Breaking: The Fed Cancels All Rate Cuts - Market Selloff Has Begun!

What's up you guys, it's Graham here, and I hope you're prepared for what just happened. Believe it or not, as of a few hours ago, the Federal Reserve just completely flipped their entire outlook for the economy, inflation, and most importantly, their money to the point where we're about to see a complete financial reversal, and almost no one's prepared for how quickly everything is going to change. After all, from this point on, Kevin Warsh has officially replaced Jerome Powell as the head of the Federal Reserve. The market is freaking out because they're now planning to increase interest rates sometime in 2026, and all of this is happening during what's being called the most overvalued market in history. That's why we really got to break down exactly what the Federal Reserve just said, the changes that are about to take place as soon as next month, and then what this means for you, your money, and your investments, because the decisions being made right now are about to determine who gets rich and who quietly gets left behind. Although before we start, as usual, if you appreciate me making this entire video, after spending 18 hours flying across the entire world, it would mean the world to me if you hit the like button and subscribed if you haven't done that already. Really means a lot, that's all I ask, and as a thank you for doing that, here's a picture of a bird. So thanks so much, and also a big thank you to Policy Genius for sponsoring this video, but more on that later. All right, so to bring you up to speed with exactly what's going on, we've got to talk about the one subject that's nearly destroying the value of almost everything in 2026, and that would be, you guessed it, inflation. See, here's what most people don't realize. Even though rising prices were steadily trending downwards over the last few months, inflation has returned back to a three-year high, with CPI now coming in at a whopping 4.2% increase. Why? Well, when you really dig into the numbers, almost all of the inflation comes down to one source, and that's energy. Like, as you can see, this has nearly doubled in the last six months as a result of the conflict throughout the Middle East, and with inflation starting to tear through the value of almost everything, the big question then becomes, what's next? And to look at that, we have to see what's called PPI. For those unaware, this stands for the Producer Price Index, and it measures what businesses pay before they pass on a price to you, kind of like what's coming down the pipeline. And in terms of the most recent numbers, it was a lot worse than expected. This puts the Federal Reserve in a genuinely impossible spot, because if inflation doesn't come down, they might be forced to raise interest rates to prevent prices from skyrocketing out of control. But, if oil falls, then they're going to have to wait and see for another few months before making their next move. Because the moment a deal falls through or something mysteriously happens, oil jumps right back up again. That's why, if the Federal Reserve gets this next move wrong, or waits a little longer than necessary, the consequences are going to be felt almost immediately, especially throughout the stock market. First of all, I think it goes without saying that this has been one of the most eventful stock markets that I have seen in years, highlighted by the largest IPO ever in history, SpaceX. However, when it comes to buying into an IPO like this, and hopefully making money, here's where things get very interesting. One analysis looked at every single tech IPO over a billion dollars since 2010. And on the surface, the returns have been pretty incredible. Like the average IPO company was up 248% in just five years. But the catch here is that the average is skewed up heavily by a few incredible winners, like Shopify and Palantir, which have both increased by thousands of percent. So when you take those out of the equation, believe it or not, the Median Tech IPO is actually down 7.4% six months after its first trading day, and was still down 3.5% a full year later. On top of that, when it comes to SpaceX specifically, the reason that some of the big winners like Shopify and Palantir did so well is because they IPO'd small, and then they grew into $100 billion market giants. But SpaceX is already trading at over a $2 trillion valuation, meaning that 30x returns from here are extremely unlikely. And this post sums it up pretty perfectly. Of course, in defense of Elon Musk and SpaceX, he's not the type of person you ever want to bet against. And all of his companies have seemingly just defied the odds and have done incredibly well. But it is a reminder that buying into the hype usually produces below average market returns, and eventually things tend to cool off, especially as the existing shareholders within the company start offloading their shares, which is expected to happen over the next six months. Oh, and by the way, speaking of SpaceX, for anyone curious about my own thoughts on this, if it's a good time to buy and what I think is going to happen in the future, I just posted an update for all the channel members. That video is now live for anyone who wants to see it. There you go. That's my way to post unfiltered content there, and I hope you enjoy it. Separate from that, second, I definitely see this narrative that the record-breaking SpaceX IPO is going to signal a market top in the middle of an AI bubble, and that private investors are using this as a way to cash out before the entire stock market comes crumbling down. So are they right? Well, Yahoo Finance actually laid out two really good arguments. If you believe the market's going down, well, the data says that you'd probably be correct. Historically, bursts of giant, money-losing IPOs have often clustered near market peaks, and SpaceX fits the profile. On top of that, the S&P 500's P-E ratio now sits near 40, a level it's only touched once before during the dot-com bubble. Bank of America warned that the S&P 500 is overvalued on 17 of the 20 valuation metrics, with 8 of those metrics exceeding the levels we saw during the peak of 2000. However, as pessimistic as all of this might sound, keep in mind that the exact same Bank of America checklist hit 70% back in February of 2025, when the S&P 500 was sitting around 61.44. And if you had panic sold back then, you would have missed out on another 20% increase. In addition to that, AI activity is skyrocketing. Even Google said that our cloud revenue would have been higher if we're able to meet the demand. That is why now, more than ever, you need to be careful with your money, avoid buying into the hype, and position yourself for both sides, because now could either be the start of the next major market rally, or the beginning of a much worse problem beneath the surface. Although in terms of what this means for the future, and what Kevin Warsh just said about our economy for the first time ever in history, here's what you need to know. Although before we get onto that, I think this is a good reminder that a lot of our financial life is built around things that we can't control, like inflation, interest rates in the Federal Reserve. However, there are a few things that we can control, like making sure the people who financially rely on you are protected in the event something were to happen. Because look, we could spend all day talking about interest rates, but if something unexpected happens and there's no plan in place, nothing is more important than making sure your family is taken care of. That's why when it comes to planning ahead, our sponsor Policy Genius is there to help. 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Now this is a topic I've been paying extremely close attention to over the last few months because I just listed and sold another property in Los Angeles that's actually scheduled to close next week, and I gotta say, over the last few months, the market has shifted substantially. Like, to put this in context, last year I sold my house in LA, I got multiple offers over asking quick and easy, but this one I priced a little more aggressively. And even though I still got multiple offers over asking, it just wasn't as strong as I expected it to be. I'm also selling a third property pretty soon, and with mortgage rates having increased, I'm definitely noticing that the buyer pool is thinning out quite a bit. To me, this is why it's just not surprising that sellers are pulling their homes off the market at a near-record pace. Like, at a certain point, if you don't get the price that you want, a lot of sellers just want to pull their home off the market and wait for things to recover, especially if they already have a record low interest rate. Or basically, just from what I'm seeing, you still have a corner of the seller's market who believe that their home is still worth what it was in 2021, so they're pricing it really high, and if they don't sell it, not a problem, they just take it off the market. And buyers, on the other hand, are realizing that they're gaining some leverage, and they're submitting more aggressive offers with the understanding that if they don't get it, they just walk away. This is why, according to Zillow, they believe that the housing market recovery is back on pause, while the typical home is only up 0.8% year over year. However, I will say, it is very important to understand that housing is very much location-based, and some places might do a lot better or worse than the average. Like, Zillow believes that prices will fall in places like Austin, New Orleans, Denver, the Sunbelt, and a big chunk of California. Meanwhile, prices are expected to rise throughout a lot of the more affordable areas in the Midwest. We're talking Rockford, Illinois, Rochester, Wisconsin, and Syracuse, New York, as those areas are attracting younger buyers who just want a more realistic price point to buy their first house. That's why, in terms of the housing market today, as weird as this sounds, the higher interest rates go, the more likely sellers are to pull their homes off the market. But coincidentally, the fewer the homes that are on the market, the higher those remaining homes end up selling for. So it's a weird paradox where housing prices should be falling more than they are, but they're not. So here's my advice. For buyers, don't be afraid to walk away, don't be afraid to submit an aggressive offer, and make sure to shop around your loan to get the lowest interest rate, because even a small difference here could save you thousands of dollars a year for a very long time. And for sellers, the strategy is actually the exact opposite. You have to price aggressively up front if you actually want to sell your house. The reality is, the longer your house sits on the market, the more leverage you lose, the more buyers begin to think that there's something wrong with it, and you wind up accepting an offer that's probably going to be a lot lower than had you just priced it appropriately from the get-go. In fact, this type of leverage isn't just happening in real estate. There's another market that's reacting to the exact same uncertainty, except much, much worse. And that would be Bitcoin. Look, there's no way to sugarcoat it. For all of you Bitcoin holders out there, it's been a rough ride. Like over the last year, Bitcoin is down almost 40% from the all-time high of $124,000. And even in the last month, it's fallen another 20% to its lowest point in over a year. Why? Well, I hate to say it, but a lot of people right now seem to be blaming one person, and that's Michael Saylor. See, for those unaware, Michael Saylor runs a company called Strategy, which is the largest corporate holder of Bitcoin in the world, with slightly more than 4% of the entire supply. This means that the Bitcoin market is now heavily exposed to the actions of one company, or in essence, one person, who's built their entire reputation around the mantra of never selling. However, on June 1st, it was disclosed that his company ended up selling 32 Bitcoin. And right after that was made public, the entire market started to sell off. Now, even though in the big picture, selling 32 Bitcoin out of 844,000 is basically nothing, one person summed it up perfectly. They said that Saylor could buy 20,000 Bitcoin a week and nobody cares. But the day he sells even a tiny amount, the whole market panics. Or basically, to simplify this even further, Strategy is buying Bitcoin by issuing shares in their company. And to entice people to buy, they're paying out a 12% dividend deal. How could they afford that, you might ask? Well, if the price of Bitcoin keeps going higher, they could issue more shares and use the appreciated price to pay the dividend. But if the value falls, well, they might issue more shares of their common stock to raise more money, which dilutes current shareholders. Or they're going to have to sell their Bitcoin to pay for their overhead costs, which could cause the market to fall, causing them to sell even more Bitcoin, causing the market to fall, essentially creating a death spiral. Of course, in Michael Saylor's defense, he claims that if Bitcoin appreciates by just 2% a year on average, the company could cover all of its preferred dividends indefinitely without needing to issue more common shares. And he did wind up buying even more Bitcoin after the price fell. So where do we go from here? Well, even though it doesn't sound as dramatic, the real reason Bitcoin has been falling is because a lot of the excitement and money has been chasing recently IPOs, AI, and tech. Bitcoin's also been underperforming over the last five years and people have grown tired of it. And until everyone gets excited about Bitcoin again, we're probably going to see pretty choppy performance for the near future. For example, Galaxy Research just reported that they believe Bitcoin may not have bottomed With a base case that it could fall between 40 and 46,000 by late this year. But on the other hand, Standard Chartered believes that the Bitcoin bottom is already in at 59,000. And Galaxy itself still believes that Bitcoin hits 250,000 by the end of 2027. Although in terms of the main event, the new Fed chair, Kevin Warsh, and why everyone is panicking about what comes next, here is what you need to know. As of a few hours ago, Kevin Warsh officially gave his first speech as chair of the Federal Reserve. And just like Jerome Powell, he reiterated that they are committed to fighting inflation while protecting the broader economy. Except until recently, things weren't really going that well. Inflation was rising, oil prices were skyrocketing, and it was unclear when the conflict was going to end. Although I will say, maybe it was just a crazy coincidence, but right before this meeting, a peace agreement was tentatively reached with Iran, which gives the Federal Reserve some room to eventually cut rates again when things start to subside. The bad news is that as of today, the market's pretty much confirming that we're unlikely going to see any rate cuts anytime soon. In fact, they've just indicated a potential rate hike sometime this year, and that interest rates are expected to remain much more elevated than all of us were expecting. On top of that, today's the day where we get what's called the Summary of Economic Projections, which basically forecasts where the entire Federal Reserve thinks our economy is heading over the next few years. And in terms of what they just said, like I mentioned earlier, they're now expecting interest rates to increase a little bit in 2026 before falling back down again in 2027 and once again in 2028. They also expect inflation to remain elevated at 3.6% throughout 2026 before eventually falling back down again. Now, funny enough, one of the ways that we could tell where the market's heading in the future is based on what's called the Dot Plot, where every voting member gives the public full transparency as to what they think is best for the economy. But wouldn't you know it? Kevin Warsh wants to get rid of the Dot Plot entirely under the impression that the Fed should signal less and do more, effectively meaning that we would all get zero guidance as to what's going to happen next. It would be just a total shot in the dark, although even if he is able to accomplish this, each voting member would still be able to cast a vote as to what they want for the future. It's just we wouldn't know it. That's why Kevin Warsh cannot unilaterally lower interest rates without convincing the entire Federal Reserve to vote alongside with him. And with Jerome Powell still on the board, it's unlikely that we're going to see any substantial changes until he eventually steps away. However, there are rumors that since Kevin Warsh is Trump's pick, he'll attempt to use that freedom to make his case internally for far reaching changes at the Fed, all of which I promise I will keep you posted on as long as you're subscribed. Anyway, in terms of my own thoughts about what just happened today and then what you could do about it, here's, of course, what you came for. Overall, I tend to think that what everyone's saying about Kevin Warsh is a bit dramatic. Like in reality, the guy inherited an economy with four point two percent inflation, a war driven oil shock, a divided Fed and a bond market that's already in shambles. That's why, from my perspective, the only thing that matters over the next month is simply the peace deal. If it goes smoothly and oil comes down to the point where inflation begins to subside, then potentially we could talk again about rate cuts. But if something throws a wrench in that plan, things happen when you least expect it and inflation rises back up again, then all bets are off the table. Basically, I am just cautiously optimistic at this point that things will work out, but I'm also hedged just in case they don't. Plus, absolutely no one can predict what's going to happen next. Like just in the last week, we've seen the largest IPO ever in history, the hottest inflation in three years, a peace deal with Iran and Bitcoin cut in half before the markets moved higher. If you would have even tried to have predicted this a year ago, would have been impossible. That's why through all of this, I just keep saying that I'm a random dude making videos in a half converted garage. I have no idea what I'm talking about. And the only thing I can consistently do that has the highest chance of coming out ahead is just buying in, as usual, consistently. I know people hate that I keep saying this, but like my strategy is not going to change. I've just I've been doing this now for like 10 years openly on YouTube. And so far, it's worked really well as long as you hit the like button and subscribe if you haven't done that already. So with that said, thank you so much for watching. Make sure to check out our sponsor Policy Genius down below in the description. And as always, if you want bonus videos from me every single week, along with early access to content just like this, feel free to join as a channel member. And there's a special bonus. If you send me your investment portfolio, I'm picking a few every other week or so to do a financial audit where I could go through all of your finances and give you my thoughts. So if that sounds interesting, feel free to join. Thank you so much. And until next time.