Chase WARNS Market Crash will KEEP GOING [Fed Warning]

boy oh boy Marco from JP Morgan is very

unhappy but we're not going to start

with him we're going to start with what

else is being said and we'll end up with

jpm's commentary on why this stock

market correction that may now be

starting might continue even after this

earnings week now that's even more

bearish than what I said just a couple

days ago we made a very detailed video

and said look this week is important we

have a lot of earnings this week that

are going to give us a lot of insights

into the consumer from telecoms to

artificial intelligence to advertising

like the Roku and uh look metas right

the microsofts we've got huge earnings

this week the Autos Tesla and otherwise

and so I thought this week would be a

catalyst for how is 72% of our economy

are the consumers finally rolling over

are they finally saying yes the charge

off the massive doubling of charge offs

that we've seen at Banks is finally

starting to take a toll and is finally

stopping the ridiculous greed and

ludicrous euphoric spending that we're

seeing will this week finally tell us

that well according to Marco doesn't

matter what happens this week things are

going to keep getting worse not better

so before we hit him because he's

obviously pretty dang bearish let's try

to position ourselves a little bit so

here is the market ears description of

where we sit with flows equity inflows

and as you can see we've clearly gone

from a level of extreme bullishness on

inflows uh back uh postco obviously you

could see these spikes here uh and you

could see them again right here but

we've gone from these levels that are

maybe not all the way at the top of

extreme bull but they've certainly

topped out there towards the beginning

of

2024 which makes sense the market going

up the way it has has made sense for a

while and I'll tell you why there's this

reason it is that we went into this

period right here expecting seven rate

Cuts this year that has now been reduced

to a market estimate of just

1.6 and the fact that the market has

only moved from this level to here in

terms of its actual bullish versus

bearish positioning does suggest maybe

there's a bit more to go but do only 1.6

rate Cuts take us all the way to extreme

bar probably not we'd probably have to

see more things break to get to that

sort of level though it is possible

because at the end of last year between

about July 19th and October 31st we had

a pretty bearish session markets were

down substantially we had a correction

in the cues and many stocks peaked out

in July to bottom out on Halloween and

what's fascinating about that is we can

actually compare the timeline of the

greed and fear index now now just Friday

we were at a 31 on fear we're at 38 now

so we've recovered a little bit this

makes sense you get a bounce today the

day after Extreme bearishness well the

highest level of fear we've seen a while

but take a look at the Timeline you can

see we've gone down to this level of

fear at about a 32 but we've seen this

before where we come down and bounce and

it's right here we come down into fear

bounce back up to neutral or maybe even

greed only to truly sell off a few weeks

later into extreme fear now this is

fascinating because it does suggest we

might end up having to push to extreme

fear before we could truly Mark a bottom

on whatever the heck is happening in

markets right now and so this is

interesting because it brings up Marco's

argument on why we might actually

continue to see a selloff and so that

argument is right here another reason

keeping us with a defensive stance is

invest

positioning as we highlighted in our

sister publication flows and liquidity

the current market narrative and

patterns are increasingly resembling

those of last summer that's not good as

inflation surprises to the upside and

the fed or other central bank rate cuts

are priced out now I don't actually

think we're going to see other rate Cuts

priced out by other markets it's mostly

the us but it's worth remembering that

if us rates stay higher and everybody

else reduces their rates that makes the

dollar more desirable because people

want to buy our bonds which increases

demand for the dollar so dollar goes up

that's actually bad for earnings I think

people forget that currency and a strong

dollar matters to earnings companies

that are selling 25 to 50% of their

goods and services outside of the United

States they get hit by currency

adjustments and those can be painful in

periods of a strong strong dollar of

course at the same time we also have

this comment here from Marco which

suggests investors are starting to look

at reducing overweights or adding adding

hedges in Risk markets such as equities

and credit now that's interesting

because I thought hm well the greed and

fear index actually lets us know how

many people are starting to buy puts so

I went over here and looked okay Market

momentum's neutral okay so it's not a

momentum problem okay stock price

strength has gone fear okay that's fine

we've done that before you know we did

that in January oh okay stock price

breath okay whatever so the difference

between the ups and downs okay fear

that's not a big deal

ooh what do we have here ah interesting

we haven't actually gotten this close to

a you know into the 90s even I was say I

guess we were in the low 90s over here

but we haven't gotten past

a95 since over here when we had our

correction which was again again between

that July you can see in July people

start realizing oh no there's your

bottom right there July 19th what did I

say there's your bottom all of a sudden

oh we need to start picking up the

hedges pick up the hedges pick up the

hedges we run up here to about n that's

about where we are now August 16th and

look at that you actually had to become

positive for the market correction to

stop you had to have people buying more

puts than calls for the market

correction to finally get to a phase of

uh ending and we have not hit that yet

if anything you could argue that we sort

of got rejected over here at the one so

we might be setting up for some more of

those Hedges especially since those have

started being really profitable uh a lot

of people in the stocks and sitech group

they know this they've been buying armp

puts and at least last week going into

Friday we're like okay that's a good

move down maybe take some profits people

were doing really well on those now uh

what we want to talk about though is

what

when when does this end you know what

else is Marco seeing and what are some

of the other uh investors seeing well

Marco thinks that ultimately we're going

to see Fed revisions and some fed

hawkishness now I don't think that the

Federal Reserve is actually going to

raise interest rates again I think the

ceiling is in for rates unless we get

some really bad reports but I got to say

I am folks have forgotten that the

Federal Reserve actually matters it's

not just earnings it's the FED now I'm

going to explain that right after I

mentioned that you should come visit me

in person at the house hack investor

Road show we are starting this event

tomorrow and it ends on May 1st we're

going to 23 different cities Toronto

Miami New York Nashville's in there

Vegas if you're wanting to go because

you're an accredited investor and you

want some exposure to an amazing real

estate startup my take obviously read

the PPM this is not a solicitation it's

linked right there house.com 2024 uh

then consider coming in person to these

events they'll be short only going to be

maybe me talking for about 15 minutes

then we do maybe 30 40 minutes of some

Q&A some pictures and it's going to be

time to go so we're going to keep them

nice structured and straightforward

super casual we'll just sort of hang out

at the airport together uh you can check

out all the locations and the

information but anyway check that out at

house.com so now let's focus on the fed

when is the next fed day when's When's

the next time Jay is going to come give

us a good old rug and tuggin it's May

1st May 1st is also the deadline to

invest in house act by the way but

anyway May 1st we are going to get a

Powell that has literally gone from the

last two meetings January and March we

had a Powell that said H you know the

recent data might just be a bump in the

road we think it's going to be lumpy and

bumpy to get inflation down we went from

that kind of jpow to last week getting a

jpow that

said we haven't gotten any more

confidence from the latest inflation

reports well that's not great if the

last three inflation reports were not

confidence inducing in any direction

then that actually means even if we get

a good report or two good reports we're

going to get a Fed that might say h one

report doesn't make a trend two reports

don't make a trend what if they come in

even worse Tom Lee one of our faite

Market Bulls the person who's always a

market bull I feel like it's redundant

suggest oh well inflation's going to

surprise to the downside great but what

if it surprises to the upside what if we

truly are visiting the potential of a

second wave now that's not my base case

I think we go through a bit of a

correction here and as long as we can

avoid a joblessness recession maybe we

could stick the soft Landing but boy we

better start getting some good data

coming in soon because otherwise things

can get poop Dy very very quickly

especially since you're starting to get

Wall Street waking up to that

realization here's sock gen sock gen

economists no longer expect Fed rate

Cuts this year and they see a no Landing

scenario now they do think they're not

expecting a wholesale risk off across

Assets in other words everybody sort of

dumping their risk assets they don't

actually expect a wholesale sale selloff

but then again I try to read multiple

different perspectives to make sure that

I'm not just relying on one for example

another perspective that I was looking

into today was the Cadence Design

earnings call just to see hey you know

what are we starting to get with some of

the AI earnings and let's just say their

guidance wasn't as optimistic as people

expected they were asked about backlog

which came in less their Q2 numbers came

in lower than expected and when they

were asked about the summer and what

people should expect for 4 for Q3 and 4

Kaden's designs sort of suggested ah

we'll let you know when when we figure

it out so you're starting to see maybe a

little bit of that toppess and some of

that earnings growth that you might

expect from some of the AI companies so

it does make sense that there could be

some rich valuations which is very much

in line with what Marco suggests uh over

at JPM now it is a concern and I really

hope this is not the case but there is a

real concern that maybe we're repeating

the same mistake of the 70s this is TS

Lombard this would be very bearish and

obviously here they've got the 2020s in

red and the 70s uh in black and they're

suggesting hey the FED might be going

down the same exact path that led to the

problem in the 70s where you started

cutting inflation reanimated and then

you had to get Paul vard that would be

basically this time is not different we

get the same is the 70s now that's not

my base case I don't think that's going

to happen I pray that doesn't happen

because it's going to drive us into

recession and a lot of joblessness I

don't want to see that because

recessions are very painful for everyone

I don't like when people lose jobs bad

okay uh now obviously recessions to some

extent are from a macro point of view

healthy right there is a clearing that

happens when you have a recession bad

businesses that shouldn't be alive

zombie businesses go bankrupt and they

leave this is very normal it's a good

healthy clearing process and it allows

companies to lay off people that aren't

as functional or practical to the

business or maybe as productive as

people assume that they should be and

the companies are able to start over

with less people or or start fresh with

fewer people and try to build from there

maybe that's exactly what Tesla's doing

right now but the real concern here is

is the market right now

convinced that JP Pal's is not going to

talk dirty to us on May

1st and I kind of think the market is

mostly tenuous about earnings right now

which I'm not that optimistic on I'm

probably if I had to pick between a

scale of 1 to 10 on optimism for

earnings it be like a three and a half

so I'm definitely on the more sort of

like I think we're going to miss side or

we'll beat but we won't beat as much as

Wall Street is actually expecting and so

we'll see sell-offs we'll see profit

taking and then we'll get that

correction we're looking for that

correction could really be accelerated

by a positive

japal as in like I should say a hawkish

japal right so now we should take the

other side of this case as well what if

we have really good earnings what if

everything starts going back to the Moon

because we have really good earnings how

can we have a very bearish setup well we

got to get a doish japal a japal who

says hey we still plan to cut this year

he might say that he said that before he

could say it this year or this meeting

he probably will actually hey our base

case is still to cut this year but if

the data keeps coming in like this maybe

we won't but what if you get a Powell

who says hey even with the latest data

it's good enough for us to cut well that

would be bullish and then you get

bullish

earnings maybe maybe the fear was right

for a short window of time we had our

little correction nominal correction and

we're back to the races that's possible

but it's really going to rely on

earnings beating well past expectations

a a more dovish pow and getting softer

CPI reports I think wishing for all

three of those with prices that is stock

valuations where they are now is a

recipe for disaster that's my take I

just hope that that sort of recipe for

disaster doesn't create a stock market

selloff that drives us into recession

now some people have asked me about this

they're like Kevin how can a stock

market sell off drive us into recession

it's simple as the stock market sells

off earnings need to do whatever or

companies need to do whatever they can

do to beat on earnings again and so

they'll cut lay off that starts the

cycle anyway these are some thoughts for

tonight Tesla earnings tomorrow big day

will be covering them thank you so much

for being here and we'll see you

tomorrow morning for the market open

live stream thanks so much goodbye those

by the way are every morning at 5:25

a.m. and they're on the NE Kevin Market

live channel so check that channel

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