The New Fed Chair will Shock Markets!

Añadido: 2026-05-23

[00:00:00]After eight years, we've got a new Federal Reserve chairman, Kevin Walsh, and he's been weaponizing AI to slash interest rates aggressively. So, what does this mean for the markets? What does this mean for your portfolio? Let's find out.

[00:00:23]US stock markets continue to make new highs almost every other week and the S&P 500 is up over 8% year to date. My portfolio is doing pretty well after suffering a bit of a draw down early part of the year. Uh my portfolio is up 16% year to date. In fact, in the last month where they say sell in May and go away, uh the portfolio's up 4.51% just in the last one month. So what's the reason markets have been surging?

[00:00:51]Well, there are two main reasons. Number one, corporate earnings. Earnings have been much stronger than expected. The second reason why markets are surging higher is because of the new fat chair that's just been sworn in, Kevin Walsh.

[00:01:03]As you guys know, Chairman Powell has been the Federal Reserve chairman since 2018 when uh Trump first appointed him and he's been serving for the last eight years. But in Trump's second term, as you know, Trump has been constantly uh berating him, insulting him, saying that he's he's a too late. Powell is an idiot. Why? Because Trump wants power or wanted power to cut interest rates, but Powell refused to cut interest rates because his argument is that if you cut interest rates, then inflation is going to come back and we're all going to die.

[00:01:33]Uh and that's why Trump has now appointed Kevin Walsh to take over to do his bidding. Although he just said, I want to be independent. Yeah. Right.

[00:01:44]Okay. Anyway, so is this a big deal for markets? I think so. And let me explain why. So, uh, before Walsh was sworn in, he's been doing a lot of interviews on TV and he has been setting up and framing the public uh for aggressive interest rate cuts and he has been arguing for aggressive interest rate cuts. Now, you may say, how can he cut interest rates when inflation is still very high, when the stock market's at all-time high? Is is he is he crazy?

[00:02:15]Well, well, let me explain uh his argument. So we know that traditionally uh the Fed policy goes according to when there's high economic growth. High growth could create inflation. So the Fed needs to hold interest rates or raise interest rates to cool inflation.

[00:02:33]So that's the traditional economic model. Now what Walsh is now saying is that uh the rules have changed. We're going to uh have a new policy shift in the Fed. And his argument is that this time is different because this time we have got the AI revolution, the AI productivity boom where now companies can produce more goods with less input with less employees with less uh resources they can produce more. So that increases companies productivity and that would reduce overheads drastically for companies reduce company's cost and hence companies can eventually price their products lower.

[00:03:14]So this would lead to a structural deflation. He believes that in this new world the economy can grow very strongly without inflation and he expects a structural decline in prices that's going to come soon. So, might as well preemptive preemptively cut interest rates now before prices come down. But the problem is currently prices have not yet come down. Currently inflation is still very sticky. The recent CPI, PPI coming up uh coming in higher than expected. But what he's saying is that but all these inflation indicators are looking at the past. They're all lagging indicators. We need to be preemptive. We need to cut interest rates right now before prices start coming down. So, if he really follows through on what he's saying and he really starts cutting interest rates really soon, what's going to happen to the stock market, which stocks are going to be winners and which stocks are going to be losers? Well, let's take a look at what could possibly happen. So, first of all, who are the winners? So, if he cuts interest rates aggressively, growth stocks, especially tech stocks, are going to be huge winners, right? Because lower interest rates plus surging AI profit margins will be a massive tailwind for these secular growth companies. So companies like your usual suspects, right? Your Nvidia, your Google, your Palanteer, your Palo Alto, these will continue to go up like crazy if he cuts interest rates, but which would could be the losing stocks. Now, if he cuts interest rates, but inflation doesn't go down as fast as he expects and inflation stays high, then deep cyclical stocks would be in the danger zone. Now what are deep cyclical stocks? These are companies in manufacturing, in logistics, in transportation, like airlines, like cruisers, uh consumer stable companies.

[00:05:03]They would be in the higher risk category. Why? Because these companies might get squeezed by by current energy and commodity cost. So these companies have a lot of physical cost, commodity, energy cost. So these costs go up because of inflation.

[00:05:19]But they are not able to benefit from the AI productivity benefits as fast. So their profit margins could be crushed.

[00:05:28]So companies like Federal Express, UPS, uh Delta Airlines, in fact, all the airlines would be in big trouble, which I'm wondering why uh Burkshshire Heatherway just bought Delta Airlines.

[00:05:39]Again, I can't understand why. uh Kroger which is a supermarket chain, Dowo Chemical, uh automobile manufacturers be really hard hit especially like Ford and General Motors the traditional car makers um you know physical retail outlets like Target and Carnival Cruise Lines all this could be negatively affected by surging inflation.

[00:06:00]Now how about bonds? Um as we know long-term bonds have continued to go down. If you look at like the TLT which is the long-term bond ETF, it's been crashing. Now, if this happens, it's going to get worse. Okay? So, this would be actually very bearish for long-term bonds, especially long-term treasury bonds with long duration of 8 years or more. Why? Because if the bond market thinks that the Federal Reserve is cutting interest rates too fast into an energy crisis, into higher inflation, then long-term yields will continue spiking. So long-term yields go up mean long-term bond prices will continue going down like again TLT. This will again be very bearish for long-term bonds. But for short-term bonds and medium-term bonds which are bonds with duration of 5 years or less, it is actually going to be bullish. Why?

[00:06:56]Because they will be positioned to capture the upside of the rate cuts.

[00:07:01]Because remember the Fed cannot control the long end of the curve. the the Fed doesn't control the long-term interest rates. The Fed only controls the short-term interest rates, the Fed funds rates. So shorter term bonds like one-year bonds, two-year bonds, 5year bonds, they are more in sync with the Fed funds rates. So these will be positioned to cut capture the upside of the rate cuts. They will rise in price, yields will fall uh without being totally exposed to the longerterm inflation traps. So as investors, what does this mean for our portfolios? As we know, there have been a lot of talk in the markets that the market is expensive. It's a bubble. We should stay out of the market. And of course, we know that Buffett, of course, he's retired, but Bert Heatherway is sitting on 400 billion in cash on the sidelines.

[00:07:48]And many people are looking at that and following that, you know, holding cash on the sidelines, not daring to go into the market or getting out of the market.

[00:07:56]So in this new scenario with Wash coming in, what does it mean for these people?

[00:08:00]So I have to admit that yes, if you stay in the market, there is risk. There's always risk of staying in a market, especially if you are in stocks that are very overvalued. But again, like I said, not all stocks are overvalued. In this market of all-time highs, there are stocks that are actually very very undervalued. And of course, you can find them easily by doing your research with like stock oracle, which I use in less than a few minutes. You can check the intrinsic value. you can track uh all these type of stocks and I'll run you through some examples later on. Okay.

[00:08:33]So, like I said, there is a risk of staying invested in an all-time high market. But if you ask me with wash coming in, I think there's even bigger risk of staying fully in cash. I think there's an even bigger risk of not being in the market. And that's why for me I I stay in the markets. All right? Why? The reason is now think about it. There are two scenarios here. Scenario number one is that Kevin Walsh is right about his new uh theory, right? So, if he's right and he comes in and he cuts interest rates, what's going to happen? Stocks will go to the moon and inflation will also come down as he says. Okay. So, in this scenario, who wins? Everybody wins because consumers get lower prices. Yay.

[00:09:22]the economy grows rapidly and investors who invest in stocks will build massive wealth. Everyone wins. That's the first scenario. But scenario number two, what if he's wrong? What if Kevin Walsh is wrong and he cuts interest rates aggressively but prematurely?

[00:09:42]So interest rates come down but because of the ongoing geopolitical tensions in Iran because of the high oil prices inflation surges up like crazy. So in this scenario stocks will still go up but inflation will go up as well. So in this case who will win? Asset owners. People who own assets like you own stocks, you own real estate, you will win because you will see the asset values pump up shielding your wealth from inflation eroding cash. But in this scenario, anyone sitting on the sidelines in cash will suffer heavily because your purchasing power will be wiped out.

[00:10:29]So what I'm saying is that in this new era whichever happens it pays to be an asset owner. It pays to be invested in the stock market. Now having said that of course be careful in in the market.

[00:10:44]There are stocks that are extremely overpriced. There are stocks that are in a freaking bubble right now. You know and all people are chasing some of these these these shiny new objects. You know, if you're in them, you got to be careful because once the market corrects, these could drop significantly. But if you're holding great companies that are still undervalued or fairly valued, then that's a safer way to play it. So, in this all-time high market, are there still stocks that are undervalued or fairly priced? There are actually quite a number and in fact, many of them are very high quality compounders. Let me give you a few examples and you can also check very quickly on stock oracle. Oh, by the way, in the next uh month or so, we'll be launching the stock oracle uh stock screener and the stock heat map that will allow you to find stocks very very quickly. And of course, by the end of the year, we're also going to have the Singapore listed and the China Hong Kong listed stocks on stock oracle as well. So, that's all uh going to be rolled out really soon. Really excited for that. Yeah. So, some examples, Microsoft, such an obvious example.

[00:11:49]Microsoft is right now actually very very undervalued. If you take a look at uh Microsoft, the intrinsic value currently is $553 and it's currently selling at $418. So yeah, you have got good companies that are pretty cheap, right? On if you look at PE ratio by itself, which is not always meaningful, but the forward PE is at 21 times when the company is growing at uh 19% for the next 3 to 5 years. You can see it's very ranked very high on predictability, on profitability, on growth, medium, very strong white economic mode. Uh high financial strength and pretty good valuation right now. And if you look at the chart, all right, it looks like, you know, very nice wave up, wave down, wave up, wave down. Looks like, you know, it's it could be rebounding back up after a nice uh double bottom pattern. Again, there's no guarantees it's going to go up right now. uh but the charts show a pretty good probability and again this is not financial advice for you to buy this this just sharing with you uh what I own and what I've been adding and what I see from an educational perspective platforms is another good example of a company that announced solid earnings but the share price has not search in accordance with the the valuation so Meta remains very undervalued uh intrinsic value $95 currently selling at $610 So very undervalued right now and so these are the stocks that I continue to hold. I continue to add to and if you look at the charts you can see again it's making a very nice retracement more or less consolidating right now uh before the eventual push up. Um now beyond the MAX 7 are there also companies that undervalued? Yeah. For example, if you look at S&P Global, which is a uh finance company, financial analytics and ratings agency, and they also own the S&P brand. So, every time you look at anything with S&P 500, Dow Jones, uh they own these brands. So, they get royalties every time an ETF, every time a fund uh uses their brands, you know. So again, this has actually been uh going through a bit of retracement. It's been a bit sideways recently, but the under uh underlying fundamentals have been growing pretty significantly. Um intrinsic value is $515, currently selling at $417.

[00:14:17]And that's why again a lot of super investors have actually been uh purchasing this in their recent uh filings, right? Another example is Mastercard. Mastercard and Visa.

[00:14:28]Although Visa is slightly overvalued, Mastercard, which is actually growing stronger than Visa, is actually quite undervalued right now. Intrinsic value is 561, currently selling at 498 and is growing at about 15% uh projected growth for the next 3 to 5 years. So again, just to name a few. All right. Now, how about stocks that you own that are now overvalued? You know, I've got students in my community asking me, Adam, uh, some of the stocks are now overvalued. Like I think Google is is a bit overvalued right now. Google is one of my biggest holdings. Let me just double check. I don't remember everything offhand, but yeah, Google is uh slightly overvalued. You can see intrinsic value is 298 currently selling at 382. So, uh, 382 minus 298, uh, is about 28% overvalued. So, people have been asking me, Adam, is about 30% overvalued. Uh, should I sell? Well, it really depends what's your objective. If you are a short-term swing trader or you need the money for something else, then yeah, nothing wrong with selling right now. It is overvalued. But for someone like me, I'm not selling because I don't need the money and I look at it uh where it's going to be in the next 10 20 years and no doubt it's going to keep compounding in value. So um I don't sell it just because it's slightly overvalued. You know I would only consider selling a great company only if it is grossly overvalued. Grossly like if it's more than 100% overvalued then yeah and start to scale out. So in other words, if uh Google today was at $600, which is more than double the intrinsic value, then yeah, I may start to sell a bit, right?

[00:16:21]But 30% overvalued, you know, I won't sell just because of that because I want to hold it as a long-term compounder. You know, another example would be the cyber security stocks that were actually left for dead about a few weeks ago and then now they've searched back when people realize that hey, we need cyber security, right? Duh. Of course. So, I own Palo Alto, I own Foret, I own Crowdstrike and recently the share price has been like going up uh very very steeply. So, if you look at Palo Alto right now, I think Palo Alto is currently overvalued already. Right.

[00:16:56]Yeah, I'm right. So intrinsic value 199 is currently at 260. It is overvalued and you can see the the PRICE ACTION GOING UP right it's like you know going up very steeply. So people say, "Adam, it's like overextended, overbought, overvalued. Should I sell?" And I said, "It depends. If you need the money, nothing wrong with selling here, right?

[00:17:17]If you need the money to reinvest in something else, you need the money for your personal expenses, you need to raise cash, nothing wrong. But for me, Palo Alto is one of my uh bigger holdings. I ain't selling shit." Okay?

[00:17:31]Why? Because I don't need the money. Uh and if I sell it, I have to find another equally good company, you know? So I I keep holding it. Even if it goes down temporarily because it's overextended over price in the short term, I'm fine because I know in the long run the intrinsic value at 199 will continue to grow over the long run, you know. So that's why I keep saying that, you know, I never give advice to people. I never advise people to buy. I never advise people to sell. And you should never listen to other people's advice. Why?

[00:18:05]Because we all have different objectives. Some of you are long-term like me. I look where my portfolio will be in 10 20 years. Some of you are more shortterm. Um you know so we all have different objectives. So one size cannot fit all. You may need the cash so you sell. I don't need the cash. I'm not selling. Um that's why I never give advice. You know the only thing I do is I share with my students what I'm doing, why I'm doing it. I share my research, but then I say the decision to buy and sell is your decision based on your unique circumstances. All right? Just because I sell something or I buy something doesn't mean that you should follow me. All right? But I'll explain why I'm doing it. And if you're in the same situation, then yeah, sell or or whatever it is. Yeah. Okay. So, that's it. That's what I want to share in this video. I hope it's been useful. And like I said, it's important to stay invested in the right companies. Time in the markets is more important than trying to time the markets. You know, people who attempted to time the markets early this year uh in in the early part of the year when the markets drop and they panic and they sold and they're staying in cash are sucking their thumb looking at the markets going up every day like and they're holding cash, their cash is losing value. and worse, people who shorted the market listening to the profits of doom have been getting slaughtered, right? So, we don't want to do that. We want to grow our wealth in a lowrisk, stress-free way.

[00:19:39]Okay, so thank you for listening.

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