The New Regime's First Message

The Federal Reserve leaves interest rates on hold... Fed Chair Kevin Warsh's first test... Interest rates are moving higher across the globe... OpenAI's leaked financials show huge losses... The reason behind the IPO rush...

More of the same...

During its policy meeting this week (the first under new Chair Kevin Warsh), the Federal Reserve unanimously voted to keep the federal-funds rate in the range of 3.5% to 3.75%.

Today's policy statement was much shorter than those during former chair Jerome Powell's term – coming in at 130 words, versus 341 words for Powell's final meeting in April.

Warsh gave a briefer breakdown on recent economic developments. And the Fed removed the language showing that it had a "bias" toward easing interest rates and about committing to the dual mandate of price stability and maximum employment. Instead, the statement said: "The Committee will deliver price stability."

The Fed also released its quarterly Summary of Economic Projections ("SEP") today. The Fed raised its core inflation outlook for 2026 to 3.3% from 2.7%, for 2027 to 2.5% from 2.2%, and for 2028 to 2.1% from 2%.

As for economic growth, the Fed lowered its GDP growth outlook for 2026 to 2.2% from 2.4%, but kept its growth outlook the same in 2027, and raised it to 2.2% in 2028 from 2.1%.

In the closely watched "dot plot," where Fed presidents estimate where they see interest rates moving in the future, the Fed – on average – no longer sees a rate cut in 2026. In fact, 9 of the 18 Fed members see at least one rate hike this year.

Warsh is ready to make changes at the Fed...

In his statement, Warsh made one big announcement. He said he's establishing five different task forces to analyze how the Fed operates. The five task forces, which will include both Fed members and outside consultants, will seek to:

1. Improve communications between the Fed and the market. Warsh said he believes markets are more efficient when they react to data on their own, not reacting to how they think the Fed will respond. He also called for potential changes to the SEP.

2. Analyze the benefits and risks of the Fed keeping its "ample reserves" on the balance sheet to ensure liquidity.

3. Find potential new information sources and data gathering to give the Fed a clearer picture of the economy.

4. Analyze the pace and impact of technologies like AI on the Fed's dual mandate of maximum employment and price stability.

5. Better understand the drivers of inflation and, alongside the task force on data, find a more accurate way to measure inflation.

Warsh added that the start of a new tenure is the time to make changes. But we don't expect changes to how the Fed measures data or to its balance sheet anytime soon. Warsh said that these task forces will launch in the next few weeks, and will only begin returning some recommendations in the fall.

Of course, reporters also asked Warsh about inflation. He tried to play "dove" and not outright say that a rate hike is coming...

When asked about the dot plot, he said that the Fed presidents' submissions came in "pencil." He added that he didn't hear a lot of conviction from those who put down expectations for higher rates.

Still, even with Warsh trying to talk down inflation fears, markets tumbled this afternoon with fears that the next move for interest rates may be higher. The Fed is still in that "sticky" spot with higher inflation and lower growth.

The two-year Treasury yield spiked today, while all three U.S. indices sold off and held their losses throughout Warsh's press conference.

Whether Warsh likes it or not, interest rates are headed higher across the globe...

Last week, the European Central Bank ("ECB") hiked rates for the first time since 2023. And a member of the ECB's governing board said he anticipates at least one more hike as Europe battles an uptick in inflation.

On Tuesday, the Bank of Japan raised interest rates as well, marking its fifth hike since March 2024. The Bank of Japan's interest rate now sits at its highest level in more than 30 years.

With core inflation still well above the Fed's 2% target and a steady labor market, the Fed is also starting to lean towards higher rates – not lower ones.

Higher interest rates are a bad sign for the economy and the stock market. They ripple their way through the economy to fight inflation, creating higher rates on business loans, credit cards, and more. That makes it harder for unprofitable companies to borrow funds to fuel their growth.

As we wrote earlier this month, one of the main victims will be unprofitable tech companies. But the broader economy suffers, too.

The Chicago Fed's National Financial Conditions Index measures whether financial conditions are tight (higher interest rates) or loose (lower interest rates). As you can see in the chart below, right now, conditions are loose...

But every time we've seen a recession in the past 50 years, conditions have flipped from loose (a negative reading) to tight (a positive reading). Even the last two times conditions tightened significantly – 2015 and 2022 – led to sharp corrections and drawn-out bear markets.

That's the test that Warsh faces now. While the market is pricing in higher rates, investors (and the president) prefer lower rates and easier policy.

Meanwhile, a look at OpenAI's financials...

Yesterday, the Financial Times released AI startup OpenAI's audited financials for both 2024 and 2025. Last year, OpenAI brought in about $13 billion in revenue – more than triple its sales in 2024.

But spending surged alongside revenue...

Last year, OpenAI reported $34 billion in costs and expenses, up from $12.4 billion in 2024. Altogether, OpenAI's loss from operations grew to more than $20 billion last year from "only" about $9 billion in 2024.

Ed Zitron, CEO of media relations company EZPR, pointed out how bad the numbers look on his Substack...

The financial condition of OpenAI is deeply concerning. $38.53 billion in losses are astronomical, and far higher than most believed it would be. Losses also appear to be mounting year-over-year at a dramatic rate, and I'm not sure how this company finds a way toward any kind of sustainability or profitability.

With the losses getting larger each year, OpenAI has to raise capital. Back in March, it raised more than $120 billion in the private markets. And earlier this month, it filed with the Securities and Exchange Commission ("SEC") for an initial public offering ("IPO").

But, right now, the markets (private and public) care less about the financials and more about the story of AI.

As Stansberry Research Senior Analyst Gabe Marshank explained in an all-new, free presentation yesterday alongside Whitney Tilson, OpenAI's valuation has soared from its previous funding round a few months ago.

From Gabe...

When OpenAI raised $122 billion this year, the vast majority — $110 billion — came from just three companies: Amazon, Nvidia, and SoftBank...

[J]ust three companies, for which these investments are like a drop in the bucket, determined OpenAI is now worth $730 billion.

What's more, they also decided OpenAI was worth $230 billion more than it was just four months earlier when it raised money at a $500 billion valuation.

That's a roughly 50% increase in valuation in less than a year, and would make OpenAI one of the 20 largest companies in the U.S. based on market cap. All for a company that is seeing its losses balloon as it commits more and more money to buying chips and computing power.

There's a reason OpenAI is lining up an IPO right now...

According to Gabe, insiders are "cashing out." Now that private equity and venture capital have seen the value of their investments soar, they're locking in the gains. And they're passing the risk on to individual investors who have gotten caught up in the hype of seeing the private valuations climb higher.

You see, no matter how good a deal the financial media or investment banks try to make investing in these IPOs sound, you're likely not getting in at a good price. More from Gabe in yesterday's presentation...

Investors have the "opportunity" to buy the stock at a valuation maybe 15 or 20 times higher than the venture capitalists got just a few months ago.

That's why folks should avoid the fear of missing out ("FOMO"). As Whitney said during yesterday's presentation...

I expect both SpaceX and OpenAI to take a nosedive from their opening-day close prices within the subsequent 12 months. But I think OpenAI will be the ultimate loser.

I think OpenAI's stock falls 90% from its opening day close versus SpaceX "only" falling 70%.

Avoiding FOMO is even more important in the first days after an IPO, when retail investors rush in to buy the stock for the first time. We've seen that with SpaceX, which is up nearly 20% since it began trading on Friday.

Unfortunately, you may soon own shares of these stocks whether or not you invest in their IPOs. That's because a new financial rule could "fast track" these shares into your portfolio. In their presentation, Gabe and Whitney reveal what this rule change means for your portfolio... and how you can protect yourself. If you missed yesterday's presentation, we urge you to watch a replay right here.

New 52-week highs (as of 6/16/26): Altius Minerals (ALS.TO), Alpha Architect 1-3 Month Box Fund (BOXX), iShares MSCI Spain Fund (EWP), Franklin FTSE Japan Fund (FLJP), LXP Industrial Trust (LXP), Seabridge Gold (SA), State Street SPDR Portfolio S&P 500 Value Fund (SPYV), Twist Bioscience (TWST), and State Street Industrial Select Sector SPDR Fund (XLI).

In today's mailbag, feedback on our takes on the SpaceX IPO... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"I love you guys, but dang, enough already on not buying SpaceX. You can add one line to every daily, something like, 'We remain brutally opposed to buying SpaceX,' and then jump on to things we should buy instead!" – Subscriber Roy E.

Corey McLaughlin comment: Appreciate the note, Roy, and we'll take the suggestion. But we also have been writing about things to buy...

For example, Whitney Tilson and Gabe Marshank are telling folks about one important portfolio move to make "so you aren't left holding the bag" of the SpaceX IPO. You can learn more here.

And of course, existing paid subscribers to our publications and Stansberry Alliance members are getting more ideas from our variety of advisories on a daily, weekly, or monthly basis, as they always do.

All the best,

Nick Koziol
Baltimore, Maryland
June 17, 2026