This is the worst housing crash since 2008, and the Federal Reserve wants it to drop even more. Despite raising interest rates at the fastest pace since the Paul Volker era, Jerome Powell said a recession would be necessary to get inflation down. Powell warned everyone to be prepared for a lot of pain ahead.
Jerome powell said that it would be necessary to cause a recession he said there will be pain ahead in the economy he said layoffs are going to increase and he said that the housing market is going to crash hi guys it’s doc curry and while the fed raised interest rates as expected it’s what jerome powell said that was really scary he talked about causing a recession
Crashing the housing market and a bunch of other things that you need to know about so let’s get into it the federal reserve on wednesday raised interest rates by 0.75 percent which was right in line with expectations but it’s what the federal reserve pledged to do in the future that really spooked the markets this month’s september fed meeting was a special one
Because at this fomc meeting or federal open market committee meeting the fed released their quarterly summary of economic projections now the summary of economic projections or so ep is really important because not only does it tell us how much the fed raised interest rates by today as well as why more importantly it estimates how much the fed will raise interest
Rates by in the future as well as gives us some economic projections about where where the fed sees gdp and inflation going in the future as well the fed was widely expected to raise their projected funds rates but it was the amount of the raise that really spooked the markets the federal reserve is now expecting to end the year at about a 3.4 percent federal funds
Rates keep in mind that with today’s rate increase the federal funds rate is now a variable three percent to 3.25 percent so if the fed were to raise their funds rate to either 4.25 or 4.5 percent we’re talking about another 1.25 increase through the end of this year now the federal reserve only has two meetings left one in november and one in december which
Means the federal reserve is now projected to do another fourth in a row 0.75 rate hike in november and then a 50 basis point or 0.5 percent rate hike in december now this is the fastest rate of rate hikes since the paul volcker era so we can now say that the federal reserve is going paul volcker the first thing we should talk about is that the federal reserve
Expected gdp in 2022 to be at 1.7 percent now after the first two quarters were negative the federal reserve has now lowered that gdp to 0.2 percent but later in the video i’m going to show you why that might actually remain negative and if we take a look at the fed’s projections for inflation this is why i think the fed is going to have to raise interest rates
Even more than what they’re currently predicting three months ago the fed predicted that inflation would be at 5.2 percent they expected inflation to start coming down so far it has not we have not had a single month where inflation has come down despite inflation being stickier and much higher than expected the fed only raised their inflation projection by 0.2 two
Percent keep in mind we’re currently over eight now the fed’s projections will be helped by the simple fact that inflation is reported as a year-over-year number and so far we’ve been comping against very low inflation less than one percent but starting in october we’re going to be competing against inflation that last year was running about two to three percent
Which automatically just the math works out the year over year annualized inflation will drop by about two or three percent so we’re looking at inflation dropping from 8.5 percent down to around six to six point five percent even if inflation stays the same just because of the higher comps that we’re comparing against from last year still that six to six point five
Percent is much higher than the fed’s current prediction of 5.4 percent now the fed is also expecting inflation to drop to 2.8 percent next year again that could happen just simply because we will now be comping against inflation rates of six seven eight nine percent so that again is very possible even if inflation stays exactly the same as where it is today this
Leads me to some good but also some scary things that jerome powell said during his speech today now with the stock market got news of the soep and had a chance to read it and saw just how much they were planning to raise interest rates by the stock market initially sold off by about one percent but once jerome powell started speaking we saw the stock market rise
By about two percent from that level and the reason is because of jerome powell’s definition of a restrictive policy a lot of people thought that meant that drill powell was going to raise interest rates up to eight nine ten twenty percent just like paul volcker did however jerome powell clarified that what he really means by restricted policy is that he expects
To keep interest rates at around four four and a half percent and he expects inflation to come down due to the comp effect that i just talked about and if inflation comes down to say two and a half percent and the interest rates are at four and a half percent well guess what we now have a two percent restrictive policy since interest rates are two percent higher
Than inflation so jerome powell when he talked about restricted policy was not talking about going full out poll voker and raising interest rates of time he was simply talking about inflation falling below the current fed funds rate or at least where they expect the fed’s fund rate to be e in the next three to four months and that’s why the stock market rallied by
About two percent when jerome pal said that now the stock market then turned around and started selling off quite rapidly falling two and a half percent once jerome powell started talking about the housing market jerome powell said that it would be necessary to cause a recession he essentially took a soft landing completely off the table at this point he said we are
Going to enter into a recession and that it would be necessary to do that in order to get inflation down that rising interest rates are going to have to continue no matter how much it gets worse he said there will be pain ahead in the economy he said layoffs are going to increase and he said that the housing market is going to crash jerome powell is actually looking
For housing sales to slow down he’s looking to raise interest rates on mortgages and he wants home prices to come down because this will help bring down inflation and that spooked the stock markets due to the eerie similarities from 2008. mortgage rates are now expected to rise significantly after for jerome powell speech and they could get as high as six seven eight
Percent experts say housing prices will also start to drop soon and that’s exactly what jerome powell wants now we’re already seeing home sales decline and prices fall as mortgage rates rise but jerome powell wants this to occur at a much faster pace jerome powell specifically said that we’ve only seen a very small move in home prices and decline in sales he wants
That to be significantly faster so jerome powell really wants to crash the housing market in order to get inflation down the stock market ended much lower after jeromepal stopped talking and the markets were down over one percent across the board now the really scary thing here is the technical levels because there was a key dollar amount that we did not want the
S p to fall below and unfortunately it fell below that today many many people have been warning that if the s p 500 were to fall below this particular level that it would cause a major sell-off and we would fall well below those june lows so it’s no surprise that stock futures are falling they’re currently down about one percent as of the recording of this video
And this stock market is expected to continue falling significantly through the end of september keep in mind that the last week of september is historically the worst week of the year for the stock market so if the stock market were to decline significantly during this last week of september it would just be in line with how the stock market historically trades
Now let’s talk about this upcoming recession and when we might expect it we know that the united states is already in a paper recession but i want to talk about what’s going to happen when the real recession hits today’s fed decision sent u.s treasury yields in different directions the longer term treasury yields dropped while the shorter term treasure yields rose
Now when the shorter term treasury yields are higher than the longer term treasury yields this is called an inversion to calculate an inversion you simply take the 10-year treasury yield which is where people expect the federal funds rate to be 10 years from now averaged out and then you subtract the shorter term treasury yield and that’s just where people expect
The federal funds rate to be in the short term averaged out now historically we look at the two-year and 10-year treasury yield inversion to determine when a recession might be coming up and that inverted some time ago many months ago that converted pointing to a recession on the horizon but there’s actually a far better recession indicator when we’re trying to
Figure out the timing of a recession and that is the 10-year minus three month treasury yield when the three-month treasury yield is higher than the 10-year treasury yield that inversion signals a recession within 6 to 12 months typically right around 12 months now it’s important to point out that this is not yet inverted we are currently at 0.2 percent now this
Could invert this week we’ll have to wait and see but so far it is not and if a recession typically occurs 12 months after this inverts we’re not looking at a real major recession until the end of 2023 or possibly the beginning of 2024. one of the things you need to watch out for as the us economy falls deeper into recession is an increase in the number of layoffs
We will see more and more companies doing layoffs we will see companies do layoffs more frequently and we will see the amount of people getting laid off increase this will balloon until we hit the worst of the recession as you can see here made up which is facebook is quietly looking to reduce cost by another 10 percent and that means more people are going to get
Laid off google has also quietly required some employees to look for new jobs and in addition to layoffs we’re going to see more and more companies go out of business keep in mind that historically 80 percent of all of the stocks in the stock market will event eventually go to zero so you really have to be careful in selecting which stocks you invest in during
The.com bubble we saw 60 percent of tech stocks go out of business and during the financial crisis we saw 40 percent of companies go out of business and once again companies are starting to go out of business with kitty hawk and air taxi startup being the latest victim in future videos i will give you more information about how the war in ukraine the federal reserve’s
Raising of interest rates and the housing market will affect the stock market as well as your finances personally so make sure you subscribe so that you don’t miss a thing if you got a lot out of this video go ahead and hit the like button and share this video with your friends and if you want to compare what jerome pal said in june to what he said this month you
Can go watch this video that i uploaded here
Transcribed from video
Worst Housing Crash Since 2008 – And Dropping More By Stock Curry – We Profit Day and Night
