It makes no sense to say that Powell was motivated by politics (the politics of liking Biden and not liking Trump) when he put the fed funds rate at ZERO percent under Trump, and enacted $5 trillion of QE under Trump. And even before COVID, in 2019, he inexplicably stopped normalizing rates and stopped quantitative tightening when asset markets resisted those efforts (a huge boost to Trump’s economic record in 2019). He didn’t “have to raise rates” by 550 basis points in one year under President Biden, and if he had been motivated by politics, he most certainly would not have (the market expected 150, not 550). And the Inflation Reduction Act passed AFTER Powell had raised rates, not before.

There is huge circularity in believing the fed funds rate should be where the two-year is.
And why would there be no term spread at all between 24 hours and 730 days?
~ David L. Bahnsen, July 1, 2025

What is likely meant in the question is that Chairman Powell cut rates in late 2024 and has not cut rates in 2025, yet. Some have suggested this is due to Chairman Powell trying to help the Democrats last year, and hurt President Trump this year. I’d prefer to take a more sober approach to answering this question.

First of all, I am in disagreement with Chair Powell about not cutting rates in the last meeting or two, and while I do not believe it is politically motivated, per se, I believe it is a bad decision to stay in a tightening posture right now versus a more neutral one (i.e. something closer to 3% in the fed funds rate). So nothing I am about to say suggests agreement with Chairman Powell’s decision not to cut in 2025 thus far.

Second of all, if there is “politics,” I think it can be called “reverse politics,” whereby the heavy pressure from the White House to force rate cuts has worked against the effort, as Powell has potentially resisted cutting rates to avoid looking like he is succumbing to pressure.

So with both of those things said, the idea that Powell was trying to help the Democrats with rate policy before this year is just simply absurd. He hiked rates from 0% to 5.5% in one year in the middle of the Biden term, the most aggressive rate hikes in a timeline like that in modern history. If Powell’s version of playing politics with rate policy was 550bps of rate hikes, he’s not very good at it.
~ David L. Bahnsen, June 30, 2025

Markets are a forward-pricing mechanism given all the known information. Corporate profits have never been higher, both in aggregate dollar terms and in terms of margins north of 12%. The economy continues to expand, interest rates are moving lower, and some of the geopolitical unrest seems to be subsiding (for now). There is plenty to be determined as far as tariff impact on those margins and what will come out of Congress on the tax bill, but all else equal, the backdrop is more positive than negative. To your point, the productivity gain from AI may well boost corporate profits in the future, just keep in mind the CAPEX that has already gone into the space over the last year alone was up 70% at nearly $340B. Markets are already priced for a lot of these positives, along with forward EPS growth north of 10%. My concern would be less with employment and consumer spending falling out of bed here, and to your question, and more with likely muted forward returns even if they do not.
~ Brian T. Syztel, June 26, 2025

The more tax-inefficient investments with higher ordinary income distributions would be better off in the IRA. This could range from either taxable Fixed Income, Private Credit, or some Hedge Fund/Alternative Investments. Dividend growth equity would also make sense in most situations. The same could be true for the Roth IRA, but I would opt for higher-octane growth stocks or alternatives in the Roth. The balances are typically smaller in the Roth IRA, as contributions are phased out above middle-class income levels, so having exposure to higher growth investments to grow the balance for larger future tax-free withdrawals would often make sense. Dividend Growth Equity could be owned in all the above, as well as after-tax accounts, as qualified dividends are taxed at lower capital gain rates. There isn’t a one-size-fits-all answer here, totally specific to the client and situation.
~ Brian T. Szytel, June 25, 2025