Iran attacked Israel over the weekend, and Bitcoin, as well as other cryptocurrencies, immediately crashed. But what will the impact of the Iran-Israel conflict be on the stock market? The Israel-Iran conflict in the Middle East will have far reaching effects on the stock market, and this will change the stock market forever. While we might not get an immediate stock market crash, this stock market news could cause a significant stock market correction eventually. The stock market impact from this war between Israel and Iran will depend upon how much Israel decides to escalate the conflict in the Middle East.
Rising oil prices will push inflation higher in the United States and globally. The Federal Reserve is already struggling with rising inflation, as supercore CPI shows the highest increase in nearly a year. And as US Government spending and money printing continue to be out of control, the Treasury is dealing with more bad bond auctions. This is all happening at the same time the US Consumer is struggling, as auto loan defaults skyrocket, and half of consumers are behind on their rent and mortgage payments. Investor sentiment is getting more bearish every day. But don’t worry. In this video, I’ll show you how to get rich from a potential stock market crash.
Iran attacked Israel over the weekend and the only market that was open at that time, the cryptocurrency markets, they absolutely crashed. But the impact on the stock market will be very different from the impact on the cryptocurrency markets. This will change the stock market forever. I’m Stock Curry. I’m a former Merrill Lynch and Morgan Stanley investment banker, and I’ve been trading for over 25 years. I’ve traded through many wars before, but this one is different. I have not experienced anything like this in my lifetime, although certainly some from the Silent Generation and the Boomer generation have. So let’s talk about what’s going on and what impact this is going to have on the stock market. Then let’s talk about some different ways that you can profit off of this conflict in the Middle East.
Over the weekend, Bitcoin and other cryptocurrencies tumbled amid Middle East tensions. Some cryptos such as Solana, XRP, Dogecoin, Cardano, and Avalanche were all down more than 20%. And while Bitcoin and other cryptocurrencies did recover from their initial drop, they bounced right off of a long standing support level. But the charts remain bearish. And just over the past hour in recording this video, Bitcoin and other cryptocurrencies have started to sell off once again. What exactly caused the crash in cryptocurrencies?
Iran sent over 300 drones and missiles towards Israel. Now it looks like most, if not all of those were eliminated. The Israeli Iron Dome defense in conjunction with the UK, the US, and other countries all worked together to shoot down and destroy these drones and missiles before they could land in Israeli territory. The reason Iran attacked Israel is because earlier this month, Israel bombed Iran’s embassy in Syria, killing its commanders. Iran said the attack over the weekend was aimed at punishing Israeli crimes, but now it has deemed the matter concluded. In other words, Iran says they have retaliated for Israel’s attack against Iran. Iran says they’re now done. They’re not going to do any further attacks. They’re not going to invade Israel. They’re done. So as far as Iran is concerned, this conflict is over and there’s nothing else to really think about or be concerned about.
Now, in one way, this is actually good news for the markets. Iran indicated earlier in the week that they were going to attack Israel. So Israel, as well as their allies such as the United States and the United Kingdom, they were well prepared for this attack. Now, the market did sell off significantly on Friday over fears of just what kind of attack Iran would actually do against Israel. But with Iran now saying that the attack is over, and with almost all, if not all, of the drones and missiles having been shot down, with really no damage occurring in Israel, the markets may actually breathe a sigh of relief on Monday. There’s a good chance that the markets might actually go up a little bit on Monday, at least the stock market. But that doesn’t mean that we’re in the clear. Regardless of what happens on Monday, the long tum impact of this conflict is going to be significant, and it’s something that you need to understand in order to understand what you should do longer term with your stocks.
So let’s talk about what the Middle East conflict now implies for the global economy, and more importantly for you, the stock market. It is generally agreed that this month has seen a significant escalation in the long standing Iran-Israel tensions. As trading resumes on Monday, traders and investors will react to the higher geopolitical risks, whose spillover can reach far and wide in the asset markets. We’re not just talking about the stock market here. We’re talking about gold, oil, and cryptocurrencies. It would not surprise me if Monday’s market open included higher gold and oil prices, and lower stocks and government bond yields. But what comes after that will be a function of whether the collective wisdom of traders and investors concludes that both Iran and Israel have sent their equal messages to each other, and thus feel that they’ve done enough for now.
If Iran really is done, and Israel chooses not to retaliate in a military fashion, maybe we just do sanctions against Iran, then by and large the conflict should be over for now and the stock market should be able to recover. The global economy and markets are relatively well placed to handle a once and for all increase in the geopolitical risk premium. Meaning if Iran and Israel are done for now, then the market should be able to recover. But the markets are not well placed to navigate further escalations that would involve more parties in a more significant manner.
What’s not known right now is what Israel’s response will be to the attack from Iran. If Israel decides to escalate this further and turn this into an actual war, more importantly if the United States or UK decide to start getting involved, then we could see a much larger reaction from the stock market. The energy price shock that would follow such further escalations would stifle the recovery in manufacturing that is helping countries such as Germany and the UK emerge from their technical recessions. It would also complicate a US inflation picture that is already subject to price increases, proving more stubborn than many, including the Federal Reserve, expected.
The biggest impact to the US stock market, as well as oil and gold prices, is whether or not this conflict is over. If it’s over, then perhaps oil prices can come down a little bit, perhaps gold prices will come down a little bit, and perhaps the stock market will rise and recover. But if Israel decides to escalate further and retaliate against Iran’s attack, then we might end up seeing gold and oil prices going higher, and we might see a much larger stock market crash than what we saw on Friday. The Israeli War Cabinet met Sunday night. However, they have been silent on their next steps after the Iran attack. As of the recording of this video Sunday night, we’re still waiting to see what Israel’s response is going to be.
Now what I want to focus on for the next few minutes is the US stock market. And specifically, I want to focus on inflation. Because right now, inflation and the Federal Reserve have been the biggest drivers of the stock market. Sunday afternoon, House speaker Mike Johnson said he will push for aid to Israel and Ukraine this week. Now, the problem with the US getting involved and providing more aid to both Israel and Ukraine is the fact that the United States simply doesn’t have the money for this. So the only way for the United States to get money to send would be to print more money. And as we all know, as the US prints money, that causes inflation to go up. It also increases the entire Federal debt.
So we’re going to look a little bit about what is causing inflation to go up, and what might make it worse in the future should this conflict escalate. Then I also want to take a look at some government bonds, because there’s some really scary things happening in the bond market right now. Also, Ukraine’s attack on Russian oil refineries shows the growing threat that drones pose to the energy markets because of the war in Ukraine.
The Brent crude and US crude oil prices had already been rising all year long. Brent crude reached over $90 a barrel, while US crude reached over $85 a barrel. And the escalations in the Middle East are expected to cause these oil prices to go even higher. Oil traders now have to weigh the risks of an Iran-Israeli conflict in an already tight market. Oil prices might spike at the opening of the markets, as this is the first time in history that Iran struck Israel from its own territory. Now, how long any bounce in oil prices will last will depend upon the Israeli response. The problem for US markets is that the higher oil prices go up, the higher inflation goes up. And as inflation continues to go up, this makes it less and less likely that the Federal Reserve will be able to cut interest rates sooner, and more, and more likely that those cuts are going to come later.
Surging inflation fears sent the markets tumbling earlier on Wednesday, and Fed officials are now scrambling to try to figure out what to do. Stocks slumped on both Wednesday and Friday. The Dow Jones Industrial Average dropped 2.4% on the week, and surrendered nearly all of its gains for the year. As inflation has remained stickier than many had hoped for, and the Federal Reserve appears unwilling to admit the problem, the markets are starting to sell off, and the markets are now about to wipe out all of their gains for 2024.
Now, the big problem with the Federal Reserve is they simply refuse to admit that the problem exists. They still believe that inflation is coming down, even though the data clearly shows that inflation has risen for each of the past five months in a row. So what we’ve started to do is we started to see the Federal Reserve remove certain inflation factors from their thinking, saying, well, you know, these parts are temporary. Okay, we’ve heard that word temporary, or transitory, before in 2021. It didn’t work out so well for the Federal Reserve. But hey, maybe if they try again, we’ll believe it this time.
Now we’re going to just going to ignore the fact that the inflation data is already modified and already artificially pushed much lower than the actual inflation is. The reason that the federal government does that is because every single year they have to provide an increase in both Social security as well as the pay to federal government employees and the military. It’s all part of their cost of living increase. So what the federal government does, is they artificially push the actual inflation numbers much lower than where they actually are. And the benefit of that for the federal government is they’re able to make the increases in Social Security payments and the government employee payments and military payments much, much lower, which saves the government a lot of money.
The downside, of course, is that we all know inflation is much higher than the official numbers. All we have to do is go to the grocery store or gas station to see that. And this makes American’s ability to spend much more difficult. Now in a minute we’re going to talk about consumer spending, because this has a pretty big impact on the economy. But for right now, let’s talk about what the Federal Reserve is doing to try to claim that inflation isn’t nearly as bad as it actually is. To see this, all we have to do is look at something called the super core inflation measure, which shows the Fed may have a real problem on its hands.
You may have heard of core CPI, which excludes the volatile food and energy prices. The reason we have a core CPI is because the Federal Reserve claims they don’t really have much control over food or energy prices, so we give them the benefit of the doubt. We remove those two categories and we come up with a core CPI, which includes everything else – the stuff the Fed is supposedly able to handle. Now there’s also something called a supercore gauge, which in addition to excluding food and energy, also excludes shelter and rent. The reason that we’re now looking at the supercore gauge is because Fed officials say it has become useful in the current climate, as they see elevated housing inflation as a temporary problem.
So back in 2021, the Federal Reserve said inflation was transitory, a fancy word for temporary. When that proved not to be the case, we ended up with massive inflation and a huge stock market crash in 2022. Now the Federal Reserve is once again saying that inflation is temporary, specifically pointing out the rents and housing inflation, pointing to that as being temporary. So let’s go ahead and give the Federal Reserve the benefit of the doubt here. Let’s go ahead and remove those and see what happens to the inflation data. The overall inflation, including everything, rose 3.5% from a year ago in March. And do you know what supercore inflation did – the inflation, once we remove all the stuff the Fed doesn’t want to look at? Well, supercore inflation accelerated 4.8% year over year in March, which was the highest increase in 11 months.
So the Federal Reserve is attempting to claim that inflation is temporary. And we just don’t look at the energy. We don’t look at the food, we don’t look at housing, we don’t look at rent. I mean, just ignore the fact that that’s like 90% of what consumers spend. Just ignore all that stuff, and just look at everything else and we’re fine. Okay. Well, we did Federal Reserve. And that stuff that you left us with is it 4.8%, the highest in nearly a year. And that is why the bond markets continue to sell off. The US ten year Treasury has been rising all year, hitting 4.5% as of Friday’s close, and really coming up against that 5% level that we saw last year.
Now, this isn’t just the Federal Reserve’s problem. In order to get inflation down, it’s a multi faceted approach. You have the Federal Reserve that handles monetary policy. They’re able to adjust interest rates. They’re able to buy or sell bonds. They handle the monetary side of policy. But the US federal government – that is the Treasury, as well as Congress, and the Senate, and the President – they are all in charge of fiscal policy. And fiscal policy is really simple. The less the government spends, the lower inflation goes down. The more the government spends, the higher inflation goes up.
Less government spending lowers the monetary supply, and in turn lowers the amount of money that’s out there, lowers the amount of things that are being bought. And as demand goes down, inflation goes down also. But should the federal government decide to do money printing, and should they decide to spend a whole lot of money, especially money they don’t have, then this money printing causes inflation to go up. It significantly increases the amount of monetary supply. It significantly increases the demand for goods and services, and in turn causes prices to go up. So the Federal Reserve can’t fight inflation by themselves. They need the help from the federal government. They need the help from fiscal policy in order to get inflation down.
But unfortunately, as we’re seeing coming out of the Treasury, we have a major problem on our hands. America’s bonds are getting harder to sell. Record issuances raise worries that the debt sales will exceed the amount of buyers. The way the federal government works right now is, they have a budget of, say, $10,000 a month. We’ll just put it into numbers that are easy to understand. But the federal government, they’re not spending $10,000 a month. They’re spending $40,000 a month. So they have about a $30,000 a month deficit. So what does the federal government do? Well, they have to go into debt in order to spend that extra money, just like you or I.
If you had a $10,000 a month income, and you wanted to spend $40,000 in one particular month, you would have to go into debt to do it. You’d have to run up your credit cards, maybe get a loan, something like that. And the federal government does the same thing. They go out and they borrow money in order to spend more than they bring in in taxes. And the way the federal government borrows money is by issuing bonds, or US treasuries. Now those bonds are auctioned off. The federal government goes out, they have an online website where they auction off these bonds, and people can go in there and they can buy them if they want to.
And there are what’s called good auctions and bad auctions. A good auction is when the federal government goes out to sell these bonds, and there’s plenty of buyers, and all the bonds get bought up. A bad auction is when the federal government goes out to sell these bonds, and there aren’t enough buyers. People say, you know what? I don’t want your bonds. I don’t want to give you money. I don’t want your loans. So the federal government has to increase their interest rate in order to get enough buyers. And the same thing would happen with you or I. If we have really good credit, we might be able to borrow at an 8% or 10% interest rate. But if we have bad credit, and our debt to income ratio starts to get too high, then lenders are going to require higher and higher interest rates. And if we get to the point where we have really bad credit, we may end up paying a 30% or even 35% interest rate on our loans and the money that we borrow. And the same thing is happening with the federal government.
If the federal government has a bad auction, there’s not enough people willing to buy the government’s debt. Then the federal government has to increase the interest rate in order to entice more and more people to buy. And when that happens, it’s called a bad auction. It’s a sign that things are really bad and people don’t want the US debt. Either because the US is printing too much money, they’re worried about inflation, or they’re just worried about a US default. Over the past few months, a series of weak auctions for US treasuries are stoking investors concerns that markets will struggle to absorb an incoming rush of government debt. Behind their caution lies a growing conviction that inflation is not fully tamed, and that the Federal Reserve will leave interest rates at multi-decade highs for months, if not years, to come.
At the same time, the government is poised to sell another $386 billion or so of bonds in May, an onslaught that Wall Street expects will continue no matter who wins November’s presidential election. And some worry that a glut of treasuries will rattle other parts of the market, raise the cost of government borrowing, and hurt the economy by increasing inflation. In other words, bond traders believe that this high level of government spending is not going to slow down no matter who wins the next presidential election.
Now, we all saw what happened when the government printed trillions of dollars in excess cash in 2020 in order to finance the Covid pandemic. We all saw the huge amount of inflation that caused in 2021 and 2022, as well as the inflation it continues to cause to this day. So the government learned its lesson and printed way less money. They cut back, right? Well, not so much.
The government printing of money is now higher than it was in 2020. I kid you not. They are printing more money today than they did in 2020. In the first three months of 2024, the US sold $7.2 trillion of debt, the largest quarterly total on record. That surpasses the second quarter of 2020, when the government was financing a wave of Covid-19 stimulus. And we all saw what happened to inflation in 2022 when the government printed that much money in 2020. Now they’re printing even more money. So what do you think is going to happen over the next year or two to inflation, and the Federal Reserve and interest rates, and the stock market?
But wait, it gets worse. The government must also contend with refinancing a chunk of its bonds. A record $8.9 trillion of treasuries, roughly one third of all of the outstanding US debt, is set to mature just in 2024. That means on top of the $7 trillion in money they’ve already printed in the first three months of this year, they’re going to have to print another $8.6 trillion in order to refinance the debts that they already have. This just keeps getting worse and worse and worse. And the impact that all of this rising inflation is having on American consumers is significant.
We have to look at what’s happening to the American consumer, because personal consumption expenditures represent nearly 68% of the nation’s GDP. And just like the federal government, consumers do most of their spending with debt. Much of that spending requires financing. In the fourth quarter of 2023, total household debt in the US reached a record high $17.5 trillion. This represents a 3.6% increase over the amount of debt held one year prior. Consumers are going more and more into debt every single day, and unfortunately, their cash stockpiles are dwindling. Household savings rates have fallen off from their Covid-19 pandemic era peaks in early 2020. As of January 2024, the personal savings rate was 3.8%. Something closer to 6% is considered typical.
So consumers are racking up credit at the fastest pace they ever have. They’re getting more and more in debt. At the same time, they have less and less cash available to them. Americans are running out of money. And what happens when Americans run out of money? They start defaulting on their loans. Over the past few years, auto loan delinquencies have revved up as car prices have stressed budgets. Auto loan delinquencies are one of the biggest leading indicators for a consumer that’s running out of money and about to start defaulting on their loans.
The auto loan delinquencies started to show a significant rise in defaults in 2005, and a huge spike in 2006. It wasn’t until 2007 and 2008 that we started to see a huge spike in foreclosures on homes. The reason for that is because as Americans start to run out of money and they’re unable to pay their bills, the first thing they do is they let their car loan go. They let their car get repossessed. The reason is they can usually still get to work with an Uber or or a taxi or a bus or something like that, and they really are going to spend that money that they have left on their food, their clothing and their home.
The last thing that consumers will allow to be foreclosed upon, or that they will get behind on, is their house. The house is the most important thing to the American consumer. Americans will skip a meal before they allow their house payment to get behind, because Americans don’t want to be homeless. We don’t want to be out on the streets. And that’s why the housing payments are the very last thing that Americans will get behind on. So if we start to see an increase in the number of people who are behind on their housing payments, this is a significant problem for the US economy. And last week, Redfin released a report showing just how many Americans are now behind on their rent and mortgage payments. And what Redfin showed was shockingly scary.
Half – that’s right, half – of us homeowners and renters say they struggle to pay their housing costs. 50% of Americans are behind on their mortgage and rent payments. This, according to a report by online real estate brokerage Redfin. Over one third said they cut back on vacations in order to cover housing expenses. Redfin noted the typical household earns about $30,000 less than what would be needed to afford a median priced home. Redfin reported 49.9% of survey respondents, that’s half of respondents, said they sometimes, regularly, or greatly struggle to afford housing payments. And many are making sacrifices to cover the costs.
The study found that more than one third indicated they decided to cut back on vacations in order to pay housing bills. Almost one quarter skipped meals. While one fifth worked extra hours in second third jobs, or sold their belongings. Others noted that they borrowed from friends or family, dipped into retirement savings, or passed on or delayed medical care. And this is why the stock market goes down when Americans start to get behind on their housing bills. It’s because Americans will dip into the retirement savings. They’ll start pulling money out of the stock market in order to pay their mortgage.
Now what’s really scary about this, is half of US households are behind on their rent and mortgage payments. So how does that compare to 2008? Because let’s face it, 2008 was a pretty bad time in the housing market. In 2008, conventional loans, that is, those that go through a traditional underwriting and qualification requirements, had a delinquency rate of 6.2%. Subprime loans had a delinquency rate of 28% In 2008, 6% of prime loans were in default and 28% of subprime mortgages were in default. And here in 2024, 49.9% of survey respondents are struggling to pay their bills.
Those are the facts. That is what’s happening in the world. That’s what’s happening in the US economy. Let’s talk about how it’s going to affect the stock market. And more importantly, let’s talk about how you can profit off of all of this.
These in the know investors are more bearish than they’ve been since 2014. Corporate insiders, such as directors, CEOs, and CFOs, are selling far more of their shares than buying. Selling into market weakness is one of the most bearish things the corporate insiders can do. Corporate insiders, as a group, seem to believe that there’s an above average chance of a major US stock market drop. Unfortunately the data only goes back 11 years, but corporate insiders are more bearish than they have been in at least a decade. And this bearishness is also starting to show up in the overall stock market sentiment.
CNN’s Fear and Greed Index – which measures how bullish or bearish investors are – one month ago, it was at greed at 73. A week ago it was at greed at 62. On Thursday it was at greed at 58. And on Friday it fell down to neutral at 46. The reason it’s neutral right now is there’s a fight between stock market investors and options traders. Stock market investors, people who buy stocks, currently remain bullish. They are still in a buy-the-dip mentality. So every time the market goes down, stock market investors continue to buy the dip. And that is keeping investor sentiment in the stock market side of things bullish.
Stock price strength and stock price breadth, which measure how many stocks are rising and falling, and how many stocks are hitting new 52 week highs versus new 52 week lows, remains quite greedy as stock market investors continue to buy the dip. But options traders are fearful. If you look at the number of put and call options, that ratio has been increasing, meaning options traders are buying more and more put options and less and less call options. Options traders are quite fearful. And S&P 500 options traders are in extreme fear with the VIX, which is a measurement of how many put options are being bought on the S&P 500, reaching its highest level since the October 2023 sell off. Safe haven demand has also skyrocketed as people who buy safe haven assets such as gold, are now in extreme fear.
Now, regardless of what happens to the stock market, it’s important that you know how to make money no matter what. It’s important that you take care of yourself, that you take care of your family, and that you profit during this time. Nobody wants to see the stock market fall. Nobody wants to see a war. But the reality is you’ve got to take care of your family. You can’t control what’s going on in the world. You’ve just got to make sure that you are making money in your portfolio. Now we all know how to make money as the market goes up. Let’s talk about a couple different ways we can make money if the market goes down.
Aside from buying put options on the market, there are some ETFs that you can buy that go up as the market goes down. One of those is SQQQ, which will go up as the Nasdaq goes down. Another is SDS, which goes up as the S&P 500 goes down. Another one to consider is SOXS, which will go up as semiconductors go down. This mainly is a play on Nvidia. If you believe in Nvidia stock is going to go down, you can buy SOXS which will go up as Nvidia goes down. And there’s also TZA, which goes up as the small cap stocks go down. This is a good one because if the inflation continues to go higher, and if interest rates continue to go higher, small cap stocks tend to sell off a lot faster than the mid and large cap stocks do. To give you an idea of how you can make money as the market goes down, here is SDS, which goes up as the S&P 500 goes down. And you can see how all week last week this just continued to rise.
And if you want to go beyond investing and you actually want to trade, there are ways to make huge amounts of money if the market goes down. Earlier this month I made an $11,000 profit, it was a 1,330% profit, on this SPX put in one day. And Fuzz, who is one of our full time professional traders in my discord that you can follow, made a 100% profit on some QQQ puts, and an 83% profit on an SPX call credit spread. Lady Leverage, who is another full time professional trader in the discord, she made five day trades on Fridaym and all five were winners with an 80% profit, 57% profit, 70%, 65% and 83% profits.
Our students in the discord have also been making money, with NpShoots130 making a 440% profit on a Google put option that Lady Leverage called out. Bahir Babak made over $4,000 in profit on Friday with futures. And our crypto traders have been killing it as well. If you want to potentially make profits like this in your portfolio also, come join us in the discord. We have thousands of people in the discord who are following over 35 full time professional traders, including myself. Come make money with us. You can sign up for that discord here.