2025 could bring some of the biggest market and economic challenges in years. Inflation is rising, bond yields are surging, and market volatility is testing investor confidence. Kenny Polcari ( @kennypolcarimedia ), Chief Market Strategist at SlateStone Wealth, sits down with Andrew Brill to unpack these risks, discuss debt policies, explore energy demand, and analyze AI’s impact on the economy. Discover which sectors—like tech, healthcare, and energy—are worth watching and why historical patterns, such as the 1980s inflation crisis, could offer a glimpse into what lies ahead.
Investment Concerns? Get a free portfolio review with Wealthion’s endorsed financial advisors at https://bit.ly/4h1mQ5T
Kenny Polcari 0:00
That’s that wage pre wage price spiral inflation that we talked about that kind of wallet us right back in late 70s, early 80s, right when I was just getting out of college in 1980 81 we had that wage price spiral inflation, which I fear could once again be what’s brewing in the in the economy today.
Andrew Brill 0:23
Welcome to wealthion. I’m Andrew brill. A new year, same roller coaster ride as tech goes up, then come down, then, well, we’ll see.
Andrew Brill 0:36
Like to welcome back the chief Market Strategist at slate stone wealth Kenny polkari to wealthion. He’s also a media personality appearing on all the mainstream finance shows, and of course, here on wealthion, I’m privileged to call him a friend. Kenny, thanks so much for joining me. I really appreciate it, Andrew,
Kenny Polcari 0:51
it’s always a pleasure. Happy New Year to you, and thanks for having me. It’s going to be an exciting year for sure.
Andrew Brill 0:58
Well, that’s where we’ll start. I want to get your impression on the economy as we sit here today.
Kenny Polcari 1:03
So listen, I’m in this space where I think the economy is going to struggle a little bit, not because of anything that that Trump or the new policies are going to happen, but I just think that the economy is going to start to struggle, right? We’re seeing inflation starting to tickets head up again. We’re starting to see some weakening spots in the economy. So my sense is that, you know, the first half of the year could be a little bit volatile, not a disaster, but a little bit volatile. I think the biggest risk there is what happens to inflation and what happens to bond yields in terms of the market, right? I mean, this morning, we saw bond yields 10 year tick up and through 4.7% and that’s putting pressure on the market. We saw that again yesterday, when that happened, right? Bond yields ticked up and and so rising bond yields will continue to put pressure on the market. Now look, we can have four and three quarter bond yields or 5% bond yields, and the market can function fine if the economy remains strong, but if the economy starts to get weaker, and we’ve got those elevated bond yields, then that’s kind of a recipe for for for a tougher time, I don’t want to say disaster, but for a tougher time, it’s
Andrew Brill 2:04
interesting. You talk about, you know, the incoming president, the outgoing president, the economy really has nothing to do with the President. Everybody blames the president, but the economy sort of, it’s cyclical. Sometimes it just, it doesn’t have anything to do with the President. Actually
Kenny Polcari 2:17
correct. It doesn’t have anything to do with the President. It clearly has, it clearly has everything to do with policies that create either a strong economy or a weaker economy. What the Fed’s going to do, how inflation is reacting or not reacting, right? Those are the things. Now, you could tie it to the president, because somebody’s got to the Bucha stop somewhere. So it always stops at the White House, right? You’re in charge, and that’s what’s going to happen. But here’s the point, you know we’re going to have, you know you can say that. You could say that inflation, when Trump left the first time, inflation was very, very low in the economy. Who’s was humming along. Biden came in office, imposed all these policies, right? Changed all these regulations and policies, and inflation started to take off. Now, those were direct those were direct results of the policies, right? He was president. That was a direct result. So you could point them and say, you know, you instituted these policies that created this drama in the economy, which it did. You can’t argue that, right? And so now we’ve seen it come down. They pulled back a little bit. The Fed got more aggressive with rates and all that stuff to try to slow the economy down and bring inflation down, and it has brought it down again. But now I think the Fed has actually acted prematurely when they started to cut rates fairly aggressively in September, which, by the way, was six weeks ahead of a presidential election, which is kind of unprecedented, right? The Fed shouldn’t be toying with interest rates that close to a presidential election at all. Why they did it in September is still kind of a, still kind of a question in my mind. I mean, I think I know why they did it, but the fact is, they did it because they said the economy was in need of it. And in fact, the economy is not in need of it, right? The job market is not weak the way the heat sold us, it was going to be weak. And we’ve seen that in data. That’s come right? The job market remains robust, and so lower rates is once again starting to, you know, ignite that inflation monster. And so here’s the deal, if inflation is reignited now, it’s going to, it’s going to, it’s going to take off again under the Trump presidency, and then they’ll pin it on Trump, because he’ll have been the president. But in fact, the seeds were planted in the prior administration.
Andrew Brill 4:18
Now you talked about job, the jolts came in. You know, there’s 8 million, or a little over 8 million jobs available, but yet, we have very low unemployment, which dictates kind of higher wages, as you pointed out in your sub stack. And that’s going to create another problem, well,
Kenny Polcari 4:34
and that’s going to create, that’s going to put pressure on wages, right? People are going to demand more, right? There’s all these jobs out there. You really want me to come and work for you’re going to have to pay me more. So wages are gonna go up. And how do you think those companies are gonna pay for those wages? You think they’re gonna keep prices the same for me? And you probably not. It’s gonna flow down to the bottom line, and you and I and everyone else is gonna end up paying higher prices, you know, either for services or higher prices for products. That’s. Is the way it’s going to be, right? That’s that wage pre wage price spiral inflation that we talked about, that kind of wallet us right back in late 70s, early 80s, right when I was just getting out of college in 1980 81 we had that wage price spiral inflation, which I fear could once again be what’s brewing in the in the economy today. So
Andrew Brill 5:21
that six month sort of or beginning of the year volatility, obviously we’re seeing in the VIX. And you write that, you know, if we see a vix at 17 and a quarter, you know, we’re going to start seeing some sell offs. I checked the VIX about a little before we started recording. It was over 19. Now it’s about 1850 right? So, what are you expecting? So?
Kenny Polcari 5:42
So, in fact, that sort of point, right? The VIX now broke up and through trend line resistance at 1740 yesterday, right? It pierced up through there. So now it puts us in the new zone, which becomes a little bit more anxious, a little bit more fearful. So as the VIX increases in value, stocks will typically come under pressure. Now look what happened to your point. You said this morning, the VIX even went up from, you know, traded up as high as 19 yesterday, had to get closed at 1740, now today, traded up as high as 19 futures, which were positive at six o’clock this morning, suddenly turned very negative. And there’s a couple of things that a because you got the bond market that ticked through 4.7% you had negative commentary coming out of Jensen Huang, the NVIDIA CEO that talked about this quantum computing discussion that’s been happening over the last couple of months, he thinks is probably 15 years away. So now it’s putting all kinds of pressure on tech, on certainly that sector. And so those are all kind of net, short term negative headlines which are going to put pressure on the market today. But again, I’m not necessarily surprised that we’re seeing the market back off. I think that we had this rally going into post the election, going into the end of the year. We struggled a little bit in December. I think the path of least resistance at the moment is lower just because of all those other concerns that I that I laid out already, until the market digests and dissects, kind of all this stuff that’s happening around us, and it’s not all just economic look, there’s an inauguration coming, right? There’s policy changes, there’s a new cabinet. All that stuff doesn’t necessarily price stocks in the long term, but it creates some uncertainty that the market and investors need to digest and dissect, and once they do, then I think the market finds its finds its level.
Andrew Brill 7:24
It’s interesting that there’s a sell off, because everybody talks about the January effect, and I know you’ve been doing this a long time, and you know, although it doesn’t seem that long, because you look like a young guy, but the January effect where everybody, you know, they sold off at the end of the year for tax purposes, they pour money back into the market in January, but here in the beginning of January, we have a huge tech sell off after a big tech run up. So is that a little bit of profit taking, or is it like fear, like, oh, you know, Jensen Wang said this isn’t going to happen for a long time, so I’m going to wait well.
Kenny Polcari 7:55
So So those comments were specific to the quantum space, right? Quantum computing space, and there’s a bunch of names in there that have had tremendous moves higher over the last, you know, three or four months. So his comments are directed towards that, not necessarily tech in general. But I will say, I think that what happened at the year end, after Trump became after Trump was elected, we had that rally, is that, you know, investors and retail guys and asset managers piled into tech, and certainly the semis, names like Nvidia, certainly in AMD, because that is going to be part of the key story in 2025 and beyond, for sure. But I do think they took it to levels that were just a little bit stretched, right? They got ahead of themselves and all the excitement, so which is why I think you’re going to see this pullback, not only in in tech. Because look, when the market gets nervous, when investors get nervous, they’re not going to sell the stocks that have been underperforming. They’re going to sell the stocks that have these large gains in them to try to lock in those gains, where it can take that money that they made and then redeploy it. They’re not going to sell stocks that are like, you know, energy and healthcare were basically flat last year, right? There’s no reason to go in there and sell your energy and healthcare. When? When, when tech stocks are up 5060, 150% you’re going to take money out of the stocks that really perform, because you’ve got huge profits there, and then you’re going to take some of that and redeploy it. So I think that’s what you’re seeing in January. And I think that goes along with the story about about people just being concerned and people just being a little bit more cautious, especially also as the Fed is starting to change its tune a little bit on either the number of cuts, whether they’re going to cut sticky inflation and what you know potentially is going to happen.
Andrew Brill 9:32
Are you concerned about your financial future or think your investments could be doing better? I’m Andrew brill, one of the hosts here on wealthion, and I’ve been there not sure my money was in the right places. It’s why I’ve gotten help from a financial advisor. Maybe it’s time you think more about your financial future or get a second opinion about your investments. We’ve made that process easy. Simply go to wealthion.com/free, to speak with one of wealthions, registered investment advisor. Dollars for a free, no obligation portfolio review. Again, that’s wealthion.com/free I’m now less anxious and confident I can achieve the financial goals I’ve set for me and my family. It’s, you know, talking about Nvidia, and why is the market so fickle? You know, everybody’s saying, Well, you know, the Jensen Wang didn’t talk about the next chip. They just started shipping the Blackwell chip. And it’s, it look, it’s, it’s not, that’s not even gonna be shipped, probably till, like, fully shipped till 2026 but now everybody’s looking for the next one, right,
Kenny Polcari 10:35
right? Because it because, again, they get ahead of themselves, right? Because they look at Jensen wing. They look at what he’s done. They look at how he continues to impress the market every quarter, every time there’s a conference, everyone sits on the edge of their seat listen and what does Jensen have to say? Because he look, he sits right at the nexus of of the AI community of quantum computing, of where the future lies, right? So they just want more and more and more. It’s just like, it’s like, they can’t get enough, right? So they’re waiting for the next thing, which, you know, obviously, then speaks to why they take stocks to elevated levels, because they want more. They want what. They want more. So they buy the stock expecting to get more, and then when they don’t get it, you know, they stamp their feet. A lot of the trader types stamp their feet and run out the door very quickly, which provides an opportunity for the long term investor, because as long as you’re not chasing it, traders tend to chase it. The algos tend to chase it. A long term investor gets to kind of sit there and manage it and doesn’t react the way, you know, a day trader might react was buying it for a quick trade, or an algo react because it’s, it’s, it’s reacting to a to a mathematical formula that’s programmed into it, right? You and I get to sit back and kind of assess and look and take our time and be patient.
Andrew Brill 11:44
Is there, you know, we’re so much talk about chips and all this technology, but we need the programs to run these, to work on these chips. So is that really the next step? You’re looking at people who are writing the code to them that are actually going to, you know, create the AI.
Kenny Polcari 12:03
You know, it’s very, that’s a very interesting question, because you have people that are writing the code to create the AI, you almost are going to have aI writing the code to create more AI, right? That’s kind of the scary part about it is that you can go in and you can use, I don’t know, do you use chat? Do you use chat, GBD and all that stuff? Sure, right? So you recognize what it does, and you can almost talk to it like you and I having a conversation, and it responds to you as if you and I are having a conversation. And so what’s interesting now is you can buy. You can you cannot buy, you can engage with these AI programs that will write the program itself, right? Leaving no need for human being to have to write the program the same way you’re going to see it in a lot of things, right? Whether, whether it’s writing a book or right? You know, you’re the chat. GBT, you tell, you tell chat. GPT, I want to write a book on whatever the oil markets. Suddenly, it produces this book on the oil markets. It’s crazy what it does, right? And so I think you to your point, while we do need human beings in the process, I think, I think they’re, I think they’re getting to the point where AI is going to, AI is going to start doing it all right, which, again, is, is, is, that’s the deep, dark hole we’re going down, right? Because then what happens? Yeah,
Andrew Brill 13:17
my mother would be proud. Because, you know, I find when I use chat GPT, I still say, Can you please do this for me? It doesn’t give a damn whether you’re polite or not, but it works. So
Kenny Polcari 13:31
it is funny, because I find myself saying the same thing. Can you please add this? Can you do this? Let me change it this way, like I’m talking to it, like I’m talking to you, or I’m talking to another human being, like I’m being polite when I talk to it. Yep.
Andrew Brill 13:46
Do you? Do you see the energy sector now we know that it lagged a little bit. Do you see that starting to pick up because of AI and needing to power all these, all these systems? I’m
Kenny Polcari 13:57
not in the camp that that demand for energy is waning the way they want you to believe it is. I don’t think it’s waning at all. I think if you talk to anybody in the AI space, or the Bitcoin mining space or or the quantum computing space, the demands on energy just from those, just from those pieces of the economy, are huge. They’re massive, right? And now you talk about the housing industry, we’re building houses. You know, once again, we’re starting to build houses at an increasing rate the demand on energy to run those homes right. It’s also, I don’t think energy demand is waning at all. I’m a big energy Bull. I like energy. I continue to own energy on the fact that in 2024 energy was really an underperformer. It actually had done well for half the year, and then the second half of the year it could, it could kind of hammered, but I think there’s any opportunity. Because, no, I’m not in the camp that that, that we’re going to use less energy. I’m the camera going to use more. And in wind and solar are not going to power the world for that. You know, at least, at least for the rest of my life,
Andrew Brill 14:59
we’re. Which, you know, the, obviously, the Trump administration coming in is very pro energy, oil, natural gas. You know, it’s one of the reasons why, I guess he wants to buy Greenland. Instead of coming up with a deal where we can drill in Greenland, he just wants to buy Greenland. But, you know, I don’t know if you have any trips planned to the Panama Canal or or, or, you know, the Gulf of the Gulf of America, anything like
Kenny Polcari 15:24
that. Yeah. No, no, I don’t it’s interesting. You know, Is he really going to buy green lenders? He really going to convince Canada to become the 51st state United States? No, I don’t think that’s going to happen at all. To your point, what they should do is make an agreement to to drill in Greenland, right? I’m assuming that there’s that there’s tons of natural gas and oil under the, you know, under the shelf there in green right? But you know, that’s going to be a very interesting topic, because he’s opening up the spigots here in the United States. And he’s been saying it all along that we need energy. And by the way, if we open up the spigots and drive energy prices lower, that will, in fact, help the whole economy, because it’ll bring the cost of everything lower, right? The cost of transportation, that plays a huge role in the price of products, and what’s it going to cost me to transfer this to transport this stuff around the country, right? So if you have lower energy prices, then that will, that will, that will filter itself through the whole economy and bring, you know, help to ease off inflation. So I’m all for it. I think, I think we should, you know, we should be. And we were under his prior presidency. We were the swing the US was the swing producer. In oil, the Saudis were no longer the swing producer. We were the swing producer. And I think he wants to take us back
Andrew Brill 16:37
there. You had an interesting comment about Janet Yellen masking some of the market issues with the way she’s handled the bond market stuff. Can you explain so
Kenny Polcari 16:47
So Jenny Yellen, and there was an article, I guess Charlie Gasparino wrote about it. I think he published it in the post about a month ago, and I actually put the link in my note from Monday, right? But what she’s done is that she’s been financing the debt using short term debt, right? Two year two, year and three, year and five year treasury bills, versus the typical what you would use 10 or 20 year treasury note, treasury bonds to finance the debt. She’s been financing it with short term, short term bills. And so now what’s going to happen is she’s leaving us in this very interesting position, because yields are going to yields, as we’ve seen, are going to start to go up. And when Scott Besson comes in and takes over his Treasury Secretary, he’s going to be faced with a decision, what are we going to do about refinancing this debt? We can’t keep financing it with short term debt, you need to her mistake was she didn’t finance the debt when rates were down at 2% she should have financed the hell out of it, right? But she didn’t. And so we So more recently, the last year, she’s been financing it with short term debt, which is kind of kept have it’s masked the real problem there, right? Because, had she been financing with longer term debt, 10 year debt, and she was bringing globs of 10 year supply to the market, bond prices would have gone lower to absorb the supply, and yields would have shot higher. She didn’t want to do that in the presidential election year. She didn’t want to do that to the Democrats. She didn’t want to do that to Biden. So she kept it. She kept it very tight. That’s now going to expose itself at the end of their presidency, she’s going to be out of a job in a couple of weeks. Scott pessin is going to take her place, and then this is all going to come out and be exposed. And I think Charlie gaspino wrote a long article about it. He’s got all this data and all this research he did. People should just read it so they understand it. But that’s to your point. Is really the, you know, that’s kind of the synopsis of of the issue is that she failed to finance the debt with long term treasury bonds when she could have, when they were, when rates were 2% and 3% right now they’re, we’re approaching 5% and likely to go higher, quite honestly, right?
Andrew Brill 18:58
So now, if you wanted to finance the debt with a 30 year bond, you’re looking at just about 5% and a lot more than a trillion dollars a year just to finance that. That would create a pressure on the system as well 100% so that’s
Kenny Polcari 19:14
and so it’s going to be interesting now. It’s going to be interesting to see what Scott best said, and see what’s going to happen now is it’s going to explode under the new presidency, right? So they’ll so then they’ll point to Trump and Bessant as to cause their problem. Meanwhile, the problem’s been building for for a year and a half under Janet Yellen, and that won’t be exposed until it becomes a problem. And I think that’s another one of the fears that I have about where the economy is going and the pressure on stocks, and at least in the first half of the year, and then we’ll see what happens. But you know, if Trump gets through the policies that he wants to get through, if he cuts taxes, because remember, the last time he cut taxes, the government actually ended up with more revenue. The tax rate was lower, but they ended up with more revenue because. Economy was functioning better. People making more money, you make more money, you pay more taxes. And so if he’s able, if he ends up keeping the tax cuts that he put in place, because they’re going to expire, if they keep those tax cuts, and he lowers the corporate tax rate then, and if the economy then takes off, we should end up with more tax revenue in the end. And so that’s yet to be seen, but that’s kind of how it worked the first time under his first presidency. So we’ll see. And I think that’s all the excitement around some economists and stuff that think that, you know that’s potentially going to happen again, and if it does, then we should be able to climb out of this.
Andrew Brill 20:36
So, you know, a question is, as an individual, you buy a house and you get a 30 year mortgage fixed, you know what your monthly nut is, right? Would it behoove the country to say, look, you know, let’s go to the 30 year. Get a little breathing room. We’ll know we’re gonna pay more, but we’ll know what our monthly nut is, and then we can adjust accordingly.
Kenny Polcari 20:57
Yes, but they should have done that. You know when, when, when the 30 year was 3% now it’s 5% right? So, so yes, can we do that? Should they lock it in? Should they do that? They should. But I think the problem is that if they finance all the debt at 30 year rates, there’s going to be this massive supply that’s going to come to the market in order to finance it, that they would send rates would soar. So I think they have to be very, very methodical. You know, some of it, some of it should be financed with short term. Some needs to be financed with that 10 year kind of intermediate term. And some certainly needs to be financed with much longer debt, 20 and 30 year debt. You know, remember when rates were near zero, there was that talk about creating 100 year bond. You know, back in early, in the early Biden presidency, you know, and there was that talk, should we do it? And had we done it the 100 year bond at that point, I think they were talking something like two and a half or 3% when rates were zero, right? But they never did it. They never ended up. They never ended up doing that. I don’t know exactly why. I think she actually poo pooed the idea. But one way the other, that would have been, that would have been the way to fix this problem. Now we’re in a little bit more of a problem, because we now have this problem. The debt keeps getting bigger, and we have to finance it now at higher rates. Kenny
Andrew Brill 22:13
with sticky inflation. Do you think the Fed, and I know you said you thought the Fed acted too soon. Do you think they pumped the brakes here in January? I know we have a bunch of, you know, fed governors that are about to speak, yeah,
Kenny Polcari 22:24
I don’t think they, I don’t think they do anything on rates in January. I think, I think Jay Powell made that clear in December, that they’re going to now sit back and and hold off and see what the data says, See what the you know, again, there’s this new administration. Is new policy. Let’s see how that all interacts. Blah, blah, blah. So I don’t think they’re doing anything in January. I actually don’t think they’re doing anything in the first, first quarter of the year. So I don’t think anything happens through March. And then I think they start to look at it. I’m in the I’m in the the camp that I actually think that we get no rate cut this year, and there’s a possibility we actually get a rate increase, not a rate cut, because I because I’m in the camp that I think inflation is going to continue to remain sticky and start to and start to push higher, and that’s going to put the Fed in a very, very precarious position, right on, on what they should do, because if they turn around, they start raising rates, then they lose credibility, because they told everyone they had the whole thing under control, blah, blah, we’re not too early. We’re going to cut rates because the economy is in need of it, and then they have to turn around and say, We acted too early, which is exactly what happened in 1979 1980 when they when they prematurely cut rates because they thought they had tamed inflation, and then inflation read its ugly head, and Paul Volcker, Fed chair at the time, had a jam rates to 20% now I don’t suspect we’re going back to 20% but what I’m saying is it’s the same scenario, right? And so when Paul Logan generates a 20% the stock market collapsed. And why wouldn’t it? If you were anyone with any money, you could go out and buy, you know, stocks, and there’s nothing wrong with IBM and American telephone, right? To find stocks, or you could take your money and go to the bank and give it to the banker and earn. Think about this. You were earning 20% risk free. Sleep at night. There was never a question. You’d have to worry about earnings. You didn’t have to worry about growth rates. You didn’t have to worry about forward guidance. You were done nothing, because rates were 20% and you and you had your money in the bank at 20% it was safe, it was secure, and you slept at night. And so my fear is that I think they prematurely cut rates, and that I think they’re going to end up having at the at the least. I don’t think they’re going to cut rates again. I’m in the camp. I don’t think they’re going to cut rates this
Andrew Brill 24:33
year. So do you do you envision a housing market issue? Because the 10 year is what it is, and mortgage rates keep going up, right?
Kenny Polcari 24:41
So I think housing prices will come under pressure, right? Because they always do. That’s what happens when housing prices start to come under when rates go up, housing prices come under pressure, because it’s a cost issue, right? The higher rates go, the more cost you to hold, to hold the mortgage and run the house, and if people can’t afford. It. They can’t buy the house at that price. It’s got to come down. Somebody wants to sell it, it’s got to come down. And so I suspect if we see rates, you know, tick, tick, much higher. Looks 30 year mortgage rates, I think, are just kissing 7% again, right? They’ve done nothing but go up ever since, ever since Jay Powell cutting rates in September. They were cheaper in September than they are now, and he cut rates by 100 basis points. And so what does that tell you? That tells you that the bond market is saying, slow down. You’re being too aggressive on the rate cuts. And so yes, do I suspect if rates go higher, the housing market will come under pressure? For sure, what
Andrew Brill 25:34
sectors are you looking at for 2025 or at least for the first half, so only 24
Kenny Polcari 25:41
I would always stay. You know, tech is something that I think should be in everyone’s portfolio. Now that doesn’t mean I’m chasing it. We already own it. I own it, so I’m not chasing it, but I’m also not selling it right, because I think it’s very much a long term play. But from from you have to look at kind of the underperformers of last year potentially being the leaders this year. So healthcare closed flat on the year. Energy closed flat on the year. And so those are two sectors that I think healthcare is supposed to grow at this was have a 20% growth rate this year, right? And so that’s very bullish. And so healthcare will do very well now. Earnings going to start next week, so we’re going to start to get a sense of what the C suite is saying about the coming earnings, and what are they saying about the forward guidance? Now, you know, it kicks off with the big banks, but then ultimately it works its way through all the sectors. So we’re going to start to get a taste of what the C suite is starting to say about, you know, four and six months out, and earnings for this year are expected to grow by, I think, 12% which I think might be a little bit rich, but we’ll start to see that, right? They’ll adjust after the first quarter earnings season. Here, they’ll start to adjust. You know, what the rest of the year might look like, and so so healthcare, for sure, energy for sure, basic materials is another area that I’m looking at as an opportunity. But look as a long term investor, it’s like anything you you still need to be diversified, right? So you have to have a little bit of everything because you should, because you should be diversified. But you can, in this case, you might want to overweight healthcare a little bit, because if you think healthcare is going to do better, then you might want to overweight it just a little bit in the portfolio. But you want to maintain a well diversified portfolio to carry you through. What about
Andrew Brill 27:20
commodities Can I was just reading this morning, the dollar is is up again, which puts pressure on commodities. Yeah, but we know that Donald Trump wants to come in and obviously quash the dollar a little bit. Do you think? Do you find that commodities might be a good, good thing to look at here? Well, so,
Kenny Polcari 27:39
so, so here’s the deal. Commodity zero price in dollars. So is an inverse relationship. As the dollar goes higher, commodities tend to go low because it becomes more expensive, right? To become for foreigners to come in, because the dollar stronger, then commodities end up going down and die. So you’ve seen that gold commodity, the dollar is up 8% since September. Gold is down 500% since September the Bloomberg commodity index, which includes everything. So it’s lean hogs, it’s cattle, it’s weed, it’s coffee, it’s soybeans, it’s sugar. The Bloomberg commodity index is down three and a half percent during that same time frame, just because of its relationship to the dollar, right? So if we see the dollar weaken, then commodities should do better. But here’s the deal, the dollar will weaken if the Fed cuts rates, right? If the Fed keeps rates higher, the dollar is going to stay stronger. So if the Fed, if the Fed does nothing, I don’t see how the dollar is going to weaken at all, right, if the Fed starts to raise rates, $1 is only going to get stronger, and that’s going to create more of a more pressure on commodities. So you have to be, you have to kind of watch that, and you have to take a stance. What do you think is going to happen? Do you think the economy is going to be okay and or the economy’s gonna start the weekend and the Fed’s gonna cut rates? Or do you think the economy is okay and the Fed’s gonna do nothing? Because, you know, that’s where I’m at. I’m in, you know, I’m in the camp that they’re not gonna cut rates. So, I wouldn’t I’m not a big commodity player. Anyway, gold is one thing, but I think gold is someone that everyone should own, because it’s the kind of thing that you just own and put away. Um, but I don’t trade gold, right? And I certainly don’t trade lean hogs and cattle and soybeans. It’s just not what I do. But understand the relationship between the strength of the dollar or the weakness of the dollar, and then how that affects different commodities. Now oils, the oil is a commodity for sure, and oil does react to the dollar, but look, oil also reacts to a bunch of other factors, right? There’s Saudi production cuts, there’s there’s, you know, Chinese. This week, it’s Chinese. Weak demand causes this, you know, oil to drop in value. Then it’s Chinese. Strong demand causes oil to run away. Then you got sanctions on Iran. You got sanctions on Russia. So there are other factors that affect oil, because oil is actually up 17% since September, when the dollar is up since September, right, there should have been that inverse relationship, but oil because of its because of what it is, and the role it plays in a global economy. He sometimes reacts to other factors, rather than just the dollar. Gold and other commodities will react more directly to what the dollar is doing. Last
Andrew Brill 30:08
question, I know we’re just a little over a week away from an inauguration. You think Donald Trump puts pressure on the Fed to lower rates?
Kenny Polcari 30:14
I I think he could. He could try to put pressure on the Fed to lower rates, but I think that’s a mistake, right? First of all, I don’t think the Fed, as you know, is supposed to be agnostic, right? They’re not supposed to be driven by whoever’s in the White House. They’re not supposed to be Trump. Can stamp his feet all he wants. About You know, he needs lower rates. He needs lower rates. But quite honestly, I would push back on that. If the economy is if the economy remains as robust as it is, and it is fairly robust. The job market unemployment is only at 4.2% and like, to your point you started, there’s more jobs available than there are people to work. And so therefore it’s going to be hard, I think, for the Fed to continue to cut rates. I just think it’s going to be so no matter what Trump wants, I don’t think he just can’t snap his fingers and tell Jay Powell what to do. Jay Powell has a committee of people that have to do a lot of work, and they have to set policy separate from what the White House wants. So while he may want it, I don’t think, and may he may try to put pressure on Jay Powell, I don’t think, I don’t think Jay Powell is going to cave. I just don’t think he is. Now, look, you can argue that Jay Powell caved during the election by cutting rates by 50 basis points six weeks later the election to try to support the Democratic Party. You can say that that happened. It did, but I don’t think, I don’t think that was because he was getting pressure from the White House. I think that he was just feeling like that. I think he was making a statement about what he thought was better for the
Andrew Brill 31:44
country. So the biggest question in my house, Kenny, every day is, what are we having for dinner? And I’ll peel back the curtain. If you subscribe to Kenny sub stack, you will get an idea every single day for dinner. What are we having for dinner?
Kenny Polcari 31:59
That’s very funny. So today I gave you this delicious pasta. It’s a Neapolitan classic. It’s Malta Dini with it’s called corona, right? It’s a simple dish. You just make this. You take a hat, you take a big yellow onion, cut it in half, you take olive oil, put it in a big saute pan, take a clove of garlic, whole. Don’t cut it. Put the onion. Just place the onion in the oil along with the garlic. Saute it around for five or 10 minutes, flip the onion over so it comes all nice, and then you add a can of crushed tomatoes to the to the pan. Put it on simmer, let it simmer there for 10 minutes. While that’s happening, you want to take a bowl, put some fresh under got the cheese in it, a handful of grated parmesan, salt and pepper, and a ladle of like, hot water to kind of allow you to mix the rigotta so it gets creamy. Don’t put too much water, because then you’ll, you’ll water it down, but just enough to kind of make it creamy. Whip it up with your hand. Make it nice and creamy. Put your pasta in the in the pot, cook it for eight minutes. You want it al dente. You don’t want mushy pasta. You want a little bit so, you know, you know what you eat, right? Take it out, and then put the pasta directly, you know, with tongs. Take it out of the water, put it directly into the pan with the tomato sauce. Take the onion and the garlic out. Put that on the side. You don’t need it anymore. Put the pasta right in the pan with the with the tomato sauce. Mix it up so that you coat the pasta. Then take two tablespoons of the rigotta Put it in the pan, mix it up, add a little ladle of the hot pasta water, which is called the tears of the gardens, because it’s just perfect. And then when you serve it, serve it in a warm bowl, and put a dollop of the rigotta cheese on it, and dust it with a little bit of fresh grated parmesan cheese, and put a basil leaf right on top. It is simple to make. The whole thing takes you maybe 25 minutes start to finish, and it’s a classic Neapolitan dish, and you’ll get it on finance. Chef,
Andrew Brill 33:48
the finance chef, there he is. Appreciate it, Kenny, thanks so much. Where can we find you? On sub stack, social media, at slate stone. Where can we find you?
Kenny Polcari 33:56
So my sub stack is Kenny polkari.substack.com, and you can, you can sign up for my newsletter. It’s free. You can just put your name in there and you’ll get it. You can get me on my twitter at Kenny polkari. You can get me on my YouTube, because I then take that written note and I turn it into a video every day on my YouTube channel, which is just Kenny polkari media, all one word, and there you go. And my LinkedIn. You can look me up on LinkedIn as well.
Andrew Brill 34:20
Thanks, Kenny. I know you’re up against it, so I’ll let you go, but I really appreciate the time, and it’s always a pleasure
Kenny Polcari 34:26
to see you. It’s a pleasure to see you as well. Say hello to everyone will do. Thanks very much. Bye. Bye. Thanks
Andrew Brill 34:32
so much for watching our discussion here on wealthion with Kenny Paul Carri, who is always the life of the party. If you would like be help being financially resilient, please head over to wealthion.com/free and before you go, please like and subscribe to the channel. Don’t forget to hit the notification bell so you hear about new videos and follow wealthion on social media. All the links are below in the description, and if you like this content, are looking for more ways to achieve long term wealth. Watch this video next.
