So the stock market as a whole is up nearly ten percent from this exact date a year ago. Meanwhile, the economy continues to deal with devastation as the government combats record levels of debt, household struggle, staying afloat, civil unrest, and disease spread, and this all culminates in a GDP that some are expecting to fall nearly 53 percent. We also saw unemployment that peaked at just under 10 percent in 2009, but are now seen around double vent 20 percent projected for May 2020. And likewise during the Great Recession, the stock market lost about 50% of its value.

But during this 2020 recession, the stock market seems to be a jolly little donkey racing back towards higher highs. Hee haw hee haw hee haw. And while the Fed has been much more aggressive with the economy this time around, it is still hard to argue that the current valuation makes any sort of sense given the economic situation and economic uncertainty that we are currently in. And while no one can really say for certain why this is in this video, I am going to be saying for certain why this is no in this casual fireside chat with Charlie I'm going to be giving you the facts and nothing but the facts I'm going to be giving you my interpretation of the facts and then I'm going to be giving you some basis to form your own conclusions and all that it is that I ask in return is that you hit that ravishing like button? ha ha ha.

Ok, so to start on the surface, everything is a mess. Their civil unrest, there's high unemployment there States verging on bankruptcy, and most of the companies in the S&P 500 which we describe quite gracefully as the market are unprofitable. But if you look at a composition of the overall market over the last three months, you can see a much clearer picture of what is going on and what is actually moving the market. You see these are these 500 ravishing companies within the SP 500 and this heat map displays them based on the size of company in terms of market cap.

For example, Amazon is weighted heavier as compared to say, Walmart and that's why the sizes are different and this even applies to sectors. For example, the healthcare sector as a whole is weighted more heavily as compared to say, the basic materials sector. This lovely heat map also indicates green or red based on whether they grew or shrunk during the last three months. For example, this bright green Amazon grew twenty six point four six percent in the last three months, whereas JPMorgan poor little JPMorgan in the corner shrunk about eighteen point eight six percent with the rest of the banks down in the sector.

But what? What you'll notice is that while this crisis has destroyed banking, chair prices, insurance, Care prices, aerospace, share prices, utilities, industrials, oil and gas in parts of real estate to name a few. but some of the biggest sectors such as technology, communication services, health care and the biggest player And consumer Cyclical have been downright killing it. So while the analysts are screaming and pointing for you to focus on this section here and all of the losers in these sectors, they are making you miss out on the bigger picture of why the market is holding up so well, it's because of these large companies hither that make up an insanely sizeable portion of the S&P 500 that are basically driving the market from from Rome. But you see this chart also helps keep the market in perspective.

I Keep seeing articles and speculation about how the collapse of the restaurant sector is enough to single-handedly take down the stock market. and I guess monkeys can argue anything but just for relevance, you can fit the entire restaurant sector into just Amazon and still have room to add some other entire failing sectors. So a failure of Amazon would have a much, much more devastating effect on the index as a whole as compared to the failure of the entire restaurant sector. But that's not what we're looking at, is it? So when you read an article about how the restaurant sector or how the utility sector is going to take down the whole entire stock market, understand that while that's not necessarily untrue, you need to know the bigger picture.

Obviously, at the end of the day, any part of the market can set a domino effect that takes everything down. but in the current day, it's these huge players in technology, communication services, and consumer cyclical that make up such a great portion of the market, but also happen to be doing insanely well. Throughout this crisis, they are essentially helping hold it up. But Charlie the valuation of these companies doesn't make any sense.

Obviously, the beer bug is bad for every company. Uh, well. companies like Amazon Apple, Facebook, Google, and Microsoft Well, they make up nearly a quarter of the market. And while these companies are ranging from doing better than ever to just being stable year-over-year investors are betting that these companies are going to be B most stable and consistent bets in this post pandemic economy.

But anyways, there's more to it than just big tech holding the stock market. In fact, most companies in the S&P 500 saw a lot of recovery since previous crisis lows in March and this can be largely attributed to a few different things: Numero Uno, the calming down of investor fright, Numero Dos, the revving up of monetary policy, and we're going to start with monetary policy. Monetary policy conducted by the Fed has been extremely aggressive during this crisis. At the beginning of the crisis, Federal Chairman Jerome Powell wanted to make sure that the Fed didn't under react to this crisis like they did in the first months of 2008.

so he foresaw the biggest infusion of capital into the financial markets in history. And this, ladies and gentlemen has two big effects. The first one is the direct effect of capital being infused what is the direct effect, and the second one is the secondary effect. Whoo-hooo That is the effect in increased consumer confidence, the effect it increased investor confidence, and the broader effect of stability in the overall market.

As investors CV Fed is going to step in to protect equities, this creates further fortification of the stock market and makes them more apt to keep or invest more money, which creates more stability, which further creates a self-fulfilling prophecy that then goes and continues to bring more investors in and to bring more capital. But going back to the Sp500 during 2008, there's one huge notable difference. There's one notable difference. between 2008 and 2012, it led to drastic differences in outcome for the stock market.

In 2008, we had a financial conundrum that was largely and solely rooted in failures in the financial system stemming from the housing crisis. But this crisis, on the other hand, was one that was caused by a non-financial It was stemmed from something that wasn't financial. The virus. In other words, 2008 financial crisis stemmed from a financial crisis, whereas the 2020 Financial Crisis stemmed from something on financial.

The virus. This may sound like a minor detail, but it's actually quite a big detail if the 2020 Economic Crisis was a secondary victim of the lockdowns being instigated and was solely motivated by the virus. that means that the artificial shot to supply and demand would mostly be lifted as soon as the measure started to be lifted. Obviously, damage has been done, but we don't yet know until our human capital aka V workforce gets back to work and we get two economic numbers of how fast we rebound.

And that's clear as state reopen and more people go back to work. But the underlying issue here is that while be locking up of our workforce may seem to be slowly ending, we are still in a period where we're not really sure what the actual devastation is. It's hard for investors to get a clear idea on how much the economy has actually been damaged while most of the workforce is still locked up, whereas in 2008 we had a clear idea of how much people were directly impacted by solely economic failure in 2020. We can't really distinguish the two.

Let me give you an analogy. In 2008, the economy was a car driving very, very fast that had major mechanical issues and needed to be fixed in 2020. The economy is a car who is parked outside a house with its owner quarantined at home. So because our 2020 car is not driving, we can't really yet know their real damage until the driver aka V workforce gets back behind the wheel.

Once it does, we can figure out what the problems are, how bad the engine is running, and then we can go and work to fix it. But until then, but until then we are really just speculating on how fast the car will drive once it gets back on the road anyways. folks and tell this car gets back on the road, you need to be violently prepared to trade to trade any opportunities that may come up. Now we all think that the market is going to go down at some point and sell off because of this catastrophe.

but it's not our job as traders to predict market direction and quite frankly, if you use this logic in the last couple of months, you would have been left begging outside 7-eleven So it's our job to have tools tools in our toolkit ready to trade both sides of any move that comes at us. So instead of saying oh, I only care to make money when the market goes up or oh I only care to make money when the market goes down, you can trade both sides of the market with an adverse pair such as Spxl. then SPX now Spxl goes up by three times as much as the Sp500 when the Sp500 goes up. So when the markets going up, you trade Spxl and when the markets going down, you treat SB excess.

That way you can profit off both sides in the move. The only time the sucks is when the market doesn't move in which case there's no opportunity. But there's also not as much risk because nothing's moving. but you want to trade the one that has the elevating factors every setup.

But remember, it's neither the optimist nor the pessimist that gets paid. It's the realist, so be prepared to trade both sides and be Direction independent. Anyways, folks, I do hope this video is valuable. If you have any questions, feel free to let us know in the comment section below.

What do you think is happening with the market right now? Let us know in the comment section below. And of course, if you'd like to keep up to date with all of our picks and our stocks that we're watching every single night, all you have to do is join us and zip trader circle. We post might be watch lists that are every night by the nature of being nightly and I'll put the link in the description below as well. Lastly, if you are looking to take this time to learn how to trade, we are offering $50 off step trade.

Are you for people who type in coupon code? stay home 20 20 at checkout? Anyways, folks, have a great day and I'll see you in the next video.