URGENT: Federal Reserve STOPS Rates Hikes, Prices Fall, Major Pivot Ahead!

URGENT: Federal Reserve STOPS Rates Hikes, Prices Fall, Major Pivot Ahead!

what’s up you guys it’s Graham here and if there’s one video you got to pay attention to it’s this as of a few hours ago the Federal Reserve has decided to pause rates for the foreseeable future except this time they included a very significant report that signals exactly what they think is going to happen throughout the rest of the year after all this is happening during one of the most exuberant stock markets in history having hit 25 record highs in just the last 6 months housing inventory is beginning to rise by the highest amount since the great financial crisis China just started to dump US Treasury Holdings at the fastest Pace ever in history and to top it all off Bill Gates gets free McDonald’s for Life the more you know anyway with Nvidia currently being valued at more than $100 million per employee let’s discuss exactly what the Federal Reserve just said what their signal is for the next 12 months that’s going to impact stocks real estate and even how much you get paid in the savings account and then finally what you could do with all of this information to give you the best chances possible at coming out ahead on this episode of apparently 42069 is not a get out of jail free card although before we start as usual if you appreciate the last minute updates within hours of the Federal Reserve meeting just do me a favor and hit the like button or subscribe that helps with the channel tremendously and as a thank you for doing that I’ll show you a picture of a kitten so thanks so much and now let’s begin all right so in terms of where all this starts and ends look no further than this morning’s inflation report see here’s the thing when it comes to the cost of products and services or how much they’re increasing in price over time there’s a few ways to look at it with the first being pce or personal consumer expenditures this tracks the cost of items from the perspective of businesses and that tells us how much consumers are willing to pay for something across the board essentially think of this like the canary and the coal mine where if businesses see higher demand than increased costs that probably means inflation is rising and in this case pce was recently found to come in at 2.8% year-over-year this suggests that prices are becoming incredibly sticky in the 2.7 to 3% range especially because we have seen any meaningful decline in months despite rates being the highest we’ve seen in 23 years however even though it’s a slight improvement from what we saw in 2023 it said that the FED has suggested it will take more than a month of favorable data to confirm inflation is reliably moving lower again so there’s still no reason to think that a First Rate cut will come any earlier than September although separate from that if you want even more indication where inflation is headed we got some good news for you because the latest CPI inflation report was just released this morning on June 12th and if you’re curious what was in it here’s what happened on the surface headline CPI decreased to just 3.3% a year mainly driven by the fact that oil and groceries are beginning to come down in price on top of that we can also see that all items when averaged out increased by nothing in the month of May which begins to signal that inflation has continued to move in the right direction for instance more specifically we could see that month over month Energy prices fell by 2% new cars fell by half a perc all items less food and energy only Rose by 2% and the most important from all of this shelter only Rose by 4% which even if that continues over the next year is still less of an increase than we saw year-over-year last month of course to dig a little bit deeper into the recent news we also have what’s called core CPI which purposely excludes more volatile categories like food and energy since those could be a bit more seasonal and most economists tend to agree that this is the preferred measure of inflation and when it comes to this core CPI actually declined to 3.4 % down from 3.6% a month ago overall it does seem like these reports are incredibly promising which is why the S&P 500 recently hit a brand new record high a few hours ago but ultimately from the Federal Reserves perspective it’s still a little bit too soon to celebrate so in terms of how this is going to impact you let’s talk about number one the stock market like I mentioned earlier the S&P 500 reached its 25th record all-time high this year mainly driven Higher by two categories one the that interest rates will come back down and the second is NVIDIA yeah seriously as market watch reported for the first time since 2000 just three stocks make up 30% of the entire index and that’s Microsoft Nvidia and apple this means that despite the fact that 40% the entire index is negative for the year just a few very large companies are responsible for the vast majority of profits and that also means if they go down everything else goes down with it or I guess put another way as market watch explains these three companies and their performance mask the true vulnerabilities within the economy and as a perfect example of this look at what’s called the Russell 2000 this tracks 2,000 smaller companies here in the United States and when you compare that performance with that of the S&P 500 you could see that it’s at a multi-decade low back to the same ratio we saw in 2001 in fact some even believe that the valuations we’re seeing today in Tech draw very similar comparisons to what was happening in the late 1990s during the com bubble when just a few stocks made the vast majority of profits after all even though Nvidia makes a lot of money they’re currently being valued at $102 million for every single employee which compared to everybody else is high although even though this could certainly be caused for concern a separate analysis found that just a few companies leading the market can actually be a good thing for future profits why well since 1950 it was found that a higher concentration led to even higher returns especially since those were the companies generating the most Revenue however in terms of what will actually happen over these next 12 months the truth is it’s anybody’s guess for instance Baron believes that the stock market has much more room to climb because there’s a lot of money sitting on the sidelines parked in short-term treasuries or I guess as they say institutions have $440 billion that is still yet to be deployed there’s also a money supply of 21 trillion that’s flowing throughout our economy to take that a step further a Goldman Sachs representative recently said that there’s a wall of money from passive Equity allegations that’ll pour into at the stock market in early July it’s also worth mentioning that so far the S&P 500 has been positive for nine straight July posting an average return of 3.7% the NASDAQ 100 has an even better track record boasting gains in 16 straight ju with an average return of 4.6% UBS even commented that they see the S&P 500 reaching 5500 by year end amid Fed rate Cuts robust profit growth and the secular growth Trend brought on by artificial intelligence they also expect that the FED is going to cover rates twice this year which should provide a healthy backdrop for stocks now of course China on the other hand is not so optimistic with the entire brics nations dumping the highest amount of us treasuries and government debt ever recorded in history in fact it said that as China’s dumping both despite the fact that we’re closer to a Fed rate cut cycle there should be a clear intention of diversifying away from US dollar Holdings although in terms of how this is going to affect other markets look no further than housing prices for those una aware both Zillow and redin released a monthly housing report that details everything from home prices new listings transaction volume and migration Trends across the United States and in terms of what happened last month well you’re going to want to hear this overall they found that median housing values increased another 6.2% year-over-year to almost $434,000 which is the highest amount ever on record and fortunately on the bright side there are 10% more listings on the market today than a year ago but as you could see that’s still 20% below pre pandemic levels this has has resulted in almost 44% of homes going under contract within the first 2 weeks of being listed down from 47% a year ago and 18% of sellers were found to have cut their asking prices likely because they just wanted too much money in the first place but that’s besides the point so far housing prices have remained High despite higher mortgage rates simply because there’s not enough inventory on the market to satisfy demand but that is slowly beginning to change for instance Zillow has just revised her 2024 prediction and they forecast that housing prices will only rise 6% for the rest of 2024 and actually declined by .9% over the next 12 months as they say an uptick and inventory is causing some listings to linger on the market for extended periods resulting in more negotiating power for buyers however in terms of where housing prices could go over the next 5 years one report which I’ll link Down Below in the pinned comment gives us four scenarios and I tend to agree with them it starts with this first home prices will continue to rise but at a much slower Pace second more homes are going to be built therefore adding on more inventory to the market third mortgage rates will hopefully Begin to Fall as inflation hopefully begins to come back down and fourth housing will continue to remain at least somewhat competitive thanks to strong job growth income and scarcity of land in desirable neighborhoods although on a separate note another topic that should be gaining a lot more attention right now is also what’s happening with rent for those unaware a recent study just found that thanks to Soaring housing costs renters are actually choosing to to stay in their homes for longer with one and six staying in their home for 10 years or more in 2022 up from 13.9% a decade earlier in a way redfit says this is beneficial actually for both landlords and tenants since tenants could hopefully stay where they are to save some extra money and landlords get more predictability without having to go through a vacancy essentially the housing market is still incredibly competitive but conditions are slowly beginning to ease and by 2028 we could be back in an environment where buyers are back in charge although in terms of Jerome Powell’s latest comments his prediction for the future and whether or not they’re going to raise or lower interest rates here is of course what you came for to start every quarter the Federal Reserve releases what’s called their summary of economic projections which basically encompasses their overall expectations on employment inflation interest rate hikes and other metrics associated with the economy and in terms of what happened this morning listen up according to their projections they forecast core inflation subsiding to 2.8% by the end of the year falling to 2.3 % by the end of 2025 and then finally leveling off at 2% by the end of 2026 which signals very little indication that they’d raise rates any higher than they are today which is good in addition to that they believe that the unemployment rate is going to uptick slightly in 2025 to 4.2% and that GDP overall will remain in the 2% range which is fairly consistent with expectations however when it comes to interest rates this was the biggest change they expect to keep rates in the 5.1% range in 2024 which is significantly higher than their Mark projection of 4.6% in fact they’ve signaled that they expect to keep interest rates higher for longer even throughout 2025 at 4.1% or basically they’re signaling the potential of only one rate cut in 2024 and in the long run they expect to keep rates in the 2.8% range although in terms of what Jerome Powell just said and his warning for the future like I mentioned earlier they’ve decided to pause rate Cuts once again until more progress is made with inflation after all as of right now inflation is higher than they would like prices aren’t meaningfully coming down as much as they want and if they give any indication of a rate cut the market would probably just soar and make inflation that much less likely to actually come down plus the economy has so far seen the soft Landing that everyone has been dreaming about since 2022 with no indication whatsoever of an upcoming recession in a way this is the ideal scenario for the Federal Reserve because as long as they could maintain the status quo in theory they could take their time and then reduce rates when absolutely needed for example Canada just recently reduced their rates by 25 basis points on the news that inflation declined at 2.7% to end their GDP began to slow and at some point the United States or other G7 Nations could begin to follow also fun fact but it’s been almost a year since the Federal Reserve last raised interest rates it honestly feels like a few months but time absolutely flew by anyway back then most economists truly believed that we’d only see these interest rates for 4 to 6 months before the Fed would begin to reduce them like earlier this year there was still the impression that we’d see six rate cuts by December but higher than expected inflation completely turn that expectation upside down and now here we are with the expectation that we’re probably only going to see one or two rate Cuts that’s it although if there’s anything that’s certain it’s that nothing is guaranteed and all of this is going to be completely dependent on the data that we see over the next few months and that could change dramatically For Better or Worse like I’ve said before I firmly believe that interest rates are going to remain higher than people expect for longer than people expect I mean just think about it if inflation takes longer to cool down if the drops Market continues to stay strong and people get used to higher interest rates why risk reigniting inflation with rate Cuts unless they absolutely have to if anything keeping rates higher is going to give them more leeway to reduce them if and when they actually need it but then again it’s important to remember that the stock market is not the economy and just because we have high interest rates doesn’t mean that stocks can’t continue going higher like just look at the performance ever since rates started going up very few people could have accurately predicted that type of outcome that’s why practically I’m just doing my best to dollar cost average into the markets on a regular basis ignore the noise and be cognizant not to take on any High interest rate debt that’s it yes it’s very boring and it’s not as exciting as going YOLO in GameStop call options but it’s a Timeless strategy and that’s why sometimes everything I talk about is going to sound repetitive because what works today is probably going to continue working over the next 50 years as an example of this I really like this article from a wealth of Common Sense blog that breaks down the worst returns of the S&P 500 as you could see over 10 years there’s a lot of variables that could either leave you with a small loss or up to a 20% annualized profit over 20 years everything has so far been profitable with the worst ever return happening after the Great Depression and after 30 years the market historically hasn’t returned less than 8% that’s why I tend to personally just keep on the same path regardless of any external circumstances and I tend to believe this is going to have the best result long term by the time we’re all old enough to get the senior’s discount at Wendy’s oh and lastly for anybody who comes to the channel for regular updates like this I just want to let everyone know that after 2 years being engaged I just got married so I’m going to be taking the next few weeks off just to be able to spend some time with family most likely I’ll be back in the first week of July but if you want more content until then check out my podcast the iced coffee hour I’ll link to it down below in the description I will be posting there every Sunday we have so many episodes already filmed out so like everything is already scheduled so if you want to be a part of it binge those episodes we just recently had on Michael sailor and Peter Schiff those are pretty interesting so if you want to binge that enjoy thank you so much and I’ll see you in a few weeks

Let’s discuss the Federal Reserve Rate Meeting in 2024, their summary of economic projections, and what this means for real estate, stocks, and your money – Enjoy! Add me on Instagram: GPStephan

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LATEST INFLATION REPORT:
Headling CPI decreased to just 3.3% per year, driven lower by the fact that oil and groceries are rising – year over year – at a much slower pace. All items – when averaged out – increased by NOTHING in May, which signals that inflation is continuing to move in the right direction.

More specifically: Energy prices fell by 2%, new cars fell by 0.5%, all items LESS food and energy only rose by 0.2%, and Shelter rose by 0.4%. Core CPI declined to 3.4%, down from 3.6% last month.

THE STOCK MARKET:
As Marketwatch reported, for the first time since 2000, just three stocks make up 20% of the entire SP500 – and that’s Microsoft, Nvidia, and Apple. This means that – despite the fact that nearly 40% of the entire index is negative for the year, just a few very large companies are responsible for the majority of our new highs.

Even though this certainly could be cause for concern, a separate analysis found that a few companies leading the market could actually be a good thing for future profits. That’s because, since 1950, rising concentration led to even higher returns, especially since THOSE were the companies generating the most revenue.

A Goldman Sachs representative also recently said that “A wall of money” from passive equity allocations will pour into the stock market in early July.” It’s also worth mentioning that – since 1928 – the first 15 days of July have been “the best two-week trading periods of the year for equities. The S&P 500 has been positive for nine straight Julys, posting an average return of 3.7%. The Nasdaq 100 has an even better record, posting gains in 16 straight Julys, with an average return of 4.6%.”

HOUSING PRICES:
Overall, Median housing values increased 6.2% year over year, to almost $434,000, which is the highest amount – ever – on record. On the bright side, there are 10% more listings on the market today than a year ago, giving buyers more inventory to choose from.

This has resulted in almost 43.9% of homes going under contract within the first two weeks of being listed (down from 46.9%, a year ago) and 18% of sellers were found to have cut their asking prices, likely because they wanted too much money in the first place.

Zillow has revised their 2024 projections and now anticipates that housing prices will only rise 0.6% for the rest of 2024, and actually decline by 0.9% over the next 12 months. As they say, an uptick in inventory “is causing some listings to linger on the market for extended periods, resulting in more negotiating power for buyers.”

SUMMARY OF ECONOMIC PROJECTIONS:
According to their projections, they forecast core inflation subsiding to 2.8% by the end of the year, falling to 2.3% by the end of 2025, and then finally leveling off at 2% by the end of 2026.

In addition to that, they believe that the unemployment rate will begin to uptick slightly in 2025, to 4.2%, and that GDP will remain in the 2% range.

However, when it comes to interest rates, this was the largest change: They expect to keep rates in the 5.1% range in 2024, which was significantly higher than their March Projection of 4.6%. In fact, they’ve signaled that they expect rates to stay higher – for longer – even throughout 2025 – at 4.1%.

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