The Fed's Real Priority
Weekly Investment Update | By Brian Schreiner
The major U.S. stock indexes climbed around 2% last week and, as of this morning, the S&P is on track to close above 6,800 for the first time ever. Bonds were flat last week; gold was down while commodities and bitcoin rallied strongly.
Gold’s string of consecutive weekly price gains was halted at nine on Friday as it sustained its first weekly loss since mid-August.
Friday’s Consumer Price Index report confirmed that inflation is still running at an annual rate of 3.0%. The stock market has priced-in another cut in interest rates, which is likely on Wednesday. Stable prices are no longer the main concern of the Federal Reserve. Their primary objective is to maintain calm in the bond markets.
According to Bravos Research, “The U.S. Government has a problem: The US dollar's share of foreign exchange reserves has just hit the lowest level in 30 years. The US government's interest rates are now hovering at around the highest levels of the last 20 years, breaking out of what had been until very recently an extremely steady downtrend. As a result, we've seen the government's interest payments on debt go from $500 million to $1.2 billion in just 5 years. Interest payments alone are now equivalent to over a 1/5th of total government revenues.”
Marriner S. Eccles Federal Reserve Board Building
Above all, the solutions to the government debt problem will protect average working families... Just kidding. The “solutions” will protect the bond market and Wall Street. If the bond market breaks, all hell would break loose — at least in terms of government financing.
As consumers and investors, we should expect prices of everything to continue rising. This inflation breakdown in one chart is pretty alarming. It shows the year-over-year price change for some core categories and some other notable consumer goods and services.
Inflation and tariffs are two hidden taxes that are putting pressure on millions of Americans. As Wall Street is booming, companies of all sizes in retail, construction and hospitality, are struggling from higher costs, ”tapped-out” consumers and sweeping tariffs. U.S. manufacturing spending has contracted for seven straight months, construction spending has been flat due to costs that are rising even faster than the general rate of inflation, according to CNBC.
President Trump is on a three-nation Asia tour, which began in Malaysia, moved to Japan today, and will conclude in South Korea. While at the ASEAN summit in Malaysia, he formalized a ceasefire between Thailand and Cambodia and signed new trade pacts with Malaysia and Vietnam, including a critical minerals deal.
The main focus, however, is on U.S.-China relations. Negotiators announced a "successful framework" to de-escalate the trade war, averting a threatened 100% U.S. tariff on Chinese goods. In exchange, U.S. officials say China has agreed to purchase substantial amounts of American soybeans, cooperate on the fentanyl crisis, and likely defer its own restrictions on rare earth mineral exports. This breakthrough, achieved after intense negotiations, sets a positive stage for President Trump's high-stakes meeting with Chinese President Xi Jinping at the APEC summit on Thursday.
The Fed meeting will dominate investor attention in the week ahead, with a host of important data releases, including GDP growth, PCE inflation and employment costs, likely to be delayed by the ongoing government shutdown. Absent these indicators, markets will look to consumer confidence, house prices and regional Fed survey data for insights into how the economy is performing. α
Interesting things I came across this week…
Inherited IRAs: Key tax change for 2025 (CNBC)
Washington nuclear facility will deploy 12 SMRs (Utility Dive)
Gold, Fiat Dollars & Crypto (Chris Whalen)
JPMorgan to Allow Clients to Pledge Bitcoin and Ether as Collateral (CoinDesk)
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