What Happens When The Economic Ingredients Change

December 2025
Letter to Our Clients

When I cook, I'm always trying to strike a balance. I want the meal to taste good, but I don't want it to send my blood pressure through the roof. Anyone who has cooked a pot of plain beans knows the dilemma. They can be bland until you coax out the flavor with salt, but too much salt, and the dish shifts from nourishing to unhealthy.

Other times, when the ingredients are truly high quality, just a pinch of salt is enough to bring everything to life. That's what I love about Tuscan food. Most dishes rely on two or three exceptional ingredients that stand on their own. Even the famous unsalted Tuscan bread lets everything else shine.

Don’t worry – I am not sending another recipe today! I'm setting us up for a discussion about the Federal Reserve's “dual mandate” because monetary policy, like cooking, is a balancing act.

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What Is the Fed Trying to Balance

The Fed has two jobs that often pull in opposite directions:

• Price Stability - keeping inflation around 2%.

• Maximum Employment-keeping as many people working as the economy can sustain.

When inflation is too high, the Fed raises interest rates to cool things down. When the job market weakens, it lowers rates to support growth.

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It sounds simple. It's not.

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Today's Economic Ingredients Aren't Ideal

Right now, the fundamental "ingredients" of our economy aren't at their best.  

For Instance:

• Net-zero immigration

• High government debt

• Erratically shifting and expensive tariffs

These create a baseline that's harder to work with just like trying to season low-quality ingredients into a flavorful dish.

And yet, many officials are calling for lower interest rates, which is a little like reaching for more salt just to create flavor. Add too much, and you're no longer cooking a meal, you're just raising blood pressure. Economically, we call that inflation.

We're at a tricky in-between moment:

• Inflation is still too high.

• Parts of the labor market are softening.

If the Fed leans too hard toward fighting inflation, it risks hurting workers and businesses:

• If it leans too hard toward protecting jobs, it risks letting inflation become entrenched.
• If it raise rates too far, something breaks or cuts too soon, inflation flares back up.

Layered on top of all of this are political pressures, incomplete data, and global uncertainty. There is no painless path, only better or worse versions of balance.

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Why This Matters to You

This isn't an abstract policy debate. It is possible to see the Fed's balancing act in everyday financial life:

• In your business - borrowing to expand, acquire, or weather downturns.

• In your portfolio - how stocks and bonds respond to Fed language and decisions.

• In your family- the stability of the job market for the people you employ or care about.

• In your cash flow - mortgages, credit lines, treasury yields, savings rates.

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Why This Matters to Your Portfolio

It is common to think that this balancing act inevitably ends in a fall, crash, recession or depression. But I propose that there is a third outcome: that markets may not fall in 2026 but will be choppy. Markets may not crash and burn but instead may grow at a slower rate for longer than we expect. Or that the next fifteen years will not look like the last fifteen years. These are all real possibilities.

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At Conscious Wealth, we prepare for these scenarios using our own “dual mandate”: Grow assets at a reasonable rate while taking less risk. It's a tight-rope, but that is what we do. And it's what we enjoy doing.

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I hope you enjoy this insight into our thinking and world view. Please let me know if you have any questions.

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In Abundance,  

Brandon Hatton

‍President, Chief Investment Officer

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