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fedput
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Warsh’s speech in Portugal has already set the tone for US stocks.
Remember what we said?—Something has to die: the dollar, US Treasuries, or US stocks. If none of them can die, then they all die!
So only US stocks can die.
This time, Warsh effectively wrote that line into policy.
Balance sheet reduction: “The hole we poked in ’18 can’t be plugged in just ’18 weeks.”
Translated, it means: no cuts until 2027, but after 2027 no one will be able to run.
Barclays has already warned—if balance sheet reduction goes too far, the repurchase market will be the first to blow up.
Warsh knows that, so he set up a balance sheet working group to check where the mines are. Not that they won’t explode—he’s just confirming exactly where they’ll explode.
No rate cuts: “If anyone thinks we’re going to be satisfied with inflation above 2%, they’ll be disappointed.”
Even if inflation falls, they still won’t cut. 2% is the iron floor. Higher-for-longer is the baseline scenario.
No bailouts: “Primarily through asset-price operations.”
He won’t directly drain liquidity—he lets the market watch its own portfolio shrink as it pokes itself. The Fed Put is formally buried. Forward guidance is thrown out; every FOMC is a blind box.
Put these three together, and you get one choice: protect the dollar’s credibility, protect the US Treasury market, and offer US stocks as the sacrifice.
Over the past fifteen years, the biggest long in US stocks wasn’t Buffett—it was the Federal Reserve’s $80-trillion balance sheet.
Every time it dropped, it was picked back up.
Now this long is gone.
Balance sheet reduction + no rate cuts + no bailouts = the foundation of the US stock valuation framework is pulled out.
“Growth stocks” kept alive by zero rates—AI, SaaS, unprofitable tech—are the first to show their true form.
Warsh gave a timeline: move in by Q4 2027. But the market won’t wait—the market is six months ahead of the central bank. If balance sheet reduction happens in Q4 2027, pricing for it starts in Q1 2027.
His coldest part is that he’s not in a hurry. The hole from ’18 took him 18 years to slowly plug, if he wants. But the market can’t wait 18 years. The market can’t even wait 18 months.
The dollar and US Treasuries live. US stocks die.
Warsh has chosen.
#FedPut #QT #Stocks #Bonds #Dollar
Remember what we said?—Something has to die: the dollar, US Treasuries, or US stocks. If none of them can die, then they all die!
So only US stocks can die.
This time, Warsh effectively wrote that line into policy.
Balance sheet reduction: “The hole we poked in ’18 can’t be plugged in just ’18 weeks.”
Translated, it means: no cuts until 2027, but after 2027 no one will be able to run.
Barclays has already warned—if balance sheet reduction goes too far, the repurchase market will be the first to blow up.
Warsh knows that, so he set up a balance sheet working group to check where the mines are. Not that they won’t explode—he’s just confirming exactly where they’ll explode.
No rate cuts: “If anyone thinks we’re going to be satisfied with inflation above 2%, they’ll be disappointed.”
Even if inflation falls, they still won’t cut. 2% is the iron floor. Higher-for-longer is the baseline scenario.
No bailouts: “Primarily through asset-price operations.”
He won’t directly drain liquidity—he lets the market watch its own portfolio shrink as it pokes itself. The Fed Put is formally buried. Forward guidance is thrown out; every FOMC is a blind box.
Put these three together, and you get one choice: protect the dollar’s credibility, protect the US Treasury market, and offer US stocks as the sacrifice.
Over the past fifteen years, the biggest long in US stocks wasn’t Buffett—it was the Federal Reserve’s $80-trillion balance sheet.
Every time it dropped, it was picked back up.
Now this long is gone.
Balance sheet reduction + no rate cuts + no bailouts = the foundation of the US stock valuation framework is pulled out.
“Growth stocks” kept alive by zero rates—AI, SaaS, unprofitable tech—are the first to show their true form.
Warsh gave a timeline: move in by Q4 2027. But the market won’t wait—the market is six months ahead of the central bank. If balance sheet reduction happens in Q4 2027, pricing for it starts in Q1 2027.
His coldest part is that he’s not in a hurry. The hole from ’18 took him 18 years to slowly plug, if he wants. But the market can’t wait 18 years. The market can’t even wait 18 months.
The dollar and US Treasuries live. US stocks die.
Warsh has chosen.
#FedPut #QT #Stocks #Bonds #Dollar
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