Google searches for the term recession spiked in August of 2024 to the highest level since 2022 at the same time stock market volatility spiked to the highest level since the covid pandemic as the stock market dropped by a rapid 10% according to the aaii survey 37% of investors flipped to being bearish on the stock market during this panic in August now since then stocks have regained almost all of their losses with a violent Market bounce was this recession panic in stocks just a way to shake retail investors out of the market before the S&P 500
resumes its bull market higher we're going to dive into the data to understand exactly what's happening on the S&P 500 today now evidence does suggest that institutional investors bought the dip while retail investors sold aggressively $4 billion worth of stocks were bought by institutional investors during the Panic while retail investors sold around a billion dollars worth of stocks now hopefully if you are a member or you watch one of our last three videos you would have avoided doing that because in these three videos our main message was that although we're more confident than ever that
the US economy is on the edge of a recession we weren't at all confident that it was time to get bearish on the stock market the vix spiking to the highest level since the covid pandemic showed a record amount of investor Panic during this period indeed every time that the volatility index spikes to these kinds of levels it marks pretty significant bottoms on the S&P 500 and more often than not these are buying opportunities to take advantage of not moments when you want to be Panic selling your stocks so now you're probably wondering with the
volatility of the S&P 500 coming all the way back down into the same range it was trading in between 2023 and 2024 does that mean that the recession is cancelled most certainly not the high level of interest rates that we currently have as a result of the Federal Reserve hiking interest rates violently have likely not had a complete impact on the US economy yet and when we add the volatility index of the S&P 500 on top of this chart and we shift it Forward by around 18 months we see that the impact on the Federal
Reserve interest rate on the stock market is extremely lag by around 18 months so essentially when the Federal Reserve hikes interest rates you can generally expect that 18 months later S&B 500 volatility is going to pick up and that's exactly what's been happening today around a year and a half ago we had the Federal Reserve aggressively hiking interest rates and now all of a sudden we're starting to see the markets get concerned about a recession and you can see over the last year the Federal Reserve has kept interest rates at elevated levels meaning that over
the next year we're very likely to continue seeing spikes in volatility you can see that's exactly what happened in the late 1990s where stock market volatility remained quite elevated as the Federal Reserve was keeping interest rates at high levels and you can see the two initial spikes in volatility that we had in in the 1990s led to quite incredible rallies when volatility came back down with the stock market surging to new all-time highs and in 2000 the stock market topped out and began to decline as the US economy was heading into a recession we think
we could be in a similar situation to the late 1990s today that the recession in the United States wasn't cancelled just maybe postponed by a few months now yes the unemployment rate came in at 4.3% for the month of July showing a significant pickup in the uny employment rate something that you typically only see heading into economic downturns and this was the key reason for why the stock market dropped violently following that release but what we highlighted following this report is that this bad unemployment number was likely significantly impacted by the hurricane that hit Texas
in the month of July the number of drops that were impacted due to bad weather hit extremely elevated levels for the month of July and most certainly skewed that drop number and led to an outsized Market reaction and indeed last week we had confirmation of that initial jobless claims that you can see on this Tru came in at 227,000 this was significantly below expectations and shows us that the labor market has not yet cracked now if you're a member on our website you'll know that 260,000 initial jobless claims is the level that we're closely watching
if we see initial jobless claims climbing above that level would very likely mean that we're starting out a recession but this most recent number that we got actually gets us away from that 260,000 level now eventually we do think that this chart is going to start morphing into something like this over the next 6 months again something you typically see heading into economic downturns but for now that's not the case and this is another reason why we cautioned our members against selling their Equity positions despite the fact that the stock market broke down below a
key upwards trend line in the month of August now with this most recent recent initial jobless claims number the stock market has actually regained this trend line which makes this entire move look like a big false breakdown quite a few of the trades that we have on the website are currently up 10 15% just over the last couple of weeks now the question is whether this move has a lot more room to run Higher One Target that we've laid out before is 6,000 points this is a Target on the S&P 500 that we've been talking
about since December of 2023 when the index broke out above a 2-year basing pattern that has a measured Target of 6,000 points now with the S&P 500 holding a very strong uptrend and breaking above a downtrend line that we were looking at as confirmation that the S&P 500 could resume higher we think the odds of the market can reach that level have increased substantially and we think we're exceptionally well positioned at game of trades. net for this type of move if you want to follow our entire investment strategy and get access to all of of
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