High federal debt could prompt Fed to cut rates, impacting GDP and favoring hard assets.

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The primary reason prompting the Fed to consider cutting interest rates is the increasing cost of servicing the Federal debt, expected to approach 6% of GDP by year-end. A reduction of 150 basis points could decrease the interest payment by 33%, addressing severe debt imbalances. This environment favors hard assets like real estate, as seen with Blackstone’s extensive acquisitions, while the resurgence of inflation poses a significant risk, highlighted by the recent uptick in ISM services prices, a reliable leading indicator.

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