Jerome Powell’s Federal Reserve’s policies impact inflation on everyone, especially retirees living on fixed incomes. Objectively looking at the Fed’s track record for more than a decade, the Fed has made many terrible policy decisions. Accordingly, no one should be shocked by its unnecessary 2024 interest rate cut decisions. The only markets that have not been overly inflated by today’s Fed-induced “bubbles” are commodities, specifically precious metals and crude oil.

All eyes are laser-focused on Wednesday's Fed announcement on interest rates. While 90% of market participants are betting on a 25-basis-point cut on Wednesday and FIVE more interest rate cuts in 2025, I'm not in their camp. Six rate cuts have already been priced into today’s irrational exuberance in stock prices. It’s highly unlikely that we will see five rate cuts in 2025. A cut on Wednesday would be another major policy error leading to further inflationary pressures, making an economic recession in 2025 probable.

The Fed’s 50-basis point cut in September was politically motivated, as the economic data did not warrant such a substantial cut before a Presidential election. Its additional 25-basis point cut in November intensified existing pricing pressures, further inflating the existing asset bubbles in the stock, property, credit markets, and bitcoin. Before the Fed rate cuts, the 10-year bond's interest rate was around 3.60%. After the Fed’s rate cuts, bond yields did not decline, instead, they rose to 4.45%. Today, the bond markets are telegraphing a different message than the stock markets by continuing to trade up around 4.40% as stocks bubble up to new daily highs.

The higher interest rates in the bond market are important warning signals. Conversely, consumer expectations for much higher stock prices in the coming 12-months have never been higher, not even before the Nasdaq collapse caused by the dot-com bubble. We must pay attention to this divergence.

The combination of Powell's ongoing misguided policies, the Biden administration’s reckless fiscal spending that created a tsunami of debt, and forever military conflicts on multiple continents simultaneously make the probability of a significant credit event in 2025 extremely high. It is almost as if the Federal Reserve seems to be setting the stage for a major economic crash that coincides with President Trump's first year in office.

Investors, please take note of the following cautionary message: valuations in the stock, property, and credit markets are currently trading at unsustainable levels and are likely to decline in 2025. The markets are long overdue for a significant correction of at least 50%. It may be wise to take some profits before this year ends. While it's impossible to accurately predict the peak of any bubble, the NASDAQ appears to be the most extreme and dangerous bubbles I have ever encountered. Remember, this time is not different; it never is. Proceed with caution.

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Mitch Feierstein knows the financial industry inside out. For the past four decades he consistently created opportunity and value where others have failed to look. He is a successful investor and CEO of the Glacier Environmental Fund Limited. Prior to Glacier, he was Senior Portfolio Manager of the Cheyne Carbon Fund, part of one of the largest and best-respected hedge-fund groups operating in Europe. He has acted as a consultant for a number of governments in their disaster and contingency planning. He is the author of Planet Ponzi, the only insider's account of the credit crisis detailing; How we got into the mess, what happens next, and what you need to do to protect yourself. He divides his time between London and New York.