Watch BEFORE the Fed Meeting

Fed press conference starts in a little

under 4 hours. Here are some things that

you need to know going into it. First,

Nick T is suggesting that is the Fed

losing the plot with the dots. This is a

reference to the dot plot, which the dot

plot is really just this on the uh

FOMC's

projection material. The last projection

material we had was from March 2025. And

they really show that uh the the median

doesn't really see you know rates

getting down to about 3% until the

longer run which could be 2028 or on

given that 27 26 and 25 are charted

here. Uh and so you see this sort of

like very slow decline here in the dot

plot. Uh however, Nick T appropriately

suggests that in June of 2024, they

suggested there would be just uh three

uh cuts uh or sorry in in um in the two

months prior they suggested that there

would be three 25 basis point cuts and

they reduced that to one cut in June of

2024. So they were only expecting to do

one negative 25 basis point move in

June. So June 2024 just to visualize

that they say negative 0.25% coming in

2024. Okay. Literally you know a few

months later uh the actual move is

negative 1% so four cuts in 2020 uh in

24. Now a lot of this was heavily driven

by the extension of the longerterm

unemployed. So, if we do 27 weeks

unemployed or we look at uh unemployment

numbers that we were getting, we started

seeing some real issues in the summer of

last year. Now, some people say, Kevin,

you don't have to worry about the

charts. The only thing you have to worry

about is the fact that an election was

coming up and Powell didn't want Trump

because of fear that he could end up

getting fired. There's possibly some

truth to that, but there's also some

truth in the data that the level of

unemployed, long-term unemployed was

skyrocketing uh especially in May to

June of last year to July, August,

September. We really saw this long-term

unemployed level rise substantially. It

wasn't until the election and election

enthusiasm that we saw a decline in that

long-term unemployed. We did get a spike

during liberation, but that has also

once again settled down. So, we've kind

of become a little bit rangebound on

this long-term unemployed chart, which

is good. We don't really want to see the

more than six month unemployed level

rise as it's usually a leading indicator

of a recession. Again, that's something

we generally don't want. If you refresh

the chart here, you can see that a

little bit more broadly that usually the

beginning leading turn up is where you

get sort of the lead into a recession.

And then of course once the recession is

underway, that's when it skyrockets out

of control, typically peaking out

actually at the end of a recession. And

this is why recessions are so

frustrating to predict with employ uh

employment numbers because employment

numbers just lag so heavily, especially

unemployment claim numbers. by the time

they start skyrocketing, it's really too

late. And that's likely why the Federal

Reserve chose to give us four cuts in

2024 to get ahead of some of that labor

market weakness that we were seeing. And

it wasn't just in the unemployment

claims, but it was also in the uh BLS

labor surveys suggesting, okay, you

know, once we start getting fewer than

100,000 jobs uh per month, we might be

in a place where we're going to start

revising into a recessionary level.

However, this is now leading Nick T to

cast some shade on the dot plot and the

use of it. Totally fair. But what it

does is it gives you a snapshot of where

the Fed's brain is at the time using

current data. The data that really came

into color in August and September was

labor data that we didn't have in June

of 2024 yet. So, is it possible that

this year is not different and we end up

getting the same cuts as we had last

year where the Fed in my opinion the Fed

is likely today. So, I'm going to write

this down just to because I I I like

writing down my predictions because even

if I'm wrong, at least I have the balls

to give you a prediction. I think it's

likely the Fed's going to uh project

somewhere around 40 basis points of cuts

this year. And if you think about that,

that's kind of between 1 to two cuts

slightly more likely to be two cuts,

right? Because 50 basis points is two

cuts, 25 is one, midpoint would be 37

12. So you go with 40, a little bit more

likely to get two cuts projected this

year. That's sort of a way you could

evaluate this in a numerical manner. Uh

now we'll see this is the last FOMC

dotplot and Nick T also points out most

of the time I regret having to fill out

the min the uh uh summary of economic

projections says Neil Qashqari doesn't

so much matter though because we are

going to be getting a new chart like

this and again the timing for this is

the presser will be at 11:00 a.m. uh

Pacific time. Uh actually this is when

we will get the announcement and we'll

get the dots. So this would be dots and

uh rate decision which is almost

certainly going to be a nothing burger.

So rates will hold steady and we'll get

the letter. Uh and then of course at

11:30 we'll have the actual press event.

Now what are we looking for in terms of

changes in this chart? Uh well in my

opinion what we're going to be looking

for is right here in this in

unemployment rate. We want to see if the

Fed, it would be negative to see the Fed

suggest that this could move up.

Although I don't think the Fed has any

real catalyst to suggest that it

absolutely will move up. So maybe this

will be a nothing burger. And then you

have PCE inflation. We, you know, this

is personal consumption expenditures

which would require some pull through.

I'm actually going to go in here and I'm

going to suggest that that might

actually end up being lower. So, I'm

going to give you my guess for some of

these numbers. I'm going to go uh and

suggest that the Fed's going to go and

lower this to 26. I think it's possible

that the Fed might say, "Hey, we might

be willing to take a 45 on the

unemployment rate by the end of the

year." GDP

probably mostly stable. If anything,

honestly, they'll probably revise this

up to 18 or or 1 N. We'll see. So far,

no no no signs of big damage from

tariffs. Uh and then over here on the

projected policy rate, wouldn't surprise

me to see uh that uh instead of

projecting a little bit more than two

cuts, you end up projecting slightly uh

fewer cuts. So maybe around that 41,

that would be about 40 basis points

down, which lines up with the number

that I just gave you. So these are some

of the numbers that I would be looking

for today.

Uh, and then I would also want to see

limited deterioration here. So this

section right here you want to pay

attention to. This is the potential that

individual board members are starting to

panic about unemployment. And if you

start seeing some of these higherend

numbers range up, then you potentially

start getting into an environment where

some of the Fed board members were

starting to panic about the potential of

unemployment rocketing up. Though I I

don't see conditions for that just yet.

And and to me, you probably have a

broadly bullish result. I mean, absent

actual strikes or deterioration in

further negotiations with Iran, uh it's

it seems likely that, you know, eight

out of 10 times you end up having a

green day on the Fed day. Now, we

already have quite a bit of green priced

in. You got Tesla up 26, recovering some

of yesterday's pain. We're covered that

318 level. You got uh the Q's slowly

relaxing a little bit pre-Fed meeting.

Not uncommon. You usually tend to bounce

in the Fed meeting. So, I'm not sure

that this is terribly u unusual, but

those are sort of my expectations for

the Fed today, and we'll see what

happens. Obviously, we'll be live. We'll

be doing Fed bingo on it. I think

broadly, this is going to be mostly a

nothing burger for the Federal Reserve.

You're going to be in a position of,

hey, you know, we've uh uh you know,

we're going to wait and see. Wait for

the data. Totally makes sense. We're

just now getting May data, right? It's

still really early in this data cycle.

So when we actually start getting real

numbers is going to be

July, August, September again and you

know that's when we get back to school

hiring Q3 Q4 seasonal hiring uh we'll

get earnings reports for Q2 as well as

guidance although so far seems like

companies are are uh you know revising

up their guidance rather than down. So

broadly market seems bullish which

doesn't call for cuts. Now, I know

Donald Trump is calling for cuts. You

know, this morning at his presser, and

you can see this in the uh meet Kevin

app as well, but uh this morning we had

uh you know, Trump just now on Powell

rate should be 2% lower. Well, sure,

it's easy to say 2% lower because it's

populist and that's what people want,

but it doesn't uh you know, consider the

potential for inflation to rip again.

Uh, I don't think that's personally very

likely, but the Fed, you can't take that

gamble. So, here's the what it looks

like on the uh app and it can you can

change the colors if you don't like it,

but you should download this app. It's

nice and convenient. Meet Kevin app and

Apple and Android. But rate should be 2%

lower. Powell has done a poor job. He

probably won't cut today. If the Fed

would lower rates, we would buy debt for

a lot less. 1% chance the Fed cuts 25

basis points today. That's that's the

statistic on it. Uh and and see that's

where I say, you know, call it about 40

basis points of cuts by the end of the

year. Trump wants 200 basis points of

cuts. Now, the only way that's really

likely is if you start seeing uh poopy

dupies in the labor market, which you

know, could could be on their way. But

then again, uh you know, we had some

labor market scare at the end of last

year or you know, third quarter of last

year and they recovered with the uh

election optimism. So, you know, maybe

maybe we that was our soft landing. So

that said, now that gives us a little

bit of perspective on Eloetto. Why not

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Congratulations, man. You have done so

much. People love you. People look up to

you. Kevin Praath there, financial

analyst and YouTuber. Meet Kevin. Always

great to get your take.