Central Bank Rate Cuts start *This Week.* [Do This]

it's official with

97% certainty the likelihood of us

getting interest rate Cuts this week

from one of the major economic

contenders in the world is almost

guaranteed the European Central Bank on

June 6th in Just 2 days from the filming

of this video is expected to conduct its

first interest rate cut of the cycle and

this has some broad implications for the

United States but first don't take it

from me take it from Barclays Barclay

tells us the ECB is expected to cut with

a

97% Market implied probability on June

6th and this is consistent with the same

Outlook that looks for two additional

Cuts later this year September and

December now what does this mean for the

United States and what does this mean

for what could be a good potential

investment well let's talk about that

and Barclay also talks about what the

good investment could be but first

practically this means the European

Central Bank will essentially be leading

the Federal Reserve and I'm not

convinced that the Federal Reserve likes

to be led it seems like the Federal

Reserve prefers to be the leader uh in

all things interest rates but in this

case the United States has just had

higher for longer inflation unlike the

European Central Bank which generally

uses a harmonized measure of inflation

we talked about this a few weeks ago

where Deutsche Bank actually argues that

the harmonized uh index of consumer

prices they call it the

hicp is a much more accurate way of

measuring inflation and that's why

European inflation looks lower than in

the United States even though Europe

also has some level of stickier in

inflation in services and in this video

I'm going to actually show you how

sticky inflation might actually be very

normal we'll go into history and look at

that but consider that Deutsche Bank

tells us that if you apply the European

Standard of inflation to the United

States we've actually already been at 2%

inflation for 9 months since the middle

of

2023 so what does it effectively mean

when the European Central Bank starts

cutting rates and we're still at Peak

rates especially since the FED keeps

slamming the door shut to the idea of

raising rates again well it effectively

lowers yields in the United States as

well which could be good for us stocks

think about how that could work

mechanically if Bond rates go down in

the European markets either in

anticipation of cuts or because of cuts

then what happens is you're European

bonds become less desirable so their

pricing for bonds can go down slightly

as demand for those goes down which

ironically actually boosts yields a

little bit but in the US we still have

higher yields so demand could go up for

our bonds driving up pricing for our

bonds which actually lowers rates see

the market has this really really funny

way of practically trying to equalize

what's going going on across the world

of course adjusted for the reality of

inflation in various different areas

you're not going to have the same rate

of course in Argentina as you will or

EUR in Europe or the u United States

because they actually have substantially

higher inflation now of course you've

got chainsaw Javier Malay who's working

on that but it's going to take a little

bit of time and time is something we're

going to be talking about in this video

because when you look at this history

you're going to be a realizing ah what's

happening today might actually not be

different at all it might be totally

normal but think about what that means

for a moment the ECB cutting rates

should actually slightly lower yields in

the United States as well which should

be bullish for the Nike Swoosh recovery

consider for a moment that the 10-year

treasury right now at least is sitting

at a 1 month low now that's not really

highly impressive given that we're still

sitting at like like 4.38 on the 10e but

it does show that we're finally topping

out on interest rates which is nice you

could see that here on screen we're at a

one one month low on the 10-year and

we're at just a - 42 basis. 210

inversion which does still pretend a

recession potentially coming but it is

indicative of rates trending down which

is good right now in the United States

we are pricing in 1.7 rate cuts for

December of 2024 and one rate cut being

priced in for November of 2024 right

after the election yes that's after the

election so a lot of folks are going to

look at that and go of course it's right

after the election it's politically

rigged and frankly it might be after all

Donald Trump has made it very clear that

drum pow will be fired so let's just say

Donald Trump is not doing himself any

favors with the Federal Reserve and U if

there's a political bias if then um

Donald Trump ain't helping himself but

Donald Trump does this because it's very

easy to villainize the FED after all

they're the ones who hiked rates to

these levels they're the ones who have

made cars more expensive credit cards

more expensive housing more expensive

student loan debt more expensive so of

course it's a populist argument to say

Hey look he's the guy who made rates go

up don't mind what fiscal authorities

had to do with it that includes

president Donald Trump and President Joe

Biden he's the guy who actually pulled

the

lever so it's easy to villainize the FED

it's certainly not going to help though

that the November fed meeting is

literally right after the election they

actually I think it was supposed to be

on the day of the election and then they

delayed it to the next day to not have

the FED meeting on the same day as the

election

whatever so what did I find out about

history and what is a potential

investment strategy going into rates

beginning to decline all right let's hit

both of those quick reminder this video

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about and that's a paid promotion let's

be clear about that but now let's talk

about where to invest and what history

has told us so history has told us that

inflation takes a really long time to

come down take a look at this here's the

multivariate core trend of inflation you

see this little tick right here for

January 2023 where my mouse mouse is

mouth where my mouse is right here

that's actually the end of 2023 so this

little bump right here was January of

2024 and you could see that inflation

had a little bump at the end of 2023 and

at the beginning of 2024 and

multivariate core is trending down great

now what I wanted to do is find out is

this bumpiness normal and what I found

is that if you look at the 40 Years of

disinflation that we had from the early

1980s to about 2020 what you'll notice

is that it's actually extremely common

for inflation to be very very bumpy look

over here on the left side just this

left 20% for a moment very very bumpy

over here look at the right half of the

screen it's all bumpy obviously here's a

recession but it's all very very bump

bumpy the only time you really didn't

have a lot of bumpiness was over here

between the beginning of 1990 and 1999

in fact between March over here where we

sat around 4.3% multivariant core

inflation to over here where we sat at

just

1.1% it took 9 years so even when

inflation was not bumpy it took 9 years

to get inflation down now right now

multi VAR at course it's about 2.9 is%

so to line that up with here we'd be

about halfway down this 1990s curve but

even if we had this same rapid decline

over here if we just pick up from that

Midway point to the low it would still

take an extra 5 years to get inflation

as low as it was at the end of the '90s

and so what that shouted to me was

patience

is a seriously undervalued virtue

honestly I have been a victim of this

myself after the Nike Swoosh Larry cudow

v-shaped recovery I thought markets were

supposed to move really fast and I

thought that inflation would rapidly

come down but history tells you that's

wrong history tells you that inflation

actually takes quite a while to come

down I personally do think and I know

this is an unpopular opinion but I

personally do think over the next 10

years we are going to see inflation go

lower than where it's ever been before

but I never realized that the real start

to inflation coming down would take so

much longer and so that patience is

something I have to bake into my

Investment Portfolio and one way I do

that is by making sure I don't go all in

on the interest rate sensitive sectors

just yet instead I have a nice

Diversified portfolio that will

enable quite frankly patience and so

that's exactly what I'm doing I'm

exposing myself to an actively managed

ETF that has a good Diversified basket

that I think will work even as we have

patience going into slowly declining

inflation now what does barlay suggest

as a potential investment opportunity

well Barclays and their piece on screen

right here suggests that uh there is a

real potential in small caps see they

say we believe lagging small caps which

typically display higher interest rate

sensitivity have yet to price in much of

the interest rate relief and what's

fascinating is if I go to the passively

managed uh iwm which is a Russell 2000

small cap

ETF I see on Weeble that it's been

basically range Bound for 3 years in

fact if you go from this right side here

3 years back you're here it's kind of

remarkable you've done nothing for three

years and so I think there's a chance

that if Barclays is Right which is

calling for uh rate Cuts in September

and December in at the ECB after this

June 6th rate cut we'll see what

communication we get from the ECB on the

on June 6th but uh they argue basically

that small caps could end up seeing a

Nike Swoosh recovery as well as what we

saw in the S&P 500 and the NASDAQ which

I expect will continue now remember

smaller cap companies they're what I

call interest rate takers so when

interest rates are high they pay the

higher rates whereas Mega cap companies

which are cashr are uh interest rate um

how should I say it um they they let's

let's rephrase this okay so small caps

they are interest rate payers I

shouldn't say takers their interest rate

payers small caps pay the higher rates

because they have to they have to borrow

to survive cashr Mega caps they're more

like the interest rate takers they're

the ones who take the higher interest

rates because they have so much extra

cash so really in a high interest rate

environment what you're really doing is

just making the rich richer again which

is really frustrating but unfortunately

it's the way our capitalistic markets

work now I'm not arguing that that's the

best system that exists I think there

are debates to be had but the point is

it's the system that we're part of and

so when Nick T from The Wall Street

Journal tells us hey uh look housing

very slow to decline core Services very

slow to decline core Goods kind of back

to normal but these segments are going

to take time he's kind of reiterating

what we're talking about in this video

patience is going to be the key maybe a

balanced portfolio that ALS also has

some exposure to small caps though could

do really well so it's going to be

something that I'm paying attention to I

find it very interesting and I'm

personally tempted to get some exposure

to iwm we'll see what happens but uh

something I'm going to be paying

attention to especially as the ECB

strikes its first R cut so remember to

go to metkevin.com coinbase thank you so

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congratulations man you have done so

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