Disastrous Inflation Report. No Rate Cuts until Election [Trump vs Biden].

well Donald Trump should be very very

happy because rate cuts are now fully

priced in instead of for this summer or

as early as September in November but

those rate cuts that rate cut meeting

comes just a day after the election so

that means there is a chance we will get

zero rate Cuts until the election is

over a big win for Donald Trump

especially since even as Nick T men in

his Wall Street Journal piece this

morning on CPI Americans have had it

with inflation and unfortunately the CPI

report today which was supposed to give

us Direction was January February just a

bump on the road or was it a trend of

inflation resurging well the numbers

came in hot as outlined over on ec.com

to make it easy for you remember every

time you go to pooper check on ec.com

what do you got CPI month over Monon

you've got a point4 every item comes in

point one hot you can see that on screen

here core month over month year-over

year year-over-year core everything

comes in. 1% overe

expectations uh Market's looking at just

1.9 rate Cuts this year maybe 2.26 by

January the super core trend is not

great the super core trend is the

biggest problem that we have right now

the last time we had a rise in supercore

was really when the Federal Reserve

started freaking out you'll see right

here in about September mber July July

August September we bottomed out in

super core in 2021 unfortunately we

skyrocketed until the FED lifted off on

interest rate uh uh increases lift off

uh in March of 2022 and we are now

trending towards the longest uptrend in

the super core now super core is exactly

what we pay attention to every single

time we get a CPI report the first thing

we do is we jump in over here and we go

what's going on on with Services Pet

Services up 1.9 we warned that we wanted

to pay attention to insurances pets

Financial Services healthc care all of

them hot motor vehicle repair 31 this is

month over month so when you annualize a

31 you're talking 36% inflation you just

multiply it by 12 don't use exponents

when you annualize 3.1% on motor vehicle

repair Insurance 2.6 Mo uh motor vehicle

maintenance and repair 7 uh you've got

health insurance up one2 hospital and

related up one2 medical care services up

6 household operations up8 Pet Services

up 1 n postage delivery 04 other

personal services8 not great all of

these hot that's super core Rising uh

since we did touch on medical I want to

give you a quick little heads up by the

way uh summer baby summer uh I'm already

starting to talk to a discharge nurse so

we could be within 2 weeks knock going

would knock on wood or three surgeries

are done and she is recovering so yes uh

but anyway baby summer hopefully be home

soon so all seven babies will be home uh

but anyway going to the Super core chart

this chart over here on the right is

rough uh this is a rough rough rough

chart the chart is going in the wrong

direction and so now you have to look at

the implications the implications are a

clearly policy isn't restrictive enough

clearly the Federal Reserve thinking

that 55% rates is restrictive in not

it's not restrictive how could it be

deemed restrictive if supercor is

skyrocketing the way we see super core

here uh it's crazy uh then this also

raises the estimates of the neutral rate

which reduces where we might end up

going with interest rate Cuts in the

long term the idea that we're going to

go back to 0% rates is is basically

killed by reports like this where

inflation is continuing to resurge in

the face of H of a very high policy

rates and the econom is still chugging

along we don't have jobs weakness if

anything we have jobs strength yes some

of that is affected by immigration

obviously but the jobs Market is broadly

expanding there is a renewed risk of a

wage price spiral especially since we

think the ECI reports are going to come

in hot in part due to California still

raising minimum wages during a time

we're trying to get inflation to

stabilize now I'm not here to say people

shouldn't earn more money I do think

people should earn more money but I am

also concerned that if from an economic

data point of view we start getting

signs of a wage price spiral the Federal

Reserve will be forced to drive us into

a recession again this is actually what

we're getting right now is good for

Trump in the short term because not

getting Cuts until November means the

Federal Reserve is kind of going to look

like they're behaving politically the

moment Trump potentially or the new

president gets elected that's when

you're going to get rate Cuts whoever

obviously ends up winning of course

delaying that until then is going to

look very political uh but you know the

data is also driving them in that

direction the problem though is if you

stay at those higher levels for too long

you do increase the chance of a

recession a recession could end up on

the next president's plate so whoever it

is whether it's Biden uh or or Trump or

whatever it is very possible that with

rates having to stay this high and super

core moving up like this and a potential

lead into a wage price spiral the

Federal Reserve is going to have no

choice but to drive a recession uh to

actually finish the job on inflation and

the Federal Reserve will do that if

necessary obviously this is not good for

your interest rate sensitive stocks

yesterday we anticipated that the most

volatile mover would be Sun Run followed

of course by the other interest rate

sensitives we thought there was maybe

some hope for artif icial intelligence

but at least this morning there's really

hope for basically nothing the only

thing there's hope for is the volatility

index Alibaba and United Airlines uh

other than that you've got sun run down

7% open doors down about 7% wfirs down

five end phase down five you've got uh

uh uh the tqq down 3.9 that's because

obviously your index is down about 1.3%

right now arkade down 3% Cheesecake

Factory down

uh you've got Tesla over here is

actually only down about 1.8 uh is

NVIDIA is down about 2% Nvidia now in

correction territory along with um AMD

and uh you really want to watch on

Nvidia that 850 line we are below that

850 line right now and that's a big deal

for NVIDIA uh getting below 850 it is a

support level breaking could bring us

back to 731 uh for some violence uh arm

for example down 2.5% on the day uh

though that's also been sort of a

volatile up and Downer uh we'll see what

happens though but with markets but

right now you've got the bond market

looking at a

4.48% 10year yield you also have

inflation break evens moving up the

5-year inflation Break Even is sitting

at

2.55% and the trend of the inflation

Break Even chart is not good keep in

mind that Jerome Powell consistently

says that inflation expectations remain

well anchored this is in the face of

inflation expectations just one measure

of inflation expectations moving up

rapidly you can see on screen here we've

been straight up since December Jerome

Powell is not changed his tune at all

and the question now is what is he going

to do and what is the market going to

react with when JP really uh ends up uh

uh you know uh going oh no oopsy doopsy

whoopsies we screwed up when we get that

commentary from Powell how markets will

reply will be very uh uh obvious uh uh

will be very interesting uh obviously

we're expecting to get Fede this week we

will get minutes today at 11:00 a.m.

though I'm not sure how useful the

minutes will be given that we just got a

third month of um hot dat out so if you

get minutes that say Hey you know two

months could just be a little bit of a

bump on the road unless we get some kind

of hedging bets like hey if we get three

in a row that would be bad then these

minutes might not be very useful today

we're really going to be looking for is

that fed speak coming Bowman today we'll

have other speakers going forward the

rest of the week like Walker will be

speaking towards the end of the week so

we'll cover the FED speak clearly

rafhael Bostic was uh not informed of

having any kind of sort of preak on

what's going on uh given that Rafael

bosk suggested hey it'd be great if we

hit consensus and uh you know what maybe

you know he he sort of acted bullish

rather and doish suggesting hey

consensus are a little below would be

wonderful news and just accepting

consensus at even where it is somewhat

implied hey maybe he knew what the data

was going to be turns out no maybe only

japal gets the data ahead when he wants

it but uh doesn't look like Bostic had

any kind of clue and so the market and

it's run into the close yesterday wasn't

really led by anything other than

speculation so uh again coming in hotter

than expected here uh also hits our

Trend numbers we'll pull up the trend

numbers here which uh thank you Nick t

for throwing those up but Nick T gave us

the trends and this is the problem the

trend is not our friend when it comes to

inflation here you go on screen now

you've got Nick T everybody loves our

fed Whisperer he gives us the 36-month

and 12-month basis uh and those here say

uh what's going up are the course on

building your wealth from meet Kevin

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member or a curious member you have

questions but anyway uh so staff atme

kev.com but anyway look at that core

Consumer Price Index right here you see

that 3 six and 12- month Trend solidly

moving up here this is an issue because

again at five and a half percent rates

it means the Federal Reserve is not

managing to control this inflation

problem so a little oopsy doopsy again

we're not pricing in our full rate cut

until November and we are moving down on

rate cut expectations to uh just one

okay we've just moved down even more

that's uh that's incredible we are now

down at

1.69 I'm going to throw this uh screen

on um uh this chart on screen rather but

I want you to first see yesterday's data

so I got uh yesterday's data I'll show

that on screen first yesterday's data is

right here this is what it looks like in

terms of the market pricing and cuts the

way to read this is these These Bars are

basically number of rate Cuts priced in

and if you hold your mouse right here

for December you'll be able to see we're

pricing in -2 six rate Cuts as of

yesterday

-2.6 so basically 2.6 cuts for yesterday

okay today uh we have now moved that

number down again because we were at 1.9

if I now hover over December I get 1.

692 that's it 1. 692 on rate cuts that

means we're getting to only pricing in

about 1 and a half rate cuts at this

point that might end up moving down on

hawkish talk here to only pricing in one

rate cut for the year uh so big

implications here obviously for the

market broadly for treasuries we'll see

how the market responds as the day

trading moves I really think it's going

to take probably the whole trading day

to kind of figure this out and then

obviously we'll get PPI tomorrow as the

next Catalyst and then we'll get fed spe

coming up PPI for tomorrow month over

Monon is expected to be3 core month

month is expected to be .2 core less

trade is expected to be 0.2 so we'll see

usually those producer price numbers do

come in lower and then at the end of the

week we'll get sentiment University of

Michigan inflation expectations those

are usually uh something that is closely

watched or are closely watched by jpow

so we'll look at those next week we'll

get retail sales building permits uh and

some other um smaller data sets as well

but obviously 3 months now much more

than a bump in the road this is turning

into a trend it's not great let's see

how markets respond though can we get a

market rally here in spite of maybe not

having R Cuts let's find out as we get

ready uh for the trading why not

advertise these things that you told us

here I feel like nobody else knows about

this we'll we'll try a little

advertising and see how it goes

congratulations man you have done so

much people love you people look up to

you Kevin pafra there financial analyst

and YouTuber meet Kevin always great to

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