Powell’s PANIC PIVOT As He CONFIRMS Private Credit Is COLLAPSING...

This morning, Jerome Powell shifted the entire market narrative from "higher for longer" to "balanced risks." Why did Fed Funds Futures collapse from a 52% hike probability to under 10% in hours? It wasn't just the labor market—it's the $1.3 Trillion corporate debt wall and a private credit market that is starting to freeze.

In this video, Mark Malek breaks down:

The specific language Powell used at Harvard to signal a June cut.

Why the 5.8% Private Credit default rate is the Fed’s real "Invisible Hand."

The $1.3 Trillion maturity wall that makes further hikes impossible.

THE TRUTHBOMB: Why your purchasing power is being sacrificed to save the shadow banking system.

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Transcript

SPEAKER_00 0:00

All right, guys, I have a truth bombs bomb blast for you, and it really couldn't wait. So I'm just gonna sort of get it out there. This is a developing story. We've got a major story breaking this morning. Uh, every experienced investor needs to understand right this moment. Going into this morning, as you recall, the Fed funds futures market was pricing in a 52% chance of a rate hike by year end. Oil was at 116 bucks, corn inflation was still running at 3.1%. And the narrative for the past three weeks has been stagflation, higher for longer, and maybe just maybe another rate hike. Blah, blah, blah. You already know the story. You've heard it from me a hundred times, if not a thousand. Then Jerome Powell walked into a Harvard economics class this morning, and everything kind of changed. Powell told those stories, uh, those students, and more importantly, told the bond market and the bond vigilantes that are out there right now, flexing their muscles, that there is a genuine, quote, downside risk to the labor market. Did you get that? Downside risk to the labor market, and that the Fed needs to keep policy, quote, not too restrictive, quote. And FedSpeak, that is as close to a dovish signal as you're gonna get from a man who has spent the last several months refusing to blink. He used the word balanced, and I want to burn that word into your memory right now because when Jerome Powell says balance risks, what he means is that he's scared of a recession, or at least it seems like that. The futures market didn't wait too long for clarification on that, as you might not be surprised to learn, and you've probably already seen the probability of a hike collapsed from 52% to under 10% in real time. The probability of a cut at the June 17th meeting spiked from 5% to 44%. Now, that is a complete wipeout of the hike narrative in a single morning. Now, it's calmed down quite a bit, and since it's kind of even reversing at this point. Uh, but if you've been with this channel for the past few weeks, you know exactly why PAL pivoted today. And if you've been paying attention, you should know this. And it has nothing to do with the college students. We've been tracking the private credit stress building under the surface for months. The U.S. private credit default rate is now 5.8%. Morgan Stanley is warning that it could hit 8%. And Fitch found that 94% of all private credit downgrades in the last 12 months were distressed exchanges. Aries, Apollo, Blackstone. We've been talking about these guys for a long time now. They are all hitting redemption gates. Investors are trying to get out and they're trying to get out fast, and there's no exit. They can't even find the exits because of the gates. Powell even mentioned the private credit sector today. Buried in the QA, though, he was saying that the Fed is in regular contacts with industry participants and it is monitoring it closely. He called it a relatively small part of a very large asset pool. And he's right, but that's still Fed speak for we see it and we're watching it and we're not going to hike into it. Okay. And here is why that matters for you. Sitting behind all of this is a$1.3 trillion corporate debt maturity wall that has to be refinanced this year. We've covered this in other videos. If Powell raises rates one more time into that wall, it doesn't just crack. It could potentially collapse. And the Fed knows this. Today was the day that he finally admitted it. If this kind of analysis, my friends, is useful to you, please hit like and subscribe right now and click that notification bell because we do this every single day, multiple times in one day, even. And you don't want to risk missing some of this stuff. Now, I got a truth bomb here, and then I'm going to follow it up with something else. The Fed is no longer fighting inflation, guys. They're fighting insolvency. When Powell talks about balanced risk today, what he's really saying is that the risk of credit freeze in the shadow banking system is now greater in his mind than the risk of paying$6 for a gallon of gas. Your purchasing power is now the sacrificial lamb, and the floor under the shadow banking system is the priority. For experienced investors, this means the floor under real assets like gold, hard commodities, and quality businesses with pricing power just got a lot thicker. I want to leave you with a couple of more points. Don't be fooled by any relief rally in stocks this week. A Fed that cuts because it has to is a very different animal than a Fed that cuts because it wants to. One is a gift, the other is a warning. Based on everything we're seeing in the private credit market, this one looks a lot more like the second kind. So keep your eyes on credit spreads, not the headlines. That is where the real story is being written right now. Lastly, the story is going to shift probably again and again, and it's going to shift again. Crude is still a problem and is going to remain a problem until a real resolution is reached, a real one, a lasting one. The positive news here is that the Fed may be paying attention to the part of the dual mandate that it actually can control. And we should take that away as a positive for now. This is going to be playing out again over the next couple of days. Watch bond yields very, very closely. They came in quite a bit as a result of that, even though futures is undulating back and forth. Right now, you need to watch 10-year futures yields and you need to watch two-year future yields. So you can expect that we're going to come back to you with more of this information as it develops and it continues to undulate and it continues to shift. But that is the last thing I want to cover today. But I want to remind you to join me every day for Wall Street Truth Bombs because I drop them here before the market figures them out.