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hey welcome back to two stupid guys TR Sox I'm Dylan and I'm Vinnie and last week we looked at timing of the rate cut and future 12month returns this week we actually correlated that with the labor market and it is not what you think is actually really really cool um the most important data point is not the fomc meeting coming up it is this week and we you know we got to pay attention to what happens here because history tends to repeat themselves so let's let's take a look here all right so this is what we did last week it was pretty interesting right there was only two negative returns after a rate cut after the previous 14 times in history right so logically this rate cut should lead to a positive 12month return we asked the community um I thought this was hilarious there's I'll save you the the time there's basically like two yeses and then like throughout all the other comments like 50 NOS so the odds of a recession according to the main you know you know everybody no there is is not going to be a recession I disagree respectfully depending on this Friday's September numbers and the first Friday of October's numbers not the fomc meeting the reason why I don't think that's important I think we all kind of know there's a rake cut it's just if it's 25 or 5050 and it's really looking like it's 25 so I'm not that's not like a surprise all right and but the Friday numbers you mean jobless claims that's the thing you're gonna be focused on yeah first Friday of every month we get the jobless claims so last uh last time the first Friday of August we got the jobless claims unemploy went up to 4.3% everyone was very very nervous Goldman Sachs went from 15% to 25% recession this year however they have changed that back to 20 because of this so this is good news but basically this is uh seasonally adjusted initial jobless or unemployment claims but it's weekly so you can see that we actually curved up here so okay they're not worried about the the rapid continuation that makes sense okay um now granted this is not the best metric that's why we got to make sure now this is that super scary convoluted slide bear with me this is the 14 times that we have had a rate cut and then the following 12 month returns so you see we only had two negative returns that was in 2001 2007 after the rate cut and then mostly positive and mostly very positive you know most of these are over 20% returns so this is this is a big decision because you do not you know if if people are thinking of shorting if think people are thinking of staying cash because they're scared which I think maybe this is just me it looks like everyone else just wants to go all in which yes at least look at this before you do that um what we're going to do we're going to take a look at these three data points correlated with what was happen in the labor market a year before and a year after okay okay why did you pick those three though just out of curiosity oh we're we're going to do all of them oh okay yeah but these three have the same pattern of the recession started a large amount of time before the rate cut Perfect all right and they're fast don't worry so you have this is the rate cut the red okay and then here is 12 months after and 12 months before of the unemployment rate okay so it's 25 data points 24 months plus the rate cut month the pink is the market low and then the green is the length of the recession the start and the beginning the start and the end okay that make sense yeah I'm just trying to draw some sort of correlation from the data here and what it's trying to tell me so essentially we're having a relatively low unemployment rate okay recession starts we have a low in the market and then your rate cut so obviously when you have a low in the market before the rate cut the following 12 months are going to be fantastic when I say low I mean low for years low for anywhere till the next recession okay okay so you have your rate cut towards the end of the recession your Market low and they all kind of have the same pattern of ramping up ramping up ramping up this is the only one that's different cuz there's another recession one month after this data point so not ideal oh I just realized you can't my arrow a rate cut in response to a recession that's already occurring is kind of the the pattern here oh you couldn't see my arrow the whole time but yeah pink Red's Ray cut Green's recession pink is the low so you can see we have this whole ramp up every time except for that one that one's a little bit weird okay okay the these are when the oh that's supposed to be xed out my bad these are supposed to be when the uh recession was during it had literally happened right after so you have your recession then you have your rate cut and you have your Market low okay okay so the rate cut for these happens sometimes towards the beginning of the recession not towards the end of the recession follow me yeah so Market bottom followed the rate cut in this these particular exactly which means obviously because you have a 12 Monon timeline of returns you're going to have a solid year when the low was one month after the rate cut right because you have 11 months of only positive gains because that was literally the low this one you have eight months of positive gains I.E happy everyone's happy all right this one's easy so obviously our two options for our current scenario are not those CU we're not in a recession right now before the rate cut we already know that and we we in weren't in a recession before the rate cut so it's either recession right after or no recession right here so okay this is fairly easy to draw correlation to these five data points no recession okay it the labor market other than this terrifying this is co this is this kind of threw up this the point quite a bit wow but you can see the labor market stayed within like 3% just for 25 months which is pretty incredible M it's just they're all hanging out there's no ramp up towards anything if anything it went down a little bit there's no change everyone's very happy no increase unemployment okay okay this is the biggest data point this is important then I propose calling this the Dylan rule it's like the S rule if unemployment doesn't increase by more than 0.3% after the uh the rate cut then we're we're golden it's good I mean if you want to put my name on it I'm okay with it so now let's look at the only two negative returns okay you have fairly stationary unemployment and then then a rate cut recession right after this one fairly stationary unemployment rate cut and then once again recession and after employment goes up these graphs don't look as scary but remember this is four to% to to six that's a 50% increase it's just you know yeah I mean both of those times were kind of unique and interesting within our lifetime so it's things that you know we kind of remember and you know experience to some degree um whether or not you're actively trading it you're at least aware of the the backstory there in detail um so you know and those circumstances were unique let's say put it that way oh I I mean I would say each one of these are unique it's I mean they all have very different socioeconomic things that were happening there's like especially in the 80s I mean it's like really hard to compare anything in the 80s to now it's not really fair but the interesting thing here is both of the the low was not for in this one 20 months let me get my arrow back after the rate cut and this one's 17 months after the rate cut it was a prolonged dip in the market it was a very very long recession okay all right um here we are right now so obviously I don't have the data points because I don't have the year after this that would be awesome you see unemployment hanging out very very stationary you know 36 38 and now we're starting to rise and we haven't missed a step this is it augmented just so you can see a little bit more we're 2% the base same graph all right if the September numbers come out and October I need at least two more data points and they start to correct I'm going to say odds are everyone's right the next year is going to be pretty solid everyone's going to be very happy but if those continuously increase there has literally not been a scenar scario where unemployment goes from 36 to 46 almost a 30% increase and there has not been a recession immediately and a and a direct negative impact on a 12mon um S&P 500 timeline it literally hasn't happened so jobs are all that matters now got it in my opinion that's you know I'm just a YouTube guy who doesn't know anything um so these are the two dates I think that these are very very important um it's you know you can never tell the future but I can tell you I really really the market looks toppy as hell to me I don't like how we've gone so high in almost no volume whatsoever I am not willing to start a short until I see these two numbers um I I think it it's a little bit foolish because you know no one really knows we don't ever know what's going to happen but these are the other three fomc meetings and then I just want to show you this this is all the way since like 2000 these are the only times in that those two uh recessions 2001 2007 that we were below the 200 for a sustained amount of time we literally it hasn't happened we had Co for like a week and then nothing it's crazy we've been in like an outrageous Bull Run I know it's been nice it's just it's absurd I don't know how realistic it is but uh yeah um I don't know let us know what you guys think uh I'm I don't want to be all doom and gloom I'm not 100% sure that it's going to be negative returns I just I need the September jobs and the October jobs report before I can make a better educated decision I don't think the fomc meeting is as important because we already kind of know what's GNA happen all right fair enough I just want to say thank you man that that those were some interesting charts it's not something I've seen anyone else talk about in this sort of presentation format so cool cool nice work could be completely useless all right guys
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