Polkadot Eyes Wall Street Investors to Close Gap With Ethereum, Solana

Cryptocurrency

Summary:

The Polkadot team stated that the Polkadot Capital Group will help traditional finance participants navigate the network and identify investment opportunities.

Polkadot is moving to reposition itself in the current bull market by introducing a dedicated unit to bridge its ecosystem with institutional capital.

On Aug. 19, the network announced the launch of Polkadot Capital Group, a capital markets-focused division designed to attract Wall Street investors and build stronger ties with traditional finance.

According to the network team, the initiative aims to capitalize on recent developments, including the growing crypto demand from institutional players and increasing clarity in the US regulatory environment.

The Polkadot team stated that the Polkadot Capital Group will help traditional finance participants navigate the network and identify investment opportunities.

David Sedacca, the division’s lead, said: “Our goal is to lead through data-driven education, driving adoption through knowledge transfer, and adapting in real-time to the dynamic priorities of institutional market participants.We envision a future where institutions clearly understand the unique value of our network and can engage confidently.”

Gavin Wood returns to Parity

This organizational pivot arrives simultaneously as a leadership change within Parity, the blockchain network’s developer.

On Aug. 13, Polkadot co-founder Gavin Wood confirmed he would return as CEO by the end of the month, replacing Björn Wagner, who has served in the role for three years.

Wood said his decision was driven by “leverage,” explaining that with the core architecture completed and markets gaining momentum, his leadership from the top seat would allow Polkadot to accelerate execution.

He added: “Nothing changes day-to-day. Teams, projects, and plans stay on course. But the bigger picture is evolving and you’ll start to feel that in the months ahead.”

Why Polkadot needs these changes

The timing of these changes reflects Polkadot’s recent struggles to compete with heavyweight rivals such as Ethereum and Solana.

The two ecosystems have captured billions of dollars in DeFi and stablecoin activity. By contrast, Polkadot hosts only about $88 million in stablecoins, a fraction of its competitors’ figures.

Moreover, current market forces have amplified these Polkadot challenges.

While Ethereum has risen nearly 30% this year thanks to rising institutional interest and Solana has benefited from strong memecoin activity, Polkadot’s DOT token has lost more than 40% of its value in 2025.

This underperformance has fueled concerns among backers, who see governance restructuring and capital market outreach as necessary steps to restore relevance.

Source: Cryptoslate

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Manuel

Central Bank

Economic

The investment world will turn its attention away from Wall Street and toward Wyoming this week.

Some of the world’s leading economists and monetary policymakers will meet for the 48th annual Jackson Hole Economic Symposium. The long-standing conference has often served as an opportunity for key officials to make public statements that have implications for Americans' wallets.

This year is no exception. Markets and economists will closely follow Federal Reserve Chair Jerome Powell's remarks on Friday. Powell is expected to address potential next steps for the central bank as it decides whether or not to cut its influential interest rate.

Several other policymakers are expected to speak at the three-day event, which brings together representatives of central banks from nearly 40 countries to meet with other business and economic leaders. This year’s theme is “Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy."

Sponsored by the Kansas City Federal Reserve, the meeting has been hosted at Jackson Lake Lodge for most of its history. The National Park Service provides a mountain backdrop for the 120 people who attend every year.

Here’s more about what to expect from this year’s symposium.

Fed Chairs Have Made Important Remarks During Historic Periods

When former Federal Reserve Chair Paul Volcker spoke at the event in 1982, he shifted the conference’s focus from agricultural issues. He started a tradition of the Fed chief addressing the meeting each year.

Over the years, the meeting has featured important speeches that have marked a turning point for the economy. Volcker used his remarks to defend his interest rate policy as the central bank fought record inflation in the early 1980s, while former Chair Alan Greenspan addressed issues with the 1990s tech bubble when he spoke there.

Amid the 2008 financial crisis, then-Chair Ben Bernanke addressed key monetary policy issues at the conference.

The conference is no longer focused solely on U.S. economics. European Central Bank President Christine Lagarde is among the speakers scheduled for this year’s conference.

Interest Rates Will Likely Be at the Top of the Agenda for Powell

Powell’s comments will focus during this year's conference as investors await clarity on the Fed’s policy path ahead.

Recent inflation readings have shown price pressures remain above the Fed’s target of 2%, while worries about a weakening labor market intensify. While most investors believe the Federal Reserve will make its first interest rate cut when it next meets in September, Powell’s comments could provide some insight into how the board will move.

“With markets pricing in a quarter-point cut for September, and some even expecting a bigger move, the Fed chief will use this platform to appropriately set forward guidance and outline his views on inflation and the labor market,” wrote BMO Senior Economist Priscilla Thiagamoorthy.

Powell Expected to Weigh In on Fed’s Decision-Making Playbook

Powell will also likely address another key issue for the Federal Reserve. The title of his speech indicates he will discuss the central bank’s framework for analyzing and acting on economic data.

The Fed's policymaking committee updates the framework periodically; the most recent iteration was established in 2020. So far this year, the Fed has been analyzing its current strategy and taking feedback. It is looking to complete its review by late summer and will then assess its findings.

A team of analysts at Deutsche Bank wrote that the current framework may have slowed the Federal Reserve's response to the 2022 spike in inflation. They said that could influence Powell's take on the framework.

“[We] expect Powell’s speech to call for rolling back the 2020 modifications,” the note said.

Source: Investopedia

To stay updated on all economic events of today, please check out our Economic calendar

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Adam

Economic

Indian Prime Minister Narendra Modi’s top aide and China’s chief diplomat hailed their nations’ warming ties, in another signal both sides are recalibrating their foreign policy amid mounting tariff pressure from US President Donald Trump.

“I am very happy that in the last nine months, there has been an upward trend” in bilateral ties, India’s National Security Adviser Ajit Doval said Tuesday ahead of a meeting with Chinese Foreign Minister Wang Yi in New Delhi. “Borders have been quiet, and there has been peace and tranquility.”

On his first visit to New Delhi in three years, Wang trumpeted improving ties between the Asian neighbors as an opportunity for “growth.” “The setbacks we experienced in the past few years were not in the interest of the people of our two countries,” he added.

Wang is scheduled to meet Prime Minister Narendra Modi later in the day, before the Indian leader travels to China this month for a regional summit — his first visit there in seven years. Wang said Beijing attaches “great importance” to Modi’s trip to the Shanghai Cooperation Organisation summit.

Ties between the world’s two most-populous nations soured after a bloody border clash five years ago, but relations have recently been on the mend, with efforts gaining urgency amid Trump’s tariff policy. Beijing has loosened curbs on urea exports, New Delhi has reinstated tourist visas for Chinese nationals, while a growing number of Indian businesses have been seeking partnerships with Chinese companies for deals including technology transfers, Bloomberg News has reported.

Despite the thaw, Beijing’s close alliance with India’s rival Pakistan leaves New Delhi wary. China announced that Wang will be heading to Pakistan on Aug. 20-22.

“Our policy is to develop friendly and cooperative relations with both India and Pakistan,” Chinese Foreign Ministry spokeswoman Mao Ning said Tuesday at a regular press briefing in Beijing. China hopes the two nations can find a “proper solution” and is “willing to play a positive role,” she added.

India’s recent outreach to China underscores its tense relationship with the US under Trump. New Delhi initially welcomed the Republican’s second stint in the White House, hopeful of striking a quick trade deal and building on years of closer ties with the US, its largest trading partner.

The two sides have been at odds recently after Trump imposed 50% tariffs on India over its purchases of Russian oil, a level that would decimate many Indian exporters.

Against that backdrop, Wang’s visit has taken on added significance. During the trip, China has also assured India of supplies of fertilizer, rare earth minerals and tunnel-boring machines, an official in New Delhi told reporters, asking not to be identified because discussions are private.

“History and reality proves once again that a healthy and stable India-China relationship serves the fundamental long-term interest of both our countries,” Wang said.

Source: Bloomberg

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Manuel

Central Bank

Economic

The Federal Reserve's top regulatory official suggested on Tuesday that central bank staff should be permitted to own small amounts of crypto products, arguing experience would better inform their work policing activities in those financial markets.

Fed Vice Chair for Supervision Michelle Bowman said easing restrictions on staff investments may also help recruit and retain expert bank examiners, and "de minimus" holdings of crypto and other digital assets would help staff develop a working understanding of those products.

"There’s no replacement for experimenting and understanding how that ownership and transfer process flows," she said in prepared remarks delivered to a crypto conference in Wyoming. "I certainly wouldn’t trust someone to teach me to ski if they’d never put on skis, regardless of how many books and articles they have read, or even wrote, about it."

Bowman did not offer specifics in terms of amounts or types of holdings she was considering, but her remarks serve as the latest indication of the friendlier tone regulators in the Trump administration are taking towards the crypto sector. Under Trump, the Fed and other bank regulators have already taken several steps to be more open to crypto activities by banks, after years of requiring banks to clear additional hurdles before diving into the sector.

Throughout her remarks, Bowman emphasized that bank regulators need to be less skeptical of new technologies in the financial sector, including crypto products. She accused bank watchdogs of having an "overly cautious mindset," which she argued could actually hinder the banking sector by placing undue restrictions on activities.

"We must choose whether to embrace the change and help shape a framework that will be reliable and durable - ensuring safety and soundness and incorporating the benefits of both efficiency and speed - or to stand still and allow new technology to bypass the traditional banking system altogether. From a regulator’s perspective, the choice is clear," she said.

Bowman said there are risks that come from any rapid transformations, but she maintained regulators need to acknowledge the potential benefits of those changes as well as potential problems.

"Risks may be offset or at least determined to be manageable when we recognize and consider the potentially extensive benefits of new technology," she said.

Source: Reuters

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Adam

Commodity

The global energy landscape is undergoing a massive transformation, with electricity emerging as the new engine of economic growth. The demand is increasing, outpacing all other energy sources as the world shifts toward electric vehicles (EVs), AI-powered data centres, and digital infrastructure.

Renewables are leading the charge, but nuclear and fossil fuels still play vital supporting roles. This accelerating electrification wave is driving a surge in demand for key raw materials. Lithium powers the batteries, copper delivers the current, and uranium ensures grid stability. These three elements have become the backbone of the energy transition and a strategic focus for long-term investors.

Rising Global Electricity Demand

The International Energy Agency (IEA) reports that global energy demand increased by 2.2% in 2024. However, electricity demand surged by 4.3%, nearly double the pace of overall energy growth.

Renewables accounted for the largest share of demand growth at 38%, followed by natural gas (NG) at 28% and coal at 15%. Oil contributed 11%, while nuclear made up 8%. The data shows that the energy transition is underway, with renewables leading growth, but fossil fuels and nuclear still play significant roles in meeting rising electricity needs.

Why Lithium, Copper, and Uranium Are Set to Soar in the Global Energy Transition_1

This surge reflects structural shifts in the global economy. More households and industries now rely on electricity-intensive appliances such as air conditioning. Manufacturing is also moving toward electricity-heavy processes, increasing pressure on grids worldwide.

New technologies are driving additional demand. Rapid adoption of EVs, the expansion of AI and data centres, and the broader digitalisation trend require vast amounts of power. This shift underscores electricity’s central role in future growth and highlights the pressure on raw materials needed to sustain it.

Why Critical Materials Matter for the Energy Transition

The surge in electricity demand has increased the need for battery solutions. In particular, lithium is essential for batteries and energy storage systems that support solar and wind power. Furthermore, the rapid expansion of EVs and grid-level storage creates long-term structural demand. The lithium shortages can slow adoption and disrupt renewable integration. According to Statista, the chart below shows that the demand for lithium-ion batteries will reach 9,300 gigawatt-hours by 2030.

Why Lithium, Copper, and Uranium Are Set to Soar in the Global Energy Transition_2

On the other hand, copper is used in motors, charging stations, transformers, and transmission lines. The shift toward EVs and smart grids is driving a surge in copper demand. Without copper, clean energy infrastructure cannot scale. Grid upgrades in emerging economies also depend on a reliable copper supply.

According to the chart below, global data centre power demand is projected to reach 127 GW by 2028, mainly driven by generative AI workloads. As a result, this rapid growth in electricity needs strengthens the case for uranium. Unlike intermittent renewables, nuclear power offers a stable, carbon-free baseload source essential to supporting AI and digital infrastructure. Therefore, uranium ensures energy security in areas where renewables alone fall short.

Why Lithium, Copper, and Uranium Are Set to Soar in the Global Energy Transition_3

Lithium stores the power. Copper delivers it. Uranium keeps it steady. These three elements form the backbone of the electrified world. As electricity becomes the dominant force in global energy, the pace of the transition now hinges on the supply of electricity. Policymakers and investors are watching them closely as electricity becomes the world’s primary energy driver.

Lithium Rebounds Sharply as Supply Tightens and EV Demand Surges

Lithium carbonate prices jumped over CNY 84,000 per tonne in August, hitting a one-year high. This rally was over 30% after a rebound from the June bottom, which erased earlier losses for the year.

Why Lithium, Copper, and Uranium Are Set to Soar in the Global Energy Transition_4

Why Lithium, Copper, and Uranium Are Set to Soar in the Global Energy Transition_5

The lower output from key mines helped offset oversupply concerns. China pledged to cut capacity in deflation-hit industries, signalling tighter lithium supply. Investors responded by betting on reduced output from the world’s top lithium refiner. This momentum was further increased after CATL halted production at its Jianxiawo mine, which lacked a renewed permit. The mine accounts for about 5% of global supply.

The chart below compares the performance of three lithium-related ETFs: the Sprott Lithium Miners ETF (LITP), Global X Lithium & Battery Tech ETF (LIT), and iShares Lithium ETF (ILIT). All three ETFs experienced a prolonged downtrend from early 2023 through mid-2024, reflecting lithium market weakness. However, a noticeable rebound occurred around April–May 2025, shown by the upward arrows.

Why Lithium, Copper, and Uranium Are Set to Soar in the Global Energy Transition_6

It is observed that the Sprott Lithium Miners ETF led the rally with a 73% gain since the bottom in 2025. On the other hand, iShares Lithium ETF followed with a 61% rise, and the Global X Lithium & Battery Tech ETF climbed over 45%. The upward trend aligns with rising lithium prices, tightening supply expectations, and the growing demand from EVs and battery storage. As electrification accelerates, capital continues to rotate back into lithium assets.

Why Lithium, Copper, and Uranium Are Set to Soar in the Global Energy Transition_7

Copper’s Long-Term Uptrend Holds as Prices Reverse From Key Resistance

The long-term outlook for copper is observed through the quarterly chart below. It shows that prices have been trending higher within an ascending channel. Each time the price touches the lower trendline, it recovers sharply.

Why Lithium, Copper, and Uranium Are Set to Soar in the Global Energy Transition_8

For example, copper bottomed in July 2002 at $0.65. It then surged to record highs by 2006. After this rally, prices dropped during the 2008 financial crisis to a low of $1.24. From there, copper rebounded and reached a high of $4.59 in 2011.

After this peak, the price again dropped to form a double bottom in 2015 and 2019. Prices broke above the neckline at $3.29 and began a strong upward move. This rally reached a high in 2025 at the $5.98 area, followed by a sharp reversal in Q3 2025.

This recent reversal in copper prices was due to the resistance of the ascending channel. However, the prices are now approaching the channel’s midline, suggesting possible volatility in the coming months.

To understand the bullish price action in copper, the monthly chart below highlights an ascending channel formed between the March 2020 low and the July 2025 high. This channel shows strong support at $4.30, and a break below this level could trigger a decline toward the $3.35 support area. However, the $2.70 zone remains the long-term support for copper, indicating strong buying pressure around that level.

Why Lithium, Copper, and Uranium Are Set to Soar in the Global Energy Transition_9

Uranium Rally Gains Strength on Supply Constraints and Data Centre Demand

Uranium prices remain bullish and hold $71 per pound support in August. This level comes after a pullback from the June peak of $79, when holding funds paused their aggressive buying.

The Sprott Physical Uranium Trust fueled the rally by committing $200 million for new uranium purchases, twice the amount first planned. However, uranium trades in a thin market; these large purchases had an outsized impact, sharply lifting prices and keeping momentum strong. This strong momentum is observed by the rounding cup pattern in the chart below, which indicates continued upward momentum.

Why Lithium, Copper, and Uranium Are Set to Soar in the Global Energy Transition_10

The short-term outlook for uranium is also bullish, as the chart below shows a rounding cup pattern on shorter time frames.

Why Lithium, Copper, and Uranium Are Set to Soar in the Global Energy Transition_11

Institutional Buying and Tech Giants Drive Momentum

The support for uranium comes from rising demand expectations. Microsoft Corp (MSFT), Alphabet Inc. (GOOG), Amazon.com, Inc. (AMZN), and Meta Platforms. Inc. signed nuclear power supply deals to secure energy for future datacenters, signalling a structural shift in consumption. On the supply side, Kazatomprom confirmed output of 14 million pounds, nearly 20% below earlier targets, tightening the market further. French miner Orano also warned of a possible closure of its SOMAIR mine in Niger, adding to supply risks. This mix of firm demand and constrained output keeps uranium well-positioned for sustained gains.

The chart below shows the performance of various uranium-related instruments used by investors to gain exposure to the sector. Global X Uranium ETF (URA) has followed a long-term downtrend since 2011, falling from above $100 to below $20 before stabilising and gradually recovering toward $40. This ETF tracks a basket of uranium mining companies. Its movement reflects the prolonged bear market after the Fukushima disaster, followed by a renewed uptrend as nuclear energy gained momentum post-2020.

Why Lithium, Copper, and Uranium Are Set to Soar in the Global Energy Transition_12

Moreover, Sprott Uranium Miners ETF (URNM) shows intense volatility with higher highs since 2021, reflecting investor demand for miners leveraged to uranium prices. Sprott Physical Uranium Trust Fund (U.UN) and Sprott Physical Uranium Trust (SRUUF), which directly hold physical uranium, display steadier growth patterns, showing uranium’s gradual appreciation in spot markets since 2020. These instruments illustrate how uranium has moved from a decade-long slump into a period of structural recovery, driven by energy transition policies and renewed nuclear demand.

Conclusion: Why Lithium, Copper, and Uranium Are Set to Soar

The global energy transition is accelerating. Electricity demand is rising faster than overall energy use, driven by EVs, AI, data centres, and digitalisation. This shift creates structural demand for critical raw materials. Lithium, copper, and uranium form the foundation of this new energy economy. Investors should closely watch these markets as the next decade will be shaped by the race to secure these resources.

Lithium, copper, and uranium offer a unique investment edge:

Lithium powers EV batteries and grid storage. The prices rebounded sharply in 2025 due to tightening supply and strong demand. ETFs like LIT and LITP rallied over 70%, signalling investor confidence.

Copper is essential for electrification. Copper demand is increasing due to the need for use in EV motors and the development of grid infrastructure. The long-term technical charts show an ascending channel, with prices bouncing strongly from key support levels.

Uranium ensures stable, carbon-free baseload power. Tech giants are locking in nuclear deals to fuel AI data centres. Supply disruptions from Kazatomprom and Niger amplify its bullish outlook.

From a technical perspective, all three commodities show solid foundations for long-term accumulation. Specifically, lithium-related ETFs are forming recovery patterns after multi-year bottoms. Meanwhile, copper has reversed from long-term support in the quarterly trend channel, pointing to structural upside. At the same time, uranium remains in breakout mode, supported by thin supply and rising institutional demand.

Therefore, investors may consider buying copper at $4.30 levels and add more positions if the price drops to $3.35 and $2.70 levels. Moreover, uranium and lithium are considered strong buys at current levels. These materials are not just cyclical trades; they are strategic assets for the decade ahead.

Source: fxempire

Risk Warnings and Disclaimers

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Manuel

Commodity

China–U.S. Trade War

Major US producers of electrical wire are raising prices just weeks after a surprise decision by President Donald Trump to exempt the most basic copper imports from tariffs, suggesting that American consumers may end up paying more even after metal prices plunged.

Southwire Co. LLC, one of the largest makers of copper wire and cable in the US, and Cerro Wire LLC, a wiremaker owned by Berkshire Hathaway Inc., in recent days announced price increases of 5% across a range of copper wire products, according to a Bloomberg calculation based on their published price sheets.

US copper-processing plants are likely to be the primary beneficiaries of Trump’s shock tariff reprieve.

The president’s decision to apply his 50% import tariff only to manufactured goods containing copper such as wires and cables, and not to unprocessed refined copper as widely expected, means companies like Southwire and Cerrowire will now be paying much less than they feared for the metal they purchase. At the same time, the import tariff on copper-containing goods raises costs for their international competitors shipping products to the US.

And until the US builds more copper processing plants, the added cost on the hundreds of thousands of tons of copper-containing goods it imports each year is likely to be inflationary for US consumers despite a sharp drop in domestic prices for copper itself, analysts say.

“While wire and cable prices are influenced by copper prices, they are not the same. The margin between the two can widen if local producers have more pricing power,” said Aisling Hubert, senior wire and cable analyst at consultancy CRU Group. The tariff means that US producers will have the upper hand in price negotiations with their customers, she said.

It’s not clear whether the price increases were a direct response to the tariff decision, and it’s likely to take some time before the full effects on the market are clear.

Domestic prices for copper wire and cable — used in almost every building, electronic device, and power utility — had already risen sharply before Trump’s decision, according to US government data. An index of prices that forms part of the calculation of producer price inflation hit a record high in July, up 12% from a year earlier.

Neither Southwire nor Cerrowire responded to requests for comment. Southwire, which is one of the largest importers of refined copper into the US, lobbied against tariffs on refined copper imports in a letter to the Department of Commerce earlier this year.

Massimo Battaini, chief executive of Prysmian SpA, which together with Southwire dominates the US wire and cable market, said the tariff decision had been a relief and would likely mean higher profits for his company.

Speaking on a conference call with analysts the day after the announcement, he said: “Local producers, like we are, will benefit from cost of cables imported from overseas much higher than today. So this will certainly benefit our guidance, our forecast for the full year.”

The US imported 810,000 tons of unprocessed copper last year, accounting for 45% of the country’s consumption of 1.8 million tons, according to US Geological Survey data.

While those imports are spared from tariffs, the US also imports hundreds of thousands of tons of copper-containing goods, which are now set to be subject to 50% duties. That includes semi-processed products like copper rod, pipe, tube and sheet, and finished goods like cables. Of the total US cable demand last year, 23% was met by imports.

Domestic Capacity

To be sure, US companies may invest in more domestic capacity to replace imports, reducing the inflationary effect of the tariff. Cable imports would be “difficult to replace in the short term” but new capacity for low-voltage cable can be built in 1-2 years, said Hubert at CRU.

What’s more, there’s significant uncertainty about how broadly the tariffs will be applied. It isn’t clear whether imports from Canada and Mexico, two of the main sources of imports of copper products, would be exempt from the new tariffs under the free trade agreement between the three countries, according to Hubert. For wire rod, an intermediate copper product which is used to make electrical cable, the US sources most of its supplies domestically but relies on imports from Canada and Mexico for 17% of consumption.

Analyst at JPMorgan Chase & Co. said that the US was significantly less dependent on imports of copper products than on refined copper, making the buildout of additional domestic capacity “likely relatively achievable in the coming years.” Still, they predicted “higher end-use prices” in the meantime.

Peter Schmitz, director of global copper markets research at Wood Mackenzie, said that copper accounted for about two thirds of the cost of a cable and 20%-30% of the cost of an electrical motor.

“Is it inflationary? Yes it is,” he said of the tariffs. “Ultimately somebody pays; that is going to be the American consumer.”

Source: Bloomberg

Risk Warnings and Disclaimers

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Adam

Economic

Could the Fed cut rates—and actually cause interest rates to rise?

Absolutely. In fact, it’s a setup I see as very much in play. Today we’re going to talk about a 15%-yielding (!) stock that’s well-positioned to benefit.

Powell Vs. the 10-Year, Round 2

How would this “rate split” come about? To get at that, we need to bear in mind that the Fed only controls the effective Federal funds rate. That’s the “short” end of the yield curve—or the rate at which financial institutions lend to each other.

Meantime, the “long” end—pacesetter for consumer and business loans (including mortgages—more on those shortly) is tied to the 10-year Treasury yield—and has a mind of its own.

This wouldn’t be the first time the 10-year has called out Jay Powell. Last September, the Fed cut rates for the first time since 2020, after hiking to counter the 2022 inflation spike.

The bond market was having none of it. Even as the Fed cut, 10-year Treasury rates jumped, sending Powell a clear message: Slow your roll.

Powell Gives the “All-Clear.” Bond Market Says “Not So Fast”

When the Fed cut rates, it ironically sparked a rally in long yields. Once Powell backed off, leaving the Fed’s rate where it is now, the 10-year yield steadied, too.

History doesn’t repeat, as the saying goes, but it does rhyme. As I write this, inflation is still above target. But even so, July’s CPI report came in below expectations. That’s another point in favor of a lower Fed rate—and a higher 10-year Treasury rate.

And yes, producer prices did jump in July, and tariffs likely played a role. But as we’ve written before, recent studies have found that tariffs are not inflationary, because rising prices depend on a hot economy. A trade war brings in the opposite, since tariffs are a short-term headwind on growth.

And don’t forget that Powell’s term ends in nine months, and whoever the administration appoints is likely to cut quickly—inflation or no.

Mortgage REITs Borrow “Short” and Lend “Long”

In my August 5 article, we looked at business development companies (BDCs) as contrarian plays on this “rate split.” But there are other options, like mortgage REITs (mREITs).

When most people think of REITs, they think of equity REITs—landlords of buildings, such as warehouses and apartments. mREITs deal in paper—buying mortgage loans and collecting the interest.

They make money by borrowing at short-term rates to buy mortgages that pay income tied to long-term rates. The profit is in the difference, so management always wants short-term rates to be lower than long-term ones (which they typically are).

Moreover, the value of these loans gets a nice bump when short-term rates decline and long-term rates hold steady or, better yet, move lower. That’s because lower rates mean mREITs’ mortgages—issued when rates were higher—yield more than newly issued ones, so they’re worth more.

That, in a nutshell, is the setup we’re looking at now. Look at this chart of 30-year mortgage rates. You can see they’re drifting lower now, but not quickly enough to encourage a wave of refinancing or prepayments. The sweet spot for mREITs!

30-Year Mortgages Edge Lower, Boosting mREITs’ Loan Values

This comes at a time when mREITs, as measured by the iShares Mortgage ETF (NYSE:REM), in purple below, have lagged the REIT pack, as measured by the Vanguard Real Estate Index Fund (NYSE:VNQ), in orange.

mREITs Lag the Field, Tee Up an Opportunity

However, as you can also see toward the left of the chart above, mREITs have outperformed for long stretches, such as during the low-rate 2010s. In the coming months, with the gap between mREITs and REITs as a whole still wide and the Fed set to lower rates, we’ve got a nice setup for another run of mREIT outperformance.

To add an extra layer of safety, we’re going to focus on an mREIT dealing in “agency” mortgage-backed securities (MBS)—those guaranteed by Fannie Mae (OTC:FNMA), Freddie Mac (OTC:FMCC) and Ginnie Mae.

A 15% Dividend About to Get “Backup” From the Fed

That would be AGNC Investment Corp. (NASDAQ:AGNC), which yields 15% now. It buys MBS (often through repurchase agreements) and profits off the spread between its loan cost and the yield these assets deliver. Its profits are easy to spot: In the second quarter, its average asset yield was 4.87%, while its average repo cost was 4.44%, down slightly from Q1.

Falling short-term rates would cut its repo costs almost immediately, further widening this spread (and boosting AGNC’s profits). The mREIT did post a modest loss in Q2, but we love the fact that management added to its assets at attractive prices as a result of the April “tariff terror”:

This 15% Dividend May See Big Upside With Fed Rate Cuts_4

Now let’s talk about that 15% dividend. As you can see below, management cut the payout (in purple) when the Fed hiked rates (in orange) through to the end of 2019 and into the COVID lockdown period. We’d expect that, as rising rates boosted repo costs and COVID uncertainty—especially in the early days—put the real estate market on ice.

But look to the right and you’ll see that AGNC did hold the line on the dividend as the Fed drove rates higher in response to the inflation surge of 2022/2023. That’s a great sign—and shows the payout likely got an assist from the hedging programs AGNC uses to cut its rate risk:

Dividend Falls Heading Into COVID, But Holds Up in 2022 Dumpster Fire

Now that the Fed looks to be headed back into cutting mode, the dividend should get some extra backup on lower borrowing costs. Going forward, analysts have the mREIT pegged for $1.60 per share in earnings for this fiscal year. The dividend—$0.12 per month for a total of $1.44 annually—accounts for 90% of that.

That is a bit high, but bear in mind that a falling Fed funds rate would add to profits and therefore reduce that number. It may even open the door to a dividend increase, especially if 10-year Treasury rates hold steady or gradually move lower, as I expect.

Finally, as I write this, AGNC trades at 1.1-times book value and six times forward earnings. A wider gap between the Fed rate and 10-year Treasury yield would boost both numbers—putting a lift under the share price as it does.