Inflation is about to EXPLODE | WARNING.

hey everyone me Kevin here a lot of

folks wondering why did the market feel

like it trended down into the close

today was there something in particular

that market started to digest and the

answer to that was yes quite possibly

look obviously we had a fantastic CPI

report PPI report and import export

prices report that would be Wednesday

Thursday and this morning but we also

got consumer sentiment data and today's

consumer sentiment data was a little bit

more excited and previously expected

take a look at this the survey for the

University of Michigan was expecting a

consumer sentiment rate of 65.5 we

actually got and this would be up from

the prior read of 64.4 but we actually

got

72.6 so an explosion here in consumer

sentiment which is very good because to

some extent it maybe gives you some hope

that if consumers are spending a happily

and they're traveling more then maybe we

won't actually walk in into a recession

because consumers again making up around

70 percent of the economy could keep us

out of a recession the question is are

they going to have enough money to keep

sustaining that to prevent us from going

into a recession and then what is that

going to mean for inflation that's where

Barclays this morning warned that we've

got to be careful even though this June

CPI report was exciting we're worried

that the airline disinflation that we

saw in this report and used car prices

as well as lodging prices could

potentially see a rebound I don't see

any leading indicators of used car

prices coming back up but I totally

agree that the next two months could be

bumpy with inflation thanks to Airlines

which will probably see more demand than

any seasonal adjustments or covers for

and lodging we also saw current

conditions look at how this expectation

skyrocketed this is your preliminary

read for July that's why right here it

says July P preliminary for July the

final read will come out on the 28th

which is just a couple days after that

expiration of the coupon code for the

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it's fantastic

University of Michigan expectations

where it's

69.4 these are condition expectations so

you've got how are you feeling right now

uh how are business conditions right now

in your financial conditions right now

what do you think about the future all

of these coming in very very hot and you

actually see that you're getting a

little bit of heat over here on the

inflation expectations and I think this

is probably what helped Drive the market

down a little bit today where folks

started getting nervous again about the

idea of uh oh what if we're going to get

that Resurgence of inflation and I have

to say it's a little exhausting it's

exactly what the Bears are looking for

and consistently trying to point to oh

just wait for the second wave of

inflation and then we're gonna have a

double dip crash

no it's very unlikely that we would have

a double dip crash unless there was some

Black Swan event or something that

really led us back to a Paul volckering

level of fear which we hadn't seen since

really Jackson Hole uh September of last

year and of course led to some bail tax

loss harvesting going into the close of

last year I mean look at this these

these little expectation surveys that

are so volatile or ultimately compared

to charts like this these charts are

what we're told is reality of course you

know we we know sometimes these numbers

can seem rigged but let's just since

markets move based on this data well

let's just assume this is more accurate

than people's expectations so as you can

see here food inflation is making up a

very small percentage of our inflation

rate right now most of energy is

actually leading to negative inflation

so deflation we've got new and used

vehicles have basically disappeared from

contributing at all it's actually a tiny

little white sliver right there

then you've got your core inflation line

which is actually this yellowish line

right here showing you that's still

where you've got a little bit more

inflation than the total set of

inflation and the big contributor to

that is going to be the blue segment

here which would be your core Services

which is where you're going to have all

of your financial services your travel

services so you know them by now but the

point is look at the trend folks I mean

it's obvious it's obvious the peak is

here we're trending down the peak is

here on core services and look at the

delay in the peak right this is about a

six to seven month delay and where we

actually saw the peak in overall

inflation and the peak in core Services

addition or inflation and look at the

trend though I mean really this trend if

we were to draw somewhat of a line maybe

somewhere right here yeah you can't

really see it that's not even really a

really a good one but it's obvious that

the trend is down here let's just remove

the image for a moment there we go if I

told you this was the trend over a six

to ten month period of core inflation or

are we really going to be bearish that

some expectations have ticked up a

little bit uh on uh you know in a recent

survey data no again the stat is very

very volatile and what I like to do is

compare it to what the bond market is

responding to with and we're seeing

10-year treasury yields fall but not

only are we seeing those 10 years

finally fall off that four percent we

got but look at the five-year break even

here here's the five-year break-even

index sitting at about 2.16 before CPI

we were actually at that Peak right

there which was about a 2.22 and we've

come down so the bond market saying yeah

whatever take your volatile consumer

expectations for inflation and forget

about them we actually think we're gonna

we're still on this path of really a

longer term downtrend of inflation

expectations and again to see Cuts we

really need to bring this down to about

1.6 is like likely I think this is

probably the tool the FED is using

pretty regularly so not horribly

concerned although I do think markets

can get a little nervous and start

hedging a little bit salt almost a blow

off the top on Nvidia today pretty wild

movements in the stock market but let's

take a look at another piece of

inflation data this is the rent of

primary residence one month change and

12 month change and what we're expecting

in terms of how it will show up for CPI

and so these are the projections we're

looking at we're just now starting to

see the disinflationary process begin

for rental inflation that actually is

really good because it gives us a

Tailwind of something that supports us

of disinflation that's what we want we

want more disinflation and that is

coming leading data for Via Zillow

Redfin status Center apartment list and

core logic all of them are pointing to

more rent this inflation rather than

resurging inflation which that would be

a big problem if rental inflation

started trending up again we didn't

actually fulfill this dotted line that

would be a big problem that would lead

the FED to really have to get more

aggressive

if we jump into some of the core

services that people are nervous about

you can even see yes health insurance is

a little hot along with Medical Services

excluding health insurance but they're

relatively stable we lost some of that

disinflation that we had at the end of

last year but we're stable we're not

we're certainly not taking off on this

Medical Services inflation which is good

to see as well here's another one to

look at these are really your inflation

expectations charted over time and you

can see it's relatively a volatile

survey this is the Michigan survey

charted over time and it compares to

what we started this video on and look

at just this this overall downtrend we

really have here I mean here's your

ceiling on your one-year expectations

your one year expectations actually

pretty darn low notice how they actually

just in the last few months we had a

little bit of an explosion over here and

it just shows you this volatleness so

you really have to look at the trend gas

prices are the blue line and those are

actually somewhat uh solidified over

here and then you've got your five to

ten year inflation expectations which

are here but just look for a moment uh

in the longer term here how volatile

this read is and this is that's one year

just this little section here is one

year so it's a lot of volatility over

time so this kind of nonsense is

expected it is worth noting though that

that level is slightly elevated from uh

where we have been in the past if we

take this across you can see it's

certainly higher than where we were with

expectations for 19 17 16 15 14. so and

so forth right the prior years but it's

not too dissimilar from what we saw when

we really started printing money to get

us out of the Great Recession but I do

expect that as more reports come in soft

this will slowly start showing a trend

down much like this downtrend you got

here but look how long it took to go

from a 2013-ish start to really this low

level over here took six years for that

5-10 your inflation expectation to come

down and for you to really get that

Trend here so these inflation

expectations are going to be something

that a lot of folks get nervous about

and I think you'll get some Market

volatility because of that that's likely

what we saw in the market today but

otherwise has there been anything really

bearish today that maybe think oh my

gosh it's time to float no no of course

not I'm obviously still cautious when it

comes to you know you want to go too

heavy on margin or use margin at all I'm

not a big fan of that it reverses the

psychology of wanting to buy the dip

because you then you get nervous about

oh my gosh what if you get margin margin

is just bad I would highly recommend

staying away from it but other than that

this gives you a breakdown of maybe why

we had some volatility going into the

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