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.