Okay folks, so today, the market got hammered as bond yields took off. We had some strength in banking, stocks and capital markets, as well as some select industries outside of that, but overall, just hammered. And just yesterday, the Fed stabilized the market by stating that they weren't worried about out-of-control inflation and they wouldn't be raising the interest rates for several years. Yet, Today, investors basically called Jerome Powell a big fat liar.

Those aren't my words. Those are the words of the market. I personally like Jerome Powell. By selling, investors are basically saying you are wrong.

This is going to be a bigger and faster recovery than we've ever seen before and everything's going to get out of hand and so interest rates must go up soon. You Must sell everything now. Sell growth stocks, Sell recovery stocks, Sell the dog, sell The neighbors. Welcome to the emotionality of the capital markets.

But anyways, folks, this isn't a huge surprise. We've been talking about for weeks, how we're going to keep seeing these random spikes of the bond yield and how investors have their eyes glued to these yields and they're going to panic every time they go up, but that eventually you're going to see these stabilize out. But anyways, I want to talk about what the heck is going on. A lot of you need to know exactly the mechanics of what's going on right now.

Who's causing these bond yields to go up Despite inflation outlook not being as bad as the market says it's going to be, I want to give you some predictions on how long the sell-off is going to take. what plays you should be focusing on. if we get another dip o'clock it's about a quarter to dip o'clock according to my non-existent Dip watch. I need to start selling Dip watches so every time it's dip o'clock you guys just look at the watch.

I'm like, all right, it's buy time. The only thing that I ask for all the work that goes into a video like this is that you hit that ravishing like button and also don't forget to subscribe. Also, this video is sponsored by Ziptraderu. If you'd like to learn how to trade with our 8 plus hours of step by step video lessons, take action, prompts as well as quizzes.

Would like our daily morning briefings as well as our price targets. You may find this extra helpful during days where the market's down because you can get an idea of what actually is happening. Each morning I give my thoughts on the market and this morning I talked about how people are freaking out over Bond yields, how to react to this, Why? I'd be focusing on certain high conviction plays and some catalysts that were happening despite the overall market condition this morning. Well go ahead and check out Ziptraderu.

I'll link to it below. You'll get 15 off if you use coupon code youtube15. okay folks, before I go any further, I need to explain to you the mechanics of the Bond market right now. A lot of people are letting the whole bond thing go over their heads, but they don't actually understand the parties that are at control here.

A lot of people don't understand why it's in the interest for some people to push bond yields up in the short term, crushing the market and then ride it out slowly on the other end, Understanding that now is key to breaking down the entire market and what's happening, and key to understanding when it stops happening. Who is controlling this? Obviously, the Fed has abdicated that position. They say the Bond market's reaction is a useless temper tantrum, but still yields keep going up, spooking the market, And the trend is quite clear. On a day where bond yields spike growth sectors panic, and then on a day where bond yields cool off, growth sectors bounce.

If the data does or doesn't show out of control inflation, why don't we see the market picking a consistent direction With this? What is making this bond yield go up so quickly? All of a sudden? Well, the referred to 10-year bond yield is essentially an evolving and constant meter of the speed at which bond traders think interest rates are going to rise or fall. But you see, here's the thing and this is where it gets interesting inflation data and policy changes in terms of interest rates don't come out minute by minute, get quarterly and sometimes haphazard data, but it doesn't come out minute by minute, But bond yields are minute by minute. Why? Because bond yields are not a measure of what is actually happening. it's a measure of expectations what people think is going to happen.

And because it's a capital market, that means the ones with the most capital make the market. The people with the most money get to decide where the bond market goes. It doesn't represent anything of the broader economy. They get to decide where the bond yields go, and there's two sides to this.

On one side, you have the Fed, as well as the people that don't think inflation is going to get out of control and they're saying well, inflation is going to go up, but we don't have to raise interest rates for several years because overall it'll be below our benchmark at two percent. And then you have the other side where you have a lot of big money betting on bond yields going up, basically shorting bonds because as bond prices go down, bond yields go up and the big money is looking at Jerome Powell and saying, you don't know nothing, Little boy, We the big money, the big boys. And you know what? we see. big big boy inflation.

So as a result, they're employing tons of capital to go and short bonds. Net Though nothing changed, the data behind everything is still the same. We don't have out of control inflation now, but just because the big money is going and betting that that's going to happen, they're able to move the entire bonus. So despite the Fed staying consistent on interest rates and outlook, they're still letting the big money in the bond market overrule them.

basically. Now again, the Fed can step up and say, hey, I'm going to go ahead and buy long-term bonds, causing yields to go down, but they don't have a reason to do that yet. Okay, so if you're still with me, why would bond traders bet that yields were going to go up? Why would they bet that? Why would they go in in mass short bonds when they probably have come to a similar conclusion that the Fed has and that we have that we're not going to see out of control inflation within the next period that the Fed isn't going to have to raise interest rates to curtail inflation? Well, some of them probably don't believe the Fed, but even if they do believe in the Fed's analysis, the truth is that this is a win-win proposition for them. Bond yields have already been on a consistent uptrend from all-time lows, and we're destined to go back to 2019 levels minimum if not 2018 levels regardless of how fast the economy rebounded.

So bond traders are looking at bond yields and saying, hey, wait a second So everybody agrees that bond yields are going to go higher than they are right now? Well, what if we can force them to rise all at once instead of over a long, consistent two-year period? Well, then we can make a lot of money very quickly and we don't even have to be right. Inflation? Interest rates are not doesn't matter. We can get them to go up two three years in advance. Guess what, Cha-ching And then if the inflation data comes out, who cares? We already made our damn money.

Meanwhile, the Fed has left pretty much a vacuum of power. He has the ability to stop this by buying long-term bonds, causing the yields to go down, but he knows that interest rates are at all time lows anyway, so there's no reason to do that. From the big money's perspective, this is an opportunity to make a lot of short-term money and low-risk money, because again, rates are going to go up anyways. So why not force them up all at once and then cash out and not have to worry about if you're right or not.

By the time the data comes out, well, guess what? they'll already have made all their money. But at the end of the day, the Fed not taking action basically leaves a vacuum of power because by not taking action, the bond traders are dictating the bond yields and the bond yields are dictating the stock market in totality. Regardless of what happens, it makes sense for big money to bet against bonds. Makes sense for the big money to bet on rising interest rates.

Why? Because interest rates are almost certainly going to go up anyways. and the more power and money goes behind selling bonds, the higher the yields go up and the higher the yields go up, the faster the media pumps that were headed for this inflation disaster causing more money to bet against bonds, causing the rates to go up even more. And by the time we actually start getting data and the yields start getting tied to reality, well, it won't even matter anymore because they've already made all their money, so accuracy doesn't matter. That's why people are willing to bet that this is going to get out of control, even if it doesn't Okay, now that begs the question.

How long is this going to last at the current pace? In just the last month, the 10-year went from 1.3 to 1.7 That's about plus 0.4 in a month If it keeps that pace over. let's say three months. Well, we'd already be back to 2018 levels. If it kept this pace for six months, we'd be back at the four percent interest rates, which we haven't seen since 2008-2009 which could happen if enough big money goes in and Shorts bonds.

but there's very little economic reason for rates to stabilize. At that point, we have a 40-year trend of downward pressure, 40-year downward pressure for bond yields, and the Fed itself has signaled low interest rates until 2023 and very slow tapering after that. So it's hard to see that rate being sustainable or even justifiable for more than a couple weeks or a couple days. My take is that we're going to have an overall uptrend in bond yields, and we're going to have some days where you have these huge spikes as people bet against bonds.

But then as we approach summer and fall as we get deeper into this recovery, you're going to start getting actual data and the data is going to bring the market back to reality or we have an out of control inflation. If we're not, and it's matching what the Fed has projected, then you're going to start to see it stabilize out a lot in my opinion and pretty much in everyone's opinion, inflation is definitely going to rise, but overall, if you look at the next couple years, you're going to see it start stabilizing and evening out. So what does that mean for us? Well, it means that we got a look bigger picture. We'll continue to have both Bull and Bear runs over the next few months definitely as we approach the summer and the key is doubling down on putting in the work to do your research and doubling down on high conviction plays at good prices as well as making sure to lock in profits.

when they're up, the media is going to tell you that you need to be putting all of your money into already overvalued recovery plays that are already factored in a complete recovery anyways. Sometimes that's good advice because some of them actually are undervalued, but most of them are already trading at all-time highs just like the Dow and the S P. But at some point and probably a point very soon, those are all going to be way way overvalued. In which case, it's going to make more sense in terms of risk to buy undervalued deck stocks than it would be to buy overvalued recovery places.

Heck, stocks are only the riskier asset because they are at all-time highs, but the farther they drop, the more de-risks they become. eventually. if you're a fund that's looking at where to invest, it makes more sense to invest in undervalued growth plays than it does to invest in some of the other plays at all-time highs, and at that time you're going to start seeing some more broadening out into tech. Anyways, folks that caps off the video, I'm going to save the ticker of the day for tomorrow's video if you like to learn how to trade, would like access to our private chat and daily morning briefings.

We'll go ahead and check out Ziptraderu in the comment section below or in the description below. I have a link if you'd like two free stocks and you're wondering what broker to trade these stocks on? Well, Weeble is a fantastic broker and I'll put a link to them below and as always, have a great day and I'll see you in the next video.