--- title: 'Final Warning on Fed' source: 'https://youtube.com/watch?v=uXS337Waf7w' video_id: 'uXS337Waf7w' date: 2026-09-16 duration_sec: 606 channel: 'Meet Kevin' --- # Final Warning on Fed > Source: [Final Warning on Fed](https://youtube.com/watch?v=uXS337Waf7w) ## Summary This video provides a detailed analysis of the upcoming Federal Reserve meeting, focusing on the anticipated Summary of Economic Projections (SEP) and the potential for a rate hike driven by Fed Chair Kevin Warsh. It examines market expectations, key economic indicators, and the implications for Treasury yields and the stock market. ### Key Points - **Pre-Fed Meeting Summary** [00:00] — The video begins with a quick bottom line summary before the Fed meeting, noting that today is the second to last day to get a summary of economic projections. - **Previous SEP Forecast** [00:13] — The last SEP had a base case of one hike priced in for next year, while markets were pricing in two. The actual SEP showed one hike up in 2026 and one hike down in 2027. - **Expected SEP Revision** [00:37] — This SEP is expected to be revised up significantly, mostly due to Kevin Warsh's highly anticipated rate hike. Robobank reports Warsh backed himself into a corner because of his Jackson Hole comments. - **Warsh's Jackson Hole Speech** [01:27] — Warsh mentioned 'hike' three times during his Jackson Hole speech, signaling a potential rate hike. Markets are pricing in 3.6 rate hikes between now and September 15th of next year. - **Warsh's Credibility Signals** [02:38] — Warsh made statements like 'inflation is not necessarily mean reverting' and 'price stability is not self-executing,' which are interpreted as signals that he intends to hike rates. - **Economic Indicators** [03:02] — The economy is holding up, with business capex rising, profits high, and volatility low. The Senior Loan Officer Lending Survey (SLOOS) shows easing at historic ranges, but price stability is a concern with six months over 4%. - **CPI Report Impact** [03:40] — The recent CPI report showed SuperCore at 5.1%, over 6% annualized, a four-month high. However, stripping out cell services, SuperCore is around 2.2%. - **Rate Forecast** [04:43] — The creator believes the Fed will forecast a 4.3% interest rate in 2027. Markets are pricing in 3.6 hikes; more than 3 would be bearish, fewer than 4 would be bullish. - **Base Case Scenario** [05:16] — The creator's base case is only one or two hikes, hoping for positive news on Iran and falling oil prices to bring down core inflation. - **Credibility and Market Reaction** [06:21] — If the Fed doesn't hike (only 5% chance), the 10-2 spread will widen, and the 10-year Treasury could run up to 5.15% rapidly. Robobank says staying on hold is incredibly difficult. - **Robobank's 'One and Done' View** [06:58] — Robobank believes this is a 'one and done' hike, not the start of a new hiking cycle. - **J.P. Morgan's Forecast** [07:14] — J.P. Morgan sees no hike and expects the S&P 500 to fall. They also forecast that Warsh might remove all 2025 easing in forward guidance, though the creator disagrees. - **Neutral Rate Discussion** [08:20] — The talk about the neutral rate and the distance from it is crucial. If Warsh suggests the Fed funds rate needs to be materially higher, the S&P 500 could fall. - **Strong Economy and Higher Rates** [09:01] — Bloomberg op-ed suggests the economy is strong, with retail sales beating expectations and corporate profits high, so 5% yields may stay longer. - **Creator's Optimism** [09:28] — The creator maintains hope for an Iran war resolution and raised the bull/bear scale, potentially being too optimistic on the AI cycle. ### Conclusion The video concludes that the Fed's decision and, more importantly, its guidance on the neutral rate will drive market reactions. The creator expects a hike to prove credibility, but sees a 'one and done' scenario as most likely. ## Transcript Quick bottom line summary before the Fed meeting. Here's what you've got to know. Today is the second to last day that we're going to get a summary of economic projections. This is what the last one looked like. The last one had a forecast base case of basically just one hike priced in for next year. Markets were pricing in two. And what we actually got in the last summary of economic projections was one hike up in 26 and then one hike down in 27. That was the last SEP report. This SEP report, we expected it's going to get revised up a lot, mostly because of Kevin Warsh's highly anticipated rate hike. Now, what's also kind of weird is that Robobank reports that Kevin Warsh backed himself into a corner because of what he said at Jackson Hole. And so because he backed himself in the corner, now we have to prove whether or not he has any balls. And because this is such an important question, whether or not he has balls, we literally released a coupon code called Warsh's Balls, expiring Friday. You can get the Meet Kevin membership here. You click on the little membership button, kind of see everything you get right here. It's actually really incredible, all the things that you get. It's a fantastic membership. But let's focus on Warsh for a moment. Warsh gave us a heads up right here, and I want you to hear it because it's kind of crazy. Listen to what he says, and I'm going to show you the transcript. We'll play this for about 15 seconds. Watch this. This is Jackson Hole. Choice. As I learned years ago, you can take two different kinds of heights on the trails around Jackson Hole. Jackson, I can sum up my hikes with former Vice Chairman Don Cohn with two words. I survived. These feeling marathon death marches revealed a sign of Don that I was not ready for. But there's another kind of hike. All right, did you hear that? Hike mentioned three times at Jackson Hole. Three times, right here, you heard it with your ears, it's also on the transcript. Hike, hike, hike. Markets are literally pricing in 3.6 rate hikes between now and September 15th of next year Freakish But it not just that Look at some of the things Kevin Walsh said to build his credibility during Jackson Hole Forward guidance should be limited in normal times The trends matter. Trends ain't good, buddy. Inflation is not necessarily mean reverting. That's not good. Price stability is not self-executing. That's him basically telling you we have to hike. The only test of our credibility, results, not reasons. This is why he's got to show us the balls today. He's got to tug the rug. He's got to come from under. And he's got to prove that he's not a eunuch. And he's got to prove the madness. Okay, what do we have here? Economy holding up. We're incredibly resilient. Business capex rising. Profits high. Volatility low. Sluice survey. That's the senior loan officer lending survey for how tight conditions are for lending. Easing end of historic ranges. Price stability. Oh, crap, we have problems. Six months over 4%. All of this was a signal during Jackson Hole that a hike is coming, especially predicated on the CPI report that we just got. So if we take a look at what Robobank and J.P. Morgan just said, they give us even more of a little bit of a warning. And this is Sarah Eisen. Over here, we have two weeks ago, the downside risk was the labor market had negative labor readings. But that was actually revised away in the last report. We went from negative labor to positive labor. Then we got CPI that showed SuperCore at 5.1%, over 6% annualized. Yet, if you strip out cell services, you have like a 2.2-ish percent or something like that for SuperCore. But it is still a four-month high on SuperCore. And Headline is nowhere near where it should be. Plus, Walsh kind of screwed himself when he suggested, hey, we're going to focus on inflation to the left of the decimal number. That was his July screw-up, and that's where RoboBank says, this guy's bashing himself into a corner. We have to get a rate hike here. JP Morgan gives us scenarios for what that's going to do to the market. We'll talk about those in just a moment. But let's get into some of the details. So we're going to go through the weeds of each of these. We'll keep it brief. my belief is that they're going to forecast 4.3 as an interest rate in 2027. So the blue, the red is what I wrote in June. The blue is what I writing now which is I think they going to forecast 4 for rates in the future That pricing in three rate hikes in full Markets are pricing in 3 More than 3 would be bearish Fewer than 4 would be bullish My base case is that we're only going to get like one or two hikes. That they start this hiking cycle, they do one or two, and then we start getting, you know, positive news hopefully on Iran, and inflation starts rolling over, oil prices come down, core inflation comes down. That's the hope. Might be wrong. So, market's pricing in 3.6 between now and September 15th. I do think they'll keep the unemployment rate stable, and I think they'll revise up GDP substantially in the summary of the economic projection. Going to the Robobank piece. They say, if we look at the economy, the downside risks to the labor market have receded for now. GDP growth remains solid. The CPI report showed larger than expected gains. To me, this is all about Warsh signaling, don't doubt my balls. They're right here. And yes, we have a coupon code. NBC invest.com. You'll see how we change it from meet cabin to meet your investment. I don't think they're going to do the full full hike. Continuing on here, this is where they talk about credibility. Warsh lost credibility when he first came out, suggesting we're only going to focus on inflation to the left of the decimal. That was bad. That led the market to really substantially hike rates and the odds that the Fed needed to prove some credibility. If they don't hike today, which I think is only a 5% chance, the 10-2 spread is going to widen. The 10-year treasury will probably run up to 5.15% rapidly. These bearish long-term yields and short-term yields will probably come down because they're relatively anchored to the Fed rates. They could also both rise, but the 10-year would rise more. So, you've got to prove you're a tough guy. And RoboBank says staying on hold is incredibly difficult. He's painted himself into a corner. Here's the part about wireless phones. We've already talked about that. RoboBank says that this is actually, in their opinion, a one and done. They think this is not a new hiking cycle. It's one and done. That's what RoboBank thinks. Now, as far as J.P. Morgan, J.P. Morgan... I'm the darn thing. There it is. J.P. Morgan's got no hike. They actually see the S&P 500 falling. This is like the world of reverse command. Yes lower rates from the Fed right now would hurt credibility and actually hurt the market rally I know That what we been talking about Kind of crazy He got to prove his ball No guidance base case market actually goes up I think it goes up more than J Morgan is forecasting They do forecast here that he might get forward guidance, that he removes all of the 2025 easing. I don't know where he's getting this crop from. J.P. Morgan's getting this crop from. He's not going to give us forward guidance. I do think he's going to talk about the mutual rate. in our course number live stream this morning, which is a critical course number live stream for course members to listen to. It's probably one of the most important ones of the year. But not only did we talk about the future of this economy and how to position around it, but we also talked about Fed scenarios today. And a critical component of this, we put some specific wording out for it, but a critical component about it is what does he say about the neutral rate and the distance we are from the neutral rate. That is very, very important. And then, of course, this talk right here, if worse suggests the Fed funds rate needs to be materially higher, the S&P 500 could fall. That is a form of being very far away from neutral. So the talk about neutral is really, I think, what drives the market's reaction today. That's the guidance function, not whether or not we get a rate hike or not. And some people are like, oh, don't worry about what the Fed says. Worry about what they do. We're going to do a 25 basis point hike. Now you need to worry about what we're going to get with that and what kind of talk we get with that. Now, Bloomberg has an op-ed piece suggesting that the economy is doing very strong and that these higher rates of around 5% might meaningfully stay longer because we're not worried about people running out of cash cushions. Retail sales smoked this morning. They were really, really good. And frankly, there's no reckoning if people are running out of cash. People are getting wealthier. Corporate profits are through the roof and the economy is doing well. And so 5% yields are just an example of the broader economy on average doing well, even if components of the economy are doing poorly, which plainly is what's happening. I maintain this belief that the Iran war can find resolution, and I'm potentially too optimistic on the AI cycle, and I raised our bull bear scale this morning. We also set a bio alert. Why don't you join us over at MutualInvestor.com and you can learn more there about all of that. Doing a lot of advertising, these things that you told us here, I feel like nobody else knows about this. We'll try a little advertising and see how it goes. Congratulations, man. You have done so much. People love you. People look up to you. Kevin Paxos, finance analyst. And you too, bud. Meet Kevin. Always great to get your take.