And Why the Reset Is Now Imminent

Every new statement from Federal Reserve officials reinforces how disconnected monetary policymakers have become from the real economy. Their confidence in the strength of the consumer, the labor market, and overall demand simply doesn’t match what the data now shows. While they continue to warn about inflation driven by tariffs and individual policy actions, the larger and more immediate risk is a sharp economic slowdown already unfolding beneath their feet.

Recent demand indicators leave little room for doubt. Bank of America’s card-spending data shows a rapid loss of momentum across income levels, and payroll growth has collapsed from 168,000 to just 29,000 in a single month. These aren’t normal fluctuations — they are signals of a weakening economy struggling under the weight of higher costs, rising delinquencies, and shrinking savings. In an environment where households are stretched thin, the Fed’s fixation on tariff-related inflation misses the far more urgent warning signs.

What policymakers call “strength” is increasingly just noise. Their own models — the same ones that missed the inflation surge in 2021 and the fragility of Silicon Valley Bank — now appear to be underestimating the speed of the slowdown. A Fed that spent two years reacting too slowly to rising prices is now poised to repeat that same pattern on the downside. Instead of acknowledging a cooling economy, they are holding rates in restrictive territory at precisely the moment the system can least afford additional strain.

Meanwhile, asset markets reflect a very different story than the one the Fed tells. Years of artificially low rates have left equities extremely leveraged to optimism and cheap money. Valuations remain historically stretched even as earnings flatten, credit tightens, and liquidity drains out of the system. This is precisely the kind of environment where a seemingly small policy error can trigger a major repricing across stocks, real estate, and credit — a true market reset brought on not by panic, but by math.

For retirees and families depending on their portfolios, this divergence between narrative and reality is dangerous. When policymakers anchor their decisions to outdated data and misread the risks building in front of them, investors become exposed to sudden and severe volatility. This is why independent thinking matters — and why preparation always beats prediction. You can’t control the Fed’s decisions, but you can control how prepared your portfolio is for a wide range of outcomes, including the one we are now approaching.

A sharp economic rebound could change the trajectory, and if inflation falls faster than expected, the Fed may eventually pivot. But based on the most reliable forward-looking indicators — from consumption trends to employment softening to stretched valuations — the risk of a significant correction in the next 12 to 24 months has increased meaningfully. The conditions that typically precede a reset are in place, and the window to prepare is narrowing.

We are living in historic times, and families deserve an approach that recognizes the moment we are in — not the one policymakers wish we were in. Staying defensive, maintaining liquidity, diversifying across non-correlated assets, and avoiding overexposure to inflated markets are steps every prudent investor should consider. These are not ordinary conditions, and this is not a normal cycle. A major adjustment is coming, and those who prepare now will be positioned to navigate it with clarity and confidence.