Okay folks, so this morning we got flooded with even more bad news and some more insights into this coming recession. I want to save you some dramatic amounts of time with this video by breaking it all down for you and then for the main entree. Bank of America just put out a very powerful warning and a checklist of things that we need to hit in order for the market to bottom. And let's just say if they are right, we've got a lot more pain to go.

So get your Tylenol ready and let's get to work. Okay, so recently on your daily Economic Meltdown report with Charlie, inflation is at 9.1 percent, a 41-year high, a 100 plus year high if you consider the 1980 Cpi that we used to use and which was more honest, the stock market is having its worst year since 1970. Tech stocks are less popular than root canals. The S P 500 is actually earning its name standard and poor, because that's what it's making all of its holders.

American savings rates are at their lowest since 2008. Consumer confidence is lower than my standard for good jokes. The yield curve is inverted more times than my stomach inverts when I go to Taco. Bell.

and Jerome Powell, of course, is not our friend for the foreseeable future, but unfortunately, new cracks are emerging rapidly. Let's talk about what they are when you enter the beginning of a recessionary period. What happens? Well companies notice that they're earning less and less moolah. So they go, and they cut back their spending.

They cut back their customer outreach, and eventually they cut back on their hiring. But if things get bad enough, they start laying people off the companies in the more sensitive areas of the economy. For example, startups will. They tend to see hiring freezes and layoffs first.

In fact, start-up layoffs are the highest they've been since the coveted lockdowns according to Layoffs.fyi But according to Trueup.io the number of tech employees as a whole let go has been skyrocketing month over month. In fact, we went from 80 tech employees being let go in August of 2021 to 28 537 being let go last month. That is a pretty damn big acceleration now. Of course, startups and tech have been the first to start getting bludgeoned.

But if you start looking at some of these bigger companies in tech, you can start seeing the trend emerging where everything is going to start having the same exact problem. Take a look at this piece about Alphabet Quote: A potential recession will not spare many multinational companies. That's what investors who are liquidating their positions and tech giant seem to think. Alphabet, the parent company of Google, seems to prove them right Quote: to avoid any unpleasant surprises And above all, to anticipate a sharp slowdown, a sharp slowdown in the economy.

Google will take preventative measures to control its costs. Here's Alphabet saying they are preparing because they are anticipating a sharp slowdown. Oof, one of the most powerful companies in the world anticipating a sharp slowdown. a couple days ago, Microsoft announced they are laying off a portion of their workforce as part of quote realignment.

And while they say they are still hiring in other segments, this follows the overall industry trend. Everybody right now just seems to happen to be cutting costs, right? All coincidingly Oracle announced they are considering 1 billion in cost cuts That would include thousands of layoffs. This would disproportionately impact U.s and Europe-based workers. Let's see what Meta is saying and doing.

This morning, the Economic Times reported that Meta is asking managers to identify people for layoffs. Unfortunately, I don't think that Zuckerberg is going to be cut, but this comes in the backdrop of Zuckerberg saying in a recent earnings call quote. If I had to bet, I'd say this might be one of the worst downturns that we've seen in recent history. A high ranking Met official said recently, if a direct report is coasting or a low performer, they are not who we need.

They are failing this company. The company is taking aggressive action to remove any employee that is not efficient. Any employee that is not completely effective. You look back at Tesla.

Their latest round of layoffs is their largest in years. Remember, these are some of the most powerful and well-capitalized companies in the world. If they are starting to buckle up right now, what about all the other companies, how are they going to fare? There's this story going on that companies are just cutting back to be more cost efficient. And yes, that is certainly true, but that's only part of the story.

The reason they are choosing right now to be cost efficient is because of where we are heading. We are seeing the slow and progressive forced deceleration of this economy, and it's playing out week after week after week. One or two more quarters of this trend and it's going to be very, very bleak. And in some cases, I know that big companies are saying that we're going to go and we're going to hire other workers and other segments to make up for the ones that we're cutting loose.

But in a lot of cases, if you really look into it, that's a Pr move so that investors don't freak the heck out, they're going and saying yeah, we're gonna laugh a couple hundred workers in this segment and we're gonna hire another 100 workers in another segment. They give themselves like a year or two to actually do that, and then when push comes to shove, they don't even have to do that if the costs don't make any sense given the current economic environment. In some cases where they actually are rehiring, they're switching from expensive, salaried employees to lower paid hourly employees which is another big cost saving maneuver. And as we go through earnings season which really just started today with Chase which left The Big Doozy and with Morgan Stanley which also was quite a doozy, you're going to see the same narrative, if not worse.

pushed company after company after company. But anyways, Now I want to talk about what Bank of America is doing. Exhibit 26 of their U.s Equity and Quant Strategy data set put out their list of things that have typically occurred before the market has bottomed. They showed every market bottom period since 1974 and found that generally at least 70 of these indicators were hit before the market actually bottoms, and right now they found that only 18 have been hit.

The chart is a little bit blurry, so I put it in the Charlie spreadsheet. So the first thing that happens before a market bottoms is the Fed cuts rates. and that happens within the previous 12 months. In fact, unlike most of the other items on this list, the Fed has always, always, always cut rates.

At some point in the previous 12 months before a market has bottomed and a new bull rally has begun. So then that brings us to the question: Well, has the Fed cut rates year over year? Absolutely not. We're just starting to increase them, right? The second thing that happens before a market bottom is unemployment rates rise over a six-month period. Has that been the case? No.

January. Unemployment was at four percent. Now it's at three point six percent. Why would unemployment rise before a market bottom, you say? Well, it's because markets sell off when economies are projected to contract, and when the economy actually contracts, unemployment rates do rise.

With that. And because markets are forward-looking they tend to prefer to see the thing they factored in happened before they move on to the next cycle. It's very, very popular to say that you can't have a recession if you have record low unemployment like we have right now. But I proved in this other video that I made about a week ago that that is a huge fallacy.

In fact, every single time since 1950, that we troughed in unemployment, that happened right before the next recession started, and every single time, the Fed raised rates into that trough. dramatic unemployment increases, fallout. So this idea that record unemployment means a lot and is a saving grace when the Fed is going on this insane tightening cycle is quite frankly, not historically backed by the data. So what they're saying here is, if the market hasn't seen unemployment rates rise yet, six months Over six months, That means that the odds we have hit a bottom are incredibly low.

Next, more bears than bulls the prior three months. This one is referring to the Aai survey. When asked what direction do Aai members feel the stock market will be in the next six months? As of 7 13, which was a day ago, 46.5 percent of votes were bearish. Only 26.9 were bullish.

Which means there are more bears than there are bolts. It tends to be that this happens before a market bottoms, and this indeed has happened. So we have passed this one line here. Next, equity risk premium increases by greater than 75 basis points from trough.

What is equity risk premium? It's the amount of premium that stocks are expected to generate over something that's risk-free like a certain bond or debt instrument. The loss equities are likely to outperform the last incentive you have to buy them right, and B of A says this needs to increase by 75 basis points from the trough. And as of right now, this has not happened. Although there have been other months where this happened for short periods of time.

but B of A based on the overall chart, thinks that this needs to happen in the same month that you bought them. Number five decreasing two-year yields. I hope you guys are yielding because it's time that we talk about the damn yields. You need to see the two-year bond yields decrease when compared to where they were six months ago and 12 months ago.

This has not happened yet. In fact, if you compare it to where it was six months ago or 12 months ago, we are, of course, significantly higher. Why? Well, because the Fed is raising short-term rates and the short-term recessionary risk is very, very high, the long-term danger seems lower to the market than the short-term danger and part of that is because how aggressive the Fed has been. They have a real impact on real rates, but they also have an impact at creating more and more danger for the economy.

Those things are coming together to make the two years go parabolic. Generally speaking, these go back down before a bottom in the equity markets. Or at least they start showing signs of going back down like they have a peak. and then they're like vroom.

So obviously this hasn't been hit yet. unfortunately. Next, you have their sell side indicator showing a buy signal. This is a lovely contrarian indicator that essentially tracks when the Wall Street consensus is too one-sided I go on Twitter sometimes, and every time Jim Cramer tweets something like oh, it's time to buy this or it's time to sell That people are like, okay, well, it's time to do the opposite.

I think people say that about Poor Charlie too, but we're not going to talk about that. But the funny thing is that if you actually look at this on an overall Wall Street consensus basis, well, Bank of America kind of takes that as a science, you just do the opposite. And it tends to indicate when you should buy and sell. And as of close on this report in June, we were only at halfway to buy time.

So this one is not satisfied either. Next, finally, one that is satisfied, the yield curve steepening as compared to the prior six-month period. Yield curves tend to steepen when investors rush into Safe Haven assets and are unsure as to how aggressive the Fed is going to be. And obviously nearly every single main yield curve has steeped over the last six months, so this one was definitely hit.

Then you have the criteria for five percent Rally Bear Market Rallies in the prior three months. This one is basically saying that, hey, before the market bottoms, you're often going to get some big contrarian Bear Market Rallies usually above five percent, and that's gonna happen within the last three months now. Three months takes us back to here in mid April on the S P 500. We did have one seven Percent Bear Market Rally right here in May, but I think what they could be referencing here is you get a five percent rally above a three month or 90 day moving average.

I went ahead and plotted that, and the only period that really managed to break out was that March rally, right? And we certainly haven't had anything close to that for a while. And then they say the rule of 20 needs to be fulfilled. And the rule of 20 essentially means that when you add up the P E ratio and the inflation rate, that if it equals 20, then you're at the fair value. Stocks are undervalued when it's below 20 and overvalued when it's above 20..

Yardini research used a forward Pe metric and they found that we are currently at around 25-ish which means that we are very overvalued compared to the fair value at 20, right? In fact, we haven't hit the rule of 20 any time in the last 12 months on that basis, and usually we trade well above it the 10th condition. Pmi improves year over year. This is the purchasing manager's index. It measures the prevailing direction of the economic trends in the manufacturing and service sectors which are just doing terrible.

and sadly, by almost every stretch of the imagination, they are doing worse year over year and the trend is plummeting fast, so this one isn't hit either. And then finally, the copper slash gold ratio decreases. This is a pair that I was pretty unfamiliar with before I actually saw it on this chart, but apparently it's a useful indicator because copper is an industrial necessity, whereas gold is seen as more of a safe haven asset. And interestingly enough, when they did this survey like two weeks ago, it didn't hit the criteria, but because of commodity trends in factoring in a recession, well, as of right now, two weeks into July, we are now trading at a lower copper to gold ratio than we were six months ago and a year ago.

So this criteria has now officially been met, so I'll switch it to yes. that means that in totality, three of the eleven things that tend to happen before a market bottom have happened this month. Which historically means that the chances that this is a market bottom or near a market bottom are pretty low. However, this chart does tell us the main key factors and some of which are pretty obvious, but it does tell us the main key factors that you should look for.

If you want to see when the market is going to really bottom, you look back at the blurry diagram from B of A. You can see that certain line items are always present before I bought them dating back to 1974. that's the Fed cutting rates. That's equity risk premiums increasing that's decreasing to your yields, which are very correlated to Fed cutting rates, so that makes sense.

It also seems true though, that if you hit more of these things, you're more likely to bottom. For example, in March of 2009, you literally had every criteria hit, which was crazy, But the point is it tends to be the case that you need to historically and statistically hit at least 70 of these on average before you can confidently declare a bottom in the market. Odds are strong that this time around, we may end up looking a lot more like 1974, where the main driving factors are simply the Fed cutting rates again, which back then when they did that, it ended up leading to another 10 years of basically out of control inflation that ended up having to result in Mr. Volcker going and vulgar and everybody.

and of course Michael Jackson. Michael Jackson and everybody. Two major actions that made the market moonwalk and made Charlie tell really bad jokes 40 years later. But in any case, I think if you take this message in totality, I mean we are pretty far from hitting the major criteria which are of course, the Fed cutting rates, unemployment rates rising which that would be expected if the recession started playing out like the market is starting to, price in equity, risk premiums increasing from troughs decreasing to your yields and so forth.

So we've definitely got a long ways to go if you're looking at this. so buckle up folks. Anyways, that caps off the video. If you appreciate us keeping you informed rather violently, make sure to hit that ravishing like button and also subscribe if you want to get up to 10 free stocks with Moomoo.

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Have a good rest of your day folks and I will see you in the next video.