watch BEFORE tomorrow | fed warning

welcome back to another want to expect

this week especially before tomorrow

which is the Consumer Price Index

inflation we're eating it comes out at 5

30 a.m Pacific time I will be live

streaming it the very next day we're

going to get a PPI and then the very

next day after that we're going to get a

consumer sentiment survey which is also

very important because we need

expectations to come down so that the

Federal Reserve can actually cut now

when I when I say that people like what

do you mean the fed's actually

potentially going to cut yesterday we

Dove deep into this on the channel we

talked about how the Federal Reserve

wants real rates to be about two percent

well if and and that would be measured

by what the rate is of the Federal

Reserve which is about five percent

right now minusing off the one year out

inflation expectation which is three

percent which creates a two percent real

rate that's the formula Jerome Powell

gave us well if expectations go down one

percent 10. we can drop interest rates

one percent so it's a big deal but guess

what drives expectations

the actual inflation report so you tend

to get this self-fulfilling prophecy

where if you get this High CPI inflation

report all of a sudden people like

watching it prices keep going up and

then uh they expect prices to continue

to go up and they expect that there's

going to be no resolution to the

inflationary crisis after all there are

still businesses raising prices

especially those with large PP pricing

power like for example on Wednesday

because we're introducing basically a

whole new course within a course for

free for existing members we're

increasing the price to the AI course

120 dollars it's a big deal but

fortunately we don't show up in the CPI

measure so it doesn't so much matter but

what does matter is that on Wednesday

we're going to get the CPI data and I'm

going to go through the projections with

you we've got a few we've got a

jpmorgan's expectations for what could

happen and then we've got expectations

uh for these various surveys so that's

the most important one I quickly want to

get PPI out of the way which is the

producer price inflation a lot of the

numbers are going to be higher between

CPI and PPI because energy costs were

higher in April than they were in March

so the headline numbers are going to

show an increase increase from the March

report and you're going to see kind of a

spike up but you'll want to look past

the headline numbers and you'll want to

look at core numbers because we've

already seen energy cut prices basically

settle back down a lot of that had to do

with OPEC production cuts and a lot of

drama around that

so uh we'll see some weird headline

numbers like for example with PPI we're

expecting 0.3 on the month over month

whereas before that we were at Point

negative five negative 0.5 which is

remarkable but if we go to core

stripping out energy uh food and trade

we're expecting to be at 0.3 on PPI

still higher than the 0.1 on the prior

report though so we're actually seeing

potentially there's some stickiness in

that core producer price reading if we

end up matching that survey uh which is

not great we really want these numbers

to come in soft nothing about these

price numbers it tells us anything about

the state of the economy right that's

important to remember too like we could

have strong GDP and low inflation so

when we get low reads on CPI there's

nothing that says oh the economy is

faltering because prices are coming in

low no no we want price increases to

stabilize because everybody's worried

markets bond market everybody's worried

about stagflation

stagflation is when the economy slows

down while the same Prime prices are

still Rising it's the worst case

scenario you want a booming economy with

low and stable prices that's what you

want slight price increases one and a

half two percent maybe two and a half

percent increases not runaway inflation

because that means the FED has to crimp

the economy more and potentially over

tight that's the big fear of the stock

market right now which is why there's so

much tenuousness in the market right

before this report now keep in mind that

in order for us to maintain that sort of

Nike Swoosh recovery we have to slowly

Nike downswush in inflation but if

inflation reignites tomorrow

the Nike Swoosh could be over now before

we continue a quick note from the

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on my trial for the Apple App Store and

iPad terms and conditions apply so this

is a big deal now I don't think it will

be over and we're going to look at these

surveys but anything that indicates okay

inflation isn't going away it's going to

be a problem so again PPI even when you

look outside of the volatile segments

we're expecting a little bit of an

acceleration from point one to point

three and that's on Thursday morning 5

30 a.m we'll be covering that live on

the channel so come by uh yeah so so

that is potentially a red flag we'll

want to pay attention to hopefully that

comes in soft

well also on Friday morning have the and

this comes out at 7 A.M Pacific time

we'll have the University of Michigan

consumer expectations report where we

are currently expecting the one year out

inflation expectation based on that

report to drop from 4.6 to 4.4 the fed's

pce inflation expectation report is

sitting at 2.9 right now we really want

to see that University of Michigan one

come back down it used to be a lot lower

it ran up last month that's not good we

do not want that to continue to run up

so hopefully that comes in low so we

want PPI to come in low we want uh the

expectations to come in low but then of

course we've got CPI and so what are the

expectations for the Consumer Price

Index and what are the potential

scenarios based on various different

prints of what the stock market could do

based on JP Morgan's expectations

well let's analyze that first CPI month

over month is expected to come in at

point four percent that's way higher

than the 0.1 but again that's not core

Energy prices are going to drive that up

so what's core going to do well core is

expected to come in at point three

percent

that would be okay I would be willing to

completely accept a point three percent

because that's annualized 3.6 it would

show us a continuation of a trend down

yes I understand it is higher than two

percent but don't worry being higher

than two percent is okay it's going to

take time to get this number down and

that is okay what you want to pay

attention to is that the trend is coming

down so look for example on screen now

you're going to see this latest line

which is Bloom and that blue line shows

you the latest CPI month over month core

reading for CPI again the expectation

this time is that we're going to get a

0.3 read a 0.3 read would be right there

where that red line is so you can see

currently we're slightly above that at

0.4 I'll Circle 0.4 right here in the

blue line the pink line is the

expectations line sort of the average

expectation side so so blue is where we

are

and what you could see is that this

number is very volatile it goes up and

then it goes down it goes up it goes

down it's pretty volatile right so what

you really want is to see a smooth Trend

down and you could say we approximately

have that it's taking longer than

expected but if we draw for example an

orange line here and just try to draw an

average here we could see that we're

probably doing about this that is the

blue lines are moving up and down around

this but we are clearly trending down

and a nice read at point three on the

month over month for CPI which is the

expectation would be good

now lately surveys have been pretty bad

that is they're not very accurate

there's a lot of volatility and that's

normal around periods of economic stress

there tends to be a lot of volatility in

the data which is unfortunate because

when you have volatility in the data

well

let's just say it makes these surveys

less useful and when the surveys are

less useful more people get jaded and

doubt the outcome of these surveys at

all and then they wonder why do we even

look at these surveys and I can't blame

that because they have been wrong so

many times in the past but they're

useful for evaluating what the Market's

expectations are see if the market

expects one thing and we get something

totally different well then we kind of

know what the stock market's going to do

right so that's important now let's

consider what and where those

expectations sit right now because

they're somewhat useful to look at on a

chart and we'll look at the core CPI

month over month expectations that is

right here so on the right side you can

see this red bar chart which shows you

the most of the expectations for CPI

month over month actually average

3.6 that's the average read uh however

the median read is point three percent

so we kind of tilt closer to 0.4 on this

chart with more sitting over here at

about 0.3

uh now this does mean that we're pretty

open to a downside surprise which I like

because boy if we got a 0.2 oh my gosh

nobody is expecting a .2 on the core

month over month nobody now that could

be a sign that it's just not going to

happen but that would be fantastic for

stocks because nobody's expecting it

whereas anything like a 0.3 0.4 I'd say

is relatively expected and then of

course we taper off over here on the

bell curve to about that 0.5 direction

that would be terrible that would be

very bad if we got something uh in that

direction so we don't want to see that

the month over month chart itself looks

something like this a little bit more

predicted at about 0.4 but again the

month over month non-core in my opinion

doesn't so terribly much matter uh

what's going to matter a lot more is

what happens with the sticky segments of

inflation and as you can see most of our

inflation right now is generated by this

blue chart right here this blue chart is

your services X food and energy segment

and we'll really want to pay attention

to Services X housing especially since

we think that either this month or next

month we could actually start seeing the

second form of disinflation which is

housing disinflation let me remind you

really quickly about the three forms

number one is Goods disinflation that we

already have we already have Goods

disinflation you had a lot of goods

inflation here in the pandemic see that

orange you can see how that orange has

basically disappeared over here so we

have Goods disinflation or no inflation

from Goods

we are soon expecting housing

disinflation but we still have not yet

seen the X Housing Services disinflation

that's going to be your haircut CPA

attorneys and just other Goods or sorry

not Goods other services like going to

restaurants air travel and other

Associated expenditures with things you

hire people to help you with which could

be Dental Care Medical Care Services

otherwise right these are really

sensitive to labor costs so as labor

costs rise you tend to see Services

inflation rise and even though the labor

market has softened it's still pretty

dang tight businesses are still hiring

people and people still a companies

still have job openings and they're not

solely for lower income jobs you're

still actually seeing some cyber

security companies technology companies

hiring it seems like they've just gone

through sort of a it's insensitive to

say but like a weeding and those most

people are finding new jobs and that's

why the economy keeps sort of booming

along and consumers keep spending which

seems wild but anyway we're looking for

that Services disinflation if we can get

X Housing Services coming down to around

point three you know that'd be great we

got to get away from the 0.4 and 0.5

because those annualized to 4.8 and 6

inflation way too high we need these

next two CPI reports to come in Juicy

because if they don't

if that's going to keep hiking that's

not going to be good so a lot of this

report is going to help us dictate what

the FED is going to do now here's JP

Morgan's view JPMorgan views uh that

they're they're judging this based on

the headline estimate by the way I

preferred they did this read based off

of the core month over month I don't

think the headline matters that much the

headline is expected to be five percent

so if we got a report above 5.5 percent

they think the S P 500 will drop three

percent they think there's about a four

percent chance of that they do think

there's a 25 chance that we're going to

get the headline between 5.3 and 5.5 and

they think the s p will lose about 0.75

to 1.25 25 chance of that

50 for a 50 chance of a slightly hot to

at match which would actually even

slightly hot on the headline they think

will lead the S P 500 to gain slightly

seems like people are bearishly

positioned them and then of course you

have uh getting a blow which could

potentially add to the S P 500 as you

see here on screen getting something

super low like this basically not going

to happen 99 certainty that's not going

to happen per JPM but 20 chance of

getting that 4.7 to 4.9 again that this

does include energy pricing though so I

I think that's relatively unlikely the

core is going to be much more important

and uh we're looking at this core month

over month over here uh the implication

for core month over month is 0.4 uh that

is the uh that is JP Morgan's view the

actual survey core is 0.3 so jpmorgan's

coming a little hot on that core which

wouldn't be great so we'll see what

happens but now why does this all matter

well again it all matters because of the

Federal Reserve so write down these

numbers because these are the ones we're

going to read off tomorrow morning 0.4

headline month over month

year over year five percent

core year over year 5.5

core less food and energy 0.3 those are

the expectations that'll be followed of

course by PPI the price increase for the

courses I'm building uh your wealth and

the AI uh course for making more money

with PPI tomorrow and then U of M on

Friday all of this is going to bundle

together and give us guidance on what

the Federal Reserve is likely to do next

the Federal Reserve next meets on June

14th which comes the day after the May

CPI release on June 13th that's really

important because it means the FED is

going to look at these two next reports

to determine do we pause

do we start talking about cutting or do

we hike more right now everything is

coming down to these next two reports so

50 on this next report 50 on the next TP

airport yes of course we're gonna have

other jobs data pce PPI but in my

opinion everything based it comes down

to those expectations and the CPI

reports get so much media attention it's

a high pressure on that CPI report

tomorrow so I'll see you there tomorrow

morning 5 30 a.m Pacific time check out

the programs I'm building your wealth

link down below if you need a bundle

code email us at kevin.com and we'll see

you in the next one goodbye and good

luck now I want you to know this when it

comes to AI

time is what's going to make you money

and if you can prove that value to an

employer you'll always be able to be

employed so this is another way of

making sure that you don't get replaced

but