Another day, another sell-off But in this video, I want to violently discuss with you some big points that you need to consider if you're worrying about a market crash in 2022, a bigger, more widespread market crash in 2022.. sometimes we drive ourselves crazy with constant headlines saying we're in for 50 years of subpar returns or 10 years of hyperinflation, or every stock is just going to keep going down endlessly until we die and nobody really knows what's going to happen next. But the way that I look at it is, you need to be aware of what the factors are, what is causing the market to move and then just be stoic about it. But be an informed stoic and hopefully we can help you do just that in this video.

But first, before we get into it, I do want to give a quick plug. So Goodbye 2021, our Goodbye 2021 coupon code on Ziptraderu will be expiring tomorrow. Okay, so we have to start from the inflation standpoint. Right now, inflation is at multi-decade highs.

The New York Federal Reserve reported that as of the latest data set, supply chain issues were at all-time highs. You zoom in, you see two huge booms of supply chain disruption: the original Kovic global shutdown which resulted in the halting of factories and tons of different businesses in many different economies. That was a period where you had an unprecedented supply chain pressure, but you also had a lot of inventories that were still stacked that were able to deplete quite a bit to service demand available at that time. Then things started opening up.

factory started producing again. Supply chain issues went down. But then what happened? Well, you got a massive, massive rebound in consumer demand in 2021, and the supply chain pressure went parabolic again. This also came to a time where you had still reduced production and lower inventories overall because they had been depleted during that first boom.

But the main motivator of this upward curve was what? well, consumer demand. All that pent up demand from the prior periods going in and pouring into the economy, and people trying to spend tons and tons of money. So if you want to gauge the trajectory of that inflationary pressure, it makes sense to look at the root cause of it. which is again, consumer demand.

to see how much firepower consumers have now heading into 2022. Already in the beginning of 2022, we could actually go and look at the personal savings rates. During the start of the pandemic, personal saving rates skyrocketed. people were stuck at home, didn't have many things to spend on.

You know the story. Many got their personal savings boosted by stimulus. You actually see direct correlations between personal savings rates and stimulus rollouts. Obviously, that makes sense.

And when the economy started opening up through Summer 2020, savings were quickly dropping, and there was a lot of pent-up demand going for many areas of the economy that had been closed. But then this is where it gets really, really crazy. You then had coveted outbreaks and rebounds in personal savings in the fall of 2020, and then in early 2021 you had new stimulus rollouts for some Americans, and this all contributed to savings rates going up again in the end of 2020 and then the first quarter of 2021. And that really set the stage for inflation going out of control in 2021.

For the rest of the year, the personal savings rates that were at near record highs before 2021 and in the beginning of 2021 got emptied into the economy. Record savings were put towards creating record demand. Now, why does this matter? Well, it matters because in 2021, we were entering a year where consumers had record pent-up savings to go out and spend on the economy in goods and services, which also happen to be at the same time in short supply. This time we're entering 2022.

And where are consumer savings? Where are our personal savings rates? Well, as of November, they're back towards where they were pre-pandemic In fact, they might actually be lower than where they were pre-pandemic because this doesn't even count December and you would have expected year end sales to drop personal savings rates a little bit lower. So if you want the biggest argument for why demand and a lot of inflationary pressures from demand is going to be lower or are going to be lower in 2022, I would argue it's because consumers have a lot less buying power. We are going into a year with very, very low savings rates. Now to make matters more interesting: 2021 Again, had that problem where you had massive, massive supply chain issues and even more insane consumer demand.

This year you're going to have lowering consumer demand and a lot of the supply chain issues are actually going to be solved in a massive way. The other thing is that you have certain sectors that are obviously in bubbles that people don't want to acknowledge they're in bubbles because there's just so much fear around this inflation talk. Inflation sucks, but there's some sectors that are clearly not going to retain their pricing pressures now. No disrespect to this person, especially if you know who this is.

But I was watching a video the other day and this individual said used car and truck prices are never ever going to come back down. Now dealers know that they could charge these prices. Why would they ever charge less? Now I'm of the opinion that most pricing pressures actually aren't going to come down. Most of them are just going to start slowing down in terms of the growth rate of the pricing pressures.

But the used car and truck market definitely isn't one of those sectors those prices are going to come down. The reason is because throughout 2021 you saw a lot of used cars that cost more than their new car counterparts. Ic Cars.com made a nice list of 15 cars that cost more used than new, and some of these models cost thousands and thousands of dollars more for a used vehicle than a new one. We are talking wide scale vehicles, not niche markets Toyota Tacoma, Chevy Tahoe, Toyota Rav4, Honda Civic, Toyota Corolla, Subaru Wrx, the Tesla Model 3, which that one's a little bit more niche, but Dodge Charger.

Not sustainable to be an environment where used cars cost more than the new ones it used to be. You buy a new car the minute you drive it off the lot, you lose 5 to 10 of the value. Now you drive it off the lot and you go and sell it on the neighbors used car lot and you make five to ten percent, which probably isn't much if you have sales tax, but still, you get my point. When somebody says that used cars and trucks aren't going to come down, they have to explain to you why somebody in their right mind would pay more for a used car if new cars were readily available and the supply actually caught up to demand and the answer would be they wouldn't and you'd start seeing used cars, Go back down.

Now to be clear, I do believe that used cars and new cars are going to be more expensive net when comparing 2022 to say 2019, but not at a 37.3 increase in one year. After new vehicles are available, this number is going to come down dramatically, and there's probably going to be an oversaturation of course. Secondly, in 2020, you had a 1.4 annual inflation rate. Overall, economic activity was hampered quite a lot and people saved their money.

We know this energy prices at that time dropped huge, which caused pricing pressures across the board to be negatively impacted as well and things were kept at bay. But essentially what ended up happening is a lot of that pent-up demand in 2020 ended up getting spread over to 2021.. So not only did you have the impact of the entire year of 2021 being compared to 2020 and looking just awful in terms of pricing pressures, but you also had a lot of the pent-up demand from 2020 being deferred into 2021, and perhaps still some in 2022, causing this environment where a lot of the inflation that should have happened, especially around stimulus time in 2020, actually ended up happening in 2021. There was so much consumer demand in 2021 that you could literally raise your price much faster than your actual cost for rising and just make out with a ton of extra profit margin.

And that's what you saw on a wide scale. But they were able to get away with that. Because you had record personal savings and record consumer demand in 2022, they're not going to be able to get away with that as much, and a lot of them are gonna have to discount some of these goods and services in order to still sell them at a decent pace. Now, obviously, the conversation in regards to inflation is in regards to its correlation with valuation.

If inflation ends up being less than the market expects, then you'd expect valuations to start climbing again. Why? Because the Fed wouldn't be as aggressive with their monetary policy. If the market's factored in four or even five rate hikes right now and it turns out we only get three or two, it's very, very possible that you see a lot of that multiple crunching revert the other way. Now, moving outside of inflation and Fed policy, we do have to talk about this earnings season that's coming up on one end.

2021 was an excellent year for businesses all across the board. Profits for S P 500 companies rose 22 in Fourth Quarter and nearly 50 to 2021 overall. according to Cnbc estimates, the low interest rate environment, the huge consumer pent up demand, and record savings rates, but it's tough to have that set up year after year, especially when you're getting later into the economic recovery cycle and people have less money to spend. And now we have the opposite problem.

You're going into this environment where consumers have less money to spend, you're at a slowing down of economic growth, and the Fed is going and raising interest rates. And according to B of A global research, corporate sentiment for future earnings is dropping fast and many of the early reporters are already hinting about weak guidance for future quarters. Now, I do think that there's going to be major sectors that still report massive beats for Q4 and maybe even Q1, but when you start looking at some of the guidance for some of these big companies in 2022, it's not gonna look so peachy, Which is problematic because of course, especially mega caps are trading at record highs. They're factoring in some nosebleed revenue growth, which kind of goes back to why I do like mid cap and small cap plays.

Because you get a much better value, your small caps remain historically cheap by a big factor compared to large caps, and mid caps remain historically cheap compared to mega caps. Obviously, one of the things that I look for in companies is a healthy and rapidly growing, above average business model that's usually revenue in the early stages and profits in the later stages, which is why I've spent so much time focusing on smaller caps, even though the Fed's trajectory has been punishing them thus far in the process. To me, the factors that are driving today's market aren't long-term factors. For example, in most western countries, especially in the U.s interest rates are on a 40-year decline, and many small to medium cap companies and a slight few mega cap companies are on a 10 to 15 year exponential increase.

And so when you're talking about multiple crunches because of short-term raising of interest rate to curtail short-term problems of inflation, I have a hard time assuming that we need to get rid of companies that are showing a lot of proof of concept in the present day. and instead I'm thinking, well, maybe we should be buying the dip on them at a faster pace at the end of the day, Nobody really knows how long a growth crunch can last, but you look at those two things: interest rates and growth in terms of revenue business models, and you think well. The two things that are holding those back right now are the markets inability to accurately price in this inflationary pressure, and the markets and ability to look at the long-term trend of interest rates, as well as the market's complete ignorance over a lot of these businesses that are disrupting huge areas of the economy and are actually showing the numbers quarter over quarter. Now, I do think that there's certain medium term opportunities in regards to the banks.

I added three different banks to our zip Trader You Price Target list last night. We also have a credit card company that we like quite a lot that should benefit from increasing fees in terms of the percentage. When things go up, they make a bigger amount since they have a percentage of that. But I think if you look at a long-term perspective after this whole monetary policy crunch ends, you're going to see that.

a lot of the Nasdaq that's in a deep deep bear market is actually where a lot of the value is. We could certainly have a quarter or two of rebounds of different variants and a lot of the acceleration of these problems that we've had for the last 18 to 24 months. But over the long run, if you're looking at companies that you believe in, you want to look at where the revenues are coming from. you want to look at where the profit potential is.

Over the next three to four years, you want to look at companies that are actually moving in terms of their business model instead of companies that have to fight massively for a dwindling consumer pocketbook. But anyways, folks, that's just my thought. Let me know what you think down below. If you have any questions, feel free to reach out to us below or join us on Ziptrader Circle.

And of course, tomorrow is our last day of our goodbye 2021 coupon code on Ziptraderu. So if you would like that coupon code, make sure to check it out. link below. Anyways, have a good one and I'll see you in the next video.