December 20, 2024

Fed Disappoints: Insights from David Prince on Market Dynamics and Strategic Adjustments

In a recent live discussion, hosted by G Wall, David Prince, a prominent figure at T3 Live’s Inner Circle, provided valuable insights on the market’s response to the Federal Reserve’s decisions and the strategic shifts investors might consider. The session titled "Fed Disappoints LIVE with David Prince" offered a deep dive into the Fed’s recent moves, market reactions, and strategic trading adjustments needed in light of new economic phases.

Understanding the Fed’s Recent Decision

During the discussion, Prince dissected the implications of the Fed’s latest monetary policy decision, where a hawkish rate cut was announced. The market had anticipated this move, but its reaction was notably negative when further details emerged. Most notably, the Fed’s dot plot adjusted to show fewer rate cuts in the upcoming years (two in 2025 and 2026, and one in 2027), deviating from previous market expectations.

An important trigger for the market’s disappointment was the revised PCE (Personal Consumption Expenditures) inflation expectations, which are now set at 2.5% for the end of the next year, up from a prior forecast of 2.1%. This adjustment suggests tighter monetary conditions than many investors hoped for, impacting both sentiment and valuation models across various asset classes.

Strategic Trading Adjustments Post-Fed Announcement

1. Shifting Portfolio Composition

Post-announcement, the market saw a decline, which Prince attributed to the recalibration needed in investor expectations. He stressed the importance of adjusting portfolio strategies, focusing more on risk assessment and the quality of stocks. This entails taking profits in certain overvalued positions and potentially increasing hedges or diversifying into sectors less sensitive to interest rate changes.

2. Market Segmentation and Asset Focus

Prince highlighted changes in market dynamics, noting a shift towards quality and large-cap stocks. He advised traders to be wary of highly speculative assets, which might no longer be as attractive under the new economic forecasts. This includes sectors like quantum computing and other high-growth but currently non-revenue-generating technologies.

3. Trading Tactics in Volatile Markets

With increased market volatility expected, Prince discussed the importance of adaptable trading strategies. This includes being ready to capitalize on short-term market movements without committing to long-term positions until more clear trends emerge. He exemplified this with his trading actions on NASDAQ (referred to as the ‘cues’) and other technology stocks, recommending a focus on liquidity and shorter trading windows to manage risks effectively.

Economic Indicators to Watch

Looking ahead, Prince underscored the significance of upcoming economic data releases, especially the PCE inflation figures. These indicators will be crucial for investors trying to gauge the potential for further rate interventions by the Fed and their implications for the markets.

Conclusion: Adapting to a New Phase

As David Prince elucidates, we are entering a new phase of the economic cycle, marked by recalibrated expectations for growth, inflation, and market dynamics. For traders and investors, staying nimble, focusing on quality, and carefully managing risk are paramount in navigating this evolving landscape. His insights from the frontline of trading floors underscore not just the challenges but also the opportunities that sophisticated, responsive strategies can provide in times of uncertainty.

Watch this video below for more info:

Fed Disappoints LIVE with David Prince



2024-12-20 05:59:04
Visit t3live.com/dp to apply for the Inner Circle

David discusses:

-What the Fed’s hawkish outlook means for stocks
-Whether Powell just ruined a Santa Claus rally
-End of year expectations
-Recent wins in the Inner Circle
-His strategy for 2025
-And more!

Video transcript:
all right hello hello everyone happy Thursday uh welcome to this weekly Market checkin with myself G wall I’m your host and I’m joined by David Prince the leader of T3 lives Inner Circle virtual trading floor hi David happy Thursday how’s your day going so far my day is going well so far so good no complaints all good stuff all right let’s get straight to what we’re discussing today the title of our stream today is fed disappoints and uh they definitely disappointed the market yesterday but getting a bit of a bounce back today let’s first talk about what happened yesterday and then what is going to happen from here so we got a hawkish Fed rate cut yesterday uh that was expected uh by most of the market especially yourself uh 25 basis point cut uh the Dot Plot now showing just two cuts in 2025 and 2026 as well and then one in 27 uh really the focus for the market and what uh many say was the nail on the coffin yesterday was those higher pce expectations for 2025 showing two and a half% inflation by the end of next year versus previous expectations for 2.1% and as you tweeted a quote from Powell uh he said we are at a new phase in this cycle so talk about how you were positioned heading into this rate cut and how you know initially the reaction from you I know was you know the Market was expecting this but then things really went to crap uh on across the street yesterday as pal was speaking so how you reacted to to the decision as well all right so uh how we planned for it was I simply said listen I get it we’re in the most bullish time of year but I everything’s risk award and I see much more downside potentially even though I don’t think the market should crack on this bed meeting I definitely think we can go down and it’s probably a move you can buy on the downside right uh and see much less upside so just based on that risk award if we’re up a lot in certain positions you have to size down like it just risk award doesn’t set up uh thus uh example shorts that we were in we kept some like uh we had shorter TS uh Tesla uh Palante here because that kind of a nice hedge uh and then more importantly on Longs like I’d gotten aggressive on Uber recently it bounced all the way to almost 64 yesterday and I bought it some at 60 the day before I said listen it you know this is not a market to be greeted uh so I I sold a lot um in positions like uh Nvidia that we had added 131 through 128 or so I was like looking at it at 135 I’m like I’m not worried about the old days where it goes right to 140 I’m triming down and that’s what we did into the FED meeting then out of fairness I said listen I I I don’t think I’m the only guy who expects a hawkish cut so the market should not be shocked I expect a pullback but I don’t know if it should be down tooo much this is when the cues are down four or five then he started to speak then he actually as most people know by now a little faux paw there where he kind of said he’s you know they’re screwed in terms of inflation I assume you know what I’m referring to where most people know he literally kind of admitted we might have an issue he didn’t mean to say it the way he said it perhaps more importantly he said one line which was enough for me was we are in a new phase and then I told Inner Circle to me that’s him saying cuts are over now I’m not saying they’re over I’m saying he’s recalibrating the market and saying the bottom line is whether you think it was for and now we’re now the market has this at two it’s recalibration time which simply means take your foot off the gas and start to look at the market maybe with more discipline how you buy things the type of um stocks you buy the quality you buy and so on um and that one line it took me a while to get it normally I am so on fed meetings and this one we were prepared but I didn’t get aggressive on the short side um which I was pissed about and then once he said that line I was like okay at least I know to stay the F out of the way once he said uh this is a new phase it was him saying you know just literally look at your work and whatever you thought it was two months ago it’s a new game right now now of course if things like pce are really soft on Friday and we continue to get numbers that dictate we’re soft and we don’t have to worry as much we will get a big bounce but for right now um it means there’s certain types of assets that were a little crazy that were going up every day the quantum and you know the the the stocks that basically won’t have Revenue till 2026 27 that people are going to be less interested in and I actually wrote this on Twitter yesterday and it tells you where we are in the market I wrote It’s a new game and it’s been a lot of fun but you got to adjust that’s our job like I I never knew when the game’s going to change when I shorted Tesla it was overbought it was an extreme I’ve done well with before I didn’t know the market was just going to fall apart right but I knew my risk award set up to be short my point is when whenever it happens then you’re giving evidence the evidence is the bond market is not happy right 10year uh yields not friendly and literally he said it’s a new phase so we adjust and it is a new game which means like Quantum Computing stocks I had some guy on Twitter yesterday who’s like if it’s a new game why are these stocks holding up well sure enough I’m looking at these dinky stocks one’s down 26% one’s down 24% and another one’s down 10% by the way the nasdaq’s still green very so my point is it is a new game you got to adjust you got to be a bit more serious in what you invest in that’s how we’re going about things uh you mentioned pce PC is on Friday this is of course the fed’s preferred inflation gauge uh the expectations are uh a bump to two and a half percent on the headline number and 2.9% on the core number year-over-year we’d gotten to the point for the market where it felt like the inflation numbers didn’t matter anymore and we were all about the labor market do it does do inflation matters now matter inflation numbers now matter again Market yeah yeah yeah so when it comes me yes just oh yeah oh yeah Friday yeah so Friday you know we’re gonna get this number at 8:30 in the morning and yeah there’s a lot happening on Friday so most people are in nping or St parts so there’s a lot of bids not around so who the hell we get a crazy rally on top of it uh so you think we need a softer number not an inline number to get a bunch of moving um but I think because now people realize maybe he is more data dependent than we realize it also can lead to some big rallies here’s what I told people to prepare for more volatility I don’t I get it a lot of people are like that look at the fix the size of the move that indicates you got to be long um and it’s usually the sign we’re close to a bottom but I like what Josh Brown said just now on fast money which is what I told Inner Circle we’re barely down that’s a percentage this is like nothing we’re not down 10% this just may have started if it is you want to have some Firepower to buy because it will be a buyable Market but not just because we’re down 4% or something you know what I mean um and the cues can get to the 50-day and it won’t even be a it won’t even be a full 10% correction yeah so I think we have to just recalibrate how we buy things and the way I mentioned this yesterday was I’ve been buying stocks way above the eight day average on pullbacks and killing it that’s not normal now we got to wait for them to pull back to the eight and 10 day um yeah and and and it’s just going about things in a little bit more disciplined fashion and what you buy how many stocks you carry and how aggressive you are at certain times like I bought the one last thing I bought the q’s earlier today first thing I did was short the cues this morning right 521 I’m like thank you um and I am look for a home run we’re out after a couple points but my point is and then early later in the day as they flushed I said expect them to go about flat and then we’ll start to get low then they went up three right I didn’t say oh my God I caught the bottom of the market I’m smart I was like I’m lucky I’m up three I’m out and now they’re back down I think we’re in some for some volatility put on your trading cap less your investor cap so we have a pullback that’s more investable like 10% or something like that yeah that the drop is yesterday felt it felt really dramatic uh but like you mentioned we’re not even in a correction territory a stock that is in correction or was you know Nvidia is bouncing now but did hit that official correction territory down 10% uh is NVIDIA uh we’re getting a bounce today what up two and a half percent right at the 132 the market it’s I mean really special actually uh the leader has been of course Tesla versus Nvidia in the past since the election and Tesla down today Nvidia up do you think we return more to you know just investing or just trading in those mag seven big cap Tech names L let pool of small caps and interest rates don’t affect them the way they do smaller companies and whether true or not all that matters is narrative The Narrative is higher rates for longer make it hard for small caps to operate pay more for debt grow quickly it doesn’t affect Amazon the same it doesn’t affect Nvidia the same so people buy it’s partially true but even if it’s not that much true that’s the narrative and that’s the way stocks will trade um so we get some really soft uh inflation debt or maybe the jobs Market falls apart which it’s probably not but something will have to change did Powell ruin the possibility of a Santa Claus Rally or you think in a week the market will be moved on to the next thing I truth I don’t know here’s what I know I think he ruined the possibility for the silly Part very often if you have a lot of gray like me you know during Santa Claus during Thanksgiving the silly stocks they go the most right these dumb little stocks with smaller floats that the bench who’s still around trading on Wall Street while everyone’s gone they can move them because the floats are smaller I don’t know if you’re G to see like Quantum stocks go up 100% next week like you could have right or some Bitcoin uh alternative um and it might be oh Amazon goes up a lot because it’s Christmas and Nvidia does well so maybe the type of Christmas like it doesn’t have to be over but maybe it’s going to be a little bit more of a sedated one with less Fanfare of $2 stocks that go to six less than two less than two weeks left in the year yeah for trading yes um what are your expectations for the for beginning of the year January effect what what names are you looking at for a January effect type trade when it comes to the new year uh well a lot of that happens now January effect happens lot of it now and we’ve played a couple Celsius was kind of a focus one for us that worked well but here’s an example of how we’re trading right now we made a few bucks I think maybe Max it was $3 I was like I’m getting out I’m not going to be a home run hitter it’s a January effect play the company’s not doing well it’s time to get out um so we sold it um and now it’s not it’s yeah oh it’s way below where I sold um we sold at like almost near 32 at 27 I’ll look at some plays like that if I think they’ll be around but not excited I said I’m going to be a Trader first for the first time in many months um and invester second and when we pull back enough and I see names to invest in that I’ve been waiting to pull back that are too expensive I.E aaba which is breaking down and maybe it’s going to continue to pull back I can’t wait to invest but for now I’m gonna be a trade so this morning Q’s long then they pull back six long excuse short and they pull back six we got long uh Tesla this morning I said listen if Tesla rips just press your button and short it um I covered early and I made seven or 8 dollar short Tesla uh my partner Rick bought puts that went up 100% I think he still has them I don’t know maybe he just closed them look look at the range on Tesla 456 to 420 you don’t have to be a good Trader to make a lot of money in a Range that big um so understand there’s some volatility uh I think Traders can take great advantage of it I think you can carry a little less in terms of position positions and overnight would not be shocked if the market rallies the Dow is down 10 days in a row if you take out today uh you know prior to today so are we do a rally sure is it happen at the end of today or tomorrow I don’t know but I know that volatility probably continues a bit and I’ll carry less positions and uh I’ll also take losses more quickly um and keep them you know keep keep my book tight you mentioned those puts by Rick this morning something you guys have been doing in the Circle a lot lately is adding some Alpha to your Equity trades using options this just an example since over the past like week and a half you had Tesla puts that went up 72% broadcom puts up 113% paler puts 100% upstart calls 16 wrong goes up calls went up like 300% you’re cheating me there okay 300% I mean I’m teasing but that was last Friday still so I mean exactly so um well you don’t have a lot of risk the opt you know talk about that strategy how you’re adding that Alpha using the options Market two things um when you’re fading a conventional strong Trend which so many Traders are taught not to do there is still a way to do it if you quantify your risk and don’t get halfhazard and short thousands of shares of a paler you can look at it into a level and like your risk award and say I am willing to lose this amount of money via puts if I think my gains are worth it so that’s what we when we’re fighting a trend um and then when I think it’s about to really break I I size up often shorting the stock so that helps and then on the flip side when you think the Market’s overbought and nuts right um let me go with Google Google was uh for me a a buy at 165 that’s where I owned the stock from and got flat yesterday at $21 now as it was raging off the willow news did I want to buy more stock no not really I was up 30 some oddd points not really appetizing to buy more stock up there but we’ll buy calls on pullbacks especially short-term calls to add some Alpha to that trade so it’s a way to add risk while also not getting out of hand and taking maybe more risk than you should in a market that was clearly overbought prior to yesterday so that that’s how we do it it’s really about managing risk on the short and long side you know so many people think of options as a way to get rich I think is a way to manage risk and maybe get lucky and make a lot of money but it’s first manage risk as opposed to other people which are like you know I’m going to put 100 Grand in and make millions that’s not the way I think of it I think of it as what a great way to be able to go to sleep at night not take more risk than you can sleep with and perhaps get some leverage like returns rather than five or 10% on a stock maybe get 30 or 40 per. if I make 100% I’m pumped all right so you say you’re putting on your Trader cap uh versus your investor cap heading into the end of the year post fed meeting what uh are some of the levels and setups on certain names that you’re monitoring as potential traits so Tesla we talked about today I said 4:30 were last night’s lows and get below that it get ugly now that’s I mean we’ve been long it since 222 after urg uh I didn’t get flat till you know a couple days ago and then got short so where might I come back into it well the Almighty 21 days is at 385 now I know no one makes money trying to be exact so if I see this stock at 400 or below I’m going to start adding to Tesla again would I be excited of 400 no be excited as we get closer to the 21 day which is sloping upward so by the time I buy it if I get lucky enough to buy it it’ll probably be closer to 390 or so but closer to the 21 Day right now it’s a incredible chart just hanging out on the 10day but we were that overbought it was 50 points above the 8 day so there’s a name natur pull back this is like normal stop just you know it’s one of the largest companies in the world at this point it’s not Apple like but it’s large it just doubled right so this I mean anyone who didn’t expect this is nuts um next what are other leaders well of course you know Bitcoin it’s still going to work it’s a matter from what level well if we go back down to 90 91,000 You’ be sure as hell I would add back to my position like I did a week ago on that nutty correction after hours when we went to like 91,000 what else works well Nvidia turns out they’re doing pretty well I heard I heard they’re involved in AI or something so just like we did earlier in the week if it got low enough I’d buy it now am I gonna buy it full steam ahead no like that we do that on major Corrections in Nvidia against averages it still kind of looks like it wants to press lower so where would I get excited i’ get excited 115 to 120 that area if we ever have a real pullback and I’m going to kind of up my quality of names in other words like I joked around for a while and I said I love assana it was a firm it was tem uh lockup time but I also know these are not the stocks everyone’s rushing to now so I have to adjust and uh up to Quality and quite frankly it’ll be more big in midcap someone asked me about biotech today because there are times I focus on it and have done well I haven’t bought xbi or touched it in weeks and they were about to buy it and I was like dude I I think you take a deep breath I don’t see any reason to buy it but can it become a value play and can you buy some xbi if it just gets like demolished which it already is but if it continues to get demolished sure but right now most of it is going to be big cap Tech Banks um that can still thrive in a uh less less interest rate Cuts environment um so gave you the Tesla gave you the Nvidia um I would come back to affirm uh and the level I gave today and it’s kind of last I saw breaking down said 5860 uh is a name that I mean it’s done really well by us 5860 do well Uber we did great in a short-term trade it’s still under Fire it’s kind of broken if it got really ugly uh mid-50s I’d be back in Uber but I’m definitely not in a rush on those types of names it’s going to be more big cap so I’m going to let them come to me if I miss them I miss them all right uh okay quickly before we go got a question in right at the end here uh Jason wants to know what about AMD it’s been beaten down uh are they still in business I’m teasing so listen uh Lisa is a Bonafide Rockstar right she took this was a three4 stock I remember I owned half the float for me uh when it was a $5 stock and Goldman did a secondary it’s been a rough year I honestly don’t know because you’re hearing evidence that suggests that the reason you’d buy this stock for their growth we know is about AI right which is from a smaller base so I always thought woo in 25 given the smaller base they’re coming from this could be a stock that works great even if the Market’s not great right part of it is the law of large numbers Works in their favor because they’re not large but now you’re hearing from analysts they may not make those numbers then you think at the greatest moment the Advent of AI when everyone’s going crazy if they can’t make their numbers I don’t know if it’s going to work so here’s how I look at a stock like this I look at it like when it gets really oversold will I bet on that jockey to figure things out are the numbers low enough in terms of AI that she can really show amazing growth probably yes and I would buy it is it ugly yes is it broken yes is it broke at every level on the chart yes and is there prob last minute tax loss selling for anyone who doesn’t think ahead yes so there’s nothing I can tell you like it’s time but it’s pretty darn ugly and I’ll bet on Lisa Sue to some degree here but if like some Trader is out there and wants to focus on AMD like you know check yourself before you wreck yourself because like there’s got to be something better than AMD right um but if you want to invest would you invest in a great jockey who took this from a $4 stock to 220 okay I’ll bet on Lisa I think she’ll figure it out that’s how I look at it very messy perhaps starting to be an okay investment while we’re on the topic of Chip makers besides Nvidia Micron getting wrecked today after earnings uh last night the earnings beat but the second quarter guidance wasn’t great any thoughts on mic just just memory tried to build itself as a Growth Company tied into Nvidia uh no longer this slow mark in you know uh memory company yeah it’s a low margin memory company I don’t care about it and I’m not buying it nor should you game over not interest yeah and then H Karen wants to know if you have any thoughts about Netflix about which one Netflix Netflix uh my partner Rick makes so much money in it I’m so jealous I didn’t pay attention to the story as I should have it’s been amazing best in breed but I think it needs a rest I mean it’s been an amazing run uh I think think it could use a rest and I think if you’re first buying Netflix I I would wait I think it could pull back some but boy it’s done everything right doesn’t trade at obscene evaluation so uh I have nothing bad to say about it and boy um this guy killed it on inner circle with it so every time he was selling it for a profit I’m like oh not again how do I keep missing this by the way a Ted’s you know the guy who runs a company bright as can be you know it’s not obviously read anymore just a great company great CEO not a bad word I could say about it all right all right all right uh David is a real Trader so I want to let him get back to it uh but for everyone who’s with us live if you’d like to apply to work with David in the Inner Circle you can go to T3 live.com DP that’s a screenshot from the room last week I can’t remember the last time I had such a good day had the best day I’ve been having a lot of great days outstanding day and we get I see messages like this daily in the room so great guidance from David and Rick and Kira as well there in the Inner Circle so again you can go to t3.com dp2 apply David and I are going to take a bit of a break until the new year so we’ll be back in January David have a Merry Christmas and a Happy New Year and a happy Hanukkah as well um so everyone have a great holiday the new year thank you for joining all right bye guys bye d e