Rate cuts are likely coming – who will it help?… why the American Dream 1.0 no longer works… evidence of the emerging American Dream 2.0… the critical portfolio action steps to take today
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As I write Thursday morning, Wall Street is all but certain we’re going to get a quarter-point interest rate cut at next week’s Federal Reserve meeting.
The CME Group’s FedWatch Tool shows that traders put the odds of that cut at almost 90%.
But there’s an important question that Wall Street isn’t asking…
What will a rate cut really accomplish in the economy we’re living in today – not the economy we had yesterday?
The truth is that the “old math” behind rate cuts may no longer apply. In fact, the old model might be breaking in real time.
Understanding this shift is becoming essential for anyone trying to protect and grow their portfolio in a market where the old playbook is quietly falling apart.
Why the Fed feels pressure to cut – and why the reason matters
Yesterday’s ADP employment report found that private payrolls unexpectedly fell by 32,000 jobs. That’s a troubling signal. But it’s just one of many.
This morning, the latest Challenger, Gray & Christmas report found that 2025 layoffs have hit 1.17 million – that’s 54% higher than the same 11-month period last year. It’s also the highest number since 2020’s Covid layoffs.
As we’ve been tracking here in the Digest, hiring is slowing… layoff announcements are rising… wage growth is cooling… consumer confidence keeps slipping… and delinquencies are creeping higher – from credit cards, to car payments, to student loans.
Bottom line: The labor market – the foundation of the American economy – is showing cracks.
Now, historically, this is exactly the environment in which the Fed comes to the rescue by cutting interest rates.
Lower rates mean cheaper loans… which means more business investment… which translates to more hiring… which spurs income growth… which promotes a stronger consumer spending and a more robust GDP.
But what if this model no longer fits the world we’re living in?
What if this rate cut won’t help lower-income Americans who are struggling… even while it gooses the portfolios of higher-income Americans who are thriving already?
This brings us to one of the defining realities of today’s economy…
Welcome to the K-shaped economy – where the two halves of America live in different worlds
If you’ve been reading the Digest for a while, you’ve seen us write about the K-shaped economy:
- The “Upper K” – Americans with rising wealth due to the increased value of their assets
- The “Lower K” – Americans whose wealth is primarily wage-based, who are being squeezed by stagnant wages and inflation
As stock owners watch their net worths climb, wage earners are watching their purchasing power fall.
This isn’t anecdotal. As I’ve highlighted in prior Digests, while the wealthiest 10% of Americans now account for nearly half of all consumer spending, almost half of all Americans report that they’re living paycheck to paycheck.
This split is becoming the defining feature of today’s economy.
Here is where the Federal Reserve comes in…
Rate cuts play differently depending on which spoke of the “K” you’re living in. For Upper-K Americans, a rate cut is like rocket fuel:
- They push stocks higher
- They inflate asset values
- They ease margin, mortgage, and investment borrowing
- They reinforce the wealth effect that keeps high-end spending strong
But for Lower-K Americans, cuts are less “fuel” and more “mild pain reliever”:
- A little interest-rate relief
- Slightly lower monthly bills
- A bit more wiggle room in the family budget
Yes, they’re helpful. But they don’t fix the deeper, structural issue weighing on this group, which is another important story we’ve been tracking here in the Digest…
Namely, the replacement of human workers with software, robotics, and AI.
Here is where the economic logic of rate cuts gets uncomfortable.
The fire that’s growing – and why rate cuts don’t extinguish it
Now, I’ll say up front that it’s too simplistic to lay our economy’s challenges directly at the feet of AI and robots replacing human workers.
We’re dealing with lingering high retail prices, tariff uncertainty that hampers corporate planning, and a still-fragmented global supply chain that raises costs in places we don’t always see.
But unlike those other pressures, which ebb and flow with the business cycle, automation is a structural, compounding, and non-cyclical force.
Rate cuts can lower borrowing costs, but they can’t reverse a company’s decision to automate a warehouse, shift workflow toward software, or replace a call center team with an LLM.
This is the direction we’re heading. And, if anything, cheaper capital accelerates this shift.
So, while AI/robots aren’t the only challenge facing the labor market, it’s the one that rate cuts can’t solve.
To illustrate, let’s use a simple analogy…
Lower-K Americans have their feet near the fire right now.
As I’ve profiled with data in recent Digests, inflation has scorched many family budgets. Debt costs have risen. Savings are running low.
Rate cuts pull them back from the fire a little via slightly cheaper credit and perhaps lower mortgage rates.
But what if the fire itself keeps getting bigger? What if that flame is being fed by something more profound?
As you’ve already guessed, I’m talking about corporate America replacing human workers with AI, robotics, and automation systems at the fastest pace in modern history.
Pulling people back from the flames doesn’t help much if the flames are rising faster than you can move your feet.
And this is precisely the point we need to confront…
Rate cuts can reduce financial pressure – but they do not restore lost income from jobs being replaced.
So, yes, rate cuts will help. But the real risk to the economy isn’t the cost of money. It’s the labor market’s sudden vulnerability to AI.
This is why the December rate cut might not deliver the kind of relief many struggling Americans hope for.
But it may deliver plenty of relief to one group…
Why a December cut is great for Upper-K Americans
Rate cuts may not save workers, but they’ll almost certainly help investors.
A rate cut boosts:
- Equity valuations
- Growth and small-cap stocks
- AI infrastructure buildouts
- Corporate balance sheets
- And the wealth effect
And in this new era, where corporate earnings can grow without increasing headcount (because AI/machines are doing more of the work), rate cuts disproportionately benefit the owner class.
Bottom line: Due to AI, rate cuts will help capital far more than they’ll help labor.
So, what does this mean for markets? And for society?
It means the K-shaped divide in our economy will likely become even more pronounced… greater wealth concentration… more political pressure and division… and growing social tension as wage earners watch asset owners race further ahead.
Now, zeroing in on you and me, this means we must position ourselves on the ownership side of this transition.
Which brings us directly to the central idea behind Monday’s American Dream 2.0 Summit.
The American Dream 1.0 is giving way to American Dream 2.0
Let’s go to our technology expert, Luke Lango, editor of Innovation Investor:
For decades, the social contract was simple: Work hard, play by the rules, invest a little, and you’ll get ahead.
That was the American Dream 1.0.
But Luke says that this dream is over:
You don’t need a PhD to see that contract has been smashed.
Corporations are pouring billions into technologies that replace labor, not reward it.
AI software is eating white-collar work. Warehouses are turning into robot-run zones. Stadium-sized data centers operate with skeleton crews.
Meanwhile, the middle class is being squeezed from every direction…
At the same time, stocks are hitting new highs. The top 1% has money to burn. AI millionaires and billionaires are being minted every day.
Replacing the American Dream 1.0 is a new, uncomfortable reality…
Workers get squeezed while owners get wealthy. This is the American Dream 2.0.
In other words, the new path to financial security flows through the ownership of assets powering AI, automation, and America’s rebuilding.
It’s not a theory, or what’s going to happen – it’s happening right now.
More than $11.3 trillion is already flowing into:
- AI supercomputing campuses
- Humanoid robotics factories
- Data centers
- Smart logistics hubs
- Semiconductor fabs
- Rare-earth and critical mineral infrastructure
- Advanced energy systems
- Reshoring and industrial revival projects
But as Luke notes, this isn’t a “jobs boom” – it’s an automation boom
A $10 billion data center may employ 5,000 construction workers, but only 500 long-term employees.
Meanwhile, factories are being built with robotics at the center, not humans. And warehouses are transitioning from “humans with barcode guns” to AI-powered robotic fleets.
This is the fire that’s increasingly burning Lower-K Americans. And this is why next week’s rate cut won’t extinguish that fire.
So, what will put out the fire?
Ownership. That’s it.
In an automation-driven economy, ownership isn’t optional – it’s survival.
So, it’s critical that everyone move from the vulnerable side of the equation to the empowered side.
Anyone relying on wages alone must start aligning their assets with the technologies reshaping the economy.
This is the message behind Monday’s American Dream 2.0 Summit
This is a closed-door strategy session featuring Luke, Louis Navellier, Eric Fry, and a select group of special guests.
I’m told they won’t be sugarcoating the reality of what’s happening today:
- AI is accelerating a historic labor reset
- Firms believe they can grow profits without growing payroll
- Wealth is concentrating in the choke points of automation
- Investors who align with these choke points may see extraordinary gains
- Investors who sit out risk being left behind
But for investors who see this shift – and act – the American Dream 2.0 appears markedly different…
Our three experts believe that the next 12–18 months could see a late-cycle melt-up with the Nasdaq-100 potentially doubling. And leading tech/AI companies could surge multiples higher as the wealth concentration intensifies.
On Monday, Louis, Eric, and Luke will show investors how to get on the right side of the fire with a collection of hand-selected stocks designed for this American Dream 2.0.
The last time they collaborated on a “power portfolio” was in late 2024 – and it returned 32%, nearly triple the Dow and more than double the S&P 500 over the same period.
Given the rate at which wealth is concentrating today, I wouldn’t be surprised if this latest portfolio performs even better.
Wrapping up
The December rate cut will matter, but not in the way most Americans think.
Even with a cut, expect the fire under the Lower-K Americans to get hotter as automation fans the flames.
So, let’s return to the question at the top of today’s Digest…
Given the economy we have, not the one we wish we had, what will a rate cut really accomplish?
Not much if you’re in the Lower-K, still hoping for the American Dream 1.0…
But it could be huge if you’re an owner, having positioned yourself for the American Dream 2.0.
For all the details on this from Luke, Louis, and Eric, click here to sign up for Monday’s summit at 10:00 a.m. Eastern.
Have a good evening,
Jeff Remsburg
