URGENT: Federal Reserve Cancels 2025 Rate Cuts, Markets Crashing FAST!

What's up, Graham? It's Guys here. We got a bit of a problem. As of a few hours ago, the Federal Reserve decided to cut interest rates by another 25 basis points. Except this time, there is a bit of a catch. Despite the stock market, housing prices, and Bitcoin recently reaching brand new record highs, experts are beginning to warn that we've officially entered bubble territory to the point where, now, there's no turning back. After all, we have seen similar valuations in 1929, 2001, 2020 before the COVID crash, and again today, as people throw their hard-earned money into the most ridiculous places like Bartcoin, which is somehow up 50% in a week. It makes no sense. Anyway, with the recent rate cuts and market euphoria, it's more important than ever that we break down exactly what's going on, what the Federal Reserve just said, their warning for 2025, and what this means for you watching. Because this will have a direct impact on almost everything from the stock market, housing prices, Bitcoin, and even the price of Bartcoin. Although, really quick, if you appreciate the videos where I try to bring you updates like this as quickly as I can, it would mean the world to me if you hit the like button or subscribe if you haven't done that already. It helps out the entire channel, and that's all I ask. So thank you so much, and also a big thank you to Policy Genius for sponsoring today's video. But more on that later. Alright, so before we go into the biggest changes about to take place in 2025, when it comes to rate cuts, the single biggest factor is what's going on with inflation. That's because on December 11th, it was revealed that overall inflation increased by 2.7% year over year. And even though this is higher than their 2% target, it is an improvement from last year's 3.3%. And according to them, inflation isn't accelerating, it's merely just persistent. Anyway, in terms of where it's most persistent, food at home increased by 1.3%, food away from home like restaurants is up 3.6%, motor vehicle insurance is up almost 13%, health insurance is up 6%, and hey, at least some good news, energy is down 3.2%. On top of that, it's estimated that shelter, which has about a one third weighting in the CPI calculation, accounted for more than 40% of the total increase in November. And in this case, the shelter index rose 4.7% on a 12 month basis, which by the way, is the smallest increase since February of 2022. All of this implies that as long as the Federal Reserve holds steady or manipulates the data, everything is on a bit of a downtrend. Although none of this comes even close to what we're experiencing in the stock market. Look, on the surface, someone needs to say it. This year has been absolutely incredible for every single stock market investor, unless you shorted MicroStrategy. I mean, for anyone who's been paying attention to their portfolio, this has been the best year for the S&P 500 of the century, being up more than 30%. And it doesn't even end there. If we go all the way back to the 1920s, we could see that there have only ever been nine times where the S&P 500 has returned more than 30% in a year. But some experts are warning that you better not get used to it. Even though historically the stock market tends to see above average returns in the years following all time highs, Warren Buffett is taking a slightly more cautious approach as he sells massive positions and sits on his largest cash pile of all time at $325 billion. And if that sounds crazy, just take a look at what's called the Buffett indicator. This measures the value of the U.S. stock market divided by GDP, and he's previously referred to this as the best single measure of where valuations stand at any given moment. With this gauge, it's suggested that a reading of 100% is said to be fair. At 70%, stocks are a bargain price, and if it's near the 200% mark, investors are playing with fire. Yep, I think you know where I'm going with this. As you can see, we are currently trading at an above trend price of 208%, which places this as one of the most expensive stock markets since the 1950s. Of course, these days, the Buffett indicator is said to be somewhat flawed because it doesn't take into account how lower interest rates could affect a company's valuation, but that isn't stopping experts from warning that these types of returns probably are not going to continue. For instance, one economist was quoted as saying that the stock market is in a mania that will push it higher before a potential 26% drop in 2025. However, it is important to mention that not everybody agrees with this thinking, and just because something is historically expensive doesn't mean it can't keep going higher and higher. Like, most experts have been calling for below average returns for more than a decade now. Like this Forbes article, which estimated an 80% chance of the S&P 500 being lower over the next five years in 2017. Safe to say that didn't happen. These days, most analysts all seem to fall within the same camp that we're probably going to see an annualized return of 0 to 7% over the next 10 years. And in the next year, J.P. Morgan, Goldman Sachs, and Morgan Stanley are calling for an S&P 500 at 6,500, Barclays estimates 6,600, Bank of America's coming up with an oddly specific 6,666. Make it that what you will, and Wells Fargo thinks 7,007 is possible. Although whatever happens, don't expect a straight line upwards. In fact, throughout history, most returns simply come from a few very, very good years that outweigh the very bad years. And 37% of the time, stocks see an annual return of more than 20%. This suggests that the title, average returns aren't normal, normal returns are extreme, is very true. And what we're seeing right now isn't so much reckless, it's just par for the course. Even if people are getting caught up these days again in meme coins. And that of course brings me to the second topic I want to talk about Bitcoin. In a remarkable turn of events, my thumbnail from January of 2021 finally came true when Bitcoin hit its infamous price of $100,000, which by the way, I'm sorry to be the bearer of bad news here, but my mom recently asked me if I heard of Bitcoin and whether or not she should buy it. That's probably a top signal. I hate to say that, but you know, it is what it is. Anyway, even though it's currently a bit down from its all time high, everything is lining up for Bitcoin to be pretty well positioned politically in 2025. For instance, the Trump family is openly pro Bitcoin and could be open to a Bitcoin reserve in the next year or so. Gary Gensler is stepping down and being replaced by Bitcoin advocate Paul Atkins. And it appears as though quite a few companies are now beginning to raise money for the purposes of buying Bitcoin. For example, Riot Platforms is considering a raise of $500 million to place in Bitcoin. Both Microsoft and Amazon are considering proposals as well that would allocate 5% of their reserves into the asset. And the basketball player Scottie Pippen said that Satoshi Nakamoto came to me in a dream last night and handed me Santa's list. I saw Bitcoin next to Gates and Bezos. History's being written. And whether or not Scottie has supernatural future telling dreams or is just privy to inside information is yet to be seen. But no matter what you think, Bitcoin is certainly going to be a very hot topic for 2025. And I have a feeling that many more companies will soon begin to adopt it. Although in terms of what's happening with the housing market, it's a completely different story. Although before we go into that, keep in mind that this is the last Federal Reserve meeting of the year. And as we wrap up 2024, it's important to use this time to take care of anything that you might have been delaying up until now. For instance, just like the Federal Reserve is trying to protect our economy from inflation, it's equally as important that you protect yourself and your loved ones with life insurance for anything that might come your way. And thankfully, our sponsor PolicyGenius is there to help. For those unaware, PolicyGenius is the country's leading online insurance marketplace, making it easy to compare life insurance quotes from America's top insurers in just a few clicks to find your lowest price. Essentially, they could help save you time and money so that you could provide your family a financial safety net starting today. 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Now, before we go into Jerome Powell's latest comments and his outlook for 2025, there is one more item that we really need to talk about, and that would be housing prices. That's right. Despite mortgage rates staying at their highest level in more than 20 years, home prices have continued to grow, with the average home rising 5.9% since December of last year. Of course, in terms of growth towards the end of this year, a lot of analysts were saying that homebuyers were waiting on the sidelines until after elections. Well, now that elections are over, it's said that we've started to see signs that homebuyer demand is coming back. That could lead to increased competition in coming months, possibly pushing prices higher unless we see a major spike in the number of homes being listed. In terms of which housing markets are seeing the biggest increases, we've got to give it up to Detroit, Michigan, with more than a 15% gain year over year, followed by Chicago at 13.5%, Newark at 11%, and Cleveland at 10%, with the hardest hit being Austin and San Antonio, Texas, having fallen 3 to 4.5% over the last 12 months. Although in terms of the future outlook of housing prices, Zillow has made a few of their own predictions, and surprisingly, they're all pretty reasonable. First, they think that the housing market's going to pick up, with prices rising another 2.6% within the next 12 months. This suggests that home prices may simply rise alongside inflation, which has been the trend for over 100 years. After all, if home prices rise by 5%, but inflation also rises by 5%, your equity is simply holding value, and I have a feeling this will continue to be the case. Second, expect mortgage rates to remain a bit volatile. Since home interest rates are generally tied to the value of the 10-year treasury, there tends to be a lot more speculation here than, let's say, credit card interest rates, so as a result, there could be a lot more fluctuation over the next year. Third, more of the United States will become a buyer's market as inventory gets listed. In terms of where this is going to happen, Zillow thinks that the Southwest will become the hotspot for affordability and negotiations. Fourth, they've pointed out that smaller homes are now becoming more common. In this case, builders are realizing that it's no longer profitable to maximize square footage when their buyers are just strapped for cash, so as a result, they're building less and they're passing some of the savings on to you. On top of that, more than a third of builders said that they built smaller homes in 2023 and more than a quarter plan to construct even smaller this year. And finally, fifth, rent concessions will end. In their mind, an apartment construction boom meant that landlords were competing with one another to try to get tenants, but now that almost all of those units are leased, competition is going to increase now that there's less to pick from. Now, honestly, from my perspective, just anecdotally, I am seeing a lot of sellers list their homes at exorbitant prices just to see what they could get, and on a lot of listings that I'm following, I am seeing consistent price reductions as they slowly come back down to reality. But everyone else is simply asking a very high price just for the sake of seeing what they could get, and this provides a unique opportunity for a buyer who's willing to negotiate. Although in terms of what your own pal just said as of a few hours ago and the reaction of the market, here is what you came for. As of a few hours ago, the Federal Reserve has decided to cut interest rates another 25 basis points as expected, except this time we get the benefit of receiving a lot more information about their plan for the next year in what's called the Summary of Economic Projections. This estimates where they believe we'll see inflation, interest rates, unemployment, and GDP over the next few years. And in this case, bad news, they're now expecting significantly fewer rate cuts in 2025 than they initially expected, as you can see here, which has caused the market to enter a bit of a free fall as investors price in higher rates for longer. For them, they explain that they want to take it slow, make sure that inflation doesn't re-accelerate, and by holding firm, they're ensuring that prices don't meaningfully spike back up. On top of that, they believe that we'll be able to return the inflation rate back to their 2% target and then hold steady and adjust in the future as needed. And overall, it appears as though their fight against inflation is working. All in all, none of this is too shocking. All of this was somewhat as expected, except with a few extra details sprinkled in. And if history shows us anything, it's that the Federal Reserve does move a little bit more cautiously and slowly than people expect, but eventually they're probably going to get the job done. Now, I do have to mention that in the last meeting, he was asked if he would step down if Trump wanted him to. And his response was, no, because that's not permitted under law. If he asked you to leave, would you go? No. Can you follow up on, do you think that legally you're not required to leave? No. So of course, leading up to today's meeting, Trump preemptively made the comment that he would not try to remove Jerome Powell. So hey, for the time being, it looks like we're getting more of the same. Now, as far as my own thoughts about everything discussed, in terms of the stock market, even though it is expensive, relatively speaking, based on history, at the end of the day, no one has any clue what's going to happen. And no one has any idea what the price is going to be a year from now. That's why I like to take the approach of prepare for the worst, but hope for the best, prepare for the worst. That one. This means I diversify my money throughout a variety of index funds. I do not buy individual stocks. I keep a little cash on the sidelines just in case. And I keep buying in on a regular basis, regardless of the price, because you know the saying, The market can remain irrational longer than you could remain solvent. Look, I know I always give the same boring advice at the end of every single video, but the truth is, the boring strategy works, and I've been saying this same thing in 2017, 18, 19, all the way through today. If you would have followed this over the last eight years, you'd be up over 200%. Now, sure, that's certainly not as much as Bitcoin's 9000% return in that time frame, but that's why I believe a well-diversified portfolio is worth it. I like placing a small amount of Bitcoin in something like an ETF, where if it goes up, great, and if it doesn't, that would really suck, but it's not the end of the world. So even though, yes, markets are high, I'm not deterred by the price, and I'm just buying in on a consistent basis, no matter what. Like, I remember making similar videos addressing the market all-time high six years ago, and we'll continually hit new all-time highs as the market and economy grows, hopefully. I'm just a firm believer of taking a very slow and steady approach that's very consistent, and no matter what, hitting the like button and subscribing if you have not done that already. So thank you guys so much for watching, it really means a lot. Happy New Year, happy holidays, and until next time.