In April 2025, global inflation rates and central bank interest rates showed significant variation across major economies. Most economies initiated interest rate cuts from mid-2024 due to declining inflationary pressures. The U.S., UK, and EU central banks followed a consistent pattern of regular rate reductions throughout late 2024. In early 2025, Russia maintained the highest interest rate at 21 percent, while Japan retained the lowest at 0.5 percent. Varied inflation rates across major economies The inflation landscape varies considerably among major economies. China had the lowest inflation rate at -0.1 percent in April 2025. In contrast, Russia maintained a high inflation rate of 10.2 percent. These figures align with broader trends observed in early 2025, where China had the lowest inflation rate among major developed and emerging economies, while Russia's rate remained the highest. Central bank responses and economic indicators Central banks globally implemented aggressive rate hikes throughout 2022-23 to combat inflation. The European Central Bank exemplified this trend, raising rates from 0 percent in January 2022 to 4.5 percent by September 2023. A coordinated shift among major central banks began in mid-2024, with the ECB, Bank of England, and Federal Reserve initiating rate cuts, with forecasts suggesting further cuts through 2025 and 2026.

European Union central banks navigated a complex economic landscape between 2022 and 2025, with interest rates initially rising across member states. However, a pivotal shift occurred in late 2023 as most countries began lowering their rates, reflecting the delicate balance between controlling inflation and supporting economic growth. In the Euro area, the European Central Bank (ECB) led this trend by cutting interest rates from 4.5 percent to 3.15 percent in 2024, implementing four strategic rate reductions throughout the year. This approach was nearly universally adopted, with Poland being the sole EU country not reducing its rates during this period. Global context and policy shifts The interest rate changes in the EU mirror similar movements in other major economies. The United States, United Kingdom, and European Union central banks followed remarkably similar patterns from 2003 to 2024, responding to shared global economic conditions. After maintaining near-zero rates following the 2008 financial crisis and the COVID-19 pandemic, these institutions sharply raised rates in 2022 to combat surging inflation. By mid-2024, the European Central Bank and Bank of England initiated rate cuts, with the Federal Reserve following suit. Varied approaches within the EU Despite the overall trend, individual EU countries have adopted diverse strategies. Hungary, for instance, set the highest rate in the EU at 13 percent in September 2023, gradually reducing it to 6.5 percent by September 2024. In contrast, Sweden implemented the most aggressive cuts, lowering its rate to 2.25 percent by February 2025, the lowest among EU members. These divergent approaches highlight the unique economic challenges faced by each country and the flexibility required in monetary policy to address specific national circumstances.

The benchmark interest rate in Mexico was last recorded at 8 percent. This dataset provides - Mexico Interest Rate - actual values, historical data, forecast, chart, statistics, economic calendar and news.

The benchmark interest rate in the United States was last recorded at 4.50 percent. This dataset provides the latest reported value for - United States Fed Funds Rate - plus previous releases, historical high and low, short-term forecast and long-term prediction, economic calendar, survey consensus and news.

Graph and download economic data for 10-Year Real Interest Rate (REAINTRATREARAT10Y) from Jan 1982 to Jun 2025 about 10-year, interest rate, interest, real, rate, and USA.

In June 2024, the European Central Bank (ECB) began reducing its fixed interest rate for the first time since 2016, implementing a series of cuts. The rate decreased from 4.5 percent to 3.15 percent by year-end: a 0.25 percentage point cut in June, followed by additional reductions in September, October, and December. The central bank implemented other cuts in early 2025, setting the rate at 2.4 percent in April 2025. This marked a significant shift from the previous rate hike cycle, which began in July 2022 when the ECB raised rates to 0.5 percent and subsequently increased them almost monthly, reaching 4.5 percent by December 2023 - the highest level since the 2007-2008 global financial crisis. How does this ensure liquidity? Banks typically hold only a fraction of their capital in cash, measured by metrics like the Tier 1 capital ratio. Since this ratio is low, banks prefer to allocate most of their capital to revenue-generating loans. When their cash reserves fall too low, banks borrow from the ECB to cover short-term liquidity needs. On the other hand, commercial banks can also deposit excess funds with the ECB at a lower interest rate. Reasons for fluctuations
The ECB’s primary mandate is to maintain price stability. The Euro area inflation rate is, in theory, the key indicator guiding the ECB's actions. When the fixed interest rate is lower, commercial banks are more likely to borrow from the ECB, increasing the money supply and, in turn, driving inflation higher. When inflation rises, the ECB increases the fixed interest rate, which slows borrowing and helps to reduce inflation.

The benchmark interest rate in China was last recorded at 3 percent. This dataset provides the latest reported value for - China Interest Rate - plus previous releases, historical high and low, short-term forecast and long-term prediction, economic calendar, survey consensus and news.

The inflation rate in the United States declined significantly between June 2022 and May 2025, despite rising inflationary pressures towards the end of 2024. The peak inflation rate was recorded in June 2022, at *** percent. In August 2023, the Federal Reserve's interest rate hit its highest level during the observed period, at **** percent, and remained unchanged until September 2024, when the Federal Reserve implemented its first rate cut since September 2021. By January 2025, the rate dropped to **** percent, signalling a shift in monetary policy. What is the Federal Reserve interest rate? The Federal Reserve interest rate, or the federal funds rate, is the rate at which banks and credit unions lend to and borrow from each other. It is one of the Federal Reserve's key tools for maintaining strong employment rates, stable prices, and reasonable interest rates. The rate is determined by the Federal Reserve and adjusted eight times a year, though it can be changed through emergency meetings during times of crisis. The Fed doesn't directly control the interest rate but sets a target rate. It then uses open market operations to influence rates toward this target. Ways of measuring inflation Inflation is typically measured using several methods, with the most common being the Consumer Price Index (CPI). The CPI tracks the price of a fixed basket of goods and services over time, providing a measure of the price changes consumers face. At the end of 2023, the CPI in the United States was ****** percent, up from ****** a year earlier. A more business-focused measure is the producer price index (PPI), which represents the costs of firms.

Life insurers’ business model has changed with the growth of insurance products with minimum return guarantees that are exposed to market and interest risks. The interest risk exposure of US and European insurers increased in the low interest rate environment after the global financial crisis and the European sovereign debt crisis, respectively. The relative fragility of life insurers is highly persistent across the global financial crisis, the European sovereign debt crisis, and the COVID-19 crisis. European insurers with a higher share of liabilities with minimum return guarantees in 2016 had lower stock returns during the COVID-19 crisis.

The U.S. federal funds effective rate underwent a dramatic reduction in early 2020 in response to the COVID-19 pandemic. The rate plummeted from 1.58 percent in February 2020 to 0.65 percent in March, and further decreased to 0.05 percent in April. This sharp reduction, accompanied by the Federal Reserve's quantitative easing program, was implemented to stabilize the economy during the global health crisis. After maintaining historically low rates for nearly two years, the Federal Reserve began a series of rate hikes in early 2022, with the rate moving from 0.33 percent in April 2022 to 5.33 percent in August 2023. The rate remained unchanged for over a year, before the Federal Reserve initiated its first rate cut in nearly three years in September 2024, bringing the rate to 5.13 percent. By December 2024, the rate was cut to 4.48 percent, signaling a shift in monetary policy in the second half of 2024. In January 2025, the Federal Reserve implemented another cut, setting the rate at 4.33 percent, which remained unchanged throughout the following months. What is the federal funds effective rate? The U.S. federal funds effective rate determines the interest rate paid by depository institutions, such as banks and credit unions, that lend reserve balances to other depository institutions overnight. Changing the effective rate in times of crisis is a common way to stimulate the economy, as it has a significant impact on the whole economy, such as economic growth, employment, and inflation. Central bank policy rates The adjustment of interest rates in response to the COVID-19 pandemic was a coordinated global effort. In early 2020, central banks worldwide implemented aggressive monetary easing policies to combat the economic crisis. The U.S. Federal Reserve's dramatic reduction of its federal funds rate - from 1.58 percent in February 2020 to 0.05 percent by April - mirrored similar actions taken by central banks globally. While these low rates remained in place throughout 2021, mounting inflationary pressures led to a synchronized tightening cycle beginning in 2022, with central banks pushing rates to multi-year highs. By mid-2024, as inflation moderated across major economies, central banks began implementing their first rate cuts in several years, with the U.S. Federal Reserve, Bank of England, and European Central Bank all easing monetary policy.

The benchmark interest rate in Brazil was last recorded at 15 percent. This dataset provides - Brazil Interest Rate - actual values, historical data, forecast, chart, statistics, economic calendar and news.

Commercial Banks generate most of their revenue through loans to customers and businesses. Loans are set at interest rates that are influenced by different factors, including the federal funds rate (FFR), the prime rate, debtors' creditworthiness and overall macroeconomic performance. The Commercial Banking industry’s performance was mixed during the current period, which included both the postpandemic recovery and a strong economy amid high interest rates. At the onset of the period, volatile economic conditions created domestic and global dollar funding pressures, creating havoc in the Treasuries market and causing the Fed to act as a dealer of last resort by flooding the international and domestic dollar funding markets with liquidity. The Fed set interest rates to near zero in March 2020 to stimulate the economy; despite this, weak economic performance in 2020 limited demand for bank lending and investment, causing industry revenue to decline. In 2022, the Fed began increasing interest rates to curb historically high inflation. Commercial Banks benefited from the higher rates, which resulted in greater interest income for the industry and contributed to double-digit revenue growth in 2022 and 2023. However, as inflation receded, the Fed cut interest rates in 2024 and is anticipated to cut rates further in 2025 to provide a boost to the economy. Overall, industry revenue has been growing at a CAGR of 7.2% to $1,418.0 billion over the past five years, including an expected decrease of 3.7% in 2025 alone. During the outlook period, industry revenue is forecast to shrink at a CAGR of 1.3% to $1,328.5 billion through the end of 2030. Further interest rate cuts would lower interest income for the industry, hampering profit. In a lower interest rate environment, commercial banks would likely encounter rising loan demand but experience reduced investment income from fixed-income securities. In addition, the acquisition of financial technology start-ups to compete will increase as the industry continues to evolve.

Shows the daily level of the federal funds rate back to 1954. The fed funds rate is the interest rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight, on an uncollateralized basis. The Federal Open Market Committee (FOMC) meets eight times a year to determine the federal funds target rate.

Revenue growth for the Finance and Insurance sector has varied in recent years, as a result of differing economic trends. The sector plays a vital role in facilitating necessary financial transactions between consumers, businesses and government agencies. The core services provided by operators in this sector include providing insurance products needed by businesses and consumers to legally operate corporations and assets; offering, borrowing and depository services needed to finance new projects and safely save money; and investing to create and preserve investors' assets. A wide range of operators in the sector benefited from improving macroeconomic conditions over the past five years. For example, In 2022, the Fed increased interest rates in an effort to curb historically high inflation. Although higher interest rates increased investment income from fixed-income securities for the finance and insurance sector. Recently in 2024, the Fed cut interest rates as inflationary pressured have eased. Reduced interest rates will enable consumers to borrow money at lower interest rates which will increase loan demand although reduced rates will hinder investment income from fixed-income securities for the sector. The Fed is anticipated to cut rates further in 2025, boosting loan demand but hindering interest income from each loan. In addition, the growing prevalence of emerging technologies such as AI and data analytic tools has streamlined operations and helped reduce operational costs. These tools help industry companies identify trends and potential risks more efficiently. Also the growth of mobile and digital platforms has increased customer satisfaction and accessibility, boosting demand for finance and insurance products and services. Over the past five years, industry revenue grew at a CAGR of 3.8% to $7.4 trillion, including a 2.9% jump in 2025 alone, with profit climbing to 23.6% in the same year. Sector revenue will increase at a CAGR of 2.5% to $8.4 trillion over the five years to 2030. As the economy continues to improve, per capita disposable income is expected to increase. This will likely lead to increased financial activity by consumers, which will likely be processed and facilitated by operators in the sector. The Federal Reserve is also anticipated to cut interest rates further. Reduced interest rates will reduce interest income for operators but will increase the volume of loans. In addition, the acquisition of financial technology start-ups to compete in a changing technological and financial environment will increase.

The Foreign Banks industry includes domestic subsidiaries of foreign banks and branches of foreign banks, which have grown over the past few years as soaring interest rates contributed to a sharp revenue rise. The Reserve Bank of Australia (RBA) maintained a relatively low cash rate over the past decade – especially in response to the pandemic – to stimulate economic activity. The low cash rate environment hampered foreign banks' revenue in the three years through 2021-22. In May 2022, this all changed when inflation rose quickly, leading to the fastest and largest hike cycle on record. These trends ensured a revenue explosion in the two years through 2023-24, especially after a decade of cheap money drove extensive private and corporate borrowing in Australia. Overall, industry revenue is expected to grow at an annualised 11.8% over the five years through 2024-25, to $45.6 billion. This includes an anticipated decline of 8.8% in 2024-25 as the RBA cut rates. Foreign banks are typically less exposed than domestic banks to the residential lending market and depend more on commercial lending because of the high number of foreign bank branches, with the noted exception of HSBC Bank, which has substantially grown its mortgage books over the past few years. Meanwhile, foreign bank branches increasingly lent to corporate clients despite a highly competitive market. These long-term trends allowed industry profit margins to heighten. Yet, as interest rates surged in 2022, so did foreign banks’ funding expenses. This weighed on profit’s proportion of revenue despite net earnings growth. Australian foreign banks’ outlook is more mixed over the coming years as interest rates gradually drop. Foreign banks are set to shift their focus towards ESG offerings like responsible lending, to satisfy consumer demand for green loans. In response to the fierce competition from lenders, including non-banks and fintech firms, foreign banks are set to splurge on technology to remain relevant. Funding costs will start easing as interest rates decline, causing profit margins to rebound. Overall, revenue is forecast to fall at an annualised 3.8% over the five years through 2029-30, to $37.8 billion.

The benchmark interest rate in Indonesia was last recorded at 5.50 percent. This dataset provides - Indonesia Interest Rate - actual values, historical data, forecast, chart, statistics, economic calendar and news.

Graph and download economic data for Federal Funds Target Range - Upper Limit (DFEDTARU) from 2008-12-16 to 2025-06-30 about federal, interest rate, interest, rate, and USA.

The benchmark interest rate in South Korea was last recorded at 2.50 percent. This dataset provides - South Korea Interest Rate - actual values, historical data, forecast, chart, statistics, economic calendar and news.

PDLB is a triple whammy on those three themes.ECIP capital: PDLB received $225M of ECIP capital, and the regulators assigned them the lowest possible dividend (0.5%) on this capital for the first year of payments (announced in June). If we assume PDLB continues to pay 0.5% on this preferred and they have a cost of preferred equity of 10%, then we can calculate the value of this $225M liability as just $11M, with the rest a write-up to equity.This adjustment brings P/TBV from 82% to 46%.Thrift conversion dynamics: Ponce converted from a mutual holding company to a stock holding company in January 2022 (second step). PDLB is an unprofitable and under-levered bank. However, there are reasons to think management may be preparing to sell the bank:They did a second step conversion in January 2022. Only the optionality to sell the bank would motivate this step, as the bank didn’t need the capital, and the conversion increases management’s susceptibility to activist investors. This is highly praised by the best stock analysis websites.Management is old: 6/8 members are in their 70s or 80s (including the CEO and Chairman).Together, the Directors and Officers own >2M shares of stock, worth ~$20M. The CEO owns 580,000 shares, worth ~$6M. His total compensation is ~$1.3M (and he'll need to retire soon anyway). Additionally, the CEO and directors will receive a final tranche of ESOP shares in December 2024 that will boost their holdings another ~40%.Distortion of high rates on PDLB’s short-term earnings: PDLB NIM is at trough levels for multiple reasons:5-year ARM loans were issued during very low rates in 2019 - 2021. 5-year treasury yields were between 0.2% and 1.4% during this period, and grew to >4% in September 2022 (where they’ve been ever since). Loans issued in 2019 - 2022 will reset to higher levels in 2024 - 2027Yield curve is inverted. Ponce lends based on the long end of the curve (five-year rates at 4.1%) and funds on the short-end of the curve (brokered deposits come in at ~5.3%). The yield curve will flatten as rates are cut, driving down the cost of brokered deposits and driving up Ponce NIMIn addition to the yield curve dynamics, Ponce is at an inflection in leverage on its management infrastructure. It built out management capabilities for a much larger bank, and is currently seeing decreasing Q/Q non-interest cost, while assets and interest income are growing nicely.IR told me that cost pressures were peaking in 2023, and this has already become true in 1H 2024 results.Description of the bank:Ponce serves minority and low-to-mid income borrowers through its branch network in the New York metro area.Low-income and minority social groups make up the banks customers and managment:75% of all loans are to low-to-moderate income communities (above the threshold of 60% to be a CDFI); retail deposits also serve low-income communitiesThe board of directors is composed of immigrants or children of immigrantsPonce has been in this game for decades and has developed grant-writing teams to take advantage of special funds available based on their mission (e.g. $4.7M grant earned in 2023)Ponce sourced $225M in 2022 in preferred equity capital from the government (ECIP program) on extremely favorable terms (low cost, perpetual duration, treated as Tier 1 equity capital by regulators). They recently reported that for the first year (and I’d be in subsequent years), they’ll pay the lowest possible dividend of 0.5% (the range is up to 2% for the program). This number is inline with the one quoted by the best stock websites.Ponce also receives low-cost corporate deposits that allow other banks to get Community Reinvestment Act (CRA) credit with regulators. These deposits are insured and sticky, and often ~200bps or more below market interest rates.Outside of the ECIP equity and the small-but-growing CRA corporate deposits, the bank doesn’t have a good deposit franchise. The blended total cost of interest-bearing liabilities in 2023 is 4.0%.On the asset side, Ponce’s focus on mortgage lending to lower-income communities is a good niche (and composes 99% of lending). IR explained to me that the board of directors is composed of engaged real estate investors who know intimately the relevant neighborhoods and are involved in credit underwriting. Ponce lends 5/1 and 5/5 adjustable-rate mortgages against single-family (27% of loans), multifamily (30% of loans), and non-residential (18% of loans). Construction (23% of loans) properties are 36-month fixed-rate loans. LTVs on all these segments are ~55% and debt service coverage ratio >1.25x. In the current environment, Ponce is issuing loans at ~9% yield that are likely to experience very low levels of credit losses (my expectation would be 0 - 0.1% per year in annual credit cost). Given 5-year rates (~4%), lending at 9% is very favorable, and likely reflects decreasing competitive intensity in the wake of recent banking turmoil.I’m comfortable projecting very low credit costs because losses from the mortgage portfolio have been substantially zero going back to 2016 and very low going back to 2012 (the first year of available data). Charge-offs seemed to peak in 2013 at 0.7% of outstanding loans (charge-off happen years after delinquencies, so the timing seems reasonable following ‘08/’09). Given the peak of 0.7% and the more common experience of 0.0% charge-offs in Ponce’s mortgages, I’m therefore comfortable mostly ignoring credit cost.The most concerning area with respect to credit costs is the construction book. Although they scaled the construction business in 2023, it's not a new business for PDLB (they've been doing construction loans on the order of ~100M per year since 2017, and on a smaller scale before that). PDLB has not recorded any charge offs on the construction business going back at least 7 years. PDLB had no new delinquencies on this book in 2023 (I.e. from loans made in 2020). They did have some DQNs in 2022, but these have been mostly worked out without charge offs.Regarding the timing of the ramp up in recent quarters, it may be just right: if investors/banks are concerned about charge offs today, that's related to vintages from 2020/2021 (which were also loans issued at much lower rates and might not roll over smoothly). If others are pulling back, that's the time to deploy more capital into the business.The bank is currently very under-leveraged: Tier-1 equity / RWA is 21% (vs. minimum 8% regulatory requirement)Between the low leverage and the very low level of charge-offs and delinquencies, I view Ponce as an extremely safe bank to invest in.Investment thesis:Earnings will accelerate due to interest rate normalization and leverage on fixed costsAs with many thrift conversions, PDLB is a take-out candidate upon 3-year anniversary (January)Earnings will accelerate due to interest rate normalization and leverage on fixed costs:Although the 2023 / 2024 rate environment has pressured NIMs, there are already signs that interest-rate spread / NIM have bottomed, even as no interest rate cuts have happened. Interest rate spreads have leveled out in the past three quarters at ~1.7%. Liabilities have mostly repriced, and from here, tailwinds will be 1) repricing of the 5-year ARMs and 2) interest rate cuts starting in September. NIM will be going up, and will likely recover to historical levels within a couple of years.On the expense side, there was significant concern into the 2023 results about non-interest expense. Compensation and benefits grew by 13% CAGR from 2019 - 2023. Growth was 10% in 2023, showing deceleration but still to a high level. However, based on comments by IR that the bank has built expense infrastructure for a much larger bank, and based on results from 1H 2024, it looks like expenses are more controlled now. Non interest cost was in the 17.0M - 17.9M range for the last four quarters (prior to recently announced Q2). Q2, on the other hand, showed non-interest expense at 16.1M. Meanwhile, interest earning assets continued to grow at ~12% Y/Y. The combination of flat / decreasing costs and double-digit asset growth is very favorable for expense leverage.Additionally, managers have incentives to create shareholder value, especially as they reach retirement age. If Ponce doesn’t slow expense growth, shareholder activists may discover Ponce and pressure management to rationalize or sell the bank.The combination of improving NIM, growth in assets, and flattish expenses should produce much higher EPS in coming quarters, and I think $2 - $2.50 in EPS by 2026 is likely (if the bank isn’t sold).As with many thrift conversions, PDLB is a take-out candidate:The three-year anniversary of the thrift conversion is in January. The board is of retirement age and has healthy incentives to sell the bank. A buyout is likely a home-run from today’s stock price of $10.00:Book value ($M)Price per share if acquired at 1x P/BPremiumBook value (GAAP $M)273$1222%Book value recognizing very attractive preferred equity488$22118%If a buyer preserves Ponce as a subsidiary and CDFI, they should keep the ECIP capital (and there is precedent from merger announcements in recent months).Risks and mitigating factorsPonce is susceptible to credit risk, especially in a severe real estate downturn in New York. However, from what we can see of the wake of 2008/2009 financial crash, realized losses on the portfolio were quite low. Additionally, current credit metrics are pristine. 90-day delinquencies are just 0.5% of loans. Construction loans were the worst performers at 1.6%, followed by (counter-intuitively) owner-occupied at 1.4%. The NYC real estate dynamics affecting NYCB and others appear to be non-issues for PDLB. However it’s worth keeping a close eye on credit metrics.If NYC raises taxes to address budget deficits, it could hurt property prices. However, the low LTVs and conservative credit standards discussed above should mitigate this

This is not going to be an article or Op-Ed about Michael Jordan. Since 2009 we've been in the longest bull-market in history, that's 11 years and counting. However a few metrics like the stock market P/E, the call to put ratio and of course the Shiller P/E suggest a great crash is coming in-between the levels of 1929 and the dot.com bubble. Mean reversion historically is inevitable and the Fed's printing money experiment could end in disaster for the stock market in late 2021 or 2022. You can read Jeremy Grantham's Last Dance article here. You are likely well aware of Michael Burry's predicament as well. It's easier for you just to skim through two related videos on this topic of a stock market crash. Michael Burry's Warning see this YouTube. Jeremy Grantham's Warning See this YouTube. Typically when there is a major event in the world, there is a crash and then a bear market and a recovery that takes many many months. In March, 2020 that's not what we saw since the Fed did some astonishing things that means a liquidity sloth and the risk of a major inflation event. The pandemic represented the quickest decline of at least 30% in the history of the benchmark S&P 500, but the recovery was not correlated to anything but Fed intervention. Since the pandemic clearly isn't disappearing and many sectors such as travel, business travel, tourism and supply chain disruptions appear significantly disrupted - the so-called economic recovery isn't so great. And there's this little problem at the heart of global capitalism today, the stock market just keeps going up. Crashes and corrections typically occur frequently in a normal market. But the Fed liquidity and irresponsible printing of money is creating a scenario where normal behavior isn't occurring on the markets. According to data provided by market analytics firm Yardeni Research, the benchmark index has undergone 38 declines of at least 10% since the beginning of 1950. Since March, 2020 we've barely seen a down month. September, 2020 was flat-ish. The S&P 500 has more than doubled since those lows. Look at the angle of the curve: The S&P 500 was 735 at the low in 2009, so in this bull market alone it has gone up 6x in valuation. That's not a normal cycle and it could mean we are due for an epic correction. I have to agree with the analysts who claim that the long, long bull market since 2009 has finally matured into a fully-fledged epic bubble. There is a complacency, buy-the dip frenzy and general meme environment to what BigTech can do in such an environment. The weight of Apple, Amazon, Alphabet, Microsoft, Facebook, Nvidia and Tesla together in the S&P and Nasdaq is approach a ridiculous weighting. When these stocks are seen both as growth, value and companies with unbeatable moats the entire dynamics of the stock market begin to break down. Check out FANG during the pandemic. BigTech is Seen as Bullet-Proof me valuations and a hysterical speculative behavior leads to even higher highs, even as 2020 offered many younger people an on-ramp into investing for the first time. Some analysts at JP Morgan are even saying that until retail investors stop charging into stocks, markets probably don’t have too much to worry about. Hedge funds with payment for order flows can predict exactly how these retail investors are behaving and monetize them. PFOF might even have to be banned by the SEC. The risk-on market theoretically just keeps going up until the Fed raises interest rates, which could be in 2023! For some context, we're more than 1.4 years removed from the bear-market bottom of the coronavirus crash and haven't had even a 5% correction in nine months. This is the most over-priced the market has likely ever been. At the night of the dot-com bubble the S&P 500 was only 1,400. Today it is 4,500, not so many years after. Clearly something is not quite right if you look at history and the P/E ratios. A market pumped with liquidity produces higher earnings with historically low interest rates, it's an environment where dangerous things can occur. In late 1997, as the S&P 500 passed its previous 1929 peak of 21x earnings, that seemed like a lot, but nothing compared to today. For some context, the S&P 500 Shiller P/E closed last week at 38.58, which is nearly a two-decade high. It's also well over double the average Shiller P/E of 16.84, dating back 151 years. So the stock market is likely around 2x over-valued. Try to think rationally about what this means for valuations today and your favorite stock prices, what should they be in historical terms? The S&P 500 is up 31% in the past year. It will likely hit 5,000 before a correction given the amount of added liquidity to the system and the QE the Fed is using that's like a huge abuse of MMT, or Modern Monetary Theory. This has also lent to bubbles in the housing market, crypto and even commodities like Gold with long-term global GDP meeting many headwinds in the years ahead due to a demographic shift of an ageing population and significant technological automation. So if you think that stocks or equities or ETFs are the best place to put your money in 2022, you might want to think again. The crash of the OTC and small-cap market since February 2021 has been quite an indication of what a correction looks like. According to the Motley Fool what happens after major downturns in the market historically speaking? In each of the previous four instances that the S&P 500's Shiller P/E shot above and sustained 30, the index lost anywhere from 20% to 89% of its value. So what's what we too are due for, reversion to the mean will be realistically brutal after the Fed's hyper-extreme intervention has run its course. Of course what the Fed stimulus has really done is simply allowed the 1% to get a whole lot richer to the point of wealth inequality spiraling out of control in the decades ahead leading us likely to a dystopia in an unfair and unequal version of BigTech capitalism. This has also led to a trend of short squeeze to these tech stocks, as shown in recent years' data. Of course the Fed has to say that's its done all of these things for the people, employment numbers and the labor market. Women in the workplace have been set behind likely 15 years in social progress due to the pandemic and the Fed's response. While the 89% lost during the Great Depression would be virtually impossible today thanks to ongoing intervention from the Federal Reserve and Capitol Hill, a correction of 20% to 50% would be pretty fair and simply return the curve back to a normal trajectory as interest rates going back up eventually in the 2023 to 2025 period. It's very unlikely the market has taken Fed tapering into account (priced-in), since the euphoria of a can't miss market just keeps pushing the markets higher. But all good things must come to an end. Earlier this month, the U.S. Bureau of Labor Statistics released inflation data from July. This report showed that the Consumer Price Index for All Urban Consumers rose 5.2% over the past 12 months. While the Fed and economists promise us this inflation is temporary, others are not so certain. As you print so much money, the money you have is worth less and certain goods cost more. Wage gains in some industries cannot be taken back, they are permanent - in the service sector like restaurants, hospitality and travel that have been among the hardest hit. The pandemic has led to a paradigm shift in the future of work, and that too is not temporary. The Great Resignation means white collar jobs with be more WFM than ever before, with a new software revolution, different transport and energy behaviors and so forth. Climate change alone could slow down global GDP in the 21st century. How can inflation be temporary when so many trends don't appear to be temporary? Sure the price of lumber or used-cars could be temporary, but a global chip shortage is exasperating the automobile sector. The stock market isn't even behaving like it cares about anything other than the Fed, and its $billions of dollars of buying bonds each month. Some central banks will start to taper about December, 2021 (like the European). However Delta could further mutate into a variant that makes the first generation of vaccines less effective. Such a macro event could be enough to trigger the correction we've been speaking about. So stay safe, and keep your money safe. The Last Dance of the 2009 bull market could feel especially more painful because we've been spoiled for so long in the markets. We can barely remember what March, 2020 felt like. Some people sold their life savings simply due to scare tactics by the likes of Bill Ackman. His scare tactics on CNBC won him likely hundreds of millions as the stock market tanked. Hedge funds further gamed the Reddit and Gamestop movement, orchestrating them and leading the new retail investors into meme speculation and a whole bunch of other unsavory things like options trading at such scale we've never seen before. It's not just inflation and higher interest rates, it's how absurdly high valuations have become. Still correlation does not imply causation. Just because inflation has picked up, it doesn't guarantee that stocks will head lower. Nevertheless, weaker buying power associated with higher inflation can't be overlooked as a potential negative for the U.S. economy and equities. The current S&P500 10-year P/E Ratio is 38.7. This is 97% above the modern-era market average of 19.6, putting the current P/E 2.5 standard deviations above the modern-era average. This is just math, folks. History is saying the stock market is 2x its true value. So why and who would be full on the market or an asset class like crypto that is mostly speculative in nature to begin with? Study the following on a historical basis, and due your own due diligence as to the health of the markets: Debt-to-GDP ratio Call to put ratio