The Recession Just Started | How Not To Lose Money

"come may 4th the market is predicting that we will increase rates by half a percent"

"so now let me show you how to interpret all of this data so you can use this yourself i promise it's going to make perfect sense all right i apologize ahead of time if this is already super basic to you and you understand i just want to make sure that everyone understands what i'm talking about so if you click at the top the date may 4th 2022 which is the next time that the central bankers or the fomc gets together to decide interest rates which is going to be this week you will see two bar graphs pop up one on the left and one on the right and at the top of that page you will also see the current target rate is between 25 and 50 basis points"

"the market is pricing in that come may 4th the odds that it will still stay the same to be 2.9"

"and as of right now that is between 75 to 100 basis points that's the market's guess that's what it's pricing in that converts to once again point seven five percent to one percent and the market is pricing in a 97.1 percent chance that rates will most likely be between that range come may 4th"

"there are rumors flying around that papa powell will announce at this fed meeting that the next time the central bank raises interest rates it could be as big as 75 basis points or 0.75"

"if you click the 15th of june 2022 this time you will see three bar graphs now the reason we're seeing more is because the farther out into the future you try to look the more possibilities there become because now we're making an assumption based on another assumption right and that's not always as accurate so we have to account for more possibilities but the same rules still apply because the left side of the bar graph so the first one you see is what we expect the federal fund rate to be that's our assumption and that's anywhere between 100 to 125 basis points so once again anywhere between 1 to 1.25 percent"

"now the middle bar graph shows there's an 11 chance that interest rates will be between 125 and 150 basis points which of course translates to 1.25 and 1.5 percent but what the market thinks is the highest probability of happening is when interest rates will be between 150 basis points and 175 it thinks there's an 88 chance and that of course translates to 1.5 to 1.75"

"bond prices will keep going down but their yields will go up especially once the fed starts to sell off their bond portfolio"

"all the predictions and all the estimates i've given you are based under the assumption that the federal fund rate will be at 300 basis points by the end of this year or three percent"

"two weeks before interest rates go up the markets on average have reacted negatively"

"and two weeks after interest rates go up on average the markets have also gone down"

"but after that two week period the stock market starts to recover and in some cases by a lot and most of the recovery happens by the six month mark"

"between 1869 and 2018 we've had 30 recessions and of those 30 16 of them have had a positive stock market with an average return of 9.8 percent despite the fact that the gdp declined an average of 3"

"and the other 14 times where the stock market was negative it lost an average of 14.2 percent"