It’s Only Money
Market Highlights
Jerome Powell concluded his run as Fed Chairman on May 15th. During his tenure, stocks soared 177%, and the economy avoided any severe recessions. A strong record, as long as you don’t look too closely.
Powell oversaw one of the largest money-printing sprees in history. The money supply increased by over 25% in 2020 alone, and the so-called “transitory” inflation rate refused to fall below 2%. Good for Wall Street, but expensive for Main Street. Powell did shrink the Fed’s balance sheet from 2022 to 2025, but he reversed course as soon as conditions became a bit tight.
Enter Kevin Warsh as the new Chairman. For the first time in 75 years, however, the former Chairman is remaining on as a governor. So much for upholding tradition. Warsh was brought in to push for lower interest rates, but with inflation still running above 2%, cutting the Fed Funds rate may not be the first thing he cuts. If Warsh is focused on moving the economy forward, he may begin with bank deregulation.
Since the Great Financial Crisis, banking regulations have become convoluted, contradictory, and constrictive. It is one of the primary reasons we have seen a boom in private credit, as banks have been limited to an extreme through regulation. If lending can be encouraged by allowing banks to hold more loans relative to Treasuries, a true spark could ignite lower mortgage rates and small business borrowing.
With interest on the national debt now second only to Social Security in government expenditures, lowering interest rates is not so much a want as it is a need.
On My Mind
Embarking on the Open Road of Investing
This is part one of The Investment Road Trip, where we use fun driving metaphors to make smart investing feel familiar and approachable.
Investing for the long term can be likened to many other activities that are more familiar and concrete.
The open road stirs up that wonderful sense of adventure and freedom!
For example, when you switch financial advisors, it’s like keeping your beautiful limousine but changing your chauffeur. How you should be invested is similar to choosing the best route for your journey. You want to make good time on your trip without taking on too much risk. It’s exciting to go fast, but not so fast that you risk an accident. Reckless driving is never allowed when it comes to your precious investment vehicle!
We’re here to help you enjoy the ride with confidence. Stay tuned for the next installment where we’ll talk about handling traffic and lane changes. Wishing you smooth roads ahead!