Warning: Pay Attention to This UNEXPECTED Shift.

hey everyone me kevin here in january we

talked about how good news was bad news

and bad news was terrible news the

reason for that was in quarter one we

were looking at the market coming off a

high and thought oof if we have any well

missing earnings

stocks are going to plummet and january

was really sensitive to that because

that's ultimately what ended up

happening to a lot of companies earnings

came in

not so great and everything started with

the canary in the coal mine going

straight downhill with netflix missing

terribly well then we thought though

bad news from earnings reports will be

bad because valuations are coming off

higher levels

but good news is also

bad news that's because any kind of good

news that we get on a strong consumer or

strong demand would encourage the

federal reserve

to hike faster and unfortunately that's

exactly what they had to do going from

maybe 25 basis point hikes to reports

continuing to come out that the consumer

is just continuing to spend money and

what happened we ended up getting 50

basis point hikes and then they'll never

go for 75 up and sure enough they go 475

well folks there's a really big memory

going back to january that hey wait a

minute maybe these last earnings reports

weren't actually that good that we just

had here q2 earnings

the ones in january were actually q4 it

was in q1 but anyway so these last q2

earnings maybe weren't actually that

strong and maybe

the good news that we just got this

morning is actually going to be the kind

of stuff that the federal reserve needs

to say you know what we just got to keep

cranking the wrench and crushing this

economy and that has a lot of folks

saying

we're ready for another big downside in

the stock market now let me explain what

i'm talking about

first of all we've got the nasdaq

testing the 50

fibonacci retracement line right here

you can see that simply by going from

the top to bottom that's a hundred

percent to zero from zero back up fifty

percent we are back up

a full fifty percent retracement from

the lows of june on the nasdaq and that

is a testing point if we hit this test

point just like when we were sitting at

the 38.2 line there's a good chance

we're gonna see

some resistance just like we've seen

here at the end of the day yesterday and

sort of in pre-market uh and and the end

end of the day on the monday as well and

we're seeing a little bit of a pull down

here in pre-market already

now why could that potentially be well

that could potentially be because of

this memory of

good news is actually bad news and bad

news is terrible news see this morning

we got retail sales data for example

economists were actually expecting

retail sales data excluding autos to

fall

0.1

which annualized would be a fall of 1.2

percent and the thesis goes that hey

well if consumers finally spend less

money then inflation has to come down

right because retailers will be forced

to cut prices and when they're forced to

cut prices then then we'll get

disinflation or potentially even

deflation

well they didn't come down 0.1

they actually went up 0.4

which all of a sudden means we're

actually still growing retail sales at

4.8

which might just be the pace of

inflation but it's still a concern

because oh that could be all companies

need to continue to get pricing power

when you exclude autos and gas we are

expecting get a surveyed increase so

this is quite your core retail spending

we're expecting a survey of point four

percent which is four point eight

percent annualized and what did we

actually get

well we actually ended up with point

seven percent uh which represents

8.4

of a core

increase annualized

in retail spending and this is sending a

signal to the market saying hey whoa

whoa whoa whoa

this is all the ammunition the fed

really needs to continue to say dang our

job is to destroy demand like we can't

fix the supply curves that's it let's

just hike more and so

some of the overhang that we're going to

see over the next weeks and months is

going to be that there is still this

lingering belief of good news is bad

news but i have a different opinion

about this and i want to tell you why i

think we might actually be passed

good news

is bad news right after this message

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payments with melio today so why could

good news on consumers continuing to

spend actually be great well first of

all it means we're still propping up

earnings at least to some degree for the

amazing companies that are becoming so

much more efficient in the markets right

now these are amazing companies in

america right now you can't bet against

america and they're becoming more

efficient unfortunately by laying off

people and being more disciplined with

their spending and their advertising

which is bad for certain sectors and

certain companies but some of these

larger tech companies are killing it for

a reason there's a reason apple is close

to six percent of all-time highs it's

because not only are they able to become

more efficient but consumers are

continuing to spend more money so why

isn't that bad though if the consumer

continues to spend more money kevin why

is that not terrible that should be a

sign the fed has to work harder not

necessarily and the beautiful thing is

the federal reserve

is looking at inflation as long as

inflation moves down

we could actually see the fed

take a more soft and steady approach to

get to that 3.9 percent fed funds rate

by the end of the year maybe 3.5

somewhere between there 3.9 to 3.5 and

stay there and then just relax as

inflation slowly bleeds down but kevin

how can inflation slowly bleed down if

consumers are still spending like mad

men if every quintile of consumers have

more money than they did compared to

last year and compared to 2019

and consumer spending is actually

ticking up and not

down how come the fed wouldn't try to

crush us

the answer is simple

we could actually see inflation go down

disinflation while at the same time

consumers are spending more

now that's the mind-blowing point see

most folks are associating more spending

with more inflation but let's be real

between 2011 and 2019 we spend more

every single year and we did not have an

inflation problem why

because we had enough supply that's the

bottom line we had enough supply

so there was no

massive upward pressure on prices beyond

the usual 1.5 to 2 percent

the same could happen now if we have a

glut of inventory at companies like

walmart or target or the chip

manufacturers or apple gets enough

inventory then the pressure on pricing

is not there to keep pushing prices up

even though consumers continue to spend

that is good see what we want is

consumer spending let's

think about this sort of just as an

example if consumer spending goes from

100 to 102 that's still 2 consumer

spending growth right if supply goes

from 100 to 101 well now we have a lack

of supply and so prices go up that would

be bad we don't want to see that but

instead again consumers go from 100 to

let's say 102 and supply goes from 100

to 103

the necessity to raise prices goes away

so as long as you believe that companies

have worked hard to solve supply chain

nightmares and even though we know

they're not all solved as long as you

think they're solved enough

to

hold or to handle an increase in

consumer spending an increase in retail

sales

which means that inflation will continue

to go down you could actually have a

phenomenal next 12 months in the stock

market

as long as this is correct because if

inflation starts breaking to the upside

then this thesis is wrong and you'll

lose money but if my thesis is correct

inflation will actually bleed down the

federal reserve will get to about 3.5 to

3.9 percent and pause we'll see

inflation bleed down while at the same

time consumers are still spending more

people are going to go what how is this

even freaking possible i thought

more spending meant more inflation no

this inflationary crisis was a supply

crisis

that's it we always see consumers spend

more money and we don't have an

inflation problem

don't forget that so retail spending

going up

earnings coming in positive are not

necessarily bad news they were bad news

back in january because valuations were

ridiculous

coming off the november december highs

so remember that in a different place

right now now do i really think that we

should be retracing back to 100 on the

nasdaq let's say back to all-time highs

anytime soon no not really but

this

could be

good news thanks for watching