Folks, this is the most realistic and optimistic and comfortable jerome powell. I have heard so far in the last eight months. This was not a hawkish jerome powell. This was a confident jerome powell.

He gave us clear guidance. He told us this is not going to be easy, it's going to be a challenge and we are going to try to aim for a soft-ish landing. But if our plan doesn't work, we're going to have to screw you and raise rates more and the market's going to suck, but here's our plan, we think there's a chance that inflation peaked in march. What we're going to do, though, is while we wait for confirmation that inflation peaked in march, we're going to raise rates 50 basis points now, 50 basis points in the next meeting and 50 basis points again.

That puts us around 1.75 to 2 soon, and that is still in the accommodative direction. Remember if we had a paul, volcker and the fed believed we need to paul volcker the economy, you would get rates above where inflation are or where inflation is. If inflation's at eight eight and a half percent we'd have to see rates at nine percent, that would be a rug poll. Federal reserve.

Chair powell says no, we don't need or we're not even considering larger rate increases. He killed the idea of 75 basis points for now. It's entirely possible that they'll flip-flop, in fact jerome powell, and this is something that i've been talking about on the channel - gave a very clear and, in my opinion, very credible explanation as to why they flip-flopped last time. Remember in the summer of 2011 exceeded in the summer of 2021, while i was campaigning for governor, i remember the cpi reports coming in low and it wasn't until the delta variant that cpi started coming in substantially higher, and so that's what jerome powell was outlining when He said: look we were in sync with the data in the middle to end of last year we had weak job reports, inflation was trending down and it really wasn't until post delta late october that we got strong job reports.

The stock market was going euphoric. We had strong eci, readings, employment, cost index readings, we had high cpi and then they had to pivot and so they've, given us a very clear path for this pivot, which i really appreciate because remember what jerome powell's his number one goal is. His number one goal is to make sure that inflation expectations remain anchored. There are two ways you can measure this.

You should know this by now. If you watch this channel regularly number one consumers university of michigan consumer sentiment survey. What has that been showing it's been? Showing stable but elevated inflation expectations, what are the five-year break-evens telling us what that is? What is the bond market telling us about market inflation expectations stable to declining compared to the peaks that we saw in march? Obviously still elevated from you know, pre-war era. This would make sense, so i believe that you had a jerome powell in january.

That was very much. We've lost control, we're like we've lost the plot, we're way behind uh. This is a big problem and we have to shift that pivot has now caused about five months of hell in the stock markets, and jerome powell has regularly been asked this, and he dodges this every time he dodged it with sarah eisen. He dodged it today.

He regularly dodges the question of like hey well, do you need stocks to be lower to reduce demand because his tools affect demand, and the question here has to do with the wealth effect if people feel poor they'll spend less money? Well, he says you know his response is generally well. We look at everything, credit spreads debt, the equity markets, which is stocks, and that's just part of it, okay, fine. So if the stock market goes too euphoric, who knows? Maybe jay powell can come out again in a few weeks and go oh wait a minute because that's literally what happened after march - and i want you to remember that after march, the market rallied after the uh, the federal reserve meeting and it rallied for two weeks To levels where we had almost retraced between 60 to 80 percent of of market losses from all-time highs and we're like what should we really be back to 60-70 percent of all-time highs to 80 of all-time highs? Probably not sure enough? Jay powell and the whole fed team come out and they start talking about how uh we're gon na get a little more aggressive and bring the market right back down. So you know they're watching the markets.

You know they're watching valuations all right. Let's talk a little bit more about where his confidence is coming from, though his confidence seems to be coming from this idea that the economy is extremely strong and it's positioned to handle this tighter monetary policy and again their goal is to set these expectations by talking Directly to people and markets that we are going to get inflation back down now, hopefully it goes according to plan and we start seeing more data come in that inflation continues to trend down. Jerome powell wasn't hawkish about this. He was actually really realistic.

He observed hey. We've already had two months in a row of core cpi coming down we're already starting to see some signs that inflation is coming down as long as this is consistent, we're on a good path for a soft landing. If we get a big miss on inflation, it comes in hot. Well, then, obviously, we would expect another fed pivot he's been pretty dang clear here.

I don't think we could ask for more than this. However, drum powell right now does see - and this is actually positive - household spending and business - fixed investment - still strong, still excessive savings on consumer and business balance sheets. This is very unusual in a recession right. This is a very good thing now, of course, in inflation he does say: inflation is much too high and we understand the hardship that this causes to folks again he's signaling to the world.

We are going to get inflation down and this signal is a way of setting in expectations as soon as you get expectations. Unentrenched you end up getting a paul, volcker. Jerome powell actually expressed his admiration for paul, volcker and in the minutes he was talking about uh, like literally the one or two minutes uh. He spent talking about paul volcker.

The market like quickly turned red uh, at least in sort of the minute candles, and it's funny because it's like people, he'll paul, volcker, probably algos here, paul volcker. That's not what we want to hear coming out of jay pal okay, because paul volcker. He did force a recession, but he forced a recession. When inflation expectations went unanchored, we have anchored inflation expectations right now, which is really good, and this is why jay powell thinks we are going to see inflation expectations flatten out and that we've already seen evidence of flattening and peaking.

But one to two months is not enough: we need more evidence now. I love this. He makes it clear, no wage price spiral. We thought we had a wage price spiral in january, but that data actually ended up getting revised in february uh, with with more accurate data, no wage price spiral.

Wage price spiral is really usually evidenced by wages going up faster than the rate of inflation uh. We had that in january that was a panic mode right there, because if we went to wage price spiral, the fed would rug, pull us and he says that he literally says we cannot allow a wage price spiral because that that's worse, that's and like you could Have regime collapse if you have a wage price spiral and obviously nobody wants that so j-pal is right, like we got to get expectations and everything under control so that we don't ultimately have regime collapse. When he's asked about a recession uh, he thinks that look, the economy's doing very well good time to be a worker, and he says we have a good chance to restore price stability without a recession or severe economic downturn. I thought this was interesting that he kind of mentioned the severe economic downturn part because he's kind of saying like, but if we do have a recession, it's gon na be minor.

You know it's gon na be like a paper recession which we've sort of been talking about. The fear is that a paper recession could freak consumers and actually drive us into a deeper recession right labor market. Obviously, participation uh up slightly, but still a large lack of uh workers we're at 3.6 percent unemployment. We have 11.5 million job openings, as we saw from the jolts report yesterday that, with six million unemployed people means we have about 1.9 spots per person.

Now i personally think of this as, like the excess demand problem that you have uh in in real estate, where you have excess demand for jobs. Just like you have excess demand for real estate. So what do you do? You raise interest rates, think about real estate and then look at how exactly it relates to jobs with real estate. You increase rates.

What do you do? Well, you you take demand, that's in the way excess you drive, excess demand down. That doesn't necessarily mean prices have to go down right, that would mean demand, has fallen below supply levels or supply levels have risen, but you drive that excess demand down to a to a balanced level. The same exact thing is what j-power was trying to do for wages. In fact, it took him a little bit to say it, but somebody asked like what's the ideal level, that 1.9 ratio and i'm like one, that's obvious, it's one and uh.

It took jay powell. You know a minute or so to get to it, but he's like yeah, i mean like a few years ago we were at a one-to-one ratio and we deemed that to be pretty appropriate at the time. Of course, there's a matching effect like if you have the wrong people in the job market, who don't have the skills for the certain jobs, you might see a different ratio there, but obviously the the point of markets is to have a balance between supply supply and Demand uh, that's obvious, so so no surprise there that when we're so hot on that ratio 1.9 times the openings per workers available, we have room to bring that down with higher rates. We have room to bring that excess demand in this real estate market down and we've already like flushed out so much cash out of the stock market.

It's no surprise to me that we're basically bouncing perfectly off the zero percent fib here, because that's the bottom like how many more indications do we need. This is the bottom now who know i can't guarantee it. You know you know. A sack of rice could fall over in biden's office tomorrow, and he could go crazy and uh and and the market could crash more.

You just have no freaking idea, but this is now the fourth time we are bouncing off the 318 uh 5 level on the qqq. And if you don't see that as a signal, i don't know what more you need. Okay, that's all i got ta say, but anyway, it is possible. Obviously that uh this here from the federal reserve could lead to some uh risk on attitude here, because the fed is giving us a very clear sense of comfort and stability and that could lead smaller stocks like we're.

Seeing now sofi robin hood and small caps to actually run as you get a risk on uh momentum, move just be careful. I think now is the time to kind of get into stocks, but if they, if we start retracing back fifty percent again, seventy percent again don't get surprised when the fed comes out and starts talking hawkish again, if it happens before inflation actually comes down. Jerome powell obviously makes it clear that we're still going to have uncertainties coming from china from russia and talks about how his tools work on demand not on supply, there's nothing. They can do to bring oil prices down, there's nothing.

They can do to bring wheat prices down, but what they can do is affect demand. Now, what i thought was really interesting here is he made it clear to us that they're not paying attention to the top line level of inflation they're paying attention to? As expected core cpi used car prices going down core cpi's going down? These are the things we want to pay attention to. That doesn't mean it's not painful that food and energy prices are high, but the fed is judging their efficacy on core prices going down. Okay balance sheet runoff, they kind of randomly it sounded like pick june.

1St. Doesn't really matter uh very uncertain the effect of the balance sheet, but again it's going to take 19 months for the balance sheet to even start affecting the markets in terms of tightening, because the reverse repo market has over 1.8 trillion dollars of cash, uh and they're. Only going to moderate or taper this down at about 95 billion dollars after three months, you know we got ta, we got ta ramp up to 95 billion dollar taper and so uh that that's at least 19 to potentially 20 months that we have before you actually Start seeing the tightening effect of uh the balance sheet runoff now it's an oversimplification to do this kind of math like this, but it's a rough like roughly. If you're going to approximate, it's is actually a pretty good approximation.

So don't worry so much about the taper focus more on the trajectory of rates and specifically core inflation and core inflation expectations. Those are going to drive the fed. This, in my opinion, was a phenomenal, phenomenal fed meeting uh. This was the most coherent and controlled that i've seen jay powell and the most certain he has seemed i'm happy about this, and i wouldn't be surprised if it continues to push a risk on rally, in which case, if you want to learn more about my perspectives, Whether it's in the stock market or the real estate market make sure to check out those programs on building your wealth, a link down below now uh.

There is a coupon code that is expiring on may 16th, that'll be our largest price increase ever because of all this inflation, that's going on the prices are never lower, so uh, and they haven't been for the last four years that i've had uh various programs and Have been adding uh, adding content to these, so uh check them out you get lifetime access to whatever content gets added. We got a couple of sweet real estate videos coming out as well for the real estate course, and the wealth course is getting a bunch of new access, so super excited anyway. That's the update for you on jpap.