The Fed Is About to Repeat History

August 21, 2025 • 1 minute, 19 second read

With traders still betting on a quarter-point rate cut in September, we have just one simple question: Why?

After all, gold is near all-time highs. Ditto stocks. Even bitcoin, which hit an all-time high last week and is only down 8%.

The fact of the matter is, the Fed has a history of cutting interest rates while assets are still trending higher, if not near or at all-time highs:

Turn Your Images On

The Fed has often cut interest rates near market highs. (Source: Barchart)

But the good news for investors: 20 out of the past 20 times the Fed has cut rates near all-time highs, stocks have been higher a year later.

The issue? Most of those rate cuts came during the 1980s and 1990s, as inflation continued to tick down, justifying lower Fed fund rates.

Today, with inflation still on the higher end of the Fed’s target, and possibly even starting to track higher, it’s not quite an apples-to-apples comparison.

~ Andrew

P.S. Rate cuts are coming whether we like it or not — it’s just a question of the timing.

But depending on the speed and size of those cuts, they risk kicking off a “most terrifying bull market” in stocks, which sends those valuations into the stratosphere before they come crashing down to earth. And it could help gold push higher.

In short, investors won’t be in stocks because they want to, but because alternatives, like holding money in cash, will just look too risky.

If you have any questions for us about the market, send them our way now to: Addison@GreySwanFraternity.com.

Dave Hebert: How Long Could That $1.8 Billion Powerball Jackpot Fund the Government?

September 16, 2025 • Addison Wiggin

Our fiscal reality is clearly unsustainable. With the passage of the “Big Beautiful” budget reconciliation bill, Congress has already given itself permission to grow the national debt to $41 trillion. Interest payments on the national debt are already the second-most-expensive item on the federal budget, behind only Social Security (and ahead of defense spending). As the national debt continues to grow, debt service will become our number one spending obligation. History suggests it’s only a matter of time until we hit that limit and, unless things change, once again raise the debt ceiling. This cannot continue indefinitely.

Dave Hebert: How Long Could That $1.8 Billion Powerball Jackpot Fund the Government?

When Trust Runs Thin, Markets… Rally?

September 16, 2025 • Addison Wiggin

Bloomberg’s September survey of economists found that the majority are “somewhat or extremely worried” that the Fed’s decisions will be influenced by political loyalties.

If that happens, borrowing costs for the U.S. government rise as risk premia creep into Treasury markets.

Public confidence is already threadbare.

In 2001, 74% of Americans trusted Alan Greenspan to do the right thing. In 2025, only 37% say the same of Jerome Powell. For the first time, trust in Trump to manage the economy is higher than trust in the Fed chair.

The Tech Meltup, Exhibit A

September 16, 2025 • Addison Wiggin

Overall, the S&P 500’s RSI hit 70, the low side of overbought territory — for the entire index.

“Fed rate cuts tomorrow are likely priced in,” writes portfolio director, Andrew Packer, “it may not trigger a selloff, but at these levels, investors may be disappointed with a .25 cut.”

Tech investors will remain bullish on the prospect of multiple rate cuts over the next few meetings.

But be wary of any indication the Fed tries to rebuff Trump’s overtures and, God forbid, remain independent tomorrow.

Plowshares into Swords

September 15, 2025 • Bill Bonner

The empire is in decline. Demographics, regulatory tightening, fake money and the mis-allocation of trillions of dollars (much of it on pointless wars) have sapped the vitality of the economy. The Federal government gets bigger and bigger, but there is no longer enough output to pay for it.

The interest on the debt alone takes more more than a trillion dollars a year. The US faces a financial crisis. And for the first time in history, our children face a poorer future.

The welfare state model no longer works; the center — consensual democracy — wobbles towards the extremes. What to do? Beat our plowshares into swords?