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the coupon on building your wealth ends tomorrow evening make sure to r use that check them out in the links below hey everyone meet kevin here will the stock market bubble top in january in this video i'm going to share with you as much as i know about market moving catalysts that are coming between now and the end of january remember catalysts are things that can accelerate the stocks market growth or decline so let's go through some of these right after i cover some fundamentals that are fascinating and important because they play into our expectations now first i've discussed this before but the magazine the economist reported that 25 of all currency in existence today was created in 2020 thanks in essence to the central bank's money printing addiction which isn't even really money printing anymore they just change digits on a spreadsheet so what's crazy here is especially during a time that the stock market feels terribly overvalued try this take the price of the s p 500 when it closed at the end of 2019 which it closed on december 31 2019 at 3221 and 29 cents take that and add 25 to it well that breaks you and just over 4 000 per share right now the s p 500 on an index basis is somewhere around 3 700 per share which actually says given a 24 25 increase in the money supply or it might actually be undervalued relative to december 31st 2019 now that is an overly simplified metric and we're not going to say the market is undervalued because of solely this but it is a way of showing us oh crap i mean it makes sense if there's 25 percent more money around and we take the stock price of the s p 500 at the end of 2019 just add 25 to it assuming that as everybody's money floats up more people throw it into the markets hey you could totally see that kind of change but now you could actually get even more rude and add in the average annual rate of return to that because not only did we you know print 25 percent of money essentially and if we're gonna float up the s p stock price by that well then we'll be around four thousand but now we gotta add an average annual return well i put together a little spreadsheet and i just listed all of the s p 500 returns for the last 20 years and if i take an average return of the last 10 years i get an average s p 500 return of 12 per year for the last 10 years that's really really good money now if we add in the great recession unfortunately this return literally halves it goes down to 6.01 but even that is pretty decent and if i take the blend of these two we could say hey let's go ahead and add nine percent appreciation to this value and hey we could get s p value 4 400 as a reasonable potential expected value for the end of 2020 just because of all the insane money printing that's being done so given this including average returns if the roney rona weren't around hey s p 4400 here we come but the reality is given that restaurants retail and travel are all slugging down the s p 500 making the s p 500 look really expensive because earnings are removed and tech companies they don't like earnings so they spend all their money on research and development anyway so they can keep saying they lose money and keep focusing on growth well we get to what look like really scary p e ratios with the s p 500 and if you focus on p e ratios in the s p 500 you're probably missing the big shift that's happening in the s p 500 shift towards tech and future growth not earnings today but i will say things look a little topsy-turvy in the markets and this is where we have to consider catalysts for a potential market crash now while the market could sell off without any clear catalyst this does happen sometimes usually people end up buying the dip and prices stabilize unless there is a severe negative catalyst that is actually coming out to be a real negative problem so what i wanted to do is go through all the catalysts that i think we've got potentially coming up knowing this sort of fundamental backdrop of these structural changes happening over at the s p 500 shift towards tech so what we need for the market to sell off and for us to get another black friday sale in the market is some form of fear panic or world ending paranoia and this is kind of what leads to market shocks in march obviously we had a big old shock we had world ending paranoia in september we had a tax sell-off that was due to valuation fears in the tech market and since we're way beyond those prices but that was fear right and in october before the election we panicked over a country that was certain to fall into oblivion and you know flames of protest wars after the election which never materialized so what are our new fear catalysts going forward do we even have fear catalysts going forward this is where things get it gets interesting we've actually got quite a few let's go through the list and you're going to want to stay to get through all this list because some of these could be more severe than others they're not ranked in any particular order first mutant covid we know we've got a few mutant strains of cobid we know right now there are 20 to 30 popular strains of coven but we've got the one in the united kingdom that spreads 70 faster than other forms of covid and is being blamed for cancelling christmas in the united kingdom now they did get brexit done which is cool that was a big fear catalyst back in 2019 but the market's kind of shrugging that one off maybe they already priced that deal in so that thing done instead we got to focus on this covet here there's even talk about another a south africa variant this time that could actually be even more transmission transmissible than the united kingdom variant which is crazy because that one in south africa has already replaced and dominated most of the other strains in south africa and you know strains of covid different types of strains usually not a big deal the severity of the disease tends to be stable so far from what we can tell there doesn't seem to be one strain that's more deadly than the other yeah one might be more transmissible than the other but in actuality next week we expect the world health organization to announce that they'll probably believe mutant covid will respond just as well or close to just as well to previous strains of covid to the vaccines that we have now this is where we have a catalyst potential if the world health organization comes out and says hey look the vaccine is still 85 plus percent effective i would expect moderna pfizer and the other mrna stocks to perform very well on a rebound and the market to keep chugging along if these vaccines don't hold up and all of a sudden we hear that the vaccine's only 40 effective like the old flu shot well we could immediately see a pretty fast rotation in the stock market and so while i think the chance of this is small that the vaccine won't work anymore i would expect an instantaneous and severe rotation if we got bad news on the vaccines bye bye restaurants buy buy travel by by retail and hello zoom again which wow you seem cheap at 377 dollars relative your to your previous high-flying valuations we got amazon and tech should obviously do very well again if we had this instantaneous reaction back but initially everything could potentially sell off as people assess the consequences of what could mean you know shuttered businesses what's the result of shuttered businesses for another you know potential year or two years uh into the foreseeable future what what's that going to do to the market well it'd be pretty pretty bad now i think this is a relatively small on the list of chances of happening but it is a fear catalyst that that exists and that could even be uh deemed as bad as a world ending catalyst if we got really bad news on the vaccine we'll see thus far though most of this could potentially just be fear-mongering that's because doctors so far believe that hey the vaccines are designed to handle mutations and we really shouldn't have issues they target the protein spike and there's plenty to expect that the vaccines will continue to target the protein spike although you do have some researchers saying well the protein spike is where we've actually got some mutations so we'll see vaccine uptake is also potentially a little slow we were expecting to get 20 million people vaccinated by december 31st and here we are on christmas eve with seven days to go before the 31st and we've only got one million people vaccinated second catalyst an eviction crisis with or without stimulus which that might seem ironic because the stimulus package is supposed to solve the eviction crisis right maybe not morgan stanley worries that we could be as much as 70 billion dollars behind in rent even if stimulus passes congress is only allocating 90 of the 25 billion dollars to back rent and back utilities if you reduce this by another 20 due to fraud because we all know there's going to be fraud you're really only providing an 18 billion dollar band-aid to a 70 billion dollar problem that is if we even get the stimulus package at this point this means that come january 4th i would not be surprised to see an eviction crisis in the headlines across the united states with sheriffs on already processed eviction cases currently waiting to evict families they could storm in january 4th when the eviction ban is over and we're back to our first business day of the year except business this time might mean kicking people out of their homes which what is the consequence of that well you take people who can't afford their living space and you throw them into poorer communities aka you concentrate the poor make education and the poor areas suffer even more and we could potentially see new housing inventory and sort of those mid-priced markets come up on the market pretty dang fast that could actually depending on how many of these we see be a good thing for home buyers gives us more inventory or we'll get inundated with inventory depending on how things go and we could potentially see a micro crash in the real estate market micro cash 10 to 15 sell-off in the market kind of like what we saw in the summer of 18 which remember summer of 18 we had our micro crash in the real estate market what happened after that gave we gave it about two to three months and the stock market started selling off of course the rationale was oh well rates are going up and we got a china trade war but real estate signaled that crash coming months ahead now as valuations come under threat in real estate in a potential micro crash stocks might also start scratching their heads as well due to valuation concerns reiterating the idea that a real estate sell-off could lead to a stock sell-off now the third catalyst seems to be an unemployment disaster that is having substantially many more people laid off now even though the unemployment and the unemployment rate really does affect the economy it weighs it down like a small anchor it doesn't seem to directly affect stocks as much as we think it might it seems more like unemployment is a consequence of what's actually happening in the market oh we get bad earnings companies issue layoffs and then we get unemployment but that might then already be priced into the stock market so usually we don't see higher unemployment levels in my opinion at least lead to lower stock prices that seems to be more of a vice versa a situation where you've got unemployment going up because of bad earnings anyway do consider though as maybe a more important risk than what the unemployment disaster is consider what ray dalio's firm over at bridgewater capital suggests and that could be that we have such high expectations for earnings to be so insanely impressive going into 2021 that we might all be really disappointed and that is the fourth catalyst what if earnings miss in a really nasty way well the problem is when you get earnings that miss at the first companies to start filing their earnings every other company starts oftentimes selling off in anticipation that their earnings are going to be bad as well so this does create a potential for a market sell-off if we really miss those q1 earnings so high expectations definitely a risk factor and high expectations in the stock market definitely can lead to bubbles getting popped so this might be more severe of a catalyst that we want to pay attention to however right now we don't have that many alternatives to invest into you look at bonds yields suck you look at real estate there's not that much inventory you look at the links down below you find look at bitcoin crap miss that rally it seems like everything is expensive this is where we have to ask ourselves could a crash in stocks lead to a surge in bond investments or would any kind of crash just be temporary like we saw in september and october those periods of uncertainty were here for two maybe three weeks and then they were gone catalyst number five georgia georgia january 5th runoff election republicans losing their one point lead in the georgia runoff election polls so far according to 538 is making some people nervous that potentially democrats could take the lead now right now we do still have purdue 0.5 percent ahead of their democrat challenger and senate republicans only need to maintain one seat to maintain control of the senate but if democrats win in what could potentially be a surprise expect ev electric vehicles tech marijuana to skyrocket but be careful because there could be a tax hike fear that could lead to a sell-off so we've got a little bit of a balance going on if democrats take control if republicans win we're probably just going to be chugging along with the same kind of status quo gridlock and the same chugging along stock market and see there's even evidence to suggest that gridlock actually keeps inflation low because it keeps government spending low which could be deemed by some as keeping government trust high that they're not just going to spend like crazy which is it's insane to say hi trust in government in the same sentence but from an inflation point of pov people actually like the stock market in general likes it when there's gridlock because again it's harder to spend money and you get insanely low inflation expectations and that actually keeps rates low which keeps the stock market propped up crazy crazy how the market works then we've got the potential catalyst for january 6th january 6th and even inauguration day inauguration day or mike pence's certification of the election on january 6 could both be days of violence or protests though if we consider the lack of post-election protests last time this seems less likely to actually affect the markets and when we look at the black lives matters pro black lives matter protests that we had in the spring and early summer those didn't really affect the market either the next catalyst number seven would be a government shutdown at the end of 2018 we had a government shutdown that we might repeat in fact we had an insanely long 35-day shutdown at the end of 2018 as donald trump forced funding for his border law wall well guess what the s p 500 did during the lockdown now in fairness the s p 500 did have the china trade fears sell-off in november but literally if you look at the s p 500 dates at the end of 2018 and you overlay that with the government shutdown the s p went up about 10 in 35 days seems like the market just don't care the market is weird number seven catalyst cyber security look we know after the massive cyber attack via solarwinds that allegedly hacked into computer networks of top officials the treasury department and other departments throughout the country that are very sensitive donald trump of course says no it's not a big deal but we do know that biden is kind of freaking out about it and it's potentially that biden is freaking out because he doesn't know if there was damage because trump's not telling him or he knows there's damage and he's freaking out because it's concerning we really don't have an idea other than biden saying he wants more information wants to investigate this how much of this is politics who knows but now it does kind of make us wonder how much does russia know about us and more importantly what's biden going to do about it see biden suggested that we give russia or anyone who cyber attacks us an equal and appropriate response which when he was asked in questions he even mentioned the word nukes now is he actually planning on using nukes to respond to a cyber attack probably not but he said an equal response would be merited and he's the one who raised eyebrows by even mentioning that word so which of these catalysts is the most dangerous well look if you're in recovery stocks obviously you know covet mutations are your biggest risk low vaccine uptake those are your biggest risk high debt at these indebted recovery stocks those are your risks regarding the other ones look i can't really say that any of these are jumping out at me screaming in my face going oh my gosh this is a big negative catalyst and if this came true we got major problems i might be blind to a really big negative catalyst coming up and if you've got one let me know down in the comments but what is possible and this is probably more realistic is a combination of multiple catalysts that could be bad individually none of these make me too terribly fearful to the point where i don't want to be fully invested as such my plan going forward i mean for the rest of the year here is take advantage of the last few trading days get fully invested up to 20 margin and then when we go into 2021 i'll be on standby to see what kind of opportunities i can go shopping for my plan is really to reduce margin at the same time as these catalysts disappear if the market sells off because one of these catalyst hits in january i have no plans to sell any stocks to protect against 20 margin it's a relatively low exposure instead i think i'll take the advantage and go on a buying spree and actually use some margin or new income coming in to go shopping for cheaper stocks although right now as much as i want to sail on stocks i really personally just me i'm literally making up these numbers so don't hang your hat on them but i think there's only a 25 chance of a 15 correction i'd say we have a 50 chance of maybe a 10 correction that's reasonable you know over the next 35 days i think that's reasonable 50 chance of that you know that's again decent i'm not going to be not invested for a ten percent correction though that that doesn't make sense uh and that's why i am fully investing because again i only think there's a 25 chance of a 15 or more correction and then when i think about like what about a big you know margin risking sell-off yeah a 30-plus percent sell-off something that would start kind of making you go like oh how long is this gonna go you know between now and my birthday on january 28th i don't know i'm marking that up as a 10 chance unless i'm really off here i'd i'd have to be missing some big catalysts or a black swan which look kovit was a black swan but what did we do when covet came around we went shopping too so now i didn't have margin going into covet coming around but uh that is my those are my current plans and who knows maybe by the end of february or march i can get back to zero margin we'll see how it works regarding the portfolio but these are my plans this is my catalyst watch we'll see what happens i want to know what you think and folks if you like this kind of content consider sharing this you
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