Hello, and welcome to our Market Alert video for today, which is Friday, May 20th, 2022. We’re titling this video, “Dow 25,000.” You may be asking yourself, “Well, how on earth could that possibly happen?” So, I’m going to go over that with you here in just a moment. Before I do, I just want to tell you that I am in New York for my daughter’s graduation. What’s interesting is she graduated in 2020. Because of the pandemic, the live graduation ceremony is in 2022. So, they’re celebrating that because the other one was virtual, not the same. So, if you’re noticing any weird stuff happening, it’s because yes, it’s a virtual background. I admit it. Technology’s kind of cool, but not perfect.
So, let’s go over what’s going on in the world right now and what we think is going to happen. We’re believing more and more that the possibility of the Dow going down to 25,000 could be a reality. So, I want to go over with you a rationale behind that and why we think there is. There have been few times in the past when we believe it is more important to look at protecting what you’ve got and making sure that you’re not taking more risk than is appropriate for you. So, the first thing is that the Federal Reserve has a dual mandate, the first one of their mandates is to control inflation. The second is to grow the economy. Well, given a choice of which one of the two is the worst enemy, inflation is a cancer, the economy going into recession is the flu. So, which one do you want? Neither one! If you had to pick, you don’t want cancer. So, the old expression about “Don’t fight the Fed” means that when the Fed is determined to do something, they usually win.
Right now, what they want to do is they want to slow the economy down. They essentially want to take all the money out of the system. There’s so much excess money that is chasing after fewer supplies of goods and services, which is causing all this inflation. Which by the way, they’re the ones that did this. They put too much money in because of the pandemic. So now they’ve got to take it out. And what are we seeing? Well, the consumer represents 70% of the economy, and they could be in for a really hard time. Walmart and Target came out and said that they’re seeing higher food prices, higher product prices, and that they’re guiding lower in terms of their profits because a consumer is not going to be able to afford as much. The consumer, which represents 70% of our economy, is faced with rising gas prices, rising food prices, rising cost of heating and cooling their home. They don’t have a lot of discretionary income. That could really put a dampener on consumption and the profits of companies, and therefore the stock market that the profits come from.
The other thing also is that I want to show you a chart here. This is the Dow Jones so far this year, as I record this, and one of the things that happens when you go into a bear market is what I call playing a Yo-Yo while you’re riding on a down escalator. So, the escalator is corporate profits; it’s the economy. So, if the economy and profits are going down into a recession, then you have a down escalator and you’re playing a Yo-Yo while you’re riding on the escalator and the Yo-Yo is the stock market. If you look at this chart, what do you see here, it’s a downward escalator, and you can see the Yo-Yo. The interesting thing also, which is not a good sign, is that each new low is lower than the previous one. That is a very, very bad sign for your investments. So, we’re right now very glad that we are looking at our protection mode in terms of our strategy and for our clients.
This next chart, this chart shows why we think it’s possible that we could see Dow 25,000? Well, this is a two-year chart, and it goes back to when the Fed right here on the far left down here started this massive infusion. The federal government, they borrowed and they pumped the economy by putting trillions in. We had this huge surge, as you can see here in the stock market. This is the Dow. And now they’re going to take all that money out to get us back to basically the amount of money in the system before they pumped all that in. Well guess where the Dow was before they did. It was 25,000! So that could be another 25% drop from here, folks. So, what you’ve experienced already, if you are still invested, it’s half of what it could be in our view. What should you do about it? Well, our opinion is you should protect yourself. Now, we can’t help you with that unless you visit with us. So, what I would recommend is you go to our website, it’s RPOA.com. When you’re there, click on “Meet with an Advisor,” and we’ll sit down with you, go over how our strategy works, and we’ll tell you what we think we’re looking at. We will tell you what we think you should do. We believe this is a time to protect your retirement. You don’t want to see what you’ve already experienced get worse. Then it takes several years for it to get back, like 2008 which took until 2013 to get back. You don’t want all of that. So let’s see if we can help you! Go to our website. Again, it’s RPOA.com. We’ll look forward to visiting with you and seeing if we can a have a good partnership. So, thank you for watching this video and we’ll talk soon!