Recession or 4% Inflation?? What is worse??

**Michael Zuber** (0:01)
All righty, folks. I think we are coming to a decision point for the powers that be. What I see going forward really isn't a choice about rate hikes or something of that nature, but it is actually a choice between 4% inflation or a recession.
So the question is, if you wanna chime in and leave comments below, I would love to hear what my audience has to say. What do you think is worse? Consistent 4% inflation for a couple of more years, at least, or a 9 to 15 month recession?
This is what I think the Fed, Treasury is really dealing with. If they raise rates, it will be a series of rate increases. The Fed traditionally doesn't tweak, doesn't do a single rate hike. So it would unlock a series of two or three rate hikes. That could potentially impact the economy, it could blow up the AI trade, and it could cause a nasty recession. Now, recessions are obviously painful. However, they are historically short, short being nine to 15 months. A recession would likely also see stocks fall, right? The stock market at a record high would fall. Unemployment would undoubtedly increase. Bankruptcies, all kinds of nastiness would ensue.
Or, or the Fed could lean into a rate cutting cycle, which would undoubtedly unlock animal spirits and cause another burst of inflation, likely for a couple of years.
Again, if you are an asset owner, you would obviously like some more inflation, especially if you have fixed rate debt. This is what I do think the powers that be are looking at. Again, with what I see out there, obviously, I am in the rate hike camp. I haven't changed that opinion. But I do realize we are staring at a fork in the road. Do we want 4% inflation, or do we want the potential of a recession in 2027? So that's where we are. I think it's an interesting question. Let me know what you want below, 4% inflation or a recession. Just love to see what the audience has to say. What else was said? We got Scott Bessent. He's over at the G20. He's obviously traveling with Kevin Warsh. Who would like to be a fly on the wall in that conversation? Bessent said, quote unquote, traditionally, you don't raise rates into a supply shock. Now what is that code for? Oil has had a supply shock. Why would you penalize the American economy, businesses, the government by raising rates?
Torsten Slock, an economist that I love to read, basically says what I highlighted and believe to be true as well. He says, if the Fed does hike in September, it will come with several more hikes. Again, folks, you can go ahead and look at the history of the Fed, which obviously I've done the last 30 years. They usually go in rate hiking or rate cutting cycles, right? They don't just go up down, up down, like a chart or something of that nature.
Rate odds as of this morning were up to 66%.
Again, they were in the low 30s just last week.
Citigroup and JP Morgan, poo poo, yes, poo poo, rate hikes. They say the data does not support a hike.
Interesting. I wonder where they're looking at. And again, folks, I think this is really interesting because I think earlier in the week, we had two other financial firms say rate hikes are coming in September and December. I want to say that was, who was that? I think they were two European firms, as I recall. But anyways, this is one of the things that I think Kevin Warsh wants. He doesn't want Wall Street on one side of the trade. He wants them to do their job. He wants them to place bets, and he wants them to win and, yes, lose if they're wrong, right? And as opposed to playing the referee and just, you know, not really doing their job.
Trump said yesterday, although he said something else this morning, yesterday, again, this is important, right? This is evolving, folks. Trump said yesterday, lots of respect for Kevin Warsh, and he'll do what he has to do. This morning, Trump is on the wires talking about, we need rate cuts, we should be the lowest rates. You know, the traditional things he said under Powell, he is now starting to say under Warsh. Tom Lee, the ultimate bull, says the market could rally very, again, very substantially if the Fed holds rates in September. Basically telling us that the market is setting itself up for a rate hike, and if it doesn't happen, it will go higher.
I do want to highlight that we are now in September, folks. September, October, November, December, you have four months left in 2026 What are you going to do? Lots of you have been sitting on the sidelines trying to do things by yourself. And I keep telling you, we have the best school community out there for real estate investors, for wealth builders. Do yourself a favor, join school, spend 80 bucks, four times 20 for the rest of the year. See if the community, the education, the mentoring, the Q&A meets your needs, and start to take your wealth seriously. Join school, the link is right there on the screen, and we will see you there. And shout out, Amber. Amber, thank you for joining yesterday. Much appreciated. Please introduce yourself. All that good stuff, the family will welcome you. We got a bunch of rates shooting up around the world. The global rate environment is higher and higher. We got a 52 week high on mortgage rates yesterday, and folks, they're going higher today, my guess. Will we get 7% mortgage rates? Yeah, I think so. I think 7% mortgage rates are coming.