A Once in a Lifetime Market Event Is Here

A once in a lifetime market event is here, and it will change everything you thought you knew about investing. The stock market crash that occurred in 2022 is over, and the latest stock market news shows that a major stock market event has started. The stock market today is up nearly 9% over the past month, and it looks like the stock market rally will continue. Stock market investing has never been easier as this once in a lifetime market event starts. This video explains the stock market for beginners and is better than spending time watching most stock market classes. The share market is rising and the share market news is bullish.

It all has to do with the federal funds rate. Something is occurring that has never occurred before in the history of the United States. As inflation started to rise significantly in 2021, the Federal Reserve began raising interest rates in order to fight inflation. Now inflation is coming down and is approaching the Fed’s target of 2%. And because inflation is now coming down, investors are now betting that the Federal Reserve is done raising interest rates. And that bet has caused stocks to rally over the past month. The reason stocks rallied in November of 2023 is the same reason that stocks rallied from about 2013 through about 2021, and the reason had to do with the fact that as interest rates are low, this allows companies to borrow at lower interest rates. In turn, they’re able to grow faster, and as they grow faster, that means their profits increase.

Now, ultimately, stocks are priced based upon profits, also known in the stock market as earnings. And we can see this in something called a price to earnings ratio. As a company’s earnings go up, its price to earnings ratio goes down. And as a result, investors tend to buy the stock in order to keep that price to earnings ratio at about the same level. The average price to earnings ratio on the S&P 500 right now is 24.33, as of September of 2023. Now, we did see the market continue to sell off in October, but then we saw the market rally in November, wiping out all of the losses from the past four months and getting back to the July 2023 highs. As a result, I would expect that once the November PE ratios are released, we will see them near the July level of around 26. And while a PE ratio of 26 is certainly well above the historical average of 18, it is still nowhere near as high as the January 2021 high of 38.

The important thing for investors to understand is how interest rates affect PE ratios. In every period in the last 30 years, when the Federal Reserve raised interest rates in 1994, 2004, and again in 2022, we saw PE ratios decline, marked by sell off in the stock market. We saw this in 1994, again in 2004, and again in 2022. But what’s most interesting is that the decline usually starts before the Fed starts to raise interest rates. And the reason for this is because the stock market is really good at predicting what the Federal Reserve is going to do in the future. When the Federal Reserve is about to raise interest rates, the stock market predicts this by starting to sell off about six months before the Fed actually starts to raise interest rates. Now, it can be said that the exact opposite would be true as well. The stock market should start to rally about six months before the Fed starts to lower interest rates. But in the current market environment, the Federal Reserve is not looking to raise rates, nor are they looking to lower rates. In fact, what they said is they are looking to keep rates elevated for a long period of time.

So what happens when the Federal Reserve stops raising interest rates, as they did in 1995, 2006, and now in 2023? Well, every time the Federal Reserve stops raising interest rates, the stock market bottoms out. It bottomed out in 1995 when the Fed stopped raising interest rates. It bottomed out in 2005 when the Fed stopped raising interest rates, and it bottomed out in 2022 when the market predicted that the Fed was going to stop raising interest rates. Now, what’s interesting is how much of a rally we see in PE ratios from the moment the Fed stops raising interest rates. In 1995, we saw PE ratios rise from about 15 all the way up to a peak of over 40 in 2001. In 2005, we saw PE ratios rise from a bottom of 17 all the way up to 120 in 2008. Now we’re seeing PE ratios rise from a bottom of 19 to… how high? Well, certainly I don’t think 26 is going to be the max. That’s where we are right now based upon history. We could see PE ratios rise well above 40. And investors know this. And that’s why they’re so greedy right now.

So every time the Federal Reserve stops raising interest rates, we see stocks absolutely rally. And in the past, that rally has been more than a 100% gain in the stock market over a three year period. So it stands that if history repeats itself, we could see stocks go up by more than 100% from the lows that we experienced in October of 2023, meaning we could be looking at a three year rally of more than a 100% gain in the stock market over the next three years. However, we are in a very different period from history. What is happening now that has never happened before in the history of the United States, is that we are coming off of a nearly 15 year period where interest rates hovered around 0%.

During this past 15 year period, we saw the stock market rally. And the major reason for that was something called TINA – There Is No Alternative, meaning there was no alternative to stocks. People didn’t want to put their money into bonds because they only generated about a 0.5% interest rate. You didn’t want to put your money into Treasuries, which were generating around a 0.2% interest rate. You didn’t want to leave your money in the bank account, which was generating around a 0% interest rate. That was a horrible place to keep your money. So the best place to put your money was the stock market. That, in turn resulted in a massive stock market rally.

But now that interest rates are rising once again, there are alternatives to the stock market. The main places we see alternatives to the stock market are in Treasuries, bonds, and something called a money market account. A money market account is essentially a place where you can put your cash – it’s as safe as putting your money into a bank account – but the interest rates are much higher. In fact, almost all money market accounts are now paying more than a 5% interest rate on cash. And that is why institutions and investors together have a record $5.7 trillion parked in cash like money market funds.

Even you can take advantage of these money market funds by opening an account with Webull, where you’ll get 5% interest on your uninvested cash, or by opening an account with Moomoo, where you will get 5.1% interest on your uninvested cash. You can open either one of those accounts here, where you can get an amazing interest rate on your cash – far better than leaving it in the bank, or with some other broker that doesn’t have a high yield money market fund like Webull and Moomoo. The fact is, for the first time in a long time, cash is a competitor to the stock market. But will it be a competitor to the stock market forever? The answer is most likely no.

At some point, the Federal Reserve is going to start lowering interest rates again, and a lot of people think that as soon as short term rates start to come down, you’re going to see large flows out of money market funds and into other assets such as stocks. And in fact, we’re already seeing a large movement of money out of money market funds and into stocks. In October, money market funds posted their first significant monthly outflow since interest rates began rising nearly two years ago. And all of that money went into the stock market. This is why we saw the S&P 500 rise nearly 9% this month, as well as the Nasdaq rise 11% this month. And there’s still over $5 trillion of money in money market funds that is yet to be invested into the stock market. When that money does get invested into the stock market, I believe the stock market is going to continue to rally over the next few years, and this is going to help cause that nearly 100% rise in the stock market over the next three years that we have historically seen.

This week, we have more Fed governors speaking. And over the past month, whenever the Fed has spoken, it has caused the stock market to go up, as the Fed has continued to solidify the belief that they are no longer going to raise interest rates. On Thursday, we also have the PCE index, or Personal Consumption Expenditures Index, which is the Fed’s preferred measure of inflation, and that is expected to show a continued decline in inflation as inflation continues to go down. This will further cause investors to believe that the Fed will no longer raise interest rates, and might even start cutting rates at some point in 2024.

We also got news that Black Friday shoppers spent a record $9.8 billion in US online sales, which is up 7.5% from last year. Including the decline in in-store sales, Black Friday sales were up about 3% year over year. And as consumers continue to spend, this is going to continue to help increase the revenues at companies, which in turn is going to help increase the profits at companies, which in turn is going to cause stock prices to continue to rise. So for all of those reasons, it looks like a major stock market rally is going to continue for the next few years. And that is why I am going to continue to buy stocks in the stock market and ride this rally up.

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