Uhhh… the Fed FOMC

hey everyone me Kevin here okay let's

get right into the skinny of the fomc

minutes so so far I'm actually surprised

by this it's better than expected I

thought there was going to be a lot of

dissension in the minutes about uh like

almost a fight a brewing between fed

members arguing that we need a hike and

others saying we need to pause we didn't

get any of that pretty much everybody's

like yeah okay let's see if how the lags

uh impact the economy over the next

month let's get through that July 12th

report and let's just go ahead and pause

even though some would have preferred to

have hike 25 they all agreed that a

pause was acceptable so it sounds to me

like you've really got a fed that's sort

of like you know we've done so much so

fast we're okay being at five or five

and a quarter five and a quarter is

probably most likely or 5.5 and we can

take between now and the end of the year

to get there we're really just in that

fine-tuning stage regarding the actual

minutes when I go into the minutes

beyond that observation

it does they do mention that the market

expectation is that there will still be

some form of a recession though it seems

like the FED is trolling a little bit

here because the FED still says and

again reiterates here but the expected

timing was again pushed later and this

is kind of a slam on the analyst who

just keeps saying oh it's gonna be a

recession q123 oh no it's gonna be q23

oh no Q4 now it's like q124 we just keep

pushing the recession back uh you know

it's it's uh it's constant so the FED

does think that credit tightening is

going to lead to a quote mild recession

starting later this year

followed by a moderately paced recovery

however even that mild recession

argument from the FED is probably going

to get delayed you've already heard

Jerome Powell delay his recession

expectation and even though he a couple

months back mentioned oh yeah you know

we're probably gonna have a recession

he's now removed that and now he's

argued nah maybe we're not going to hit

a recession so he's he's on that line

he's teetering

regarding inflation uh we expect that

the FED here expects that housing

inflation has peaked and core

non-housing Services is projected to

slow gradually this is really important

because drone Powell has made it very

clear they're willing to wait basically

until 2025 to get inflation back to two

percent a lot of the Bears today are

arguing oh well you know we're still way

higher than two percent so by the way

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degrees down here so forgive me I'm in

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nominal wage growth eased further and

eventually the softening in wages will

lead to a softening and core inflation

uh let's see staff saw the possibility

of the economy continuing to grow slowly

and avoiding a downtown a downturn as

almost as likely as the mild recession

Baseline so it's really a coin toss that

soft Landing scenario playing out you've

got uh full effects yet to be realized

for the tightening we already know that

I did think it was very interesting that

they've thrown in this argument here

that the housing market at least

tentatively with low income low

inventory has started to show signs of

quote bottoming out with home sales

Builder sentiment and new construction

all improving now that's good by the way

Builder sentiment and new construction

all improving we need inventory in real

estate I mean I'm out here and it's sort

of like Slim Pickens to find real estate

right now but that's okay because as

soon as inventory starts going up and

rates are higher they're gonna be some

sweet opportunities to buy real estate

so you really got to perfect where you

want to buy now so you're ready to

strike probably beginning of Q4

beginning of q1 and and just slowly

ramping into the market is our

expectation right now I think they're

going to be plenty of opportunities over

the next 5 five years frankly there

won't be a shortage of opportunities so

uh more from the Fed so let's see here

uh okay we talked about the lags uh

talked about continuing the uh the pace

of the balance sheet runoff we've got uh

zero mentions of Russia zero mentions of

Ukraine one mention of kovid Market

reaction very muted right now you're

really not seeing anything the Hawks on

the fomc want to rate wanted to raise

rates but they ended up agreeing with

the pause we talked about that uh let's

see here no no real foresight in this in

terms of what might come in the future

we just really have to lean on what

we've previously heard from powie owie

all participants judged it as

appropriate to pause that unanimity is

actually phenomenal that Jerome Powell's

been able to pull this off treasury

yields not really moving much you've got

uh some again the quotes that you have

it is some policy members favored

raising hikes uh raising rates but ended

up agreeing with waiting one month uh

Powell still thinks he can pull off a

soft Landing here's some Wall Street

commentary on this looking at uh back to

the actual uh commentary from the FED of

items that I've highlighted uh you've

got still this uncertainty around the

banking crisis I would vastly argue that

the banking crisis is mostly over uh and

uh well I mean I suppose it depends

because if treasury yields do Trend up

more then that's going to end up hurting

Bond values which actually hurts the

banking crisis more and that's probably

why you've seen some of the buy the dip

funding program it's not actually what

it's called but that's probably why

you've seen some move up in yields

potentially be another risk for banks so

I'm looking at just refreshing right now

uh the 10-year actually is starting to

jump right now that's actually quite

interesting the 10-year is up eight

basis points now you're at 3.94 on the

10-year that's your headline right here

is the 10-year jumping we're almost at a

four percent on the 10-year again that

actually does increase the risk of

putting pressure on these smaller Banks

again in the banket crisis issue we had

in March it's all driven by these higher

rates higher yields means lower

portfolio value more borrowing necessary

so more bank failures could come uh so

far it's been a nothing Burger but we

were also expecting yields to go Trend

down as inflation was trending down now

we've got inflation trending down and

yields just Rising it's it's totally the

opposite of what you would have expected

so a little bit bizarre it does look

like even though the market initially

reacted neutrally I mean the nasdaq's

down 11 Pips uh it uh it has slightly

trend did uh down so it's it's teetering

there's really little movement here

other than in the treasuries treasuries

does increase the risk of breaking

something though and breaking something

is where

excuse me the FED breaks something

that's usually where you start pricing

in Fed rate Cuts again remember what we

had during the banking crisis people

were expecting 1.7 percent in Cuts right

now the market is expecting 25 BP in the

next fed meeting and no Cuts until March

at the earliest of next year so really

just higher for longer our economy

continuing but in terms of any kind of

Secrets here in the minutes I'm not

seeing anything really scary what I did

like that I highlighted I said the

unemployment rate is forecast to

increase this year JPM argues September

the FED is thinking some point this year

we're going to get the unemployment rate

Rising a little bit this Friday we're

expecting it to be 3.6 percent down from

3.7 where we were last report but that

was up from three five but anyway uh

that unemployment rate decline is

expected to continue until

2025 after the unemployment rate peaks

in 2024 so I would guess around the time

of a peak employment rate is probably

when the fed expects to start cutting

once they're convinced that core

inflation has fallen a market-based

policy rate expectations Rose notably

right where pricing in basically the

next 25 BP and the FED is acknowledging

that so so far everything's relatively

consistent here let's check the Futures

Market uh for the fomc rate projections

this morning we were about 88 percent

certain we were going to get a 25 BP

here we're still right now at about that

88 percent and if we look at the

five-year break I don't know that we're

going to have any movement on this but

let's do a quick check five-year Break

Even this morning was Rising

um still a 2.23 stable up we were

sitting around 2.1 2.12 prefer to stay

around there so stable up right now but

that sort of aligns with what we're

seeing in the bond market with

treasuries trending up treasuries

continuing up the 10-year breaking four

percent in the sort of steepening of the

yield curve could put more pressure on

the banking system so uh that's your

heads up like if you're still in the

super small Banks you know maybe

diversify within your FDIC limits knock

on wood not trying to create any kind of

food or fear or whatever but you know

the banking crisis could easily renew

itself there were plenty of other banks

that were really close to failure and

then everybody kind of forgot about them

uh and uh and that could absolutely

reignite I mean consider this for a

moment you should really look at this

just go to cnbc.com click on the 10-year

look at the one year for uh for the

10-year treasure yield and you were last

at four percent right before the banking

crisis we're basically right back to

that and then you were there around

November and October of last year that's

when househack bought a bunch of

treasuries which obviously we're now

looking for real estate for so uh anywho

uh check out the links down below for

the courses in the shadowing program uh

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kevin.com since we're bringing it back

thanks so much for watching but

otherwise I'd say broadly this is uh

this is mostly as expected this is good

news one more look at what Wall Street

is saying here because you don't want

any kind of rug pull here participants

generally judge growth would be subdued

they've been saying that for two years

minutes were right in line with

expectations exactly uh yeah that's it

anyway thank you so much for watching

and we'll see you in the next one

goodbye