Life would be a lot easier if all fats were unhealthy…it was always incorrect to wear anything white after Labor Day…and our monetary policymakers knew exactly what was happening and what they should do next. But as it turns out, things are a bit more complicated than we would like, writes Nilus Mattive, editor of Safe Money Report.
In fact, Federal Reserve Chairman Jay Powell summed it up nicely in his recent post-meeting speech: “We will continue to monitor the risks to both sides of our mandate…We are well positioned to determine the extent and timing of additional adjustments to our policy rate based on the incoming data, the evolving outlook, and the balance of risks.”
This is a very fancy way of saying, “We really have no idea what will happen next or what we will do about it.” The Fed is now pointing to Iran as the big wildcard…which it is. But the central bank was already caught between a rock and a hard place before the first bomb fell.
First off, inflation was ALREADY running hotter than the central bank’s stated target. Based on the Fed’s favored measure — the Personal Consumption Expenditures (PCE) index — prices jumped 2.9% year-over-year in December and 2.8% year-over-year in January. These levels are almost 50% higher than the Fed’s stated target of 2% and higher than what we were seeing a year ago.
Second, economic growth was ALREADY slowing before the war. US GDP rose at a 0.7% annualized rate in Q4 2025. That number was after a significant downward revision from an initial 1.4% estimate…below forecasts…and sharply lower than the 4.4% increase we saw a quarter earlier.
Meanwhile, the latest jobs numbers were equally rough. The U.S. economy lost 92,000 jobs in February, a sharp reversal from prior months and a weaker result than economists anticipated.
This is all very bad news. The Fed didn’t know what to do before Feb. 28. It seems to know even less now. And it is highly likely that inflation will only go higher, and the economy will only grow weaker, from here.
Yet the stock market is still more richly valued than at almost any other time in history. That makes absolutely no sense at all. And it’s going to crush millions of portfolios.
