I watched the entire speech tonight by Fed Chair Warsh from start to finish. Although after he finished speaking, fedwatch data showed the probability of a September rate hike rising by 10%, and the U.S. dollar index also surged sharply, my personal guess is that he must have been quite satisfied with how things turned out tonight.
Looking back at his previous remarks in July, his last speech caused a substantial negative shock to the market. At the time, it felt as if he was deliberately avoiding the topic of rate hikes, which resulted in the 30-year U.S. Treasury yield surging before his remarks were even over. The impact was so significant that it ultimately even required Bessent to step in and use buybacks to put out the fire. As is well known, the Federal Reserve’s independence directly determines the performance of longer-dated Treasury yields, and those longer-dated yields in turn further influence the overall condition of U.S. fiscal affairs.
Completely different from last time, Warsh this time cleverly reversed the market’s direction. Even though he himself didn’t spell it out directly, he successfully guided everyone to interpret his remarks as an indication of a potential rate hike. This strategy, in fact, managed to keep the 30-year Treasury notes in check. Meanwhile, only the 2-year sector saw a modest increase—which is also why, within the same time frame, we observed a bearish (red) candle for risk assets such as the gold-silver ratio and Bitcoin.
In summary, he managed to stabilize the broader market situation this time, which is undoubtedly good news for the U.S. stock market. As for whether the Fed will actually take action to raise rates in the future, we will ultimately need to closely monitor the nonfarm payrolls and inflation data to be released in September to make that judgment.
Looking back at his previous remarks in July, his last speech caused a substantial negative shock to the market. At the time, it felt as if he was deliberately avoiding the topic of rate hikes, which resulted in the 30-year U.S. Treasury yield surging before his remarks were even over. The impact was so significant that it ultimately even required Bessent to step in and use buybacks to put out the fire. As is well known, the Federal Reserve’s independence directly determines the performance of longer-dated Treasury yields, and those longer-dated yields in turn further influence the overall condition of U.S. fiscal affairs.
Completely different from last time, Warsh this time cleverly reversed the market’s direction. Even though he himself didn’t spell it out directly, he successfully guided everyone to interpret his remarks as an indication of a potential rate hike. This strategy, in fact, managed to keep the 30-year Treasury notes in check. Meanwhile, only the 2-year sector saw a modest increase—which is also why, within the same time frame, we observed a bearish (red) candle for risk assets such as the gold-silver ratio and Bitcoin.
In summary, he managed to stabilize the broader market situation this time, which is undoubtedly good news for the U.S. stock market. As for whether the Fed will actually take action to raise rates in the future, we will ultimately need to closely monitor the nonfarm payrolls and inflation data to be released in September to make that judgment.