Powell on Recession and Rate Cuts

In this section, Jerome Powell discusses the possibility of a recession and when rate cuts may occur.

Framework for Rate Cuts

• Powell establishes a framework for when rate cuts will occur based on inflation.

• If inflation comes down slowly, rates must stay higher for longer.

• If inflation comes down quickly, especially in services, rates can be cut.

• A few months of data will convince us if the forecast is right or wrong.

Market Data Dates

• Several market data dates are provided:

• May 10th CPI at 5:30 AM

• June 13th CPI at 5:30 AM

• June 14th next Fed meeting

Housing and Wage Inflation

• Housing remains weak and wage inflation sits at about four to four and a half percent.

Inflation Expectations and Rate Cuts

The speaker discusses inflation expectations and rate cuts, including the possibility of a pause in June and potential cuts starting in July or August.

Inflation Expectations

• The speaker notes that inflation expectations have started to rise again, possibly due to temporary increases in gas prices.

• The market is currently pricing in 3.5 rate cuts by January 31st, with the first cut potentially coming as soon as July or August.

Rate Cuts

• The speaker suggests that it would be surprising if the Fed announced rate cuts were coming.

• However, the Fed did announce a 25 basis point hike, which was expected by the market.

• The market is currently pricing in a terminal rate of 5.08%, slightly below where rates are now.

• Jerome Powell suggested that we may be at peak rate cuts right now.

Policy Statement and Credit Tightening

The speaker discusses the policy statement from the Fed meeting and Jerome Powell's comments on credit tightening.

Policy Statement

• Jerome Powell suggested that we may be at peak rate cuts right now.

• The Fed removed language about attaining a sufficiently restrictive stance on monetary policy because they believe they are already there.

Credit Tightening

• Jerome Powell believes that real rates are at or above the neutral rate due to quantitative tightening and credit condition tightening from banks.

• Heavily focused on cumulative effects of credit tightening, especially for small and mid-sized banks.

Labor and Inflation

The speaker discusses labor and inflation, including Jerome Powell's comments on job openings and the odds of a recession.

Job Openings

• Jerome Powell notes that job openings are declining without an increase in unemployment, which is a good sign.

• This scenario is unusual because usually when job openings go down, unemployment goes up.

Odds of Recession

• Jerome Powell suggests that the case for avoiding a recession is potentially more likely than it was previously.

• He believes this is due to the lack of a wage price spiral and the unusual situation with job openings.

Fed Report Overview

In this section, Kevin discusses the recent Fed report and provides his opinion on it.

Key Points

• Kevin likes the clarity of the press conference and how J-Pal made it clear that they are going to hang tight at this level.

• The next couple of reports will determine if there will be any rate cuts. If inflation is doing fine, then they may start talking about cuts.

• The Fed is being patient until they have data to support any rate cut talks.

• Overall, Kevin thinks that the report was very clear and compares well with expectations. He also mentions that there was no mention of GDP growth other than avoiding a recession.

Why No Rate Cut Talk Yet?

In this section, Kevin explains why there has been no talk of rate cuts yet.

Key Points

• There is no way J-Pal would dive into rate cut talk until they have data to support it because that would undo potential inflation coming down.

• People would start spending like drunken sailors again if there were any premature talks of rate cuts.

Investing Courses vs How to Make Money Courses

In this section, Kevin clarifies the difference between his investing courses and his "how to make money" courses.

Key Points

• The real estate course is legendary and the stocks course is pretty great.

• The "how to make money" courses have had different titles in the past but are now titled "How to Make More Money and Get Sh9T Faster Featuring AI."

• The AI portion of the course comes out on June 1st, and if you have any questions or want to bundle up, send an email to Kevin.

Conclusion

In this section, Kevin concludes his video by sharing his opinion on the market and encouraging viewers to start building their wealth.

Key Points

• Overall, Kevin thinks that it's a great time to start building your wealth.

• He can't wait to launch the house hack non-accredited course and wishes viewers good luck with their investments.