The Market Is About To Drop - Again
Published: 2022-05-13
Status:
Available
|
Analyzed
Published: 2022-05-13
Status:
Available
|
Analyzed
Predictions from this Video
Incorrect: 0
Prediction
Topic
Status
The stock market is on the verge of a bubble comparable to the dot-com crash and the 1929 Great Depression.
"the stock market was on the edge of a bubble similar to the magnitude of the dot-com crash and the 1929 great depression"
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Bubbles exhibit six predictable and recurring historical categories.
"bubbles like this could be measured throughout six predictable categories that repeat themselves throughout history"
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A bubble indicator reached 70% of the peaks seen in 1929 and 2001, signaling severe overvaluation and potential stock market crash.
"he noted that the bubble indicator was approaching 70 percent of the peaks last seen in both 1929 and 2001 suggesting that some stocks were severely overvalued and poised to crash"
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The stock market has experienced a decline ('popped') since the initial assessment of overvaluation.
"since that first article came out the stock market has for a lack of a better word popped"
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Market bubbles can take a long time to unwind, and their current state below extreme levels does not guarantee safety or a good time to invest long.
"bubbles could take a very long time to unwind and that just because they aren't at a bubble extreme does not mean that they are safe or that it's a good time to go long"
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Aggregate US stocks remain overvalued based on current measures.
"US stocks in aggregate still look overvalued by our measures"
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After a bubble pops, markets tend to trend downward, with historical precedents suggesting a settlement around a 20% decline.
"once a bubble pops it continues to trend downward and in this case most previous bubbles tend to settle around 20 percent"
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The trajectory of emerging tech mirrors that of historical bubbles in 2001 and 1929.
"emerging tech has followed the exact same trajectory as both 2001 and 1929."
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Widespread belief in an impending market crash may indicate the opposite outcome, suggesting a potential buying opportunity.
"the more people believe there to be an upcoming crash the more likely the market is to do the exact opposite of that and not crash"
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Recessions typically begin after periods of peak market euphoria, not peak fear.
"the beginning of a recession is usually after peak euphoria not after peak fear"
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Significant drops in consumer sentiment have historically correlated with an average 23% gain in the S&P 500 over the subsequent 12 months.
"large declines in consumer sentiment translates to an average 23 gain in the s p 500 over those following 12 months"
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Increased investor worry is often a leading indicator of a market bottom.
"the more worried investors are the more likely we are to have bottomed out"
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A downward market trend may signal an upcoming reversal.
"now that we've begun to trend downwards maybe this could be a sign that we're about to see a reversal"
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Fear is currently the primary driver of the market, evidenced by trading below the 125-day moving average.
"right now the market is mainly driven by fear especially as the market trades well below its 125-day moving average"
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The stock market historically tends to underperform between May and October.
"the stock market tends to underperform in the six month period between may and october"
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Since 1928, the average return for the month of May has been -0.1%.
"since 1928 the average may delivered a return of negative point one percent"
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From 1950 onwards, the May-October period has averaged a return of +0.3%.
"since 1950 the may through october time frame has returned an average of positive 0.3"
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The June-August period is historically the second-best performing part of the year for stocks, with a 63% probability of gains and an average return of 2.97%.
"the june august period typically is the second best of the year with gains 63 of the time and an average return of 2.97 percent"
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In the last decade, stocks have consistently delivered positive returns during the May-October period.
"over the last 10 years stocks have delivered positive returns over every six month period between may and october"
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A shift towards bearish sentiment is a positive sign, as irrational exuberance is a stronger indicator of a bubble than excessive pessimism.
"if anything it is a good sign that people are beginning to be bearish because if anything irrational exuberance is a much bigger indicator of a bubble than excessive pessimism"
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Bubbles frequently overcorrect, experiencing sell-offs that extend beyond fundamental valuations.
"bubbles often over correct and sell off beyond what their fundamentals would suggest"
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Significant price drops during market downturns can present excellent buying opportunities.
"if things get bad prices get worse and that could be a fantastic opportunity to keep buying in"
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Only 30% of Americans believe now is a good time to buy a house, the lowest recorded figure since 1978.
"only 30 percent of americans believe that now is a good time to buy a house which is the lowest on record since they started the survey in 1978"
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Housing affordability is currently at one of the worst levels on record.
"home affordability which right now is almost the worst on record"
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Even if housing prices remain constant, a new low in housing affordability is imminent due to rising rates.
"if housing prices stayed the exact same we could hit a new low for housing affordability any day now"
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The average monthly mortgage payment has increased by 72% since the start of the pandemic.
"the average monthly payment having increased 72 since the onset of the pandemic"
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A 'lock-in effect' is occurring in the housing market, where homeowners are hesitant to move to avoid losing historically low interest rates.
"we're also seeing what's described as a lock-in effect where homeowners refuse to move because otherwise they'd be giving up a historically low interest rate"
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The current real estate market presents opportunities for investors as sellers are motivated to sell quickly.
"as a real estate investor now for over a decade this is actually the time i'm beginning to get back into the real estate market because there are finally deals to be had from sellers who want to sell or cash out quick"
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Rising interest rates may lead to market softening and increased inventory in some areas, but a lack of new construction and strong demand could keep prices relatively high.
"i would not be surprised if rising rates leads to some softening throughout the markets and some parts of the country could begin to see a lot more inventory but because of a lack of new building and strong demand i would not be surprised if prices still remained fairly high"
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Ray Dalio accurately identified several market segments that were significantly overvalued and have since experienced substantial declines.
"ray dalio did correctly call out several segments of the market that were drastically overvalued and have fallen a significant amount"
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Diversification across various asset classes including stocks, real estate, cash, and cryptocurrency is recommended as a solution to market fluctuations.
"the biggest solution for all of this is to simply diversify as continuously as possible throughout as many different sectors as possible whether that be stocks real estate cash and even a little bit of cryptocurrency"
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Historically, markets have shown a long-term tendency to recover and trend upwards eventually.
"long term history has shown us that eventually markets recover prices trend back up"
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