And Why the Reset Is Now Imminent

Every time I read another Federal Reserve analysis, I’m reminded why my confidence in the Fed has eroded over the years. Their models, their assumptions, their track record — all of it points to a policymaking institution consistently behind the curve, consistently misreading risk, and consistently underestimating the fragility of the financial system they helped inflate. This latest fixation on tariff-driven inflation is just more evidence that the Fed is focused on the wrong threat at the wrong time.

The hawks are clinging to a theory that hidden inflation is quietly building because businesses are absorbing tariff costs today and will supposedly unleash a wave of price hikes in 2026. That storyline might work in an academic model, but it has nothing to do with the reality American households are living through. When I look at consumer demand — really look at it — the picture is unmistakable: the economy is cooling rapidly, discretionary spending is weakening, and households are shifting into defensive mode.

Bank of America’s latest card-spending data shows lower-income families barely increasing spending at all. Even higher-income households — a group that typically props up consumption — are now slowing. Debit spending is rising faster than credit spending as families try to avoid taking on more liabilities. Surveys show more than 60 percent of households feeling financial stress and nearly 90 percent planning to shop at discount stores. That is a demand environment that kills pricing power, not one that fuels it.

The labor market, which the Fed continues to treat as “strong,” is also sending clear warning signals. Payroll growth has collapsed from 168,000 per month last year to only 29,000 this year. Construction is in retreat as commercial real estate deteriorates and homebuilders face rising inventories of unsold homes. And more than half of American workers now fear losing their jobs. Weak demand, shaky hiring, and recessionary dynamics across multiple sectors are not the conditions under which businesses start raising prices. They’re the conditions under which they fight to survive.

This is where the Fed’s narrative becomes dangerous. They’re not looking at the broad picture. They’re drilling into three-month annualized numbers that show goods inflation ticking up — while ignoring the fact that year-over-year goods inflation sits at just 1.5 percent. Short-term bursts of price movement are not trends; they’re noise. And yet the Fed is treating the noise as a crisis while downplaying the real crisis that is unfolding beneath them: weakening demand, fragile labor data, and an economic slowdown that has already begun.

And here’s the truth I’ve been writing about for years:
We are overdue for a reset — badly overdue.
The Fed has spent more than a decade pumping liquidity into markets, suppressing interest rates, and inflating asset prices to levels that make no economic sense. Their policies created the very bubbles they now pretend to "manage." Instead of allowing natural cycles to cleanse excesses, they intervened every time. And now, the cost of those interventions is coming due.

Markets remain priced as if nothing can go wrong. But everything is going wrong — from global instability to inflation that never truly fell back to target to a Fed that is terrified of its own shadow. Their tariff obsession isn’t just misguided; it’s a distraction from the far more serious risks forming across the economy.

The reset is coming.
The timing is always uncertain, but the conditions that precede major market breaks are now firmly in place:
– Weakening demand
– Fragile employment
– Asset prices far detached from fundamentals
– Mounting debt at every level
– A Fed still misreading the landscape

My role as an advisor is not to sugarcoat reality but to prepare the families and retirees I serve for what’s ahead. We are moving toward a moment when fundamentals will reassert themselves — decisively. Those who remain invested according to yesterday’s assumptions will feel the full force of the adjustment. Those who prepare will have the opportunity to protect themselves — and even capitalize on the recovery that follows.

The Fed may continue to cling to its models and its narratives. But investors don’t have that luxury. We have to read the data honestly, understand the risks objectively, and make decisions based on what’s actually happening — not what policymakers wish were happening.

The reset is no longer a distant possibility.
It’s the logical outcome of years of policy distortion.
And it’s getting closer by the day.