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Well, there we have it. The Federal Reserve catalyst is out of the way and I have to say some things went as expected. Some things did not go as expected here. First of all, we know we are coming off a good earnings for AMD and Microsoft. Fantastic earnings here. And Nvidia is benefiting way more than AMD or Microsoft are benefiting.
But what did the Federal Reserve just say? Well, the Fed told us the time has come. Now, that's the time for rate cuts. Now, this is mind-blowing to me that they actually teed this up. They totally teed up the September rate cut. I was not expecting that. I was expecting a neutral to positive or neutral to dovish Fed.
We got dovish and positive and teed up rate cut, baby. Now, let's explain how they teed this up cuz it was pretty remarkable. First, they started with the statement. The statement started off pretty obvious that we were about to have a dovish Fed because they were completely removed the idea that they were going to be highly attentive to inflation risks and we were really surprised when we saw this.
Instead, they moved to this sort of 50/50 aspect where they're attentive to both sides of the dual mandate, which basically implies they're equally balanced between yeah, we're bullish on jobs and bullish on inflation. They've equally balanced this now. Now, of course, they're not going to declare victory, but wow, what did they tell us in the meeting?
They told us that uh inflation, here we go. Uh inflation has eased substantially. We're attentive to both sides. We've got good growth, 2.6% investment in equipment has picked back up. Inflation has eased notably and we've made considerable progress on inflation. This was mentioned maybe three or four times.
So, really trying to show that they wanted to bring this idea that they're so heavily focused on inflation down into balance. And later in the meeting, he even said we're pretty much balanced now between the two. Uh we're moving closer to where it will be appropriate to reduce policy rates. He went into even more detail later.
Rates could rate cuts could be on the table as soon as the next meeting and we are getting closer to the point of where we can reduce rates. He says, "If we get a disappointing reading, obviously that could weigh against a September meeting cut. We want more good data. We've seen progress." What I'm basically gathering from this is as long as you have an acceptable jobs report and an acceptable CPI report, they will clearly signal by Jackson Hole, the third week of October, that yes, the rate cut for September is in the bag.
The progress is equal now. Keep in mind, when I get through the summary, I'm also going to go through my thoughts on the market and trades and things like that. So, we'll cover that. Just want to get through some of what JPow just said. And then, of course, remember today is coupon expiration day. Questions, email [email protected].
Otherwise, get in before the price goes up. You get lifetime access. So, even if I'm right yesterday and wrong today or whatever it is, you get me for life in the course member live stream and you get my ideas and you get my perspectives. So, consider if you like my perspectives, consider checking that out at meKevin.com.
Or if you want something more detailed, go to the meKevin.com/mastermind. The next group is almost full for October. All right. We last raised rates a year ago in the July meeting. Today, we're in a completely different economy. He says we've made a lot of progress. We've made progress on all three forms of inflation, all three core forms of inflation.
Goods, non-housing services, and housing services. We can afford to begin adjusting rates. The upside risk to inflation has decreased. The time is coming at which it is beginning to become appropriate to cut back those restrictions. Uh headline number on on jobs have come down and the majority supported not moving today.
Now, this is really interesting because it somewhat implies that some were for actually cutting today. Uh or maybe hiking, but I doubt hiking. It was probably someone was like, "Uh why don't we cut today?" And everyone was like, "Uh no, let's consensus cut in September." He says, "We're starting to see the lags start showing up, the lagging effects of higher rates on the economy start showing up." He says that the labor market has seen a normalization.
Was asked about the Sahm rule. We actually specifically thought that he would get asked about it. We wrote this on our Fed Bingo. Someone asked about the Sahm rule trigger. Literally got asked about it. But I'll tell you, look at how I lost Bingo here. I had two chances at Bingo. I had a shot at Bingo across the board right here on the second row.
This was a shot at Bingo and this was a shot at Bingo. But I literally lost Bingo in two ways because Nick T did not sit next to the New York Times blondie. I'm like, what the hell? Like seriously, he always sits next to Jennifer from the New York Times. This is the first time in years Nick T had a different woman between him and her.
What is this? This is crazy. Anyway, so that was a little bit of a disappointment because I would have had double Bingo. But anyway, Jerome Powell suggests this situation is unique, no decision made yet on whether we'll do a 25 BP cut or 50, that we are consensus consensus driven as soon as the next meeting.
Uh oh, he was asked Uh would you consider cutting as soon as the next meeting? Is there a growing consensus? And he said, "Yes, there is a growing consensus. The time is rapidly approaching to cut as long as the data doesn't show a sharp weakening." So, in my opinion now, here's how trades get played.
And this is tough, okay? This is this is tough to play. So, I want to make this crystal clear. So, we're going to set this up on screen here. This is my take for the trades, okay? So, last week we said whatever earnings are, they drive the market this week. Fed will introduce vol, but that's it. Maybe short-term trade, but earnings will prevail.
So, what are we seeing? Well, we saw markets rally after AMD and Microsoft yesterday. Uh what do we expect today? Uh markets right now are trading down going into the close. Why? My opinion, markets are waiting for Qualcomm, Meta, and Arm. And then tomorrow, we get Apple and Amazon tomorrow. So, in other words, true bullishness may not fully unlock until we clear all of these earnings.
So, a lot of people are saying, "Kevin, in your opinion, not financial advice, when is it time to buy the dip? When dip buy?" I think there's an argument to say you dip buy potentially each of the good earnings, right? Maybe each good earnings set. So, a little today uh based on AMD MSFT. A little tomorrow based on Arm, Qualcomm, Meta today if the earnings are good.
And then a little Thursday uh {slash} Friday based on Apple, Amazon if the earnings are good. Right? Now, remember what I've said last since last week. I said if earnings bad, recession. If earnings good, uh flip bullish, right? And then I also said Fed will just add fuel to the fire of whatever earnings are.
I maintain this belief. Now, so far, we are trending in the bullish direction. So, I think the markets, as long as we continue to get good earnings, will trend bullish in through the week. Everything. IWM, the Qs, chips, interest rate sensitive. I don't really care what it is. I think it all goes up into Friday as long as Arm, Qualcomm, Meta, Amazon, and Apple don't get reamed.
If they get reamed, you got big problems. So, that's my take. So, that's why I think if you're looking for sort of longer-term dip buys, maybe every time you get good earnings, you dip buy. Another option is you know, other option, wait until earnings are done. Uh and then another thing you could do if you want less volatility.
So, for less less vol in a trading portfolio, I'd probably go go at least next Friday unless you have diamond balls or you know, some some like you know, death wish or whatever. Uh not saying I don't. I do crazy things sometimes. But anyway, um probably a good idea because there will be volatility. And really that volatility is going to be based off of earnings.
Now, markets were really tenuous going into the Fed meeting today. I think that's because markets are like, you know, what if we get rugged? What if we get rugged? Didn't expect a rug, didn't get rugged, but I also didn't expect them to tee up the September rate cut the way they did. And frankly, they fully gave us a Fed.
They fully gave us an all clear for a Fed rate cut in um uh in September. So, now I'm going to take a brief look just to see at where yields sit right now and the odds of a September rate cut. September yeah, September rate cut odds just jumped. We're now at 1.16. After the FOMC or at the beginning of JPow talking, we were only at about 1.04 rate cuts.
Uh that's now jumped to 1.16. We're now at uh almost pricing in two full rate cuts by November. And almost pricing in three full by uh December, and then three and a half for January. So, we'll see where markets go, but uh I think there's going to be a lot of tenuousness on these earnings. If we can get these earnings out of the way, finally, finally, we can have the all clear.
And we can get rid of all hedges. It's my take. Uh still got some hedges, and uh as we continue to get good earnings, I'm going to roll off those hedges. So, let's see what happens. Anyway, if you want to know exactly what I'm doing, make sure you're part of the Stocks and Psyche group, uh linked down below.
Can't guarantee you'll make money, but always guarantee to provide you the best perspective that I possibly can give. Uh and folks, today is coupon expiration day. That does mean the price goes up at the end of the day today, 11:59 p.m. today. You got questions, email us at [email protected]. Jeffrey Gundlach Gundlach says, "A lot of room for the Fed to cut short-term rates" in an interview on CNBC.
Yeah, okay. Oh, yeah, he's he's yapping uh right now on CNBC. Anyway, uh we're going to be jumping over to the market closing live stream for Meta earnings uh within about uh 30 minutes. We'll see you all soon. .
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