QE Again! Powell Is Pouring Gasoline On This Market Rally

0:00We cut rates yesterday, QE is back, the housing market's broken, and there's a massive tax refund check coming to working families in America. We're live today from the desk of Anthony Pompliano.

0:20Before we get into today's episode, I need your help. My goal is to get to 1 million subscribers on YouTube, but we currently have 40 ,759 of you. Hit the subscribe button and let's get into it today. Quantitative easing is back, baby. the Federal Reserve announced a 25 basis point cut yesterday, and that brings the federal funds rate down to 3.5 to 3.75%. The vote had three dissenters, two people. They thought we should have left rates exactly where they were, completely unchanged. But Fed Governor Stephen Myron, he's holding in there tough. He wanted a 50 basis point cut. Now, while the interest rate cut is important and people are going to talk about it, it was a consensus.

0:56Everyone across Wall Street thought that the central bank was going to reduce the cost of capital by 25 basis points. That's what they did. The big surprise though, coming out of that two-day meeting, what was that the Feds announced now that they are going to restart balance sheet expansion. They're going to do$40 billion in monthly treasury bill buys. QE's back, baby. My friends at Geiger Capital put it best. They reminded us that Ben Bernanke, he promised in 2008, QE was temporary and the Fed's balance sheet, it would soon be lower than when they started. Wrong. Take a look at this chart right here.

1:27As you can see, the Fed's balance sheet has continued to grow over time. And now Jerome Powell's telling us that it's time to go back higher, higher on the balance sheet and higher in asset prices. This entire situation is highly unusual. Creative Planning's Charlie Bellello, he outlines it and he says that stocks, all-time high. Home prices, all-time high. Gold, all-time high. Money supply, all-time high. National debt, all-time high. CPI inflation, 4 % a year since January 2020, two times the Fed's target. And the Fed, they cut rates again, and they'll start QE on Friday. But as I wrote earlier this week, multiple deflationary forces are headed for a collision with the U.S.

2:05economy. We've got AI, robotics, tariffs, and a surge in deportations. Each would be worth watching on their own, but they collectively create the perfect storm for the Fed to fail at monetary policy. If you add in the weakness in the job market, and it becomes clear why the Fed has to get interest rates lower. Frankly, they're not doing enough yet. So now that we know QE is coming back, and it's going to be fun, what will happen to asset prices? Now, first, you got to remember, when the Fed buys bonds, it pushes bond yields down and it encourages investors to move into riskier assets in search of higher returns.

2:36This liquidity wave, it's called, it makes borrowing cheaper, it boosts confidence and it raises demand across all the financial markets. The biggest beneficiaries of QE are almost always risk assets. Stocks, they tend to rise because future earnings are now discounted at lower rates and it makes companies appear more valuable. Bitcoin and other digital assets, they benefit because investors look for assets that outperform cash when the money supply expands. Real estate, hard assets, those go up because mortgages become cheaper and investors are chasing hard assets in that environment. And then long duration assets like tech stocks, growth companies, and venture-backed businesses, often they rise the most because their value depends on future cash flows and they become more attractive when rates fall.

3:18But that's all the good stuff. That's the positive view. What are the assets that are gonna suffer because of QE? One of the big losers should be the U.S. dollar. That tends to weaken when more dollars are created. And short-term cash-like investments, well, they offer lower yields and become less attractive relative to those risk assets that are going up. Now, traditional value stocks, commodities tied to economic stress, and defensive sectors, those usually lag because QE shifts investor appetite away from safety and towards growth and speculation. That's why everyone thinks it's so fun. Now, overall, QE is designed to inflate financial assets, and historically, it has done exactly that.

3:55This means that investors are about to be very, very happy. But I took my analysis of QE's impact one step further and I asked Sylvia, the AI CFO that we built, to explain how the return of QE should impact my personal portfolio. She told me that the rate cuts are highly favorable for my portfolio, particularly my private investments and crypto assets. She says that my open door position is also well positioned to benefit from the housing market recovery and that however, the Fed signal of fewer rate cuts ahead means that easy gains may be behind us. The key risk in my portfolio, extreme concentration in private investments.

4:29It makes me exceptionally sensitive to any Fed policy changes. Sylvia says that my portfolio is essentially a levered bet on lower rates. She says that it's worked out brilliantly so far, but it requires careful monitoring as the Fed slows its cutting pace in 2026. Now you can go and you can ask Sylvia to analyze your personal portfolio as well. Simply just go to cfosylvia.com, Check it out there. You can click on the link in the description. It's going to be very interesting to watch what happens from here. We know that rates are coming down. We know that the government is about to go right back into the market.

5:02The Fed's going to expand its balance sheet. Asset prices are going to go up. And people who are saving in dollars, they're going to put a big L on their forehead, and they're going to be losing. So let's see what happens in the coming months. We all got to be honest with each other. Nobody likes paying taxes. But the only thing about taxes that people like is tax refunds. when they get a check back from the government. And yesterday, Treasury Secretary Scott Besson, he confirmed that there is going to be about$100 to$150 billion in 2026 going out in tax refunds to Americans. He says that's about$1 ,000 to$2 ,000 per household.

5:38Take a listen. President Trump has closed the border. Two million people have gone home, so check on immigration. Bond market had the best year it's had since 2020. Interest rates are down, mortgage rates are down. We're starting to see life in the housing market and rental rates are down about 5%. I expect they'll be down 10 or 15 from the peak. And then three, inflation, we're working on that. The energy prices are down. Gasoline nationally is now below$3 a gallon. It's below$2 in a couple of states. So I think we're on a very good track on inflation. And I'm also the IRS commissioner as well as the treasury secretary.

6:19And I can see that the president's signature initiatives in the one big beautiful bill, and I tell you, he fought harder than anyone for these. No tax on tips, no tax on overtime, no tax on Social Security, auto-deductibility. That the bill was passed in July. Working Americans didn't change their withholding. so they're going to be getting very large refunds in the first quarter. So I think we're going to see$100,$150 billion of refunds, which could be between$1 ,000,$2 ,000 per household. Now, I don't know about you, but anytime I hear somebody saying that$1 ,000 to$2 ,000 per household is going to go back in the hands of working families, that's obviously not only going to be good, because families are going to be happy, but two, that's going to hit the economy.

7:11People are going to go buy things. They're going to spend money. It's going to drive GDP growth. So the idea of$100 to$150 billion in record-breaking tax refunds coming back to Americans, game on. It's no secret to anyone that the housing market is broken. We know that housing prices are way too high, people can't afford them, and frankly, it has taken the American dream and has pushed it further and further away from a lot of people. So Fed Chairman Jerome Powell, he was asked yesterday, But if you bring down interest rates like you're doing, can this help solve the housing problem? Here's what Powell had to say.

7:46I don't know that, you know, a 25 basis point decline in the federal funds rate is going to make much of a difference for people. You know, housing supply is low. Many people have very, very low, low, low rate mortgages from the pandemic period. And they kept refinancing and caught the really low. So it's expensive for them to move. And, you know, we're a ways away from that changing. Also, we're just we haven't built enough housing in the country for a long time. And so a lot of estimates suggest that we just need more housing of different kinds. So housing is going to be a problem. And, you know, really the tools to address it are we can we can raise and lower interest rates.

8:29But we don't really have the tools to address, you know, a secular housing shortage, a structural housing shortage. Now, I tend to agree with Powell here. Yes, bringing down rates should make homes a little bit more affordable, but it's kind of like bringing a water gun to a gunfight. It doesn't really make a big enough impact. The single most important thing is we've got to build more housing. And so if you look at it from a first principle standpoint, why can we not build housing? Well, it's because Americans are being held hostage by local city government. Those city governments create all sorts of different types of regulation that either make no sense or simply are to enrich the people who already own homes at the expense of the people who want to own one.

9:06And so if you want to actually fix the housing problem in America, the number one thing you can do is deregulate on a local level, allow people to build more homes. And if you build more homes and increase supply, then prices will start to crater. That's how you fix housing. Jerome Powell knows it. I know it. And anyone with half a brain knows it. And so deregulate at the local level, build homes, and we'll fix this problem. That's it for today's show. Thank you guys so much for watching. Please remember to subscribe on YouTube. We have just over 40 ,000 subscribers today. My goal, I'm laser focused.

9:36I want 1 million subscribers. So hit the button and I'll see you guys live tomorrow from the desk of Anthony Pompliano.