Very, very interesting. We went from this day after day bludgeon in the overall market from January 4th to basically the 26th. There were a few periods of attempted reversals, but overall pretty steep downtrend. Week after week, it was quite aggressive, and then within the span of the last four trading days, the market recovered basically half that drop.

And then you have the Nasdaq 100, which essentially tops back in late November and took a bigger hit overall, but it's also bounced back quite a lot. And it's funny when you look at these reversals, it's always like hey, wait a second. Is this a dirty little fake out before a massive massive bludgeon that's bigger than what we already saw? Or is this the start of an actual recovery? Because on one hand, corrections are very, very common and happen quite a lot, and most of them just recover very, very quickly. But on the other hand, we are coming off a period of unprecedented monetary and fiscal stimulus.

And if you take the Fed at their word and you look at the pace of Congress, it seems like the best of the interventions are far behind us. Huge intervention into the market that served as a massive massive tailwind when pushing up the market, but now is serving as a massive massive headwind pushing against the market. We know that history says that markets tend to rise despite rate hikes and tightening, but many would argue the problem this time around is that the Fed has to be a lot more aggressive at tightening the cycle while the economy at the same time is slowing and at the same time, of course, valuations for large caps are very, very high up there. There's also the common sense that says, hey, if the S P 500 averages 10 a year and we are coming off three years of substantially higher than average returns 31, 18, to 28, respectively, doesn't it increase the chance that we're due for a year? That brings down the averages back closer to the mean, especially with the headwinds of Mr.

Equity Chopper himself. There's only so much growth that a stock market can price in, right? Eventually you have to let the bull take a nap or else you're doing bull abuse and that's illegal. Well, these are certainly all bear arguments that the market is pushing through and trying to digest right now. But things aren't black and white, and looking at actual data is something that can really help you identify the problem.

And the good news is over the last couple of weeks we've had a huge amount of companies that have a huge impact on the economy, reporting data and their forecasts for the upcoming quarters, and a lot of it is very telling on where we're heading. Take a look at what's happening with Paypal and what Paypal said was the reason. Take a look at Paypal total destruction of shareholder value. since July, then earnings comes out and you're down another 25 in basically a day.

People apparently can't dump these shares fast enough. Expectations were low. Paypal dropped the bar even lower. The problem with Paypal is they had a record break in 2020.

Trends were in their favor, and it's difficult to beat that. So everything from that point looks like a downtrend. Looks like they're failing. And of course, a lot of people saw the success of that niche.

and now you have all these other fintech payment processing companies trying to compete. But really, that's what a lot of companies have to deal with right now. Different changes in consumer behavior and trends, but what is actually very, very worrisome and what they really nailed on the head right here is something that almost every company, even outside the space has to deal with in the upcoming quarters. What do they cite as their biggest problems? They said the impact of Omicron and the effect of inflationary prices combined with the lack of stimulus is having an impact on spending and by extension, our business.

They continued. The impact is most pronounced on our lower income cohorts and has continued into the first quarter. The persistence of inflationary effects on personal consumption, labor shortages, supply chain issues, and weaker consumer sentiment have led us to adopt a more cautious outlook. Okay, let's go ahead and list a few of the big red flags here to get a picture.

They cite: Omicron inflationary prices, lack of stimulus people spending less money, especially lower income cohorts, supply chain issues, and low consumer confidence. They suggested that these trends have continued in to this year as well past the earnings report date that expired at the end of December. Now, these are all problems that we've talked about on the channel that companies were going to be guiding and facing in 2022. But what's special about Paypal is that Paypal got hit with a lot of these problems about halfway through 2021, and now all the other companies are just starting to realize the same exact problems.

The problem that this list sums up to is that people and businesses basically have less money to spend and or are less willing to spend what they do have. So if you want to reverse these performance issues that these companies are having and guiding for, you have to reverse this problem right here. But a lot of these causes are all interrelated and it's a catch-22 in the short term. Think about it: If you give stimulus, you risk higher inflation.

If you attempt to deflate, you risk even worse consumer spending and confidence. Let's look at the base of this problem: Why do people have less money to spend? Especially lower income cohorts? Well, because like we've talked about, they've depleted their personal savings during 2021 and we are no longer passing huge stimulus packages funneling money into our economy month after month. And then the other problem is, why are people less willing to spend the money they do have? Why is consumer confidence going down? Well, it's because everything they have to buy, everything that they need to buy and are required to buy in order to live is getting more and more expensive, and they are uncertain of how bad it's going to get. They just look at prices at the grocery aisle going up and they're like, damn it, I need to start saving more money so that I have more money, just in case.

This gets even worse. Many businesses and sectors are still struggling with supply chain issues. Some people still can't get their products. Some people are still worried about rotating variants that come and shut down their business, especially in states that want to be very, very restriction heavy.

every single time somebody sneezes. So how do you solve this? Well, you could go and create more stimulus, which again brings more people money and brings back consumer confidence. Fixing a lot of issues on this list, but you risk getting more inflation. If you get more inflation, you eventually have the same problem down the road, which is people spending less money overall and consumer confidence going back down.

The only solution at the stage is to let the economy mature, get back on the right footing, and slowly let off the brakes in terms of unprecedented monetary policy. let supply chain slowly heal, let consumers slowly regain their consumer confidence, and start spending again. And then eventually you have businesses and consumers both feeling more and more confident in the economy, and you can get back on a more natural, long-term trajectory. What you don't want is a market that's constantly hung up on the same two damn variables: the Fed and inflation.

You want a market that's anticipating what happens after that, if it needs to adjust downward to rid itself of a lot of that uncertainty premium. Fine, to make an analogy. The market right now is a baby with a pacifier. The pacifier is the fit.

You think a baby that's been sucking on a pacifier for two years is gonna be happy. When you take the pacifier away, Hell no. it's gonna cry. It's gonna cry.

It's gonna scream, it's gonna kick, probably gonna spit in your eyes. But when you grab that pacifier from the baby's mouth, you have two options: Listen and wait for the baby to stop screaming and crying and grow the hell up. Or return the pacifier to the baby's mouth. The problem is that the second solution is really just kicking the can down the road because that baby can't be an 18 year old with a damn pacifier in its mouth.

We could talk all day about the pace at which the pacifier should be pulled from the baby's mouth. We could say this year we could say next year We could say three years from now. We could say slowly pulling it out over those three years, we could say that it needs to be yanked Right now. Jerome Powell has his hands on the pacifier, barely tugging on it, and the baby's like the market needs to move on.

From when is the Fed going to pull out the pacifier, to how fast this economy and the businesses inside economy are going to be growing in the years and decades afterwards, Because on the other side, this baby's going to grow into a damn adult. and we're going to have a massive, massive, massive upside. But what we don't want to be stuck in is the market that's constantly having to look at that damn pacifier and saying, oh, is he going to put it back in Oh, we put it back in. Oh, I feel good now.

Six months later. Bam. You got another period of volatility as they're anticipating it being pulled out again. and then six months from then, you have another problem with like, okay, yeah, it's been too much.

Let's put it back in eventually. the market has to grow up and learn to live on its own. Truth be told, you could take the pacifier away from the market. But if you look at the 40-year trajectory in terms of monetary policy with interest rates, it's pretty clear that while we don't necessarily need the pacifier, we do still have the massive booster seat.

And the other thing is companies are going to have different responses to having the pacifier removed. Some will take it very, very hard and for a very, very long time. Others they'll take it hard for maybe a second and then they'll get back to being a baby and growing up. You look at some of the other companies that recently reported earnings.

your alphabet, your Apple, your Microsoft all are doing very, very well despite a lot of these same problems happening in the broader economy. Whereas you look at something like Starbucks, they are having a much harder time. Starbucks complained of several issues in their earnings call yesterday that echoes many other earnings calls They said Prior to the Omicron variant, we were experiencing some inflationary pressures and staffing issues resulting from the broader pandemic. When the Omicron surge began, inflationary costs and staffing shortages were amplified well in excess of our expectations.

So here they are saying that Omicron amplified already present inflationary pressures and a lot of these issues are eating into their profitability. Facebook Meta: after Hours just vomited into the garbage can shareholder value as well. They blamed lower than expected growth in part on inflation and supply chain issues that are impacting advertisers budgets, but this is the same issue that we are seeing everywhere. People right now in this current market environment that we're in don't have as much money to spend and the money that they have, they don't want to spend it as much.

And you're now seeing sympathy crashes alongside Facebook, Twitter, Snapchat, your Pinterest, and so forth. So I guess what I'm trying to say is that eventually the baby is going to have to grow up and learn to live without the pacifier. Hopefully the pacifier is pulled very, very slowly, but it is getting pulled and it's going to eventually not have to be in the baby's mouth anymore. It's a slow and painful process.

Some companies are going to be able to handle it very, very well, others not so well. but when you look at it in terms of a longer-term trajectory, you need to do this in order to get on a natural, healthy trend. Anyways, that caps off this video. If you have any questions, feel free to reach out to us below or join us on Ziptrade or Circle if you'd like to learn how to trade with our step-by-step lessons, our private chat, our daily morning bravings, as well as our full price target list I will put a link to Zip Trader you below.

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