What's up? Graham It's guys here. If the wait is finally over. After almost two months of silence as of a few hours ago, the Federal Reserve just reduced the rate hike to 25 basis points, signaling that even higher rate increases could soon be coming to an end. After all, mass layoffs are already putting downward pressure on the employment rate.

Wall Street is bracing for the largest downsize since 2008. home buying demand is decreasing and inflation is falling on weak retail sales. So with the FED now opting for smaller rate hikes, some Fed officials believe that the pause could come a lot sooner than expected, with rates eventually being lowered. While Others believe that this is only the very beginning with the possibility for some serious damage.

If The Fed doesn't continue raising interest rates longer than expected. That's why we should talk about exactly what's happening, discuss the Federal Reserve's warnings over these next few months, and cover exactly what you could be doing. Because I Gotta say, this could very well be setting a brand new trajectory that we haven't seen for more than a year If things go as planned. although before we go into the latest details, if you appreciate me scrambling to post this while I currently sit in an airport about to board a six hour flight, it would mean a lot to me if you hit the like button for the YouTube algorithm or subscribed if you haven't done that already.

I Know it's super annoying to ask, but it does help out. it makes a huge difference. And as a thank you for doing that, here's a picture of a green spotted puffer fish. so thanks so much! And now let's begin.

Alright, so before we talk about the Fed's recent rate hike and their warning for the rest of 2023, we got a breakdown: what's currently happening in the market because there is a lot more than meets the eye see. For the last year, the Fed's been on a mission to increase interest rates to the point where inflation begins to slow down. although the problem is that they don't have the best track record of being accurate. What most people don't realize is that initially the target Federal Funds rate was thought to be in the range of 1.9 percent by the end of 2022, but in April that was moved to 2.75 percent.

In June it was moved to three and a half percent. in August it was moved up to four percent, and now it's currently five percent with the goal of reaching that point within the next few few months. Although the good news is that it does appear to be working for the last six months, inflation has been steadily declining from its peak of nine percent in June of 2022 to now six and a half percent, which is still high, but it's trending downwards. On top of that, companies are beginning to downsize their Workforce and even though this is horrible news for the middle class, this is music to Jerome Powell's ears because this means wage gains are finally beginning to slow.

I Know that sounds completely backwards, but the general philosophy is that when job growth is strong, employees make more money. and when they make more money, they spend more money and that drives prices higher. That's why in 2023, good news is bad, but bad news is good and the more bad news we get, the less likely we are to see higher interest rates, which is good. in fact.

Speaking of good news, the most recent consumer spending report showed a decline of 0.2 percent month over month. During a time where people historically spend more money than usual, this is giving the FED even more reason to believe that the economy isn't indeed slowing down. However, in terms of the implications throughout the stock and housing market values, here's what you need to know because the latest data is extremely telling in terms of which direction the market is headed. First, let's talk about the housing market in areas like: San Francisco Luxury Home Sales About five million dollars have already declined 70 in the last year.

All homes are sitting on the market longer than they used to, and total housing inventory once again fell under 1 million units with growth slowing down from the last year's Peak Zillow's report notes that no surprise, the biggest deterrent for buyers right now is the price, with the typical home now costing 62 percent more per month than it did at the end of 2021.. this also means that we saw the biggest month-over-month housing decline since 2011, with buyers and sellers still at a standstill to determine who gives up first. Zillow explains buyers step back from high prices will would-be sellers steered clear of the market, resulting of course, in lower inventory overall. but even with fewer homes available 52.9 nine percent of them sold for less than their asking price, which was similar to what we saw back in July of 2020..

now, obviously real estate is local and every Market is going to be different. but if you're curious which Market saw the biggest decline, Minneapolis takes first place, with Oklahoma City Phoenix and Houston coming up close behind. Although other areas like Salt Lake, City, Raleigh, Indianapolis, Cleveland and Nashville have seen a rather large increase, so it's yet to be seen how those prices are going to be impacted throughout the next year. However, the largest signal to look for for all of this is what's referred to as the pending Home Sale index, which is probably one of the best leading indicators to look at in terms of which direction the market is headed.

After all, past sales only show us where the market was not what it's currently doing, and once you look at today's housing activity based on current contracts, you'll see that we did see a slight increase of two and a half percent in December coming off the record lows for the month prior. Although this is really only the very beginning because the other impact of interest rates is also what's happening in the stock. Like I mentioned earlier throughout the last week, the stock market increased from the 99 optimism that the FED would hike rates by 25 basis points and then either pause or continue increasing interest rates at a much slower Pace than in the past. On top of that, there's also the hope that China's reopening economy will help ease supply chain constraints, drive more demand, and Boost International Trade leading of course to people finally posting profitable screenshots on Wall Street bets.

Although others say that even though China might drive excess growth, it can also lead to higher inflation is their need for oil, materials and goods and creases. meaning the FED may have to raise interest rates higher for longer than expected. In fact, the President, the Swiss Chinese Chamber of Congress said the Chinese energy and raw material needs will compete with European needs and the global needs. So I see inflation relaxation right now, but we will see more pressure on inflation in Q3.

Now the bad news with this is that Michael Burry previously warned us that in the past inflation appears in spikes. It resolves Fool's people and then comes back with the chart showing that since the 1940s, inflation never just occurs once and then disappears. In fact, in every single circumstance through today, inflation generally subsides. People celebrate by spending more money, and then it reappears for as long as a decade.

It's also worth noting that even the White House did an analysis on inflation post-world War II and they determined that in almost every single case, inflation took several years to normalize from the peak, and it's never flatlined within just a few months. So even though we might currently be seeing some good news with the FED in the rate hikes, it's not over quite yet. But hey, at least on the positive side, the average analyst expects the S P 500 to end the year above 4 000, with the range anywhere from 3 500 to 4 500, and there's a record amount of cash sitting on the sidelines just waiting to scoop up stocks anytime they decline. Although I Gotta say, a lot of that really does come down to the Fed's decision over these last few months.

and in terms of what they just recently said, gonna want to listen up Now in terms of their most recent decision, let's be real: A 25 basis point rate hike has been priced into the markets now for the last few weeks, and there's no surprise there with inflation slowing down. However, the real question that everyone wants to know is simply when will the rate hikes stop? As of now, we didn't get any confirmed Direction and thefts to be expected, but currently 80 percent of Traders are pricing in one more 25 basis point rate hike in their March 22nd meeting and then a pause while they wait and see what happens. In fact, the chief Economist at ING said that U.S inflation shows price pressures are easing yet in an environment of a strong jobs. Market The Federal Reserve will be weary of calling the top in interest rates, especially since there's the concern that if investors think inflation is over, they will spend more money causing inflation to persist even longer.

That's why it's believed that the Federal Reserve is not going to give us any indication on what's going to happen too far in advance. But as of right now, a peak Federal Funds rate of 4.75 to 5 percent is being priced in, and all of that will be determined from the information and data that we receive between today and March 22nd. However, on the positive side, consumer expectations for near-term inflation did fall to the lowest level since April of 2021 at 3.9 percent for the next year. Which means the Fed's plan seems to be working as far as what I think about everything going on.

Let's talk about the rising unemployment at a first glance. Yes, it is shocking to see just how many jobs have been lost over these last few months, but in many of those cases, those companies also hired so many people throughout the last few years that the cut still leaves them with more people than they had prior to the pandemic. That's why, from my perspective, it seems as though these companies were forced to increase their head count when times are good, but scale back on some of that when times are bad, and that either means there's still room to cut even more if they need to, or they're going to play it month by month to see what happens. In terms of inflation, though, it seems as though employment is mostly recovered to where it was prior to the pandemic, and wage growth is all but returned to normal, suggesting that it's no longer a driver of higher prices.

although separate from that, I Am concerned that after this most recent rate hike, there's not a lot more optimism to look forward to. I Mean sure, we have some good earnings coming out and we have the reopening of China but there's still the hesitation that the FED may have to increase interest rates a little bit more due to higher demand, and inevitably that'll weigh down on the market. In addition to that, plenty of investors are beginning to use cash as an investment within money market accounts because it's currently paying over four percent and that is relatively risk-free when you compare it with stocks or real estate, so only time is going to tell how that plays out or if stocks have to fall even further to entice those people to buy back in. Overall though, I do think it's a move in the right direction and we could very well be headed towards the end of the rate hike cycle as both England and Canada are expected to scale back over these next few months.

But let me know what you think: I Read all the comments and I'm curious to see where you're investing and what you think will happen throughout the rest of 2023.. So with that said, you guys thank you so much for watching, As always, feel free to add me on Instagram And don't forget that you can get a free stock worth all the way up to a thousand dollars with their sponsor Republic.com Down Below in the description when you make a deposit with the good Grand and they're also opening it up so that you'd be able to purchase treasuries direct from their website instead of going through the Treasury Direct site which is pretty confusing. so if you're interested, the link is down below in the description. Enjoy! Thank you so much! And until next time.

.