The Fed Is About to Repeat History

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:

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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.

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.

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.

There’s something about big, round numbers that draws investors like moths to a flame.

In the stock market, every 1,000 points in the Dow or 100 points in the S&P 500 tends to act like a magnet.

Now, after consolidating for five months, gold has broken higher to $4,000.

AI stocks are running hot. They’re not the only game in town… but they’re about half of it.

JPMorgan just reviewed all of the 500 companies in the S&P 500. A full 41 of them are AI-related. While that’s less than 10% of the index by total, it is over 45% of the index by market cap.

Overspending during periods of rising ASPs is self-destructive. For most products, today’s ASP increases result less from natural demand pull and more from supplier-enforced discipline. If memory makers treat them as justification for a capex binge, they will repeat past mistakes and trigger another collapse.

The $50 billion bull case for WFE in 2026 rests on a faulty assumption. Lam and AMAT may benefit from selective investments, but the cycle-defining upturn Morgan Stanley describes is unlikely.

Investors should temper expectations. If history repeats — and memory markets have a way of doing so — the companies that preserve pricing power will outperform, while equipment suppliers may find that the promised order boom never fully materializes.

Europe’s GDP has flatlined over the past 15 years, against a doubling in GDP for the U.S. and even bigger GDP gains in China.

While the U.S. leads the world in AI spending, and China leads in technology like drones, what does Europe lead the world in? Regulation.

They spend more time penalizing U.S. tech firms for regulatory violations than encouraging their own tech ecosystem.