Hey, make sure to check out the expiring coupon code on the programs on building your wealth tomorrow Real estate stocks, trade alerts, you name it, link below or go to Meetkevin.com So you want to buckle up for Drome Powell's R cut talk tomorrow. Well, here's what you got to pay attention to. First, you got to recognize the dates that are coming up because May seems a lot further away than March. But the reality is it's not because the March meeting is being held March 20th and the May meeting is being held April 30th to May 1st.

Which actually means you've only got about a 5. We delay between those two dates, which in my opinion, with how little spread there is between those two meetings, is really not going to make much of a difference if they end up cutting in March or May. In fact, between now and the March meeting, we will have two more jobs reports and two more inflation reports. But by the May meeting because that May meeting is May 1st.

Basically is when it end ends, we won't actually get CPI or jobs data within that month by that Fed meeting. so we'll only actually be getting one additional report for both jobs and inflation. Now the FED might want that. They might want to go for that.

But here's the reality of what I think happens tomorrow. What I think happens tomorrow is you get a Drome Powell who won't make up his mind yet as to whether they're going to cut in March or in May. The reason for that is he might be willing to cut in March But I Don't think they want Financial conditions to loosen any more than they already have and remember the bias of the bond market. I'll explain First Financial Conditions Financial Conditions as measured by the Goldman Sachs Financial conditions index are as low as they were in June of 2022.

Which means we're at the lowest levels of this entire tightening cycle of almost one and a half years. Now that this has been going on, were the lowest levels and the Federal Reserve usually ends up seeing after they start yapping at the Fomc bonds rally. So bond yields falling which loosen Financial Conditions In fact, take a look at this chart here. you can see that the 3-day rate Trend after the Fomc speaks is -67 basis points on yields.

In other words, bonds tend to Rally after fed meetings Jerome's going to know this. So if I'm Jerome I'm going into tomorrow with a short-term hawkish attitude, but longer term doish attitude. In other words, hey, this is looking really good. but we're not prepared to make any decisions.

We're going to keep rates stable. now. if we need to, we're going to raise rates again. Yeah, things are looking good, but you know what? We're not convinced.

I I Would almost bet money he's going to say something like this phrase. We're not convinced yet that we need to cut rates anytime soon or within the next meeting or two. Something like that where he kind of almost potentially implies that they might end up waiting until June to do their first cut now. I Don't think that's likely the market doesn't think that's likely either.

In fact, the market right now for a May rate cut is pricing in a May rate cut percent chance of 85.7% So things would really have to. You know, we'd really start have to seeing we would have to start seeing inflation really come up again to not get the May rate cut, but the odds of getting a rate cut in March are as low as about 39.6% That's because keep getting strong data. Atlanta fed now real GDP at 3% the IMF increasing GDP forecast jolt Sta coming in hot this morning. The next two jobs reports May tell us the jobs Market is starting to weaken, but if it's not drum Pal's not going to want to cut in March So I think he'll want to keep the optionality open for March based on the next data sets, but he's not really going to tell us tomorrow what those data sets are going to say because he probably doesn't have them yet.

Although there's a chance he does, He sometimes says that he can get labor reports maybe the night or two nights before they actually come out. Well, interesting. The next Labor report comes out February 2 which is Apple provision release day I'll make a video. Okay, two days before that ah Fed meeting? Is it possible he'll get a little sneak preview of the jobs numbers? Yes.

And so this is why there are two things to understand. Number one: if Drw Pow does end up going, we need to wait and see. Get these next two reports then he probably doesn't know yet. or he does know.

and the labor market still strong and he'll keep open the optionality for the March cut. but I think he only pulls that trigger if he needs to. We're probably going May now. We'll also have the bank term funding program shutter on March 11th.

There are 11 days between March 11th and March 20th. If things start showing signs of stress in those N9 days, we'll get a cut in March. But I don't think Jum Powell is going to forecast that tomorrow unless he gets spooked. What would spook him? An early preview of the jobs report.

If we get a pure doish Drome Powell Tomorrow, we probably have a Miss on the jobs D on Friday and with a Miss on the jobs dat on Friday we will almost solidify our rate cut for March. So this is all going to come down to again: Messaging from Jerome Powell He probably has a heads up of what he's going to get for jobs that on on Friday I Don't think we're expecting like a massive plummet for Friday that is you and I are expecting that. Wall Street certainly is projecting up Wall Street for this: Friday is projecting non-farm payrolls to come in at 185,000 down from the 216. But honestly, the long run average we've been seeing here has been around 180,000 so totally benign report expected.

We'd have to get basically rugged in my opinion on the job data to actually get a purely doish Drome tomorrow I Think he's really going to kick the scan down the road to get these next two to three reports and there's really no reason for him to speculate on. Yep, we're going for a March rate cut tomorrow. so I'm not. That's why I say I think we get near-term hawkish, longer term bullish.

We might also even get some hints that I think people haven't woken up to yet on hey, remember, we don't only have to cut by 25 BP Like we could start in the summer and cut by 50. Which means you know we could actually end up cutting more in the year because inflation has been lower than expected. Remember this is the chart of inflation right here: Annualized rate of inflation. Over the last 3 months, it's like 1.6% for a core.

That's core. PC It's like 1.6% It's crazy. You do it over 6 months, you're at 1.9% and you do it. From the change of a year, we're at about 2.9% right? So inflation is plummeted.

But I Don't think there's a reason since we're not cutting tomorrow to Signal All right, it's rally mode. everybody go crazy. So let's think about that straight: no declaring a victory, no shortterm. Yes, we're definitely going to cut in March I Do think we are going to get some discussion about we might see larger rate cuts and remember by us not doing anything, we're actually continuing to tighten.

but that would be okay for March because the Jobs data is still good If the leaked Friday report is indeed good. like Jpw tomorrow is basically leaking us the Jobs report for January in my opinion. I I think I think he'll know going into it and it'll actually be very important for him to know so we could properly signal that. Yeah, look if things randomly Decay Yes March Otherwise May Fine, then we start getting our loosening.

Now there are some folks who ask me about, uh, stagflation I don't see it everywhere we look. With the exception of Aerospace lot of inflation, there, a lot of inflation still in Aerospace uh And then of course insurance which is very lagging. Rents are already coming down. Insurance will come down just like rents are coming down now.

Insurance will come down as well. Those take a very long time to actually have cost increases move through the system, annual contract renewals, all that fine. Outside of those three items, not really seeing new inflationary spikes, we're seeing more businesses talk price Cuts Not, uh, not spikes. In fact, that's exactly what we saw in the Fed's beige book.

And we also have folks like Esther George Again, she's retired from the FED She retired last year, suggesting things could go down very rapidly and quickly. That is true Jerome Powell Will consider that, but again, if he has the leaked report, he'll know. Well, not yet. And if that starts happening, we could always cut rapidly and quickly.

So again, bond yields will probably fall tomorrow as the market recognizes. Okay, we've hit Peak So I think we're going to the market will recognize we're at Peak rates. We're not going to get rapid cuts, which actually is a good thing because signals the Jobs report won't be disastrous Friday and that the economy is still, you know, keeping the wheels on so to speak. Uh, and we'll be setting up for a May cut with the slight possibility that if things go poopy dupy, we get the March.

But again, the spread between March and May is not that big. It's only 5 weeks, so instead Jerome's got to act to keep Financial conditions as tight as possible and they're already low, right? We just don't want them to plummet in terms of Jerome like to Financial conditions are already substantially looser than where they were in, say October right? We had our October 31st Peak over here Financial conditions Way looser. We just probably don't want the financial conditions to drop a bunch after tomorrow. so that's why I say slight Hawking bias.

So am I expecting things to go to the Moon after tomorrow? No, Will things go vastly red tomorrow? Probably not because most of the economy or most of markets have already basically said the May rate cut is way more likely I Still think there's a chance because of the ending of the bank term funding program that you get March But I don't know with this jolt data I wasn't expecting that. Uh, over 9 million job openings I Thought they were going to miss by a good 3 400k. I was wrong. I was looking at about 8.3 million job openings.

Uh and uh, now we're we're We just got data coming in at Uh 9: pretty remarkable Anyway, thank you so much for watching. Make sure to check out the programs on building your wealth. We've got an expiring coupon code tomorrow at Meetkevin.com and we'll see you soon! goodbye. Why not advertise these things that you told us here? I Feel like nobody else knows about this? We'll We'll try a little advertising and see how it goes.

Congratulations man, you have done so much. People love you people. look up to you Kevin Pafra there financial analyst and YouTuber meet Kevin Always great to get your take even though I'm a licensed financial adviser, real estate broker and becoming a stock broker. This video is neither personalized Financial advice nor real estate advice for you.

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