The Federal Reserve is getting nervous. Its latest meeting sent three signals: inflation might stay higher for longer, interest rates are probably going up, and concerns about companies and AI are growing.
Markets are already feeling it. Chinese AI stocks have fallen about 40% in just the last few months, and Google stock just dropped more than 10% in a single day.
Investors worry Google is pouring money it doesn't have into AI. Now they're asking whether this is a sign of something bigger coming for the economy.
AI can help you research what all this means for your investments, but it's garbage in, garbage out. Briefs Finance CEO Jaspreet Singh is hosting a free livestream on November 17 to show how he and his analysts use ChatGPT and Claude to research investments and pick stocks.
What the Fed Said at the FOMC Meeting
At its latest FOMC meeting - short for Federal Open Market Committee, the Fed group that sets interest rates - the Fed decided not to raise rates right now. It also left the door open to raising them again in the future.
Kevin Warsh, the Fed's new chairman, said "inflation remains elevated," but that the committee "will deliver price stability." Prices rose more in 2026 than most people would like.
The Fed wants 2% inflation, and inflation is running at about 3.5%. To slow it, the Fed can either raise interest rates or pull money out of the economy.
Right now it's leaning on rates. The Fed raised them within the last couple of months and is talking about raising them again, possibly before the year ends.
Warsh put it this way: "In September we removed a dose of accommodation." In English, the Fed gave the economy a dose of higher rates in September and might need another one in 2026 or 2027.
Why an Interest Rate Hike Hits Everyone
Higher rates make mortgages, car loans, and the national debt more expensive. Even investors with zero debt feel it, because the company they work for probably has debt.
When a company's borrowing costs rise, it gets more expensive to run. Businesses then cut costs, and that generally leads to more layoffs.
The government has more than $40 trillion in debt. As rates rise, so does the cost of running the government.
Trump Wants 1% Rates
President Trump appointed Warsh hoping he would deliver what Trump wants, and Trump wants lower rates. Instead, rates are heading higher.
Trump posted on Truth Social that U.S. interest rates "should be 1% or less," while they currently sit around 4%. He followed up in all caps, telling the Fed to lower rates fast.
He wants lower rates for two reasons:
- Growth: Cheaper mortgages, car loans, and business loans mean more borrowing, more spending, and a faster-growing economy.
- The debt: The $40 trillion national debt doesn't have a 30-year fixed rate. It readjusts, so the government's interest bill keeps rising as rates rise.
The fastest-growing expense for the U.S. isn't the military or Social Security. It's the interest on the national debt, both because the government keeps borrowing and because the rate on that debt keeps climbing.
What's Keeping the Inflation Rate Near 3.5%
The inflation rate is well above what anyone wants. Prices are also rising faster than the median U.S. income, so the average person is getting poorer.
Four forces are driving it:
- Oil prices: The war in the Middle East has lasted far longer than expected. Higher oil prices raise the cost of gas, travel, and shipping, plus fertilizer, which is made from oil and pushes grocery prices up.
- Tariffs: Making goods in the U.S. instead of overseas costs more. Companies can accept smaller profit margins or raise prices, and more of them are choosing to raise prices.
- AI: The Fed long said AI would help fight inflation by boosting productivity. Now it says AI is adding to inflation, because AI needs huge amounts of energy and the power grid can't keep up.
- Government spending: The government still spends trillions it doesn't have. Some of that money is printed by the Fed, which creates more dollars but not more wealth, so each dollar buys less.
Those four forces are why the Fed says rates need to stay higher, and maybe go higher still.
Why Bitcoin, Gold, and Silver Fell After the FOMC Meeting
Gold, silver, and bitcoin have been hot since the pandemic, when the money printer turned on and inflation fears took off. Together they're known as the debasement trade - assets investors buy when they're worried the dollar is losing value.
Gold is the traditional hedge against inflation. Silver and bitcoin are far more volatile and tend to trade more like tech stocks than dollar hedges.
When the Fed said rates would stay higher for longer, all three fell. Higher rates help the dollar because they're meant to bring inflation down, but they hurt an economy that runs on spending.
The Fed can't do both jobs at once. Raising rates protects the dollar, while cutting rates stimulates the economy and weakens the dollar.
Right now, the Fed is choosing the dollar, which puts downward pressure on the debasement trade. That could flip if the economy breaks and the Fed decides to rescue it with rate cuts.
Mag 7 Stocks Are Carrying the Market
Jaspreet believes the economy leans so heavily on AI that without it, the U.S. would probably be in a recession right now. The stock market shows why.
The S&P 500, a group of the 500 largest U.S. companies, is near record highs. Yet more than 400 of those companies, about 87%, are in correction territory, meaning they're down 10% or more.
The index can sit near highs anyway because the Mag 7 - big tech companies like Amazon, Meta, and Google - have been carrying it. So much money has flowed into AI that these giants have been propping up everything else.
China's AI Bubble Already Burst
Chinese AI stocks are down about 40% in the last few months. There are plenty of differences between the Chinese and U.S. AI markets.
Still, if an AI bubble can burst in China, investors wonder whether it could happen here. U.S. AI stocks have soared for years while many investors insisted they couldn't go down.
Why Google Stock Fell More Than 10%
Google is spending so much on AI that its free cash flow - the cash left after running and investing in the business - went negative. At the same time, the number of Google searches dropped.
A slowing core business paired with an all-in AI bet looks risky. Investors are now asking whether they still want to pay sky-high multiples, or prices relative to profits, for AI companies.
Could Higher Rates Pop the AI Bubble?
In Jaspreet's view, higher rates have acted like a needle for past bubbles. He points to the Fed raising rates before the 2000 dot-com bubble burst and before the 2008 housing bubble burst.
If inflation keeps rates higher for longer, those rates could become the needle for AI. And because the S&P 500 is being held up by AI companies, an AI drop could set off a domino effect across the whole market.
Many investors are betting on AI with debt, and companies are too. Many more are betting on AI without realizing it, through target-date funds in their 401(k), S&P 500 funds, or total stock market funds packed with tech and AI companies.
When markets fall, investors tend to panic and sell, and that selling feeds a downward spiral. Jaspreet calls the other side of that POOP: panic leads to overselling, which leads to opportunity, which leads to profit.
If a selloff comes, the goal is to look for opportunity instead of panicking. Just know that an AI downturn could also push the economy toward a recession.
The Fed's Impossible Choice
A recession would force the Fed into an even tougher call: keep rates high to fight inflation and protect the dollar, or cut to help a hurting economy. Some Fed officials already say the Fed should have raised rates instead of holding them.
In the 2000 dot-com crash, the 2008 housing crash, and the 2020 pandemic, the Fed cut rates to pull the economy out of recession. The 1980s were different, when the Fed raised rates so aggressively to fight inflation that it caused a recession, deep pain, and high unemployment.
That's why the Fed wants inflation under control now. If it started stimulating today, the inflation problem would get even bigger, so it's hoping the economy holds up until prices cool.
But the Fed can't control oil prices or tariffs. Those forces are working against it, along with government spending, AI's energy demand, and an active war in the Middle East.
Every development comes with good and bad, and headlines tend to exaggerate both. Using AI to cut through that noise is the focus of Jaspreet's free November 17 livestream, and investors who attend live get his team's top 10 AI research prompts.
Your job isn't to panic at every Fed headline. It's to cut through the noise and find the opportunity, because emotions are the enemy of profits.
