YIKES: What the Fed **JUST** Said

Jerome Powell just said a few surprising

things at his Fed presser and I really

wanted to start with the most pressing

and exciting things that were said.

First of all, the meeting was going

great. Everything was going fine. I was

literally about to tweet out this is the

most bullish that I have seen JPL in a

long time. He was pretty freaking

bullish the entire meeting. But then we

started getting into some of the nuance

in the questions and that's where we're

going to start with the summary today.

Jerome Powell is convinced that somebody

has to pay for tariffs. And I think

Jerome Powell actually might be making a

little oopsie-doopsies here. I think he

might be making a mistake because what

he tells us is, quote, "Somebody has to

pay. The producer, the wholesaler, the

consumer, somebody has to pay. And

everybody wants to keep kicking it down

the line to where ultimately some of it

will fall on the consumer. We know

that's coming." and he makes it very

clear. In fact, he goes as far as

saying, "We expect a meaningful amount

of inflation to arise in the coming

months. It's hard to see what's going to

happen. Surveys and expectations are

anticipating a quote meaningful amount

of inflation that is coming." These were

very bearish lines later in the meeting.

Again, the opening statement, the the,

you know, summary of economic

projections, all that was actually fine,

maybe even more bullish than we thought.

But these comments right here were not

great. These comments were like, "Oh,

oh, okay. That's that's not fantastic."

And for a brief period of time, the

market actually went from rallying to

selling off and going negative on the

cues, for example, because of these

comments. Uh and when you combine this

with the second portion, the second sort

of negative shocker that he mentions, he

says, you know what's most concerning

right now is not the labor market

because the labor market's strong. It's

actually that what if you're out of

work? Well, if you're out of work, it's

harder to find a job. If there were to

be a significant rise in layoffs and the

job openings rate is this low, then you

would have a fairly quick rise in the

unemployment rate. As you've heard me

talk about on the channel over the last

couple months here, the beverage curve

is going to be something that the

Federal Reserve really starts paying

attention to. And it's basically a way

of saying that when vacancies are low

and hiring is low, it only takes a

slight amount of an increase in layoffs

to dramatically and rapidly expand the

unemployment rate. And Jerome Powell

suggests that this big wave of inflation

is coming, which I think is a little

overblown mostly. And here's my

rationale for it. It is possible that

businesses can actually absorb these

tariffs through lower earnings per

share. Now that's actually very

interesting because it means revenues

could keep rising. It means people might

be able to keep their jobs but companies

end up absorbing tariffs. Some

corporation absorbs the tariffs which

we've seen in PCE sorry PC PPI the

producer price index inflation and CPI

just in this last month. We've seen some

core good prices start rising but no

rise in the consumer prices suggesting

that companies are limited by their

pricing power to raise consumer prices

which is what the Federal Reserve cares

about. and instead the companies are

absorbing the additional costs of goods

sold on their income statements. In

other words, they're taking a lower

bottom line less profit to the bottom

line, which means less earnings per

share to shareholders. But if the

economy holds up and revenues keep

growing, markets don't necessarily have

to care. Maybe in a weird way, I'm being

too bullish, believing that we're really

not going to see a lot of inflation and

that corporations would be likely to

absorb this in margins. Uh, and then you

don't really have a problem. That said,

the rest of Jerome Powell's discussion,

other than this warning on potentially

layoffs or this warning on this big

boogeyman of inflation coming, the rest

of the presser was actually pretty dang

bullish. It was so bullish. It's the

perfect opportunity for me to mention

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an option. Got any questions? Kevin.com.

So with that said, let's get into what

actually came out in the summary of

economic projections. So I wrote a TLDDR

here. Okay. So the TLDDR right here is

okay. Yeah. Coup me.com. We got it. No

cut today. We already expected that

higher for longer. That was the TLDDR

from the summary of economic

projections. That's because PCE

inflation numbers actually came in at a

higher revision. Now, they only think

PCE will go to 3%. But the way Powell

was talking was that we would get some

kind of surge of inflation, and he hopes

it's just going to be one time. In the

longer run, inflation seemed to compress

and the unemployment rate seemed to

compress with basically more Fed members

joining slower GDP growth, but not

negative GDP growth. No mention or hints

at all of a recession, but definitely

hints and a lot of talk about more

inflation and lower GDP. and also some

flagging of how hard GDP is to forecast

or calculate that they could be very

wrong and something could break very

rapidly into a different direction. So

to some extent you got a little bit of a

stagflationary read here where you had

this lower GDP forecast yet higher

inflation suggesting uh a stagflation.

No indication though of the unemployment

rate skyrocketing in their forecasts.

Seven members forecast one cut in 2025.

2C1 cut uh so sorry 7C no cut in 25 2C1

cut 8C2 cuts and 2C3 cuts on the TLDDR

we see stable unemployment expectations

slightly higher inflation expectations

slightly lower GDP expectations and we

did see the 102 spreads widen in fact

one of the things you notice as Powell

was yapping was you actually ended up

seeing the 10-year rocket up this was

kind of way of saying that the market

was digesting what Powell was saying and

saying, "Okay, got it. We have an

inflation surge coming. We need to be

worried about an inflation surge." And

so, you actually saw the 10-year, which

was low because of the geopolitical

issues. We were down four to five basis

points today. You actually saw the

10-year yield rise because of these

inflationary warnings. And when we

looked at the 10ens 2, we saw a a a

steepening of the 102 curve all the way

up to as high as 47, though that did

pull back to about 45, which is still a

couple points higher than it was this

morning. So, in other words, a little

bit of selling on that longer end of the

curve because people like, ah, crap, you

know, maybe this war in Israel, Iran

isn't going to be deflationary. Instead,

we've got this big warning that, oh no,

there's this boogeyman coming of

inflation. Now again, maybe I'm like

kooky dookie and I've lost it, but I

actually don't think we're going to see

a lot of inflation. I more resonate with

Jerome Powell's massive optimism on

artificial intelligence. Uh art on

artificial intelligence, I was really

impressed to see him talk about it for

the first time. He says, "While I can't

talk about immigration policy, blah blah

blah goes into talking about AI." And

what does he tell us? It's hard to say

if AI is going to augment or replace

labor, but it could cut in either

direction. The progress we're making

today on AI is truly impressive. It'll

keep progressing over the next year and

it could really make people a lot more

productive, which could actually lower

inflation.

So he argues that artificial

intelligence could contribute to lower

inflation in the future. Again, the big

concern would be layoffs. Now, just

today during the presser, we actually

heard Microsoft now announcing that

they're laying off salespeople again

because you could just use an AI

chatbot. And now if you're unemployed,

you're kind of stuck in that uh Jerome

Powell catch 22 where even though the

labor market is really good and real

wages are moving up. The problem that

you're finding is if you're out of work,

it's harder to find a job because there

are fewer vacancies today. That said,

Jerome Powell also said that we're well

positioned to respond should any issues

develop. He says employment is near

maximum employment. This is the first

time, by the way, I've heard him talk

about maximum employment in quite a

while. He also says that PDFP, in other

words, measures of GDP removing some of

the crazy volatility of exports and

imports, shows about 2.5% growth, which

is still pretty good. Consumer spending

moderated a little bit, but investments

into capital assets expanded. He says a

wide data set suggests that the labor

market right now is consistent with

maximum employment. He suggests that

inflation has eased significantly.

three-month inflation is coming down,

but it's going to take time for

inflation to show up. A lot of warnings

on that. By the way, he does talk about

the economy growing at around 1 and a

half to 2% with sentiment rebounding.

Yes, sentiment is still depressed. Uh

but frankly, the best thing that we

could do for markets right now is stable

prices and max employment, including the

housing market. The more we get prices

stable, the more we could lower rates,

which is good for housing. the more we

have max employment, it's good for

housing as well. But again, the Federal

Reserve, for whatever reason, is really

concerned about inflation coming. It

could be because Jerome Powell makes it

pretty clear that in the past, consumer

prices have always gone up under

tariffs. And as a result, because

somebody has to pay for tariffs, it's

just going to be a matter of months

before tariffs show up in the data. He

says specifically, this summer is going

to be key. Well, we're in the summer.

June, July, August. There are our summer

months. So, if our summer months are

June, July, August, then what do we or I

I mean, I guess, yeah, I think that's

fair for summer months. Some people like

to pick September as well, but I think

June, July, August, or yeah, June, July,

August is pretty fair for summer. Drone

Powell tells us the summer months will

give us the data that we need. Well,

when are we going to get that full set

of data? Well, we're not getting any

June data right now with the exception

of some very preliminary data the

beginning of this month that we'll get,

you know, in the next week or so. Uh,

what we're really looking at is

collecting May data right now, which

means we're really not going to get all

of our August data until well into

September, which unfortunately, in my

opinion, does risk the potential that

the Fed may want to kick the can down

the road from September to November for

the first cut. So you could actually

still have two 25 basis point cuts once

in December and once in November while

still kicking the can down the road to

September to get that full suite of data

between June, July and August. Now

obviously I believe that we're going to

see some actual weakening in the labor

market between now and Halloween. And I

have a bet going on that. You already

know about that. But my bet is that if

we don't see a rise in unemployment

between now and Halloween and we absorb

all these tariff impacts without a rise

in unemployment, without a rise of

layoffs,

soft landing, best case scenario,

because I don't really see inflation

being a problem. Jerome Powell, on the

other hand, is like, I don't know, man.

I mean, things are great right now, but

I'm a little worried about uh about

inflation and the boogeyman of inflation

coming. It's like he's on drugs. I'm a

little worried about inflation coming,

you know? I don't know. and and if the

labor if we start getting some layoffs,

you know, we got a few problems coming

and and we'll know over the summer.

We'll know. We'll know. We got three

months for more data. Uh so he gives

this pretty clear forecast which, you

know, we've been talking about since

even before liberation day that even if

we get liberated in April, it's going to

take quite a while for us to actually

get some of this tariff flow through and

some of this data. Uh that said, I'm

very excited about what we've been

chatting about on the channel and what

we've been talking about in the alpha

report and that's why we've got a uh uh

at minimum 500k uh uh you know portfolio

that we're going to be operating, it'll

be sort of like a course member

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stocks like uh circle and the stable

coin issuance which this is like your

only pure play great short-term bad

long-term we could talk about it in the

meet Kevin membership uh and we can set

our stop losses together and we can play

these out together. So that's coming

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membership. So consider checking that

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the day. So check that out over at

mekevin.com. But anyway, this gives you

an overall outline of what's going on

with um with Jerome Powell. Oh, keep in

mind we we were also big bulls there on

Symbotic. Done a lot of fundamental

analysis on Symbotic. But that said, go

take a look at uh this commentary that

you're going to see around Jerome Powell

and pay attention to those two warnings.

an increase in layoffs and the inflation

boogeyman. Again, I'm I'm more like camp

inflation transitory on tariffs. I know

that that sounds like a weird camp to

want to be in, but I think that's just

the most transparent way for me to

explain like where my head is. I'm way

more concerned about that margin eating

rather than consumers eating the prices.

And will that margin lead to layoffs?

That's the concern that I have. Uh so,

uh we'll see. That's my POV and my take.

Uh and uh so with that true on this

and uh yeah, 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 Praat

there, financial analyst and YouTuber.

Meet Kevin. Always great to get your

take.