Are You Ready for the Next Stock Market Crash?
In a Nutshell
Markets recovered from a sharp intraday drop after the Fed’s hawkish rate hike, finishing flat despite headlines of massive losses. The speaker attributes the inflation spike to oil-price surges caused by Trump’s attack on Iran, not to the Fed’s policy, and criticizes both Trump and media for blaming the central bank instead. With the Fed united in tightening and Japan poised to potentially dump Treasuries, the risk of a larger correction hinges on whether oil prices—and thus inflation—will ease soon.
These notes were generated by AI and may contain inaccuracies.
The NASDAQ market experienced a V-shaped recovery after an initial aggressive sell-off during the FOMC press conference. Markets moved from nearly 1% in the green to 0.75% in the red after Kevin War's hawkish tone, then recovered into the close and retested previous highs. The market ended flat at 0.03% in the green despite headlines claiming $2.2 trillion was wiped from the market. A 0.5% green day tomorrow would recover all losses from today.
Markets experienced significant volatility but remained relatively flat overall. The speaker emphasizes that headlines about market losses are dramatic, but only forced sellers, overleveraged investors, and margin-called traders actually lost money. The speaker's team had prepared in advance for the volatility. Intel generated $480 in gains, Dell's $2,700 position was fully closed, and shorting MicroStrategy produced $7,100 in profits during the FOMC event.
Kevin War addressed Trump's threat to cut trade with countries if the Federal Reserve doesn't cut interest rates. War stated that the Federal Reserve's independence is a two-way street, telling Trump and his administration to "stay in their lane." This response was unexpected as the speaker anticipated War would bend to political pressure. The Federal Reserve raised rates based on data despite previous optimism.
Raising interest rates is not bullish for markets, and the pullback was healthy given red flags including labor market concerns, employment concerns, inflation concerns, and oil concerns. All 12 Fed members agreed on the rate hike, which was significant even though 25 basis points won't have major impact. This unity signals the Fed's mandate to bring inflation down, regardless of political pressure.
Trump stated the Fed should have cut rates to 1% or lower, claiming the US is carrying other countries. The speaker criticizes this as an inability to accept responsibility, noting that people have been convinced the Federal Reserve is at fault for raising rates. The speaker compares this to "blaming the firefighter for putting out the fire."
Inflation is rising because oil prices have risen, making up 75% of the current increase in CPI data. Oil prices are rising due to Trump's decision to attack Iran. Americans are now paying more for gas than in earlier years. The speaker notes that actions have consequences, and Americans are paying for the decision to attack Iran through higher energy costs.
The Federal Reserve has a dual mandate of price stability (controlling inflation) and maintaining a strong labor market. The speaker explains that blaming the Fed for raising rates ignores the root cause of inflation, which stems from oil price increases due to geopolitical decisions.
Markets appear optimistic that interest rates may need to rise further if Trump doesn't control the situation. The key focus is whether Trump will stop the war in Iran and allow oil prices to decrease. Tomorrow's Bank of Japan economic report is significant because Japan is the largest foreign holder of US treasuries. If Japan begins dumping US treasuries based on tomorrow's report, it could put the US in an uncomfortable position.
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