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What are the world's biggest investors actually saying right now? And what can we learn from the legends who came before them?
Every episode, we go source-by-source through interviews, reports, and predictions from investors like Cathie Wood, Ray Dalio, and Stanley Druckenmiller—plus deep dives into the timeless lessons from trading legends like Jesse Livermore and Paul Tudor Jones.
No speculation. Just verified quotes, specific predictions, and the strategies behind the world's greatest money minds.
This is Money Men.
In less than one hour, the most important number of 2026 is going to drop.
At 8.30 a.m. Eastern, the Bureau of Labor Statistics is going to release the January CPI report,
and this single number could change everything about how this year plays out.
Will inflation finally break below the 2.5% mark, confirming the soft landing everyone's been praying for?
Or will we get another hot surprise, killing the rate cut dream and sending markets into a tailspin?
So here's what most people don't actually know.
10 out of the last 11 January CPI reports have surprised to the upside.
That's not a typo, by the way. 10 out of 11. A 90% hit rate on January surprises.
So while everyone's positioned for a cool 2.5% print, history says we might be walking into a trap.
JP Morgan's trading desk thinks there's a 42% chance of a hot print, basically almost a coin flip at this point.
Today, we're going to be breaking down exactly what Wall Street expects, why January always runs hot,
what the Fed is really thinking behind closed doors, and the three scenarios you need to prepare for when that number drops.
Okay, let's get into it.
Quick disclaimer before we dive in, nothing in this episode is financial advice.
I'm not a financial advisor. I'm just breaking down what analysts and investors are saying and sharing my take.
Do your own research before making any investment decisions.
All right, let's do this.
So let me set the stage here.
The consensus forecast for today's CPI is 2.5% year over year.
If we hit that number, it would be the lowest inflation reading since May of 2025,
before the tariff fears really took hold and before the trade war heated up again.
And try to think about what that means for a second.
We'd be back to what economists call normal inflation, the kind of inflation we saw from 2017 to 2019,
before the pandemic broke absolutely everything, before Jerome Powell printed $5 trillion,
before supply chains collapsed, before we all learned what transitory means.
And Tom Lee from Fundstrat, one of the most respected strategists on Wall Street right now,
puts it perfectly this week. He said,
getting inflation back to 2.5% would be consistent with prices prior to the COVID pandemic
and around the average of 2017 to 2019.
This is normal inflation conditions, even with tariff impacts still lingering in these results.
Try to let that sink in.
Normal.
What would that feel like after five years of inflation chaos, we might actually be back to normal.
And then he said the key part,
with the Fed funds rate currently targeted between 3.5% to 3.75%,
well above where it was pre-COVID, the Fed has a lot of room to cut.
Did you catch that real quick? The Fed has a lot of room to cut.
That's the bull case right there.
So here's the math. Pre-pandemic, the Fed funds rate was around 1.5% to 1.75%.
We're currently at 3.5% to 3.75%.
That's a 200 basis point cushion that we have.
That's eight quarter point rate cuts of breathing room if they need it.
If inflation is back to normal and rates still are elevated,
the Fed can ease without reigniting inflation.
They can support the economy.
They can save the labor market if it starts cracking.
That's why Tom Lee and the Bulls are excited about a cool print.
But, and there's always a but to this,
let me just tell you what the bears are actually saying.
Why does January inflation always run hot?
And there's two main reasons for this and they compound each other as well.
First of all, the annual price reset phenomenon.
Companies love to raise prices at the start of the year.
New year, new prices. It's almost like clockwork.
And try to think about your own life.
Gym memberships go up in January.
Streaming services bump their fees.
Your phone bill quietly increases.
Insurance premiums reset.
Restaurants print new menus with higher prices.
Everything starts to reset.
And Barclays calls it the quote,
beginning of the year price reset phenomenon.
They literally have a term for it.
Businesses that held off on price increases
during the holiday shopping season
when consumers were most price sensitive,
they pulled the trigger in January.
It's actually predictable at this point.
It happens every year,
but the government's inflation model doesn't fully capture it.
It never does.
Then second, we have residual seasonality in the data.
So this is a little bit more technical,
but stay with me because it really does matter.
So the Bureau of Labor Statistics
uses something called seasonal adjustment
to smooth out predictable fluctuations in prices.
And think like gas prices spiking in summer
or food prices changing around holidays.
But there's a known problem to this.
The seasonal adjustments they use
tend to underestimate January inflation.
It's like a bug in the system, essentially.
It's so predictable that economists
have actually written academic papers about it.
The BLS knows about it.
Market participants, they know about it for sure,
but the fix hasn't happened.
So we get this pattern
where January prints hotter than expected
and people panic about inflation reaccelerating.
And then February and March cool off
as the seasonal distortions start to fade.
It's happened 10 out of the 11 years
that it's been going on, right?
The only exception was January, 2021,
right after the vaccine rollout
when everything was super weird.
So what does this mean for today?
Well, Barclays is forecasting core CPI at 2.6% this month.
That's above the 2.5% consensus.
And one of their analysts said,
there's quote, meaningful upside risk to that number.
And she's not alone on this.
Other analysts are also flagging January
as a month where consensus estimates
tend to be way too optimistic.
And what's the translation of this?
Don't be surprised if we print 2.7% or higher.
And if that happens,
don't assume it means inflation is reaccelerating.
It just might be that January curse striking again.
Now, let me give you the really contrarian take on this.
This is the stuff that most retail investors miss.
JP Morgan's trading desk,
and these guys who move billions of dollars every day,
by the way, they put out a note yesterday
that got buried in the noise.
They said they see a 42.5% probability of a hotter print.
I mentioned that before.
That's almost a coin flip at this point.
And try to think about that.
The biggest bank in America
thinks there's nearly a 50-50 chance we get a hot number.
But here's the fascinating part about this.
And this is what I think most people are going to miss.
JP Morgan also said that a stagflationary reading,
meaning hot inflation with weak growth signals,
would have, quote, limited market reaction.
So let me just translate that for you.
The market is already bracing for bad news.
Professional traders, hedge funds, asset managers,
they've already put on their hedges.
They've already reduced risk.
They're already positioned for disappointment.
And just look at the evidence.
So the VIX right now is elevated.
Bond yields have already sold off from their lows.
Rate cut expectations have already been pushed back.
Gross stocks have already underperformed.
The fear is already priced in,
which means if we get a cool print,
that might actually be the bigger surprise.
And try to think about the mechanics of this as well.
All that cash sitting on the sidelines
waiting for clarity right now.
All those hedges that would need to be unwound.
All those short positions that would need to be covered.
All those traders positioned for disaster
who suddenly need to flip bullish.
We could see a serious face-ripping rally
if we print 2.4% or below.
The kind of rally that happens
when everyone is leaning the wrong way and has to scramble.
And here's the key insight.
Positioning is more important than prediction right now.
The number matters less
than how people are positioned for the number.
And remember that when you're watching the tape
after 8.30 this morning.
So let me just talk about the Fed,
because ultimately CPI only matters
because of what it means for interest rates.
And right now the Fed funds rate sits at 3.5 to 3.75%.
That's after they cut rates three times last year.
25 basis points in September, 25 in November,
25 in December.
So the Fed is trying to support the job market
without letting inflation get out of control.
But here's the thing.
They've basically stopped at this point.
Fed Governor Lisa Cook said it best last week
in a speech that didn't nearly get enough attention.
She said, quote,
I put a lot of easing into the pipeline
at the end of last year.
And I think that given where the labor market is,
where inflation is,
this is the right time to sit back
and wait to see what happens.
Sit back and wait.
That's Fed speak for we're done cutting right now.
We need to see how the economy responds.
And Jerome Powell himself said the lowering of rates
bought monetary policy, quote,
within a broad range of neutral.
And what does neutral mean?
It means they're not trying to stimulate the economy
and they're not trying to slow it down.
They're just sitting there watching, waiting essentially.
They think they've done enough at this point.
They're not in a hurry to do any more as well.
But here's where it gets really interesting.
And this is where I think the real story is.
Christopher Hodge from Nataxis
and this guy has been watching the Fed for decades,
by the way, gave what I think is the most honest assessment
of the Federal Reserve.
He said, quote, ultimately, this is not a Fed
that has a whole lot of conviction
about bringing inflation back down to target.
And read that again.
The Fed doesn't have conviction
about hitting their own 2% target.
That's a bombshell statement if you really think about it.
The whole point of having an inflation target
is to anchor expectations, to give the Fed credibility,
to make sure everyone knows
they're serious about price stability.
And this analyst is saying,
they're not that serious about it anymore.
Hodge went on to explain, quote,
I think that as long as inflation is not re-accelerating,
the Fed's going to attribute a lot of the inflation
we're getting right now to tariffs.
They're gonna think that's not that big of a deal
since the tariffs aren't going to last forever.
They're more concerned about the labor market.
So the Fed has basically decided that 2.5% to 3% inflation
is good enough to them, close enough to 2%.
They're not gonna crash the economy
to get that last half point of disinflation.
And then Hodge dropped this bomb, quote,
this is a structurally dovish Fed
that's more likely to save the labor market
than aggressively fight inflation.
Did you catch that, by the way?
The Fed cares more about jobs than inflation right now.
That's what they're thinking about.
That's what's on their mind.
That's a massive shift, by the way,
from where we were two years ago,
when power was hiking rates like he's life dependent on it,
when he said he'd do whatever it takes to crush inflation,
when he warned about the pain of higher unemployment.
And now the Fed is worried about jobs.
That's what they care about.
They're worried about overdoing it.
They're essentially worried about breaking something.
This is critical context for understanding today's CPI,
by the way, even if we get a hot print,
the Fed might look through it.
They might blame tariffs.
They might call it seasonal noise.
They might not react the way they would have in 2023.
So what does this mean for rate cuts?
Well, let's do the math on this.
Michael Gapin from Morgan Stanley thinks
we'll see inflation settle around 3% coming out of Q1.
And his take is this,
quote, somewhere in there is room for a few more rate cuts,
but the timing depends entirely on the inflation data.
The market is currently pricing
about 60 basis points of cuts for 2026.
In plain English,
that's roughly two or three quarter point cuts
just this year,
down from four to five cuts that were priced
back in November.
And CME FedWatch, which tracks Fed funds futures,
shows about 50% chance of the first cut
coming in June of this year.
March is basically off the table.
Only 6% odds.
May is possible, but unlikely at about 25%.
So the market's base case is one cut in June,
maybe another in September or December, and that's it.
But here's the wild card nobody's actually talking about.
April is Jerome Powell's last meeting as Fed chair.
He's being replaced at that point.
And some people think he might want to go out
with one final rate cut if data cooperates.
And Deutsche Bank's Henry Allen pointed out
that after last week's jobs data,
quote, the probability of a cut
at Powell's final April meeting rose to 47%.
47%.
That's not a base case, but it's not negligible either.
Imagine that, by the way.
Powell's swan song could be one last rate cut.
That would be quite a way to exit
after eight years of steering the Fed through a pandemic,
the fastest rate hiking cycle in 40 years,
and now the landing.
And of course, that only happens if today's CPI cooperates.
A hot print today kills any chance of an April cut.
A cool print keeps the dream alive.
All right, so let me get specific here for a second.
When the CPI number drops at 830 this morning,
here's exactly what you should be watching.
Not just the headline, but the components underneath.
So the headline number will be, of course,
the first thing everyone's gonna see.
2.5% year over year is the expectation.
Anything below 2.4% would be a massive surprise, okay?
Anything above 2.7% would be really ugly,
but the headline isn't actually what matters most.
You need to dig deeper into the components.
And so the first component
is core services excluding housing.
This is the Fed's favorite measure.
What does it mean?
It's the cost of services.
So think like healthcare, haircuts, car repairs,
legal fees, accounting insurance,
minus the housing component, which is measured weirdly, okay?
It's the stuff that's driven by wages.
This is the measure that's never actually been negative
on an annual basis in the last 40 years.
I'm not making that up, by the way,
40 years and counting since the Reagan administration.
Dana Peterson from the conference board
explained why this component is so important.
She said, quote, services are labor reliant.
When wages are sticky, service inflation is sticky.
Healthcare, insurance, these things don't go down
just because the Fed raises rates.
Another way to think about it is like
service inflation is about people
and people need to be paid.
So until wage growth slows down substantially,
service inflation is gonna stay hot.
If core services stays hot today,
above 4% annualized,
the soft landing narrative takes a serious hit.
The second component is shelter costs.
Housing is doing most of the heavy lifting
on the disinflation side right now.
Shelter costs are coming way down in the United States
and that's genuinely good news.
But here's the catch that most people don't understand.
The government's measure of housing inflation,
something called owners equivalent of rent or OER
lags the actual housing market by nearly two years.
How does OER work?
Well, basically they ask homeowners,
what do you think you could rent your house for?
That's it.
And then they smooth that data out over many months.
So what we're seeing now in CPI reflects home prices
and rents from late 2023 and early 2024.
The real housing market has cooled off more than CPI shows,
but that data is still working its way through the system.
And this is actually bullish for inflation going forward.
There's more disinflation baked into the housing numbers
that hasn't shown up yet.
It just takes time.
Then we have the third component,
which is goods prices and tariff pass through.
And this is where the tariffs come in.
So Goldman Sachs expects tariffs to add about a 10th
of a percentage point to core inflation this month.
That's 0.1%.
It's not nothing, but it's also not catastrophic.
The tariffs that went into effect in December
are starting to show up in consumer prices right now.
Import prices are higher
and companies are passing some of that through
to consumers as well.
But here's the bigger picture.
We haven't seen the full pass through of tariffs just yet.
That's expected to peak in Q2.
So even if today's number is okay,
we might have more tariff inflation in the pipeline
for the next few months.
And it's something to watch out for as well.
Then the fourth component is car insurance and healthcare.
These two categories have been running hot for months
and they matter because they're big weights
in the CPI basket.
Car insurance in particular is still playing catch up
after years of underpriced risk.
So here's what happened already.
During the pandemic, people drove less.
So insurers lowered their premiums.
Then inflation spiked, used cars prices essentially doubled
if you recall back to that time.
Repair costs went up by 30%
and suddenly insurers were massively underwater.
So if your car gets total today,
it costs a lot more to replace that
than it did three years ago.
And insurance companies are still adjusting to that reality
and they're passing those costs onto consumers.
Healthcare costs are also sticky
because they're heavily driven by wages as well.
So hospitals and clinics,
they need to pay nurses and doctors
and those wages aren't going down.
Healthcare workers got big raises during COVID
and those raises are permanent.
They're sticking around forever.
Okay, so let me get out what happens after the number drops.
And I see three main scenarios here.
The first scenario is a cool CPI below 2.4%.
Let's say we get 2.4% or below, maybe even 2.3%,
which would be amazing.
That would be a massive positive surprise.
Everything is gonna rip at that point.
Stocks are gonna rally hard.
Gross stocks are gonna pop.
Tech's gonna lead as well.
Bond prices are gonna rally as yields drop.
The dollar is gonna weaken
and gold catches a bid as well.
The narrative is gonna shift to soft landing confirmed.
Rate cuts expectations moving forward.
Maybe June becomes a lock
and people start pricing in an April surprise
from power that we talked about before.
This is the scenario that everyone wants.
And because everyone wants it,
they're not fully positioned for it.
There's too much cash on the sidelines right now,
too many hedges, too much skepticism as well.
The upside surprise could actually be violent
to this as well.
I'm talking two to 3% up move in the S&P,
NASDAQ up three to 4%,
the face ripper rally that we just talked about before.
Then we have the second scenario, which is inline CPI,
2.5% to 2.6%.
We get exactly what's expected.
So imagine that, right?
2.5%, maybe 2.6, which is slightly hot,
but explainable by January seasonality.
Yawn, it's kind of boring.
Okay, the market breathes a sigh of relief,
but doesn't actually go crazy.
We're still on track for the soft landing,
but there's no reason to get aggressive,
no reason to chase.
And the Fed stays in wait and see mode.
Those June cut odds stay around 50%.
Nothing really changes at this point.
This is probably the base case.
The base cases are usually boring
and the market might actually sell off a little
or by the rumor sell the news kind of dynamics as well.
Then we have the third scenario,
which is hot CPI, 2.7% or higher.
Imagine we do print 2.7% or higher.
What's going to happen is services inflation surprises
to the upside where the Barclays January curse
is going to strike again as well.
Markets are going to sell off, especially growth in tech.
Yields are going to spike.
Rate cut expectation is going to get pushed back
to September or later,
and the dollar is going to strengthen.
And this is essentially risk off mood at this point.
This is what I would call the fear case,
but here's the thing about the fear case.
JP Morgan says a hot reading
would have quote limited market reaction,
which is quite interesting.
So why?
Why would it have limited market reaction?
Because everybody's already positioned for it right now.
The hedges are on.
The fear is already priced in.
People have already reduced risk.
So even if we do get a hot print,
the damage might actually be contained at this point.
So maybe we see a 1% down day instead of a 3% down day.
The worst case is already in the price.
And that's why I keep saying positioning matters
more than prediction at this point.
And so zooming out,
let me just talk about where we are
in this inflation cycle,
because today's number is just one data point
in a longer story.
We're essentially approaching the five-year mark
of inflation running above the Fed's 2% target.
Five years, by the way,
which is kind of crazy to think it's been that long.
That's really wild.
For half a decade now,
prices have been rising faster than the Fed wants.
Everyone's been waiting for inflation to normalize.
For half a decade, we've been asking,
is this the month we finally get there?
RBC, Royal Bank of Canada puts out a note this week
that said they remain, quote,
concerned about the likelihood inflation remains stuck
closer to 3% throughout 2026.
Their reasoning is this, okay?
Four structural forces combining to create sticky inflation
that won't go away easily.
I'm going to break these forces down for you.
The first force, force number one, is a tight labor market.
Unemployment is at 4.3%.
That's basically full employment.
When everyone has a job, workers have bargaining power,
wages stay high,
and wage drives service inflation as well.
This doesn't change until the labor market actually cracks.
Then we have the second force,
which is strong consumer spending.
So despite everything,
despite higher rates, despite inflation,
despite recession fears,
Americans keep spending today.
Credit card balances are up.
Retail sales are solid.
The economy is humming along at 2% to 3% growth.
Then we have the third force, which is tariff pass-through.
And we're only seeing the beginning
of how tariffs affect consumer prices.
The full impact, as I mentioned before,
is going to probably hit around Q2, Q3,
and that's going to be more inflation in the pipeline.
Then force number four
is going to be the lagged housing measure.
CPI housing reflects prices from two years ago.
The disinflation in that component is real,
but it's going to take six to 12 more months
to fully flow through to that data.
So put those four things together
and you get RBC's forecast,
which is core CPI peaks around 3% in Q2 of this year.
That's higher than we are right now.
We might actually see inflation rise
in the next few months before it falls.
That's not a disaster,
but it's not the clean soft landing narrative either,
as well.
Now, given all that, does the Fed even care?
Remember what Nataxis said.
This is a structurally dovish Fed
that's more likely to save the labor market
than aggressively fight inflation.
The Fed knows tariffs are temporary.
They know the January seasonality issue exists.
They know the housing lag is distorting the data.
They're willing to look through some hot prints
if the underlying trend is still towards lower inflation,
but there's a limit to their patience.
If core services inflation stays sticky,
if we start seeing signs of reacceleration,
if inflation expectations start moving higher,
they'll have to respond to that.
They have no choice.
The Fed can't let inflation psychology get unanchored.
Once people start expecting higher inflation,
once businesses start pricing in higher inflation as well,
once workers start demanding higher wages
to compensate for expected inflation,
it becomes a self-fulfilling prophecy.
And that's what happened in the 1970s, by the way.
That's the nightmare scenario,
and avoiding that is the Fed's primary job.
So they're walking a tightrope, to say the least,
patient enough to let temporary factors fade,
but vigilant enough to act if inflation psychology shifts.
And today's number tells us
which way the tightrope is going to tilt.
So what am I personally watching after this number drops?
Well, first, the immediate market reaction.
Not because the first move is always right.
It's often wrong, actually,
but because it tells you how people are positioned.
If we get a cool print and the market barely moves,
that means people were already positioned for it.
The move came before the news.
Smart money already bought in.
If we get a hot print and the market tanks hard,
that means people are already caught off site.
They were too optimistic at this point,
and they're going to be forced to sell.
The first 30 minutes trading are essentially noise.
We all know that.
The closing price is going to this signal.
The second thing I'm looking at
is what Fed speakers say in the coming days.
And there are several Fed officials speaking this week
and next, by the way.
Powell speaks next Wednesday.
Their reaction to this number is going to tell us a lot
about where their heads are at.
If they downplay a hot print, that's going to be dovish.
They're telling you they want to cut, essentially.
If they hammer on it, that's going to be hawkish.
They're telling you to lower your rate cut expectations.
The third thing we look at is the bond market
more than the stock market as well.
So bonds don't lie.
They never do.
The stock market can be irrational.
So we have like mean stocks, retail flows, options gamma.
There's a lot of noise there,
but bonds are where the smart money lives.
Keep an eye on the two-year treasury yield.
If it spikes above 4.25%,
that's the market saying rate cuts are off the table.
If it drops below 4%,
that's the market saying cuts are coming sooner.
And then fourth, I'm staying nimble as well.
This is not a time to be a hero.
So if you have a strong conviction on this number,
you're probably overconfident.
Nobody knows what this print is going to be.
Anyone who tells you they know is lying or delusional.
The smartest play might be to wait
for the dust to settle on this.
Let the algos do their thing,
let the initial volatility pass,
and then look for the real signal after that.
All right, so that's everything you need to know
going into this CPI report.
Just to recap, the consensus is 2.5%,
which would be the lowest since May of 2025,
but 10 out of 11 January CPIs have surprised hop.
JP Morgan sees 42% odds of a hotter print.
Barclays sees meaningful upside risk.
The Fed is in a wait and see mode,
and they're more worried about jobs
than inflation right now.
Cuts are coming eventually,
but the timing depends entirely on this data.
Keep an eye on core services inflation,
watch shelter costs, watch the tariff path pass through,
watch car insurance and healthcare as well.
Those are the components that are going to matter on this.
And just remember, positioning matters more than prediction.
The market might already be braced for bad news.
They may know this is going to come, right?
A cool print could be the biggest surprise.
So this is it, the moment of truth.
When 830 hits,
we'll know what kind of year 2026 is going to be.
All right, that's it for today.
I'll see you on the other side.