The Coming Fed RESET | Prepare for Next Wednesday!

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next week for jpow let's get into it

will the Federal Reserve re us and

absolutely destroy us next week well in

this video I'm going to break down that

thought and keep in mind my positioning

is still mostly cash I'm relatively cash

heavy I did open some positions again

after some tax loss harvesting which is

great because now as we get gains in

trading we can offset some of those

those losses and after all I was able to

buy back for a lower price so

win-win still cash heavy though and so

why is that because after all this week

we got really good earnings from the

majority 40% of the S&P 500 by market

cap that suggested the

consumer at least now is still doing

well and forcasts are still doing well

we're now nearly four weeks into the

second quarter of the year the econom is

holding up real GDP estimates are still

sitting at 2.7% Although our initial

read on GDP for q1 which came out

yesterday came in a little soft

1.6% with potentially an increase in

prices paid not great so what does that

do for the Federal Reserve and what do

we expect Drome Powell to do to us are

we going to get J powed tomorrow uh

sorry not tomorrow next Wednesday or

what do we expect will actually end up

happening well let's think about that

first I think it's worth setting this

basine you got establish this right here

so I know this looks like a little

scribbly but I'm going to do my best to

explain this very simply okay so this

right here is a schedule of CPI

inflation report releases these in the

Box here are done we've already gone

through these releases and we really had

a sad face release a sad face release

and sort of a neutral face release in

other words we're kind of like H this

isn't great in fact drum Powell has gone

as far as saying hey you know we haven't

gotten any more confidence that we're on

the right trajectory in fact the pce

numbers we got this morning somewhat

suggested o we could be seeing a little

bit of an uptake in some of those core

numbers so as jome Powell said it's the

second half of the year that usually

comes in lower which is exactly what

happened last year the beginning of last

year we're like oh my gosh January

everything's so hot and the second half

of the year really chilled out with

inflation substantially so we got to

wait almost for this July August

September October November we got to

wait for those reads to come out and we

don't even get the December read until

the beginning of 2025 so this is where

we have this hopium of being happy but

right now we're starting off with you if

I sort of averaged out all these faces

mostly like what's going on this isn't

good like a second wave or not so JP is

going to come pow us on Wednesday but

what is he going to do well I like

looking at my leading indicators to see

what he's going to do and not always

right but we try our best to provide

information and strategies around this

and so I like looking at the 5-year

break even now if the 5-year Break Even

were still skyrocketing like it was last

week all the way up at a range of about

2.57 we basically have been going

straight up since about December that's

roughly what the 5-year break evens

looked like I'd be a little nervous

because we'd have a scrunchy face and a

2.57 5year break even that's so great

fortunately that just legged down kind

of looks a little bit like this on the

chart we're at about

244 which you know it's it's not great

it's not as low as where we've been when

we're having good inflation reports but

it's it's okay you know 10-year treasury

sitting somewhere around

4.67 so we have some real potential of

markets creating tightness to push

inflation down and this goes into Drome

Powell's thinking so I really want you

to put JP's hat on for a moment okay so

remember the following we're going to

list these out number one

jpow told us now obviously he could be

lying to us right but he told us that

Federal Reserve credibility matters a

lot we know their cred is hurt because

of transitory inflation right so we know

their street cred is hurt okay so let's

think about that if their street cred is

hurt they're going to want to rebuild

some credibility right so what are some

other things that they've told us well

they've told us that we believe we're at

Peak they've told us that they've also

told us we expect to cut rates this year

so you have a fed that's actually biased

to not flip-flopping again and affecting

their

credibility so street cred hurt they say

we believe we're at Peak they never

declared Victory which we knew they

wouldn't do that because that that would

be bad especially if we ended up getting

three scrunchy face inflation reports in

a row like we did not great and we

expect to cut rates this year these are

statements we've gotten now while their

projections say three rate Cuts markets

are only pricing in 1.3 rate Cuts but

remember starting two cut rates this

year does not mean we have to do all

three this year we could totally

postpone the others to next year maybe

do one cut this year I kind of still

think there's a chance we're not going

to get any Cuts but this video is really

about hey what do we think in terms of

jpow giving us the big old jpow next

Wednesday so streak C hurt we believe

we're at Peak we expect to cut rates by

the end of the year

and uh second half inflation should be

lower okay at the same time we've seen

uh some signs of GDP weakening uh though

consumer spending strong and one of the

you know some of the reasons we had that

that GDP weakening a lot of that was

driven by uh inventories and exports so

inventories pretty common now that

Supply chains are pretty healed uh

companies don't have the urgency anymore

to stock up as much in case there's a

big wave of demand so even though

consumer spending is strong we don't

want to rebuild all these inventories

like we're prepping for Co again and the

co shortages because it's expensive it

it hurts margins and it doesn't look

good it hurts that free cash flow so we

want to sort of minimize how much money

we're spending building inventory

obviously inventory also decays over

time that's how it hurts margin right

somebody has to count it and account for

it and you have to store it and you have

to make sure it doesn't get stolen all

this so there's some explaining of GDP

that can be

done but the reality is pricing is still

kind of inching up and it's not good pce

you know we had a little Boop up there

on some of the core levels and some of

the eurover years I'm going to keep this

simple okay so we know these are some of

the facts that we know so we're going to

write down uh first half inflation a bit

warm we'll call it a bit warm right all

right great so these are some of the

facts we know and so when we think about

Wednesday of this week we think what is

JP likely to do is he going to tell us

ah we think you know it's just a

seasonally hot January and February and

and we'll brush that aside no we don't

actually think he'll do that why because

the last time we heard from jpow last

week he said yeah we haven't gained any

confidence the market actually rallied

after he said that which was really

weird because I'm like when when is the

market going to wake up again to pay

attention to interest rates again and it

it doesn't seem to have an enthusiasm to

do that at this

point fine whatever but these are facts

that we know and now we speculate uh

well let's write that down too we we

know that the last time he spoke which

helps us last time uh not more

confidence okay great so now maybe we

can put together a

strategy assuming all of these facts are

true we can think that jpow is going to

want to preserve his credibility by

preserving his credibility he's likely

to maintain we still hope to cut rates

this year now that doesn't mean three

cuts it just means ah they still hope to

cut rates this year right that would

preserve his credibility and so then we

just go quite frankly back to we're

going to wait all right so how long do

we wait well remember even if we get one

good inflation report one good inflation

report does not make a trend yall

remember that we've talked about that

many of times before uh and so what we

really have to do is have multiple

inflation reports in a row that are good

all right so let's go over here let's

say best case scenario we start getting

good reports April 10th May 15th

probably by June 12th we would have

enough data to say okay we've got enough

to confidently say yes yes sir we indeed

can

start lowering rates so you could be

ready if you had three good inflation

reports in a row but I I don't think

that's likely I think it's more likely

you're going to get more of these

scrunchy faces for a while so we'll go

with a blue you know we'll just make it

a green color here there we go uh we'll

go with let's say that's scrunchy that's

scrunchy and then finally we start

getting happy reports we're probably not

cutting until the earliest September if

at all uh you know before the December

meeting right here are the meetings by

the way summary of economic projections

December 18th uh September 18th and June

12th the May 1st meeting July 31st

meeting and November 7th meeting will

not have uh summary of economic

projections so in other words people are

going to be paying very close attention

to everything Jerome Powell is saying

rather than specifically what he's doing

although of course reducing the qu

quantive tightening reducing the level

of that is a form of stimulating because

you're you're you're taking less money

out of the system on a regular on a

monthly basis so something to keep in

mind all right interesting so we still

hope to cut rates we're going to wait

what are we probably going to wait for

probably going to wait for at least July

so we have to sort of buckle up to the

idea of you know we're at least three 4

months away from uh starting

Cuts but none of this says that jpw is

going to flip on his credibility of

hiking that's the big question will we

hike my expectation is no why do I think

that because again he said we believe

we're at Peak we know they're coming

from a place of hurt credibility and

they said they're at Peak yes inflation

is a bit warm but that means we could

solve like or hopefully by just staying

at a stable level of inflation or or of

interest rates for a longer period of

time okay great so we don't actually

have to hike we just have to

wait so I think the jpow next week is

going to be blunt he's going to come

look obviously we haven't gotten the

confidence yet we've had some hotter

reports and we've had some mixed reports

coming in but the labor Market's still

strong and the consumer still strong

those things are true but they can turn

on a dime so that's one of the reasons

I'm still you know way more cash heavy

than I have been but I'm

also uh you know like can can we just

keep growing from where we are and the

reports this week were really really

really really good okay like even

Facebook missing by 1.3% I'm going to

have a big Facebook video coming out on

that even Facebook missing by 1.3% it

was still a really good

report uh okay

so my bottom line takeaway from this is

going to be set up like this here's how

the trading I think goes all right you

ready for this so you're going to have

Monday Tuesday Wednesday Thursday

Friday I believe that on Monday Tuesday

if you have a rally so if we go into

jpow rally rally you probably want to go

puts for

Wednesday now if we go sell sell into

Wednesday I'm going to probably set up

for calls on Wednesday now that's

trading it's a trading strategy know

it's like I really I try my best to come

here and and give opinion on what might

happen and then people love hating on me

when the results come out and they're

different from what I say but I'm giving

a strategy and so take that for what

it's worth but I don't think this is a

meeting that we have to be so heavily

concerned about hearing about hike

they're not going to like actually hike

the question is would he sort of plant

the seed that they might hike I don't

think so I don't think that's necessary

at this point it could lead to Too Much

instability uh in the bond market and if

you lead you cause more selling in the

bond market because people think rates

are going to go a lot higher then you

actually hurt liquidity and funding for

the government at a time when the FED

wants to uh you know kind of be like all

right we're going to start C te because

we're getting concerned that there might

not be enough liquidity to keep buying

government bonds to keep the government

debt

funded so long and shorted out of

everything that's my trading tra

strategy going into next week obviously

I'll continue to sell my buy and sell

alerts to everybody in the stocks and

sight group Hope you join it we've got a

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everything thank you so much for

watching good luck everybody have a

wonderful weekend we've got a bunch of

Road shows coming up I'm heading over to

those uh in a few moments here we'll see

you soon thanks bye 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 PA there financial

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