The Bull Market Of 2022 | Did We Just Hit Bottom?

What's up guys, it's Graham here. So, I had another video that was scheduled to post today, but with the current state of the market combined with the absolute annihilation of some of the largest companies in existence, I thought it would be more important to break down what's going on, why the market began to sell off, and what this means for the current state of the economy.

For example, we've already seen 300,000 jobs disappear in January from Omicron fears. The yield curve is getting close to inverting, which typically signals an upcoming recession. PayPal warns that spending has suddenly begun to decrease. The most surprising news from all of this is that owning cryptocurrency apparently makes you more desirable in the dating scene.

Okay, but seriously, let's talk about the likelihood of actually seeing a recession, why the yield curve is worth paying attention to, how Facebook is beginning to crash the markets, and then what you could do about all of this to make money. But before we start, I'll make you a deal. If you subscribe or hit the like button—your choice—I’ll show you this really cute picture of a baby hamster. If you want to see the hamster, just subscribe or hit the like button. Thank you guys so much! Here’s the hamster, as promised. And now, with that said, let's begin.

All right, so first, before we talk about stock market earnings, a lack of consumer spending, and upcoming fears about a recession, we need to mention one of the most important metrics that people look to for the future of our economy, and that would be the yield curve, which is nearing a key threshold that usually heralds a recession.

For anyone confused with how this works and why it's beginning to skew towards a rather ominous prediction, the yield curve pretty much graphs the short-term bond returns with the long-term bond returns. In this case, if you're unsure what a bond is, just think of it like an IOU that promises a return on your money for a set period of time.

It usually ranges anywhere from one month all the way to 30 years. Although where this gets interesting is that, generally speaking, the longer you lend your money for, the higher the return you should get, right? That’s because long term, you might not know where the markets are heading. You wouldn't be able to predict inflation 20 years from now, and there's more that could go wrong that would impact your overall return.

So, because of that, you should, in theory, be compensated more for the longer you invest. As you can see from this chart here, however, right now things are actually beginning to move in the opposite direction, which is known as what's called the yield curve flattening. This occurs when the short-term two-year borrowing rates increase while the long-term ten-year rates decrease, thereby signaling that investors see more risk investing in the short term than they do in the long term.

I know it sounds really confusing, but all you need to know is this: when investors want to lock in a guaranteed return, they'll buy long-dated treasury bonds, which drives up the price and drives down the yield. This leaves less demand for short-term bonds, which have to pay a higher interest rate to incentivize investors to buy them. When this happens, it's used as an indicator that economic growth is beginning to slow down.

And if those yields invert, meaning the two-year bond pays more than the ten-year bond, it's typically a warning sign of an upcoming recession. Even if we look back in history, an inverted yield curve has correctly signaled nine recessions since 1955, with only one false positive in the 1960s when there was an economic slowdown but no official recession.

Now, if we look all the way back to the 1960s, when the three-year ten-year treasury yield inverts for more than ten days, it took an average of 311 days from there to actually enter a recession. And once in a recession, it lasted an average of 17 and a half months. The last time we saw an inverted yield curve was in 2019, and, uh, yeah, we all know what happened in 2020.

Although in this case, even though Credit Suisse says that we currently have a 25% chance of an upcoming recession, they explained that since people have so much money saved—more money than usual is held in a ten-year treasury—thereby pushing yields down slightly more than usual and giving us a higher chance at a false positive recession signal. So overall, it is something to be made aware of, but that's just the very beginning.

Because in addition to the flattening yield curve, we also have the entire market being dragged down by some of the largest companies in existence. Of course, we've got to talk briefly about Facebook, I mean Meta, because whether or not you're buying the dip, their decline impacts nearly everyone in one way or another.

So, here’s what you gotta know in Facebook’s situation. Almost all of this began with an Apple iOS privacy change that now requires opt-in to being tracked throughout their browsing. See, before this change, anytime you’d visit a website like Facebook, the company would store little bits and pieces of your data in terms of which websites you visit, how long you spend browsing various products, and which purchases you make.

And then after a while, it could build a complete profile from which advertisers can better target and track a demographic. But that abruptly ended with the iOS 14.5 update, which reduces targeting capabilities by limiting advertisers from accessing an iPhone user identifier. Now, this doesn’t just impact large tech; it also impacts every single small business and individual who relies on that tracking to determine whether or not they’re generating traffic from a specific source.

For instance, in terms of myself, nearly every single one of my affiliate links in the description suddenly had difficulty counting how many people were signing up, and that got to the point where, almost overnight, I was only reporting 30% of the traffic that I used to a week prior. In fact, the New York Times reported that only 24% of iPhone users around the world have consented to being tracked by advertisers, meaning if your customer is using an iPhone, there’s a good chance that person is completely invisible.

Though obviously, many advertisers have tried to find a workaround to this, but the fact still remains that tracking data right now is incredibly complicated and that has a ripple effect throughout every single online business. Except, of course, if you’re Apple, in which case you just do whatever you want.

By the way, speaking of affiliates, if you want a free stock that’s now worth all the way up to a thousand dollars, you may as well use the link down below in the description and sign up for Public using the code Graham. You may as well do that because with stock prices down, that could eventually be worth a lot more when the market recovers.

In Facebook's case though, this results in an enormous hit to the future of their revenue. And now that they’ve been stripped of their customer data, their stock price plunged, bringing down the entire market alongside with it. Just consider this: when you invest in the S&P 500, your investment is weighted by the market cap of each company. As a result, if you invest a hundred dollars, twenty dollars of that is invested in just the top five largest stocks, and Facebook is one of them.

In this case, if Facebook's market cap makes up two percent of the entire index, that stock selling off by 30% causes the entire S&P 500 to sell off by more than half a percent just from one stock. On top of that, there's very much a ripple effect where if Facebook sells off, then Snapchat should too.

And while Snapchat is at it, let’s sell off Twitter, and, uh, well then at that point we may as well just sell off everything in the market. Falls. For example, in addition to being unable to track marketing campaigns, PayPal just warned that consumer spending is about to substantially decline because of Omicron inflation and a lack of government stimulus.

This isn't just their own theory either; even the US government posted their findings that spending declined by over half a percent in December, as the Wall Street Journal explained. A portion of that was simply due to rising prices as people became tapped out from what they would ordinarily be able to afford.

However, even though these might begin to point to recession concerns, here's what you have to know: usually when people refer to a recession, the first thing that comes to mind is a falling stock market, declining real estate values, high unemployment, and an overall bad economy.

But technically, a recession occurs when we see two consecutive quarters of economic decline, as reflected by the GDP. Or in more simple terms, that just means that our economy is beginning to shrink as fewer goods and services are produced. However, when it comes to the stock market, here's what I found really surprising: since 1950, not every recession has coincided with the stock market going down.

According to them, on average, the market declines 5.3% during an economic recession. The worst drop was 36.4%, and the stock market’s best gain totaled 16.6%. On top of that, we don’t know we’re in a recession until we’ve been in one for six months; hence, predicting one is a fool’s errand.

Although it does seem as though when you look back over the last 70 years, every single recession so far has marked a great buying opportunity, where within the following three to five years, prices are significantly higher than where they started. So in the short term, if we do see a recession, prices do tend to go down, but not always.

And in the big picture, if stocks do decline, that’s usually signaled the relative low of the market. But then we had this CNBC report that owning cryptocurrency may make you more desirable on the dating scene. Yeah, apparently 33% of Americans said that they would be more likely to go on a date with someone who mentioned crypto assets in their online dating profile.

And even more surprising is that nearly three in four would be more interested in a second date with a person who paid the bill in Bitcoin. Just wait, this gets even better. Nearly 20% of singles would be more interested romantically if you set an NFT as your profile picture on a social platform or a dating site.

Now, unfortunately, I couldn't find the study itself, which should break down exactly how and where they found 2,000 adults willing to partake in a survey or if they're just scraping the barrel from Wall Street bets. But as interesting as this is, I can't say I'm surprised. Even though I’m certainly not a dating expert from the standpoint of being memorable, cryptocurrency brings up an interesting talking point.

And if you pay your bill in Bitcoin, you’re probably gonna stand out. As far as getting your profile picture as an NFT, I am shocked to find that twenty percent would be more romantically interested. But that could also mean that eighty percent would be less romantically interested. So, uh, take that for what it's worth; I probably wouldn't do it.

All right, but seriously, while we're on the topic of cryptocurrency, just the other day it was announced that the IRS may not tax unsold staked cryptocurrency, and that's really good news. Just consider this: when you stake your cryptocurrency, on a really simple level, you’re investing your cryptocurrency within the blockchain to generate a return.

And when you get that return, it's paid back in that token. But in this case, because they classify cryptocurrency as property, no taxes are owed until you actually realize those gains, meaning you could in theory just keep reinvesting those profits and letting it all compound tax-free until you eventually sell and buy a mansion.

Okay, it might not be that easy, but this will absolutely set the precedent that others will begin to fight the IRS on paying tax on their cryptocurrency until they actually sell. After all, the price will fluctuate, and there's always the chance that they'll be taxed at the current market value at the time they receive it versus at the time that they actually sell it, which could be lower.

The whole thing is honestly a big mess that's wide open for interpretation, so I would take all of this with a grain of salt and just walk away with the knowledge that most likely we need more details, and only time is going to tell exactly how this plays out.

So overall, even though some of this sounds kind of spooky, I’m not changing up my investing philosophies. I’m still buying into an index fund on a regular basis, and I’m still allocating eight to ten percent of my portfolio to a 50/50 split between Bitcoin and Ethereum.

And that's it! I have to say, it is incredible watching these momentous swings between some of the largest companies in existence, and it is concerning that we’re seeing 20% price swings in companies worth more than $500 billion. But it's still best to stay the course, keep invested, keep buying as usual, and no matter what, subscribe and hit the like button.

So thank you guys so much for watching! Also, make sure to add me on Instagram and 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.

Joy, thank you guys so much for watching, and until next time!