저자: Kevin · 외국인
요약 보기
연준 회의 후 관세의 대법원 판결(11월 5일 구두변론, 판결은 내년 여름 전후 예상)을 주요 촉매로 보고, 판결 전까지는 완만한 상승을 예상. 금리는 10년물 4.15% 부근에서 주식시장에 우호적이라 봄. 경기침체 신호(선행지수, 27주 이상 실업자 증가)는 존재하나 현재 시장은 침체 회피를 기대. 10월 1·3일 고용지표가 다음 주요 변곡점.
다듬은 글
Well, it's the morning after the Federal Reserve meeting and we've got some new information. Unfortunately, it's not as quick or fast or as great as we would like. The United States Supreme Court is going to hear its initial oral arguments in tariffs on November 5th. Right here it is on the docket. And this could get delayed, but typically after we get oral arguments, it's going to take probably anywhere between 3 to 6 months to actually hear a Supreme Court decision on whether or not tariffs are legal.
So, in other words, even though tariffs are probably illegal, we're probably still stuck with them for at least the next 6 months. See, that's not necessarily bearish. It's more less bullish. I'll put it that way. I would hope that tariffs get declared illegal because then our economy will see rapid deflation because, you know, now we'll be lapping year-over-year inflationary prices from tariffs.
That transitory overtime inflation the Fed is worried about will disappear. You'll have year-over-year now negative numbers, disinflation and deflation in categories, and it'll really give the Federal Reserve a license to continue to cut rates. Unfortunately, that decision isn't going to come until, frankly, next summer.
So, it's going to take some time before we get those tariffs gone. Either way, you know me, I expect tariffs will be gone at some point in the future. Either courts declaring them illegal or ultimately we end up getting a new administration that says, you know what, we're not doing this. Now, do understand this, though.
This is a uh a potential downside to uh this thesis that you know the tariff will end up being declared illegal. Uh this is a little reminder uh and then we'll talk about the Federal Reserve since it's the morning after here. This is a little reminder of how the Supreme Court votes when it comes to Donald Trump uh versus Biden.
And so if you look really closely at that, you could see that uh when it comes to voting for Trump, the Republicans tend to vote in favor of what Trump wants 80 to 90% of the time, and the Democratic justices vote in favor of what Biden wants a lot of the time. Uh so in other words, yes, the Supreme Court is very politicized, which does mean there's also the risk that the Supreme Court is just going to say that tariffs are legal.
But again, we won't know until next summer. So, uh, worst case scenario, we're stuck with what we have. Best case scenario, they declare them illegal and and we get some deflation. Now, what's going to matter more is that economically, we just cleared a really big catalyst. We really have no catalyst now until the beginning of October.
And this is why in the meth membership I've been talking about, hey, once we clear a catalyst, we should be on a clear path to $600 on the cues, which is remarkable because even from this morning when I mentioned it, uh we're we're up substantially. Well, actually the $600 target we've had for a few weeks now uh in the me Kevin membership, but this morning just to give you a little spoiler and then we'll talk about the Federal Reserve here.
To give you a little spoiler in this morning's alpha report, I said bearish real estate stocks today because of the yield rebound on a neutral Powell. Bullish Palunteer, bullish hood, bullish Q's, bearish Tesla on the day. Those were my calls in the meet Kevin Alpha report this morning. Remember that's at meet.com.
And take a look at this cues from or hood from what we mentioned it way up over 3 and a.5%. Palanteer from when we mentioned it up over three and a half%. The Q's moving up, real estate stocks down, and Tesla down. Mostly because Tesla is in no man's life. But beyond this Supreme Court catalyst, we kind of have to look and go, okay, you know, what is there that's actually going to hold this market down right now?
Well, not rates, because the broader stock market doesn't really care if yields move higher a little bit. This is very normal. Federal Reserve doesn't want to aggressively cut. So yields move up. 10 years almost at my target of 4.15 for a neutral power. We almost ran up to 4.15. We're at, you know, 4.126 right now.
Uh this my expectation is actually that this is supportive in the stock market until we actually get some real bad catalysts. Now, we had the leading index this morning that came out with, you know, their recessionary uh triggers or sell triggers, but really the leading index has just been wrong and wrong and wrong for the past 3 years.
The leading index registered its largest monthly decline since April of 2025, so liberation day. They think that tariffs are going to continue to be a drag on the economy. And you can see the leading index has been in decline for 3 years. On top of that, the leading index is indicating recessionary triggers, but these triggers have been firing in 22, in 23, and again now.
So, I don't know how reliable this is. And the only thing that's actually propping up the leading index is the S&P 500 more broadly. A little bit credit here, but that's a little circular in nature. It's like the more the S&P 500 goes out, the the more bullish the data. But that's ironic because the S&P 500 goes up off of the data.
that is sort of based on the S&P 500 going up. So, it's this circular uh momentum of of bullishness. But the reality is, you know, people are cheering that unemployment claims uh you know, have their largest fall since 2020 today. But that's only because we normalized after that crazy spike we got from Texas last week.
If you actually look at unemployment claims o on a sixmonth rolling basis going back to 2022, unemployment claims have basically done nothing. I mean, look at this. Unemployment claims 218 in the first half on average in 2022. Right now, we're at 227. Who cares? Doesn't mean anything. Now, if you look on a week overweek basis, of course, you're going to have volatility.
Now, look at that volatility. But, you know, once you smooth it out, we're really not much meaningfully higher than we were in 2022. Uh, and so this is leading, you know, the economists to actually make the argument maybe there's a chance the Fed's going to end up having policy that's too loose. All of this, mind you, bullish for stocks.
The stock market just wants to avoid a recession. The stock market doesn't really care what rates do. The stock market wants earnings to go up and wants to avoid a recession. And by getting three 25 basis point cuts, what Jerome Powell is essentially trying to set up, just like Nick T mentioned in his Fed article this morning, is that hey, we're trying to set up for uh a a you know, an economy that avoids a recession just like we did in 1995 when we had our prior soft landing.
And what did we do in 1995? Well, we ended up with loosening interest rate policy. We never got higher than 63 basis points on the 102 yield curve and we ended up soft landing. Yeah, we had a period of slower economic growth growth, but then we soft landed after that. So now you've got the 102 yield curve sitting at 55 basis points.
We're below that 63 high, below that high that we saw in 1995. Uh and really you've got no catalyst until October. What do you have in October? again October 1st ADP October 3rd jobs report then we'll get some inflation numbers and at the end of October we'll get another Fed meeting but unless jobs fall off a cliff this idea of being modestly bullish on the cues for a slow kind of schlog up to 600 which is what we've been calling for in the course member liveream makes sense it is entirely reasonable that we can keep chugging along and there's really nothing that says in the morning after that Powell you know should be a lot more bearish and should be rapidly cutting.
Now, he was very aggressive yesterday. I was frustrated with him because out of one side of his mouth, he's like, "We have serious risk to the downside." But I also get it because when we look at the data, it's like, is it really rolling over? And this is where the economist said something that they haven't said before, which is this idea that net migration could end up going negative.
This I thought was really interesting. Some researchers think that net migration this year will be negative. Well, damn. No. Well, we've talked about the unemployment or the the jobs break even rate being very low. Now, Jerome Powell talks about that jobs growth is below the break even rate right now.
But nobody really knows because what if we end up having population shrinkage this year? Nobody wants shrinkage. Little PP. Nobody wants shrinkage. But it's possible that if our break even like if net migration goes negative, then the break even rate for employment would actually also go negative. So maybe there really isn't a jobs issue.
I don't know. Obviously, we'll be paying attention at the beginning of October, but between now and the next two weeks, I just can't be bearish on the market. I think it's slow up. no analysis over the last, you know, 12 hours or whatever or 24 hours almost here since since the Fed has has made me think otherwise.
Uh and uh we're looking looking on a daily basis, you know, where are the red flags in the economy, waiting and seeing. Of course, the labor market is the biggest risk. Of course, the fact that the top 10% of spenders make up roughly half of all spending in America is an issue. Of course, slightly elevated inflation still contributed to by tariffs is an issue.
But if we're waiting for that big moment where, you know, Treasury yields plummet, the stock market sells off, and there's some kind of crisis. The only place you're really going to get it is in jobs data. That's the only thing that's going to move this. So again, October 1st and 3rd. and until then probably slow it up.
Uh and uh I think we're going to hit that $600 Q's target very quickly and so we'll keep sending the alpha reports. But we're pretty excited about it. Uh so anyway, that's my take on on where we sit with the market right now. And it's it's not bad. Uh I think that's why it, you know, puts me at basically 50/50 on the bare bulls scale.
I mean, we're buying stocks for, you know, top 10 stocks to buy for the next 10 years. Uh but um you know these are stocks we think will do well recession or not. You know, as I like to say, recession or not, here we come. But um wow, kind of in a good spot right now. I don't know. Leave me your comments.
Let me know what you think in terms of why maybe uh we're missing something. So here's a great question from the chat. Uh we've got Hybrid Universe says, "I'm curious. Do they actually put immigration jobs in the jobs data? How can that be used to adjust for how many jobs we should have? This is a great question and the answer is the Bureau of Labor Statistics has absolutely no idea if the jobs are immigration based or not.
That's because when the Bureau of Labor Statistics calls businesses to say, "Yo, how many employees you got?" They don't say, "How many Americans you got versus how many people from Mexico you got?" They they don't ask that. So the Census Bureau, they when they ask how many people are in a household, they try to get information on where people are from, but they don't ask if people are legal or illegal.
But the Census Bureau will count population growth and so the delta in population growth. So we'll get net migration from the Census Bureau, which will tell us how much is is the population growing or shrinking. Typically growing. Uh, and then the Bureau of Labor Statistics, they're just calling businesses going, "Hey, how many people you got working?" Or they're calling households going, "How many people in your house are working?" Right?
Household survey, payroll survey. So, nowhere do these two things get reconciled. Basically, you just have economists that are going, "Hey, uh, if migration is slowing down, then we would expect to see fewer jobs show up in the jobs report." That's it. So, like it's possible though that that economist argument is covering up what is truly a serious weakening in the labor market.
That is the risk factor that this immigration idea is uh covering up and masking real underlying issues. And uh and that then leads the Federal Reserve to go, we don't really have to cut that aggressively because things are mostly fine. You know, things are a little softer than than break evens, but you know, mostly fine.
And that's why we had such a neutral Fed yesterday. Uh could that lead them to make a policy mistake? Of course. But remember, Jerome Powell is of the mindset that if SH9 hits the fan, he'll just cut to zero. So that's why Powell was so neutral yesterday. That's why my base case yesterday in the alpha report was that POW's going to be neutral and yields are going to go up to 4.15.
You know, that's what I told course members before it happened. That's what I thought the base case was. You know, I mean, we didn't get all the way to 4.15, but we got to 4.126, which is pretty damn close to 4.15, and we could still settle out over there last few days. But uh really it's it's a really good question because it's basically economists guessing that if the economy is slowing or if if the if the population is growing slower then how many jobs we should be getting would be lower.
That argument though could mask real weakness. And then again this is why I say the two things that you pay attention to are the labor force participation rate. If it goes up, the unemployment rate will skyrocket. Uh and or if layoffs go up, the unemployment rate will skyrocket. Those are the things you really have to pay attention to.
So it's it's tough. It's a tough tough environment. Uh no. So that's so somebody's asking, hey, why basically the question is basically why did yields go down yesterday? Okay. So in the dovish scenario, yields would go down, right? So you have to see you need in financial analysis, you need nuance and it's really really important.
So I'm going to make it very clear. Why did yields initially go down yesterday after the Fed meeting? Uh let's explain. So yields initially fell yesterday because the statement seemed doubbish. Uh you know my prediction uh if Powell doubbish yields down under 4%. Uh if Powell neutral yields up to 4.15%.
Right? The statement was doubbish yields fell under 4%. Powell was neutral. Yields up on Powell. uh which matters more than the statement. So that's that's what you have to understand when when you look at financial analysis. You have to understand what are you basing the scenarios on. The scenarios are based on POW.
That's what matters. But you get the statement 30 minutes before Powell comes out. So of course the market is going to have a reaction function to that statement as a potential tell of what Powell is going to do. Uh, obviously we got a neutral pow. So anyway, uh, so Antonio's House of Pizza says, "Kevin, I want to become a member.
I really like your analysis." Oh, well, thank you. Uh, yeah. Well, join us over at mekevin.com. We'd love to have you. I want You're making me hungry, man. I want some pizza. The one thing that is fair is worrying about that 27we unemployed number. The 27-we unemployed number usually only rises when you're in a recession, not at the beginning of a recession.
It's not a leading indicator. It's a tell that you're already in a recession. And this is probably just the most bearish thing that we could pull out in addition to having been inverted on the yield curve. Right? So, yield curve inversion and the 27 weeks unemployed. This is one of the reasons why one of the major reasons why I'm still like, you know, only fiveish on the bare bull scale.
Like I'm not I'm not uber bull here. Valuations are high. Yes, I'm buying. I've got 10 stocks to buy over the next 10 years. Uh but I'm buying very specific stocks for what I think will do well no matter what happens, recession or not. But this number is bad. So there was a question here in the chat that says, uh, is it true that if you've been out of a job for 6 months or more, they no longer include you in the unemployment number?
Yes, that is absolutely true. So, you end up showing up in this chart if you're long-term unemployed. You kind of get like categorized into your own little bucket. And this chart has been rising consistently. Uh, and it is a sign that you are in a recession historically. So, yes, this is a lingering red flag. Absolutely. .
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