RJ Hamster
The Fed Pauses Rate Cuts – But AI Wealth…
The Fed leaves rates unchanged… when we might get the next cut… consumer confidence plummets… but 401(k) wealth soars… how to be on the right side of this divide…
As I write on Wednesday afternoon, the Federal Reserve just wrapped up its January FOMC meeting. The decision went exactly as expected – no rate cut.
The Fed held its benchmark rate steady at 3.50% to 3.75%, marking the first pause after three straight cuts in the back half of last year.
Now, the real question wasn’t what the Fed would do today. It was what Fed Chair Jerome Powell would say about where we go from here. And on that note, Powell did what he does best…
Keep his cards close to the vest.
Wait and see…
In his press conference, Powell emphasized that the Fed is “well positioned” to wait and see how the economy evolves.
This is Fed talk for “we’re in no rush to cut rates again.” He called the current policy stance “loosely neutral” or “somewhat restrictive” – not the firmly restrictive posture we’ve seen in recent years.
Powell noted that the economy is “coming into 2026 on a firm footing,” with growth stronger than expected. He went on to say that the labor market has shown “some signs of stabilization,” despite job gains remaining low.
On inflation, the Fed Chair acknowledged it “remains somewhat elevated.” But he attributed much of the overshoot to tariffs pushing up goods prices. The good news is that he expects inflation to peak by mid-year before subsiding – assuming no major new tariffs are implemented.
As to the timing of the next cut coming, Powell wouldn’t bite – no hints when asked by reporters. Many of his favorite sidesteps showed up:
- The Fed will be “data dependent”
- Policy is “not on a preset course”
- Decisions will be made “meeting by meeting”
In the absence of more details, futures markets are pricing in June for when majority odds expect the next rate cut.
As I write Wednesday afternoon, the CME Group’s FedWatch Tool puts a 60.4% probability on at least a quarter-point cut by then.
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The takeaway for investors – and one warning flag for your radar
The Fed’s in pause mode – it’s that simple.
After cutting rates by 175 basis points since September 2024, Powell and company are taking a breather to see how the economy digests those moves.
Given that this was expected, we’re not seeing any real fireworks in stocks. All three indexes are flat as I write shortly after 3:00 pm ET.
The big move today is in precious metals, where gold is up nearly 6%, and silver has surged almost 10%.
But there is one Fed issue for your radar.
For this, let’s go to legendary investor Louis Navellier and this afternoon’s Flash Alert in Growth Investor:
The Federal Reserve did not cut rates today, and that was expected. But what caught my attention was the two dissenting votes…
What concerns me is the disconnect between the Fed’s stance and reality on the ground.
Just today, two high-profile companies announced 46,000 layoffs combined. Consumer confidence has also collapsed to its lowest level in 12 years.
Sooner or later, the Fed will have to acknowledge this
Louis is right to flag consumer confidence.
Yesterday, the Conference Board released its latest reading, showing a collapse to 84.5 – the lowest level since May 2014.
From Bloomberg:
After a slight improvement in December, confidence resumed its downward slide amid concerns about high prices and sluggish job growth…
In write-in responses to the survey, consumers often mentioned prices of oil, gas and groceries…
And this dovetails into our next story…
“It was the best of times, it was the worst of times”
Charles Dickens penned those words in 1859, but they could have been written about America today.
As Louis noted, consumer confidence just collapsed. Everyday Americans are worried about groceries, jobs, and making ends meet.
But click on a different link on Bloomberg– or any other financial website – and the narrative changes entirely…
While everyday Americans are feeling squeezed, the AI revolution is minting fortunes at a staggering pace.
In 2025 alone, America’s tech billionaires added more than $500 billion to their collective wealth, driven almost entirely by the AI boom.
And don’t make the mistake of thinking it’s just a billionaire party.
The stock market posted its third consecutive year of double-digit gains in 2025, with the S&P 500 up more than 16% and the Nasdaq climbing over 20%. This is goosing mom ‘n pop portfolios.
According to Fidelity, the average 401(k) balance hit a record $144,400 in the third quarter, up 9.1% from a year earlier. Meanwhile, the number of 401(k) millionaires surged to 654,000, up 10% from just the prior quarter. IRA millionaires jumped 11.5% to over 559,000.
These are regular Americans watching their retirement accounts and net worths race higher – “the best of times.”
But here’s the rub…
According to a Gallup poll, only about 62% of Americans own stock. That means 38% have zero exposure to the market’s historic run. So, while the AI revolution mints record investment wealth, millions of Americans watch from the sidelines, worried about their monthly budgets – “the worst of times.”
U.S. GDP details offer interesting color on this “tale of two” dynamic.
Real GDP expanded at 4.4% in Q3 2025 – a strong print. And as I write on Wednesday, the Atlanta Fed’s GDPNow model estimates Q4 will hit 5.4%.
How?
With so many Americans feeling squeezed and cutting back, how is the economy roaring?
The answer: AI infrastructure.
How AI is dethroning household spending
According to JPMorgan, AI-related capital spending contributed 1.1% to GDP growth in the first half of 2025 – more than the American consumer.
Think about that.
The AI infrastructure buildout is now a bigger driver of economic growth than household spending. Tech giants poured $437 billion into AI capital expenditures in 2025 – 61% more than in 2024.
So, we have robust GDP growth powered by datacenter construction… record wealth gains for the 62% of Americans who own stock… and plummeting consumer confidence among those worried about groceries and jobs.
It’s Dickens’ Paris and London – except it’s the same country, at the same time.
Now, there are multiple stories related to this that we want to investigate over the coming weeks. For example:
- Social polarization between the “haves” and “have nots”
- Legislation to tax the rich – basically wealth transfers
- Universal Basic Income
- Which sectors will thrive in this new economy
- Which sectors AI is most likely to render obsolete
But for the rest of this Digest, let’s zero in on how to hitch our wealth to the right side of this divide – today.
Let’s make this “the best of times”
We’ll start with our technology expert Luke Lango, editor of Early Stage Investor.
Luke has spent months analyzing what he calls the “6-Layer AI Bottleneck Stack” – the critical choke points in AI infrastructure where supply shortages are creating massive profit opportunities.
And right at the foundation sits Layer 1: Raw materials.
Here’s Luke:
You cannot print copper. You cannot code lithium. The physical inputs for this buildout are in short supply, to say the least.
His thesis is straightforward: When massive waves of capital chase scarce physical resources, prices go parabolic.
Case in point: We’re facing a 10-million-ton copper deficit over the next decade, according to S&P Global.
What’s new today is that our own government is driving much of this investment capital. Since July, Washington has taken equity stakes in five strategic companies – MP Materials, Intel, Lithium Americas, Trilogy Metals, and most recently, USA Rare Earth.
Every single one popped after the announcement. Some by triple digits.
According to Luke, this pattern isn’t over. Treasury Secretary Scott Bessent has signaled the administration has identified at least seven industries it wants to build up, with $7.5 billion earmarked specifically for critical strategic assets.
Luke’s tracking several raw materials plays positioned for government backing:
- Perpetua Resources (PPTA) – it controls one of America’s largest gold-antimony deposits
- MP Materials (MP) – the only U.S. rare earth miner at scale
- Standard Lithium (SLI) – it’s commercializing direct lithium extraction
- Centrus Energy (LEU) – the only U.S. producer of HALEU nuclear fuel
For Luke’s complete analysis of the opportunity in raw materials – plus the other five layers of the AI stack – click here to access his Genesis Mission research briefing .
Let’s dig deeper into one specific raw materials play that’s been minting money in recent weeks…
While Luke’s research covers all six layers of the AI infrastructure stack, let’s finish by zeroing in on a metal – and a trade – that’s sitting at the center of this buildout.
Copper.
We’ll do this with the help of veteran trader Jonathan Rose, editor of Divergence Trader.
Jonathan and his subscribers just had a massive win with copper miner BHP (BHP), the world’s largest diversified natural resources company. They locked in a nearly-3X return in 20 days on their BHP options trade.
I reached out to him yesterday to discuss the opportunity from here.
Jeff: Jonathan, you guys just had a big win with BHP, but I saw a trade alert that you’re taking profits. Does this mean the copper trade has topped out?
Jonathan: Not at all. This is a structural copper thesis, not a short-term trade.
Demand is being driven by AI infrastructure, grid upgrades, electrification, and reshoring, while supply remains constrained due to years of underinvestment, long mine lead times, and geopolitical concentration in Latin America.
We’re still bullish BHP, but when the market gives you a 3X in 20 days, it’s prudent to lock that in.
Jeff: So, what’s your timing advice for getting into a new copper trade from here?
Jonathan: Copper will pull back, and we are buyers on any pullback.
We traded BHP in November and December as well – we buy on every pullback. There’s not enough copper in the world.
The way to play it is through patience and positioning, not timing tops and bottoms.
Use volatility and pullbacks to build exposure, size appropriately, and express the view through either stock or options depending on risk tolerance and time horizon.
Jonathan’s approach makes sense given the structural tailwinds…
As we highlighted in the Digest recently, AI data centers require massive copper volumes for power distribution and cooling systems, yet according to MarketBeat, new mine supply takes 15+ years to come online.
The mismatch between explosive demand and constrained supply creates exactly the setup Jonathan’s positioning for.
For his specific trade recommendations on copper, click here to learn about joining him in Divergence Trader.
Wrapping up
This afternoon, the Fed punted on rate cuts.
But here’s the reality: those cuts matter far less to wealth generation than they did in past decades.
What matters now is AI infrastructure – and it’s creating two parallel Americas.
The divide isn’t between billionaires and everyone else. It’s between those with exposure to the AI buildout and those without.
If your portfolio is thin on exposure, this is your reminder.
Have a good evening,
Jeff Remsburg
