This is why everyone is wrong about what will happen at the Fed

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On September 16, 1992, the British government was fighting for its financial life.

For months, currency traders have been circling the British pound. The pound was pegged to European currencies at a rate that most people thought was untenable. The British economy was weakening. Inflation was high due to economic growth in Europe after the fall of the Berlin Wall.

The math didn’t work. And one man – George Soros – decided to bet on it.

What followed was one of the most exciting days in the history of global finance.

Soros sold $10 billion worth of British pounds. The Bank of England fought back – buying pounds by the billions, and raising interest rates twice – from 10% to 12%, then to 15% – in a single day in a desperate attempt to defend the currency.

But it didn’t work. By evening, it was over.

The British government surrendered. It unpegged the pound from Europe and later began a series of cuts, bringing the interest rate down to 6% by early 1993, sparking an economic recovery.

As for Soros, he made more than a billion dollars in one day. This date has gone down in history as Black Wednesday.

Most people know this story. Fewer people knew who was in the room.

As you can see, two men connected to this trade are about to take charge of US monetary and fiscal policy simultaneously.

I’m talking, of course, about Treasury Secretary Scott Bescent and Kevin Warsh, the next Fed chairman.

I don’t think most investors understand what that means for their portfolios right now.

I do. I’ve been at this for nearly five decades. I’ve seen every market cycle and I’ve seen every Federal Reserve regime come and go.

per day Market 360I’ll explain the relationship between Besant and Warsh – and why I think it’s good news for investors. I will also give you my predictions for the next step the Fed will take and how it will take its stance before everyone realizes it.

I’ll also go into more detail Fed shock It happened this Wednesday, May 13 at 1 PM ESTwhere I’ll share my most convinced picks and a free stock recommendation just for attendees. (Click here to reserve your place now.)

What the market is missing

Our Chancellor of the Exchequer – Scott Besent – was part of the team that did the Bank of England transactions for Soros.

Kevin Warsh comes from the same world. After leaving the Fed in 2011, he went to work for Stanley Druckenmiller, the trader who actually executed the Black Wednesday trades. Druckenmiller and Bessent have remained close ever since.

These two men know each other, trust each other, and seem to operate from a common framework.

Warsh has been a vocal critic of the Fed for years. He doesn’t like quantitative easing—money printing that has swelled the Fed’s balance sheet to nearly $7 trillion. But he also believes that productivity gains driven by AI are fundamentally deflationary (meaning they will lower prices).

This means he believes the economy can absorb stronger interest rate cuts than older models suggest.

Meanwhile, Besant is one of the most capable economic minds in Washington. He has publicly called for cuts of 150 basis points (1.5%).

He is also fully aware of the mounting debt problems in the United States. I believe he and Warsh will work together to lower interest rates, unleash growth, and tackle debt.

How can we benefit from the new Fed system?

I believe the new Fed regime will cut interest rates more aggressively than the market expects.

I’ve seen this happen four times before.

The main beneficiaries of interest rate cuts will be smaller, domestically focused companies, which are more sensitive to borrowing costs and benefit most from economic growth in the United States.

Every time the Fed opened a sustained cycle of interest rate cuts, a specific group of smaller stocks posted extraordinary gains:

• The Fed’s pivot in 1995: Cisco +2,062%. Rise +2,800%. America Online +2,900%.
• Interest rate cuts in 2001: Frontline +1,513%. Hansen Natural +1.125%.
• Interest rate cuts in 2008: Lithia Motors +475%. IPG Photonics +665%.
• Covid Sale 2020: Mara Holdings +1,800%. Moderna +1,200%.

Various stocks. Different sectors. Same dynamic every time.

Now, I realize there is a war going on. I know inflation is still a factor. I know the Fed is moving slower than anyone would like. This won’t happen overnight. Warsh will need to build consensus on a 12-person committee.

But the trend is clear. The players are in their places. History says this is the way things work.

Exclusion list

My Stock Grader system has actually been running throughout this early phase of the cutting cycle – and has flagged 53 stocks that are showing the same early signals I described in each previous window.

Strong fundamentals. Building institutional buying pressure. Consistent top rankings month after month.

I call it Exclusion list. These are stocks that are too small for Wall Street to touch. But it’s not too small for my system – and it’s not too small for yours.

this Wednesday, May 13 at 1 PM ESTI’ll be going live to share my most convinced picks from that list. I think these are the names that are best positioned for what’s to come. I will also be offering a free stock recommendation just for attendees.

Click here to reserve your place now. I will see you there.

Louis Navellier

editor, Market 360