wtf just happened

yikes any optimism that came from the

retail sales report this morning faded

faster than a hater in bed with his mom

yeah take a look at this chart right

here this is the NASDAQ yikes here was

our enthusiasm following the stock

market open following retail sales data

that was better than expected watch my

video on that still very relevant posted

that earlier this morning but take a

look at this right here at seven o'clock

uh Pacific Time 10 a.m Eastern we had an

inflection down that briefly was

Shrugged off only for Market sale wait

wait wait wait no this is bad and so

let's talk about what that bat was that

bad was the following the University of

Michigan survey of consumers now there

are some reasons for what just happened

here we're gonna try to explain them but

this is not good this is a pretty pretty

not good one and I'm also going to give

some Catalyst dates so buckle up here

and make sure you got your life

insurance in as little as five minutes

by going to metcaven.com life

all right with that sponsor out of the

way let's get over to this section right

here year ahead inflation expectations

Rose from 3.6 in March to 4.6 percent in

April the most important thing about

this cycle this fed tightening cycle

right now what separates us from the

1970s

is squarely inflation expectations if

inflation expectations continue to go on

this kind of path with the information

we just got we get Paul volcker again

it's that simple this is a warning sign

of potentially Paul volcker coming now

fortunately when we actually plot the

University of Michigan consumer

sentiment survey on a chart and we

compare to what it's been doing the past

few years you can see it is a volatile

figure

it is volatile but that downtrend

potentially just got broken now keep in

mind these are preliminary numbers which

means that these numbers will actually

come in with their final numbers at the

end of the month on the 28th of April

but look at this we had a beautiful

downtrend here and yes we've had upticks

before we had an uptake over here

towards the end of 2022 we had an uptake

over here towards the beginning of 2023

but we've always been followed by these

larger downtrends and the general trend

of inflation expectations here has moved

down however all of a sudden this large

Blue Line right here represents the

sudden explosion of year ahead inflation

expectations going from 3.6 to 4.9

percent now there's some good news and

that's that long-term inflation

expectations came in at 2.9 percent for

the fifth month in a row and they've

been in a range of 2.9 to 3.1 percent

for 20 of the last 21 months that's

great that means long-term inflation

expectations are stable but short term

we've just had some volatility now there

could be some reason for this

some folks say it's because of gas

prices in other words gas prices are

trending up over the last few months are

potentially leading people to think uh

oh all right here comes the inflation

again take a look at natural retail

gasoline prices chart we're sitting at

370 a gallon for the week ending April

10th and that's been on a nice uptrend

uh it was certainly since uh March where

we were closer to maybe 10 to 20 cents

less expensive in an uptrend since

January where we were about 30 cents

less expensive so somewhere between

seven to eight ten percent in increases

here in gas prices some of this

obviously has to do with some of the

OPEC drama and that's also something

that could weigh on this so we've got a

few things that could weigh on why this

sentiment survey comes it came in the

way it did I would first say gas prices

the second thing I would say is the OPEC

plus production cut announcement which

basically suggests that oil prices are

going to go up and therefore people

think okay maybe prices are going to

keep going but this is still a big Miss

nonetheless I mean maybe you could blame

the banking crisis but we didn't see

those numbers come up in the a final

survey for the end of last March here we

are in mid-april and so I think the

banking crisis problem which is like

over a month old now probably not

exactly what we're looking at probably

just looking at gas prices in OPEC now

write down this state April 28th that's

two weeks from today uh no it's not to

remind you about an expiring coupon or

price is going up or buy now pay later

for the programs and building your

wealth link down below those are amazing

it's to tell you that that's when the

final read comes out on this consumer

sentiment survey and so we'll want to

look at that in two weeks to see okay is

this a transitory dare we say increase

in inflation expectations who knows but

this definitely is going to create heart

palpitations for the FED now it is good

that you see here Rising sentiment for

lower income consumers was actually

offset by some declines in higher income

consumers so you're getting sort of an

evening out of the economy and while

consumers noted easing in some places

you did not actually see any kind of

material changes in what consumers

thought about the economy so consumers

still had a relatively stable thought

about the economy it's just they think

that inflation is going to remain higher

for longer I think that this report if

it holds in the final read in two weeks

is probably going to end up forcing that

25 basis point hike from the Federal

Reserve now even before this report I've

been a big believer that we're going to

see a 25 BP hike but the price action

that you're seeing in the market today

in my opinion directly corresponds with

these higher inflation expectations

numbers because again this is a big

piece of the puzzle in terms of what

separates us

from the 1970s and so we don't want to

go back to the 1970s at all now uh it is

worth noting That Wall Street mentions

the five to ten year median inflation

was unchanged expectation that's good

but this notable pickup from a 3.6

percent to 4.6 a percent is the highest

read since November it's not something

that is going to provide any comfort to

the Federal Reserve and if anything

potentially pretends sticky inflation

which unfortunately would be the worst

case scenario right so as usual in this

environment we're getting a lot of

fluctuation in data and that's actually

why I regularly say when we're looking

at that Nike Swoosh style recovery you

don't want to draw it smooth you want to

draw it like this because there is a lot

of uncertainty in the data whether it's

China Ukraine Kevin McCarthy and the

debt ceiling personally this is

something I want to pay attention to

more and some of the other issues going

on because a Breaking of inflation

expectations is the worst case scenario

that brings us Paul volcker now the good

news is we do have the five-year Break

Even remaining relatively stable that's

fantastic news because that's another

way of measuring inflation expectations

and the bond market is basically saying

hey we're not as worried maybe about

that consumer survey see in the consumer

survey you're really just picking up the

phone going hey so what do you think

about inflation expectations uh I you

know I think it's going to stay higher

for longer you hear that it starts

showing up in the surveys the bond

market is where people are actually

putting their money where their mouth is

and fortunately here you're not actually

seeing any kind of dis anchoring of

inflation expectations now of course yes

there's no doubt that inflation

expectations were on this glorious

downtrend and the banking crisis broke

that trend for a moment yes we've been

lower like in January we were lower uh

we were lower here and here so there

have been times we've been lower on

inflation expectations and we really

want to see these five-year break evens

go below two percent in order to

actually expect Federal Reserve Cuts so

we're not expecting cuts and rates until

these break-evens Trend in down even

more and we're making progress the

breakevens are down a lot fortunately

the break evens are not spiking on the

result of of this consumer survey that

could be a way of the bond market saying

hey look maybe consumers are worried but

we're not a five-year break-even

inflation rate nice and stable a little

bit of a take up tiny little bit of a

take up but again when you look at the

broader uh Trend that we're seeing here

on the uh on sort of the daily chart

rather than looking at it by minute by

minute you look at the daily chart the

trend is clear yes maybe you had a

little uptick there on the right but

really does that change any of this no

so broadly should we be nervous about

this no is the market going down because

inflation expectations came in hotter

and that's one of the things we

definitely don't want to see happen yes

absolutely fortunately other leading

indicators of inflation are really

suggesting deflation this morning in the

course member livestream we went deep

into Fastenal and we see nothing but

deflation written all over the place

deflation deflation deflation deflation

which is great that's an industrial

supplier for construction

you'll look at Carmax we see deflation

most of the companies that we are

analyzing there are very few pet stores

probably the exception of most of the

companies we're analyzing are expecting

price declines

and disinflation if not outright

deflation now of course we're not yet

expecting prices to show up cheaper in

grocery stores or whatever else so on

the day-to-day basis it may feel like

prices are still high and staying high

but that is how inflation Works prices

went up and they stay up now the goal is

let's prevent them from going up again

this consumer data hurt a little bit but

as I've mentioned before you can still

get life insurance in as little as five

minutes thank you so much for watching

the video go to metcaven.com life you

could Apple pay or Android pay for it

and folks we'll see in the next one

goodbye and good luck