 Hey everyone, this is Dan. Since the beginning of the year, S&P has dropped 21% and NASDAQ has dropped 31%. Has the market bottomed yet? When will the market recover? I looked at the macroeconomic events and also looked at market data from the last 50 years and came to some very alarming conclusions. Let's get into the details. First, let's look at the two ETFs, SPY, which is pegged to the movement of S&P 500 and QQQ, which is pegged to the movement of NASDAQ 100. As you can see, since the beginning of the year, both of them have been trending down. SPY has been down 23% as of last Friday and QQQ down 31% as of market close last Friday also. There is even a more alarming picture which has to do with the cryptocurrency market. As you can see here from its all-time high around November of last year, the crypto market has gone from $3 trillion to less than $1 trillion. In other words, $2 trillion or two-thirds of the value has evaporated. If you look back to the 2007 market crash, which was triggered by the collapse of the CDO market, you will see that at its peak, the CDO market was only about $1.4 trillion. Of course, between 2007 and today, the Fed pumped more than $4 trillion into the economy, therefore $2 trillion back then is not the same as $2 trillion now. It is nevertheless still very alarming to see the magnitude of wealth destruction in the crypto market today. I believe we need to prepare for what might be hitting us next. At this point, I'd like to pause for a moment and remind you to subscribe to my Twitter account in addition to subscribing to my YouTube channel. I share almost on a daily basis some of my trades as well as any significant event related to the stocks or ETFs that I've been trading. For example, on June 7th, I tweeted that I bought SQQQ and then three days later on June 10th, I tweeted that I sold half of the SQQQQ share bought on June 7th at 14% gain. You might want to take a screenshot of this slide to see what other information I shared, especially if you're interested, you might want to look at the video I posted on June 12th about the specific ETFs that I've been trading, which enabled me to actually make profits while the market has been going down. If you like what you've seen so far, I'd like to encourage you to click the like, subscribe and notification button. It'll enable you to receive notification when I post my next video. It'll also motivate me to post more videos like this in the future. Thank you very much. Let's continue. We have a lot to cover. To understand where the market might be going, we must first understand what major driving forces are behind the market. The most important event at this point is certainly the Ukraine war that has been going on since February 24th. The Ukraine war has caused unimaginable human suffering. It has also driven up the prices of crude oil, gasoline, natural gas, weed and many other commodities. Because of last Wednesday, the Federal Reserve Bank decided to raise interest rate by 0.75% in order to curb inflation. In the meanwhile, the Fed continues to embark on the path of very aggressive quantitative tightening or QT. Since the middle of April, a few major cities in China, including Shanghai, have been in COVID lockdown. The lockdowns finally have been easing, but these cities are not fully open yet. Because of the COVID lockdown in China, we have seen disruptions in the supply chain which caused inflation to go up even further. The May CPI came in at 8.6%, which was higher than the April CPI, that means inflation is not coming down anytime soon, which has a bearish effect on the stock market of course, and the high inflation rate compelled the Fed to raise interest rate and continue to do QT. The May producer price index, PPI, came in at 10.8% year-to-year, which was almost as high as the April number of 10.9%, again reflecting the fact that inflation is not coming down anytime soon. So May 30th, the leaders of the European Union said they would eliminate two-thirds of the Russian oil imports by the end of 2022. This action of course has been driving up the price of crude oil. In the meanwhile, Russia reduced the natural gas supply to Italy and Slovakia by 50% as of last week, and they completely shut off their natural gas export to France. Even before that, Russia already cut off natural gas supply to Poland, Bulgaria, Finland, and Denmark. The Ukraine War has been restricting the export of wheat from Ukraine, which is a major wheat producing nation. Recently there has been talk about the possibility of a humanitarian corridor opened up by the Russians to allow for wheat export from Ukraine, but this corridor has not come to fruition yet. The White House recently announced that President Biden will be visiting the Middle East during the period from July 13th to July 16th, including a stop in Saudi Arabia when President Biden is in Saudi Arabia. He will certainly try to convince the leaders of Saudi Arabia to produce more crude oil, which hopefully will ease the price of crude oil. So last Friday, it was reported that the New York Fed built a computer model which showed that chances of a soft landing would be at only 10%, whereas the probability of a hard landing would be at 80%. This is certainly bearish news for the market. Recently, the CEO of JPMorgan Chase, Mr. Jamie Diamond, said that he saw a hurricane coming over our economy. That's another bearish remark about the market. And as of June 3rd, Microsoft announced that they were lowering their earnings guideline because of a strong dollar. In the meanwhile, several major companies announced their layoff plans. For example, Coinbase planned to lay off 18% of their workforce, Compass 10%, Redfin 8%, BlockFi 20%, Tesla 10% of their office staff, Desktop Metal 12%, Warner Bros. Discovery laying off 30% of its sales team. A lot of people are saying that a recession might be coming in the next six months. The reason for the Fed rate hikes and quantitative tightening is the inflation rate. So where do we stand on our inflation rate? As of April, the CPI was at 8.3%, and then from May, it came in at 8.6%. I believe the Fed will continue to tighten unless the CPI is down to less than 5%, which will be the point where we might expect the market to recover. I will talk more about that in the next few minutes. Recently, the former Fed official Bill Dudley said that the Fed funds rate might have to go as high as 6% before inflation rate can be brought under control. I believe he is being optimistic. Based on my own analysis, which I posted on May 22nd, I looked at the data from two periods from 1973 to 1976 and from 1978 to 1982. During those two periods, the inflation rate was 8% or higher, and the S&P during those two periods went down between 27% and 50%. Therefore I don't think we have seen the bottom of the current market drop yet. Let's talk more about that later. Let's take a quick look of the Fed funds rate, which is the mother of all interest rates. Let's take a quick look of the Fed funds rate, which is the mother of all interest rates. Before last week's announcement, the Fed funds rate was at 0.77% as of May. Then it jumped up to the new target of 1.5 to 1.75%. Currently the bounce market priced the Fed funds rate at roughly about 3.5% by the end of the year. If the Fed funds rate is going to go up to about 6% or higher, then ETFs such as TMV, which I have invested in, will go up a lot higher. Let's look at the total Fed assets. Since the middle of 2020, the Fed asset has been going up at the rate of $120 billion a month. That's during the period of QE, quantitative easing. But what we see now is the reverse of QE. We have QT in action. In the last 2-3 months, as you can see, the Fed asset has been flattening and actually has come down a little bit. The goal of the Federal Reserve Bank is to reduce the asset at the rate of $47.5 billion a month in the month of June, July, and August. The rate of reduction will increase to $95 billion a month starting the month of September. As the Fed reduces total assets, it will be taking money or liquidity out of the market, which will cause the stock market to go down. In my June 5th video, which you can find on my YouTube channel, I have provided more explanations about how total Fed assets can affect the stock market. You might want to refer to that video for more information. So when will the market recover? In the last 50 years, there were only two periods when the inflation rate exceeded 8% and when the Federal Reserve Bank increased interest rates in order to lower inflation. The first such period was during 1973 to 1977. And on this chart, I plotted the Fed funds rate in green and the CPI representing inflation in orange color. And as you can see with this vertical line, we can spot where S&P 500 started to come down as the Fed increased interest rate. And then the market started to go up again at basically two, three months after the Federal Reserve Bank started to lower interest rate. And then another period in which the inflation rate was greater than 8% was between 1978 and 1982. Again, from this vertical line, you can see that the stock market started to go up when the Fed funds rate started to come down. Again, after about a year from that first vertical line, then we have another situation where the stock market picked up again when the Fed funds rate took another snookin drop. In other words, the stock market will recover when the Fed stops raising interest rates and stops quantitative tightening. And when will the Fed stop raising interest rate and stop QT? In my opinion, that's when CPI is less than 5%. Even though the Fed's long-term target for CPI is 2%, but I don't think they'll wait until CPI to be 2% to stop raising rate. When the rate is down to about 5%, they will believe that there's enough downward momentum that at least they will slow down the rate hikes for a while. And that's when the stock market might start to recover. Alternatively, which is not a good scenario is when an employment rate is higher than 6% and then the Fed might get worried about a major recession setting in. At that point, regardless of the inflation rate, the Fed might stop raising interest rate at least for a few months to increase employment rate. But before I can see CPI at less than 5% or an employment rate at higher than 6%, I'm just going to operate based on the assumption that the stock market will continue to trend down. I've assembled a portfolio with certain ETFs that have been going up while the market has been going down. If you're curious about what's in the portfolio, you might want to refer to the video that I posted on June 12th, which you can find on my YouTube channel. At this point, I'd like to remind you that I'm not a financial advisor. I share my stock trading strategies and analyses for educational and entertainment purposes only. If you want to sell or buy stock, you should definitely make your own decisions and you should consult with your financial advisors before you do so. This wraps up my video for now. I will chat with you again in the next few days. In the meanwhile, I'd like to wish you the very best of luck with your financial investments.