The Fed's Great Reset U-turn is Near | Mark this Date.

you know there's a reason I wore the

Berserker helmet today because

it's just another one of those days

those days where we look at our stock

portfolios and wonder

why are we still here

oh okay so the jobs report this morning

it didn't help at all there are fears

that we still have another 50 to go as

potentially inflation remains quite

sticky and the FED continues to hike

quite aggressively we do have some fed

speak to cover and that gives us a

little bit of a guide and the first time

we've actually heard the potential

though of a 25 basis point softening

hike by December that could also

potentially lead to a split fed and in

this video I really want to address the

potential that maybe just maybe

the U-turn in markets will come but just

a little later than expected and we'll

talk and we'll look at particular data

regarding what could happen in the first

quarters of next year let's talk about

that after we start with fet speak so

what do we hear from the Federal Reserve

today well the Federal Reserve had two

individuals talk today Mr Barkin talked

about having to be more deliberate as

when you have your foot on the brake it

becomes a little bit more difficult to

drive and I could see that yeah kind of

tense up when you got the foot on the

break right that's an interesting

analogy but they do suggest or He

suggests that uh that probably it's

going to be time to slow the pace of

rate increases but we might end up at a

higher end point and this is something

that obviously we've known over the last

few days now what's happening is the

curve of How High markets think the

fed's terminal fed funds rate terminal

just means that end point right here how

high the that level goes is What markets

are trying to figure out before the

Federal Reserves meeting we were right

around that five percent level 5.05 and

it's moved up a little smidgen and

because of that we've seen the

steepening of the curve here on the left

this right here this segment means more

pain in the short term and that short

term is really going to be the next six

months right you could see this really

this peak probably not coming until May

of 2023 and so markets are now pricing

in that Peak here at may but now the

difference is going to become how flat

is this curve going to be in other words

a curve like this kind of represents a

nice decline in rates of maybe about 50

basis points by the time we get to the

end of 2023 but what if the actual pace

of that curve is much more like this

where we barely have a move down and

until potentially mid-2024 that would be

a little bit more scary and right here

all of this difference right here would

be paying for the stock market and

compressing valuations

so the flip side of course is this

potential that maybe inflation will come

down quicker than expected though

there's been no sign that that has been

happening and there's really little

evidence that we could point to to say

oh yeah it definitely will happen though

there is no shortage of Hope and it is a

possibility and in that sort of event if

we do see inflation fall we'd see a

curve that could potentially look a lot

more like this and then this right here

would likely represent excess returns to

stocks rather than excess pain to stocks

so this curve is the most important

aspect and this idea of slowing down the

pace of hikes in December really just

does this right here on the curve you

can see that here see that's what a

Slowdown looks like and markets want to

see that so we get off of this insane uh

insanely quick movement over here that

we're seeing so Mrs Collins also came

out this morning from the Federal

Reserve and gave us a little bit Insight

she suggested the she was actually the

one who mentioned 25 basis points as

being a possibility her uh particular

quotes were including 75 and certainly

including 25 I thought that phrase was

very interesting that she says and

certainly including 25 she's the first

one to say that uh that we could

potentially be looking at uh 25 basis

points in December though I think that's

really going to be predicated on the

next two CPI reports break evens have

started trending down against since the

federal reserve's meeting which is good

but we still haven't seen that

meaningful decline in that lagging

inflationary reporting which is a

problem uh because it just means the

fed's going to keep being a little uh

you know rigid presently we are pricing

in the potential for the Federal Reserve

to raise rates 50 basis points at a

43.2 percent probability and we're

pricing in a

56.8 percent probability that we're

going to get a 50 basis point hike so

you're actually seeing greater odds in

the FED Futures market right now of us

getting that 50 BP height and no odds

yet assigned to 25. the today's the

first time we've actually heard about 25

and it comes on the jobs report day

which that jobs report just wasn't

phenomenal much stronger hiring than we

expected with revisions to the upside

though something that could actually

lead to a lot of bullishness in the

markets is the following chart ready for

this look at this this chart right here

is a chart we're going to look at right

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every time this chart right here shows

that the trajectory of payroll growth

especially when you align it with the

conference board's leading indicator

index which tends to always proceed

Falls okay so let me explain that

quickly the blue line goes down and then

the black line tends to go down and

they're sort of various moves here right

sometimes you see them go down at this

same time often you see the Blue Line go

down first and then the black line goes

down see Blue Line Peaks first and then

you kind of see a little bit of a

decline here blue line goes down here

you see the black line go down over here

blue line goes down first you see the

plummet in the black line and look at

what we have over here on the right side

that's the most interesting side

obviously because that's the now we have

leading indicators suggesting that the

rate of employment growth is plummeting

and it's about to go straight to zero

based on the conference board's U.S

leading index

and this is where you have Bloomberg

suggesting the following payroll growth

is headed to zero percent by Q2 of next

year now that's unfortunate for the

Santa Claus rally but it actually kind

of lines up with post midterm election

rallies how interesting is that

potential look at this folks this is a

chart from Citibank and Citibank tells

us that after midterm elections we tend

to go green like on average all the

freaking time in all scenarios we tend

to go green but look at the difference

you look at the s p from October 31st to

year end and then the s p a year after

the election most of the returns happen

in the year starting January and then

the rest of the year in fact look over

here if you just do uh we go over here

House and Senate split or any kind of

gridlock you only get about one to three

percent of returns

towards the end of the year most of the

returns actually come in the following

year so after January is where most of

the Returns come on average to see that

graphically you look at this particular

chart you see here this uh this uh

election point right here you see some

nominal gains towards the end of the

year but most of the gains actually seem

to have occur uh in the next year

following January 1st now this is pretty

remarkable because when we combine this

historical election chart with

Peak uh fed rates probably in Q2 and you

combine it with potentially Peak payroll

in Q2 we might actually have some

freaking final lead light at the end of

the freaking tunnel this is really

actually in my opinion exciting because

Q2 begins in five months folks we're

five months away from Q2

five months gives us five more CPI

reports and that in essence means we

probably have about five months left of

getting our positioning ready before

probably some real more sustained Market

movements to the upside now no

guarantees that we'll be at bottom and

Q2 the bottom could have already

happened we could be at the bottom today

we could be at the bottom tomorrow

actually we can't be at the bottom

tomorrow because tomorrow Saturday but

the point is

that Q2 is lining up really nicely when

you look at payroll growth

CPI lapping really high inflationary

numbers from the beginning of the

Ukraine uh disaster in February and

March at the end of q1 right we'll see

those numbers more in Q2 again payrolls

election CPI lapping and here's the

other thing to consider this is a big

one remember that Javas reports lag uh

what actually happens in the jog Market

in fact we had price Cuts over at Tesla

and China on October 24th those numbers

don't really show up in Chinese vehicle

deliveries so the deliveries that we got

at the beginning of November really uh

the report that we got for October

doesn't really anticipate those price

Cuts or include those price Cuts yet so

that's similar kind of phenomenon is

true of jobs as well we just had a ton

of companies from Apple to Amazon

freezing corporate hiring to layoff set

at Lyft and and many dozens of other

companies whether they're Financial Tech

or otherwise they're all laying off

people all of those layoffs were really

being announced after companies

announced their earnings reports or in

the case of Open Door slightly before

and what's remarkable about that is none

of those layoffs are going to show up in

the employment jobs report of October

especially since those reports usually

are based on surveys that are conducted

on the second or third week of the month

which even if they were conducted at the

third week of the month that was

basically right as earnings season was

beginning and most of job Cuts were

announced after that so you've got a

lagged report over here and over the

next five months I don't see a reason

why when we combine the fact that

companies are slowing companies are

seeing the headwinds look at cloudflare

this morning in the course member

livestream we went through the

cloudflare earnings call and all you

have to do is look at their macro

arguments that their customers are

starting to to see real pain they're

extending how long they're taking to

actually make contract decisions and

look at this line the CFO says there's

nothing in their Q4 and q1 Outlook to

indicate that anything is going to be

getting better anytime soon instead that

things are getting worse in terms of

their sales but ironically things

getting worse for cloudflare is actually

good for helping jobs get depressed and

inflation to come down so that's what we

want to see now this is all just

becoming a big game of how long can you

last can you make it to Q2 without

capitulating can you make it through

Market pain realizing that the pain

we're experiencing is based on macro and

the fed and not necessarily on your

underlying investment you know if you're

shorting you're cheering you might not

even be watching these videos but then

you'd be walking into a blind spot of

what could be coming at the beginning of

next year and those sort of changes

could start getting priced in

as soon as our CPI report potentially

next week if we start getting some

optimism on that of course if we get a

bad CPI report everything just gets

delayed more right that's all what

happens the more we get bad reports the

more this crap just gets delayed and the

longer the pain lasts and the the longer

we have to wait to get back to a real

sustained Market rally so we have to be

careful but the writing is on the wall

for big changes coming here and they're

exciting but unfortunately the weight is

agonizing so if you feel pain

totally understandable thanks so much

for watching hopefully this was

insightful to you I think it's bullish

for Q2 I wish it was bullish for the

Santa Claus rally it could be slightly

bullish but

we're just not there yet it's all

lasting a lot longer than expected

and yeah that's what she said