BREAKING: The FED Just Froze Rates – Stocks / Gold / Housing SURGING While Dollar PLUMMETS!
These notes were generated by AI and may contain inaccuracies.
Despite a falling US dollar, skyrocketing gold prices, and a looming government shutdown, as of a few hours ago, the Federal Reserve decided not to lower interest rates for the foreseeable future. However, starting May of 2026, everything is going to completely reset. The market's no longer reacting to today's Federal Reserve. It's reacting to who will be in charge throughout the second half of the year. This has the potential to reshape the way we think about stocks, cryptocurrency, real estate, and even the value of our money. Confidence in the dollar and US stability is beginning to crack. If it breaks, you are going to be the one that pays for it first.
Trump has been pushing for lower interest rates the moment he came into office. His biggest hurdle has been Jerome Powell, the head of the Federal Reserve. Jerome Powell oversees a committee of 12 people who decide interest rates together. Trump recently argued that rates should be lowered all the way down to 1%, which would spark a brand new wave of spending, borrowing, and growth. Jerome Powell doesn't agree, causing tension. Trump has even floated the idea of getting Jerome Powell fired. As of last week, Jerome Powell said that the DOJ served the Federal Reserve with grand jury subpoenas and threatened a criminal indictment tied to the multi-year renovation of a historic office building, which Jerome Powell claims is a politically motivated attack designed to pressure them into lowering interest rates more than they would otherwise. This also coincides with the firing of Lisa Cook, who Trump removed for alleged mortgage fraud. When a standing president pushes on the Federal Reserve to bend at his will, it creates the illusion that the Federal Reserve is no longer independent. Long-term, it damages the central bank's credibility around the world, leading to a potential sell-off of US dollars. Jerome Powell's current term comes to an end in May of 2026. After that, we're likely going to see significant changes across everything, including the stock market.
There's a lot of skepticism about where the market's currently headed. Over the last 5 years, the market has done incredibly well. Bank of America predicts that the S&P 500 is going to reach 7100 by the end of 2026, implying just a 3.7% increase from today. Deutsche Bank is still predicting a nearly 17% gain. Not a single analyst has predicted that the market would end the year negative. The last time this happened was 2008 before the market fell 40% and 2001 before the S&P 500 fell another 13%. The S&P 500 is on track for its fourth straight year of gains.
Bull Case for Market Higher
- AI is bringing a lot of growth. JP Morgan says the United States is driven by a resilient economy and an AI-driven super cycle that is fueling record capex and rapid earnings expansion. Prices just keep rising because people keep spending.
- Expectation of lower interest rates. It's largely accepted that interest rates are coming down mostly because inflation seems to be under control. Even if it's not, Trump's new chair of the Federal Reserve is likely lowering rates regardless, sparking a great meltup of asset prices.
- Wealthy consumers keep spending money. It's a K-shaped economy where the rich just keep getting richer. Analysts are not worried until the top stops spending. GDP rising 4.4%.
Bear Case for Market Down
- Tension between Europe and the US dollar. Tariff threats get thrown around on a seemingly daily basis. If one sticks, markets could see an abrupt sell-off, at least temporary.
- Consumer spending is largely driven by wealthy households whose investments have risen in value. The rest of the population is barely scraping by.
- US dollar is falling because we are printing a lot more money than what's sustainable. Combined with lofty AI valuations and trade agreements, things might not be as great as some people expect, especially once the market starts trading 24/7 where any new event gets instantly priced in.
Last week, home sales declined 9.3% in the month of December, having dropped in all four regions across the United States. The numbers were so bad that the National Association of Realtors made a statement that they'll be watching the data in the coming months to determine whether the soft contract signings were a one-month aberration or the start of an underlying trend. They said the decline in pending home sales could be a result of dampened consumer enthusiasm about buying a home when there are so few options listed for sale. Inventory is down slightly, and December is usually a slow month for housing. Two scenarios at play: anyone who is eager to buy a house has already bought a house, and a lot of people waiting on the sidelines are doing so because they want mortgage rates to fall because sellers aren't budging on their price. This results in a stalemate. Sellers don't want to reduce their price because they think once mortgage rates fall, a buyer will pay that price and buyers don't want to buy the house because they want to wait for mortgage rates to fall.
Trump recently expressed interest in injecting $200 billion worth of capital into the mortgage markets in an effort to lower payments and lower interest rates. Initially, this did have a somewhat meaningful effect. On the news alone, mortgage rates fell about a quarter to a half a percent on a 30-year fixed. The mortgage market is largely set by the 10-year Treasury yield, which is determined by market supply and demand. $200 billion is really just a blip on the radar until eventually home prices just balance out what you'd be able to buy anyway. Realtor.com chief economist said that the resulting boost to buyer demand could put upward pressure on home prices, offsetting some of the intended affordability relief. The entire mortgage market is worth 11 trillion and the Fed still holds $2 trillion worth of that on their balance sheet. The impact of $200 billion has mostly already been priced in, unless Trump wants to make it a recurring payment, in which case they're basically just bailing out the housing market.
Peter Schiff tweeted that Trump basically admitted that there's a housing bubble in the US. He also admitted his main policy goal is to prevent it from popping. But once you recognize a bubble, the worst thing you could do is try to sustain it. The sooner it bursts, the less damage it will ultimately cause.
Trump's executive order to block Wall Street from buying single family homes. Wall Street only owns about 1% of the housing supply, so it's realistically going to have little to no impact for the average person. Any boost to housing affordability is likely going to be minor or temporary at best, unless we see a massive housing market bailout. Most metrics so far are relatively the same. Homes listed are sitting for a median of 39 days on the market. 29% are sold to first-time buyers, 28% are all cash transactions, and 18% were sold to investors, which is pretty much unchanged from a year ago. We're likely going to see a lot more of the same throughout 2026, unless mortgage rates come down dramatically or they pass some rather large tax incentives.
As of a few hours ago, the Federal Reserve decided not to lower interest rates, at least through the end of March. Once Jerome Powell's term is up in May, things are going to get very interesting. Trump recently said that he wants a Fed chairman like Alan Greenspan in the 1990s. Alan Greenspan coined the term irrational exuberance in late 1996 about the stock market. Then he left rates unchanged. While the markets went higher and higher until eventually it popped, he finally lowered rates, leading to the last decade through 2012. This suggests that we could see a stock market that keeps going higher until eventually at some point in the future it pops.
Jerome Powell reiterated that they will remain data dependent, take every meeting as it comes, depending on the information they get, and make sure they do everything possible to maintain maximum employment, especially because job growth is somewhat beginning to soften. There was also mention about a DOJ criminal investigation, which Jerome Powell again believes is just a politically motivated attack.
There is a flight to safety towards precious metals. This is the most expensive stock market ever in history. It's not a bad idea to diversify. It's not a bad idea to keep a little cash on the sidelines and you shouldn't go all in on one thing because you think that investing is always easy.
In December of 1996, Alan Greenspan warned about irrational exuberance, telling investors that maybe they're getting a little ahead of themselves. Maybe valuations are getting out of control. Maybe people should be careful. The market didn't care. It kept moving higher. This carried on for years. The market went 50 to 100% higher than when he first coined that phrase until the market crashed in 2001. If you are an investor back then and you sold the moment he issued that warning, you didn't protect yourself. You just missed out on one of the strongest late-stage meltups in history. Stocks don't crash because they get expensive. They crash when something breaks. We could be in the exact same situation today where valuations are stretched, but that doesn't mean the market can't move even higher for a very long time.
If rates stay higher for longer, cash earns more, debt becomes more expensive, housing stays sluggish, and the market remains volatile. But if rates drop aggressively in 2026, then the stock market could keep going higher, precious metals and crypto could go crazy, housing could rebound, and we could see another late-stage meltup. The biggest risk isn't missing out on more gains. It's being overexposed to a market that's held together by expectations, politics, and overconfidence. Any one of those could change practically overnight. When that happens, you could lose months or even years worth of gains in a matter of days or weeks.
- Diversify.
- Pay down high interest rate debt.
- Keep a little cash on the sidelines as an emergency fund.
- Make sure you're not forced to sell at the worst possible time in the event the market drops.
You don't need to accurately predict the top or the bottom to win long term. All you need to do is make sure you don't panic sell when everything drops. If everything keeps going up higher from here, great. But if something happens and the market falls 20 to 30%, you're able to buy in cheaper, you're able to weather the course.
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