Hey everyone kevin here: here's a complete breakdown of everything that just happened at the federal reserve and why the market is reacting. The way it is, let's get right into it. First, interest rates were kept at zero along expectations, nailed it doubled the pace of the taper from 15 billion to a 30 billion dollar reduction in bond purchases. That means we are still printing 75 billion dollars, but we are reducing as expected.

This is good. The market likes when things happen, along and in accordance with expectations. The market does not like uncertainty, anytime, there's uncertainty, stocks plummet. That's why we've had so many red days leading up to this meeting every time.

There's uncertainty over what j-pal is going to say or do the market falls same thing is true when you look at the beginning of like right before the election, just as an example of of 2020 lots of uncertainty, stocks fall very normal. Now the federal reserve has essentially guaranteed us a rate increase in 2022. This is important to know and what we could do is we could look at a summary of economic projections. This is a little bit messy.

I'm going to explain it. There's a lot of information here, the blue dots are from the fed. Everything else is my garbage. What you need to pay attention to we're going to highlight it with this little green highlighter is right here.

Okay, this is what you got to pay attention, this yellow highlighter uh, and that is a guaranteed rate increase essentially uh at least one rate increase. However, the median forecast is for a three, a triple set of rate increases in 2022. That would bring us to just below one percent or an expectation of 0.9 keep in mind. There are only eight meetings in 2022 unless we double up a rate increase in 2022, 38 of the meetings in 2022 will contain a rate increase.

We do not believe the first one will be january. Jerome powell made it clear. We will not raise rates until we finish tapering. We will not finish tapering until march jerome powell was asked hey.

Are we going to have a lag between when you finish tapering aka march, and your next meeting aka may jerome powell answered this so now i'm going to remove this little kevin's guest thing here, because i agree with what the market believes now based on jerome powell's Answer that no, we do not need to have a lag between the last or when the taper finishes and raising rates, which basically means march. That's what he's saying rates going up in march, the federal funds futures are already pricing in a 90 chance. That rates will be up for the first time by april, but that means they're going to do it in march, based on the market's expectation. Because that's when the meeting is okay, then we're expecting one to two rate increases in 2023 and a one to two rate increases in 2020 uh four.

I wrote down that there's only like a five percent chance. We would actually actually see rate increases in january. Very unlikely that we'll see rate increases in january again, jerome powell made that pretty clear as well. Now the uh federal reserve has also changed their summary of economic projections uh regarding the unemployment rate and inflation rate.

This is very important. This is critical. Okay, this chart is mission critical right here. The federal reserve realizes that inflation is worse.

Jerome powell said this numerous times, specifically because of delta. Before delta, we had five months of cpi inflecting down and crypto fell during that time. Now you have cpi a lot higher because of those supply chain constraints. Basically, jerome powell saying we hit a wall with supply.

We thought we would see inflation because of all the fiscal and monetary money printing, essentially in the helicopter money we've been doing, but we're actually seeing it because of supply chain issues. You go to a vertical supply curve, which basically means hey. We want car and then instead of price, going up. Diagonally price is just going up straight.

It's just a visual depiction doesn't really matter, but anyway, jerome powell does believe, and the fed does believe together that inflation will go down oops to 2.6. At the end of 2022, which is about half of where we are now, they have revised to the better their expectations on unemployment. They expect the unemployment rate will be three and a half percent by the end of the year. They previously thought it would be 3.8.

They have also increased their expectations for gdp, which means they think the market is going to grow by four percent of 2022, which is more growth than they thought they would have had in 2022 when they first did this projection in september or when they previously did This projection, we think we're gon na grow at four percent. Despite the triple rate increases. The market has substantially priced in this uh. This interest rate uh news and this federal reserve news - and this is why, if you look at the s p 500 and a substantial amount of stocks that have sold off uh heavily, you can see that we've had a substantial move to the upside here in not Just the s p, 500, but many different tech stocks.

The market is liking what they heard from j-pal, because they did not get rug pulled. This is why i put in multi-seven figures of money into the stock market over the last three days, leading up to this meeting sent all of those alerts, of course, to everybody in the stocks and psychology of money group - and we talked about this in our private - Live streams which you can have access to as well. If you use that coupon code xmas before december 25th at 11, 59pm now part two. I've also bought during the meeting, essentially right now, uh, because there was always the chance that we did get a rug, pull and then you'd want to have money.

Now we don't have a rug pull now we actually don't have that many catalysts of negativity going forward. Now i'm going to talk a little bit more about what jerome powell said, but let me just quickly reiterate the negativity that we had on november 29th november 29th. We thought lucid and neo were going to go down, went down. We thought the robin hood.

Lockups were going to be a disaster, and you could watch this december catalyst to watch meet kevin type it into youtube. We thought robin hood was going to plummet because of the lockups. It did just the yolo on the dip by the way this morning. On that one, i got some call options on that one uh, full transparency.

We thought congress with the budget deficit would be a non-issue. We thought the debt ceiling would be a non-issue both of those ended up being a non-issue. We thought the fomc meeting and the cpi uh release would be the biggest negative catalyst. They were obviously profit taking and uh loss taking towards the end of the year with hedge funds and a lot of selling by corporate executives.

Because of taxes going up. We already know that uh now uh some of the other things, so so this eliminates a lot of the catalyst that we had. The only catalyst right now is omicron, which most of us think is really a nothing burger uh and that this could actually be the beginning of the end of the pandemic right. Okay, next next next then uh jerome powell told us look.

Uh. Inflation is well above our two percent, a target it's going to continue well into next year, uh. How - and there are things that could continue to increase inflation things that could continue to increase inflation. Are things like rents, because the stupid way they measure owner's equivalence? Rents lags rent increases by six months uh, so that is going to push inflation up in 2022.

Wages could push inflation up in 2022, however, the fed still expects inflation to have by the end of 2022 as more of the transitory items come down. Like transportation costs, food costs and some of the other things that are affected by supply chain issues like chips, cars and so on now, why not stop the stop all purchases of bonds? Right now? Why are you still printing 75 billion dollars because they want to take a methodical approach and clearly signal to the market? What they're doing they don't want to rug, pull the market being very, very transparent and nice here now drone pal is basically telling us we're going to see liftoff in march, i wrote down, i kind of already explained that jerome powell also says that we're probably not Going to see a strong labor force participation recovery until the end of the pandemic, omicron is a risk. However, listen to this line from jay pal, okay, jay pal literally said quote: people are learning to live with. This he's basically telling you who cares like? No.

Obviously, that's not what he's saying but but like that's what he's signaling he's like? We don't think omicron's that big of a deal he kept referring to how bad delta is and how delta is surging right now hitting the northern part of the country, the northeast and coming down the east coast and the wave of delta is a big problem. But omicron he did not talk about that that much now uh he did talk about how this was big. Okay, he says. Yes, inflation is expected to be higher, but he says: look we're being straight up here.

We think that we are doing the right thing by raising rates three times and tapering the way we are right now because of the more persistent inflation that we're seeing. We think this is the proper reaction to get rates back down. He was asked hey, but wait. A minute.

Doesn't federal reserve like a policy monetary policy sometimes take 18 months. I'm glad jerome powell answered this because conventional wisdom, economic studying uh. Well, i you know when i studied economics for an economics degree. I was taught this as well: you have an 18-month lag.

This was a very milton friedman argument. Jerome powell said exactly those words, but jerome powell says because of the way he communicates now or the way the fed communicates now so clearly he thinks the markets actually price in a lot of these. These moves by the fed much sooner interest rate moves. Uh taper moves whatever and that a lot of this gets priced in by the market.

Much quicker. I want to be clear here: jerome powell did not sound bearish today he sounded realistic. He gave us literally the best presentation he could and the markets are cheering on that now. Uh, the s p, a lot of tech stocks have done very well uh, we'll we'll go back to the sticks.

Uh you know later on here, but uh he's he's being pretty crystal clear. He talked a little bit about cyber risk being a very real threat. He talked about seeing cryptocurrencies as risky, but he did not see them as like an exigent uh financial risk. He did mention that consumers seem to be at solid levels of leverage like elevated levels, but not concerning levels.

He did mention that businesses were at elevated levels of leverage as well, but no signs that they that businesses were defaulting. If anything, things looked. Uh businesses had a very, very low default rate that that was his wording very very low, defaulted businesses relatively low household debt, despite the fact that margin is at all-time highs, uh household debt relatively low, probably because of real estate equity and asset equities and asset equity. So equity in other assets uh, he did say that valuations were relatively high but that overall, he does not believe we are behind the curve and if anything, uh they're they're uh moving appropriately in response to the concerns the market has right now again, the market uh Has been cheering, this volatility index fell immediately below 20..

I would expect to see fluctuations over the next few days, but honestly, i hope that this is the beginning of the santa claus rally and i hope you will follow me in uh in the moves. Well, i mean not financial advice, don't copy my moves, but i hope you. You appreciate the moves that i post in the stocks and psychology of money group link down below and you can use that christmas coupon code xmas to get the best pricing on it. The pricing does go up over time and it'll go up next on the evening of christmas.

Well, thank you so much for watching this video appreciate, y'all and we'll see in the next one.