Summary of Daddy Powell's Punishment Today [FOMC Fed].

okay wow Jerome Powell today was like a

dad who's mad at you for having kicked

somebody's butt and he's he's yelling at

you he's like who dare you kick that

kid's how dare you do that but he's got

this little smirk on his face he's kind

of like how dare you because he's kind

of proud of you and and in this case the

fight is CPI it's like yeah CPI is

coming down kick its butt right kick it

down and he's kind of like proud he's

like yeah that's that's my son right but

but he's also like Stern like but don't

do it again like don't mess up CPI you

know he's always gay that's what it felt

like today like today honestly it didn't

really feel extremely like hawkish or

extremely dovish we kind of got a

hawkish SCP report that initially led to

some selling off

but he was kind of honestly that Stern

dad that's like

don't do it again but good job you know

that was that's that's kind of like the

best summary honestly I have for this is

is is that like the proud dad like the

proud dad that you would have if you

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of easy okay here let's get into the Fed

so the way I wanted to break this up

today is I want you to think uh bad

neutral good I think that's the easiest

way to break this up so let's start with

bad okay bad was what we got in the

report uh I did not get a lot right in

my projection which is fine because as

we talked about in the live the reason

you make projections is to see where you

don't align if you don't make any

projections you can't adjust your

feelings in any way right so we had

initially a bad SCP because this came in

way higher than the market was expecting

in what I was expecting in fact the

fed's Dot Plot I personally projected

that most of them would come in under

five percent for the terminal rate

that's not what we got here most of them

were right here in that five to five and

a quarter percent range 5.5 percent

range that's where the bulk was so we

started with bad news you know our

number one piece of bad news is we moved

the terminal rate to 5.1 percent and the

FEDS had a tendency of moving these up

that's not that great the range was 5.1

to 5.4 percent not that great that was

bad news GDP moving up in 2022 to 0.5

big deal massive revision down over here

in 2023 that's potentially recessionary

we could have a q1 Q2 recession or or

potentially a q1 Q2 positive uh economic

growth but then a Q3 Q4 recession and

you could still end up with an average

of 0.5

but have a recession within the year

right because you only need two quarters

whereas you need four to create that

number unemployment rate projecting

going up to 4.6 Jerome Powell says this

is still low so it's fine this is

probably the least important projection

their inflation projection it doesn't

matter so much uh but uh this SCP was

aggressive that's just the way to put it

it was aggressive this was the this was

Daddy Powell going hey hey don't don't

don't do it again stay the course get

inflation out but that this was the

daddy power right but that you know he

had some other bad things to say which

we'll talk about those but the good part

was that he's proud about inflation

coming down but we're going to talk more

about that in a moment I want to stay

bad neutral good so sticking to the bad

we're gonna stay restricted for some

time uh we caution against uh premature

loosening this is old news we've heard

that a million times before no rate Cuts

projected in 2023 by the Federal Reserve

now they're just saying that the market

doesn't believe that them as far as the

market can throw daddy pow they don't

believe it you know how the market

doesn't believe it Bond deals at the

time of this recording after the meeting

went down look at this the FED talked

dirty to us about how they're going to

raise rates higher than it anticipated

higher than what the market was pricing

in for the terminal rate and told us

they were not going to cut rates in 2023

and the market said whatever old man

rates down okay that's another way of

saying uh that that they the market

doesn't believe the fed the market

actually thinks the the FED is going to

get the inflation reduction that that

we're on the trend for now and they're

going to end up cutting rates now Jerome

Powell gave us the recipe for when he's

gonna cut rates we'll talk about that in

just a moment uh it's not a terrible

surprise but I I have a formula for it

that I'm going to share with you my

opinion uh okay so this uniformity by

the FED around that five percent on the

Dot Plot unexpected that was bearish uh

middle of the next year they're

expecting to see slow following

inflation come in from housing inflation

which is really good because if you

think about it if we're on slowing

inflation now imagine how much inflation

is going to drop when that rental

inflation from that stupid lagging

owner's equivalent rent which lags like

six months comes in you're going to see

inflation just gap down like after hours

gap down you know as they say anyway so

um some beginning signs of inflation

starting to rotate down uh in the labor

Services sector which is really good you

got 45 in pce that comes from Housing

Services 55 that comes from other labor

services that other labor Services side

is starting to see some softness and

that's good that's the third part of

inflation coming down goods housing

labor starting to see that rotation

coming down in labor Jerome acknowledges

that however he also says we need to see

that consistency he does believe that

eventually uh the labor market will

soften and that will create some pain

but he kind of says sorry it's just just

doing my job gotta do it sorry some

people are going to lose their jobs he

kind of admits to that right and okay I

get it I mean he's being blunt about it

basically so on the neutral side

he kind of dodged a question about

stagflation it doesn't seem like

stagflation or recessions or really

scenarios that they're really thinking

about right now uh they haven't talked

about what kind of recession scenario

would be uh you know something that they

would react to so Jerome Powell did not

give us really any insight into

stagflation or recession they're not

expecting that now they've been wrong

pretty much on every projection they've

made so you know if you were to kind of

lean towards the more hawkish side that

would be reasonable based on the trend

but uh you know maybe we're at a U-turn

now who knows okay so let's talk a

little bit more about the good this was

the interesting part for me because of

this new sep five-year break-evens fell

that's good five year Break Even is uh

it has to do with the the spread between

treasury uh inflation protected

securities and non-inflation protective

security is basically it's the Market's

way of telling you what do we think

inflation's gonna do and sir we think

it's gonna go down in fact these

inflation expectations are at some of

the lowest levels that we have seen all

year they've only been lower once before

this year and that was at the end of

September when we had a nice little

rally which was cool uh but uh but

otherwise we are at the lowest levels

we've been at for inflation break evens

all year and the consumer sentiment

surveys have been coming in lower so

this is this is great this is great uh

you know somebody here just donated to

CHF I don't even know what that is uh

it's probably like two pennies in fact

actually I probably have more money

right here in my hand which is two

pennies but I appreciate this uh too

anyway uh bonds see more deflation uh

yeah I agree with you uh I I agree that

bonds see more deflation but you put a

little bear I don't I don't know why

that would be bearish it seems uh seems

bullish to me but thank you for the two

whatever I appreciate it all right so

um okay now my expectation on on this

sort of formula of when are we going to

see uh actually like rate Cuts I think

the fed's going to make us wait until we

get five sustained in CPI reports that's

because even though Jerome Powell

applauded the two very good reports that

we just had on inflation he said hey

those two reports just reiterate what we

think is going to happen which is

inflation is going to go down but we

really need to be confident that

inflation is on its way to two percent

so I think

two reports is the start I think you get

three more reports that's five good CPI

reports in total and guess what you get

I think that's when you get the FED

U-turn now my guess at this point let me

show you on the calendar what that looks

like okay so I think this is I would

write this one down okay this is

something I would write down we just had

the 50 basis point everyone and their

granny knew we were gonna get 50 basis

points today

uh we have one CPI report between now

and the February report which could be a

25 basis point hike could be a 50 basis

point hike Jerome Powell gave us no

clues no clues at all I don't think it's

going to be zero because we're at 4.25

they think the terminal rate is going to

end up being 5.1 why would we get a 25

in Fab eh it'd be nice I don't think

it's too likely but we do get one CPI

report between now and then maybe that

third CPI report suggests they go to 25

maybe we'll see March 22nd we'll have

three CPI reports so if we have all

three of those CPI reports Jan Feb and

March whereas over here in fabul only

have the January report right if we hit

all three of those reports that come in

low what happens all three of those

reports come in low that's when I think

potentially the FED says we're gonna cut

in May rather than doing 25 25 25

continuously they might cut in the next

meeting thereafter because then they'll

have five reports in a row in fact

they'll even have more by the time May

comes around uh you know they'll they'll

have another four or five in total from

now which is kind of incredible so uh

yeah Q end of q1 beginning of Q2 seems

to probably be the earliest potential

for a rate cut though Jerome Powell made

it very clear don't expect rate Cuts but

he has to say that you know if he's like

hey yeah maybe we'll do some rate Cuts

dude everything's gonna unwind the

stocks are gonna rally and and uh uh you

know all their work kind of will start

getting undone before we actually get

those reports so uh that said you know

markets are slightly down a little bit

flat right now in reaction to this again

I think this was mostly an uneventful

fed meeting but it certainly was one

that gave us a little bit of uh of

welcome news and that was actually

Jerome Powell saying hey you know what

we uh we're we're in a position where

we're doing good we've got two great

reports let's stay on that course now I

think uh we have a lack of catalysts

between now and uh January really that

could potentially lead to a little bit

more bullishness in the market it just

my opinion no guarantees obviously but

consider this usually right before fear

events you don't get a lot of rallying

right but look at what we have here look

what I wrote boring fed meeting quiet

mode now with less uncertainty could

create a near-term rally Santa Claus no

guarantees obviously the next major

catalystor January 7th for the labor

report January 12th for the CPI report

December 14th for the expiration of PP

and the late January Q4 earnings Q4

earnings I think are going to create

some huge uncertainty and fear so I

think there's a greater chance that you

potentially have a little bit of a micro

rally now rather than after January CPI

because after January CPI you're going

to go into earnings then everybody's

going to be focused on earnings so I'm a

little bit more short-term bullish right

now since like we didn't get rug pulled

you know Daddy Pals at least somewhat

happy with us and

um yeah those are my thoughts so anyway

thank you so much for watching as always

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thank you so much goodbye and good luck