PodcastAdam Taggart | Thoughtful Money®Axel Merk

SPECIAL REPORT: Chaos At The Fed? Record Dissents In Powell's Last Meeting | Axel Merk

Middle East hostilities and oil shocks are the primary geopolitical risks, feeding through to markets that have repriced away from cuts and toward potential tightening while factoring in temporary supply responses. Domestically, visible FOMC dissent and Powell's defense of independence have amplified market moves, encouraged cautious balance-sheet tools like swaps with Treasury, and left forward guidance deliberately ambiguous. Technology and capital trends favor large, asset‑heavy firms due to regulatory barriers and a shift into infrastructure and mining, while forecasts highlight risks from fertilizer unaffordability, energy‑sensitive mining margins, and trade-driven disruption for automakers.

Monetary PolicyGeopolitical RiskEnergy MarketsCommoditiesSupply ChainsInvestment Strategy

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Key Takeaways

Middle East hostilities elevate the risk of oil-export disruptions and politically driven demand supports (e.g., consumer subsidies), producing short-term market volatility while markets still treat the shock as temporary — but Saudi embargoes remain an available lever and U.S. frackers will only raise output if long-term price signals persist.

Oil shocks create a two-stage effect on gold and mining: an initial tightening that raises real rates and pressures gold, but a sufficiently severe shock that damages employment could force central-bank support and lift gold; miners' margins are meaningfully energy-sensitive (mid-teens to ~20% of costs), even as precious-metals mining currently reports strong margins.

Fertilizer unaffordability is already forcing rationing in some countries and will likely show up as lower yields about one growing cycle later, a risk that is amplified if oil or export routes are disrupted and energy costs for production rise.

Visible FOMC dissent and Powell's public defense of Fed independence have real-market consequences: they shaped investor expectations, and together with leadership transition toward a rules‑based incoming chair suggest a doctrinal shift in communication and policy approach.

Markets flipped from pricing roughly 75 bps of cuts to a tilt toward tightening after the FOMC, driven by a still‑resilient U.S. economy and concern that a global oil shock could be inflationary and force the Fed to hike; Powell's remarks and recorded dissent materially moved pricing.

GEO-POLITICS

Oil Disruption — Middle East hostilities raise the risk of oil-export disruption and politically driven policy responses (e.g., consumer subsidies) that would support demand and add inflationary pressure; markets currently treat the shock as temporary. The UAE's signal of higher output is viewed as a medium-term bearish sign, but Saudi embargoes remain an available lever and keeping the Straits open depends on US and ally willingness; US frackers will expand only if sustained higher price signals appear.

“And I say that is because the politically the political reaction to supply shock tends to be the economically bad thing to do…”—

Fiscal Tailwind — Speakers argued that absent the Iran conflict the US would have benefited from tax-refund stimulus and a wave of AI-driven business investment, and that AI-enabled productivity gains could create room for the Fed to cut rates without reigniting inflation.

“What we have is a stimulus from the tax refunds that was baked into the tax bill from last year.”—

TECHNOLOGY

Big-Firm Advantage — Investors are less punitive about AI revenue misses today, and rising regulatory 'red tape'—notably in Europe—raises barriers to entry that disproportionately benefit large (often US) tech firms; proposed deregulatory aims may take years to materialize.

“OpenAI giving a revenue warning…”—

ECONOMY

FOMC Dissent — The FOMC record showed dissenters who accepted current rates but opposed an easing bias, while Powell distinguished acceptable public commentary from unacceptable interference—criticizing DOJ political pressure—and reinforced the premium on Fed independence.

“but then we had three descents and what they were okay with where the rates were but they did not approve of the easing bias that's persisted.”—

Inflation Drivers — Speakers blamed post-pandemic supply shocks combined with stimulus for current inflation and noted that very high oil prices can 'destroy demand,' tempering inflation; the US is relatively less exposed than many countries.

“When you have a supply shock as we know from the pandemic providing a stimulus is inflationary right so the right reaction is to get supply and demand back into…”—

MARKETS

Fed Repricing — Markets sharply cut odds of 2026 easing and priced a material probability of hikes by next spring; Powell's remarks and visible FOMC dissent have outsized market impact, while many investors remain data-driven and unconcerned about inflation or recession until indicators shift.

“Well, we have a 48 and a half% chance of a rate hike by April of next year right now.”—

Gold Headwinds — Speakers said gold is subdued because markets view recent oil shocks as temporary and real interest rates have risen; some countries are selling reserves to cover fuel costs even as central-bank purchases continue, leaving real yields as gold's primary macro driver.

“primary reason is precisely because it's priced in as a shock more than anything else and the Fed hasn't reacted or others by kind of having these second round effects…”—

Tech Rents — High Silicon Valley compensation is bidding up local rents, producing a housing boom that speakers said does not justify Fed rate cuts.

“The talk about California, the Wley Journal had an article about the halves and the have and the have mores…”—

FORECASTS

Doctrinal Shift — Powell plans to remain through the probe but signaled he'll cede communication style to the incoming chair, calling the transition 'Walsh's Fed.' The nominee favors rules-based policy, and speakers suggested AI-driven productivity could create room for future rate cuts, implying continuity with potential doctrinal friction.

“It is somewhat over, but not completely over because it was handed over to the Federal Reserve Inspector General…”—

Guidance Pullback — Speakers said the FOMC's 'additional adjustments' wording hints at future cuts but keeps timing ambiguous, and that dot-plot and press-conference practices may be scaled back; they argued the Fed lacks a clear published reaction function like the ECB's scenario-based guidance.

“The word additional adjustments suggests that there will be cuts. And Powell was asked why is that language in there? And he said good question…”—

Expectation Flip — After the FOMC, markets flipped from pricing roughly 75 basis points of cuts into next summer to a tilt toward tightening, driven by a resilient economy and fears that a global oil shock could be inflationary and compel hikes.

“First of all before the FOMC statement about 75 basis points 0…”—

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Not Investment Advice: For education only — not financial, tax or legal advice.

AI-Generated: Made by AI from source transcripts and may contain errors.

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