Watch Before Tomorrow's Inflation Report

hey I recommend you watch this video in

full before we get to tomorrow so Morgan

Stanley just put out a really neat

indicator about what we could expect for

inflation tomorrow we already know that

the inflation estimates have been

revised down we already know that

JPMorgan thinks there's an 85 chance

we're going to have a green S P 500

tomorrow which if you're a contrarian

that's actually really bad news if you

like hearing that that's good news if

you're invested and you're a bull that's

good news right so Morgan Stanley came

out with this fascinating uh argument

they argue that there's actually this

CPI fixings chart and the CPI fixings

chart has been correct in 10 out of the

last 10 CPI prints in terms of the

direction of how CPI is going to come in

in other words is CPI going to come in

up is it going to come in down and it's

nailed it 10 of the last 10 times and so

the CPI fixings read right now I'll tell

you what it looks like and what it's

predicting but wait let me first

actually give you a quick reminder no

not of the coupon code link down below

and price is changing soon you already

know that about amazing programs on

building your wealth and fundamental

analysis live streams in both real

estate stocks you name it but the

current projections we know are

Bloomberg consensus estimates which I

did see some comments asking like hey

what creates these consensus estimates

basically it's a survey of like

somewhere around 50 to 70 economists

every month and they basically take the

average of that and they kind of chart

like a bell curve and they say all right

it looks like most people think it'll

come in here right that's basically what

they do and then you sort of have ranges

you have tails like some people think

it'll come in really high something low

whatever so we know that the Bloomberg

consensus estimate for the month over

month estimate has actually been moved

down from zero percent month over month

to actually negative point one percent

month over month which yesterday I

talked about how that makes me nervous

because I'd prefer to beat big to the

downside we also know that we we saw a

6.5 percent year over year be the

downward revision from 6.7 percent for

that year-over-year number right but

look at this from Morgan Stanley Morgan

Stanley talks about this CPI fixing

market and it's predicted the surprise

correctly in 10 of the last 10 prints

it's currently pricing in a 0.13 month

over month headline print so if you

think the trend of this survey being

right is going to continue we're

probably going to beat tomorrow look at

this CPI fixings versus Bloomberg median

forecast over the last 12 months and so

you can see here it was wrong the the

fixings the yellow came in different

from the actual versus the uh the

Bloomberg consensus which is the blue

here uh and so when they say actual

versus Bloomberg consensus it's a little

complicated it's basically just saying

that the Bloomberg consensus was way off

uh and the actual CPI read came in way

higher than expected and so basically

what to understand this chart you're

trying to see where did the CPI fixings

give you the right directionality

compared to actual CPI and Bloomberg

consensus right and it was wrong here it

was right here it was right here right

here right we're going in the right

direction right correct correct correct

correct correct correct correct correct

kind of wild that and this is this is

like a market-based survey right this is

people putting their money where their

mouth is rather than just like

economists speculating this is why kind

of like when you see betting odds for

election polls they tend to be more

accurate now no guarantees the CPI

fixings is suggesting a downside Miss

for this next one and that makes not

just Goldman Sachs and JP Morgan and

Morgan Stanley optimistic about tomorrow

which personally makes me nervous

because if everybody's optimistic it's

probably going to be bad news right uh

but it's like oh man yikes okay what do

we actually think is going to happen TBD

but let's take a look at some of this

other information what I think is

fascinating as well in this Morgan

Stanley report is listen to what they

say here and yesterday we had a pretty

damning piece from Morgan Stanley

talking about how they see a 3 000

bottom for the S P 500 still coming and

that's because they think the S P 500

and indices are going to get crushed not

because things aren't going to get

better with inflation they think things

are going to get better with inflation

and the FED in fact look at what they

say over here and sorry if I'm talking

fast like I I gotta go to a flight like

soon I have a flight that takes off in

62 minutes uh yeah I'm going to Utah so

I'm actually I'm actually already tight

addressed in like tights like I have

Under Armor under this I don't know if

you can really see that there it looks

kind of cool but so anyway so I'm a

little anxious I'm also highly

caffeinated but anyway

um

[Music]

most investors don't expect rate Cuts in

2023 according to a survey of Market

participants Market participants expect

Cuts in the first quarter of 2024

however the market actually expects

those cuts in Q4 2023 remember from

prior videos I talked about how the

markets right now are projecting about

1.73 percent Cuts in 2023 and then

before the The Cutting cycle ends we'll

be down a full five percentage points

that's what the bond market is pricing

in right now the five percent over the

next few years the 1.73 this year that

Divergence which we attributed to a

negative risk premium is commonplace

market prices aren't investor

expectations but they're just

Incorporated within them so in other

words the market might be a little more

negative and bearish now than it ought

to be for individual stocks but

potentially more optimistic on the

indices right this is

building off of what Morgan Stanley

wrote yesterday

but either way

take this for how you want it take a

look at some of the risks they point out

and some of the weaknesses they point

out this year the risks skew

increasingly toward an fomc that changes

their minds the lags with which the

fed's tools both the rates and interest

rates and the balance sheet operate

suggest the FED will need to ease

Financial conditions to help avoid a

hard Landing in other words even though

the FED wants Financial conditions tight

they don't need to be that tight to

bring inflation down because inflation

might already be plummeting in which

case you can loosen Financial conditions

to kind of hit the brakes on on like a

soft Landing or or maybe in the analogy

of a car if tight Financial conditions

are the brakes maybe they tap on the gas

a little bit again or they soften off

the brakes a little bit right anyway

analogies the labor market Improvement

continues to show a slowing look for

example when we chart this total change

in non-farm payroll plummeting and even

though we think these numbers are rigged

they're plummeting the reason we think

they're rigged is not because we're

putting on a conspiracy hat it's because

the payrolls establishment survey from

Bureau of Labor Statistics potentially

double counts people right and so these

numbers could already be inflated but

even the inflated numbers are trending

down like the last thing you want to say

is rigged is like when let's say this

number is trending up and you're like oh

it's just raked no no like it's already

going in our favor and we think it's

rigged like that's that's doubly good

right average weekly earnings and

average weekly hours worked both

trending nicely down this is good for

investors right we do want to see people

make more money in from an individual

point of view right latest ISM Services

data is giving a stark indication that

we are Contracting substantially

manufacturing and services based on the

New Order index solidly down what do you

have over here economic surprise in the

last eight years starting to go negative

over here still room to go down though

to the economic surprise side uh but we

are suggesting a big contraction in both

the demand for goods and services and

that and services line really really

important ISM Services prices have held

up recently in in the face of cooling

demand however data is really suggesting

that cooling inflation

and a soft Landing could be possible if

the Federal Reserve flip-flops and so

something everyone's expecting we'll see

well I guess I shouldn't say not

everyone is expecting in fact Morgan

Stanley I said said it best it's more

like everyone around here I feel like is

expecting the FED to cut Maybe not maybe

maybe I shouldn't say that at all

because then again I get comments all

the time people saying Kevin the FED

cutting rates is a pipe dream

all right well let me rephrase this and

simply say most investors don't expect

Cuts in 2023 as Morgan Stanley here says

however the risks are skewed to the fact

that the FED will but remember they are

going to keep the mask of Hell on for

longer because they don't want to take

that hellish mask off yet and reveal

their true clown faces just yet that

they are going to end up flip-flopping

this this data so far day after day

after day is pointing towards optimism

but I really want to caution against

being too optimistic because if you're

too optimistic

we could be terribly disappointed

tomorrow

so stay out of debt good luck godspeed I

will be live streaming the CPI release

at 5 30 a.m I hope you'll be there with

me goodbye