A New Target for the Men Who Broke the Bank of England
Listen to the audio version of this article (generated by AI).
Michael’s Note: Louis Navellier holds a distinct advantage over the dozens of other smart analysts I’ve met in my career.
Because of how long Louis has been in the game, he knows how to ignore the day-to-day noise and focus on the larger forces moving beneath the surface… The trends that define years, even decades of stock performance.
Lately, Louis has been focused on the new incoming Fed regime and how it relates to rates, small caps, and the whether the current bull market has legs. (For Louis’ full thoughts — and to get your hands on the 53-stock “Exclusion List” he references in today’s essay — click here.)
I’ve invited him here today to explain why two men – connected to the history-making collapse of the British pound in 1992 – are more relevant today than they were even then.
As Louis will show, this shift could create a rare opportunity in small-cap stocks. Read on…
On September 16, 1992, the British government was fighting for its financial life.
For months, currency traders had been circling the British pound. The pound was pegged to European currencies at a rate most believed was indefensible. The U.K. economy was weakening. Inflation was high due to economic growth in Europe after the fall of the Berlin Wall.
The math didn’t work. And one man – George Soros – decided to bet on it.
What followed was one of the most spectacular days in the history of global finance.
Soros shorted $10 billion worth of the British pound.
The Bank of England fought back by buying pounds by the billions. It raised interest rates twice – from 10% to 12%, then to 15% – in a single day in a desperate attempt to defend the currency.
But it didn’t work. By the evening, it was over.
The British government surrendered. It unpegged the pound from Europe and later began a series of cuts, bringing its interest rate down to 6% by early 1993, leading to an economic recovery.
As for Soros, he made more than a billion dollars in a single day. The date went down in history as Black Wednesday.
Many of you might know that story. But I bet not all of you know who else was in the room.
You see, two of the men connected to that trade are about to be in charge of American monetary and fiscal policy simultaneously. And I don’t think most investors have connected those dots yet.
I’m talking about Treasury Secretary Scott Bessent and Kevin Warsh, the incoming Federal Reserve Chair.
I’ve been at this for nearly five decades. I’ve seen every market cycle and every Fed regime come and go. And I want to tell you directly: I think this combination is very good news for your portfolio.
In this piece, I’ll explain the connection between Bessent and Warsh – and why I think it’s good news for investors. I’ll also give you my prediction for the Fed’s next move and how to be positioned before everyone else catches on.
I went deeper at my 10X Fed Shock event last Wednesday, where I shared my highest-conviction picks and a free stock recommendation with those attending. Catch the replay here.
What the Market Is Missing
Treasury Secretary Scott Bessent was part of the team that pulled off the Bank of England trade for Soros.
Kevin Warsh comes from the same world. After leaving the Fed in 2011, he went to work with Stanley Druckenmiller, the trader who actually executed the Black Wednesday trade. Druckenmiller and Bessent have remained close ever since.
These two men know each other, they trust each other, and they are operating from a shared playbook. And that playbook calls for lower rates.
Warsh has been a big critic of the Fed for years. He doesn’t like quantitative easing – the money printing that has ballooned the Fed’s balance sheet to nearly $7 trillion. But he also believes AI-driven productivity gains are fundamentally deflationary (meaning they’ll lower prices).
Bessent, meanwhile, is one of the most capable economic minds in Washington. He has publicly called for 150 basis points in reductions — that’s 1.5% — and he is fully aware of the mounting debt burden the country carries.
I believe he and Warsh are going to work together, and I believe they are going to move faster than the market expects.
Now, I’m not naive about what we’re dealing with. There’s a war on. Inflation is still a factor — especially with last week’s CPI coming in at the fastest pace in three years. The Fed moves more slowly than anyone wants, and Warsh will need to build consensus on a 12-person committee.
How We Can Profit From the New Fed Regime
I’ve seen this movie before. Four times, to be precise.
Every time the Fed opens a sustained rate-cut cycle, the same dynamic plays out: smaller, domestically focused companies — the ones most sensitive to borrowing costs and most leveraged to U.S. economic growth — become the biggest winners. Not immediately. But consistently… and dramatically.
Here’s what happened the last four times:
- 1995 Fed pivot: Cisco +2,062%. Ascend +2,800%. AOL +2,900%.
- 2001 rate cuts: Frontline +1,513%. Hansen Natural +1,125%.
- 2008 rate cuts: Lithia Motors +475%. IPG Photonics +665%.
- 2020 COVID cuts: MARA Holdings +1,800%. Moderna +1,200%.
Different stocks. Different sectors. Same dynamic every time.
Now, I’m not naive about what we’re dealing with. There’s a war on. Inflation is still a factor. The Fed moves more slowly than anyone wants, and Warsh will need to build consensus on a 12-person committee.
This isn’t going to happen overnight.
But the direction is clear. The players are in place. And history says this is how it plays out.
The Exclusion List
My Stock Grader system has already been running throughout this early phase of the cutting cycle – and it has flagged 53 stocks showing the same early signals I’ve described in every prior window.
Strong fundamentals. Building institutional buying pressure. Consistent top rankings in my eight-factor model month after month.
I call it the Exclusion List. These are stocks that are too small for the big Wall Street funds to touch — but not too small for you.
And at Wednesday’s 10X Fed Shock event, I gave away one of them for free.
If you haven’t watched the replay yet, I’d strongly encourage you to do it today. Because opportunities like this don’t stay hidden forever. The investors who are positioned before the crowd figure out what’s happening are the ones who capture the biggest gains.
Sincerely,
Louis Navellier
Senior Analyst, InvestorPlace