The Peter Zeihan Podcast Series - Markets Drop After Fed Rate Cut || Peter Zeihan

Episode Date: November 7, 2025

The Fed just cut interest rates by 0.25%. Instead of the desired boost to a slowing US economy, we ended up with a market drop.Join the Patreon here: https://www.patreon.com/PeterZeihanFull Newsletter: https://bit.ly/4hzmS5K

Hey everybody, Peter Zion here coming to you from Colorado. And the news is that the Federal Reserve has just dropped interest rates by one quarter of 1%. That means it's a little bit cheaper now to borrow money and the ideas it's supposed to boost the economy. But instead, the markets have dropped because the, well, we're in shutdown. So most government statistics are offline. Federal Reserve has its own system that is self-funded. Totally different topic there. And they seem concerned enough that they've decided to do what's, historically speaking, a relatively large cut. So what's going on? What is it the Fed sees? How is it going to impact? All that good stuff. So number one, the economy is absolutely slowing. We've got a lot of stress in the job market. And most importantly,

manufacturing has been dropping. One of the many impacts of the Trump's tariffs has kind of generated this background of ambient chaos. We've had over 540 policy changes on tariffs since January 20. and they keep stacking up. And so businesses don't know what the rules are going to be tomorrow, much less a year from now. And that tends to discourage investment decisions. And we've certainly seen that in the data until the point that the shutdown shut off the data. We also have an administration and a Congress that really seems in no hurry to get things back online.

And so we're going to have to wait until we have something very bad that happens, whether that is, for example, many, many, many people stranded during the Thanksgiving holidays or a general problem with health care because we have announcements on the 1st of November as to what everyone's premiums are going to be. Lots of things are going to have to get worse before there's any chance of them getting better. And that is now reflecting in the general ambient chaos that is policymaking out of Washington and specifically out of this administration. So that's kind of baked in.

The bigger problem, much bigger than that, is what's going on with capital supplies. You see, as a rule, most private capital is generated by people who are, in their 50s and early 60s when their kids have moved out and they're preparing for retirement. Their height of their earnings, but their expenses have gone down. And that surplus is put into the retirement accounts. It's about 70% of total private capital. And for the American baby buber cadre, that's about $76 trillion. A lot of cash.

Well, when you retire, you go into a more conservative portfolio with more cash and more property and more T-bills and less stocks and bonds. There's a thousand ways that's wrong, but all collectively, they're like very, very small. That's just the general trend. This is what people do as they get older and retire. 80% of America's baby boomers have now retired. So about 80% of those finances have been turned into more conservative investments. And we're moving into an environment where things like gooseing interest rates down in order to increase lending doesn't work because the money just isn't available. And the only other sources of money that are available are, number one,

foreign money, where other countries have been dealing with us faster than the United States. has, so it's seeking someplace that's more productive, you can only take that so far, especially in a high tariff environment where your economy is actively discouraging the mobilization of capital. And the second issue is if the Federal Reserve just massively expands the money supply, which is massively inflationary. So the concern in the midterm is we might get the worst of all worlds. You might get lower interest rates. You might get a little bit more consumption from that, but in an environment where supply is being constrained because of a lack of a business investment. very inflationary, which would force the Fed to go the other direction.

Now, I don't mean that as a specific forecast, because we're entering in kind of the unknown here. We've never had a demographic transformation like we're seeing on a global basis or an American basis in modern history, certainly not in the digital age. And so we're going to be living through this in real time for the first time. But what we understand of macroeconomic laws is that seems to be where we're headed right now. borrowing a significant change in capital availability or government policy, that's kind of hardwired in at this moment. So the Fed isn't a bit of a box. The White House is part of the problem, and the baby boomers are no longer part of the solution. And that leaves the rest of us

in an environment where investment is difficult, where consumption is expensive, and where inflation is rising.