Everyone kevin here we've got to talk about why jay powell just crashed the market, we're going to talk about the bond dump, we'll talk about commodities real estate, some of my favorite takers. And, of course, we got to talk about what the heck jpow just said, which jay pal is going to be the start of our conversation here. Just a note, this video is brought to you by two things: met kevin.com extra and that expiring coupon code. For the amazing programs on building your wealth link down below that, expiration is coming up in four days and the price goes up again.

Okay, so speaking about prices going up, we just had prices go down in the stock market. Why? What happened here? Well, we had our usual typical retail buying at the open the last two weeks we have seen a lot of retail buying right at market open, followed by volatility. Throughout the day, usually, we've been ending up higher. Over the last week, we've been consistently ending up higher.

The problem that we just had is at 9 30 in the morning. Look at this drop right here: 9. 30 on the dot 9 30 right. Here we get a plummet.

Why? Because jpow's speech gets released on the federal reserve website, all of its details, get parsed by computers spit out on the newswires, and the newswires did not like what we saw in that speech, which i'm going to explain, and there are some shifts that have happened. Uh since then uh then jaypal we had a little bit of a recovery after the speech was published, but after jay pal started talking uh, he gave his speech and then he answered some q, a the market rotated down a little bit more. So what is it that jerome powell said well here are the following? This is exactly what jerome powell said he said quote: if we need to go more than a 25 basis, point hike, we will do so. If we need to go above neutral, we will do so, and essentially i'm going to keep going through this, but i want to give you something that's going to make a lot more sense of this as we go through it.

What jay pal is trying to do is he's trying to limit inflation expectations. Yesterday i posted a video and said there are five very important things for you to track in this market. Two out of the five things i talked about yesterday were different types of inflation expectations: consumer inflation expectations, which we'll get more data on at the end of this week, there'll be a new update on what consumer inflation expectations are and number two, the market's inflation expectations, Which you could track the five-year break, even chart which has been peaking uh lately, and this is a sign of inflation expectations becoming unanchored multiple times during jerome powell's talk. He talked about the need to keep inflation expectations anchored, it's not so much of a matter that inflation is high.

We know that inflation is high. Obviously that, like that's the obvious problem, but the shift in their path or sort of the course that they take will entirely, in my opinion, be based on inflation expectations. That is as long as the market and consumers expect that inflation will come down. My belief is that they'll stay on the course of 11 to 17 25 basis.

Point hikes: that's going to take us all the way, basically from zero to potentially as high as 4.25 percent on the fed funds rate, and i think real estate is going to see the biggest short-term impact. Uh well short to medium term impact over the next. Really. Six months to two years, because of this increase in rates, the stock market has already discounted a lot of the fact that rates are going to go up, that we will see rates at two and a half to three percent at the fed uh within the next Year to year and a half and then potentially higher thereafter by 2024, who knows if inflation stays stubborn, we could be at that four and a quarter percent with 17 rate hikes, which is exactly what we saw the beginning of two of the 2000s, which jay powell Referenced j-power references the beginning of the century as kind of how they expect to raise rates and that's what we did in 2004 was 17 25 basis point hikes in a row.

The reason the market had some heart palpitations today is because jay powell said: if we need to go more than 25 basis points, basically go 50. We will do so, and he was bluntly asked: what's stopping you from going for a 50 basis, point hike now and he said nothing now. We don't actually believe that we're they're going to go for a 50 basis, point hike unless some of the expectations we have start changing, so what expectations that they lay out in the federal reserve meeting last week. Well, last week they told us that before ukraine, they thought inflation would peak in march and then come down towards kind of flattened for a little bit in the summer, come down towards the end of the year.

Now and j-pal reiterated this today. He said all of that has fallen apart. Their previous expectation of a peak has fallen apart now. They believe that inflation will peak in q3 kind of go flat for a little bit fall more sharply in q1 of 2023.

But if that also falls apart, then they will hike more and i think that's what the market here is missing is the market is freaking out because the market's hearing - oh my gosh, you said - maybe we're going to go for a 50 bp hike, but wait a Minute he said we'll go for a 50 bp hike if the data shows that these expectations are falling apart, and so this is where i've mentioned in many videos that what you want to pay attention to is, if you want to know, if the fed's going to Go 50. This conversation didn't change anything all. It does is reiterate the fact that you've got to look at the month-over-month data for cpi. We got to see if there's a wage price spiral which we do not have right now.

We do not have a wage price spiral. We want to watch this inflect over the coming months and of course, we want to watch the five-year break-evens which we i showed you already as spiking, which is a problem. This is a problem and then we want to watch the uh consumer sentiment, inflation expectations right. These are the some of the four core things we want to be paying attention to.

There are more you can watch my video from yesterday from that, but jerome powell reiterated how important expectations are here and that inflation is high and we've got to get this inflation down. In fact, here's some of the other things that he says he says we're at this market right now, where we cannot assume that supply chains are going to provide relief. Jay powell told us that hey we're starting to see some relief, maybe in like certain auto sectors, but we can't assume that supply chain relief is going to be what's going to move inflation down, he does say it doesn't all have to be the fed that waning Fiscal support like stimulus, some progress in these supply chains and maybe less reopening spending like less travel spending could potentially bring down inflation, naturally, but they're going to respond to the data. And if the data continues to inflict in the wrong direction - and there is no q3 peak of inflation - then they're going to hike 50.

now jay pal didn't give us a time frame, but waller did on friday. Waller told us that we could have a 50 basis. Point hike potentially two 50 basis, point hikes at one of the next coming two to three meetings, so that gave the market a little bit of anxiety, but jerome powell today reiterating that yeah nothing's stopping us from going 50. That, i think, is what led the market to be a little bit nervous today.

Personally, i don't know that this is too terribly different from what he told us. Last week he said he's going to be very data dependent. They have not made the decision. He reiterated that today they have not made the decision to go with a 50 basis.

Point hike. We recognize that inflation is too high, but we're just going to respond to the incoming data. So i've already talked to you about what data to monitor we're going to monitor this market's a little bit nervous about just jay pal, even mentioning nothing, stopping us about a 50 right. But let's talk about some things that are really good that he talked about.

So one of the things that he was asked is wait: what are the odds of a recession? And he says quote, i don't see a recession likelihood that is elevated and the main reason for that is the economy is still very strong. He says: look at growth, we're at or above potential. This is reiterating what he said during the fomc meeting in the summary of economic projections that hey look, we're still expecting 2.9 gdp growth, that's more than what we would have had in any period of time. Prior to the pandemic, uh, you know a post post the great recession, so this is remarkable growth.

He said the labor market is doing very, very well and uh that ultimately yeah well we're committed to restoring price stability. We at the same time want to make sure we maintain a strong labor market and these things can go counter to each other right. For example, if you go all in on fighting inflation, you could end up leading people to lose jobs, but you can't have inflation going forever because then, then you could end up unwinding a strong labor market right. So a lot of complicated things to balance here.

Right now, for me, i don't think much has changed beyond this. We're just going to go 25. 25, 25, 25. Until and unless that data starts looking uglier, which we know march's data is already going to look ugly because of ukraine.

We're going to be paying a lot more attention to that data for the months of april may june july, and maybe this is just the fed kind of throwing it out there that hey just remember 50. Bp is a possibility which that makes sense when he talked a little bit or when he was asked about the 10-2 yield curve. This is a big one, so the 10-2 continues to flatten, in fact, i'll pull up the the new 10-2 right now and it flattened quite a bit as well after powell spoke uh, and we know that the 10-2 can be a little bit of a signal for A potential recession, in fact, any time the 10-2 has inverted before we've had a recession within 18 months right. The current 10 2 has a spread of about 18.8.

In fact, if you just look down here under where i am right here, 18.8 is the current spread. It's at the lowest point that it's really been at and we're seeing 10-year treasury spike. When jerome powell was asked about the 10-2, he made a very interesting comment. He said, while he looks at the 10-2, he focuses much more on the shorter end of the curve.

He focuses much more on the first 18 months, and this makes a lot of sense to me in fact, in the video that i posted this morning, but then i made private because youtube wasn't playing it. It was a disaster this morning. One of the things i mentioned in it is you might consider looking at the month to the 10 year, and the reason you might want to look at that spread is because it shows you a little bit more of of how the shorter portion of the curve Could impact the yield curve a lot and take a look when you go really short? Look at the yield curve over here it it bottomed, uh at uh, just after the invasion here in ukraine 224. We saw a collapse of that curve and it's really started steepening again here.

Why would the yield curve start steepening again on these when we look at the shorter ones like the three month to the 10-year? Well, in my opinion, as markets get less fearful about the fact that yeah inflation's high yeah we're at war with ukraine, yeah oil prices are high. Uh yeah gas prices are high. Yeah food prices are high. What the more we become comfortable, realizing.

Okay, we've got a bunch of bad news, got it what happens? Well, people start dumping their hedges in bonds, so they start dumping the three-month bonds. They start dumping the one-year bonds and the two-year bonds. They start dumping these and that leads the yield on those to actually go higher faster. Why? Because, when you get these uh moving when you, when you dump the shorter term bonds, you increase the yield of the shorter term uh bonds that makes sense price goes down.

Yield goes up so uh, it's interesting to me that j-pal says hey. We like to look at the short end of the curve like that 18-month curve, because, in my opinion, what he's trying to say here is hey we're looking at how the market is reacting. To fear when markets are fearful, people go by the short-term bonds. Well, they're less fearful, they start dumping the short-term bonds.

So for me, i had a similar kind of reaction to jay pal just had this morning in my video, which i wish was still available for you, but anyway in the video that i posted this morning. I said i've kind of gotten tired, looking at the 10-2 yield curve, because i think it's totally manipulated because of the disaster that's happening in ukraine and people using bonds as hedges, j powell kind of said something similar here. He said, look we're not looking so much at the 10-2. It's a weird phenomenon.

It's just one of the things we look at. We look at a lot of things. We look at p e multiples. Risk spreads, uh, a bronze, broad range of conditions.

He says uh and the focus really right now is hey. We do have to focus on inflation and those inflation expectations. That's a critical piece that he talked about and i think it's one that it's very easy for market or inflation expectations are one that are very easy for markets to kind of sort of just like bypass, because if inflation expectations - and this is such a weird thing - If inflation expectations are really high, then what happens? Inflation becomes self-fulfilling. This is really like a bizarre phenomenon, but basically the way this works is, if you think, inflation's going to be 10 this year 10 next year, 10 the year after what happens? Well, you as a consumer are more likely to buy things today rather than next year.

If you think inflation's gon na stay around for let's say the next four years, ten percent every single year, you're more likely to buy a computer today, you're more likely to buy a car today, because you think those things are going to continue to get more expensive. Just like when we increase the price of the courses which the next increase happens in four days, you're more likely to buy before because you want to have a lower price, this makes sense. But what that actually does is it reiterates it sort of self-fulfills inflation in broader markets when people know that prices are going to go up, they move their purchases up and what happens well now the market overall sees more inflation, and this is why the two massive Things the fed pays attention to are not just what actually, the inflation rate is write that down. So what is the current rate of cpi? But it's also those expectations and we have those two ways which we talked about earlier in this video to measure those expectations and those are things like looking at the five-year break-evens and, of course, the consumer sentiment, inflation expectations right, which, on friday, will get new numbers On this, the five-year break, even you could just watch the chart on every single day and, and that is a chart that has been steepening.

So when powell comes out - and we have these fed speak periods, which we talked about this in the course member live stream. This morning there are a lot of there's a lot of fed speed coming up i'll give you the calendar, really quick here. It is oh, it's on this phone. When the fed comes out to speak, what they're really trying to do is they're trying to manipulate expectations down to make sure that people don't basically let these inflation expectations get unanchored, because once inflation expectations go unanchored, what happens you end up having to force a recession? The federal reserve remember this can wave a wand and force a recession.

Unfortunately, that comes at the cost of high unemployment, so it hurts poor people even more, which is a problem or even even medium income people, but look at the schedule that we have uh bostic spoke this morning. Powell just spoke, we've got daley speaking tomorrow, mester speaks tomorrow, bullard speaks on wednesday, he's he's a pretty big hawk. Uh kashkari speaks on thursday. Evan speaks on thursday, and then we get our consumer expectations on the 25th, which is friday and barkin also discusses inflation.

On the 25th, so you've got a whole week of the federal reserve coming out and giving us this kind of nonsense so expect a lot of volatility this week, which previously i wasn't expecting. I thought this would have been a little bit more of a calm week, but with this fed speak schedule, it's just going to be more and more of these fed headlines. So, okay, so we talked about j-pal. We talked about the bond dump.

We talked about. Oh now we got to talk about real estate commodities and some stocks, so i want to touch on real estate. This this rise in the 10-year curve is a problem for real estate. Remember i've previously and many times before on this channel said that i believe the 10-year treasury bond is going to run up to 3 percent and let me tell you about what that means for real estate.

But i do want to give a quick message and shout out to our sponsor today, and that is extra uh. Remember if you want to get into real estate, you got to have a good credit score and one of the neat things about the extra debit card is it kind of gives you the credit of having a credit card without actually having the risk of having a Credit card, the way it works is you go to medkevin.com extra sign up link this to your existing bank account and then, when you spend money on this card, extra will pay themselves back the next business day and then they'll report those balances they lent you essentially Over the night over business side, they'll report those balances as paid to the credit bureaus, and it says if you can grow your credit score by using a debit card without having the risks of a credit card. They've also got a rewards program which is amazing, go learn more about extra med, kevin.com extra okay. So let's talk about real estate.

Well, you got to look at the 10-year treasury and this morning, when i woke up, i look. I go. Oh gosh man, the 10-year, went to to 2.24. Remember: i've been shorting the 10-year treasuries.

I've been shorting them since under 2 because i'm like these things, are going well over 2. Now i closed my short on the 10-year treasury. I should have closed it today. I would had you know a little bit more profit on it, maybe another one or two percent big deal, but the point is like directionally, these 10 years keep going up.

Look at them now, they're two point: almost three percent: this is insane tomorrow. We're going to see the highest mortgage rates that we have seen since 2018, and i tell you i think this is just the beginning. I think we're going to go back to that three-year 10-year treasury yield. I don't think it's all going to happen immediately in the short term.

I wouldn't be surprised to see this 10-year fluctuate between 2.1 and, like 2.5 percent fluctuate around, but over the medium term, which is like 6 to 18 months. It wouldn't surprise me to see us go back to that three percent, which would be equivalent the equivalent of about a five to five and a quarter percent mortgage rate, and i think we're going to see headwinds against the real estate market. Probably in the neighborhood of twenty twenty five percent is in sapped, purchasing power. That doesn't mean prices will go down that much.

I think that'll just offset all of this excess demand that we have in real estate, and maybe we only end up seeing like a sort of a soft move down in real estate prices somewhere in the direction of five ten percent. Until rates start coming down again, which we expect rates will start coming down again, probably end of 2024 - maybe 2025, something like that uh. So that's something to keep an eye on remember j-pal tells us no risk of recession. Uh we've just got to make sure we keep those inflation expectations anchored, but yeah we are going to go up just like we did at the beginning of the 2000s.

Many rate increases over time, and so this is a headwind that i definitely see for real estate. Okay, so we talked about j-pal, we talked about the bond dump and how complicated these bonds are being right now talked about real estate. I do briefly want to look at some of the individual charts that we're seeing here. So this is the nasdaq.

Obviously, we were having a pretty decent day sitting around that 38.2 percent fibonacci until jay pal started talking, and he really pushed us right back down. Uh we're sitting right now about 348 still nicely above that uh well, actually we're just barely below the um 38.2 fibonacci. Here so we're still moving nicely up and for me a lot of folks are asking me kevin. When would you short in this market again, i'm not really interested in shorting or hedging to the downside? Until i see the indices get back to about that 61 to 78 retracement when we get back into this territory or imagine we get some crazy euphoric week or something and we get into this territory over here.

This is when i think it's going to make sense to to short the market uh or to at least hedge, because i don't really like it's going to take a lot for us to get back to this 318 qqq. In my opinion, we've already got so much freaking bad news priced in uh that that it's going to take a lot to really push us down and keep us down in my opinion, and that's why i think also today you're yeah, we saw a little bit of A push down, but we're no lower than where we were this morning on just typical trading uh and and no news from the fed right, so really we've we've gone. Nowhere is really what it feels like here, which is fine. So where are the opportunities? Well, if you believe a recession is coming, you do not want to be in the stock.

I have said this since i originally started talking about this stock. You do not want to be in a firm holdings if you think we are going into a recession. However, if you think, like jerome powell, that the odds of a recession are low in an inflationary time, a company like a firm could actually do quite well. The reason a company like a firm could actually do quite well is, first of all, we've barely retraced.

Anything off the bottom here, which, if anything, gives you a greater potential fear factor that doesn't mean that we've actually hit a bottom here on a firm right. Could a firm go even lower? It absolutely could, especially if the market price is in more of a risk of a recession, but i have a belief that in an inflationary time absent a recession, people are going to be more likely to want to use things like the affirm debit card and do Essentially, use buy now pay later services on things like you know, their general purchases, which you could then apply using the the firm debit card to a sort of buy, now pay later plan uh. Now i don't recommend this, but i also don't think the people who use this stuff watch my videos. I really don't recommend people spend money, they don't have ever uh.

You know some people like hey kevin. I really like the fact that i could check out for your courses with paypal and do buy and you know pay in four or whatever i'm like whatever. I don't recommend it, but if you want to use that you can so uh. I think, if we're in an inflationary time absent recession, there could be an opportunity to invest in a company like a firm and probably see them come back to this 38 to 50 fibonacci.

Here no guarantees, certainly not this insane euphoria - that we had over here at like 177 143. I was a seller of a firm over in this area here because it was just pure euphoria, but somewhere this midpoint, uh retracement. I see that we're kind of already seeing those midpoint retracements in stocks like end phase already above the 38.2, we're seeing that sort of midpoint retracement on stocks like tesla, also already over that 38.2, and so there is some argument that maybe it makes sense to look At other companies like even roblox or firm or whatever, that just still haven't even gotten to their first level of retracement, just be careful with these, i would. I would keep these at lower portions of your portfolio.

A bigger concern that i actually have, though, is this the consumer discretionary spend in general, and that would be like your shopify. So shopify is another one. That's really struggling uh to to go anywhere, and the reason here, in my opinion, just like j-pal said is people are probably more likely to save money or spend less money, just like the chinese are doing. Why? Because we're at a very uncertain time, gas prices are high, food prices are high, everything's getting more expensive, and so it's likely that you would spend less money on shopify or etsy right and see look.

This is why etsy continues to get rejected by the 23.6. Consumers are going to be a little bit weaker. The same is going to be true of the lending platforms to some degree, that includes uh square and paypal, but probably to a more greater degree. It includes the uh student loan company and mortgager sofi uh.

You know they've also got their brokerage division, which all three of those things mortgages student loans and brokeraging like robinhood kind of stuff right trading. I think all three of those are have huge anchors on their business, which is not great people who have made new accounts for savings via sofi or paypal or square. Probably already did so during the stimulus era. Now it's really tough people are spending even more money to try to get more customers here, and this is why i'm purposefully trying to stay away from some of the lending companies i'm trying to stay, or at least limit my exposure to them.

Uh because i do have a little bit of sulphide just like i have a little bit of palette here, but i'm trying to limit my exposure to them and i'm trying to go heavier when i get little dips, especially if i get under 60 on trade desk. I'm really trying to pick up a lot of trade desk under 60.. The reason for that is because i really think we're going to see a big move into advertising and, as as companies, try to spend more money either partnering with companies like affirm for buy now pay later or advertising companies to fight for the consumers who are willing To spend so these are just some ideas that i have in terms of stocks that i'm watching, obviously, i'm also keeping an eye on what's happening with uh occidental petroleum here it is now at another all-time high. Over here uh i mean, i shouldn't say: all-time high post uh, post 2018 kind of high and uh this.

This, in my opinion, has a lot of retail momentum in it. In fact, it's not even just my opinion. I can tell you what the most popular retail stocks are right now they are yep. Okay, so retail trading flows, alibaba neo, accidental xle, uh you're, actually seeing some expansion over some by the dip on jets, which i'd be a little bit more careful about that one.

One i do agree with personally would be like a taiwan semiconductors talked about them on my video yesterday, but i do think that commodities like uso wheat, corn, occidental, these are going to see a peak at some point. I've got a fibonacci drawn over here on uso and i'm looking for an opportunity to probably short uso. If we end up somewhere between the 61.8 to 78.6 fib over here, because i i don't think we're going to get to the same sort of peak fear moment - we had up here, but certainly somewhere in the 80s for uso, is going to be a potential opportunity. Short, unless, of course, you expect commodities to keep going, keep your shorts small though uh, because you know shorts, could get.

It can be very dangerous, but again in terms of real downside protection, i'm waiting until uh the qqq and spy get a little bit more euphoric. Today's sort of hemming and hawing here not a surprise to me that the market's taking a little bit of a breather after uh jay pal comes out and just even mentions hey nothing's, stopping us from doing the 50, bp hike, but really in my opinion, this is His way of trying to arm wrestle those inflation expectations down, that's the whole point of him coming out and yapping is to try to make the markets price in less inflation. So that way they don't actually have to hike 50.. So that's my thesis anyway.

If you found this video helpful, consider sharing it make sure to check out extra by going to medkevin.com extra check out the programs on building your wealth met. Kevin.Com join also link down below and uh thanks. So much for being here we'll see you in the very next one thanks again goodbye.