BREAKING: The FED Cancels ALL Rate Cuts - Market Selloff Has Begun!
In a Nutshell
The Fed has reversed course with new Chair Kevin Walsh signaling potential rate hikes in 2026 amid 4.2% inflation driven by energy prices, while the S&P 500 trades at a 40x PE ratio near dotcom bubble levels. Bitcoin has crashed 40% from its peak with Strategy's selling potentially creating a death spiral, and housing markets show price divergence with Sun Belt declines versus Midwest gains. Long-term regular investing remains the recommended approach despite these warning signals.
These notes were generated by AI and may contain inaccuracies.
As of a few hours ago, the Federal Reserve completely flipped their outlook for the economy, inflation, and interest rates. Kevin Walsh has officially replaced Jerome Powell as head of the Federal Reserve. The market is reacting because the Fed is now planning to increase interest rates sometime in 2026 during what's being called the most overvalued market in history.
Even though rising prices were trending downward over the last few months, inflation has returned to a 3-year high with CPI coming in at 4.2%. Almost all of the inflation comes from energy prices, which have nearly doubled in the last 6 months due to Middle East conflicts.
The Producer Price Index (PPI) measures what businesses pay before passing costs to consumers. The most recent numbers came in worse than expected. This puts the Federal Reserve in a difficult position: if inflation doesn't come down, they may need to raise interest rates. However, if oil prices fall, they will need to wait several months before making their next move, as any deal could collapse and send oil prices back up.
The stock market has been highly eventful, highlighted by the largest IPO in history from SpaceX. An analysis of all tech IPOs over a billion dollars since 2010 showed average returns of 248% over 5 years. However, this average is heavily skewed by outliers like Shopify and Palanteer, which increased by thousands of percent. When excluding those winners, the median tech IPO is down 7.4% six months after its first trading day and still down 3.5% a full year later.
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