URGENT: Federal Reserve Announces MASSIVE Rate Cut, Bailout Begins!

What's up you guys? It's Graham here, and I hope you're prepared for what just happened. As of a few hours ago, for the first time since March of 2020, the Federal Reserve has finally made the decision to lower interest rates after one of the most aggressive tightening cycles in history. That's right, without exaggeration, this single decision sets a brand new trajectory that not only confirms that the Federal Reserve believes inflation is over, but it's about to affect everything from the stock market, the housing market, the national debt, and even how much you get paid within a savings account. No joke! If you have any amount of money stashed away whatsoever, this is going to directly impact you almost immediately.

That's why we really have to discuss exactly what the Federal Reserve just said, the impact this is about to have on all things money, what history tells us is most likely to happen next, and then most importantly, how you could use this information to profit. Although before we start, as usual, if you appreciate me trying to frantically edit all of this together to give you the most up-to-date information, it would mean the world to me if you hit the like button or subscribed if you haven't done that already. Doing that is totally free, it takes you a split second, and as a thank you for doing that, I'll do my best to reply to as many comments as I can. So thanks so much! And also, big thank you to Policygenius for sponsoring today's video, but more on that later.

All right, so in terms of why the Federal Reserve finally felt comfortable lowering interest rates, as well as how low these interest rates could possibly go, all of this comes down to the recent inflation report. Now, even though consumer prices have risen across the board by an average of 21.2% since February of 2020, there is some good news in the fact that recently prices have begun to come back down, which has given the Federal Reserve some room to begin cutting interest rates before the entire economy goes to... okay, in all seriousness, as far as where consumer prices are headed, it was recently reported that inflation only rose by 2% in August, which was the lowest level since February of 2021.

This effectively puts the 12-month inflation rate at just 2.5%, with energy being one of the main culprits, having fallen 4%. On top of that, used cars and trucks have declined 10%, new vehicles are down 1.2%, and oil is down 12.1% over a year. However, the only sticking point here is that core inflation, which excludes food and energy, is pretty much unchanged from the last month at 3.2%, all because housing remains incredibly high at a 5.2% increase over the last year. Of course, in this case, housing is seen as a lagging indicator because the prices that we see today are often the result of data that was signed a year ago. But this could be a reason why some people don't see as big of a rate cut as they would have liked.

On top of that, we have another metric that greatly contributes to the Federal Reserve's decision to lower interest rates, and that would be the jobs market. Look, here's the thing: the Federal Reserve's entire objective is to simply support the goals of maximum employment and stable prices, which is a really fancy way of saying they're going to do everything within their power to make sure the cost of goods and services doesn't skyrocket out of control without ruining everyone's lives in the process. Of course, when it comes to that, one of the metrics they look at is the jobs market because this signals how many people are employed, how many jobs are available, and if wages are strong enough to support the average person.

However, as it turns out, their recent interest rate hikes have been enough to result in the fewest jobs available since January of 2021. In addition to that, August payrolls also saw their smallest gain in 3 years, confirming that hiring has slowed down significantly. This means that most likely, the Federal Reserve has reached the maximum that they're willing to push, and everything from here on out is simply about not screwing it up.

But in terms of where things get really interesting, we got to talk about the stock market. When it comes to this, there is one single question that every investor wants to know: is the stock market going to go up or down as the Federal Reserve cuts rates? After all, in theory, when rates are lower, businesses could borrow for less, growth expands, and your meme stock portfolio returns to levels you haven't seen since 2021. But plenty of charts show the opposite, where nearly every single time the Fed cuts rates, the stock market plummets by an average of more than 20%. So what's actually true?

Well, historically, the Federal Reserve hasn't dropped rates unless they absolutely need to. They don't just say, "Hey, so that Japan stuff kind of spooked the market a little bit, so here's a rate cut to get your profits back." Instead, they usually drop rates in anticipation of events that could be really bad for the economy—almost as a way to help soften the blow. And this has been the case throughout the last three recessions. Like in 2001, they lowered rates before the dot-com bubble; in 2008, they lowered rates during the Great Recession, and in 2020, they lowered rates before everything shut down—almost as though they knew what was going to happen before the rest of us did.

But you know what? That's besides the point. Anyway, in these cases, the market drop wasn't due to the rate cuts themselves but rather the events that led to the rate cuts being necessary. So, in this case, is a rate cut going to lead to a stock market sell-off? Drum roll... the answer is: it depends. On the one hand, since the stock market is always forward-thinking, the stock market could sell off since rate cuts like this are already priced in. For instance, one of Investing.com's analysis made the argument that investors front-run and anticipate any rate hikes or cuts that may come up, and therefore where the market is trading at today already takes this into account.

They also made the argument that the Federal Reserve is somewhat trained investors to the point where if things get really bad, investors know that the Fed is always going to step in to save the day. Or, as they say, any financial or recessionary event jeopardizing the markets would be met with rate cuts and accommodative policy. For many investors in the markets today, their entire investing experience consists of continual interventions by the Federal Reserve. That's why the market has so far only gone higher.

But in terms of rate cuts of the past and previous downturns, there's an answer to that. For the most part, the Federal Reserve started cutting rates due to the onset of a recession, a bear market, or a financial event. At that point, as shown on screen, the markets are pricing for lower expectations of earnings growth rates and profitability. Or basically, in terms of what's most likely to happen, history tells us that it all depends on whether or not we see a recession, which also means that rate cuts make less of a difference than we think they do compared to the overall health of the economy. This also means that everything we're seeing today is most likely already priced in unless, of course, there's a looming disastrous event the Federal Reserve is trying to get ahead of.

But is this the same for the housing market? Although before we go on that, at the end of the day, the goal is really just about improving your financial future. After all, things happen all the time that are outside of your control. Like you can't predict what the Federal Reserve is going to do, you have no idea how the stock market is going to perform in the short term, and health is something that almost all of us take for granted. Like when it comes to that last part, nearly half of Americans expect that if they passed away today, their loved ones would inherit their debt, and 41% don't have the life insurance coverage they need, which is why our sponsor Policygenius is there to help.

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All right, so before we discuss the Federal Reserve's latest statements and what they anticipate happening in the markets, let's discuss the topic that everyone is wondering about: housing prices. At first glance, there's the concern that lower interest rates are going to spark more demand for cheaper mortgages because buyers' monthly payments go down. Buyers could afford to pay more, and that in turn will cause more demand for housing, causing prices to spike back up, especially when home affordability is at a record low.

However, even though prices are still hovering at all-time highs, the good news for buyers is that prices are starting to get cut. For example, a recent report found that the share of available listings that saw a price cut in July rose to 18.9%, causing the median price to fall from $445,000 to $439,000. Why? Well, Realtor.com says that there are two reasons for this. First, mortgage rates remain higher than expected, causing less buyer demand, and two, a lot of would-be buyers are sitting on the sidelines waiting for interest rates to come back down, causing sellers to reduce their asking prices to entice them back.

But what happens when interest rates begin coming back down? Well, in terms of mortgage rates, the Realtor.com chief economist seems to think that a 25 or 50 basis point rate cut isn't going to be that big of a difference, and it's going to take something much more significant for the average buyer to begin to notice. Just for context, it said that a 1% decrease in mortgage rates would allow for an additional 5 million buyers to qualify. But the mortgages we're likely to see are only going to be reduced from 6.47% to 6.3% with the recent cut. That's because mortgages are mainly priced based on the 10-year treasury yield plus an additional 2 to 3% so that banks make a little bit of profit, and as you could see, these rates are pretty much even from what we saw a year ago.

On top of that, it's said that roughly 86% of outstanding mortgages have a rate of 6% or below, meaning rates are going to need to continue trending lower to see a fully re-energized housing market in such a way that would entice homeowners to sell. After all, who would want to give up a 3% mortgage just to buy another home at 6%? Basically, it's presumed that the Federal Reserve is looking for just the right spot to be able to cut rates enough to keep our economy afloat, but not so much that it floods the market with excess demand, sending prices back up again.

That's why for buyers, this first rate cut isn't going to have that large of an impact, but it is going to lead to the choice of buying a house at higher rates with less competition or buying a house with lower rates but more competition. Really, at the end of the day, housing prices take some time to be able to fully react, and any changes are going to take time to materialize. But in terms of where prices are headed in the future, the Mortgage Bankers Association believes that prices will increase another 2.9% in 2025. Fannie Mae believes we could see prices rise 3%, and NAR estimates that prices could increase by another 2%.

In terms of rental prices, though, that's another story entirely. New data found that one in three property managers offered a concession on rents amid a glut of supply. That's right, multifamily construction is on the rise, with more units completed in June than any other month in nearly 50 years. However, even though 30% of properties are giving out freebies, the rest are still going up, with rental prices now 3.4% higher than they were a year ago, with 4.7% being the increase on single-family homes and 2.6% being the increase on multifamily properties.

Although speaking of increases, there is one more market that we have to talk about before diving into the Federal Reserve meeting, and that would be Bitcoin. Now, I'll admit, usually, this isn't a topic I cover fairly often because one, it's extremely speculative, and two, any price predictions just seem like a random guess in the dark. But I did find it interesting that recently, the number of active Bitcoin addresses has declined significantly. Why, you might ask? Well, one article from Coin Telegraph believes that it could be a combination of investors locking up their Bitcoin and holding longer, the irrelevance of wallets thanks to Bitcoin ETFs, and a lot less active trading because Bitcoin has been a lot less volatile.

Now a separate analyst believes that the years of Bitcoin's peak compound annual growth are likely over, meaning investors may need to put in more upfront to see better returns. On the other hand, this chart seems to suggest that more and more people are in the accumulation phase, which could lead to a new period of stabilization and growth. The reason I'm saying all of this is because both presidential candidates have made it clear that they intend to make cryptocurrency a central part of their policy, with Trump saying that he has a plan to ensure that the United States will be the crypto capital of the planet, and the Bitcoin superpower of the world, along with Kamala accepting donations through Coinbase.

It seems as though this is going to be a huge selling point for either candidate, realizing that the entire community is growing rather large. But in terms of how this is going to be impacted by Jerome Powell and the recent rate cut, here's what you need to know. As of a few hours ago, for the first time in four years, the Federal Reserve lowered interest rates by a staggering 50 basis points, all because the job market is somewhat weakening, which was caused in the first place by higher interest rates.

As far as what Jerome Powell recently said about this, he reiterated that their fight against inflation is a work in progress. Progress is being made, restrictive policy isn't needed to such a large extent, and a rate cut at this time begins to make a lot of sense. Or basically put another way, they want to make sure the entire economy doesn't collapse because hiring has started to slow down. So a rate cut at this time is going to help soften the blow, and then we could see even more rate cuts in the future.

How do we know? Well, today is also when they released their summary of economic projections, which estimates where they believe we will see employment, inflation, and interest rates over the next few years. In this case, they believe that interest rates of 2026 are going to be dramatically lower than they are today, implying that we're going to see a series of rate cuts over the next few months and years. After all, there is the concern that GDP is going to slow down, unemployment is going to rise, and if that's what they anticipate, it makes sense to begin cutting interest rates today to help smooth everything out.

All in all, none of this meeting was too surprising. A lot of it was exactly as people expected, and if history has shown us anything, it's that the Federal Reserve tends to move a bit slower than people think. That's probably a good thing given the volatility of the economy, but it also means that we're most likely not going to see anything that the Federal Reserve doesn't prepare us or warn us about far, far in advance.

That's why overall today just reiterates that they're going to make their decisions meeting by meeting, take it slow, be data dependent, and then most importantly, avoid a recession, which like I mentioned earlier would greatly affect the entire economy. After all, if we enter a recession, all indicators point to a stock market decline, a labor market that gets worse, and an economy that slows down dramatically. So, if they could reduce interest rates ahead of time before a disastrous event, that could help prevent it entirely.

In the big picture, though, it does seem as though we're most likely going to see a series of more rate cuts in the future. Restrictive policy like this is no longer needed to help bring down inflation, and right now is really just a game of patience to watch prices slowly come back down. To me, none of this was that big of a surprise since they've really gone above and beyond in terms of signaling their intentions for the future. But time will tell how this plays out for the rest of the year, especially now that elections are less than 50 days away.

So let me know what you guys think of all this down below in the comment section. As always, I will do my best to reply to as many of them as I can, and if you're not already subscribed, you're going to want to do it because it's totally free. It takes you a split second, and I'll cover the next meeting that happens in November. So thank you guys so much! Really appreciate it, and until next time!