Jerome Powell did NOT Expect THIS!

well we just got some data boom that's

pretty dang exciting and it makes me

wanna say the lead yes absolutely

because guess what we just got the joltz

data release and listen to this we were

expecting 10.5 million the prior read

was

10.824 they revised the prior read from

10.824 to

10.563 that is jobs openings right the

jolts is the job openings and labor

turnover turnover survey so in other

words they went from 10.8 to 10.5 in the

last reading

well now the survey was projecting 10.5

for the current reading it actually came

in at 9.931 Really Good beat we watched

that live together with course member

livestream and phenomenal on top of that

we also got Factory order data a little

bit weak here we got the prior Factory

order data coming in at negative 1.6

that was revised down even more to 2.1

the current survey was negative half a

percent and we got negative 0.7 so worse

than expected Factory orders so you're

getting a softening labor market now and

a softening Factory order section this

should be a big bad signal to the FED

stop tightening so much you tight wads

anyway then we got a durable good orders

release that was expected to come in at

negative one percent it did durable good

orders with the exception of

Transportation came in at negative one

percent uh or sorry negative point one

percent that is versus the expectation

of zero so pretty much everything came

in weaker remember what durables are

they're like home appliances you know

think like big things like Machinery or

cars or

um washing machines appliances CNC

machines whatever right

so it's kind of like the components that

help you do stuff compared to factory

orders being like all right we have the

components what are we making with them

right uh and in this case all of the

data came in soft this is very important

data for the Federal Reserve the jolts

data report because it tells us this

whole idea of a wage price spiral is a

myth and the FED needs to relax because

all of the leading indicators are

pointing to disinflation yet the FED

continues to hike as if we're

experiencing re-inflation and we're not

when we look at earnings calls across

the board we are not seeing the

indicators of inflation still here the

only place maybe we're seeing it would

be in Aerospace and in a weird way pet

food but beyond that we're just not

given the fact of the availability of

supply of laborers willing to work for

Uber and Lyft we have plenty of people

willing to work you remember I've said

many times before cloudflare I received

over 400 000 applications for somewhere

around thirteen hundred jobs as they

talked about in their earnings call

McDonald's is expected to lay off a

bunch of corporate workers this week

despite the fact that their franchise

model is actually extremely profitable

they're feeling the squeeze as well when

we went through the earnings calls of

other companies this week as well we saw

the same thing no indications of a wage

price spiral Darden is no longer able to

raise prices like they previously were

although everybody was talking about how

oh the restaurant industry continues to

raise prices not Darden anymore they've

raised prices yes and prices are higher

than they used to be but the rate of

increase has slowed Canadian Solar sees

substantial deflation uh ahead uh what

do we got Dave and Busters talking about

both disinflation in labor and goods

look at that I'm going to start with

labor inflation we're seeing some relief

there I think when you look at hourly

wages sequentially they're relatively

flat which means quarter over quarter I

feel like we've got that stabilized and

with commodities we've actually seen a

nice decline

this is Dave Busters

it's not just them it's multiple

companies Starbucks Chipotle

all the companies are almost in

alignment I read earnings calls almost

daily

and there just seems to be this extreme

alignment on there is no inflation

anymore yes prices have gone up but

they're not continuing to run away which

is great because it's a big indicator to

the FED to do what

to pause follow the lead of the bank of

Australia

and pause

let's talk about the bank of Australia

now and remember we've got European

inflation expectations as well that came

in softer than expected but for now

Australian Central Bank and what it

means for America let's take a look at

the first pause of the banking crisis so

one of the first and major pauses of the

banking crisis is in the particular uh

institution that paused is actually one

that led the United States on rate hikes

that's a sign that maybe the United

States will soon follow this particular

bank so think about it they hiked then

the U.S hiked now they've paused and

what could they possibly cite and how

could their information be similar to

what we're experiencing in the United

States well after you read this

statement with me you'll see wow it's

surprisingly similar let's take a look

at it right here this is the Bank of

Australia the board decided to leave the

cash rate target unchanged today at 3.6

in other words pause the big old pauses

in at Australian remember they they

started hiking before us

that's important uh all right the board

took the decision to hold interest rates

steady this month and provide additional

time to assess the impact of the

increase in interest rates to date

and the economic Outlook Global

inflation they say remains High uh and

this is actually Something That We're

wanting to pay attention to as well in

the United States is wait a minute if uh

yes inflation is high why would you

potentially pause well they give us some

reasons and in my opinion it actually

might give some indications to the

United States take a look at this Global

inflation remains high in headline terms

it is moderating although service price

inflation remains high in many economies

service price inflation is of course

that third type of inflation that we're

facing in the United States as well

phase one being goods and disinflation

phase two being Housing Services

disinflation and then phase three being

all other services specifically

Healthcare retail hospitality and

otherwise and this remains high in many

economies the outlook for the global

economy remains subdued with below

average growth expected this year and

next the recent banking system problems

in the U.S and Switzerland have resulted

in volatility in the financial market

and a reassessment of outlooks for

Global interest rates these problems are

expected to lead to tighter Financial

conditions which would be an additional

headwind for the global economy so they

like us are recognizing this potential

for tighter Financial conditions leading

to basically the equivalent of more

hikes so that's potentially why they're

taking a pause

now listen to this on CPI and inflation

well CPI being inflation a range of

information including monthly CPI

indicators suggests that inflation has

peaked in Australia now this is good

because we would imagine that the

Federal Reserve in Jerome Powell might

say something convincingly like this at

some point in the near future as well

imagine if Jerome Powell came out and

the next meeting in May and said

inflation's peaked we're confident of it

it would really if they didn't pause

then lead markets to start pricing in oh

they're setting up for a pause and be

quite bullish because remember nobody

really expects the FED in this cycle to

actually cut rates until inflation is

conquered that's a big deal and I think

a lot of folks forget that the FED isn't

here

to cut at the sign of potentially a

recession if anything they are

engineering this recession in order to

make sure inflation has been

convincingly conquered multiple

different reports whether it's JP Morgan

Morgan Stanley whether they're Bears or

bulls suggest it's clear the FED is not

cutting anytime soon until inflation is

conquered but Australia actually gives

us hope that wait a minute maybe maybe

that Peak is closer than we think or

that Peak is already well behind us to

the point where central banks can start

reacting and so that makes this such a

unique occurrence where the bank of

Australia which again led the rate hike

rate increase a cycle is now pausing

Goods price inflation is expected to

moderate over the months ahead due to

global developments and software demand

in Australia meanwhile rents are

increasing at a faster Pace in some

years and vacancy rates are low the

price of utilities is rising and the

Central Bank forecasts for inflation is

expect directed to decline this year and

next to around three percent by mid 25

medium-term inflation expectations

remain anchored and it's important this

Remains the case this is also quite

interesting because what you have is the

central banks basically saying in

Australia hey look we want to get to

about a three percent inflation Target

and we're willing to wait until 2025 for

that to happen now that's pretty

incredible it's almost as incredible as

the paid promotion here to get 12 free

Stocks by going to metcaven.com a free

link down below uh but think about that

for a moment if the bank of Australia is

saying look we're going to pause we

realize inflation is still high but

we're at Peak let's now just let our

raid hikes actually function and we're

okay with not only a three percent

inflation Target but we're willing to

wait another two and a quarter years to

get to three percent

they said it'll be three percent by mid

25 is two years and a quarter is how

long they're willing to wait to not get

to two percent but to get to three

percent and this could be something that

our Federal Reserve does as well all

they have to do is say

yeah we're okay with an average of two

percent by mid 2025.

kind of interesting let's keep going

with uh the statement from the Royal

Bank of Australia

oh there we go fix that all right so

growth in the Australian economy has

slowed with growth over the next couple

of years expected to be below Trend

that's been drawn Powell's goal as well

to push us into an environment of below

Trend growth there is further evidence

that the combination of higher interest

rates cost of living pressures and the

decline in housing prices is leading a

substantial slowing in household

spending while some households have

substantial savings buffers others are

experiencing a painful squeeze in their

finances this is usually the difference

between poor income households and

wealthier households

the unemployment rate is near a 50-year

low and unemployment is also low many

firms continue to experience difficulty

hiring workers although some report an

easing in labor shortages and the number

of vacancies has declined so very

similar again to the United States

very low unemployment probably also our

50-year low in unemployment and a

difficulty to hire new workers but

things are starting to loosen and those

are the conditions that led Australia to

pause

starting to sound very similar to the

United States right now we're sitting at

about a 50 50 chance of pausing I do

think there'll be a psychological

benefit to the Federal Reserve to

getting us to five percent so I wouldn't

be surprised if there's one more hike in

the pipeline and then a pause especially

since right now at 4.75 and I think

hearing okay fed lower bound rate is

five percent is a good psychological way

to show the FED is really serious about

inflation but uh but beyond that I think

further hikes are less certain

especially since now you've got the bank

of Australia saying wage growth even

though it's growing is actually

consistent with their inflation Target

and their goal is to return to a two to

three percent inflation regime the path

to a soft Landing remains a narrow one

but they're taking the steps to get

through a soft Landing by pausing now I

personally I think that's that's uh very

fascinating I want to look now in

reaction to this at the Goldman Sachs

Financial conditions index and maybe

what we can do as well is look at

inflation break evens because generally

what we want to see are that Financial

conditions are at least somewhat

elevated they don't necessarily have to

be as high as previously and we want to

see that the five-year Break Even

inflation rate is staying stable and not

skyrocketing after those OPEC production

Cuts yesterday we did see the five-year

break even take up so it'd be good to

see how it's moving today I have both of

those charts so let's pull those up and

then evaluate those alongside what we

just heard from the bank of Australia so

the first chart is right here oops right

here there we go this is the first chart

this is the five year Break Even

inflation rate you can see we had a nice

little surge here after uh you know an

oil oil price cut or sorry oil

production cut but it really shrunk

yesterday this surge was actually a lot

higher I would go as far as saying we

were up to about 2.6 yesterday on the

five year break even so we've really

dropped down some of the severity of

those oil production Cuts here in terms

of inflation expectation so I would say

that's actually very good news I don't

think it's so terrible that we remain

potentially along this sort of average

right here which would be about the last

nine month average that's probably not

horrible I do think before we get any

kind of cuts we need to see this level

down to about 1.6 so it's going to be a

moment before we actually get that down

uh and then here we have the Goldman

Sachs Financial conditions Index this

Titan substantially during the uh

banking crisis as it was starting but

Financial conditions actually quickly

loosened again

and so right now we're sitting at some

of the lower levels that we've been in

since December and about the end of

January so Goldman Sachs Financial

conditions lowering slightly

uh this uh this all comes at the same

time as you've got the 10-year treasury

yield right now sitting at

3.46

the two-year just for comparison the

two-year treasury yield right now is

sitting at just about 4.01 so you've

still got that inversion of about 55

basis points between the two and the

10-year at the moment the three month

which is another pretty common one is

sitting at 4.9 which is pretty widely

inverted 4.9 to

3.46 puts you at almost a

[Music]

1.4 percentage point in version pretty

substantial between the two and if we

look at that historically

I know we've had some recent

re-steepening of the curves and often

people like to say that as the curve

re-stepens that's when you know a

recession is imminent but so far it

doesn't actually seem like that's

happening to the three month tenure that

did happen with the fives and the tens

you got some re-steepening the twos and

the tens and for those two but you're

not seeing any of that at the fed's

preferred measure of recession which is

actually this one right here this is

what your three month tenure looks like

that's the math that I just sort of

mental math calculated and look how

steep this inversion has gotten here

I'll hide myself for a second so you can

see this a little bit more broadly there

you go look how steep that is 144 basis

points 1.44 here of inversion you've had

some volatility but I think the trend is

exceptionally clear here when we draw a

line

not a curved line there we go when we

draw sort of the trend line here it

suggests we're still substantially

inverting relative to uh seeing any kind

of uh steepening of that curve now again

usually the steepening is the painful

part unless of course this is just a

measure of hey you know we still expect

time and this is the only counter

argument against the inversion of the

yield curve hey well the yield curve is

as inverted as it is because well

obviously inflation is going to be high

for the next few months so we're going

to demand a higher yield now than we

will 10 years from now you're really

taking the polar extremes right the near

term and the long term basically purely

liquid and almost purely eLiquid

although treasuries are relatively

liquid it from a Time perspective it

makes a lot of sense that you could just

hold the three months to maturity and

it's basically like cash we do a lot of

that with house hack a lot of rolling

three months

so uh that's pretty remarkable now not

only is that remarkable but it's worth

keeping an eye on uh these uh these what

the bank of Australia is doing and other

central banks are doing because it

really potentially can give us a leading

indicator especially since the bank of

Australia led the Fed

so with that said remember Bank of

Australia leading indicator and they

just paused their arguments for pausing

is let the lagging effects hit we don't

have a wage price spiral wages are

growing as expected we're slightly below

Trend growth and maybe we can actually

thread the needle of a soft Landing

nobody well I should say very few people

actually think that's possible to stick

this off Landing but there is a lot of

Hope but always remember hope is not an

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