so Interest Rates are on the rise again the 10-year Yield just went from 3.6% to 4% in under a month Rising Interest Rates can have absolutely massive implications and are something that nobody should ignore we just have to rewind to the
1970s to understand that this is what happened to Interest Rates between 1972 and 1975 and when we look at the impact that had on the US Stock Market it caused one of the largest market crashes of the last 100 years now although the recent jump in Interest
Rates look small the big worry is that this is just the beginning of a resumption of the rising Interest Rates we have throughout 2022 indeed if we quickly sketch out the same chart from the 1970s on top of today’s Interest Rates we definitely see
there similarities and you understand why a lot of people get spooked every time there’s a little jump in Interest Rates because if this is what’s in front of us it’s going to make the rising Interest Rates from 20122 look like Child’s Play
in order for us to know whether this scenario is actually plausible we can start by looking at exactly what happened right here in October of 1973 exactly 51 years ago that catalyzed the rest of this move up in Interest Rates if you know your history this is the date of the yam
kapor War where Egypt and Syria launched an attack on Israel to reclaim the Sinai Peninsula and the Golden Heights and this conflict led to an Arab Oil Embargo significantly reducing the oil supply from a region absolutely key in oil production in fact oil prices immediately tripled following the
start of the conflict in October of 1973 and oil being one of the most important raw materials of the global economy this instantly brought about a wave of Inflation and with higher levels of Inflation comes higher Interest Rates because over the
long run what we see is that Interest Rates typically follow what Inflation does so that’s what triggered the rising Interest Rates in October of 1973 oil prices Rose as a result of the war in the Middle East which created a bunch of
Inflation which LED Interest Rates higher now if we look at what oil prices have been doing today we’re definitely not in the same situation oil prices in October of 20124 are lower than they were in October of 2023 not really the same type of situation to
what we had in 1973 so at a first glance it doesn’t look like we should be too worried about Rising Interest Rates however unless you’ve been living under a rock you’ve probably heard that there’s been some things happening in the Middle East things that
could potentially cause the price of oil to rise if let’s say an allout war starts in a region that is responsible for 50% of the world’s oil production in fact if we look at oil’s price a little bit closer we see there was a little bit of a jump right here as a result of an
escalation of the conflict and when we add the 10-year interest rate on top of the price of oil we see that the two are almost mirror images of each other and the most recent move up in interest rate has been directly driven by Rising oil prices which themselves have been driven by the escalation
of the geopolitical tensions now this isn’t the first time this has happened over the last couple of years most of these spikes in oil prices have been driven by the geopolitical tensions and so far all of them have been resolved to the downside now could it be that the situation in the
Middle East escalates further and ends up driving oil prices much higher this time around absolutely I’m not going to try and tell you I can predict the future of the war in the Middle East I can just tell you that right now this looks nothing like 1973 because oil prices are trending lower
not higher and it also looks nothing like the most recent oil shop from the Russian invasion of Ukraine this right here was what oil was doing in the 3 months leading up to the invasion of Ukraine Can you spot the difference oil prices were trending higher heading into the conflict as Russian
troops were surrounding the Ukrainian territory and getting ready to invade and we can use moving averages to help us stay objective regarding which direction price is heading in all of the moving averages back here were pointing up today that couldn’t be further from the truth all the moving
averages are pointing down and price for now is still below them you could argue this is a bearish technical setup and that’s actually why we still have an ongoing short trade on oil on our website so although you’ll hear many news headlines comparing today to the 1970s hopefully you
now understand that the situation is quite a bit different and when we look at Inflation in the United States we also see that it has been trending down violently this is not the same look to the one we had in 2021 when Inflation was picking up which led to Rising
Interest Rates and it’s also not the same look to what we had in the the 1970s with the three waves of Inflation that led to higher Interest Rates and given that Interest Rates tend to follow Inflation over
time our expectation is that Interest Rates will Trend lower here not higher assuming that we don’t see any big war in the Middle East now lower Interest Rates by themselves should be a net positive for the Stock Market just like Rising
Interest Rates by themselves are a net negative for the Stock Market and so far that fits pretty nicely with the price action that we’ve had on the S&P 500 recently price recently broke out of this 3month consolidation and is slowly grinding higher all of
the moving averages are pointing upwards and we also have a very clean price channel that is very well defined by multiple Market reactions which for now still suggest that the S&P 500 is in a strong and healthy uptrend we’ve made some incredible trades with our clients throughout this
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Rising interest rates are concerning, especially since the Fed's recent rate hikes.
The United States is a major fracker and can produce most of it’s own oil now if it needs to. Also nuclear energy will be a major player for the US as we become more and more energy independent from the Middle East going forward.
We are currently the world leading producer of crude oil and natural gas. About 14.5 million barrels a day from ~475 wells. We also have the ability to pump about 40 million barrels a day. More than double our consumption. Oil prices will not shock the stock market as much when people understand our abilities. DRILL BABY DRILL!
wha- why'd the audio cut off so abruptly at the end there?
Why do you keep saying “interest rates”, when you are referring to the 10 year bond yield???
Hint, its not plausable based on debt and asset prices.
Very nicely done. I learned a good history lesson. Thank you
The yield curve alway rises when the Fed begins a rate cutting cycle and its always temporary. It's called consolidation. The market correcting for overly aggressive rate cut expectations. Don't fool yourself, the yields follow inflation and they will continue to drop lower because we are in a state of disinflation. The yields already dropping since the start of October. There is no war that could reverse the disinflationary trend that we are in because we have a weak labour market and a weak consumer. A spike in oil prices will only accelerate the pace towards a recession, which will be accompanied by a flight to safety by the investors (US treasuries)
I can't get past the current valuations. First the market was pumped with money printing and lowering rates, then as that was just starting to fade, the A.I. hype machine flipped on and now the market is even more overpriced! According to long-term indicators we've pulled forward several years worth of profits.
great videos. great content, succinct with graphics. thank youu
this is how financial news should be given
BTC to 130-150K by Xmas🚀🎄
BTC to 300K by 2025 March🚀🚀💥
If everyone thinks the economy is shit, layoffs, house prices crashing, commercial real estate collapse. How is inflation going to come roaring back? We’re also a lot more oil independent than the 70s
US can detach from global oil prices and sell it in the US, for a lower price, than the global price of oil.
Are you measuring inflation with the same metrics the historical inflation you compare it to was measured? Not sure this analysis is apples to apples
inflation is about to make a come back, the last reading of CPI was a warning. I doubt we see any more rate cuts this year. Consumer weakening fast, the jobs market is totally at a stand still (cooked jobs numbers are just government and part time jobs, they will readjust the numbers down after election). We are facing a major economic crisis after election.
If you are not in the financial market space right now, you are making a huge mistake. I understand that it could be due to ignorance, but if you want to make your money work for you…prevent inflation
Money doesn’t grow overnight, but with the right investments, it can grow exponentially over time
No more game of trades?
I like your videos disprove your video titles every time
3:40
As November 5 draws near, campaign commercials, news coverage, and heated social media posts are not the only things stressing me out. I have roughly $600k invested in the markets but with much uncertainty, I'm under pressure if I should sell off or not.
No chance the 10Y goes that high 😂
Very good effort at rear vision mirror driving. Would be helpful to see a prediction/result graph.
Just by looking at the wave theory, you will see that the collapse is only a few months away.
So you have been calling for a recession for months and saying lower rates is going to maybe start a recession. And now you arr saying the exact opposite? I dont get it..
Growth is slowing the world over and it’s growth prospects that set interest rates
Forget about oil shock – both USA and PRC will tell those small warlords in the middle east to shut up.
Let's see what is the narrative today… Extreme poverty or extreme wealth. It usually is one of those two.
Let's sell off or let's buy off??Speculation is the queen of global markets right now¡¡Chile has not a deep hedge against this pricing game¡¡
People really think the market is the economy a recession will come the peasants will get fucked and the market will keep on booming and CNBC will print some bull shit article about how the massive AI book is offsetting the recession all while the common man starves
Great video as always Bravos! Being the contrarian macro investor, hearing the predominant narrative of interest rates rising due to a re-ignition of inflation is precisely why I began gobbling up TLT over the last two years. It became my second largest position, second only to btc (not a recommendation! Willing to risk the helicopter ride, understanding the 4 year btc cycle which remains intact until one day it breaks and my helicopter ride turns into a nightmare haha). But I'm not seeing any reason to be fearful of btc 4 year cycle breaking. Huge multi-month bull flag and multi-year cup and handle on btc with a target a la 265k per coin sometime late 2025…) And here too, gobbling up stocks with all the recession narratives going round. Markets don't crash when everyone is expecting one! Same story with pre-election volatility. I'm sure most everyone didn't see the August VOL spike! Bought the heck out of that opportunity! And look at us, printing new ATHs on SPX with NVDA testing ATHs. Wouldn't be surprised to see SOME volatility in the upcoming weeks, but imo very likely any pullbacks I see as great opportunities. Great to see confluence here. The next 6-12 months, at least, look to be a great time to sit on our hands and reap the rewards! “Far more money has been lost by investors in preparing for corrections, or anticipating corrections, than has been lost in the corrections themselves.” – Peter Lynch (thanks Peter & Peter)
Not the same sitzuatiazion
High Interest rates also cause fewer people to take out risky loans.
History might repeat itself but you wont be able to show this on a graph, because datas are falsified