THE FED JUST CRASHED THE MARKET | Major Changes Explained
Published: 2022-11-02
Status:
Available
|
Analyzed
Published: 2022-11-02
Status:
Available
|
Analyzed
Predictions from this Video
Incorrect: 0
Prediction
Topic
Status
Experts predict that continued Federal Reserve interest rate hikes will lead to a global recession.
"experts warn that they'll drive us straight into a global recession in which this would just be the very beginning"
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The Federal Reserve aims to create a deflationary environment over the next few months by balancing employment shortages and returning the economy to its target.
"over the next few months their goal is to create a deflationary environment where prices come back down employment shortages are balanced and the economy returns to their ideal Target"
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The Federal Reserve's current actions and statements are expected to impact investments across stocks, savings, and real estate.
"now that inflation is not going away so in terms of what's happening right now what the Federal Reserve just said as of a few hours ago and how this is going to impact your investments from stocks to savings to real estate here's what you need to know"
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Mortgage rates have nearly tripled since January, reaching their highest point since 2002.
"since January mortgage rates have almost tripled from 2.8 to now over seven percent and as of today day we're sitting at the highest rates that we've seen since 2002."
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Home sales are declining significantly, with new construction sales down 10% in the last month and 30% year-over-year, reaching lows not seen since the 2010 mortgage crisis.
"as a result home sales are tumbling recent reports have found that new construction sales have declined 10 percent in the last month they're down 30 percent year over year and that marks the lowest we've been since the mortgage crisis in 2010."
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Buyer purchasing power in the real estate market has decreased by over $100,000, indicating a downward trend.
"buyers purchasing power has been reduced by over a hundred thousand dollars leaving the market with nowhere else to go but down"
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Mortgage demand is at a 25-year low.
"mortgage demand is at its lowest level in 25 years"
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Home buyer confidence is at its lowest since 2011, with only 19% believing it's a good time to buy and 59% believing it's a good time to sell.
"in October of 2022 was fairly telling in terms of which Direction the market thinks were headed in the most recent report only 19 percent of home buyers believe that now is a good time to buy 59 believe it's a good time to sell and this represents the lowest confidence in the market since 2011."
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US net worth has decreased by $7.7 trillion due to falling stock values.
"U.S net worth fell 7.7 trillion dollars in wake of declining stock values"
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Despite recent stock market gains fueled by optimism about a Fed pivot and slowed rate hikes, some analysts believe it's a bear market rally before a further crash.
"even though stocks are up from the optimism that weaker economic data could cause the Federal Reserve to Pivot along with Bank of Canada's recent decision to slow rate hikes during recession fears others believe that this is just a bear Market rally while stocks temporarily recover before crashing even further"
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Historically, bear markets have typically included rallies of 5% or more, with two-thirds experiencing rallies of 10% or more between 1901 and 2015.
"every bear Market between 1901 and 2015 spawned at least one five percent rally in rallies of 10 percent or more interrupted two-thirds of the 21 bear markets over that span"
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The Federal Reserve will consider the time lags between monetary policy actions and their effects on the economy and inflation when making future decisions.
"even though their intentions were to raise rates so that it's sufficiently restrictive to return inflation to two percent over time they followed that up by saying that they'll take into account count the lags in which monetary policy affects economic activity and inflation and economic and financial developments"
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The Federal Reserve's acknowledgement of policy lags allows for a more cautious approach, enabling them to pause or slow rate hikes and assess the economic impact.
"by acknowledging these lags it gives the Federal Reserve enough time to pause slow down the rate hikes adjust as needed and basically take a wait and see approach without having to drive the economy into a disaster"
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There's a risk of entrenched inflation, where consumers expect prices like rent and medical services to remain high.
"there is the concern that inflation will become entrenched within the economy meaning consumers believe that inflation will continue to rise and that will reach markets which are unlikely to come back down in price like rent and Medical Services"
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Savers can now earn a significant amount of interest on their savings accounts.
"Savers are finally able to earn a respectable amount of money in a savings account"
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Government treasuries are yielding 4-4.5% for terms over three months, and other bonds are yielding over 6%.
"government treasuries are currently paying about four to four and a half percent on all terms above three months and other bonds are paying above six percent"
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There is significant demand for inflation bonds, with a mention of locking in 9.62% yields.
"locking in 9.62 inflation bonds"
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Due to inflation, holding onto debt longer can make it easier to pay off in the future.
"as backwards as this sounds the longer you don't pay off your debt the easier it is to pay off your debt I know that sounds kind of weird to say but trust me the math works"
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Analysts have differing predictions for when the Federal Reserve might pivot, with some suggesting early 2023 and others late 2023.
"some analysts believe that this will occur once inflation begins to subside which could be as soon as early 2023 While others argue that it'll probably be a lot later like the end of 2023"
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A Federal Reserve pivot might manifest as a 50 basis point rate hike or a brief pause, rather than a significant policy reversal.
"if anything it's likely to be a 50 basis point rate hike instead of a 75 or maybe a quick pause so that they could wait and see what happens"
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There's a possibility that stocks could crash further after a Fed pivot as the market overcorrects.
"once the FED pivots stocks crash even more while they open over correct the situation"
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Historically, the market has traded flat or declined following Federal Reserve balance sheet reductions or pivots.
"every time that that scales back on their balance sheet or pivots in this case the market trades flat or Falls"
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The Federal Reserve tends to adjust its policy pace only after unemployment has risen and a recession has already occurred.
"they often begin to change their Pace once unemployment is already increased and once a recession is already realized"
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It's impossible to time the market; the best strategy is to remain employed, save money, and dollar-cost average into investments.
"no one can time the market and generally the best strategy is to stay employed save money and dollar cost average to the markets"
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The speaker is maintaining 20% of their net worth in cash, allocated to treasuries and high-yield savings accounts.
"I'm currently keeping about 20 percent of my net worth in cash spread between treasuries and high-yield savings accounts"
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The speaker is regularly buying US and international stocks and actively looking for real estate deals.
"I'm buying into U.S in international stocks on a regular basis and I'm keeping a lookout for a good real estate deal whenever that might come up"
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