Okay folks, so we need to talk about what Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen just said what they're thinking about the stock market right now, what they're going to be doing with the economy and how that relates to us and our moolah. They specifically said something very interesting about valuations. Right now, we have a lot of people coming from both extremes. Some saying hey, this is a great market condition That means that we could snap place up at good deals and just be patient.

And then there's other people on the other side of the extreme. That's like hey Charlie We wrote the wave of 2020 and now we're all screwed. And obviously we've been through many teasing market conditions together in the past. As late as just this last September and October, we had two months of just insane teases.

So I think that it's very important that we listen to their perspective and this is what we're going to be doing in this video. and the only thing I ask in return is that you hit that ravishing like button And also don't forget to subscribe. Also, if you're looking to learn how to trade with eight plus hours of step-by-step lessons, our private chat, and daily morning briefings, well, I'll put the link to Zip Trader you below and you can go ahead and check it out. This may be the perfect time to learn about the market and to be briefed every single morning on what's going on.

Coupon code youtube15 will get you 15 off at checkout. Okay, so to start, we're gonna put them on in a second. but they ask what they're thinking about valuations and overall financial stability. and this is what they say.

Monetary policy is highly accommodative right now. That is appropriate given how far we are from our, uh, our employment goal and our inflation goal for that matter. How many times does he have to say we're going to be accommodative to the stock market. We're going to be accommodative to the economy.

I mean, poor guys like a broken record at this point. We heard this last week. We heard this the week before We heard this. Like six months ago.

he's been saying the same thing over and over again. Thing I would point to is just our overall monitoring of financial stability. So we look carefully at financial stability on an ongoing basis. We have a framework with four pillars.

If you look at those, the the evidence is is kind of mixed. You can say that asset prices are are somewhat. Some asset prices are a bit high, but the the banking system is highly capitalized. Okay, so here he's saying some asset prices are high.

He's been very careful with how he's wording this because if he's like, oh, valuations are high across the board, Obviously, that's going to cause a little bit of a stir. But at the same time, what this tells us is that he sees the overall asset picture as unequally valued. There's a little bit of a disparity between asset classes that are overvalued and some other ones that are undervalued. It's not that everything is overvalued, it's that there's a disparity between different asset classes and how this is a natural result of the banking system being well capitalized.

aka there's a ton of liquidity in the system because of the Fed's easy money policies that have been taking place over the last year. Um, and uh, funding risk is is relatively modest. The remainder is the remaining category is really leverage among households and businesses, which is somewhat elevated, but but nothing like it was before the financial crisis. So so he's talking about leverage aka margin In terms of small businesses and individuals, he seems to think it's a little bit higher than he'd like it to be, but it's not nearly as bad as it was during 2008, and this is an important distinction.

The goal of the media is always to get headlines that relate to previous panics, because that's what gets them clicks. They want him to say things they want him to address concerns as to whether we are right now heading for another crisis like the dot-com bubble, the 2008 recession, so on and so forth. I watch a lot of financial media and oftentimes what you see is people point up the chart of 2020 saying oh my god, the pace. The pace of equity valuations rose so dramatically in 2020.

clearly we must be in for a huge huge crash. And I'm not saying that the market can't afford to take a damn breath, but the nature of the market is that it's exponential. so bull markets compound faster in recent times as compared to when you look at the historical chart. That's especially apparent if you look at the 100 year or 50 year charts.

So for folks who are looking at the chart saying, oh, we've clearly we've clearly gone way overboard. Well, yeah, the stock market is forward-looking so you're always going to go overboard a decent amount. but I think it's important to look at the historical context. During every single bull period we've had for like the last 50 to 100 years, you'd have situations where the market would take off rapidly at an exponential speed and then then it would either tank or it would go into teasing mode where it's kind of up and down and then after that you'd get another rapid speed exponential growth.

Let's go ahead and get back to the interview. The main thing is to have a resilient financial sector that can, um, that can, uh, you know, withstand the sorts of disruptions that that will come in terms of of moving forward. We've said that we would, uh, start to taper our asset purchases when we've seen substantial, further progress toward our goals. When that comes, we'll communicate well in advance of the time of actually tapering.

That's what we do. we've learned over the course of some years now that we need to communicate carefully and move slowly. well ahead of time. We we will.

We will let people know what's coming and that's the best we can do to make sure that the transition away from very highly accommodated monetary policy as the economy reaches full employment and and price stability goals. Uh, that will transition to a different policy. Also, that ringing isn't me. It looks like it's Jerome Powell's beeper or something.

I'm not sure who still uses beepers, but maybe that's a government thing. I don't know. Okay, let's go ahead and switch over to Treasury Secretary Janet Yellen. I'd say that while asset valuations are elevated by historical metrics, there's um.

Also, um, also believe that, uh, with vaccinations proceeding at a rapid pace, that the economy will be able to get back. um, on track. Um, you know, I think in an environment where asset prices are high, that what's important is for regulators to make sure that the financial sector is resilient, and um, to make sure that markets work well. Um, and that financial institutions are appropriately managing their risks.

So she's talking a little bit in a different tone from Jerome Powell. She's not just saying that some asset valuations are kind of elevated like Jerome Powell said, she's actually saying it's elevated by historic standards. Now, I discussed earlier how the stock market is exponential, so by a lot of metrics, it's always going to be up by historic standards after a bull market. But she does walk this back a bit, saying because of the vaccines and the belief that vaccines are going to lead us out of the pandemic and with overall resiliency in the financial markets.

Well, that might lead to more stability than the markets are pricing in right now. She goes on to talk about tax policy, and I know the tax policies kind of walk in a thin line between politics and the market, but obviously you know tax policy has an effect. Expect to examine changes to tax policy along with programs that will address some of the long-standing problems that have held down our productivity and labor supply In the United States will address infrastructure risks from climate change education, training. Let me ask you Ma'am Um, Secretary what impact would this action have on jobs and workers wages? Um, I think a package that consists of Um investments in people investments, and infrastructure.

Um will help to create good jobs in the American economy and changes to this tax. But anyways, in totality, my perspective here is hey, we don't really have control over what the market does. We've been in all different market conditions. A couple weeks ago we were in panic mode.

This week we're in teasing mode. Next week we may be in more teasing mode or more panic mode. After the Kova Drop, we have this insane day after day rally. I mean, we had some little pushbacks, but it was an insane day after day rally for pretty much six months.

And then what happened? We have the September and October crash. A lot of the big plays. They're valuable, lost tons of money. People said, oh, I thought these were good plays.

Why are they losing money? Well, because the overall picture of the market had changed, people weren't willing to take on that risk during that period. so you got a lot of teasing that lasted for two months. Then in February we got a huge rotation. This one was more painful because valuations had climbed up so quickly.

During January and February, people were buying at all-time highs and they kept getting higher and higher. But overall, the teasing hasn't been that much different from September and October or anything that we've seen in years past either. But historically, if you were to bet that a bull market would never come back, well, you would have been wrong every single time. It's actually interesting, though.

I find a lot of people lose faith in the stock market more when it's like slowly bleeding or going up and down and teasing then if it was just an outright panic drop. But the truth is that your success as a trader isn't going to be dictated by how many stagnant markets there are. It's going to be dictated by what you do during the stagnant markets. What are you taking advantage of? How are you preparing for the bull market? How are you protecting your downside and getting ready for good deals during a bear market? Sometimes it's also worth mentioning that hey, you don't have to trade every day.

certain high conviction plays you don't have to watch every day. If you doubt some of your positions do some extra work to make sure that you're reaffirmed in your stance on those positions and then wait for them to realize that strength that you've projected. And in the meantime. it's not about just sitting still and not doing anything.

It's about taking advantage of short-term plays. It's about taking advantage of good deals. It's about taking advantage of that ravishing like button. Anyways, folks, I just wanted to bring this to your attention.

hope this was valuable to you. If you have any questions, feel free to reach out to us below or join us in Zip Trader Circle. if you'd 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.

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