It's a Bad time to buy, and Things are going to get worse. So, Because Of that, you really shouldn't Fear Drops like this. Even though It's Hard To Watch and It's Not Easy seeing your money being flushed down the toilet, If you're not planning on Selling, and you don't need the money for the next 10 years, Just consider it a Holiday Discount.

Keep buying as normal and Don't Let it stop you in the moment. No One Knows What's Going to Happen, and Maybe it Drops even more, but Long Term, If you're diversified and don't Invest In companies that Can't audit their financials, you should Be OK.

As Long As You Destroy The like Button for the YouTube algorithm and subscribe. So, with that said, you guys, thank you so much for watching! Also, make sure to Hit The notification Bell and feel Free to add me on Instagram or on my second Channel, the Graham Stephan Show. I Post There every Single Day I'm not posting Here. So If you want to see a Brand new video from me every Single Day, make sure to add Yourself to that.

Thank you so much for watching, and until next time!