Why Markets are Falling | What the Fed JUST Said.

Markets are now pricing in one full cut

for September. And if you look closely,

markets are actually pricing in slightly

more than one full cut in September. We

are currently pricing in 1.13 cuts in

September. Reason for that is we have a

21.2%

chance of a cut in July, which comes

just minutes after Jerome Pal says he is

not taking off the table the chance of a

July cut. This was bullish enough for

the bond futures market to potentially

start pricing in a the highest odds for

a July cut that we've ever seen. So far

over the past few weeks, we've seen the

odds of a July cut go from zero up to

10% to 15% 17 19% now as high as 21%.

Now Powell does say that when it came to

tariffs, we basically went on hold on

our rate cutting regime. So we were in

the process of cutting rates. Donald

Trump's liberation came and so we

basically went on hold. We delayed more

rate cuts because of tariffs and other

countries are also trying to figure out

how to respond because even the bank of

Japan's uh president suggested well we

have to evaluate what the relative

tariffs are going to be. Is everybody

going to be at 10% that the United

States imposes or is China going to be

higher than us? And and that relative

aspect will have some effect on our

monetary policy. So in this forum

between drum Powell, Christine Lagard,

the president of the Bank of Korea, Bank

of Japan, and then Bailey from the Bank

of England, we find this sort of

collaboration of yeah, we're all trying

to get to 2% mandate on inflation and

we're all uncertain about tariffs. But

one thing that's really good is so far

numbers are coming out pretty dang well

when it comes to jobs. Jobs data has

been fantastic. In fact, this morning we

had the Jolts numbers that came out.

they came out as a beat. Uh pretty much

across the board, the revisions were

super minor and positive. And when it

actually came to looking at uh the quits

rate, the quits rate increased, which

usually usually when we see quits go up,

it's a sign that people are more

confident in the labor market. We saw a

higher opening rate with a lower layoff

rate and 7.769

million jobs versus the 7.3 expected. So

bullish across the board on Jolts this

morning, which echoes something we saw

in the course member live stream this

morning when we were analyzing paychecks

earnings calls. And in the paychecks

earnings call, they went as blunt as

saying, "We do not see a recession based

on current jobs data." Yes, some

businesses are going under and some

businesses are failing, but broadly we

are not seeing recessionary data. Now

the market today may not perfectly agree

with that. But it is very interesting

because this morning something I

mentioned is that Robin Hood would very

likely get rejected at close to $100 and

usually what we see with rejection

levels is Robin Hood or other any stock

really rejects slightly before that. So

this morning Hood was at $93 and in the

alpha report we sent out an alert

suggested hey this this could climb to

nearly $100. Look what it did this

morning. It went from 93 in pre-market

when I sent out the alpha report to 99

and 18 uh and then essentially rejected

straight down. So this is essentially

your uh front running of a 100

rejection. Uh and then also Tesla, look

at that bounce on 295. So if you're not

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So, as far as the ECB forum, uh JPAL

also talks about labor and he says we

see a gradual cooling in the labor

market, but we don't actually see any

sign of a shock yet. Now, this is

potentially because of this delayed

impact that we're seeing uh in well,

tariff data really. Now, one of the

things that's remarkable about this is

if I pull up the S&P manufacturing

report that was just released this

morning, you'll find the following. It

was actually a pretty decent report. The

manufacturing sector expanded again in

June with operating conditions improving

to the greatest degree in over three

years. This is a fantastic manufacturing

report. However, we are seeing input

costs for companies increase which

suggests that that uh pricing power to

pass on prices to consumers might be

limited. It also suggests that the costs

going into what businesses are paying is

rising which unfortunately or are rising

rather which unfortunately is a red flag

for company margins and future hiring

maybe. And here is I think the biggest

warning. So the chief business economist

at the S&P Global Market Intelligence

Group, basically they analyze and put

together this data. They say that, hey,

this is a welcomed return to growth for

manufacturing after a 3-month decline.

We're seeing rising orders both

domestically and in export markets.

We're seeing reviving demand,

encouraging factories to take on

additional staff at a rate not seen

since the end of 22, which is when the

chip sector bottomed out. remember that

uh this is really good. However, they

caution that and say, however, at least

some of this improvement has been driven

by inventory building as factories and

their customers in retail and wholesale

markets have sought to safeguard against

tariff related price increases and

possible supply issues. It therefore

seems likely that we will get payback in

the form of slower growth as we enter

the second half of the year. I hate to

say it, but this is a very very clear

warning that potentially a lot of the

excitement we're seeing right now is

that uh we will end up having some form

of punishment for in the future. Now,

hopefully not. The data right now says

there's no punishment. Again, Joltz was

great. S&P numbers were great. Even the

ISM numbers were good this morning. This

morning we got the ISM uh numbers that

came out and we had essentially beats

across the board. We had ISM

manufacturing coming in at 49 versus the

48.8. That's still in contraction but

slightly better than expected. Prices

paid came in worse than expected. So

higher prices than expected. New orders

came in I guess I'm sorry it wasn't a

beat across the board. My memory didn't

serve me right there. ISM new orders

actually missed at 46.4 and ISM

employment missed at 45. So both of

those in contraction. So you're kind of

getting this mixed data I guess is the

way to look at it. Uh so this is

probably because we are in this mixed

environment where we got this pull

forward but now the question is how long

is that pull forward going to last? It's

a little bizarre. In fact we can just

jump over and look at the report. Here's

the actual ISM report that came out this

morning. Economic activity in the

manufacturing exp sector contracted for

the fourth consecutive month following a

two uh straight month expansion.

Uh general let's see here okay the

reading let's get to some of the bottom

line here. Okay in June manufacturing

slowed its rate of contraction. So

that's actually good slowing your rate

of slowdown. That's a bizarre way to put

it with improvements in inventory and

production being the biggest factors.

However, and this is actually consistent

here with the S&P report, demand

indicators remain mixed. Uh so this is

where you're seeing kind of like new

orders coming in slower, but it's that

inventory buildup that has made things,

you know, decently exciting. So, uh

there's, you know, this mixed talk about

a tariff mess. There's some talk about

hiring freezes. And you could see the

data is really all over the place right

now. And I think, you know, erratic

trade policy, uncertainty, I mean, these

are things we just hear over and over

again. None of this at this point is

something that we can look at and say,

"Oh, yeah, we definitely know what's

going to happen." But this warning from

the S&P economist does suggest, hey,

even though we might have really good

Oh, thanks, Jack. You want to come say

hi really quick? Oh, we dropped it. Jack

made a video on his YouTube channel of

our little trip to Vegas. What's your

channel? Meet William. Meet Jack. Oh,

meet Jack. That's my middle. Oh, that's

your middle name. Okay. See you. Have

fun at uh what are you going to school?

Yeah. Yeah. Camp. Yeah. Camp. It's

basically school.

It's basically babysitting.

Yeah. But with friends. But with

friends. Let's go. See you, dude. Uh so

anyway, um yeah, we're we're in this

environment where

you kind of look at this and go we can't

really point to really bad data right

now. If you're a bear, you're kind of

like

I mean things as J Pal said, okay, J Pal

said, we see a gradual cooling in the

labor market, but no shock yet. And I

think that's a great way to put it is

we're kind of in this environment where

we're shockprone.

Like if all of a sudden we had a surge

in layoffs, the 102 yield spread and the

beaver beverage curve, both of those

suggest we'll be in a really crappy

situation really fast. So we're really

shockprone, but if you're a bear right

now looking, you're kind of like

can't really point to one thing that's

really bad. I mean, valuations are high,

but you know, that's probably because

data's just been good. You can't really

be a bear right now. That said, that's

kind of how every recession goes, right?

Or we just won't have a recession at

all. Who knows? That's kind of the place

where we are right now. But I will say

what's optimistic is JPAL moving up this

potential talk about rate cuts. Uh all

of them, by the way, being willing to

cut rates, tariffs, just delaying the

issue. Uh and Lagarde actually defending

Powell saying we would all do exactly

the same thing as Powell is doing uh

right now. Powell also talks about

stable coins a little bit by echoing

Christine Lagard's talk on private uh

stable coins. The concern that central

banks, by the way, have on stable coins,

and there's been some there have been a

lot of economic research papers on this.

I've read them. They're very boring.

It's not worth me pulling them up for

you. I'm going to give you a bottom line

on it. Central banks are worried about

private stable coins replacing dollars

or or like whether it's euros or pounds

or Japanese yen or or you know Chinese

yuanb

currency system right central banks are

worried about losing these fiat

currencies to stable coins because it

prevents them from being able to print

money right what's up oh okay nice dude

see

U

that's why central banks want fiat. Fiat

gives them the opportunity in a crisis

to print money. Remember folks, people

ask me, "Oh Kevin, aren't rate cuts

bullish for the market?" And obviously,

you can't look at the market on a

day-to-day basis and say, "Oh yeah, rate

cuts are bullish or bearish or

whatever." Rate cuts in a weird way,

they're they come at during a time of

economic slowing.

Rate cuts usually don't prop up the

market. What props up the market is

helicopter money and printing money. So

usually what happens is you'll get rate

cuts at some point. Then you get a

recession and you don't really get out

of the recession until you get the money

printing. When the money printer turns

on, that's when we flood the economy

with liquidity and and markets really

bottom out and go up. That comes well

after rate cuts usually. Uh and so it's

a very bizarre situation to be in. But

remember that right now, yes, we are

shockprone, but the data right now isn't

screaming bad. I do though respect this

warning here that yeah, if we just

pulled forward a lot of the good data,

the second half of the year could kind

of suck and congratulations, we are

officially in the second half of the

year. I personally can't believe it. I

feel like this year has run away from me

already. Although, I did become a jet

pilot this year, which is kind of cool.

But then again, I'm like, man, it's

already July 1st. Uh, I feel like the

year is just escaping me. But anyway,

it's July 1st. We're already in the

third quarter. We're already in the

second half. So, today is the first day

of the second half of the year. And it's

kind of interesting that on the first

day of the second half of the year, the

Q's are down 80 basis points. And it's

not solely because of Tesla either. Very

interesting. Anyway, that's our update

on JPAL. Oh, and check out the alpha

report over at meet.com. Sign up and get

that lifetime access. 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 Pra there,

financial analyst and YouTuber. Meet

Kevin. Always great to get your take.