#沃什重申坚守2%通胀目标 Worsh’s policy shift will not directly end the long bull run in US stocks, but it is likely to change the market’s operating logic from the past few years. The market will move from a “liquidity-driven broad advance” to “earnings-driven differentiation,” and the volatility center of gravity will also be systematically raised.

#沃什重申坚守2%通胀目标 Waller’s policy shift will not directly end the long bull market in US stocks, but it will very likely change the operating logic of the bull market over the past few years. The market will shift from “liquidity-driven broad-based rallies” to “earnings-driven differentiation,” and the volatility center of gravity will also rise systematically.

On the day of the hearing, the market showed a “rally first, then stabilize” pattern. The June CPI upside surprise turning into a decline—positive news—offset Waller’s hawkish remarks. In the end, all three major indices closed higher: the Dow edged up 0.02%, the S&P 500 rose 0.38%, and the Nasdaq gained 0.9%.

The US dollar index slipped slightly from a 13-month high, while gold moved in a range. The CPI pullback was bullish for gold, but Waller’s refusal to cut rates kept upside room constrained. Meanwhile, crypto faced pressure on risk appetite in the short term due to Waller’s statement that the Federal Reserve does not engage in rescue operations.

Overall, there was no panic-like selloff, indicating that Waller’s remarks did not go beyond what the market had previously expected.

In the long run, whether the bull market ends during Waller’s tenure mainly depends on whether the foundation of the bull market has been damaged. The core driving force behind this US stock bull market has been the upward revision of earnings expectations brought by the AI industrial revolution, alongside the US economy’s resilience beyond expectations. Monetary easing has been more of an earnings-multiple amplifier rather than the core driver. Waller himself also recognizes the long-term productivity dividend from AI, which suggests that the fundamental industrial logic behind the bull market has not been denied.

However, Waller’s policies will place long-term constraints on the market from three dimensions:

First, high interest rates shut off valuation-expansion space. As long as inflation has not returned to the 2% target, rates will remain elevated. In an environment where the risk-free rate is above 3.5%, it is difficult for high-valuation growth stocks to pull up valuations purely through expectations; a rally driven only by hype and concepts will keep fading.

Second, after losing forward guidance, market volatility will rise significantly. In the past, the market could stabilize expectations based on the Federal Reserve’s guidance. Going forward, every release of inflation and employment data could trigger sharp swings, and the uncertainty premium will compress the market’s overall valuation center of gravity.

Third, accelerated balance-sheet reduction will drain marginal liquidity. Waller’s push for balance-sheet reform is likely to accelerate the pace of balance-sheet reduction. This will hit the most vulnerable assets—small-cap stocks that rely on incremental capital and high-leverage assets.

Therefore, compared with the bull market being ended, the more likely scenario under Waller is a profound style rotation in the market.

So, for investors, the biggest challenge is not the end of the bull market, but the change in the logic for making money. The era when you could profit just from valuation expansion has ended. Going forward, investors must go back to corporate earnings themselves and earn money from earnings growth.

In short, Waller’s debut in Congress marks the start of a new era for the Federal Reserve. What he brings is not a dramatic shift in monetary policy, but a deep change in the decision-making framework and communication approach. The market needs time to adapt to this “no script” new environment, and the adaptation process will inevitably come with volatility and differentiation.