Are we in a recession?
Not by the usual definitions.
Then why would interest rates fall?
The current administration has signaled the need for rate cuts to spur further economic growth ahead of midterms. Let’s be clear. Historically, 3.5% is on the lower side of the interest rate spectrum. But that doesn’t matter. We believe there is a host of reasons why they should fall, but those don’t matter either.
Trumps fed chairman nominee is Kevin Warsh. He’s actually known as a monetary hawk, not a dove. During his time as a Fed Governor (2006-2011), he was one of the most vocal opponents of extended low rates and QE. This creates a paradox if you’re expecting aggressive cuts.
However, it does give him more of a leg to stand on in front of the Senate Banking Committee before his nomination is sent to the full Senate. Only time will tell if he gets the job, but that clock is ticking. That said, his term ended 15 years ago and smart people change their positions to current circumstances.
The national debt in 2011 was $14 trillion.
The national debt in 2026 is $38.6 trillion.
Reasons why a fed rate cut will be justified.
Boost Economic Growth Pre-Election
- Lower rates stimulate borrowing and spending
- Gooses GDP growth numbers that the administration can campaign on
- Creates “good times” feeling among voters
Weaken the Dollar
- Lower U.S. rates → dollar weakens vs other currencies
- Makes U.S. exports more competitive globally
- Helps reduce trade deficits (admin priority)
Support the Stock Market
- Lower rates = higher stock valuations (present value of future earnings increases)
- Rising stock market = wealth effect + positive sentiment
- Administration can point to market gains as proof of success
- Wealthy donors and supporters benefit
Reduce Government Borrowing Costs
- Federal deficit is ~$1.5-2 trillion annually
- Lower rates = less interest expense on national debt
- Saves hundreds of billions in debt service
- Creates fiscal space for tax cuts or spending programs
Support Housing Market
- Lower rates → lower mortgage rates → housing affordability improves
- Construction/real estate sectors employ millions
- Homeowners can refinance, freeing up cash to spend
- Housing is politically sensitive (homeownership = middle class dream)
Corporate Debt Refinancing
- Massive amount of corporate debt issued at low rates 2020-2021
- Much of it maturing 2025-2027
- Companies struggling to refinance at 5%+ rates
- Lower rates prevent wave of defaults/distress
Regional Banking Stability
- Small/regional banks still stressed from 2023 issues
- Lower rates ease their interest rate risk
- Prevents another SVB-style crisis
- Banking stability = political win
Private Equity/Real Estate Rescue
- Commercial real estate stressed (office vacancies, refinancing issues)
- Private equity firms struggling with debt-financed deals from 2020-2022
- These sectors donate heavily to politicians
- Lower rates = bailout without calling it a bailout
Prevent Market “Accident”
- Markets addicted to low rates after 15 years (2008-2022)
- Extended high rates increase risk of liquidity crisis or “break something” event
- Pre-emptive cuts as insurance policy
- “Don’t fight the Fed” → keeping markets calm
Impact for Business
A cut from here would be a mixed bag for businesses: cheaper money and stronger demand on one side, more inflation potential and long‑term risk on the other. Rate cuts in a HEALTHY economy equal a soft landing which is 🟢 very positive for most businesses.
Real Estate / Property Owners ⭐⭐⭐⭐⭐
- Property values surge
- Refinancing saves massive amounts
- Development projects become feasible
- Cap rates compress = values up
Capital-Intensive Businesses ⭐⭐⭐⭐⭐
(Manufacturing, Construction, Transport)
- Equipment financing cheaper
- Expansion funding easier
- Customer financing improves
Tech / Growth Companies ⭐⭐⭐⭐⭐
- Valuation multiples expand dramatically
- VC/PE money flows freely
- Unprofitable growth models viable again
Small Businesses ⭐⭐⭐⭐
- SBA loans cheaper
- Lines of credit more accessible
- Local spending increases
Soft Landing Scenario
(Rate cuts without recession)
✅ Lower borrowing costs
✅ Rising asset values
✅ Strong consumer demand
✅ Strategy: EXPAND AGGRESSIVELY
Bottom Line for Business Owners
The opportunity is MASSIVE if you act correctly
✅ Refinance all debt (immediate cash flow boost)
✅ Lock in long-term financing even if you don’t need it now
✅ Consider selling if you’re near retirement (peak valuations)
✅ Expand/acquire if you’re growth-oriented (cheap capital)
✅ Don’t sit on cash (inflation + opportunity cost destroys value)
Businesses that thrive:
- Recognize opportunity early
- Access cheap capital aggressively
- Invest in growth while others hesitate
- Optimize balance sheets
Businesses that struggle:
- Stay too conservative
- Miss the refinancing window
- Hold too much cash
- Let competitors gain advantage