The Fed JUST Responded to the Stock Market Crash.

quick reminder the 38 off coupon code on

building your wealth

expires in nine days take a look at that

if i have the links

down below you can bundle up the

programs if you want you get lifetime

access to the content

get access to the private channels with

stock buy cell alerts and the stocks on

psychology and money group

and every program gets access to my

private livestreams where i can interact

directly with you

hey everyone me kevin here let's talk

about what the federal reserve said

today

friday march 5th now we're not going to

hear from jerome powell

but we do hear from two members of the

federal reserve

these are very important members because

they are presidents of individual banks

of different branches within the federal

reserve system and

they help jerome make policy decisions

so let's take a listen to some of the

things

that they're talking about reuters put

this article together and it's really

insightful

all right so this is a chart of the

10-year treasury yield and then we're

going to talk about what the fed just

said but take a look at this let's go

ahead and just draw on this for a moment

here

this is really our pain began in the

stock market

right here february 19th was really the

last day that we had some good it was a

friday

and then all of a sudden the stock

market started selling off and in part

it sold off because

treasury yields started rising but this

wasn't even that

rough of a rise this slope right here

where things really got

nasty was when the slope or the

acceleration of the rate of the tenure

did this i mean look at that slope that

is that is fast

that is a rapid and so this is when we

began

having our sell-off we had a little bit

of recovery on monday when

bond yields were actually at a lower

point but bond yields started

rising again throughout this week and

when federal reserve chairman jerome

powell talked and spea

spooked the market yesterday we got a

big spike in bond yields here

and the stock market rapidly sold off

but i personally believe this

relationship is going to begin

to fall apart let me show you the

relationship a little bit more clearly

first just by overlaying the s

p 500 and you can see the relationship

gets weaker and weaker at least in my

opinion

you can see that so let's take a look

here let's draw where the relationship

makes sense so what do we see here right

here in orange

we see the chart having a spike and the

s

p 500 or the spy in this case which is

the blue line

plummets we see that plummet there it's

really really

evident then look at this i will erase

this for a second let's go ahead and use

a different color let's look at green

look at this the bond yields oh there we

go bond yields

fall and what immediately happens while

immediately like what happens right

afterwards

there you go the s p 500 goes back

up right and we get this sort of like

trading with okay when the bond yields

go up the stock market goes down

and this has kind of been training us to

think okay all right if we want to know

what the stock market's going to do

just look at the uh the 10-year treasury

yield

in my opinion this is going to break

this relationship

will not last much longer and i think

it's already started breaking today

why do i think it started breaking today

because take a look at this folks

watch this this right here and we know

what the market did today

but the market was insane today okay the

market opened

up today it actually opened green but by

eight i'm sorry that's california time

by 11 a.m

the market started plummeting so let's

mark that for a second

the market started plummeting right here

at

11 a.m the market opened

up at 6 30 which is actually right here

but wait a minute this is when the

10-year treasury was at its highest

point

and this is when the 10-year treasury

was at its lowest point

which is very very odd especially since

we

rallied into the clothes so we had our

most pain when bond yields were in the

day at their lowest point

then we started rallying into the

clothes and we actually get bond yields

going

up into the clothes right so in my

opinion the 10-year treasury yield as a

relation to the stock market i think

that's already

starting to fall apart i don't think

it's going to work very clearly again

next week

why did we have the big run-up because

of that rate that acceleration was so

fast but now we got it we're used to it

okay all right

the 10 years gonna go up over time that

happens

that's normal that doesn't mean the

stock market has to keep selling off

well what did the fed say today and this

is interesting as well because it

relates obviously to bonds

so neil kashkari the minneapolis a

federal reserve

bank president said the following quote

if we were seeing a real uptick in

yields

that would give me pause that would give

me concern

of the amount of accommodation we are

providing to the economy and that the

amount of accommodation we're providing

is falling or it's reducing and that

maybe he says quote

that might warrant us considering a

policy response

they talk in tongue so in english he's

saying look

i see that the ten year went up but this

isn't really like a big deal because

look

if the 10 years at 1.5 and inflation's

at 1.5 percent

we really have a real return of zero

percent

and so we're actually not even seeing a

real uptick in

treasury yields we're just seeing a

quick uptick

that's kind of what the fed is saying

here they're like look we're not seeing

any cause for concern here

yeah sure all of a sudden it like it

ticked up really fast

i mean the five-year treasury bond

ticked up

so fast last week that it ticked up at

its fastest

rate in 10 years that shows you how

quickly it ticked up

and that was one of the things that

really spawned this panic

instead neil kashkari says and this is a

great reuters piece here

we are not seeing much movement in real

yields but rather

an increase in what bond investors are

demanding

for compensation to reflect rising

inflation expectations

again fancy tongue simplify this okay so

bond yields accelerate up the fed's like

okay well real

yields are still low so why is the fed

not doing anything well because the

fed's saying well

because real yields are still really low

and remember real

is what the yield is 1.5 minus inflation

which if that's around 1.5 you're at

zero so real rate of return is zero

uh nominal would mean you're not

considering inflation

anyway so you've got neil kashkari going

look dude

this is no big deal like we're the fed

and we're trying to get

people to expect two percent inflation

obviously in the course of our business

of trying to get people to expect two

and

two percent inflation coming at some

point bond investors are gonna go well

damn everybody's gonna start inspect

expecting two percent inflation coming i

better start asking for more money on my

bonds i better start asking for a bigger

yield in my bonds

like why would i take a bond at one

point two percent if everybody's

expecting two percent inflation well

hell

give me 1.6 otherwise i ain't buying

that's kind of what's happening here and

the fed is like

uh everything's actually kind of going

according to plan

just because the stock market freaked

out because bond yields went up a little

too fast

for you all little paper-handers that's

not our problem

this base i'm obviously heavily

oversimplifying the federal reserve here

but again when you listen to them they

speak in like this foreign language it's

bizarre

uh let's see if they simplify their

language at all

all right kashkari said friday that a

that the new framework is helping push

inflation

up and providing the kind of

accommodation that we hoped it would

yeah no still still foreign language but

basically that is exactly what i just

explained

like what's happening is what the fed

wanted to happen they want inflation

expectations to go up

to two percent the fed is basically the

fed's basically taking credit for what's

happening

they're flipping the script here we are

like stock market tanks and everybody's

like

where's the fed sorry thor came back and

took his hammer

uh i'll get that back later anyway so

this is basically

the fed responding like dude this is

what we expected

so no we're not gonna bail you out you

paper handers

anyway then we switched to a different

president saint louis fed president

james bullard in an interview on sirius

xm

radio he said quote it's not

matching up right now that we need to be

more dovish than we already are

in other words again in plain english

he's saying

yo look we're already telling you the

economy is indulgence and we're going to

keep printing money and we're going to

be at a you know

zero percent rate for like until at

least 2023 i mean we've told you that

like 17 times

and we think that we might even keep

rates low until 2024 like

we don't know how many more times and in

different ways we can tell you that

uh but uh just because y'all paper hand

is uh sad the stock market is going down

doesn't mean that we need to start

printing more money that's pretty much

what james ballard is saying

and so when james was asked what about

operation twist

can't you just do operation twist and

start buying longer-term bonds

because if you start buying the 10-year

or the 20-year or the 30-year bonds

what's gonna happen you drive those

yields down and you push yields down

well that's gonna be good for the stock

market right

bullard goes dude folks

the interest rate or the yield on the

10-year is 1.55

if you look at the six months before the

pandemic

that's pretty much consistent to what

the yields were before the pandemic

and those are still pretty dang low

historically

and the stock market did fine then again

not our problem that there's a little

bit of a hissy fit going on right now

and quite frankly you gotta give it to

him he's not wrong

if i put up the five-year chart right

here this is the five-year chart of the

10-year treasury yields

we're you know right before the pandemic

we were like 1.8 we had a period here of

1.5 to 1.6

in october of 2019 and august of 2019

we bounced around uh in november of 2019

we were like 1.7

uh right before the pandemic 1.78 and

he's like dude

1.566 like the stock market was doing

amazing over here the stock market was

doing fine over here with the exception

of the end of 2018 like right around

here

and this is where the fed's like okay

okay okay we will stop raising rates

and that kind of led to that you know

stock market like

okay but that's different right that's

the federal reserve's discount rate

and we don't want to over complicate

things here the bottom line that we want

to take away from mr bullard here

is mr bullard is saying guys chill

long term this is not a big deal 1.55

percent

bollard goes on to say the following

that he would be concerned by disorderly

behavior in the treasury market

something panicky would catch my

attention but we're not at that point

mr bullard was then also asked about the

stimulus package and he said

that he is skeptical that such a 1.9

trillion dollar package would even get

enacted

he thinks there's only a 50 chance of

the stimulus package getting enacted

now i'm at like 80 to 90 of it happening

uh i'm maybe more bullish than obviously

he is

but let's stick to the fed right here

and not stimulus

so sticking to the fed we didn't hear

from jay pal today he's probably you

know

half a fifth deep okay okay i shouldn't

say that

but uh when we listened to neil kashkari

and we listened to

mr bullard what do we get we get

a reiteration that what's actually

happening in the market

is pretty much engineered by the fed

maybe the fed is just retroactively

taking credit like see

we designed this like everything is fine

but keep in mind the fed's job is not to

pump the stock market even though it

feels like that's exactly what the

federal reserve has been doing since

march

that's not their problem they don't care

if stocks go

down or up they care if the monetary

system start breaking

if banks stop lending credit cards

freeze up auto loans stop

happening that freaks them out that is a

danger

we're not seeing that danger is what

they're saying so they're saying we have

we have no motivation right now to

change anything that we're doing

because what's happening is not a

problem and now if we

gen saggy circle back to the beginning

of the video where i talk about we're

already

starting to see this fall apart of this

correlation between

bond yield up stocks down in my opinion

it's entirely possible

that next week it doesn't make sense

anymore the charts don't inverse anymore

and the yield's not going to matter that

much anymore

i think next week the stock market's

going to be in this position of

all right let's now assess the damage

the hurricane happened the last two

weeks

let's assess the damage is something

still overvalued sell it is something

cheap let's buy it

and we'll see how the market reacts next

week so

those are my updates for you from the

federal reserve

and on bonds hopefully this was helpful

if you found it helpful consider sharing

the video

and folks we will see you in the next

[Music]

one

[Music]

you