OpenDown net YouTube Europe Has Fallen Media RcYKm2js3m8 001 1080p

Europe's services sector just crashed at the fastest rate in three years. Their manufacturing sector is on the verge of an outright collapse. And the European Central Bank is about to make the same policy mistake they made in July of 2008 right before the global financial crisis when they cut rates all the way down to zero. And here's the frightening part. The US economy, we're on the same exact path. And wait till you see the data that dropped today. It's confirming that where Europe is headed, we're right behind them. Now I'm going to break down everything that's going on in Europe, the parallels to us, and then I'm going to show you exactly how I see the markets playing out. So if you're a short-term investor or a long-term investor, stay to the end because I'm showing you exactly what I see in the charts and how you can position yourself. And if you're wondering if the hat's coming out today, well, you bet it is. Because the Eurozone business activity shrinks at the fastest rate since 2023. As the Composite Purchasing Manager Index, compiled by S&P Global, fell to 47.5 in May from 48.8 in April. And what this is now, the second month of contraction. You can see it isn't small. It's a huge contraction. And you think back, it wasn't long ago that everybody was saying that the services sector was going to lead the global manufacturing sector higher. And now what we're seeing is manufacturers are hanging on. They're front-running rising prices. Meanwhile, the services sector is collapsing. So what is this telling you? Is that Europe's economy is headed right into stagflation. And the consumers, they don't have enough money to support higher prices. Demand is dropping. And that's exactly what you see during energy shocks before a recession hits. Because once again, manufacturing grew thanks to precautionary stock building while the services sector slumped. So what you can be thinking here is what happens when manufacturers finish building up all the stock they need? What's going to happen? Is they're going to start to lay off and in a big way. And where services sector is going now, manufacturing is soon to follow. Price pressures, meanwhile, continue to build with input costs and goods and services prices both surging at the fastest rate in more than three years. So this is the exact sign that we've been looking for to prove that the energy shock is heading us right into a global recession. We're seeing rising prices. We're seeing demand falling. And the next thing you know, we should see in the data that the labor market is the last piece to go. But let's take a look of why we're seeing all this front running of demand. Let's take a look at this first chart. We've got West Texas intermediate crude oil prices in blue against producer prices by commodity of final demand in red. And what you can see is the two are strongly linked. And the market believes that oil prices and energy prices are going higher, which means producer prices are going to continue to rise. But as consumers can't afford them, what happens again, demand erodes. Next thing you know, hours get cut, jobs go, and we're in an all out global recession. One that the US, wait till you see the data, we're not going to escape. Now, the rise in the survey's price gauges already hinted inflation running close to 4% in coming months. That combined with the growing signs of the region slipping into an economic downturn creates a deepening dilemma for policymakers. So if you think back to July of 2008, the ECB was really worried about inflation. So they raised rates. What a huge mistake. Because shortly thereafter, the global financial crisis hit and they slashed rates all the way down to zero. So you can see they're making the same mistake they did before. They're worried about rising inflation. But what happens when demand drops, inflation becomes transitory. And it's exactly what you see in energy shocks. Just wait, I've got some charts for you. But let's talk about the ECB because right now the June rate hike case is nearly sealed. But July is fully open according to sources. The inflation outlook is now moving towards the bank's adverse scenario. So the bank must act at its next meeting because the bank also needs to preserve credibility after signaling the move. But where is their credibility? Because you go back to July of 2008, you can see there's absolutely none. They said we have to curtail inflation. We have to bring demand down to bring inflation down. The problem was demand was already falling. That's the issue here we're seeing in the services sector is consumers cannot afford higher prices. Demand is dropping. Rate cuts are the absolute wrong move right now. Plus a quick reminder, the Enhanced Games are launching on Sunday, May 24th at 6 p.m. Pacific, 9 p.m. Eastern. Check them out on the web at enhanced.com. You can find them on the New York Stock Exchange under the symbol ENHA. I'll be watching. I hope you will be too. But yet an ECB spokesperson declined to comment, saying no decision hasn't actually made yet. Of course, we know that that, of course, policymakers always wait to the meeting for an announcement. But nevertheless, if they don't raise in June, will they hike in July? Will they make the same mistake they made in 2008 right before the world collapsed into the financial crisis? Well, we're going to find out soon enough, but it's the parallels of what's going on in Europe to the U.S. that you absolutely need to see. But if you're asking, Steve, how do we trade this? How do we navigate this? Check this out. Back on the 12th, you know, we put this trade on to all our subscribers. We told them to buy the XLE ETF. And on the 20th, we were stopped out for a 3.4% gain. And this is exactly what a swing trade looks like. We told them to buy right here on this little red candlestick. We wrote it up and we let our stop losses trade them out. So they didn't have to sit in front of a computer wondering, do I sell today? When do I do this? Nope. We let our system dictate the whole trade for you. And in that case, you see a nice, smooth, quick swing to the top for a nice 3% gain. Now, if you want to get in on trades like this, know how I'm trading the market. All you need to do is grab those links in the description below. Use the coupon code for your free 30-day trial. Because the risk right now we're facing in Europe is when does the labor market go? The problem is we're seeing signs of that now. Eurozone companies continue to lower their staffing levels in May. Although modest, the fifth successive monthly fall in employment was the most pronounced since November of 2020. In fact, excluding the COVID-19 pandemic, the workforce numbers was the largest since August of 2013. So what we're seeing is exactly what you get during energy shocks and stagflation. Rising consumer prices, demand drops, and the labor market goes. Once you lose the labor market, it's game over. But this next chart, it proves why the ECB is about to make a massive mistake if they raise rates. Let's take a look at the U.S. consumer price index. I've got that in blue. And overlaid in red is the nonfarm pay report. That's also on a year-over-year rate of change. Now, in green is the federal funds rate. So let's go back to the late 80s and the early 90s. What's happening? Inflation is rising. The labor market is weakening. And the Fed, well, they respond by cutting rates. And they got ahead of this one kind of early. But let's fast forward to the dot-com bubble. What's happening? Inflation is rising. The labor market's holding steady. Then all of a sudden, it starts to drop off. The Fed fixates on inflation. You notice they go flat here. And then when it's too late, they start cutting. The bubble then bursts. But let's fast forward now to the financial crisis. Inflation is rallying on energy prices. The labor market's weakening. Once again, the Fed is uncertain. They go into pause mode. And then they start cutting too late. And that's the problem we're facing right now. All these central bankers are confused about what's happening. But it's very clear. We're in an energy shock. We're in the early stages of stagflation. But let's dive into Germany before we get into the U.S. data. Because I want you to see that the biggest economy in Europe, the manufacturing base, look at what's going on there. They continue to see activity shrinking. And you go back to 2022. You see they're in contraction. Then everyone said, hey, look, everything's okay. Then back to contraction. Then, hey, we're okay. Nope, back into contraction. And then in late 2025, everyone finally said, this is it. We're out of this. And guess what? A huge drop there. Because in manufacturing, the boost we saw from efforts to build stocks and get ahead of price increases and supply shortages appears to be fizzling out. And this is the key point here. Because in the U.S., we're seeing what looks like a manufacturing renaissance. Everything seems to be booming on the manufacturing side. They're hiring people. Everybody's putting in orders. But the problem is when you look to Europe, what happens when everyone's built up the inventory and stock they want? What's all fizzling out? And that is the biggest risk to the global economy right now. Because slower rises in both manufacturing and services output prices point to businesses shouldering a greater proportion of the burden. This suggests some containment of inflationary pressures, but also hints at an increased squeeze on company margins. And this is where we get to the labor market. Because it all is coming down to this. You can have rising inflation as long as you have rising wages and a rising labor market. But if you lose the labor market and when profits go, what's the biggest indication employers are going to cut? Let's take a look. We've got corporate profits after tax in blue. That on a year-over-year rate change against the unemployment rate. And I want you to see going to the 91 recession what happened. Profits collapsed. And next thing you know, the unemployment rate went up. You go into the next cycle. What do you see around 1998? Profits go negative, but the economy was strong enough. It was the second time they dropped that employers said, look, we've got to cut people. The same thing happening going into the financial crisis. A big drop in profits meant workers hit the unemployment line. And as we look at now, what happened around 2022? Profits briefly dip negative. We didn't see a huge increase in last, but this time we're likely to see that. You can get the parallels of exactly what's going on in Europe. And you can see it coming to the US. But wait until you see the data. And then we're going to dive into the charts and how I see this playing out. And exactly what you can do to your portfolio right now. Because it's turned to the second largest economy. That's France. And the shock has materially lifted recession risk for the euros on second largest economy. So now you have Germany, you have France looking at recessions and where they go, the rest are going to follow. And yet, what are they citing as a problem? High interest rates. Higher interest rates are likely to present another headwind with the European Central Bank modeling a hike next month and markets pricing in two more after that. I don't think that's going to happen after all. Because I want you to be thinking about rates. Everyone thinks that you have to have higher rates because inflation is going up. But keep in mind, if you don't have demand for lending, you can raise rates all you want. But next thing you know, they have to come down if nobody wants to borrow. Now let's turn to the US data because you've got to see these parallels. Because as you look at your portfolio, maybe you're like me thinking the market's going to go higher. But at some point, it's going to reverse. You got to be ready for that. So here we can see the US flash PMI. Look at this. We see the services sector drop to 50.9. That's a two month low. Even though it's not under 50, and an official contraction for the services sector, that is. And you can see business activity growth held steady in May at a modest rate. However, factory growth was again in part supported by temporary stock building. Note that we're temporary here. So again, I want you to be thinking, what happens when all this stock building is done? Well, the layoffs are going to fall. Because employment fell in May for the second time in the past three months. And the rate of job loss is reaching the highest since August of 2024 due to growing concerns over rising costs, and get this, deteriorating demand conditions. So you can see in Europe, demand dropped off a cliff. It's happening here. There's some validation. Let's turn to the Philly Fed. Because the survey's indicators for general activity, new orders, and shipments all fell sharply this month. The employment index ticked up but remained negative, continuing to suggest overall declines in employment. And look, this thing's pretty ugly. New orders went from 33 to minus 1.7. Unfill orders still in contraction of minus 2.5. Prices paid 59 to 47. Yeah, they cooled off a little bit, but they're still rising. Prices received, and here's a big indicator of margin squeeze, 33 down to 26, meaning they can't pass on higher prices. And yes, they cut employees and they cut the average work week. Again, these are all signs that the U.S. economy is falling right behind Europe. And Walmart validates that. Now they're saying fuel costs are an issue, but that's only a small part of it. Because a higher-income consumer is spending with confidence in many categories, whereas a low-income consumer, for as far as we can tell, is more budget-conscious trying to navigate certain financial distress. So for Walmart, any time that they're doing well, it's not good for the economy. So what they're saying is high-end consumers are trading down, at the same time low-income consumers are spending less as they see more stress on their budget. Spending has been largely held up in recent years, although higher tax refunds this year have given families some extra cash. But this benefit is expected to fade. And for the U.S. economy, that's everything. So let's talk about how to trade this, because you can now clearly see that Europe is heading to recession, the ECB is about to make a major mistake next month, and that the U.S. economy is falling right behind. So let's look at some big-picture charts here, and then I want to show you my trade screen, exactly how I think you can be positioning either your investment portfolio or some trades you can be looking at right now. Because when we go back to that same chart that we had the federal funds rate overlaid, let's now change that out to the NASDAQ 100. And what I want you to see, in periods where you get rising inflation and a weakening labor market, you can get a blow-off in the market as you can see going into the recession there. The same thing happened going into the dot-com bubble, we get a final surge in the stock market. It happened again in the financial crisis, but what soon followed was an all-out bear market, and that's the risk we're facing here. But the market also says that interest rates have to go higher. Well, let's go back and put that to the test, because going into the 90s, inflation was rising. What happened? Rates started coming down because the labor market was weakening. We see that happening again going to the dot-com bubble, two-year yields are dropping as inflation is rising. Same thing in the financial crisis. So while everybody today says, look, rates have to go higher, there's no way around it. The evidence is quite opposite. The risk is we get a blow-off top and then a bear market. So there isn't room for complacency here. But is there evidence that the market goes higher? Well, absolutely there is. And for this next screen, we got to put on the hat. Let's dive in. Let's take a look at the S&P 500. This is the SPY ETF. And notably, it's popped up here. Everybody said this is it. It's now going to come down. I said, not yet. I don't think we're there. But let's zoom into the 10-day. And what do we see? Price fell below the 10-day volume profile. I got a little concerned here. But look, it's popped up above that. It's holding support, setting up for a move to further all-time highs. But what about the bigger issue here? So we talked about this from a short-term trade. But what about from your broad portfolio perspective? Is there room for the bond market here? Well, I think there is. Because there's something I want you to understand. When you're looking at trading, right now, everybody is short bonds. And when everybody is short and price refuses to go lower, that's when reversals happen. Let's take a look back at that chart we've looked at before on TLT. My line disappeared because I didn't save it. But we're back near those all-time lows at 82.42, looking at the five-year chart. But let's zoom in. Because what happened back then is prices dropped. Everybody said interest rates were going to continue to go higher. It didn't. We can actually see that right here. Prices just held firm. And the next thing you know, they rallied around 20%. But what about right now? Well, let's zoom in. And you can see prices have dropped. And now they're starting to firm up. And if we look at the 10-day volume profile, you can see it's holding here. Now, from a trade perspective, I wouldn't be looking at this on a short-term trade just yet. I would wait for further confirmation. But if you think about it, if you're in a 60-40 portfolio and you've got 40% of it in bonds, you can start making slivers of allocations into longer-term treasuries here. You don't have to take a ton of risk. But if price starts to rally, you can add into that. So you can look at this from a broad perspective on your portfolio. You should be thinking large-cap U.S. here. Forget Europe. You don't want to be in that at all. And then look to be adding some long bonds to your portfolio. From a trade perspective, the broad market, the S&P, the Nasdaq, those are your big tickets. But keep an eye on the bond market. I think it does something that surprises everyone. And if we get a rate cut, well, watch out. Or if interest rates come down, it could be a huge catalyst to send stocks higher. With that, I'm Steve Admeter. Thanks for watching. Thanks for being fans. Bye now.