S&P 500 Outlook

hey everyone and thanks for jumping back into the equity verse today we're going to provide a general outlook for the S&P 500 if you guys like the content make sure you subscribe to the channel give the video a thumbs up and again check out the sale on intothe cryptoverse premium at intothe cryptoverse tocom let's go ahead and jump in so the general thought process uh that I've had for the S&P 500 is that it generally climbs the wall of wary until it has a sufficient reason not to do so therefore the best course of action

is just to uh DCA low expense ratio index funds and wait right that tends to be the best strategy and that trying to time the market usually does not work okay um now what I do is I DCA it as long as it's at a low enough risk level but obviously recently the S&P did get a little bit of a pullback here and so I wanted to talk about you know what's potentially going on what does it look the most similar to you should know that even in Bull markets the S&P does occasionally get 10%

Corrections every year or so and you can actually see that we've already had a couple of them we had one in 2023 we also had one in early 2024 some of the times though you'll see sort of like five or six per Corrections and if it does get a five to six per correction it could still take the S&P down to its bull market support ban but I wanted to talk about what does this resemble the most not because of the chart but because of other aspects of the market I think that if you were

to look at the 10-year yield that could give you some insight into what is potentially going on in 2023 there is a period when the 10year yield broke through this lower high structure and what happened essentially what happened is that you had a high you had a lower high and then there was sort of a breakout right there was a breakout right here and then the the 10year yield came back and retested the 21 we EMA now overlay the S&P 500 right so overlay the the& p and you'll see that the S&P back then got

a correction precisely when the 10e yield back tested at 21 we EMA that this is blue line that's when you got that correction now if you go back and look at this cycle which you'll notice is or sorry this year you'll notice there's something very similar happening right where there's a high a lower high and then it breaks out comes back down tests that 21 we EMA just like it did over here and upon that test you can see there's been a correction by the S&P 500 so I would argue that the reason why the

s&p500 is getting a correction right now is because the long of the yield curve is going up this is something we've been talking about all year I said that the dollar would likely rally in Q4 and accelerate in December potentially topping in early January and if the dollar rallies the long of the O curve is likely also going to rally and if they rally right if they rally together and they continue to go back up to these highs that's where you could see a a a short-term correction by the S&P 500 now I could theoretically

be wrong about the 10year yield continuing its rally if you get a recession soon then the 10e yield would likely Drop Like a Rock because then it starts to price in recession fears more so than inflation reaccelerating but as long as you don't see you know inflation really re accelerate as long as you don't see the labor market completely fall apart then we're not yet seeing a recession and and one of the things I've argued as well is if you go look at at um initial claims I've said that until they start printing 300K it's

not really recessionary and they're still at around 220 a little bit of a spike recently back up to 242 but it came right back down to 220 so as long as it's below 300K I I don't really think it's a recessionary um environment um that doesn't mean that you can't have Corrections right you you you absolutely can have corrections but until you see that take play I think that would be sort of the argument so if you go look at the 10year yield the question is is well when would it top I have thought that

to some degree it could be mimicking what happened in 2016 where it it basically gets a fairly explosive rally in Q4 and then kind of like tops out sort of late this year early next year and then starts to go back down the dollar did something really similar back then and so that was one of the reasons why I thought the 10-year yield would rally um and by the way you could also look at at say like the two-year yield we did a video on this when it happened here it is right I mean here's

the the notation from it where I basically said that like we we should see the 2-year yield bounce back when the FED cut rates I think a lot of people are hoping that yields would fall after the FED cut rates that's not what we've seen and I think the argument is that if they're cutting uh aggressively which they have been since September but there's not really a sufficient reason to do so then the market might interpret that as as potentially leading to another wave of inflation now again we're not seeing the labor market uh you

know be really tight right now I mean the labor market if anything is loosened up and even pal said that you know sources of inflation future sources is not likely not coming from the labor market anytime soon just because of how loose the labor market has become so if you do see inflation re accelerate it would probably be for some other reason than the labor market at least if it happens in the short term so with yields rallying it kind of takes the legs out of the out of the rally by the S&P 500 now

remember when the S&P bottomed in October of 2023 it bottomed right after the 10year yield topped okay so the 10-year yield topped right there that's where the S&P bottomed out so if you're curious about where the S&P might start to move back up I would look towards a 10-year yield to see when is it going to top out one of the things you should know is that you know B I mean assets like TLT operate inversely to the long of the ove so if the 10e yield is going up TLT goes down if the 10e

yield is going down TLT goes up but if you look at at TLT a lot of times it will it will find double bottoms um before moving up right a double bottom there double bottom there double bottom right here sometimes it'll sweep the low so it's always possible that it sweeps the low as well or finds double bottom there are times where you'll see an asset put them sort of like a low and then sort of a higher double bottom low and then it'll get a little bit of a rally but then a lot of

times even when that happens it then still resolves lower eventually so be aware that that you could see that play out and if it happens it doesn't mean that the 10e Y can't go higher if the tenear yield does top out soon uh it could just simply mean that the fed's gone too far and then they need to start cutting really aggressively but again if you assume that the markets are you know the economy is okay and that things are going to keep chugging along then the argument here by the long of the yeld curve

is that the FED is cutting too soon too quickly and therefore the long of the yo curve has to do what the FED is unwilling to and that's to basically raise the long of the Y curve and take the legs out of the the rally by equities again that doesn't mean that equities can't eventually go higher it just it's hard for them to go higher when the 10year yield is going higher right when the long theal curve is going up it's hard for the S&P in the short term uh to continue that rally and so

what I'd like to do also is I'd like to go over here to the equity side of the cryptoverse and look at year-to dat Roi of assets like Apple in 2024 make the comparisons to 2023 and you can kind of see that apple had a little bit of a correction in 2023 right around this time but if you look at the indices right if you look at like the NASDAQ in 2023 compared to 2024 you can see that it it the shape looks really similar right and it's also tracking higher but the one difference is

that last year the 10year yield topped here right now we're seeing the 10e yield continue to move up so you could see some Divergence uh if the 10-year yield continues uh to move higher right and I think it's just always important to remember that I would also take a look here at the risk on the S&P 500 um it has come down at least somewhat recently especially with um especially with markets uh getting that correction recently when they went all the way basically up to like 6100 the S&P and then now it's dropped back below

that level uh let's see if it actually lads normally normally it livs a little faster than this it's basically like 100 years of data which is why it it tends to take a while um but we'll see if it we'll see if it loads here in a second but let me reload it and see if we can get it to to show up but the S&P 500 risk level has obviously dropped a little bit recently just because of that correction and I I would I would again defer to to the long of the Y curve

right as long as the long end goes up it it will be a drag on risk assets but if you can see the long end uh start to to show weakness then you would likely see risk assets accelerate again just like they did in in 2023 so here's the the risk on the S&P so you can see it's finally come back down below 08 after being there for for a little bit of time right so something certainly interesting to to follow but those are my general thoughts on the S&P 500 I want to remind people

that my strategy with the S&P is to just DCA low expense ratio index funds uh at low enough risk level right so and I don't you know it's not like I wait for 0.5 risk normally I just DCA below 75 risk somewhere around that level because the S&P will often spend many many months uh above you know high risk levels it's not the same as crypto right it doesn't drop as much as crypto does so ien I generally DCA low expense ratio index funds up to a higher risk level one of the other things I

wanted to mention in case this does evolve into a larger correction uh is that if you look at the S&P divided by M2 there was actually you know there have been some s similarities between sort of this move and what happened in 1996 right there was a big move by the S&P in 1996 that started from the same level right here that we did in November October 2022 it then rallied on up to this level and then it had a larger correction down that correction was actually about 20% so if you were to see something

like that obviously it would be detrimental to the cryptoverse we haven't seen that yet um you know back over here when we got that correction you can see that the S&P basically fell to the 20we SMA and then it pretty quickly fell below it if you look at it today it already fell to the bullmark sport ban but it has not yet Fallen below it but I would I would keep an eye on that and and there are some other similarities for instance if you were to look at interest rates the FED also uh kind

of well they cut sort of in response to that what was interesting is they cut around that that drop and then the market exploded higher again and then they had to raise rates so imagine if they did that and the funny thing is they cut rates from 52% down to 4.75 right here they just cut rates from 52% down to 4.5 I don't I mean I hope they don't have to raise rates again pal sort of scoffed at the idea that they would have to raise rates again but he did say anything's possible let's hope

they don't have to do that I'm sure it would be very painful if we had to go through that process where they sort of bottomed out and then went back up and then fell off you know because that's essentially what happened uh during the dot days they cut too soon you had a COR you had a correction they cut too soon and then you had sort of the Final Phase of of the bull market so certainly something to keep in mind here because you know history can have a way of of repeating itself I mean

and and by the way you know if you look at the NASDAQ divided by M2 it's already higher than where it was in thec Era right I mean it it it already has has sort of surpassed that um level you see that right there how I me get rid of this fi Trac right but you can see where it was back over here and and that was also you know the FED cut rates too soon the NASDAQ just accelerated higher so I would I I would and by the way just because you have it be

a top here doesn't mean it has to be a top here it could continue to go up further right I mean in fact uh you know you did have a you already had a pretty big correction right here okay you don't you don't really see the exact same thing over here I mean there are some but they look kind of small I guess um comparatively they lasted a lot you know a much shorter period of time but you know I I think it's interesting to to follow the S&P to try to figure out you know

how's it going to move based on the long theal curve when you get the long end moving up you will see these Corrections by the S&P but whenever the long end tops that's when the S&P should start moving up again the only way that it wouldn't move up again more than likely would be that if there is a an economic downturn caused by you know monetary policy lags right um so you you could see something like that but even in the case know of an inverted yield curve that precedes recessions you should remember that not

all recessions are are the same right I mean sometimes you get just 20% drops uh like you had in like 1998 even though that wasn't even a recession but like in 1980 um 1980 1981 you know here's a recession where the market just dropped 20% here's one where the market dropped about 20% I think a lot of people sort of look at it like this and assume that any recession's got to be like a 50% drop but that's not always what happens right you know it doesn't always have to be like that so please remember

there's a lot of ways this Market could play out be open-minded have a plan try not to time things perfectly because you're probably not going to be able to thank you guys for tuning in subscribe give the video a thumbs up and I'll see you guys next time bye