Okay folks, so you've got yet another sell-off with oil and energy prices being the only areas of the broader market seeing unanimous strength as of closed Friday. Obviously this came a day after another record hot inflation report and some lift service from Central bankers suggesting that they need to move fast and even more recent speculation that the Fed's meeting on Monday may serve as an opportunity for an emergency rate hike, considering that the Fed likes to form a consensus and doesn't like to act very very quickly on new data. Well, it seems to me in all likelihood that we're going to be waiting for that March meeting, but in any case, it's increasingly no longer just the Fed and inflation that is spooking the market. And you already know that we've got the Us advising Us citizens to get out of Ukraine and the Pentagon, removing U.s troops and everybody and their mother is trying to speculate what Putin's next move is going to be.

Will he invade or is this symbolic Cold War style positioning? We know that if he does decide to invade, the energy price inflation problem that we're already going through is going to significantly get worse. You've got various oil contract prices factoring in a high likelihood that Russian supplied energy to Europe could be under threat. Of course, historically energy prices have been one of the big drivers of hyperinflationary periods in a lot of countries, But in terms of looking at the actual reaction of the S P 500 to geopolitical issues at home and abroad, Lpl research put out a very, very nice piece. It looked at the biggest geopolitical events in the last 80 years and it found that the total average drawdown in the S P 500 was 4.6 and that the average bottom took 19.7 days to reach and 43.2 days to recovery.

Now there's actually some very, very important conclusions that you can draw by looking at this data set. But first, of course, a word from our sponsor. Just a quick reminder that Ziptraderu does have a big Valentine's Day sale which will be ending Monday night. If you do want to lock in lifetime access at the Valentine's Day reduced rate, make sure to go ahead and click the link below and learn more about it.

Coupon Code: Valentine I'm somebody who personally, in my own consumer decisions, make sure to get every dollar out of everything that I buy and I expect the same from you. If you're going to sign up, make sure that you're planning on going through each of the lessons, you're planning on participating in each of the resources, and you're planning on taking a lot away from it. But anyways, going back to the data here, you could see that the more prolonged the crisis is and the more the U.s is dragged into it, the longer and more painful the market reaction For example. one of the worst ones on here is the Pearl Harbor Attack which resulted in a nearly 20 drawdown and also was a 143 day drawdown that took 307 days to recover.

Why? Well, because that attack formally led the Us to getting entrenched in World War Ii and led to a period of prolonged uncertainty and a big dark cloud over the market's head. Of course, we know that after World War Ii, the U.s had unprecedented growth, but during that time of original entrance, the market was understandably fearful. The North Korean invasion of South Korea was also very long and protracted. The drawdown was 12.9 and it bottomed in 23 days, but took 82 days to recover.

The Us also entered that conflict to back South Korea, which again dragged the Us into a big, prolonged and bloody war. Iraq's invasion of Kuwait in 1990 was also a big draw down. This is what started the Gulf War. Negative 16.9 in the S.

P that bottomed in 71 days and took 189 days to recover. Iraqi leader Saddam Hussein wanted control of the oil supply in Kuwait, so they took it and the U.s and the U.n got pissed, demanded they leave. This leads to a U.s prolonged bombing campaign in the region and eventual famous Operation Desert Storm. about the time that Operation Desert Storm was completed and Saddam Hussein had signed a ceasefire and released Kuwait while the market had recovered.

So this is another situation where the market performed badly. Because the U.s had got dragged into a six-month ongoing conflict, the Us terrorist attacks on 911 also led the U.s into a period of uncertainty and drag the Us into of course, more Middle East conflicts. But the market reaction was interestingly less severe at least if you look at the surface level Here, the bottom was hit in 11 days and the recovery only took 31 days. Reason for how it traded is simply because of the context of how the market had been trading prior to that.

The attacks happened after a period of time where the market had been tanking after the dot-com bubble had bust, Valuations tanked more, but then recovered in a sigh of relief to where it was when 9 11 hit. But if you look at the overall picture even though it had bounced and recovered from that original sell-off it returned to panic selling as the U.s took action in the Middle East, and it didn't bottom until March of 2003.. So I mean, if you were really fair here, I would argue that the 911 crisis and following Us military action in the Middle East likely accelerated the dot-com bus to laws that it otherwise would never have reached had it not been for those geopolitical disasters. But overall, if you look at this, it's pretty black and white geopolitical events that are largely one-off short-term events that don't drag the Us into prolonged boots on the ground conflict or imminent risk of that seem to have a very, very minimal impact on the market.

Geopolitical events like the Us pulling out of Afghanistan last year, ended boot on the ground engagement over there, and didn't do much to harm the market. Same thing with terrible but one-off events like attacks in London, Boston, Madrid, or even direct hits on U.s political leaders like the failed assassination of Reagan or the successful assassination of Kennedy. All of these things, while tragedies in and of their own right, did not do anything to drag the Us into prolonged conflict, and thus did not drag the market into prolonged contraction. So quite simply, I would extrapolate that the level at which the market reacts is based on the level at which the Us is dragged into a prolonged conflict.

Which means that if we're going back to this new Russia Ukraine situation, you have to ask yourself, is the Us going to be dragged into a prolonged conflict? Boots on the Ground is the type of conflict that hurts the U.s market the most and paints the biggest dark cloud over the market. And if the answer is no and that seems to be what the current administration is telling us, then history at least tells us that the market reaction is going to end. Very, very shallow, but of course that's not the whole picture. Unfortunately, over time more and more wars have been fought via economic sanctions versus via actual Boots on the ground.

And what stands out about this situation is the role that Russia plays in the broader economy. The White House said Biden was quote clear that if Russia undertakes a further invasion of Ukraine, the United States, together with our allies and our partners, will respond decisively and impose swift and severe costs on Russia aka tougher Sanctions. If you're going into economic war with Russia, you have to hit Russia where it hurts, right, and what is the powerhouse behind Russia. Well, according to tradingeconomics.com Russia's main exports are fuel and energy products, which account for 63 of total shipments, of which crude oil and natural gas accounted for 26 and 12, respectively.

And where are all these exports going? well? Number one: The European Union. It's all fun and games when you sanction countries that don't have a huge impact on the global economy. Unfortunately, that's just not Russia. And if you want to sanction Russia effectively, you have to sanction their main export.

And if you hit that, you literally choke off a huge amount of global energy supply. Not to mention that energy prices are already accelerating at a pace that's out of control. You look at who the top energy producers are in the world. You have China, the Us, then Russia, and Saudi is about half that of Russia.

So I mean, removing Russia from the global exporting list would have a dramatic dramatic impact on pricing pressures. The supply that Russia exports out into the world could be a threat of getting politically banned. If it gets politically banned via sanctions, what happens? Well, the global supply of accessible energy shrinks, but demand still stays the same, right? So all of a sudden you get into the situation where all that demand on a global scale is all bidding for a smaller supply. Energy prices are set on a global scale.

If the global supply of, say, oil is compromised, then that means that all prices everywhere go up the end of the day. The Fed can try and do what they want to curtail inflation, but they really only have impact on demand. They can make it so expensive to borrow money that your head can spin and inflation will still be out of control as long as you have energy prices skyrocketing to the moon. And I know that there's some proposals to protect Russian exports of energy, which really calls into question how effective sanctions are even going to be.

But let's just say that you forget energy. You go down the list of the top 10 Russian exports. You start obviously with mineral fuels including oil, but they also export precious metals, iron, steel, cereals, machinery including computers, wood, fertilizers, copper, aluminum, fish. They are also a world leader in exporting wheat Sanctions were even the mere thought of cutting off global supply to any of these main commodities is going to cause them to rally even higher.

And they're already up on their own because of a combination of global monetary policy decisions and covet induced supply chain constraints. So I mean, if we're going to go back and talk about the real impact of a Ukraine invasion, it's very possible that the market's impact is not going to have much to do with the actual invasion itself, but the indirect impact of the decisions on what sanctions Russia is hit with post-invasion it really ties together in all the worst ways: the main fear of today's U.s stock market out of control prices and the Fed's reaction to out-of-control prices. So in terms of how bad this is going to get, well if Russia ends up not invading, while the Russia-connected fear sell-offs in the stock market would reverse although I do think those are minimal, I don't think the stock market has been looking too much towards the Russia Ukraine invasion situation at least not until Friday. I do think that broader commodities, but specifically energy, have been rallying up for the better part of the last quarter or two trying to price in the likelihood that Russia does eventually invade Ukraine.

If it turns out that Russia does not invade Ukraine, you'd expect those to start going back down. You can't blame all of the pricing pressures so far on Russia and Ukraine. A lot of it is just due to the voluntary low production by oil producers, but the parts that can be blamed will reverse if there is no invasion and with that causing deflationary pressures across our economy and the global economy. But if Russia does invade all of a sudden, the ball is now in the court of the Us and the Eu and other allies who decide how they're going to respond.

if they respond with huge sanctions. That is not a good thing for inflation. From a geopolitical standpoint, it makes sense for Russia to invade right now, if that's their goal. A lot of countries right now are struggling with inflationary pressures and citizens are pissed off.

If countries decide to sanction Russian exports, their inflation problems are going to be a lot more out of whack and politicians who made that decision are going to get backlash from their citizens who don't want to pay 500 for a loaf of bread or 50 for a gallon of gasoline. Right now. the threat is for economic sanctions, but Russia knows that At the end of the day, it's hard to say what level of sanctions countries are actually going to put on them. If you sanction the energy market, that's going to have a disastrous effect for everything, whatever you sanction in Russia is going to have a huge impact on your own domestic citizens.

We're talking direct impacts to energy costs, metals and minerals that build our infrastructure and computers. Any type of hardware food like wheat and fish. I mean, there's a number of things that are going to be impacted, no matter what sanctions you put on Russia. I mean, you hear Biden warning Putin of swift and severe cost if Russia invades Ukraine.

But those swift and severe costs are also going to be put on us as well. The leverage that Russia has on the global economy is severe, and considering that many major countries are already in a major inflationary spiral on a global scale, now is not really a good time to cut the supply down a lot further. Now again, I want to be clear: I'm not making any geopolitical commentary in terms of what I think they should or shouldn't do. I'm just saying from the stock market perspective, it's worth mentioning that there's going to be costs if Russia does invade.

But I do want to finish off the conversation with an important and positive reminder: The periods of time with the highest vix, the highest volatility, fear, and uncertainty tend also to be the times where you're statistically more likely to get the highest returns. But if this catalyst serves as an opportunity to bring up that lovely vix again, well, we may once again be presented with a historically even better opportunity to get some extra alpha on the rest of the market. Higher the vixes, the more we can make soundly and statistically back decisions to plow cash in and get a higher reward over the long run. At the end of the day, there's always going to be new opportunities for the market to sell off.

Most of them are very, very short-lived Some of them are very, very long-lived But the longer lived the Fear sell-off the better. Historically your rewards are. If you keep buying the Dip five years from now, we'll be talking about a new Piece of Fear Catalyst, but the market will likely be trading much higher than it is today. Plus, of course the Great Reset takes us down 99.

But anyways, that caps off this video. If you have any questions, feel free to reach out to us below or join us on Zip Trader Circle. If you'd like to learn how to trade with our step-by-step lessons, our private chat, or daily morning bravings, as well as of course, our full price target list. Well, I'll go ahead and put a link to Ziptraderu below coupon code.

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