Watch BEFORE 2:30pm Wednesday | The Fed

Right. So, hey everyone, me Kevin here.

So, you want to know this information

that we're about to cover here before

2:30 p.m. on Wednesday, June 16th. The

reason for this is on June 16th, we are

going to have probably a 45 to one hour

conversation or we're going to be able

to listen to this conversation that Drum

Powell has with media and we're going to

be paying really strict attention to

certain things. and I want to set your

expectations for what it is that you

want to look for, but I also want you to

be prepared in what those things could

end up entailing for the market. So,

here's what we're going to be up

against. Tomorrow is the second day of

the FOMC meeting, Federal Open Market

Committee. Day one is today. Tomorrow is

day two. When the meeting concludes at

uh usually around 2 PM Eastern time,

we'll get a release of what the

conclusion was of the meeting and did

they decide to raise rates or change any

kind of bond purchases. Right now, the

Federal Open Market Committee, the Fed,

they are buying $40 trillion worth of

mortgage back securities and uh I'm

sorry, $40 billion of mortgage back

securities and $80 billion of Treasury

securities every single month. that

totals up to about $120 billion dollars

in treasuries that they're buying every

single month. And so what we're looking

for is is that number going to change

and are interest rates going to change.

So that's going to be a big thing that

we want to pay attention to tomorrow at

that 2:30 moment. Actually at 2:00 is

when the statement comes out. Jerome

starts talking at 2:30. At 2:00, our

expectation is that interest rates will

stay at zero and bond purchases will

stay at 40 and 80. Those are the three

things you're looking at in the

statement. That's pretty much it in

terms of what you're looking at in the

statement. We can kind of parse the

statement or look for little changes,

but they're so good at really not

sending big signals in the statement

that usually we don't get any changes

out of the statement. The bigger moment

is going to be when Jerome Powell

speaks. So Drum Powell speak at about

2:30 Eastern time and he's usually very

much on time. And what we're going to be

looking for in his verbal statement and

his answers to folks questions is

exactly when we should begin to expect

to hear about a taper actually

happening. Taper means the reduction of

bond purchases. That's tapering back.

Now, when the Fed first talked about

this in 2013, the markets kind of threw

what became known as a taper tantrum,

which is kind of like a child throwing a

tantrum over ah the cheap money's going

away, right? Uh and and so the markets

are very nervous right now about what's

going to happen if the Fed starts

tapering. Like how are markets going to

react? Are people going to freak out?

Because they freaked out in 2013 and

guess what? When we tried it again after

the taper, when we tried again in 2018

to actually go from taper to continuing

to raise rates, that's when the market

really freaked. We had a pretty bloody

winter in the stock market uh in 2018.

The real estate market got hammered by

about 12% in the year of 2018, though it

did mostly recover by the end of the

year. Started in about May of 2018. And

a lot of this was because of Fed action

directly. So, when the Fed talks, people

pay attention. And we know it's going to

have a big uh it's it's going to have

big implications from what whenever the

Fed makes their changes on taper and

rates. We know the market's going to

react. So here are the key things that I

think we're looking for. Number one,

we're going to be looking for very

particular key words tomorrow when

Jerome Powell answers questions. The key

words we're looking for are soon and

imminent. If they say anything about,

hey, we're planning on tapering soon or

we're planning an imminent taper, I

think the market's going to have a

little bit of heart palpitations and

chest pain. The reason for this is we

know the taper is coming, but a lot of

economists, I would say the average of

economists based on a Bloomberg survey

right now, are expecting the taper not

to actually begin, which would mean

going from 120 billion to let's say 100

billion. We're not expecting that to

actually begin probably until

August through September. Somewhere in

that range is when we would expect the

taper to begin. If it doesn't get

delayed through the end of the year, the

more it gets delayed, the better. What

we don't want is them to go, we just

decided to taper. The reason we don't

want that is because Drum Powell told us

that he would give us plenty of notice

before tapering. Well, so people are

going to now challenge that assumption

and decide, can we trust Dr. Powell? Can

we trust JPOW to actually keep his word

and give us a lot of advanced notice if

a taper is going to come and when that

taper is going to come? He has promised

that he would make it extremely clear.

If we taper, we will make it extremely

clear. You will know about know about it

and everyone will have ample notice. He

has mentioned that. Now, he's also

mentioned that you should use that 40%

off coupon code down below to join my

amazing courses link down below. Uh but

beyond that, obviously didn't mention

that. But beyond that, uh, the other

word we want to look at is is soon. Uh,

and and well, the two words soon and

imminent. The reason here is we kind of

don't want to hear imminent. Imminent

would be bad because that would probably

mean next meeting, which would be way

earlier than expected. Soon is not so

great either, much sooner than expected

because September, October, August, I

wouldn't really think is soon for this

purpose on tapering. If we hear him say,

"Look, we're starting to talk about

tapering," which this is my expectation.

We're going to start talking about

tapering. We have no plans of tapering

soon and no plans of an imminent taper.

That's good. Okay, that's positive.

That's what the market wants. The market

wants to wait. The market does not want

to taper yet. Uh and so this is going to

be very, very important. We're not

expecting any change on rate trajectory.

Probably still going to see rate

trajectories for rate increase at the

end of 2022, beginning of 2023. But

remember, the market likes to project

pricing forward. So the market likes to

generally price well stocks about 18

months to sometimes 24 months ahead. So

the market's really trying to predict,

okay, well what's going to happen at the

end of next year? You know what's going

to happen at the beginning of 2023? Are

we moving that up? Are we moving it

back? How are you reacting? Now we also

had uh Paul Tudtor Jones talk about how

if the Fed doesn't respond to inflation,

he's going to go big on all these

inflation hedging stocks, right? short

bonds, industrials, things producing

cash flow now like REITs and that. This

in in my opinion is it's a little

excessive. We broke this down in a video

yesterday. I think it's a little

excessive that you would go so hardcore

on on uh bagging on the Fed for maybe

not responding to the last two CPI data,

particularly because the last two sets

of data, the last two releases, they

were expected. We expected high

inflation from base effects. We expected

high inflation from stimulus month

overmonth factors from people going out

and spending. We expected to see those

things in transitory portions of the

CPI, which is exactly what we saw.

Airline travel, uh, used cars and

trucks. I mean, this is this is expected

so far. So, so far, everything's along

the correct trajectory. Personally, I

don't think the Fed's going to change

anything here. I think tomorrow is going

to be a dud in terms of what they give

us. I think it's going to be we're going

to remain patient. There's a lot of work

to be done. the economy is nowhere near

to to you know being ready to recover.

We're nowhere near ready to taper but we

are starting to have the conversation

about tapering. I think it once they say

we're ready to taper like we're ready to

have that conversation. He's going to be

very blunt about that. Like we're having

the conversation. We had the

conversation. We talked about it for a

little bit but we don't plan on doing

anything yet. Those are my expectations.

I think the market will take that very

well tomorrow. I think the market's

going to be happy with what Drum does

tomorrow. Drum has pissed us off before.

Okay. In February he's pissed us off.

He's called equity valuations high

before. He's messed up some things in

the markets before, but hey, that's

that's what they do. But anyway, uh I I

do expect a pretty boring uh Fed release

tomorrow. I will be covering it

obviously live, but I wouldn't be

surprised to see the market a little

like tentative later today through the

rest of the trading day today and into

tomorrow uh until the Fed talks and then

really we just get unleashed until the

next Fed talk. It's kind of like, okay,

well that's over. That wasn't that bad.

That's part of my expectation in terms

of what's going to happen. Uh I do not

believe we're going to have any kind of

aggressive action from the Fed on

inflation. And I think Paul Tutor is is

going to be very disappointed. Although

we can kind of expect this now next

month. Okay. And this is the bottom line

I I want to get to as well. And then

we're going to move on to the sticks. So

the next thing that I want to hit here

has to do with well wait a minute. What

about the next CPI data set? Okay. So

next CPI data set which is going to give

us inflationary data from June will get

reported in July at the beginning of

July second week of July. In the second

week of July, we'll be able to look at

inflation data from June. I'm expecting

to see it inlect down. If we get a good

downward inflection, we go down from 5%

year-over-year to like 4.1 or 3.5

somewhere in that range 35 to 41. And

month-over-month inflation stays around.

2 to6

somewhere around there uh in terms of an

increase. Uh that that would be very

good. So hopefully that's uh that's

where we end up landing, but we

obviously won't know that for about

another 3 weeks. So there you have an

update on what I think expectations

should be for inflation uh the Fed and a

tapering for tomorrow. Great. Thanks for

watching that portion.

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