The 'Melt Up' Fuse Has Been Lit

Time to get ready for mania... Maybe this time without the 'crisis'... A big reason is interest rates... What could keep a lid on stocks... This Week on Wall Street: Catch the next doubles...

It's time to talk about the 'Melt Up'...

The benchmark S&P 500 Index, tech-heavy Nasdaq Composite Index, and Dow Jones Industrial Average are at all-time highs... And on Thursday, the small-cap Russell 2000 Index joined in (it's just slightly lower than its record today).

Meanwhile, thanks to the Federal Reserve's recent rate cut, interest rates are coming down... with the promise of more to come. The cost of dollars (in the short term, at least) is getting cheaper.

So it sure seems like a good time to consider whether the next market "Melt Up" is around the corner... when stocks will push higher to previously unforeseen heights and a blow-off top.

That's the idea Stansberry Research senior analyst Brett Eversole explored in the latest issue of True Wealth, published on Friday.

Brett says a Melt Up typically happens after some crisis inevitably leads to a policy response that triggers an upswing in stocks...

This cycle has repeated throughout history...

1. A small problem snowballs into a crisis...
2. The crisis triggers a major policy response...
3. Easy money sets the stage for a market mania.

For example, we saw a Melt Up after the start of the COVID-19 pandemic. We also saw one in the lead up to the late-90s dot-com bubble...

As Brett explained, "In July 1997, a butterfly flapped its wings in Thailand" when the Thai government devalued its currency. That led to a sequence of events where U.S. stocks fell 15% in two months the following year.

That led to a Fed-organized multi-bank bailout of the Long-Term Capital Management ("LTCM") hedge fund and to the central bank cutting interest rates... just the kind of rocket fuel that made for a Melt Up and market euphoria in 1999... and an inevitable bubble burst.

This time, the cycle might happen without a 'crisis'...

As Brett writes...

I don't expect a crisis. At least, I won't pretend I can predict one.

Things like the pandemic or the Thai baht devaluation leading to the blowup of LTCM are black swan events. By definition, that means you can't know they'll happen ahead of time.

Normally, we'd get a crisis to ignite the next Melt Up. That could still happen.

But today, we're in the unique setup where we might not need one.

A big reason for this is interest rates.

As we reported last week, the Fed announced a 25-basis-point rate cut – the first in nine months. And the central bank projected at least one, likely two, more cuts by the end of the year, with more "easing" in 2026.

Fed Chair Jerome Powell is attributing the moves to a weakening labor market. But it's hard to ignore the political backdrop of President Donald Trump repeatedly calling Powell "too late" throughout the year for not lowering interest rates until now.

Powell and the other 11 Fed voting members approved this rate cut and outlook while saying inflation will continue to run hot. By official measures, prices are already rising by more than 3% annualized. The Fed projects that will continue.

Still, the market expects more rate cuts to come...

The "coming power shift" at the Fed that we wrote about a few months ago is going on now.

Powell's days as Fed chair are numbered. His term is up in May, and there's a high likelihood that Trump will replace him with someone agreeable to lower rates. That means the return of "easier money." As Brett wrote...

Powell still seems resistant to Trump's demands overall. He'll lean on the data to determine whether the Fed should cut rates further.

But it's darn rare for the Fed to cut rates just once. Cuts tend to come in batches. And the market agrees...

According to the CME FedWatch tool – which uses the futures market to predict the Fed's upcoming moves – traders expect two more cuts by year-end. And we can expect even more in 2026.

If more rate cuts play out, they could juice a housing market that has been frozen for several years. And they could turn the AI boom into a speculative frenzy where "all rationality will go out the window." As Brett writes...

That kind of change will overheat the economy and the market. It'll ensure we end up with a more painful bust... eventually. But in the meantime, it will create a Melt Up in stocks.

If these events play out, the Melt Up playbook could skip a step...

Remember, it usually goes like this: A small problem grows into a crisis... which necessitates a policy response... and leads to a market Melt Up.

But the easy money is what really matters. That's what creates the Melt Up. And that's a sure thing if Trump gets his way on interest rates.

If Brett is right, the risk to investors isn't a market crash... It's being underinvested when the next Melt Up takes off. So Brett recommended two ways his subscribers can set themselves up to profit. Again, existing subscribers and Stansberry Alliance members can read the issue here.

Now, we might not see a straight shot higher...

First off, as Brett acknowledged, a crisis could very well happen... and lead to a conventional Melt Up scenario.

As I (Corey McLaughlin) wrote earlier this month, we may be in the "1997" of today, at least when it comes to burgeoning AI technology and investment. So keep in mind what happened back then... The S&P 500 fell nearly 20% in 1998, amid the Russian government default triggered by falling oil prices... which led to LTCM's problems, "crisis," and a Fed rescue.

So we could see volatility ahead...

That's what our Ten Stock Trader editor Greg Diamond is preparing for, as he explained in his Weekly Market Outlook today. Greg shared several sectors that tell him folks should be "patient" right now and not get too bullish.

Greg also highlighted that Treasury yields have been rising since the Fed cut rates last week and projected more cuts ahead. As Greg wrote...

As you know, the Fed cut its federal-funds rate last week. But look what happened to the 30-year Treasury yield...

Everyone was expecting that when the Fed cut rates, all interest rates would fall. Instead, the Treasury yield is rallying and bonds are falling.

I'm not going to worry about why this could be happening. It is happening. It's something to keep an eye on.

Yes, it is.

We saw something similar happen during this time last year. After the Fed cut rates 50 basis points last September, longer-term yields took off. After two more smaller cuts, the central bank hit "pause" – and projected higher inflation and interest rates for 2025.

That kept a lid on stock prices for a few months. Tech stocks and a lot of AI names hit a near-term top in December 2024... recovered in February 2025... and then led the market down as tariff concerns emerged in the spring.

If bond yields keep moving higher again, it could signal that investors are expecting longer-term inflation (again), which could lead to a breather in this ongoing bull market. We'll keep an eye on it... while readying for the next Melt Up.

New 52-week highs (as of 9/19/25): AbbVie (ABBV), Agnico Eagle Mines (AEM), Allegion (ALLE), Altius Minerals (ALS.TO), Valterra Platinum (ANGPY), ASML (ASML), Atour Lifestyle (ATAT), Barrick Mining (B), Alpha Architect 1-3 Month Box Fund (BOXX), Ciena (CIEN), Western Asset Emerging Markets Debt Fund (EMD), Franco-Nevada (FNV), VanEck Gold Miners Fund (GDX), VanEck Junior Gold Miners Fund (GDXJ), Alphabet (GOOGL), Houlihan Lokey (HLI), iShares Convertible Bond Fund (ICVT), iShares U.S. Aerospace & Defense Fund (ITA), JPMorgan Chase (JPM), Kinross Gold (KGC), Grand Canyon Education (LOPE), Lynas Rare Earths (LYSDY), Newmont (NEM), OR Royalties (OR), Invesco WilderHill Clean Energy Fund (PBW), Construction Partners (ROAD), Roku (ROKU), ProShares Ultra Technology (ROM), iShares Silver Trust (SLV), SSR Mining (SSRM), Torex Gold Resources (TORXF), Global X Uranium Fund (URA), and Vanguard S&P 500 Fund (VOO).

In today's mailbag, feedback on Dan Ferris' latest Friday essay on a "contradictory state of mind"... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"I own a company up in Canada and we just got two humanoids from China and we should have them working on our line in the next 60 days. I think the real story most people are missing in the markets is when in the next few years these things become widely more available our unemployment systems and society will be structurally different... The counterbalance is a negative effect on society. This is a different technology than any other. Also, the advancements happening in AI and the power structure filled out are going to be vastly overdone..." – Subscriber Salman E.

"OMG, references to Wayne and Garth and Alfred E. Neumann in the same column. Takes me back, all right..." – Subscriber Sherwin R.

All the best,

Corey McLaughlin
Baltimore, Maryland
September 22, 2025