The Illusion of Stability

Trump’s gamble seems to have paid off - Kevin Warsh may have found the only way to deal with stubbornly high inflation without even hinting at rate hikes:
“We’ve dropped forward guidance.”
In other words, the Fed is no longer going to telegraph where rates are headed. Everything will be decided “meeting by meeting.”
Markets had been bracing for a more hawkish tone, so this was interpreted as surprisingly dovish. Stocks immediately ripped higher before giving back some gains.
The rest of the press conference barely mattered. Although one detail stood out: unlike Powell’s usual “Good afternoon,” the new Fed chair opened with a simple “Good day.” 😁
Now the real question is whether the hand hovering over the Sell button will start shaking.
Everyone knows inflation remains elevated. Everyone knows monetary policy is in a difficult spot. But everyone also knows that Trump is willing to do whatever it takes to prevent a market meltdown.
The worst-case scenario didn’t happen.
But nothing fundamentally improved either.
Markets were simply fed an illusion of stability - enough to calm investors down, at least for now.
P.S. Expect Trump and his talking heads, like Kevin Hassett, to reinforce Warsh’s dovish narrative in the coming days. The messaging campaign has only just begun. 📈👀

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