Emptiness of the FOMC....

[00:00:01]Okay, let's go over the market for the past week. So, for the past week, NASDAQ and S&P were both up by around 2% and 1% for the past week. And the market rose over the course of the past week, but the market remained quite bumpy throughout the week. So, it generally rose on Monday, but fell on Tuesday and Wednesday and rose again on Thursday.

[00:00:21]Now, the reason the market remained volatile is because of a few things.

[00:00:25]Number one, last weekend, Trump announced that the US is nearing an agreement on ending the war with Iran.

[00:00:31]So on Wednesday, the US and Iran signed a preliminary to end the war. Now, the important thing was not the war itself, but the fact that it involved a full reopening of the straight of Hormuz.

[00:00:44]This instantly pushed down the oil price from around $86 per barrel to around $75 per barrel post the announcement. Now JD Vance confirmed that 12.5 million barrels of oil had passed through the straight of Hermuse overnight which is a record high since the war began. Now given the inflation is the major choking point for the market the drop in the oil price led to a relief rally on Monday.

[00:01:09]Now the second point was that the FOMC happened. Now, I'm going to go into the details of this FOMC meeting involving the new Fed chair, Kevin Worsh, but what basically happened was that the market showed some weakness on Tuesday as it moved towards the Wednesday FOMC meeting and post the FOMC, it showed a big drop with NASDAQ falling by around 2% in a single day. However, on Thursday, it instantly rebounded by around 2% again, erasing the loss it recorded on Thursday. Okay, so that was the headlines of the week. Now, let's go over the FOMC meeting in detail. Now, to give you a oneliner summary first, the new Fed chair, Kevin Wars, he he just basically said nothing. I mean, I'll explain this in detail, but he basically said nothing and gave no directions or guidance whatsoever during that long press conference. I mean, don't get me wrong, I like this guy. And when I listened to his press conference, I may be a bit biased because he's a fellow M&A investment banker from Morgan Stanley. But that aside, he basically provided nothing to the market. Okay, so let me break this down for you. Now, this was the grand debut of the new Fed chair and the the whole world was super focused on this event given it'll determine the entire market trajectory for the next few months. To give you my thoughts, basically the market was extremely wary on five things or five questions. Number one, we all know the rate will be held constant this month, but what will happen to the interest rate in the future? Number two, what will happen to the Fed's balance sheet?

[00:02:42]Number three, what is the Fed's view on inflation? Number four, what is the Fed's view on the labor situation?

[00:02:48]Number five, will the Fed make any changes to the data sets the Fed monitors? If so, how? Okay, now let's go over this one by one. Now, on the first point, the interest rate. Yes, the Fed held the interest rate constant, but we all knew that was going to happen. What the market was interested in was the future trajectory of the interest rate.

[00:03:07]Now, to tell you how much this was important, if Kevin Worsh even just hinted that his thinking about thinking about thinking about raising the interest rate in the next FOMC meeting, the market would have easily crashed 5% or more. The vice versa would have been resulted in an opposite situation. Now while the situation was so crucial, the market wanted to know a how the dot plot came out and b what the ration were on the dot plot and most importantly see what Kevin Worsh's view is given he was quite against the dot plot from the first place and also everything ultimately comes down to the Fed chair's decision. Now was there a dot plot? Yes, there was a dot plot. The median year end interest rate projection was at 3.8% which is in line with the current interest rate band. However, more on the higher side. However, it was a bit higher than the last FOMC meeting which is at around 3.4%. Now, nine out of 19 policy makers voted that the rate will be higher than now by the year end. And nine policy makers out of 19 policy makers voted that the rate will either be held constant or lowered by year end.

[00:04:13]Now, did you notice something strange with the math? There are 19 policy makers, but nine voted up and nine voted even or lower. So it sums up to 18. So what happened to the other one vote? So basically it was Kevin Worsh's vote.

[00:04:28]Kevin Wor basically told the press that he abstained from the vote and didn't submit a dot lot. Now this is the exact quote from Kevin Worsh. It's been the practice of this committee for participants to submit these projections and I have encouraged my colleagues to continue to do so. However, I refrained from offering any projections of my own consistent with my long-held views.

[00:04:49]Okay. Now, Kevin Wor has consistently been messaging to the market that he is against the dot plot system because he doesn't believe in forward guidance in a fast-paced world like this where the Fed needs to have much flexibility in reacting to the data which are coming in real time. Now, this is understandable, but I did not expect him to abstain from his first FOMC. Okay, so to wrap this up on the first point on the interest rate, the market didn't really get much hint on the future trajectory. Basically the dot plots were submitted but Kevin Worge basically noted that you know this dot plot is not important and he didn't even provide his own view. Now on the second point on the Fed balance sheet this is where Kevin Wor started to act like a broken record. Actually I think we can just cover the second point the third point the fourth point and the fifth point altogether because Wars just repeated the same message over and over again. Kevin Warish basically said he created five new independent task forces which are designed to comprehensively re-examine and reshape core central bank operations and those five task forces are on number one communications framework number two balance sheet policy number three real-time data sourcing number four productivity AI and jobs and number five inflation framework now in terms of the timeline he said that the task forces will launch in July initial perspectives will be provided in fall and finalized reports will come in December. Okay. Now, let me give you my views on what this means. This basically means everything including the data we monitor, what policies we adopt, how we come up with our views on the market is going to change to some degree, but we don't know what will change and even if something changes, we may not tell you.

[00:06:34]Okay. Well, this was somewhat expected, but personally, this was actually beyond what I imagined. So basically everything from the first point to the fifth point, the market didn't get any directions, guidance or answers on the current situation and where the Fed is headed.

[00:06:49]Now the reaction from the market was initially negative. I think the market was probably as confused as I was and I'm sure there were a lot of investors who decided to just take some profits off the table just because they couldn't really understand what just happened.

[00:07:03]The thing is however after a day or so I think the market reassessed what happened and concluded that nothing really changed and decided to roll back the losses from Wednesday. Now from my view the only thing which was slightly negative from the FOMC was one comment from Kevin Wars regarding the inflation.

[00:07:21]He said we recognize the inflation has been running well ahead of the Fed's long-term goal of 2%. That's been going on for over 5 years. this committee will deliver price stability. Now, while this may be interpreted as being negative, this is not necessarily a super negative comment given it was the case for many years, but this was probably the only somewhat negative comment that came out out of all the neutral comments that Kevin Wor gave to the market. Now, just the fact that Kevin Worsh said that he recognizes that the inflation is above target which may potentially lead to an interest rate hike may have sent a negative message to the market which may have led to the fall in the market on Wednesday. But it was an obvious comment. So, nothing super negative.

[00:08:09]Okay, so that was it. That was the grand debut of Kevin Wars. Nothing new, nothing negative, and nothing positive.

[00:08:17]just a repeated message on his beloved task force project. Okay, so that was pretty much it on this week's market update. Now, given the lack of events that happened, my strategy still remains the same, which is hold on to whatever we have and be extremely careful in buying into the market. However, very recently, I do recognize that the market is probably a little bit stretched. So, I'm very closely monitoring three things. Number one, earnings release of big tech and major semiconductor companies. Number two, credit spread of high yield bonds. And number three, upcoming IPO of big AI companies including Anthropic and Open AI. Now, as I said all the time, those metrics will give us some idea of whether the market is reaching a peak of the cycle. And as the market continues to move upwards, I expect to see more volatility each time a major event takes place. Just like what happened during the SpaceX IPO, Broadcom and Oracle earnings releases, geopolitical tensions and etc. So next week we also have Micron earnings release coming up which will be another key event and I do believe the market will continue to remain volatile for the near term. So we'll need to monitor that closely as well. So that's it for this week. I hope you enjoyed the video and I'll be back with more videos very