The Real Reason Why The Stock Market Is Crashing

New Tariffs and Market Uncertainty [0:00]

• The stock market experienced one of its worst days, coinciding with a boom in gold prices, due to new tariffs and concerns about an AI bubble.
• Initially, the Supreme Court's ruling invalidating President Trump's tariffs boosted the stock market, as companies were expected to increase profits without the tariff tax.
• President Trump announced a new global tariff, first at 10% and then increased to 15%, causing significant uncertainty which investors dislike.
• This uncertainty impacted global trade, with countries like China, Brazil, and India potentially benefiting due to lower effective tariffs, while the UK, EU, and Italy faced higher tariffs.

"And all this created uncertainty and the stock market hates uncertainty which then led to investors wanting to sell off certain stocks because we know that this is going to impact global trade again."

The AI Bubble and its Market Impact [0:12]

• Investors are realizing that AI is rapidly becoming smarter, potentially reducing the need for businesses to use multiple software and tools.
• Services like ChatGPT and Claude could replace proprietary software such as Salesforce or Service Now, leading to decreased spending on these services by businesses.
• This potential reduction in spending could impact companies like Microsoft, leading to lower revenues.
• The "Magnificent Seven" companies, which make up over a third of the S&P 500's total weight, are heavily invested in AI, meaning any volatility in these stocks can significantly pull down the entire market.
• The heavy weighting of AI in investment portfolios, including the S&P 500, can cause panic and stress when downturns occur, affecting retirement accounts.

"And so now as soon as you have a little bit of volatility with those big seven companies, it can pull down the entire stock market because now AI has become so ingrained into people's investment portfolios because now if you're investing in the S&P 500, well, you're effectively very heavily weighted in AI in this new technology tools."

Bank of America's Perspective on AI Spending [0:16]

• Bank of America suggests it's contradictory to simultaneously believe AI spending will collapse and that AI will become so powerful it destroys established software businesses.
• The concern about an AI bubble is that excessive investment might lead to a collapse in spending, causing AI companies to fail due to lack of funding.
• Conversely, for AI tools to become smart enough to make software companies irrelevant, significant investment and development (more money) would be required.

"You cannot simultaneously believe that AI spending is going to collapse and that AI is going to be so powerful that it's going to destroy established software businesses."

Market Rationality and Investor Solvency [0:12]

• A famous investing quote states, "Markets can remain irrational longer than investors can remain solvent."
• This suggests that market behavior can be irrational for extended periods, potentially longer than investors have the financial capacity to endure.
• It highlights the risk in investing, where one can be correct in their analysis but still lose money if they cannot weather the market's irrational movements.
• The video advises educated investment decisions, never investing more than one can afford to lose, and not blindly trusting advice.

"The idea being sometimes markets can do things that are irrational and they can do that longer than many people will want to actually invest their money and ride out the wave."

Stock Market Valuation and Volatility [0:56]

• The stock market is currently heavily valued, with the S&P 500 trading at approximately 22 times earnings, significantly higher than its historical average of around 18 times earnings.
• This higher valuation means the market is more expensive than in the past, leading to larger swings and increased panic during periods of volatility.
• Gold prices are benefiting from this volatility because, unlike stocks that produce value, gold is seen as a safe haven during times of economic pain or expected dollar devaluation.

"Well, historically, the S&P 500 has traded at around 18 times earnings. Today, we're significantly higher than that. Depending on which formula that you use, it's somewhere around the 22 times earnings today, which means we're trading a lot higher than the average PE ratio in the past."

Gold as a Safe Haven Amidst Uncertainty [0:00]

• Gold prices are booming because investors are worried about impending economic pain, a potential loss of dollar value, or slower growth in other investments.
• Unlike stocks which are tied to company performance and future value, gold is a passive asset that does not actively produce economic value or employ people.
• A surge in gold prices typically signals investor concern about broader market conditions or economic stability.

"When you buy gold, you buy gold because you believe that there's pain coming ahead. You buy gold because you believe the dollar is going to lose value."

Unprecedented Market Volatility [0:00]

• Seasoned investors describe the volatility observed over the past 12 to 24 months as abnormal, unlike anything seen in the last 10, 20, or 30 years.
• Extreme volatility, characterized by significant upswings and downswings in the stock market coupled with booming gold prices, often indicates negative developments on the horizon.

"And if you talk to any seasoned investor, and I know this because I've talked to a lot of them recently, they'll tell you this that what we're seeing over the last 12 to 24 months, all this volatility that we're seeing, it's not normal."

The Investor's Advantage in a Changing Economy [0:00]

• The economy is undergoing rapid changes, and historically, long-term investors, not traders or savers, have been the ones to build wealth.
• Savers risk losing value to inflation, although saving is still necessary for emergencies and large purchases.
• Investors benefit from owning assets, especially during periods of money printing and inflation, which are expected to continue through 2026.
• Volatility can cause panic, but it presents opportunities for financially savvy individuals.

"When you are a saver, you lose value to inflation."

Warren Buffett's Wisdom and Investment Strategy [0:00]

• Warren Buffett's quote, "Be fearful when others are greedy, be greedy when others are fearful," suggests buying when the market is fearful.
• Downturns create opportunities for investors to purchase good investments at discounted prices, a strategy beneficial for long-term wealth building.
• Trading, however, is riskier during volatility as market direction becomes unpredictable.

"Be fearful when others are greedy, be greedy when others are fearful."

Inflation and the Need for Asset Ownership [0:00]

• Inflation is expected to persist, as indicated by statements from the Federal Reserve, meaning the value of the dollar will continue to decrease.
• Government spending beyond its means and money printing by the Federal Reserve contribute to ongoing inflation, which diminishes the purchasing power of salaries and savings for the average person.
• Owning assets is crucial to counteract the effects of inflation and preserve wealth.

"Inflation is not dead. Even the Federal Reserve Bank just came out and said that inflation has not gone away."

Capitalizing on Market Panic [0:00]

• Market panics and sell-offs create opportunities for financially savvy individuals to acquire valuable investments at reduced prices.
• This requires a shift in thinking from emotional reactions to strategic acquisition during periods of fear.

"That panic and selling creates opportunity for the financially savvy."

Future Changes Driven by AI and Tariffs [0:00]

• Significant changes are anticipated due to advancements in AI and evolving tariff policies.
• The uncertainty surrounding these changes, including the specifics of future tariffs and their impact, contributes to market volatility.
• Historical data from 2025 shows that the stock market crashed and rebounded after major tariff announcements, particularly when President Trump softened his stance.

"There's going to be changes because of AI. There's going to be changes because of tariffs. These changes are uncertain."

The Role of a Financially Savvy Investor [0:00]

• The key to navigating market volatility and uncertainty is to be a financially savvy investor rather than an emotional one.
• Savvy investors can capitalize on opportunities created by market downturns and panic.
• The video offers a free investing master class to guide individuals on how to start investing and identify hidden opportunities.

"But that's why your goal, your job is to be a financially savvy investor instead of an emotional investor because as an investor, you can capitalize on those opportunities."

Government Stimulus and Market Intervention [12:55]

• The government has quietly begun stimulating markets, with most people unaware of these actions.
• On February 5th, 2026, the Treasury Department announced that the Federal Reserve Bank had injected $90 billion to stabilize markets.
• The Federal Reserve has no plans to cease these stabilization efforts, indicating continued intervention.

"The government has quietly started to stimulate markets again and most people are not paying attention."