Fee cuts are probably coming – who will it assist?… why the American Dream 1.0 now not works… proof of the rising American Dream 2.0… the essential portfolio motion steps to take right now
As I write Thursday morning, Wall Road is all however sure we’re going to get a quarter-point rate of interest lower at subsequent week’s Federal Reserve assembly.
The CME Group’s FedWatch Device exhibits that merchants put the chances of that lower at nearly 90%.
However there’s an essential query that Wall Road isn’t asking…
What’s going to a price lower actually accomplish within the economic system we’re dwelling in right now – not the economic system we had yesterday?
The reality is that the “outdated math” behind price cuts could now not apply. Actually, the outdated mannequin is perhaps breaking in actual time.
Understanding this shift is turning into important for anybody making an attempt to guard and develop their portfolio in a market the place the outdated playbook is quietly falling aside.
Why the Fed feels strain to chop – and why the explanation issues
Yesterday’s ADP employment report discovered that non-public payrolls unexpectedly fell by 32,000 jobs. That’s a troubling sign. Nevertheless it’s simply considered one of many.
This morning, the newest Challenger, Grey & Christmas report discovered that 2025 layoffs have hit 1.17 million – that’s 54% larger than the identical 11-month interval final yr. It’s additionally the best quantity since 2020’s Covid layoffs.
As we’ve been monitoring right here within the Digest, hiring is slowing… layoff bulletins are rising… wage progress is cooling… shopper confidence retains slipping… and delinquencies are creeping larger – from bank cards, to automotive funds, to scholar loans.
Backside line: The labor market – the inspiration of the American economic system – is exhibiting cracks.
Now, traditionally, that is precisely the setting through which the Fed involves the rescue by reducing rates of interest.
Decrease charges imply cheaper loans… which suggests extra enterprise funding… which interprets to extra hiring… which spurs revenue progress… which promotes a stronger shopper spending and a extra strong GDP.
However what if this mannequin now not suits the world we’re dwelling in?
What if this price lower received’t assist lower-income Individuals who’re struggling… even whereas it gooses the portfolios of higher-income Individuals who’re thriving already?
This brings us to one of many defining realities of right now’s economic system…
Welcome to the Okay-shaped economic system – the place the 2 halves of America reside in several worlds
For those who’ve been studying the Digest for some time, you’ve seen us write in regards to the Okay-shaped economic system:
- The “Higher Okay” – Individuals with rising wealth as a result of elevated worth of their belongings
- The “Decrease Okay” – Individuals whose wealth is primarily wage-based, who’re being squeezed by stagnant wages and inflation
As inventory house owners watch their internet worths climb, wage earners are watching their buying energy fall.
This isn’t anecdotal. As I’ve highlighted in prior Digests, whereas the wealthiest 10% of Individuals now account for almost half of all shopper spending, nearly half of all Individuals report that they’re dwelling paycheck to paycheck.
This break up is turning into the defining characteristic of right now’s economic system.
Right here is the place the Federal Reserve is available in…
Fee cuts play in a different way relying on which spoke of the “Okay” you’re dwelling in. For Higher-Okay Individuals, a price lower is like rocket gasoline:
- They push shares larger
- They inflate asset values
- They ease margin, mortgage, and funding borrowing
- They reinforce the wealth impact that retains high-end spending sturdy
However for Decrease-Okay Individuals, cuts are much less “gasoline” and extra “delicate ache reliever”:
- A little bit interest-rate aid
- Barely decrease month-to-month payments
- A bit extra wiggle room within the household finances
Sure, they’re useful. However they don’t repair the deeper, structural problem weighing on this group, which is one other essential story we’ve been monitoring right here within the Digest…
Specifically, the substitute of human employees with software program, robotics, and AI.
Right here is the place the financial logic of price cuts will get uncomfortable.
The fireplace that’s rising – and why price cuts don’t extinguish it
Now, I’ll say up entrance that it’s too simplistic to put our economic system’s challenges straight on the ft of AI and robots changing human employees.
We’re coping with lingering excessive retail costs, tariff uncertainty that hampers company planning, and a still-fragmented world provide chain that raises prices in locations we don’t at all times see.
However not like these different pressures, which ebb and circulation with the enterprise cycle, automation is a structural, compounding, and non-cyclical power.
Fee cuts can decrease borrowing prices, however they’ll’t reverse an organization’s resolution to automate a warehouse, shift workflow towards software program, or change a name middle staff with an LLM.
That is the course we’re heading. And, if something, cheaper capital accelerates this shift.
So, whereas AI/robots aren’t the one problem going through the labor market, it’s the one which price cuts can’t remedy.
As an instance, let’s use a easy analogy…
Decrease-Okay Individuals have their ft close to the hearth proper now.
As I’ve profiled with knowledge in latest Digests, inflation has scorched many household budgets. Debt prices have risen. Financial savings are operating low.
Fee cuts pull them again from the hearth slightly through barely cheaper credit score and maybe decrease mortgage charges.
However what if the hearth itself retains getting greater? What if that flame is being fed by one thing extra profound?
As you’ve already guessed, I’m speaking about company America changing human employees with AI, robotics, and automation programs on the quickest tempo in trendy historical past.
Pulling individuals again from the flames doesn’t assist a lot if the flames are rising sooner than you’ll be able to transfer your ft.
And that is exactly the purpose we have to confront…
Fee cuts can scale back monetary strain – however they don’t restore misplaced revenue from jobs being changed.
So, sure, price cuts will assist. However the actual threat to the economic system isn’t the price of cash. It’s the labor market’s sudden vulnerability to AI.
For this reason the December price lower may not ship the form of aid many struggling Individuals hope for.
However it could ship loads of aid to 1 group…
Why a December lower is nice for Higher-Okay Individuals
Fee cuts could not save employees, however they’ll nearly actually assist buyers.
A price lower boosts:
- Fairness valuations
- Progress and small-cap shares
- AI infrastructure buildouts
- Company steadiness sheets
- And the wealth impact
And on this new period, the place company earnings can develop with out growing headcount (as a result of AI/machines are doing extra of the work), price cuts disproportionately profit the proprietor class.
Backside line: As a consequence of AI, price cuts will assist capital way over they’ll assist labor.
So, what does this imply for markets? And for society?
It means the Okay-shaped divide in our economic system will probably change into much more pronounced… higher wealth focus… extra political strain and division… and rising social stress as wage earners watch asset house owners race additional forward.
Now, zeroing in on you and me, this implies we should place ourselves on the possession facet of this transition.
Which brings us on to the central concept behind Monday’s American Dream 2.0 Summit.
The American Dream 1.0 is giving option to American Dream 2.0
Let’s go to our expertise skilled, Luke Lango, editor of Innovation Investor:
For many years, the social contract was easy: Work exhausting, play by the principles, make investments slightly, and also you’ll get forward.
That was the American Dream 1.0.
However Luke says that this dream is over:
You don’t want a PhD to see that contract has been smashed.
Companies are pouring billions into applied sciences that change labor, not reward it.
AI software program is consuming white-collar work. Warehouses are turning into robot-run zones. Stadium-sized knowledge facilities function with skeleton crews.
In the meantime, the center class is being squeezed from each course…
On the similar time, shares are hitting new highs. The highest 1% has cash to burn. AI millionaires and billionaires are being minted day-after-day.
Changing the American Dream 1.0 is a brand new, uncomfortable actuality…
Staff get squeezed whereas house owners get rich. That is the American Dream 2.0.
In different phrases, the brand new path to monetary safety flows by means of the possession of belongings powering AI, automation, and America’s rebuilding.
It’s not a concept, or what’s going to occur – it’s taking place proper now.
Greater than $11.3 trillion is already flowing into:
- AI supercomputing campuses
- Humanoid robotics factories
- Information facilities
- Sensible logistics hubs
- Semiconductor fabs
- Uncommon-earth and demanding mineral infrastructure
- Superior power programs
- Reshoring and industrial revival initiatives
However as Luke notes, this isn’t a “jobs growth” – it’s an automation growth
A $10 billion knowledge middle could make use of 5,000 development employees, however solely 500 long-term workers.
In the meantime, factories are being constructed with robotics on the middle, not people. And warehouses are transitioning from “people with barcode weapons” to AI-powered robotic fleets.
That is the hearth that’s more and more burning Decrease-Okay Individuals. And this is the reason subsequent week’s price lower received’t extinguish that fireplace.
So, what’s going to put out the hearth?
Possession. That’s it.
In an automation-driven economic system, possession isn’t non-obligatory – it’s survival.
So, it’s essential that everybody transfer from the weak facet of the equation to the empowered facet.
Anybody counting on wages alone should begin aligning their belongings with the applied sciences reshaping the economic system.
That is the message behind Monday’s American Dream 2.0 Summit
This can be a closed-door technique session that includes Luke, Louis Navellier, Eric Fry, and a choose group of particular visitors.
I’m advised they received’t be sugarcoating the fact of what’s taking place right now:
- AI is accelerating a historic labor reset
- Companies consider they’ll develop income with out rising payroll
- Wealth is concentrating within the choke factors of automation
- Buyers who align with these choke factors might even see extraordinary features
- Buyers who sit out threat being left behind
However for buyers who see this shift – and act – the American Dream 2.0 seems markedly totally different…
Our three consultants consider that the subsequent 12–18 months might see a late-cycle melt-up with the Nasdaq-100 doubtlessly doubling. And main tech/AI corporations might surge multiples larger because the wealth focus intensifies.
On Monday, Louis, Eric, and Luke will present buyers learn how to get on the correct facet of the hearth with a collection of hand-selected stocks designed for this American Dream 2.0.
The final time they collaborated on a “energy portfolio” was in late 2024 – and it returned 32%, almost triple the Dow and greater than double the S&P 500 over the identical interval.
Given the speed at which wealth is concentrating right now, I wouldn’t be stunned if this newest portfolio performs even higher.
Wrapping up
The December price lower will matter, however not in the way in which most Individuals suppose.
Even with a lower, anticipate the hearth beneath the Decrease-Okay Individuals to get hotter as automation followers the flames.
So, let’s return to the query on the high of right now’s Digest…
Given the economic system we have, not the one we want we had, what’s going to a price lower actually accomplish?
Not a lot in case you’re within the Decrease-Okay, nonetheless hoping for the American Dream 1.0…
Nevertheless it might be enormous in case you’re an proprietor, having positioned your self for the American Dream 2.0.
Have a superb night,
Jeff Remsburg
