This is an interesting video by Ken aka Chicken Genius Singapore on why we are about to embark on the biggest bull run. Ken shared that the biggest indicator of an impending recession is unemployment.
If companies are not hiring, it means less business, because less people are spending, which leads to less profits and it becomes a domino effect.
There are 3 types of unemployment: Frictional, Structural and Cyclical Unemployment.
Frictional unemployment happens where employers refrain from hiring or laying off workers. Or jobless workers looking for work in a healthy economy. Today, this is at a all time low.
Structural unemployment refers to the mismatch of jobs available. For example, technically advanced job positions are not filled up due to the lack of skills. Or major disruption of old industries and these workers not being able to find another job. Today, there are so many jobs available now.
Lastly, cyclical unemployment occurs when there is not enough demand of goods and services. Today, the demand for goods and services is sky high and is causing inflation.
Ken believes that when a recession is coming, it is most likely lead by unemployment. When people lose jobs, earnings go down, business cut back, people cut back on spending because they are scared of losing their jobs.
However, in today’s context, what is happening is the total opposite of the above scenario. It is booming economy and people are loaded with cash. Despite of all the talks about the Fed pulling liquidity out of the market, there will be a large stimulus cheque, $1500 to $1800 tax credit per child, being given out soon and this will pump more money into the system. All these occurences, coupled with CPI higher than the 10 year yield, will lead to the biggest bull market we will see.
What do you guys think? Feel free to share your thoughts in the comments section.
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