저자: Kevin · 외국인
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연준 월러 이사 발언으로 관세 충격 시 고용이 악화되면 금리인하 가능성이 나오며 시장이 반등했다고 분석. 화자는 5월 인하는 아니지만 연말까지 공격적 인하(0% 수준까지)를 예상. 1분기 실적과 내구재 주문은 양호하나 7월 이후 고용 악화 가능성과 관세 충격을 경고. 실제 주식 진입은 연준 패닉 U턴(바닥 신호) 이후를 기다리겠다고 밝힘. 자산 제시는 현금 대기 및 하우스해크 언급이 중심.
다듬은 글
Today was what started as a really awkwardly quiet day and all of a sudden throughout the day stocks kept going up and up and up on what was relatively little data. The Chicago National Activities data came in negative, but durable goods sales came in stronger for March, obviously as people front-ran tariffs, and earnings for Q1 are still doing meaningfully well, decently.
For example, and I don't play earnings, but this morning course members were asking Kevin, "What do you think about Google earnings?" And I think, well, we know that Google is mostly an advertising company and advertising typically gets hit in a recession, not leading up to a recession. So, it's a good chance they can beat on ads.
But again, I don't like to play earnings, but sure enough, Google beat on ads, which again is not a surprise because you're getting this sort of compression at Google before we're actually in the advertising recession. Now, the advertising recession could come and the same thing could come to Meta stock.
I mean, Meta was $740 not that long ago and now it's trading for $557. In fact, it was just a couple days ago under $500, which is this remarkable almost 35% compression. But today, the Nasdaq just kept beating numbers. We went 458 beat, we went 460 right through the line beat, we ended up at 467. So, why did that happen today?
What gave the market enthusiasm? Well, in my opinion, it could be somewhat of a Federal Reserve I don't want to say U-turn, but U-turn in what the market is paying attention to. So, this is an interesting Fed U-turn because it's not so much the Fed U-turn, it's the market choosing to listen to something different.
So, this morning Fed chair, or not chair, got to be careful with that. That's Mr. Powell, uh one of the Fed board members, Mr. Waller, came out and told us that they will absolutely cut should employment begin to weaken. In fact, he told us that uh firms are expected to see or and conduct higher layoffs.
We would expect to see more employment. He also thinks that as a result of that, companies may not pass on as much of the tariff costs because, well, frankly, they don't have the pricing power, which we've talked about before, which again means you get a cost push. So, companies have more costs, but you don't have a demand pull, which means people aren't willing to pay whatever you ask, and that just leads to margin compression.
And what's the easiest relief valve for that? Labor. So, Waller gets it. And I think markets today were reacting to a Fed that instead of doing the costs aren't going, "Well, we got to wait for you know w." We got Waller, who appears to be applying for a job. It appears Waller would be the perfect kind of at least he's playing his positioning this way.
He's playing his hand this way. To uh sort of be that Fed board member who's like, "See, Mr. Trump, your tariffs aren't inflationary. I'll go ahead and cut for you as soon as labor weakens." It's almost like he's applying for the job of Fed chair. Now, this is really interesting because Bostic just last week told us that the White House would consider starting their discussions with potential replacements to Jerome Powell in August.
That's only 4 months away. So, if discussions are going to start in August, why not start positioning yourself in interviews as a board member who's willing to play the Trump ball game. And now, partly we might think, "Oh, no, you know, we want that Fed independence." Of course, we don't want Powell fired.
And partly we also want a Fed that makes decisions independent of, you know, political power, like having a better seat at the Fed. But, Waller is actually right. We all know this. In fact, the big concern we have is not that the Fed is going to act, it's that the Fed is just going to be late in acting.
Because generally tariffs lead to a stagnation in the economy, which yes, in the short term is inflationary, but it tends to lead, at least tariffs of this magnitude, should they remain, will likely lead to a recession. A recession is generally deflationary. In other words, people lose their jobs, people spend way less, and prices actually come down.
Which in a long-term mindset, in a long-term point of view, is actually part of the healing process, right? So, prices come down. We finally get rid of some of this inflation disaster that we had post-COVID, and we correct those prices. But at that moment, you need a Federal Reserve that's willing to respond not to inflation, but to the labor market.
So, in other words, right now you've got a Federal Reserve that's like, "Hey, hey Fed, or hey hey Trump, you know, what you're doing is inflationary." That's true. See, both of these could be true. It's a timeline. Yes, it will be inflationary, at least for the time being, until you create stagnation, companies don't have pricing power, people get laid off, and then all of a sudden the Fed has to swoop in with a giant bailout.
And so, this is interesting because my mindset, and then I want to give you more of Waller's interview, is that the Fed doesn't cut in May or June, but that they actually cut more aggressively by the end of the year. That if tariffs stay at this level, and I know this is crazy, but I just I I want you to see the difference between my mindset and what Waller is saying and what Powell is saying, right?
So, Powell will wait to see what the impacts are. Kevin is saying, "All right, the Fed won't cut in May or June, but once we start getting some nasty data, July, September, November, December, by the end of the year, cuts rates, again, this is the crazy part, but all the way to zero. In other words, we have so much disinflation or even deflation, we need to do everything in our power to stop unemployment to minimize the pain of a lengthy recession.
And then you try your best to prop the economy up again. Now, it's usually at that pivot point that I like investing in stocks, mostly because the stock market tanks when unemployment really starts suffering. But Waller, the most dovish at the Fed, is telling you, "Hey, we're not going to cut until employment starts tanking." So, in other words, if employment is solid now and the stock market is recovering on, you know, hopes of Waller, that's fine.
But you still have the unemployment drop to go if that happens. Maybe that won't happen, right? Uh then the Federal Reserve comes in uh with with their their bailout, but again, unemployment drops, stocks drop, then the bailout happens. And then we slowly start growing again. To me, that's the employment I really like going all in on stocks and getting excited because we have the wind at our back.
We don't yet have the wind at our back, but what we did hear today is hope that the wind will be at our back. So, it's it's kind of this remarkable time frame, but let's listen to some more of what Waller said. So, uh Waller told us that uh he stressed Bloomberg here in the interview suggests that he didn't believe the impact of tariffs would have a significant impact on the economy before July, but after that point, unemployment could rise and rise quickly if tariffs again come into play.
He repeated the view that in the inflationary impact of tariffs would likely be temporary. Now, some parts of markets here temporary and think transitory, but again, you have to think about the flow of what tariffs do to shutting an economy down. It's shock that isn't offset by Congress sending stimulus checks to everyone, which means we compress prices down, unemployment down, true pain hits.
You know, the earnings that we're getting now, like, come on, Hasbro earnings beating. Okay, because we're talking about Q1, and people are pulling forward really good numbers. And then companies, a lot of companies, with the exceptions of airlines, are kind of like, well, things haven't gone poopy yet, so um guidance is fine.
Yeah. All right, we can bluff our way through and pretend that tariffs aren't going to have an impact. We could pretend and continue to pretend that the Chinese are actually negotiating with the Trump administration. Trump says we are, the Chinese say we're not. Somebody's bluffing, somebody's like, who cares?
What we know is so far, we still don't have tariff trade deals with anyone. We have rumors of trade deals, which is leading to bullish call option flow and a lot of rumor mill that, oh, you know, time to buy cuz the trade deals are going to get announced. And hopefully that's true, because there is also a possibility that the stock market looks through a 3-month period of damage that tariffs cause once the tariffs are solved.
Mostly because the stock market tends to be very forward-looking. And I think that's why today we saw such a movement in markets. It wasn't because we actually got progress on a trade deal, because we didn't. It wasn't because we continue to see diversifying into House Hack. House Hack, yeah. Uh which is still happening.
People are still investing in House Hack, they're getting their 5%, they're getting upside on the stock, uh and they're getting downside protection. I mean, it's it's a great way to diversify from the insanity of tariffs and VC valuations and stock market valuations. But anyway, uh that's at househack.com, now open to non-accredited investors.
What's remarkable is what the market moved on today wasn't really any good news other than this Waller interview and hope. Now, I'm not bagging on that. It's, if anything, a good sign, because it means markets are receptive to, all right, cool. So, the Fed is going to work with us. Consider for a moment the interest rate curve.
May right now, 8.4% chance of a cut. June, 56% chance. July, 75% uh and then by September we're already pricing in a 76% chance of two rate cuts with by December us pricing in 3.4 cuts with a 64% chance. So, in other words, we're still basically fully pricing in three rate cuts. But, that Poller or Waller Poller, oh my gosh.
I merged their names. Poller, Powell, and Waller. That's bizarre. Anyway, that support for the economy is actually what we want to hear. Now, the downside is you have to wait for unemployment to start having a poopy doopy. There are a lot of people on social media that complain about why did the Fed cut 50 basis points when, you know, right before the election they they tried to rig the election.
Well, because unemployment was triggering the SAHM rule and we were starting to have serious economic fracturing on the unemployment side of the equation. In fact, some could argue that the slight softening of rates and this assumes a very quick responsiveness of rates, which I I don't think we really have, but some say that those rate cuts gave enough wind at the back plus Trump enthusiasm that we actually avoided that we're we're coming close to stalling in September and August and we actually avoided a recession in the latter part of last year because of enthusiasm and that wind at our back.
And so, today is a little bit of, you know, somebody kind of blowing us at blowing at our backs. Uh the 10-2 spread still not fantastic. It's uh There we go, 0.52. Uh but, we're seeing a lowering of of the curve on both sides today. We saw the 10-year come down to 4.31. Uh we saw the 2-year move down to What did we get on the 2-year?
The 2-year today ended at 3.79. So, almost 3.8. Uh and and a lot of this is driven again by enthusiasm from from Waller. Uh, now, again, as much as it's possible that Waller is just trying to raise his hand to say, "Hey, pick me as the next Fed chair." It is worth considering his line, quote, "I'm willing to look through tariff price increases." It's going to take courage to stare down tariff price increases and see them as transitory.
Rate cuts could come from rising unemployment, and the Fed will look at data to determine policy moves. Uh, in other words, uh, we're you know, we're going to focus on the Fed mission here. All right. So, you what you again have as a bottom line today, like why were things so euphoric today? Well, you're still getting bullish Q1 data from a lot of companies.
You're still getting bullish March data from durables. It's not going to be until July is in terms of when we really get our bad data. So, then we look and go, "Okay, can the Fed cut then?" Well, probably teeing up a September cut. And I think the market is trying to front run that right now, assuming the Federal Reserve is going to bail us out before we get a true bite of tariff damage.
And knock on wood, I hope that's true. For me personally, I'm going to wait for the point of the Federal Reserve panic, because I don't know what's going to happen between now and then. And I've got plenty of other options, mostly my favorite being House Hack. And to us, if we go into recession, we've got, you know, what, 11 12 million dollars to go buy the dip on a, you know, company with with the assets we have, that's actually a lot of cash.
Uh, and uh and and if the market doesn't go into recession, we keep doing wedge deals. So, we're good either way. So, I always say, don't copy what I'm doing, but for me, what's going to get me really motivated is when that Fed starts panicking and U-turning, because that's historically what has always represented a bottom.
You look at, you know, Black Monday Fed intervention in '87. You look at the 2003, March of 2003 bottom driven by the Federal Reserve, the February of 2009, the December of 2018, the March of 2020. These are all Fed policy U-turns. Those are the moments that mark bottoms historically. That's when I want to buy because they usually are met during shock periods when we get really bad data like bad unemployment data.
And remember the pain that we had in August? It was unemployment data that turned into a Japanese carry trade shock. Something like that could happen again. . Appreciate y'all. .
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