Wall Street Unplugged
Episode: 921July 19, 2022

The Fed is about to ignite a 15%-plus rally

ignite

Brace yourself… today’s show offers something that’s non-existent in the current market: optimism.

Believe it or not, the widespread negativity is actually a bullish sign for investors. 

On today’s podcast, I recap the last week of trading, the 40-year high in inflation, and what to expect from the Fed next week. 

There are a lot of issues putting pressure on the market, but here’s the bottom line: You need to be a contrarian… especially now that nearly everyone is bearish.

I also sift through the data the Fed is watching… and explain why Fed Chair Jerome Powell is about to trigger a big market rally over the next couple of months.

Inside this episode:
  • Why I’m optimistic (and you should be too) [1:00]
  • Why the Fed’s rate hikes could slow by September [3:00]
  • Some signs inflation is coming down [9:15]
  • What the latest bank earnings tell us about the economy [14:15]
  • This is how a market bottom forms [17:10]
  • These contrarian indicators are making me bullish [25:05]
  • How Fed Chief Powell will ignite a 15% market rally (or more) [30:50]
Transcript

Wall Street Unplugged | 921

The Fed is about to ignite a 15%-plus rally

Announcer: Wall Street Unplugged looks beyond the regular headlines heard on mainstream financial media to bring you unscripted interviews and breaking commentary direct from Wall Street right to you on main street.

Frank Curzio: How’s it going out there? It’s Tuesday, July 19th. I’m Frank Curzio, host of the Wall Street Unplugged podcast, where I break down headlines and tell you what’s really moving these markets. Guys, this is going to be a pretty cool podcast. It’s going to have some numbers, but bear with me because afterwards, you’re going to hear things that you’re not hearing any place else. And you’re going to want to put your money into stocks immediately. Yes, it’s called optimism. But it’s based on numbers. I’m not going to get too crazy. I’m not going to get too hectic, but I want you to trust me on this. I’m not going to make it difficult, I promise. What I’m seeing right now is an incredible, incredible buying opportunity. It’s something you’re not hearing out there. Not hearing the papers. You’re hearing recession. You’re hearing all this crap. But let’s start with the past few trading days. I mean, if you look what a difference a weekend makes, what do we see last week?

Frank Curzio: So, inflation numbers skyrocket from the CPI, PPI kind of a surprise. Yeah, it did catch a mark by surprise, where we were supposed to see moderation. I thought that would be the top number like the previous month, but it wasn’t. Went a little bit higher, spooked the markets. And markets hate uncertainty. So, this led to heightened expectations that the Fed’s going to aggressively cut at its next or not cut, but raise at its next two meetings. So, the first of those meetings, July 27th, not too far away, a little over a week and then meeting after that is on September 21st. Now, prior to the CPI and PPI data coming out last week, the market was pricing in two more Fed hikes at these meetings. So, the July one of 75 basis point hike and then a 50 basis point hike in September.

Frank Curzio: That’s what the Fed futures, that’s what the smart money was betting on. After these inflation numbers came out, again just last week. But after they came out, all of a sudden the smart money was betting and that Fed futures rate spiked. It was pricing in a 1% hike in just two weeks at this meeting. And then another 75 basis point hike in September. So, as 1.75% in rate hikes, stay with me. Because to put that perspective, what’s the current Fed funds rate at it’s at 1.75. So, the Fed funds future’s smart money suddenly priced in that the Fed is going to double the current Fed funds rate, bringing it to three and a half percent over the next two months. By the way, if you get a chance, watch this on YouTube. It’s absolutely free. We tape all these, throw them on YouTube. Because I’m going to share charts with you in a minute.

Frank Curzio: And it’s important that you see it. Not that… Saying it that you see it. Again, it’s for free. And that’s the only thing. You don’t have to subscribe if you don’t want to, if you want to subscribe to it, go to our YouTube, Curzio Research YouTube page, and please… You’ll see. I know a lot of you listen to us on iTunes, different places in your car. You need to see what I’m telling you here. It’s important. This is your money. Now, bringing it to 3.5% and raising 1.75% from these levels. Doubling it. I mean, this is unprecedented. Unprecedented. If you look at a 75 basis point hike, it’s extreme, I shouldn’t say extremely rare, but it’s rare. It’s like saying extremely unique. But it’s rare. And yes, we just recently had one. But the last time the Fed raised by this much, when you’ll get a 75 basis point hike, was in 1994, 28 years ago. This never happens.

Frank Curzio: Now, we’re expecting the Fed, which just raised by 75 base point in the last meeting to do it at least two more times for three meetings in a row. And possibly, as of last week, raised by 1% when they meet in about eight, nine days. Now, it’s rare to see the Fed take such aggressive action and raised by this percentage because they’re always forecasting in the future what’s going to happen. So, in order to raise by this magnitude means the Fed really fucked up. Excuse my language. There was so wrong in forecast that they were looking at inflation and saying, well it’s transitory, but they was so wrong that they had to do something drastic.

Frank Curzio: So, the first time that this happened, 75 based point hike, and that was the last rate hike. That’s the first time it happened 28 years. We want to do this another three times. So, even the change, if we look at what happened already. From zero to 1.75 in seven months, this is insane. This is extreme. Why? And this is a big deal. Might not look … Well, it’s 1.75. We look historically, it was always a little bit higher. But you it’s a shock to the system and we’re seeing that. But why is this so crazy to raise this fast? Because it’s not the credit crisis with the global banking systems on the verge of collapse. Tons of uncertainty. We didn’t know what was going on. How much of damage is, AIG, ensuring … Who knows. Everybody’s hiding everything. We didn’t know. This isn’t COVID when 80 to 100% of revenue for most companies was suddenly shut off due to lockdowns.

Frank Curzio: No. I mean, those are one off Black Swan Events. Today is about inflation. Something that was pretty easy to predict for everyone who’s listening to this and everyone who buys stuff and pays their bills. But it’s pretty easy to predict over the past 12 months for everyone except for the Fed. When you looking at monetary and fiscal. So, I mean, they flooded the market with over 11 trillion. That’s over 50% of GDP. They injected into the system, and I understand maybe the first half of that, when you’re locked down, you have to stabilize the economy. I get it. We didn’t know the full extent of COVID. But close to half of this came in 2021 when asset price returned to all-time highs after those COVID restrictions eased, and the vaccine became widely available to anyone who wanted it. And they still pedal to the metal. And they still wanted to do more. Buy back better, that the worst slogan in history.

Make America great again, that’s a pretty good slogan. You go back to different Democrat. I mean, they have good slogans. Whatever it is. Thank God that didn’t get passed. Holy cow. But almost half of this came in 2021. We all saw it. A lot of us are getting checks when we didn’t even need it, simply because we had a few kids. But a move from 0% to 1.75% in six months has huge, huge implications. I know it seems like it’s a small amount, but has huge implications. These implications take a while to filter through the system. For example, even though CPI and PPI, and these are lagging indicators, they come out and two weeks into the month, but they’re monitoring and they’re providing data for a month ago. Well, over a month ago. You’ll get it six weeks when it started. So, lagging indicators. Now, these numbers came out and hit, what was it? Whatever 40-year records, 38-year, 41-year. Whatever it was, TPI and PPI. So, I get it. I get the reaction. But when we look at real-time data, let’s look at what’s going on right now, real-time.

Frank Curzio: Commodities are crashing. Housing demand or mortgages borrowing is plunging. Inventory levels of retails up 35%. See retail spending and they take that number and say, listen, retail spending is … It’s because everything’s higher. I mean, we’re buying less stuff. I mean, not only are prices being raised, but we’re buying … I mean, if you look at a package of food, whatever it is, not only is it much, much higher than it was a year ago, but the quantity it’s smaller. So, the scene sales come in a little bit stronger, which might be a little misleading. But you look at real time, data of commodities crashing, inventory levels of retails of 35%. And the housing demand, of course, with mortgage rates rising a ton, people are cutting back and saying, maybe I want to wait. If you look at M2 money supply. So, measure the US money includes M1, which is currency held by non-bank check, deposits, traveler checks, but it includes savings deposits and shares in retail money market funds. If you look at M2, it’s falling. Money’s coming out of the system is coming out fast.

Frank Curzio: While GDP estimates, and this is what we want to do. The Fed is doing everything it can to slow growth. That’s their job right now. They don’t care about what happens. We need the control inflation. Look at the GDP estimates. Have you seen the latest estimates from economist cell site firms? And if you look at four months ago, GDP and these are predictions, right? They call for the US economy to growth 3.7% this year and 2.7% next year at 2023. You know what they are now? GDP is expected to grow just 1.8% in 2022. That’s just for four months ago, you know how much that is from 3.7 to 1.8? That’s a massive, massive move for GDP. And then, we look at 2023, it was expected to grow 2.7%. Now the expectations are calling for less than 1%. Most likely that’s when the recession will come. We’re also seeing companies start to lay off. Along with major companies, public announcing that, hey, you know what? We’re going to slow hiring. We’re seeing that everywhere.

Frank Curzio: RE/MAX, laid off 17% of their staff. You had Google come out and say, we’re going to slow. Microsoft, Apple, recently yesterday, which heard a little bit and said, hey, we’re going to slow the pace of hiring. But you’re seeing more and more layoffs. So, the Fed was late to the party. We can all agree on that in terms of trying to control inflation and raising rates. But these hikes from zero to 1.75%, they’re working, they’re clearly working. Now for the Fed, of the markets, to look at the recent CPI and PPI data from last week, which again is lagging indicators. These are lagging. Taken when oil was at 1.25, gasoline price were over $5 on average, copper was 35% higher, lumber was much higher. And then predict that we need to double a Fed’s Fund rate from 1.75% to 3.5% over the next two months is absolutely insane.

This is not going to happen. I tweeted about this Friday and said the chances of this happening, even though those odds went up tremendously last week are zero. It’s not going to happen. If that happens, we will see a 25% crash from here, because we’ve seen the effects. It takes a while to filter through the system, but it’s filtering through the system and it’s happening. People are starting to close their wallets. You impact these. You’ve seen supply chain issues start to ease, because demands starting to slow. We’re hearing that, supply chain concerns, but they’re definitely easing. They’re getting a little bit better. We’re seeing it. Trust me, I track the port data and everything that people do this 25 years. It’s finally starting to get better. Even though a lot of companies lied like Ford and GM and our supply chain issues are great last year and 18 months ago, 12 months ago. They’re great. They’re perfect. They weren’t. Based on the data.

Frank Curzio: Based on people that track this stuff at the ports around the world. And again been doing it for decades and decades. No, it was not getting better. I don’t know what they’re talking about. So, I’d say they’re lying out their teeth right now, which you could see because you still, if you order a car it’s still going to take a long time to get. We start to see cars, come on lot, starting to see chip supply a little bit better. But still it is getting better. You’re seeing it.

Frank Curzio: But unless we want see a depression and stocks falling down 20% from here, we’re not going to see a 1% as 75 basis point hike. We’re not going to see that in next two meetings. Now, that was what the smart money was predicting. And those odds went up tremendously last week, which is why the market fell sharply after those reports. Okay. And you said Thursday and Friday was a little week. When the Fed future showed all of a sudden that there’s a 50% plus chance that the Fed’s going to raise by 1% this month and 75 based point in September. Fast forward as far as you can to Monday. Just to Monday. All of a sudden, the markets start to gain traction, lost a little bit of traction because Apple controls so much of the market where they actually said, okay, well, we’re going to reduce hiring a little bit and a little bit of slow down.

Frank Curzio: So, it hurt the markets in the afternoon. But the markets were strong. Why? Because you had two Fed governors come out and say, listen, we don’t believe we’re going to see … We don’t need these two huge hikes. We don’t see that. Not to mention on Friday, a massive, massive bet was placed against, against that consensus view that the US Central Bank will hike by a full percentage point this month. When I say massive, a massive bet, I’m talking about 150 billion dollar position against the Fed raising 1% at its next meeting. So, suddenly on Monday, news broke that the Fed is probably not going to get this aggressive based on what’s these governors are saying, and also based on the latest data showing inflation is starting to moderate. That’s from last week to this week. Talking about massive policy, massive interest rate. I mean, this is what you’re going to see.

Frank Curzio: And you’re going to see this craziness probably over the next, I would say 60 days. Because this craziness that I just mentioned happened in two to three training days. That’s it, which is remarkable. Then, we look what happened to Banks over the past week. So, J.P. Morgan was the first bank to report and Morgan Stanley report a week numbers, investment banking revenue was crushed. And all of a sudden, the banks are out of… The banks start crashing. The market came down last week. Fast forward to today or even later in the week. So, the Citi, Wells Fargo, Goldman all those rocketed higher after reporting pretty solid earnings. Now, all… Some banks are favorable. Even J.P. Morgan is starting to rise. They increased their reserve, their loan loss reserves, and you have Jamie Dimon, the hurricane, and it could get a lot worse. And this is what I’m hearing. And just negative.

Frank Curzio: But now, I mean, a couple days ago, Goldman just reported great numbers. Raised their dividend, 250 a share. It yields over 3%, 3% Goldman yields right now, trading at pretty cheap levels here. Still 20% off its highs. And that you could say that for most banks… In a higher interest rate environment, where they’re forced to raise fees and again rely on investment bank fees and all this craziness for 12 years, because interest rates are zero. Now, they’re getting handed free checks because rates are going up. They’re going higher. So, now they’re adjusting. Well you see Goldman reported great results. Yet, investment banking was down incredibly. No one’s going out IPOs and stuff like that and doing deals right now. Maybe you see M&A little bit at these levels. Makes sense. But Goldman raising its dividend, paying over 3%. If you’re looking at some of these banks, I mean, these banks like screaming buys at this level.

Frank Curzio: It’s why buying back their stock and they’re raising their dividend in a market that will likely to see a recession. That’s kind of crazy. The banks. Look at the reopen trade from last week when the CPI and PPI came out. Holy cow. Airlines, hotels, cruises got crushed, got crushed. Now all of a sudden, they’re back in favor. Wait a minute, the Fed’s not going to raise by that much. It’s craziness. 1%. Again, I was arguing for a 1% rate hike when we were at point… Hey, we were at 50 bases like on the Fed Funds rate. Half a percent that’s different. We’re at 1.75%. And yes, we’re going to raise going forward. But to say, we’re going to raise even further while clearly we’re seeing signs that inflation is moderating, and let’s wait to see how this plays out. But if you’re looking at all of this from a week ago, from a week ago, I mean, you’re seen 10, 15, 20% moves in stocks from a week, just in a week.

Frank Curzio: And this is what it’s going to be like over the next couple of months while people digest and say, okay, are we ready to buy? No, there’s still risk. Okay. There’s going to be data all over the place. Some of it’s going to be negative. But then you’re going to be like, okay, it’s lagging data, whatever. You want me say, wow, holy cow, I can’t deal with this volatility. It’s insane. These market conditions are crazy. Not really because this is how a bottom is formed and we’re coming close to it. We’re starting to see a clear signs that inflation is easing. Yes, we have ways to go. And gasoline price is at 4.50 or below 4.50 are much better than where they were, what was it? Two, three weeks ago, over $5 on average. Record high. But they were what? 3.30, 3.40 a year ago. Still a lot higher, but progress.

Frank Curzio: And we’ve seen banks, cruises, many stocks catching a bid because they’re trading an insanely cheap multiples. You might say, how insane? How crazy is this? What are you talking about? I’ve never seen the Russell… This is what I’ve done for my career is small caps. My career. It’s my passion. I’ve never seen the Russell 2000 cheaper ever in my career than it is right now based on price of growth. And that growth has been chopped a ton. But I’ve never seen it cheaper than it is right now, ever. I mean, I’m going back to pre.com crash in 2000. I couldn’t find a time that it’s trade cheaper based on the potential growth over the next year. And again, those numbers have been cut dramatically. GDP numbers have been cut dramatically. Even better, and this is why I’m telling you, if you get a chance, watch this on YouTube, because we’re going to share my screen. So, Bank of America has a fund manager survey it takes every week.

Frank Curzio: If you’re a subscriber Curzio Research Advisory or Curzio Venture Opportunities, you’ve see me bring this up in videos just to give you the 50 foot view, the macro view of what I’m seeing, overall. And then we’d go into, that’s called top down analysis. And then, I go to bottoms up and individual stocks or sectors that I like. And that’s how we’ll get to new recommendations.

Frank Curzio: So, as of its last report and here we go, I’m going to show it. And this was yesterday. So, actually it reported this morning. So, July 19th, as I’m doing this. So, this morning, I thought it was last night, but it this morning. Okay. When you go down and look at this, this is the Global Fund Manager Survey. They’ve been doing this for a very, very, very, very long time. Survey. And based on this, you’ll see recession is now the consensus. So, the net percent saying recession is likely, usually that number never breaks above 1%. Usually if you go back, this chart goes back to 2006 of 1%. Right now, it’s at it’s over 50%, 55%. There’s only two periods that it was higher since 2006, that was April 20 where everyone knew we were go in a recession. So, it was like 90%. And in March 2009, where we were in the heart of the crisis, the credit crisis, which we were basically in a recession.

Frank Curzio: Everybody knew it. Outside of those two insane Black Swan events, it’s never been close to this high of the amount of people who predict in recession from these fund managers. These are fund managers that are managing trillions of dollars. These guys know a little bit. This is how they feel. And it’s important because that’s what drives the markets. It’s not data. You think it’s sentiment. If sentiment changes right now, a good … And Daniel I, I was having a back and forth with him earlier today, which is cool, because he’s like, there’s no one that thinks gasoline prices are better right now and are happier for … There are. I’m very happy. I fill up my gas tank twice a week. And we have trucks because you know, we’re driving our kids to different places and school. And again, summertime is not as bad when I drive it as much, but I saw a massive difference between $5 and whatever.

Frank Curzio: If we go to Georgia, it’s even cheaper. It’s under $4 in Georgia right now. I mean, we’re on a border of Florida and Georgia, and we drive my daughter like on a board of Georgia to go to a really good teacher for gymnastics. So, we fill up there. I mean, a dollar difference a gallon is significant. So, yes, I’m going to feel a lot better. But when I’m looking at the bigger picture, yes, I want it to come down a lot more. But man, I’m feeling that. I’m like, holy cow, that’s a lot better than what it was. That’s sentiment. You feel better. You feel a little bit more confident and that’s what determines spending patterns. Now we go down and look at this chart. Global growth, so this is optimism. So, the global growth optimism is at an all-time low. It’s never been this low in history. In history.

Frank Curzio: Think about that. How many things you could say happened for the first time in history? You say that a lot about the markets I guess when it comes to injecting 11 trillion in rates zero for 11, 12, straight years, basically almost with mild exceptions, couple of rates in 2016. But in history, this is where we are. global growth optimism is at an all-time low. Low. Think about everything that’s happened, World War II. All diseases, swine flu, you go back to everything. And we’re looking at COVID recently and the credit crisis. This is .com87. Keep going, keep going. All these crazy times right now. All-time low. Global profit optimism. So, the profits, the net percent of investors expect profits to deteriorate. Right now is at all-time highs. So, the global profit optimism, basically it is lower than ever. All-time low.

Frank Curzio: So, you look at these numbers, and I’m showing these charts, and you could see because they do a good job of circling the time periods where it’s September 98, March 01, September 08, and April 20. And now, we’re at July 22. Today, it’s lower than all those periods dating back to 98.

Frank Curzio: Keep going here. Well you see cash levels. Again, this is the Fund Manager Survey cash levels. The highest since when do you think? April 20? No. October 2016. Remember, we were a little crazy then, and terrorists, and stuff like that. You go back to 2008. No. What about the recession? No. Since March 01, 2001, cash levels at the highest… People on the sideline, the highest levels that they’ve been. And not only that, long US dollar, the most crowded trade, the markets don’t do good when the dollar’s higher, you sell it with IBM. You’re going to see that with a lot of profits. It’s why very cautious recommending stocks. Super bullish into earning season because you’re going to see those earnings coming short. And you’re going to see manager and CEOs, management teams give conservative guidance. And they should because there’s a lot of uncertainty out there.

Frank Curzio: So, why buy a stock that looks great, but could be down 10% in a day? We’ve seen IBM get crushed because they’re in, what, 170 countries and the dollar impacts them. Impacts everything internationally. That’s why small caps being this cheap. And most of them focus on the US, strong dollar’s good for them. That’s fine for most small caps, they do most of their business in the US, most of them. But internationally, 40% of these companies doing growth, doing business overseas or their profits come from overseas, you’re going to see the dollar hurt. And is it factored… Because you’re going to see something, which I love during earning season. If there were an X currency, we would’ve did this. X currency, we would’ve did that. But yet, they don’t say anything when a dollar’s low. And say, hey, our earnings exploded because the dollars… No, never say that.

Frank Curzio: But if they don’t meet earnings, and you’re seeing that adjustment of say 5%, the 5% of the earnings is supposed to report. And that difference comes in low it’s X currency. You’re going to see that a lot. So, be careful buying right now, just wait a week or two. But the long US dollar is the most crowded trade, which means what? And when you’re looking at all this data, what does it mean? These are contrarian indicators. It doesn’t get worse than this. Because another chart that’s interesting it says lower inflation expectations.

Frank Curzio: So, it’s a global financial crisis, which is Lehman. Think that inflation will be lower in the next year. Lower inflation expectations, very low. Well, if you think inflation expectations are low, that means you think interest rates are going to come down, which is also interesting. Now, when you take all of this and put it together, it’s all about sentiment. And based on these numbers all-time, all-time, these are surveys all-time how the CEOs feel right now. Based on sentiment, we’re likely going to see a huge rally in stocks in the coming weeks. And we’re seeing that. Seeing it especially in crypto, the good names are up 30, 40% from their highs in crypto. Because there’s a lot of good names in crypto. A lot of shit… BlockFi in a little bit of trouble lending and you know, craziness and Voyager. You see Silver getting its numbers.

Frank Curzio: Those numbers are great. That sucks tremendously. Again, it’s down a lot. Crypto’s gotten killed, but there’s a lot of good names within crypto. Bitcoin and Ethereum are not going anywhere. But if you’re looking at sentiment, I’ve never seen it this bearish in my career. And while things are bad, I’m not sitting here sugarcoating it. You know I was predicting inflation 18 months ago, 12 months ago, telling you guys, please learn how to buy puts, buy our Moneyflow Trader newsletter. If you did and anyone’s in that and Genia… What she’s doing in that newsletter is insane. I feel like she’s logging a hundred percent winner every couple of weeks. You’ll be making a fortune in that newsletter, basically betting on stocks in the markets coming down and you just need probably a 15%, the market comes down 15% and you’re making 2, 3, 4X times your money. Shooting fish in a barrel. You could have picked anything. Because the markets across the board outside of energy are down tremendously since January, and some are down 56, 70%.

Frank Curzio: So, I’m not sugarcoating this. I’m not sugarcoating inflation. Things are not too good. There’s a recession coming no matter where you want to time it or how you feel. I mean we’re currently, I believe we’re in a recession already. And technically you could say, oh, I don’t know. Not … I mean, that’s the way we feel that you see the markets come down. People feel like this is a recession. We’re close to a recession. So, if things are bad, you have to look at the market. Stocks are down reflecting a lot of these risks that are no longer surprises, which is key. Remember, the biggest threat to stocks is uncertainty. If you listen to me for 30 years, that’s what I’ve been saying. Uncertainty, uncertainty, uncertainty is the enemy.

Frank Curzio: That’s why the market’s been all over the place. That’s why we went down 11 out of 12 straight weeks because no one know what the hell a Fed was doing. The Fed didn’t even know what it was doing. Total 180 on interest rates. It’s transitory. It’s coming down. It’s going to be 2%, 9%. I mean you can’t get more wrong than that. Supply chain uncertainty. Why? Its take us a lockdown uncertainty still with China, war. What’s Russia going to do and Ukraine, how it’s going to end? Uncertainty, uncertainty. These are risks we see clear as day now. We’re talking about Russia shutting off gas to Germany and other places in Europe.

Frank Curzio: We see the uncertainty with China. Yes. They’re locked down in Shanghai and back and forth, but we’re pretty close to done with that. We look the statistics and… We’re perfectly fine here in the US. Most places stop wearing masks. Most places get it. We know who to protect. We understand the risk now of COVID. We’re over 60 with underlying conditions get vaccinated. It’s very important. Most people are vaccinated now. People are getting COVID it’s not that bad. It’s a cold for most people. No mask on airplanes. That fear’s gone.

Frank Curzio: But we are seeing these risks clear as day now. We know where the Fed’s going with interest rates and could things get worse? Could inflation start surgery from the levels again? Yes. I mean, data shows, real time data showing that we’re definitely moderating. So, of course. And if we do see that we’re going to see it show up in a lot of data. We’ll see it surge. You’ll see copper bounce back tremendously. Was it 4.50, 4.75, whatever it was to 3.25. Goes back to 4, 4.25, 4.50. Okay, fine. If oil goes at 1.35, we’ll see it. But right now today at these levels where stocks are trading, you have to start picking away. The next two or three months is going to be crazy volatile. Look what happened in the last week. I just told you happened the last week is crazy. Banks totally out of favor. Get out the cruise lines, the little travel stocks.

Frank Curzio: Now look at them surge. 15 moving averages. All the cruise lines are surging right now. You see Delta, a lot of these other companies, airlines bounce off their lows. I mean, you can’t see Delta trading at levels that is trading during the worst period of COVID. They have record revenues. Yes, their margins are hurting. Yes, they need pilots. But 90% of their revenue was shut off. That’s the level of trading at right now, which is insane. When you look at these valuations of banks and so many companies, not technology, still seeing a lot of technology stocks trading at over 30 times forward earnings. We’re not in a growth market anymore. The overall P is what 15, 16. It was 21.

Frank Curzio: If you’ve taking that growth component out. But when I look at this market, you have to be long going into September. You have to be. Because the Fed, they’re definitely going to raise rates. They’re going to raise rates. If you look at this next meeting, it’s probably going to be a 35 basis points. But let’s look at the September meeting. Because right now, we’re seeing what they’re doing is working. We’re seeing what commodity was seeing in inventory levels. We’re seeing it. I mean, spending is shifting different areas, but we’re seeing it. We’re seeing inflation moderate. Simply from energy prices, which is everyone gauges inflation. That’s the number one thing we want to see. And it’s come down. I mean, 1.30 to about 98, whatever we are in oil and gasoline prices are down 15% from their highs, 12% from their highs. So, we’re seeing it. But when you’re going into that September meeting, maybe they’re raised by 50 basis points.

Frank Curzio: I don’t know how much you’re going to raise by. Maybe 25, 50. Who knows? What I do know is that it’s a very strong probability Powell is going to say that inflation’s definitely moderating, and we’re going to hold off raising rates in the future. And let’s see how this plays out. Because it’s not like, oh, we raise, and this … it’s going to continue. It’s a drag. It’s going to continue. This is how higher interest rates filter through the market. You’re going to see wage growth take a hit, see more and more layoffs, unemployment rate go higher. You’re going to see conditions. GDP come down. Growth coming down. It’s going to continue to come down while we have rates this high and we continue to raise.

Frank Curzio: And when Powell gets dovish, which he will at September, we’ll likely to see a 15% plus rise across the board in the major indices. 15%, you might say 15% Frank you’re out of your mind. You’re lost it. You’re crazy. Well, let’s put in perspective. Because the NASDAQ rises by 15% from these levels. It puts it at a little over 13,000, which after that 15% rise, which I’m predicting, it’s still going to be 20% below its 52 week high of what was 16,200, a little bit higher than that. So, even if NASDAQ stocks or growth stocks, which are probably going to surge more than anything. Because that’s the high-risk stuff. And we see a broad market rally that’s called high beta. Those are going to go a lot higher than the overall market. So, they can go up 25%, 30%. You think these moves are crazy. Look at energy in the past month. Yes, the last couple days it went up 25, 35% pullback in less than 30 days in those stocks.

Frank Curzio: But if we see a 15% rise in NASDAQ was still going to be 20% off. It slows. That’s how far we have come down. So, yes, things are shitty. Things are bad. Yes, you’re reading headlines, a recession, oh my God. Inflation. You’re crazy. The market is pricing this in. It’s down a ton to the point where banks steals here, you can buy gold with a 3% yield trading at dirt sheet valuations, where they have systems that front run the market where the trading is going to explode forever in terms of profits. And this is a company where investment banking did not matter at all for them to beat their estimates. Think about that for a minute. They’re the king of investment bank revenue.

Frank Curzio: So, you’re going to see a lot of new recommendations going into my Curzio Research Advisory newsletter, and also Curzio Venture Opportunities newsletter in the coming weeks and months. Curzio Research Advisory, which I published last week, I held off because it’s earning season. So, I don’t want to recommend something that could fall 10% in a day. I said early, as most CEOs I’ve got to be cautious. You’re going to see some companies get hit with a dollar. You’ll probably get them a little cheaper. Because I don’t know if that’s factored in. It was factored in for IBM. IBM’s quarter is pretty good. You saw a big hit to profits because they operate in, seriously like 170 countries, whatever. And they own everything nowadays. Weather.com, whatever. They own everything. I don’t get how that’s part of their business model. But you get my point. Going into earning season where you’re going to see Jamie Diamond like, where, hey, we’re uncertain.

Frank Curzio: Going to see people cut back. I’m going to issue cautious guidance. We’re increase our low and loss reserves. That’s what you’re going to hear. I mean, not loan loss reserves, but you’re going to hear that going forward. You’re hearing it from Apple, Microsoft. You’re going to hear it from Google. Hey, we’re slowing hiring. We just want to be careful through this. You may see a couple companies report earnings and surge. Like, we saw it Citi group or whatever, but you know what? You don’t want to buy ahead of a quarter when as CEOs probably going to say most likely that he’s going to offer cautious guidance.

Frank Curzio: And I’m just talking about hold off for maybe a week or two, that’s it. After that you’re going to see lots of new recommendations in my newsletters. They train at dirt cheap evaluations. The Fed in September is going to go dovish because you’re seeing it right now without these two rate hikes coming the effects of what happens when you raise rates by this amount. And you’re seeing it in a lot of different areas. You cooled off housing, which is almost impossible to cool off. And you cooled off housing. You did a great job. So, earning season, most of these companies are going to report over the next two weeks, but expect to see lots of new recommendations in both of these newsletters if you’re subscribers. I know. I’m optimistic. Can’t believe it. You’re watching all these TV programs, and you want to throw a TV out the window, and you can’t watch it.

Frank Curzio: Especially financial media. Everything’s so bad. How can I be optimistic when an entire world hates stocks, hates bonds, hates everything right now. Why? Is as you know, if you’ve been listening to me and following me, I’m a contrarian. I hate being on the side as everyone else. When you are, chances are you’re going to be wrong. You might be early to the party, but that’s when you make the most profits. And right now I’m picking away. Because when I see fund managers, expectations for global growth and profits are at all-time lows, not five-year lows, not 10-year, all-time lows. When cash levels for these fund manager at the highest of over 20 years, where they’re going to have to find a home. And there’s a lot of stocks that are trading cheap, that make a lot of sense right now, especially at the Fed and that September, that, hey, we’re going to slow down a little bit. Because man, we’re seeing it across almost every single industry of how inflation is moderating.

Frank Curzio: Outside of food, that might take a little bit longer, but we’re seeing it across many industries. When we haven’t seen it at all, of course any industries, we’re seeing it a lot. But when I see equity allocation’s the lowest level since a Lehman bankruptcy in 2008, that’s the time I want to invest. That’s why I’m getting aggressive. I’m picking away. I’m not buying any stocks that are reporting this week or next week. I just want to be cautious. Even though expectations are low and estimates have come down, they’re probably going to offer conservative guidance like they should because there’s a lot of uncertainty. And some of these companies are going to hit because of the dollar being higher, especially over the past couple of months. And not to mention in that survey and Bank of America showing that’s the trade. Everybody is long, the dollar, which means that trade is going to unwind. So, if we do see a dollar come down that unwinds, we’re going to see, eh, a bump up in energy, which we’re seeing. A bump up in gold, which we’re seeing today, right?

Frank Curzio: Because the dollar’s easing. But overall, if you looking at long-term picture, it’s going to be bumpy over the next couple months, but start buying now. In 18 months, almost any stock that you’re going to buy right now is going to be higher. That’s my prediction. Hold me to it. This is archived just like every podcast I did over the past 15 years. So, if you want to track it and go back, I don’t remove anything. You could see my good calls, my bad calls, everything of what I’ve been saying. And we’ll go back and revisit this. But buying stocks right now, almost any stock, and again, don’t go crazy. If your stocks reporting the stock that you like company you like is reporting earnings in the next couple of days and maybe it goes up 10%. Don’t think you’ve missed it because chances are that stock was down 40%. But that’s going to be the opportunity to buy because we’re closing in finally on a bottom. Again, optimistic, hopefully, you guys enjoyed that. Questions, comments, through the email, frank@curzioresearch.com. That’s frank@curzioresearch.com, and I’ll see you tomorrow. Good day. Take care.

Announcer: Wall Street Unplugged is produced by Curzio Research, one of the most respected financial media companies in the industry. The information presented on Wall Street Unplugged is the opinion of its host and guests. You should not base your investment decision solely on this podcast. Remember, it’s your money and your responsibility.

Frank Curzio
Frank Curzio, founder and CEO of Curzio Research, is one of America’s most respected stock experts. His research is regularly featured on media outlets like CNBC’s Kudlow Report, The Call, CNN Radio, ABC News, and Fox Business News. His Wall Street Unplugged podcast—ranked the No. 1 “most listened-to” financial podcast on iTunes—has been downloaded over 11 million times.

Editor’s note:

Frank just called today’s market “one of the greatest risk/reward setups I’ve seen in my 30-year career”—and he thinks NOW is the time to get aggressive with small-cap investing.

Go here to learn how his small-cap strategy could quickly make you a killing.

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