Transcription
On June 17th, Trump's new Fed chair is going to make his first announcement on his plans to build and grow our economy and save the United States dollar. And what he says in the meeting could either send the stock market to new heights, crash it by 10%, or something in the middle.
President Trump wants Kevin Warsh to cut rates and stimulate the economy. Wall Street says that Kevin Warsh is going to keep interest rates where they are, which won't make any drastic changes in our economy. But the bond market is preparing for rate hikes, not cuts in 2026, which could crush the economy.
In this video, I'm going to lay out the three options and where the opportunities are in each one. That way you can build wealth no matter what the new Fed chair does. And I will also lay out some of the factors that could help you understand what the new Fed chair might do. So, make sure you stick with me until the end of this video. That way you can see where the opportunities all are.
This is also one of the reasons why on June 16th, I'm hosting a live, free, and virtual investor workshop where I'm going to be going over how our economy's changing with the new Fed chair, with AI, in Trump's economy, and how these changes create investment opportunities. I'll be going over specific examples. So, if you are an investor or want to be an investor, I invite you to join me for free and live on June 16th at 12:00 p.m. Eastern Time noon.
And as an added bonus, when you sign up for the workshop, you're also going to get added to Market Briefs, which is my newsletter for investors. And when you actually show up live on the workshop on June 16th at 12:00 p.m. Eastern Time noon, you're also going to get a free digital copy of my company's new book, How Money Changed Forever. Again, you have to actually show up live on June 16th at 12:00 p.m. Eastern Time noon to get this. So, if you're interested, I invite you to join me for my live workshop on June 16th. Again, that link is free for you down in the description below.
Just a notice for you, there is a limited number of people that can actually join me live on the workshop due to our software. So, if you are interested, I recommend you sign up soon and make sure you show up a few minutes early to secure your spot.
The new Fed chair, Kevin Warsh, has three options. He can either cut interest rates as a way to stimulate the economy and boost the stock market and encourage people to spend more money. He can keep interest rates where they are by holding them, which would keep interest rates higher for longer, and some people are worried that this could eventually cause more pain in the economy because mortgage rates stay higher, car loan rates stay higher, business loan rates stay higher, and the government has to keep paying higher interest rates on its debt. And finally, the third thing is he could raise interest rates as a way to fight inflation because we know that because of the higher oil prices, inflation is becoming a bigger problem. So, he could raise interest rates as a way to fight inflation and save the dollar, but that could be crushing to the economy because that means mortgage rates go up even higher, car loan rates go up even higher, business loan rates go up even higher, and the government has to pay more tax dollars just to service our national debt, which is already a big problem because our interest payments on our debt is more than how much money we pay for the entire military right now as it is.
But, it's all a balancing act because if you cut interest rates to boost the economy, you also boost inflation. Think of it this way. Let's assume that mortgage rates fell to 4% tomorrow. Well, what happened? Well, everybody would want to go out and start buying houses again. And now, if we have more people buying houses and not that many more houses for sale, well, now you have more bidding wars on houses. And the house that was listed for $500,000 now sells for $535,000. And now, home prices go higher even more, which is why now these lower interest rates can boost the economy because realtors get paid, mortgage bankers get paid, title companies get paid. So, as people spend more money, more people get paid, but it can make the inflation problem worse.
In general, one thing you want to keep in mind is that in these types of environments, which are higher inflationary, lower interest rates, stocks generally go up. Not every single day, but the idea is that the stock market benefits from more inflation, from lower interest rates.
Now, we could take a look at what happens when and why you hold interest rates. The reason why you hold interest rates is if you're in a position where you don't know what's going to come next. And right now, we are having this dilemma where on one hand we are seeing concerns in the economy. We're seeing concerns because of AI taking jobs. We're seeing concerns about the economy potentially slowing down due to the conflict in the Middle East. And we're seeing concerns that due to the high inflation from high oil prices, we could see people cutting back on spending. So, we have concerns about the economy. But we also have concerns about inflation. Inflation was already a problem post-pandemic. That problem never really went away and it actually started to go up in the beginning of 2026. And then after the United States attacked Iran, oil prices shot up. And higher oil prices impact the prices of everything because that makes your gas more expensive, that makes diesel more expensive, that makes getting groceries more expensive because now you have to pay more money to ship the groceries from the farm to the warehouse to the store. And that also makes growing the groceries more expensive because fertilizer becomes more expensive with higher oil prices. So, higher oil prices make the prices of everything more expensive.
And so now when you don't know what is a bigger problem, whether it's inflation and the dollar or the economy, then one thing that you oftentimes see the Federal Reserve Bank do is you just keep interest rates the same, which doesn't really change the economy, doesn't really change inflation. You're trying to just wait it out and see because you don't want to boost inflation, but you also don't want to hurt the economy. And in this situation it's kind of like just the status quo because you're not changing what's going on with economic policy. Most people believe that for his first meeting, this is what we're going to see happen is holding interest rates where they are. But what comes next is really what people are paying attention to because Kevin Warsh could give us a hint as to what might be coming next, whether it's cutting interest rates or hiking interest rates.
Now, why do you hike interest rates? We've seen this happen very recently. After the pandemic hit, we saw low interest rates, we saw a lot of money printing in 2020, 2021, and 2022. But then we also saw a big inflation problem. Remember how high inflation was post pandemic? Well, in 2022, that was when the Federal Reserve Bank started to raise interest rates. And as they started to raise interest rates, it was a way to cool inflation down, but it also cooled down the economy. If you remember in 2022, the stock market also fell by about 20%. So, you raise interest rates as a way to cool the economy down. You make it more expensive to borrow money as a way to reduce some of the new money entering our economy to reduce the amount of money out there. So, when you hike interest rates, it's a way to cool inflation, but also cool the economy. And as a result, generally higher interest rates put downward pressure on the stock market. It doesn't mean that the stock market always goes down during periods of higher interest rates, it just means downward pressure on the stock market. And that's the thing that you want to pay attention to.
Now, we are in an environment where our economy and our stock market has been heavily reliant on low interest rates for a very long time. And everybody has been hoping and praying that lower interest rates are coming. Lowe's and Home Depot have talked about this very openly that they can't wait for lower interest rates to come because as soon as lower interest rates come, people are going to do a cash-out refinance on their mortgage, and then they're going to take this money and then go to Lowe's and Home Depot and buy stuff to remodel their basement and redo their kitchen. There's a lot of businesses that are praying and hoping for these lower interest rates. And if interest rates go up, not down, well, that could be a big flip to many businesses' expectations because they've just been holding their breath waiting for the day that interest rates go down. That way they can pay lower interest rate on their debt, and so people can start spending money again. This would be a big shock, and this would hurt the stock market, and it would hurt the economy. And if Kevin Warsh gives indication that we could be seeing higher interest rates coming, that could shock the stock market and the economy.
Now, the reason why it's so hard for people to predict what Kevin Warsh is going to do is because we have two different opinions. On one hand, President Trump has made it clear that he wanted to appoint somebody who will cut interest rates. He has said it time and time again, which is why he appointed Kevin Warsh. But if we take a look at Kevin Warsh's history because he used to be a part of the Federal Reserve Bank, during his time at the Federal Reserve Bank, he was against policies that would drive up inflation. He was a part of the Federal Reserve Bank back during the 2008 crash time. And during the 2008 crash time, you might remember the Federal Reserve Bank started cutting interest rates and started printing money. This is when quantitative easing became a very popular term. So, there was a lot of stimulus happening. It was led by Ben Bernanke. There was a lot of money printing, a lot of cutting of interest rates. During that time, the 2008 to 2012 time, Kevin Warsh was very outspoken against the Federal Reserve Bank, even though he was a part of it. He was a dissenting opinion, and he said that the Federal Reserve Bank should not be cutting interest rates because we are going to create an inflation problem. We are going to create a hyperinflation problem, and these concerns about inflation are more important than the concerns about the economy.
So, if we take a look at his past, he doesn't like the idea of cutting interest rates to create inflation when inflation is a concern. Well, here we are today. Inflation is a concern. Not just because of the pandemic money printing, but because of the conflict in the Middle East and the higher oil prices. And now because inflation is a problem, the question is is he going to go back to what he used to believe, which is we should not be cutting interest rates, we need to be hiking interest rates? Or is he just going to wait it out? Or is he going to do what President Trump wants? And each one of these three things can create a different benefit for different types of investors, which is what you want to pay attention to.
Again, this is why I'm hosting my workshop on June 16th, but this is why you want to understand the different scenarios that we could see happen. But before I talk about who would benefit in each one of these scenarios, you should also understand that the chairman of the Federal Reserve Bank, in this case Kevin Warsh, he doesn't get to unanimously make decisions to raise or cut interest rates. It has to be a majority vote at the Federal Reserve Bank. There are 12 voting members at the Federal Reserve Bank. Kevin Warsh is now a new voting member, and he gets to help influence other members at the Federal Reserve Bank. But this is where things get interesting, because you need a seven vote majority to be able to make a decision, whether it's to cut interest rates or raise interest rates. And the previous Federal Reserve Bank chairman, Jerome Powell, is not leaving the Federal Reserve Bank. His term expired as the chairperson, which is why President Trump got to appoint a new chairman at the Federal Reserve Bank. But because of President Trump's investigation on Jerome Powell, Jerome Powell says that he is going to stay on as a member at the Federal Reserve Bank, which means he gets to keep his vote, even though he is not the chairman. So Kevin Warsh can come in and say we need to cut or raise interest rates. But if Jerome Powell disagrees, he can come in and almost have that veto vote, because he still has one of those voting rights up until now, because he says that he's not going to leave the Federal Reserve Bank for as long as this Department of Justice investigation is happening on Jerome Powell.
Now, although the Federal Reserve Bank is called the Federal Reserve Bank, it's actually not a bank, because you and I cannot go there to deposit money. It's not a reserve, because it's not sitting on any cash reserves, and it's not federal because it's not a part of the federal government. But, they have the ability to raise and cut interest rates, but they also have the ability to create money, money printing. But, this is where Kevin Warsh has talked about doing something a little bit unique that we haven't seen done really in modern history. And one of the things that he's hinted at is he said, "I want to cut interest rates, but I don't want to create inflation." So, I'm thinking about cutting interest rates while also pulling money out of the economy. Let me explain what that means.
Because when the pandemic hit in 2020, we saw cutting of interest rates and a lot of money printing because the government started spending money on PPP loans and unemployment checks and bailouts for businesses and stimulus checks and all this other stuff. But, the government didn't have the money to pay for all of this stimulus. So, the government worked with the Federal Reserve Bank to borrow that money. But, the Federal Reserve Bank is not sitting on any cash reserves, like we just said. So, the Federal Reserve Bank then printed money. This is quantitative easing. The Federal Reserve Bank was printing money that way they could lend it to the United States government. That's quantitative easing. Quantitative tightening is the opposite of quantitative easing. Quantitative tightening is pulling money out of the economy. That means the Federal Reserve Bank is actively working to get rid of some of this money. The way they do it is through something called tightening the balance sheet, selling off some of the treasuries. We don't need to get into the technicals of how they do it, but the idea is instead of putting more money into the economy, they're trying to pull money out of the economy. Well, what Kevin Warsh says is we can cut interest rates to encourage spending, to encourage borrowing while we are tightening the economy by pulling money out as a way to balance inflation. He's talked about doing this, and this is a way that he says that we could stimulate the economy without making inflation worse. Will it work? Will it happen? We don't know, but that's one of the things that he has talked about.
So, let's talk about the opportunity in each one of these three scenarios. Now, again, I can't tell you what to invest in. I'm not a financial advisor. I'm just a random guy on YouTube. Investing has risks. You're never guaranteed to make money when you invest. In fact, you will lose money at some point. So, make sure you always do your own due diligence and never blindly trust a random guy on YouTube. Everything I'm talking about is for example purposes only, but if we were to see the Federal Reserve Bank cut interest rates, generally, the investments that win in that instance are more speculative investments. Why? Because as interest rates go down, valuations go up. As interest rates go down, Wall Street institutions can borrow money cheaper, and they want to make more investments, which means more dollars go into the hands of venture capital firms, the valuations for startups go up, more speculative investments go up. That means the Mag 7 that are really investing into these big future ideas with AI, they would benefit from lower interest rates. Small-cap companies, growth companies, speculative companies, the semiconductor companies, the AI companies, the tech companies, those are the companies that would exceptionally benefit when you have these cutting of interest rates. Things like Bitcoin, other types of speculative investments that require more and more dollars coming in, those would generally benefit from the cutting of interest rates. Gold would generally benefit from cutting of interest rates because when there's more cutting of interest rates, there's more concerns about inflation, those things generally benefit gold. I'm not saying they're guaranteed to go up, but generally, the cutting of interest rates is good for stocks, good for speculative investments. Those are the things that generally benefit even more when you have the cutting of interest rates because cutting of interest rates puts upward pressure on the stock market. Again, it doesn't guarantee that the stock market goes up, but it puts upward pressure on the stock market. So, even if the stock market's going down, it would be going down even harder if you were hiking interest rates.
If Kevin Warsh says that we're going to hold interest rates and we're planning on just holding interest rates for longer, we don't want to make any changes, then really nothing changes because this is what Wall Street is expecting right now. They're expecting to hold, and if you say nothing's going to change, well, then that really doesn't change much in the markets. You're not going to see a big boom for these speculative investments waiting for more money to come in. Now, there is concern that if you keep interest rates where they are, which is higher than where we were, this could cause slow and steady pain to the economy because these higher interest rates are hurting some businesses. It is causing pain to certain parts of the economy, and it is making our national debt more expensive. So, while it wouldn't create much shock to the stock market, the concern is that these higher for longer interest rates could cause pain in certain parts of the economy after some time. But, I should also mention that historically, if we take a look at the last five decades, the interest rates that we have today are really not that high. We're kind of like at historical averages.
If Kevin Warsh comes out and says the dollar is under attack, we are worried about inflation, and we're going to either hike interest rates now or at some point in the future, if he kind of hints at the idea that we could be seeing higher interest rates coming, this is going to be a shock. And especially a shock to those speculative investments. That means the Mag 7, the companies that are relying on a lot of investment dollars, the small cap companies, the unprofitable companies that are relying on venture capital. We would see those speculative investments get hurt very hard because they rely on outside capital. And if venture capital companies and investment institutions have to pay more money to borrow money, they become a lot pickier where they're going to invest it, which means all the companies that are working to grow in that growth phase now all of a sudden have to struggle to get more money. You're going to see more bankruptcies. You're going to see more pain in the economy in an effort to save inflation. We have seen this happen in the past. In the 1970s, we were facing an inflation problem due to the money printing that happened because the dollar was taken off of the gold standard in 1971. Then, the United States went out and attacked in the Middle East through something called the Yom Kippur War, which caused oil prices to spike. So, we had an inflation problem followed by an oil crisis and now we had this pain in the economy due to everything going on. The Federal Reserve Bank then said the economy is a problem, but inflation is a bigger problem. So, the Federal Reserve Bank then in the late 70s raised interest rates to double-digit numbers. We're talking about 15% mortgages, 18% mortgages. The Federal Reserve Bank jacked up interest rates, which crushed the economy. We had very high unemployment. We had the stock market get hurt. But, the dollar was saved. So, we've seen it happen in the past. Chances are we're not going to see higher interest rates right now, but if we see hints of higher interest rates potentially coming, that's what investors are paying attention to. They really don't think we're going to see higher interest rates on June 17th, but if he says we could be seeing higher interest rates coming, that's what investors are paying attention to and that could hurt the speculative investments.
In this case, when you have these higher interest rates and these speculative investments getting hurt, then what investors tend to go to are more of the value type of investments. And I should also mention that uh higher interest rates could also hurt gold prices because gold prices go up when people are concerned about the dollar. Higher interest rates help to protect the dollar by bringing inflation down. But, when it comes to an environment with higher interest rates, what investors want now are value type investments. Now, when I say value type investments, I mean companies that are producing real profits because now they don't need as much outside capital. They don't need the venture capital dollars. They can operate with their own profits and keep growing with the profits that they have. So, think in this instance, dividend-paying companies. These dividend-paying companies already have big profits and they can distribute their profits to the shareholders, meaning they can pay out this money to the people that invest in their stock. Those companies will start to get a lot more attention. Why? Because the investors that are looking for growth now know that these speculative investments, these high-risk investments are going to have a much harder time to grow in a higher interest rate environment. So, now you start to see more money going to value investments, the bigger companies, the more established companies, those dividend-paying companies, which really haven't been very popular the last number of years because we've had these lower interest rates for a while. Those are the ones that benefit. Now, when I say benefit, I don't just mean that they necessarily go up, but I mean that they generally don't go down as much if markets go down and if markets are going up, they tend to be more stable. So, value investments start to get a lot more attractive during times of higher interest rates.
So, what we talked about in this video is that on June 17th, the new Federal Reserve Bank Chairman, Kevin Warsh, is going to make his first public announcement as to his plans on the economy and the dollar. And there are three options. He can announce he's going to cut interest rates, hold interest rates, or hike interest rates. Now, he doesn't get to make this decision unilaterally. He has to have a majority vote with the Federal Reserve Bank, which is 12 voting members, and the previous chairman at the Federal Reserve Bank, Jerome Powell, is still a voting member because of the Department of Justice investigation on him.
Now, the big thing that investors really want to know is not what he's going to do on June 17th, but what he says is coming in the near future because he could not only just influence what the Federal Reserve Bank does, but he could come in with a drastic different opinion than what people think because Kevin Warsh is coming in as an appointee of President Trump. President Trump says he wants lower interest rates. Kevin Warsh in his past was against lower interest rates during high inflation times, and right now we have those concerns about high inflation again because of the oil crisis happening today. So, the question is what is he going to do? And what you really want to pay attention to isn't just what he does, but what he says could be happening.
If he comes in and he wants to make President Trump happy and he says we are going to aggressively cut interest rates, maybe we're going to shrink the balance sheet by doing quantitative tightening to prevent inflation. Well, this cutting of interest rates is there as a way to boost the economy, but it could make the inflation problem worse. Again, he says that he's going to try to do quantitative tightening to balance the inflation problem. We'll see what ultimately happens, but if you have an environment where interest rates are going to be cut, that generally is upward pressure for the stock market because generally inflation is good for asset prices, especially now more of the speculative investments. Those are the ones that benefit because now they have access to more capital because when interest rates go down, investment firms and institutions can borrow money cheaper and they want to dump it into investments that can grow even faster.
Option number two is he could hold interest rates, keep the status quo because we don't know what's the bigger problem yet. Is it inflation or is it the economy? And if it's uncertain and we just kind of keep it the same, then it's more of the status quo, things don't really see a drastic change, but the concern is that if interest rates stay higher for longer where they are, it could continue to cause more of a slow and steady pain to the economy. Ultimately, we'll see what happens or if Kevin Warsh comes out and hints at the idea of potentially higher interest rates coming, that could be a shock for the economy.
Now, higher interest rates are there to protect the inflation problem. They are there to bring inflation down, but higher interest rates put downward pressure on the economy. They put downward pressure on the stock market because now you have to pay more money to borrow money. Which means less people buy houses, less people buy cars, less businesses go out and borrow money, less investment dollars are going into investments and startups and other things like that. So, in these environments of higher interest rates, it puts downward pressure on the stock market. Again, it doesn't mean the stock market falls necessarily, but it means there's downward pressure on the stock market. And especially speculative investments get hurt during this time because now these investments that need the outside money, they need the investment dollars, they have a harder time getting that money. And also things like gold and Bitcoin can also get hurt because gold benefits when people are worried about inflation. Higher interest rates bring inflation concerns lower. Same with Bitcoin because it's more of a speculative investment. If there are higher interest rates, they generally hurt the speculative investments. But during environments of higher interest rates, people then turn to more value investments. These would be things like your dividend-paying companies, the bigger, more profitable companies. Those are the type of investments that become more attractive during times of higher interest rates.
So, what's going to happen? Well, stay tuned. On June 17th, I'll be keeping you posted here and in my Market Briefs newsletter. Again, if you haven't registered for my workshop on June 16th, I have that link for you down in the description. And if you got value out of this video, the best thank you is a referral. So, if you could, please share this video with a friend, family member, colleague, or fellow investor. That way we can continue to spread this type of financial education. Thank you.
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