In today's episode, we're breaking down an action-packed Wednesday in the markets, driven by May's CPI data release and key comments from Fed Chairman Jay Powell following the June FOMC meeting. We'll dive into the exciting market reactions, discuss new highs across major indexes, and analyze the impact of lower-than-expected inflation numbers.

Dont look back because the market is closed. Good Wednesday afternoon, everyone. Tyler Herriage here with you for Todays VRA investing podcast. Hope you all had a great day out there today. If you’re watching the markets today, you know that it was an exciting one. A lot of eyes were on todays action. First of all, first and foremost, due to the economic data out this morning as we got Mays CPI data back, remember, tomorrow we’ll also get back the producers price index as well. So the economic data isn’t done for yet.

And then afterwards, we had the money printing. Rockstar himself speaking today, Jay Powell at the conclusion of the June FOMC meeting here. We got their minutes out today at 01:00. And I’ll cover the market’s action in reaction to those, to the minutes, to Jay Powell’s comments today. Again, we’ll go through the economic data. And again, what an exciting day it was. There were a whole lot of new highs out there, whether 52 week highs or all time highs, and a few areas pulling back that we want to see here as well. So we’ll cover all of that here today.

[00:01:24]:
Kicking off here with the CPI data getting a beat today. Futures were slightly higher ahead of the print. Yields were lower. So if that tells you anything, it’s that the market was expecting a number similar to today, but when it came out, it was off to the races. After that, all of our major indexes shot up and yields yields collapse today. I’ll get to that here in a second. But first, headline numbers here, month over month, unchanged for May. CPI versus expectations of a one 10th of 1% increase.

So lowest level either matching, because I think we had one other unchanged month, if I’m not mistaken. But that’s the lowest level since May of 2020. So again, but as we said here, often, inflation was never going to go lower in a straight line. There are always going to be bumps along the way. But it’s nice to get some confirmation today that disinflation is still the trend that we’re looking at. It may not be coming down as fast as we would like, but that is and remains the trend year over year, also coming in slightly, a little bit below estimates here, 3.3%. So you see, still got some work to do before you get down to that fed goal of 2%. The real goal, as we talk about here often should be 0%, but that’s a podcast for another time.

But the expectations today were for 3.4, again coming in at 3.3. Similar numbers from core CPI as well coming in about one 10th of 1% better than expectations in both the month over month numbers and the year over year numbers as well. And again, the reaction here just incredible. Yields dropped dramatically after this report from roughly a 4.41, which was a little bit lower in the morning trading. Getting all the way down. My system just froze here. Sorry, 1 second. Getting all the way down on the day, though.

[00:03:27]:
There we go to a 4.25 at the lows of the day. And I gotta point out here, that is a new lower low from the ten year. How often do we talk about this year in a chart that you’re bullish on? You want to see higher highs and higher lows. It’s never a straight line up. Right. If you’re expecting something to go to the downside, which we have been saying for some time that yields are going to head lower, then this is what you want to see. Going back to the 5%, 4.99% percent ten year in October of last year. This action today really confirms it that we’ve seen nothing but lower highs and lower lows from there.

Now we’re still off the lows of December from last year. Right. But this again a multi month low here action that we want to see continue. And a pretty big break below the 200 day moving average that it’s been flirting with their break below it, that is. All right, so what is the ten year telling us today? Again, no matter what Jay Powell said today, no matter what came out in the Fed minutes, the ten year tells us one thing and that’s that yields want to head lower from here. And we saw it in the CME’s Fedwatch tool as well. I won’t spend too long on this today, but suffice to say the first rate cut was expected in November going into this morning. That timeline has now been moved up to September, which is so interesting because you hear all the time people saying, oh, the Fed’s an apolitical creature.

They wouldn’t cut rates to help their guy out, or any guy out for that matter, or gal two, and they wouldn’t adjust rates right before an election. We’ve said from the beginning that really probably isn’t going to affect their decision making at all. And if it were to affect their decision making, we do expect it to be in the favor of Biden and the Democrats, meaning cuts to keep our markets at all time highs. We wouldn’t put it past them. Not saying that’s what’s going to happen, but we wouldn’t put it past them. So again, good to see yields lower and the CME’s Fed watch will, bumping up the probabilities for one to two, from one to two rate cuts this year. Still a minority view that there will be two this year. We remain in the camp of two, two to three again, despite what the Fed may have been saying today.

[00:05:54]:
And speaking of that, let’s cover a bit of it here. No big surprises from Jay Powell. He did his typical Jay Powell thing where he seemed like he wanted to talk down a market that was having a good day. Just got to come in and rain on the parade. After the minutes came out, the Dow was the first to head lower and just couldn’t really get that traction back to the upside afterwards. But again, the key story here, we want to see tech leading it did that and semis led tech. So no concerns for us here. Probably the most looked at part of the minutes today was the Fed’s projected path for rate cuts.

The dot plot now signaling we came. Well, first off, let me back up. We came into the year with the Fed signaling three rate cuts during the year that got the market really excited about rate cuts and started pricing in six rate cuts for 2024. We’ve said the same thing. Our tune has not changed since the end of last year when people were calling for six. We were still calling for three at the time. And as people started to go, as inflation data came in hotter earlier this year, remember a lot of people were saying the Fed’s going to have to go back to raising rates, they’re going to do more rate hikes. We said then, too, that that was just the other end of the extreme.

All the pendulum swung the other way to the irrational side, expecting cuts again. So we remain in the same camp. But the feds again with their dot plot today revised dot plot now signaling one rate cut this year with four rate cuts in 2025 and four more in 2026. So what does that mean right, especially coming from the Fed. What does that mean really? Because remember, the Fed misses on these predictions far more often than they’re right, especially on the big calls. It seems like they always get some of the little ones right. So they say, oh, hey, we got this right or that right. And those are the stories they run with.

[00:07:58]:
But there’s a huge one right in our face that just happened under no one else’s than Jay Powell’s leadership and Janet Yellen’s leadership at the treasury. Remember just a couple of years ago, the Fed was saying that inflation is not really happening. It’s just showing up here a little bit. This is no big deal. No problem. All right. Okay. Then they said that it, again, they said it wasn’t happening.

Then they said it wasn’t a big deal, and then it was too big of a deal to ignore. They said it was transitory. Remember how many times you heard the word transitory? Two years ago in Jay Powell’s meetings. 18 months ago in Jay Powell’s meetings. Right. Then after saying that it was transitory and no concerns to the Fed after all that time, they had to rush in emergency rate hikes. Right. So, yeah, we’ll take this net new prediction here with a grain of salt, as they always say.

Their data dependence, that gives them the out that if we got, you know, a really weak jobs number or much better than expected inflation data, yet they would cut rates sooner. And believe you me, they cannot wait to get back to easy money policies here. I actually do need to do a little bit deeper of a dive. I was working on a few other projects here today. I, I do want to see what Jay Powell said about their current ending, their quantitative tightening program. What that’s looking like. I need a little refresher on that one from today’s action, so stay tuned. I’ll be sure to get back to you on that.

[00:09:41]:
Sorry I don’t have it prepared here for today. But hey, we’re covering a lot here today, so let’s keep going here. So again, we’re looking for two to three rate cuts this year. Interesting to see the CME’s Fedwatch tool starting to agree with that. Then we’ll move on now to j pal speech. And I won’t really spend too long on this. I mean, nothing really of note here. Just a guy, again, who seemed like he wanted to talk down the market.

He always, I don’t know what it is about him. He just likes to go off script. If he hears the markets higher, he wants to knock it down. If he wants to give the market some life when no one’s expecting it, he’ll come off super dovish. Unpredictability is not a pattern that, that you want are not a pattern. It’s not a trait that you want in your Federal reserve chairman. We’ve said that one for a long time here as well. Let me get a quick sip of water here.

So just a couple of interesting, quick little snippets today. Jay Powell, interestingly, did acknowledge the fact that the american citizens are not happy with this us economy. Right. Everyone on the Biden administration is trying to tout bidenomics, you notice that has really stopped being a talking point for them. And most of us were shocked that they even tried to make that a talking point. So Jay Powell had to make a comment about why people are so unhappy with the economy. And he said that, you know, the data is strong. We have a growing economy, which is true.

[00:11:17]:
We’ve had GDP growth for seven straight quarters now, which is good to see, right. But the inflationary aspect of it, people having to work two jobs to be able to make ends meet now, which is. I’ll get to the jobs data here in a second. But you can see, right, why people are so bearish on this economy. All of the smart reasons out there that you look at from the fear mongers especially, you see so many reasons why we should be bearish on this economy. If you follow us here at the VRA, you, you know the reasons, the real reasons why you should be ultra bullish on this economy, right? Not talking about even just the health of the consumer, right. The health of the average home buyer, credit scores at all time highs, all of these things, including the fact that we’re in the innovation revolution, we are in the roaring 2020s. We’re going to hear a lot of that over the next few years.

But you can’t blame most Americans for thinking out there that times are tough. Right. You get it, right. Like we talk about here often, there are two americas. And right now, according to one of the latest Harris polls, 56% of Americans believe we’re currently in a recession. I don’t put a whole lot of stock into these polls, don’t put a lot of stock into CME polls, even sentiment polls sometimes, although we just use them as another gauge, right. We don’t make extreme decisions based off just one of these because for most of these, like a Harris poll, I don’t know a whole lot of people who fill these things out or get asked to do these things or government surveys. Very rarely do I talk to anybody who’s ever been polled in one of these.

So who knows? Sometimes you look into the polling factors and it’s like 1200 people in this urban dense population within a block. And, you know, it’s just bizarre how they do some of these things and manipulates the statistics very cleverly. But again, you can see why so many Americans think that we’re in a recession, especially with the inflation problem. When you used to go to the grocery store, you’re now spending $200 on what you can get for 80 gas prices, all of these things. Now somebody who got laid off. Right. And has to work two jobs in order to make the same amount of money that they used to get from one. And at the same time, the data is obscuring the fact of the struggle that they’re going through.

[00:13:43]:
I think if most people understood this, they might be a little bit more angry about it that if you’re looking at jobs data, the BLS has some crazy ways of counting these things, and I’m probably going to butcher exactly how they do it here. But this is kind of an analogy of how they do it. If you were to lose your job and pick up two part time jobs in order to make up ends meet, they do split it into part time and full time work, but not in the headline number that everybody looks at, that the Fed bases their data off of that so many economists look at, they’re looking at just the headline data where if you lose your job and then get two part time jobs, they look at that as two jobs being added to the market. And over the headline number, it’s still a net one job added despite the fact that you’re making, using two jobs now to pay for everything that you did with just one job before. At least Jay Powell kind of acknowledged that today. That was probably the most interesting thing that happened. He said that there is an argument to be made that we are overstating jobs numbers. That was interesting and maybe a topic that he shouldn’t have even gone there on.

Right. Because it’s tough to take a guy seriously that is openly telling us, hey, maybe these labor market situations, statistics are being overstated, but we’ve got to rein in this job growth. Right. Their Fed mandate is inflation at 2% and maximum employment. But if one interferes with the other, like inflation here, they’re willing to tell you that, well, we need you to get fired so we can bring down inflation. Sorry, how can you take a guy seriously that is looking you in the eye on tv and saying, well, we need a weaker jobs market. Right? Who can take that seriously? We want growth in this country. That’s what we do in this country.

We grow. Right. Amelia Earhart, we fly in this country. That’s a little Dave Portnoy reference for anybody out there who will get it. So it’s tough to take a guy like that seriously. But one last survey point here from this Harris poll that I found interesting, and Jay Powell didn’t reference these directly. These are separate polls. But right now, 49% of Americans believe that the S and P 500 is down on the year.

[00:16:09]:
That’s hard to believe, especially for us, right? I know we’ve got a great smart money audience here that likes to keep an eye on what’s happening in, in the financial world. You own stocks, you have a 401k or something similar to that, right? You’re looking to invest even if you’re not ready right now, you’re trying to get the education so that when you are ready, you can make smart decisions. That’s always a great thing to do as well. We would recommend our podcast here for anybody who’s interested in learning more about finance, not just an investor, right? Or someone who’s not ready to invest yet, but would want to in the future. That’s why we make this a free podcast. And while I’m at it right now, I’ll go ahead and tell you we do have a 14 day free trial where you can find access to everything the VRA has to offer at VRA letter.com dot. Go check it out there for our 14 day free trial. You’ll find our podcasts and everything else there as well.

But it’s hard to believe that 49% of Americans believe the S and P 500 is down on the year when we’ve hit all time high. After all time high, we hit another all time high today. Point being here, these that’s not the kind of statistic you see at a market top, it’s just not right. What you see in a market top is everyone’s euphoric about stocks. They’re keeping up with them and they can only go higher from here. Right? This is the reading. That’s the kind. That’s why I bring this up.

This is the kind of sentiment reading when you have a whole hell of a whole lot. I can’t even say it right. A hell of a whole lot higher to go for our markets until these people are euphoric and you’re getting recommendations for stock tips from your Uber driver. Right? That’s the kind of euphoric sentiment we’re looking for. And speaking of that, we’re just not seeing it anywhere. Despite all time highs, the fear and greed index is still at neutral. It was at a 45 earlier today, which is one point away from fear. Despite the fact we hit all time highs, semis, tech, S and P in the same day.

[00:18:12]:
Right. Tonight we’ll also get back the AAIII sentiment survey. We saw a big increase in bears last week, still more bulls than bears. Bulls were unchanged on the week though, so it’ll be interesting to see at all time highs here what investors are thinking going forward. All right, long winded intro today. Let’s get to our market action here. We were led by the small caps today, and again, my system froze a minute, again a minute ago. So this is based off of IWM, not the Russell 2000.

That one is glitching on me here, but IWM small caps up 1.56 leading the way today. Next up here. Now we’ll get into the big ones. Most people call our major indexes the big three s and P. Nasdaq, Dow. We like to add in the small caps because we do believe is an important barometer of the overall health of the US economy. So back to our major indexes. Nasdaq up big today, over one and a half percent.

Hitting an all time high again in a big way. Gap up this morning. And just what you want to see, tech leading and semi leading. Tech SMH up nearly 3% on the day and is up in after hours trading. I’ll point out here as well. But what really got our attention here was the mega cap generals. You know, we talk about this rotational aspect for a long, for a lot here that a lot of people been talking about. Oh, it’s seven stocks of the s and P 500 that are making all the moves.

[00:19:44]:
The other 493 aren’t doing anything well. We see it a little bit differently. We see it more of this rotational aspect. When the smaller companies need to take a break, the generals have taken over and vice versa. When the generals get overbought, we start to get rallies and the other 493 names out there, we’ve seen this rotational aspect a lot, especially this year already. So good to see the generals doing their job here once again for some of these. It’s been a little bit since they’ve hit an all time high for some of them, not too long, but we got a lot of them today. Take a look at just a few of these.

Microsoft up 1.9% plus hitting an all time high. Apple, following its massive session from yesterday, was up as much as 6% earlier in the session, finished up 2.8 again all time high here. Nvidia up even better, 3.5% all time high. Google, all time high. Then you had Tesla, meta and others still higher on the day. Not 52 week highs or all time highs, but again, good to see the generals doing their job here. Next up, the S and P 500 up 0.85% to 5421. And lastly here, the Dow Jones was slightly lower on the day.

When I say slightly, I mean it. 0.09%. Close enough to call it almost flat to 38,712. One good aspect here, though, one that we’ve talked about a lot that we want to see continue acting better and has started to since it’s double bottom, what is really looking now like a double bottom transports. We’re up much better earlier in the session, still finished up over seven tenths of 1%. We want to see them continue to act well. Speaking of the rotational aspect, would not be surprised if the Dow got a big day tomorrow. It seems like that’s been kind of a recent pattern, a give and take between the two of those there.

[00:21:36]:
All right, next up, taking a look at our internals on the day today. Good day here. I will say before the Fed minutes, these were much more impressive. We had roughly 72% upside volume on the NYSE and almost, I’m right, at 80% upside volume on the Nasdaq. We closed a lot, little bit below that, lost some steam into the close. But one last factor I’ll point out here is that other than the Dow, you know, we didn’t finish too far off the highs of the day today. Small caps did, though, as well, but we were much closer to the highs than the lows of the day. So we saw similar action in our internals, but still positive across the board here.

Advancing stocks, beating out declining stocks. Over two to one positive on the NYSE, just shy of two to one positive on the Nasdaq. 52 week highs. The lows were our bright spot here. Coming in over five to one positive on the NYSE, nearly two and a half to one positive on the Nasdaq. Lastly here, volume, as I mentioned, up much more earlier in the session. Coming in positive, but not by no. Big two to one beats here today for the NYC, but still positive then for the Nasdaq, a little bit better.

Just shy of two to one positive on the day today. All right, next up here looking at our sectors on the day. We finished with seven out of our eleven s and p 500 sectors higher on the day. And I have one more Jay Powell comment to make in here. Before I get to those, I’ll just start with the financials, which did finish higher on the day today. We also saw regional banks, which we’ve been talking about a lot here yesterday, closed below their 200 day moving average today, up two and a half percent. Jay Powell did comment saying that they don’t really see any concerns in the banking industry right now. That is also what he said before the Silicon Valley Valley banking blow up.

[00:23:30]:
Right. So who knows what to think with them, but we’ll take that as a vote of confidence that Kre was up two and a half percent. So our leader on the day, as you might expect, tech followed by industrials, consumer discretionary and real estate are laggards on the day. Energy, consumer staples. Interesting. Utilities were lower on the day. Could just be a one day move there. You know, usually utilities as the biggest borrowers in the nation would finish higher on a day when yields are lower.

But not what we got today. No big concerns. Again, only four sectors finishing lower on the day, and most of them pretty defensive sectors. So no concerns for us here. Finally for the day, our VRA commodity watch. Gold now trading flat on the day, down .02% to $2,340 an ounce. I will point out GDX higher on the day today. Exactly what you want to see, the miners outperforming the metal.

Next up, silver, also flat on the day, down just .07% to $29.78 an ounce. Copper also flat, down .07% to $4.53 a pound. And oil flat on the day as well. A lot of flat here, $78.35 a barrel. But the energy sector was our lagging sector on the day today. Bitcoin has been moving back and forth in this upper sixties range between 66 and just below 70. Still right in that range right now. This is one we remain extremely bullish on, though, over the next ten to twelve months here as we’ve now passed the having, you know, going to be an exciting end of the summer, we think, for crypto and bitcoin in particular.

[00:25:20]:
Bitcoin now up 1.6% to 68,487. Folks, that is all we have time for here today. Please be sure to subscribe to receive our VRA podcast every day at the market close. You can sign up at vra letter.com, click the podcast link at the top and we’d love to have you with us. Thanks again for tuning in. Until next time, we’ll see you back here tomorrow for the close.