The Fed Pauses Rate Cuts – But AI Wealth Is the Real Story

The Fed leaves charges unchanged… once we would possibly get the subsequent reduce… shopper confidence plummets… however 401(okay) wealth soars… how one can be on the fitting facet of this divide

As I write on Wednesday afternoon, the Federal Reserve simply wrapped up its January FOMC assembly. The choice went precisely as anticipated – no price reduce.

The Fed held its benchmark price regular at 3.50% to three.75%, marking the primary pause after three straight cuts within the again half of final yr.

Now, the actual query wasn’t what the Fed would do at this time. It was what Fed Chair Jerome Powell would say about the place we go from right here. And on that observe, Powell did what he does finest…

Maintain his playing cards near the vest.

Wait and see…

In his press convention, Powell emphasised that the Fed is “properly positioned” to attend and see how the economic system evolves.

That is Fed discuss for “we’re in no rush to chop charges once more.” He known as the present coverage stance “loosely impartial” or “considerably restrictive” – not the firmly restrictive posture we’ve seen lately.

Powell famous that the economic system is “coming into 2026 on a agency footing,” with development stronger than anticipated. He went on to say that the labor market has proven “some indicators of stabilization,” regardless of job positive factors remaining low.

On inflation, the Fed Chair acknowledged it “stays considerably elevated.” However he attributed a lot of the overshoot to tariffs pushing up items costs. The excellent news is that he expects inflation to peak by mid-year earlier than subsiding – assuming no main new tariffs are applied.

As to the timing of the subsequent reduce coming, Powell wouldn’t chunk – no hints when requested by reporters.Lots of his favourite sidesteps confirmed up:

The Fed can be “information dependent”
Coverage is “not on a preset course”
Selections can be made “assembly by assembly”

Within the absence of extra particulars, futures markets are pricing in June for when majority odds anticipate the subsequent price reduce.

As I write Wednesday afternoon, the CME Group’s FedWatch Instrument places a 60.4% likelihood on not less than a quarter-point reduce by then.

The takeaway for traders – and one warning flag on your radar

The Fed’s in pause mode – it’s that easy.

After slicing charges by 175 foundation factors since September 2024, Powell and firm are taking a breather to see how the economic system digests these strikes.

On condition that this was anticipated, we’re not seeing any actual fireworks in shares. All three indexes are flat as I write shortly after 3:00 pm ET.

The large transfer at this time is in valuable metals, the place gold is up practically 6%, and silver has surged virtually 10%.

However there’s one Fed difficulty on your radar.

For this, let’s go to legendary investor Louis Navellier and this afternoon’s Flash Alert in Progress Investor:

The Federal Reserve didn’t reduce charges at this time, and that was anticipated. However what caught my consideration was the 2 dissenting votes…

What considerations me is the disconnect between the Fed’s stance and actuality on the bottom.

Simply at this time, two high-profile corporations introduced 46,000 layoffs mixed. Client confidence has additionally collapsed to its lowest stage in 12 years.

In the end, the Fed must acknowledge this

Louis is true to flag shopper confidence.

Yesterday, the Convention Board launched its newest studying, exhibiting a collapse to 84.5 – the bottom stage since Could 2014.

From Bloomberg:

After a slight enchancment in December, confidence resumed its downward slide amid considerations about excessive costs and sluggish job development…

In write-in responses to the survey, shoppers typically talked about costs of oil, gasoline and groceries…

And this dovetails into our subsequent story…

“It was the very best of instances, it was the worst of instances”

Charles Dickens penned these phrases in 1859, however they may have been written about America at this time.

As Louis famous, shopper confidence simply collapsed. On a regular basis People are fearful about groceries, jobs, and making ends meet.

However click on on a special hyperlink on Bloomberg – or some other monetary web site – and the narrative adjustments totally…

Whereas on a regular basis People are feeling squeezed, the AI revolution is minting fortunes at a staggering tempo.

In 2025 alone, America’s tech billionaires added greater than $500 billion to their collective wealth, pushed virtually totally by the AI increase.

And don’t make the error of pondering it’s only a billionaire social gathering.

The inventory market posted its third consecutive yr of double-digit positive factors in 2025, with the S&P 500 up greater than 16% and the Nasdaq climbing over 20%. That is goosing mother ‘n pop portfolios.

In response to Constancy, the typical 401(okay) stability hit a document $144,400 within the third quarter, up 9.1% from a yr earlier. In the meantime, the variety of 401(okay) millionaires surged to 654,000, up 10% from simply the prior quarter. IRA millionaires jumped 11.5% to over 559,000.

These are common People watching their retirement accounts and web worths race increased – “the very best of instances.”

However right here’s the rub…

In response to a Gallup ballot, solely about 62% of People personal inventory. Which means 38% have zero publicity to the market’s historic run. So, whereas the AI revolution mints document funding wealth, hundreds of thousands of People watch from the sidelines, fearful about their month-to-month budgets – “the worst of instances.”

U.S. GDP particulars supply fascinating colour on this “story of two” dynamic.

Actual GDP expanded at 4.4% in Q3 2025 – a robust print. And as I write on Wednesday, the Atlanta Fed’s GDPNow mannequin estimates This fall will hit 5.4%.

How?

With so many People feeling squeezed and slicing again, how is the economic system roaring?

The reply: AI infrastructure.

How AI is dethroning family spending

In response to JPMorgan, AI-related capital spending contributed 1.1% to GDP development within the first half of 2025 – greater than the American shopper.

Take into consideration that.

The AI infrastructure buildout is now a much bigger driver of financial development than family spending. Tech giants poured $437 billion into AI capital expenditures in 2025 – 61% greater than in 2024.

So, we have now strong GDP development powered by datacenter development… document wealth positive factors for the 62% of People who personal inventory… and plummeting shopper confidence amongst these fearful about groceries and jobs.

It’s Dickens’ Paris and London – besides it’s the identical nation, on the similar time.

Now, there are a number of tales associated to this that we wish to examine over the approaching weeks. For instance:

Social polarization between the “haves” and “have nots”
Laws to tax the wealthy – principally wealth transfers
Common Primary Revenue
Which sectors will thrive on this new economic system
Which sectors AI is more than likely to render out of date

However for the remainder of this Digest, let’s zero in on how one can hitch our wealth to the fitting facet of this divide – at this time.

Let’s make this “the very best of instances”

We’ll begin with our know-how skilled Luke Lango, editor of Early Stage Investor.

Luke has spent months analyzing what he calls the “6-Layer AI Bottleneck Stack” – the vital choke factors in AI infrastructure the place provide shortages are creating huge revenue alternatives.

And proper on the basis sits Layer 1: Uncooked supplies.

Right here’s Luke:

You can’t print copper. You can’t code lithium. The bodily inputs for this buildout are briefly provide, to say the least.

His thesis is easy: When huge waves of capital chase scarce bodily assets, costs go parabolic.

Working example: We’re dealing with a 10-million-ton copper deficit over the subsequent decade, in line with S&P World.

What’s new at this time is that our personal authorities is driving a lot of this funding capital. Since July, Washington has taken fairness stakes in 5 strategic corporations – MP Supplies, Intel, Lithium Americas, Trilogy Metals, and most lately, USA Uncommon Earth.

Each single one popped after the announcement. Some by triple digits.

In response to Luke, this sample isn’t over. Treasury Secretary Scott Bessent has signaled the administration has recognized not less than seven industries it needs to construct up, with $7.5 billion earmarked particularly for vital strategic belongings.

Luke’s monitoring a number of uncooked supplies performs positioned for presidency backing:

Perpetua Assets (PPTA) – it controls considered one of America’s largest gold-antimony deposits
MP Supplies (MP) – the one U.S. uncommon earth miner at scale
Customary Lithium (SLI) – it’s commercializing direct lithium extraction
Centrus Vitality (LEU) – the one U.S. producer of HALEU nuclear gas

For Luke’s full evaluation of the chance in uncooked supplies – plus the opposite 5 layers of the AI stack – click here to access his Genesis Mission research briefing.

Let’s dig deeper into one particular uncooked supplies play that’s been minting cash in latest weeks…

Whereas Luke’s analysis covers all six layers of the AI infrastructure stack, let’s end by zeroing in on a steel – and a commerce – that’s sitting on the middle of this buildout.

Copper.

We’ll do that with the assistance of veteran dealer Jonathan Rose, editor of Divergence Trader.

Jonathan and his subscribers simply had an enormous win with copper miner BHP (BHP), the world’s largest diversified pure assets firm. They locked in a nearly-3X return in 20 days on their BHP choices commerce.

I reached out to him yesterday to debate the chance from right here.

Jeff: Jonathan, you guys simply had an enormous win with BHP, however I noticed a commerce alert that you just’re taking income. Does this imply the copper commerce has topped out?

Jonathan: In no way. This can be a structural copper thesis, not a short-term commerce.

Demand is being pushed by AI infrastructure, grid upgrades, electrification, and reshoring, whereas provide stays constrained attributable to years of underinvestment, lengthy mine lead instances, and geopolitical focus in Latin America.

We’re nonetheless bullish BHP, however when the market provides you a 3X in 20 days, it’s prudent to lock that in.

Jeff: So, what’s your timing recommendation for entering into a brand new copper commerce from right here?

Jonathan: Copper will pull again, and we’re consumers on any pullback.

We traded BHP in November and December as properly – we purchase on each pullback. There’s not sufficient copper on the earth.

The way in which to play it’s by means of persistence and positioning, not timing tops and bottoms.

Use volatility and pullbacks to construct publicity, measurement appropriately, and specific the view by means of both inventory or choices relying on danger tolerance and time horizon.

Jonathan’s method is smart given the structural tailwinds…

As we highlighted within the Digest lately, AI information facilities require huge copper volumes for energy distribution and cooling methods, but in line with MarketBeat, new mine provide takes 15+ years to come back on-line.

The mismatch between explosive demand and constrained provide creates precisely the setup Jonathan’s positioning for.

For his particular commerce suggestions on copper, click here to learn about joining him in Divergence Trader.