The Federal Reserve Matters Less Than You Think
The Weekend Edition is pulled from the daily Stansberry Digest.
"You shouldn't know they exist, quite frankly"...
That's what Bank of America CEO Brian Moynihan said recently about the Federal Reserve.
Moynihan discussed the central bank in a CBS interview during the sleepy week between Christmas and New Year's. He said that while the central bank has a big role in "stabilizing the economy," there is "too much fascination with the Fed."
As Moynihan put it...
We're a country that's driven by the private sector, by what people do, and in the businesses and the companies, small companies and large companies, medium-sized companies, and entrepreneurs and doctors and lawyers – all these people drive our economy. The idea that we are, like, hanging on the thread by the Fed moving rates 25 basis points, it seems to me we've gotten out of whack.
He approves of the Fed coming to the "rescue" in cases like the financial crisis and the onset of the pandemic. Otherwise, the Bank of America head said it shouldn't be worth our attention at all.
We agree.
Imagine if every investor could forget about the Fed, or any government institution for that matter. They could just focus on which people or companies were creating the best value for others.
Investing would become pretty straightforward. And it can be that simple, if you focus on just that over the long run.
But plenty of people don't. They might be investors at Wall Street firms looking to hit quarterly or annual benchmarks... institutional investment committees with varied interests... analysts who just want to be "right"... or individual investors chasing quick gains with leverage.
They're not trying to exclusively build long-term wealth with great companies. They're betting on what the Fed will do to "help" or "hurt" the economy by monkeying with interest rates and policy.
Another Fed official was in the headlines this week...
This one is Stephen Miran, President Donald Trump's hand-picked choice to be a voting Fed member. On Tuesday, Miran said on the Fox Business Network...
I think policy is clearly restrictive and holding the economy back... I think that well over 100 basis points of cuts are going to be justified this year.
Miran's term as a Fed governor ends January 31. His late-2025 appointment to replace Adriana Kugler was meant to last only four months... But his words in context signal what the market is expecting from the central bank this year: falling interest rates.
Current Fed Chair Jerome Powell is all but officially a goner. Trump has made no secret of his desire to replace him with a "low-interest person."
But even with his term as chair set to expire in May, Powell's term as a Fed governor still lasts through January 2028. If Powell stays on, he could prevent Trump's appointees from having a majority on the seven-member board.
Here's another consideration: Everyone assumes the next Fed chair will bend to Trump's wishes rather than make policy decisions independent from the president.
But Moynihan also cautioned against this in the CBS interview, saying...
The market will punish people if we don't have an independent Fed, and everybody knows that.
Interest Rates Can Stray From Fed Policy
Remember, the Fed doesn't control all interest rates...
It only sets the federal-funds rate, the overnight lending rate for banks. This rate can influence other interest rates... but it doesn't always.
For instance, the central bank began cutting rates in September 2024. But mortgage rates and long-term Treasury yields rose in response because the market was concerned about inflation.
As 2026 begins, Ten Stock Trader editor and technical analyst Greg Diamond says he'll once again be closely tracking rates...
The 30-year interest rate was in a strong uptrend from its COVID lows before peaking in 2023. Since then, it has largely gone sideways...
The massive headwind of rising rates in 2022 and early 2023 has softened. On the whole, rates being mostly range bound is good for stocks. But what comes next?
If it weren't for the record-long partial government shutdown in the second half of 2025, we might have the answer already. But as Greg said...
A lot of federal economic data was delayed. And as we see revisions to that data, bond traders might play "catch up" and adjust for this incoming data. What that will look like is anybody's guess. But it's why we're paying attention to rates.
Perhaps the labor market will turn around from here. Perhaps the economy will do better than many expect. Maybe rates will grind higher, but stocks won't react that negatively. That's one scenario to consider.
Another possibility is inflation coming back in a big way. If that happens, rates could move sharply higher into the April/May timeframe (see the solid blue swing line in the chart). Then bonds and stocks could fall as a result.
This data will give us a clue to how real businesses and the economy are performing. We'll keep an eye on these "real" indicators as the Fed's leadership changes over.
The U.S. labor market in general has been gradually weakening for at least a year. You could even argue that some parts of the economy, like manufacturing, are in recession. Still, last year's third-quarter GDP reportedly grew 4.3%.
As Greg mentioned, maybe everything will go perfectly. Maybe lower rates will stabilize the labor market without letting inflation get out of control. That would mean a smooth ride in the stock market.
But if that doesn't happen, investors should brace for volatility.
None of this means you should buy stocks hand over fist or flee the market. But the Fed and interest rates will drive many short-term market moves throughout the year.
The Signal That Could Shape Your Entire 2026
On Thursday, our friend Marc Chaikin – a Wall Street legend and the founder of our corporate affiliate Chaikin Analytics – shared his 2026 outlook publicly for the first time.
He detailed the "January trigger," a market indicator with 100% accuracy since 1950... and how this signal could "dictate your entire 2026" in your portfolio.
Based on this trigger, he shared the single worst money mistake you could make in the coming days... and the one urgent move you should make before January 14.
Plus, as he does each year, Marc identified his Top 10 and Bottom 10 shortlists of stocks for the year ahead. He even gave away two free stock recommendations – one stock to buy and another to avoid at all costs as 2026 begins.
Good investing,
Corey McLaughlin
Editor's note: Marc Chaikin has just finished his 2026 battle plan with the help of his Power Gauge. If you know how to use his system, he says, "There's always a bull market somewhere." Last year, it flagged 80% of the top 50 stocks... as it has every year since 2016. And using this powerful tool, Marc just released his Top 10 stocks list for 2026.