The Fed **JUST** Said "Recession."

Wow. The Federal Reserve just used the

Rword. Let's talk about what was just

said by the Federal Reserve, what it

potentially means for the December

meeting, and what data we just got this

morning. In fact, let's start with some

of the data that just came out this

morning. You've got the whole Cloudflare

outage. So, you know, X is having some

issues. Uh but this morning, we got a

report from ADP, our weekly jobless uh

report or weekly uh job running report.

It's a little different from the uh

Thursday unemployment claims report that

states and the federal government put

together. This instead is the ADP report

that says, "Hey, this is the 4-week

moving average of what we've seen in the

jobs market in October." And the ADP

report that we originally got for

October said that we gained about 40,000

jobs. A lot of those concentrated in the

Pacific. Well, the 4-week moving average

uh of jobs, which seems a little hard to

reconcile, but the 4-week moving average

of job gains

ending November 1st, so basically

October was minus 2,500.

Now, that's not good because it's

negative and it's certainly a lot lower

than the it's actually 42,000 that the

original ADP report showed, which is

suggestive that towards the end of

October, we started seeing more layoffs,

which we did. You know, we saw a lot of

corporate announcements, whether it was

Target or Amazon or otherwise. But it's

not like we're falling off a cliff. were

more appropriately close to this sort of

stall in the labor market. And this is

exactly what Chris Waller talks about.

Chris Waller just spoke and talked about

his opinion of what's going on in the

economy. And yes, the Rword comes up.

So, what we're going to do is we're

going to go through the most juicy parts

of his speech. We've got his transcript

right here. So he describes his outlook

for the US economy and he says that

right now there's plenty of data that

suggests we should be cutting. He says

even though we lost a lot of data like

are we actually going to get the October

jobs report from the federal government,

there's plenty of data to indicate the

labor market today is near stall speed.

This by the way totally reconciles with

the ADP report we just got minutes ago.

Inflation has also continued to show

relatively small effects so far from

tariffs, which is good. We expect some

bump from tariffs one time and then over

time we actually just expect GDP to

contract. That's generally consistent

with how tariffs work in the long term.

They weaken the economy.

Now what he also says is that despite

inflation for the last 5 years running

above their target, inflation

expectations are anchored. So people are

hopeful that inflation will indeed get

to 2% even though we're not getting

anywhere close to 2% right now. He also

suggests that the reason he supports a

cut is because of what he sees in the

data now and how it's different from

what he saw in 2022. Remember in 2022

when the Federal Reserve raised rates

like crazy and crushed the economy?

Well, I mean they crushed the overheated

aspects of the economy. We ended up

having a stock market selloff in 2022,

but we recovered really nicely with a

glorious Nike swoosh from the stock

market uh in 2022, basically all the way

through now. You know, this was a

prediction that I made back in 2022 that

we would have a Nike swoosh style

recovery, which we did, and it's been

remarkable. And we always thought it

would end in some kind of bout of

euphoria. The question is, are we in a

bout of euphoria right now that's

turning or is this still consistent with

this Nike swoosh? That's a little hard

to tell, but we talk about it every

single day in our alpha report. So, if

you're not part of our alpha report yet,

make sure you join it over at

mekevin.com. You can use the coupon code

NVDA

and you can join that membership. You

get lifetime access. You pay once, you

get lifetime access. You get all eight

courses. You get the new course that's

coming out totally for free. It's

included. uh every trade alert, every

live stream, every alpha report. Check

it out. Now, in 2022,

Waller tells us that he had more trust

in the beverage curve, the beverage

curve, than the Phillips curve back in

22. Why is it so important that he's

mentioning this? He says that in 2022 he

believed that because job vacancies were

so high on the beverage curve, the

beverage curve, however you want to say

it, that we would not end up seeing a

spike in layoffs that instead what you

would see is the curve would relax. So

you would see the beverage curve come

down and you would see job vacancies

come down. And sorry, I'm losing my

voice a little bit. Too much yelling

about

>> big pee pe. Uh yeah,

but anyway, this is exactly what

happened, mind you. So he was right to

cite that curve, but that actually

creates risks today. See, look at this

curve. This is the beaver curve. On the

left, you have job openings. And what he

said is that, hey, if we end up raising

rates, we'll be okay raising rates. We

don't actually think that the

unemployment rate is going to go up,

which is the bottom part of the line. We

don't think the unemployment rate is

going to go up. We actually just think

we're going to go from this very high

level of job openings and we're going to

see this level go down. And if you use a

level of this that actually looks at a

postco era, what you'll see is you've

had this very weird move down of job

openings right here. But you have not

yet uh and this is the sort of to come

part I think of where he's getting. you

have not yet seen the movement or

normalization over to the right. So this

magenta line has not occurred yet. We've

seen job openings go down, which is

exactly what he predicted in 2022. And

he was using this curve to predict that

he would be right in 2022 that we could

raise rates and you'll only see a

decline in openings. Well, now that

decline in openings has happened, what's

the next phase that this curve tells

you? the unemployment rate is going to

go up and you're going to normalize. And

that's what he's implying. He's hinting

that uhoh, if we get a normalization

there, we're going to see recession. But

he actually goes as far as using the

word recession. And I'm going to show

you that in just a moment. So he says

that the beaver curve combined with the

soft data, in other words, firms saying,

"I can't find workers like we we we we

like need to fill jobs. We have so many

job vacancies. We just need to fill

these." He predicted there wouldn't be a

big layoff surge in 2022 that would lead

to a rise in unemployment. And while

there were layoffs, there wasn't a big

spike in unemployment.

Now, he sees us in this no higher, no

fire equilibrium. And he sees that jobs

data has clearly weakened. He sees that

economic data is weakening. Look at Home

Depot this morning. Just look at Home

Depot stock. It's down like four or 5%.

Why? Because there's talk that consumers

are not spending on big ticket items and

that they're holding off on projects

that they might otherwise do if rates

were lower or the economy were stronger.

Home Depot stock now down 4%. Not a

great look into the consumer, which

usually is about 70% of GDP, maybe a

little less now because of AI spending,

but AI spending doesn't necessarily

translate to a lot of jobs. Anyway, in

the absence of more official data, but

with additional private sector forecasts

and surveys, it now appears to me that

economic activity is not accelerating

and therefore tracking more closely with

the weak employment data we've seen.

Remember, he says stall speed. He's not

saying we've fallen off a cliff, but

he's saying, hey, may maybe we should

cut rates before we fall off a cliff.

Because so far consumer sentiment data

and the longer trend of it over the last

6 months has been consistent with

recession. His word, while over the

decades the survey has not closely

correlated with short-term spending,

large persistent drops in consumer

sentiment over time have occurred

heading into recessions.

This is from the Fed. They're literally

talking about, "Oh my gosh, we could be

heading into a recession because this is

the kind of data you would expect

heading into a recession." He thinks

that a slowdown in consumer spending,

like what you just saw with Home Depot,

has huge implications for GDP growth.

And this downward move in the survey

since July about the last 5 to 6 months

since some of that data reflects June

and unexpectedly sharp low reading in

October is dower a dow view on

consumers. He thinks that the stock

market does not reflect the financial

conditions of most Americans and that

while the AI boom is great for propping

up GDP and stocks, it doesn't create

jobs or consumer spending. Now,

fortunately, because he believes tariff

effects have been smaller than expected

so far, little PP,

>> he thinks that inflation expectations

are anchored and therefore what we

should focus on is cutting to support

the labor market. He goes into his data

to support this and essentially wraps up

by saying we should be cutting 25 basis

points and there's going to be little

that's going to change my opinion on

that, not even the September jobs data

report, which is really backwardlooking

at this point. And so here you now have

the Federal Reserve blatantly saying the

quiet part out loud. Data so far is

consistent with us potentially walking

into a recession. Now what we're going

to do is we're going to go put together

our alpha report for the day because we

always do this before the market opens

up. So we're transitioning right away to

the alpha report. If you want to be a

part of it every single day before the

market opens up, make sure you join us

over at mekevin.com. Thank you so much

for watching. I wish you the best of

luck out there. Stay safe. the Federal

Reserve starting to ring the alarm

bells. Maybe we ought to start paying

attention.

>> Why not advertise these things that you

told us here? I feel like nobody else

knows about this.

>> We'll we'll try a little advertising and

see how it goes.

>> Congratulations, man. You have done so

much. People love you. People look up to

you.

>> Kevin Praath there, financial analyst

and YouTuber. Meet Kevin. Always great

to get your take.