If the U.S. Federal Reserve were to lower interest rates to 1%, as former President Trump has urged, long-term rates would likely rise instead of fall. Trump often criticizes the Fed for keeping interest rates high, arguing that they have “choked the housing market” and made it harder—especially for young people—to buy homes.

However, mortgage rates are closely tied to the yield on 30-year U.S. Treasury bonds. These long-term rates mainly reflect expectations about future short-term rates and inflation. While short-term rates are directly set by the Fed, long-term rates also include an inflation-risk premium. That means if the Fed cuts rates sharply to 1% at a time when:

• Tariff-driven inflation pressures are rising, and

• Government spending remains high (an expansionary fiscal policy),

then inflation expectations would jump, pushing long-term rates higher. As a result, mortgage rates could hit record highs. Ultimately, the Fed would likely be forced to raise rates again quickly to control inflation—risking a recession in the process. In short, Trump’s statements about the Fed are mostly political theater. Smart traders and investors should look past the noise and focus on real data and long-term economic trends.

U.S. stock markets continue to rise, brushing aside weak economic data and concerns about tariffs. Investors are betting that the Federal Reserve will eventually cut interest rates, fueling optimism across Wall Street. Technology stocks — especially those tied to artificial intelligence (AI) — remain at the forefront of this rally. The consensus view is that AI-related companies will keep driving the market’s growth for the foreseeable future.

Today, the combined market value of America’s “Big Seven” tech giants equals about 1.5 times China’s GDP, the world’s second-largest economy. These few companies now represent a major share of global wealth. Despite mixed data, the U.S. economy remains resilient, particularly the labor market. The AI boom continues to boost Productivity and growth, and there are still no clear signs of a “dot-com bubble.” Quarterly reports show steady productivity gains, suggesting that investments in AI are producing real economic value rather than pure speculation.

Leading financial institutions are also turning more bullish. Goldman Sachs recently raised its forecast for the S&P 500 index to 6,600, while Oppenheimer went even further, projecting 7,100. The profit growth of the seven largest U.S. tech firms is far outpacing the rest of the market — a trend accelerated by the rapid adoption of ChatGPT and other AI technologies.

In a major development, NVIDIA is reportedly planning a $100 billion investment in OpenAI. To put that in perspective, it’s roughly equivalent to building several 10-gigawatt hyperscale data centers — a massive infrastructure wave designed to train and deploy next-generation AI models. If completed, this would mark the largest direct investment ever made in a private AI company, cementing NVIDIA’s central role in the AI revolution and giving OpenAI a formidable infrastructure advantage.

The global surge in artificial intelligence marks another powerful signal that future electricity demand will far exceed today’s supply. Energy production, power optimization, and utility-infrastructure companies are now among the most logical long-term investment opportunities.

Consider this: GPT-5 alone consumes as much electricity as an entire country. Its estimated annual energy use is about 16.4 terawatt-hours — more than the total power consumption of nations like Myanmar, Cuba, Tajikistan, Georgia, or Slovenia. Across the United States, data-center electricity consumption is skyrocketing, and the trend shows no sign of slowing down. Major tech companies are scrambling to secure or even generate their own power supplies to meet the relentless energy demands of AI.

In this environment, natural gas is emerging as a key player. Analysts expect global demand for gas turbines to rise, and in the U.S., a significant share of future data-center power is projected to come from gas-fired power plants. Meanwhile, China now consumes more electricity than the United States, the European Union, and India combined. In 2024 alone, China’s power usage surpassed 9.5 trillion kilowatt-hours, reflecting the immense energy requirements of its industrial output. By contrast, Europe faces a period of economic stagnation and declining electricity demand. Germany, for example, has announced that given current energy costs, it does not expect any new factory openings before 2030.

Trump and his economic team are moving to restructure government subsidies, shifting from traditional grants to direct investments that include equity ownership. They’ve even floated the idea of creating a U.S. national wealth fund, similar to those in countries like Norway, Saudi Arabia, and the United Arab Emirates, where oil or foreign-exchange revenues are funneled into long-term funds that generate returns for future generations. The United States has never had such a fund. If implemented, this would mark a major shift in U.S. fiscal policy, changing how the government finances and oversees key industries. Instead of handing out free grants (like COVID-era relief packages or CHIPS Act subsidies), Washington would start taking ownership stakes or claiming part of the investment returns.

In practice, this means greater government influence over strategic companies such as Intel. Critics argue that this could amount to a form of “soft nationalization” giving the White House new leverage over corporate leaders and even the Federal Reserve.

Intel had little choice but to accept the terms: without cooperation, it wouldn’t qualify for funding under the CHIPS Act. The big question is whether this financial support will truly help Intel regain its footing. Despite billions in government aid, Intel continues to lag behind NVIDIA and other rivals, and large capital injections alone do not guarantee success. So far, Intel has received $2.2 billion out of a total $8.5 billion in grants. If a 10 percent stake in Intel is worth around $11 billion, then Trump’s new approach may already be shaping up to be a very profitable deal for the U.S. government.

Uncertainty about the U.S. economic outlook remains high. The unemployment rate is still low, and the labor market overall appears strongو making it one of the most important indicators for the Federal Reserve right now.

However, recent data has raised some concerns. The latest Non-Farm Payrolls (NFP) report came in weaker than expected, with large downward revisions to previous months. The unemployment rate rose to 4.2%, reflecting slower hiring and signaling that labor demand may be cooling faster than supply. Much of this adjustment, analysts note, is linked to higher immigration levels. These reports have significantly increased the odds of an interest-rate cut in September. Yet the situation presents a delicate balance:

• If the labor market truly remains stable,

• And the Fed still cuts rates,
  
  

then the move could overstimulate the economy and rekindle inflationary pressures, especially if companies ramp up hiring and investment again. Some PMI (Purchasing Managers’ Index) data still point to lingering price pressures, suggesting the inflation fight isn’t completely over. For now, companies show no plans for major layoffs, but they remain cautious about new hiring. Financial markets often react strongly to single data pointsو but the Fed must avoid doing the same. If policymakers rush to cut rates based on just one weak report, they risk loosening policy too soon, at the wrong time.

The best gauge of this concern will be the 10-year Treasury yield. If investors start to fear that the Fed is making a policy mistake, yields could rise even as rates fall. For now, however, yields are trending downward, hovering near 4%, suggesting that markets aren’t yet pricing in that fear.

In the first half of 2025, the U.S. dollar recorded its worst performance since 1973. Most of the weakness occurred during Asian trading hours, where investors from the region have been the largest sellers of dollars so far this year. The dollar also declined during European sessions, largely reflecting the stronger performance of non-U.S. equities compared to American stocks. In the first quarter, international markets outperformed the U.S., though American equities regained leadership in the second quarter. With the dollar already down sharply, foreign investors now have less incentive to hedge their dollar-denominated assets.

Looking ahead, the decline in the dollar may slow during the second half of 2025, especially during U.S. trading hours. The Fed’s steady and cautious policy stance removes one of the main drivers for further dollar weakness. Meanwhile, capital flows from Asia are likely to pause unless new global risk factors emerge. Still, the relative performance of global vs. U.S. equities remains a key wild card. If U.S. stocks weaken while international markets rise, the dollar could face additional downward pressure, particularly during European hours.

Overall, a sharp collapse of the dollar seems unlikely, but a selective downward bias remains; especially if global risk assets continue to perform well. The Dollar Index (DXY) may continue drifting toward 90, aligning with Trump’s preference for a weaker dollar that boosts U.S. exporters’ competitiveness.

Structural Headwinds
Concerns about the Federal Reserve’s independence have become a new, structural bearish factor for the dollar. The greenback now faces pressure from several forces:

• The prospect of easier Fed policy (rate cuts),

• Slowing U.S. economic growth, and

• Policy divergence between the Fed, the European Central Bank, and the Bank of Japan.
  
  

These dynamics point to a long-term structural downtrend in the dollar. If political interference threatens the Fed’s autonomy, markets could start pricing in a higher risk premium for holding dollars. The likely consequences would include:

• Higher long-term Treasury yields,

• Downward pressure on U.S. equities, and

• Further weakening of the dollar, as investors lose confidence in the Fed’s ability to manage inflation.
  
  

For now, markets do not yet price in this risk. Long-term Treasury yields are still trending lower, and U.S. stock indices remain near their highest levels in history, suggesting calm on the surface, even as deeper structural risks quietly build underneath.