Analysis: Interest Rate Cut Will Exacerbate Historic Wealth Disparity, Asset Holders Will Outrun Inflation

On August 24th, The Kobeissi Letter issued its most recent market analysis, indicating that the anticipated rate cut will not be as forceful as what Trump anticipates, amounting to 300 basis points. The last time the Fed cut rates due to surging inflation was in the 1970s, leading to a continuous and historical widening of the wealth gap. In 1990, the wealth gap between the richest 1% and the poorest 50% of the population was $3 trillion, and now it is $40 trillion. Currently, the wealthiest 0.1% of the US population holds wealth that is 5.5 times that of the poorest 50%. In fact, the Fed has truly "fallen behind" in the current global rate-cutting cycle. Central banks around the world cut rates a total of 15 times in May alone, which is the fastest monthly rate-cut pace so far this year and one of the largest rate-cutting waves of this century, firmly setting the stage for the Fed's first rate cut to occur just one month later in 2025. Additionally, Fed Chairman Powell has 8 months remaining in his term, and President Trump has made it clear that the new Fed chairman he selects must cut rates, and will "soon" announce his choice for the new Fed chair. 2026 will be a historic year for the market. In fact, this trend is not novel; the pandemic only expedited its progress, with asset holders emerging victorious in the battle against inflation. The richest 1% of American families own 51% of stocks, and the richest 10% of families own 87% of stocks. Before the wealth gap continues to widen, market participants should hold more assets.