Geo Chen
· Fidenza Macro
· August 31, 2026 at 15:14
· ⏱ 2 min read
| Read on Substack ↗
Summary
The market's hawkish reaction to Warsh's Jackson Hole speech is overdone because the data — cool core PCE and falling payrolls — and Warsh's own voting record point toward accommodation, not hikes. With the Treasury and Fed apparently working to suppress borrowing costs, the rate-hike premium should fade, which supports bonds and rate-sensitive equities while pressuring the dollar.
•Markets read Warsh's line — 'I would be hard pressed to describe broad financial conditions as restrictive' — as hawkish, lifting 2026 hike pricing from 29bp to 39bp, the dollar index 0.55% higher, and Nasdaq down 1.3%.
•Fed funds futures imply a 17bp September hike (68% probability), which the author says is inconsistent with core PCE rising only 0.2% (2.4% annualized) and July non-farm payrolls declining 23k.
•The Fed's July vote was 9-3 in favor of a hold, with Warsh voting with the doves; the author calls him 'a dove that disguises himself as a hawk.'
•Scott Bessent is funding billions of long-end Treasury buybacks with short-end issuance, leading the author to believe the Treasury and Fed are coordinating to keep US borrowing costs down.
Read time2 min
Length2,466 chars
Categoryfinance
Ideas
Geo ChenGlobal macro trader; ex-head of FX trading, Credit Suisse
The dollar index jumped 0.55% on the supposed hawkish Jackson Hole reaction, but the author believes the move should be faded because Warsh is likely dovish and the policy path is to keep front-end ra
The dollar index jumped 0.55% on the supposed hawkish Jackson Hole reaction, but the author believes the move should be faded because Warsh is likely dovish and the policy path is to keep front-end rates low.
Risk: Safe-haven dollar buying can persist independently of Fed expectations.
Geo ChenGlobal macro trader; ex-head of FX trading, Credit Suisse
Author argues the post-Jackson Hole hawkish repricing is wrong and cites Treasury/Fed coordination, including long-end buybacks, to keep borrowing costs down; this directly supports long-dated Treasur
Author argues the post-Jackson Hole hawkish repricing is wrong and cites Treasury/Fed coordination, including long-end buybacks, to keep borrowing costs down; this directly supports long-dated Treasuries.
Risk: If Warsh pivots hawkish or inflation data surprises higher, the duration bid could unwind.
Geo ChenGlobal macro trader; ex-head of FX trading, Credit Suisse
The article says the Nasdaq's 1.3% selloff was driven by an overdone hawkish interpretation, while the full speech was balanced and data do not support a hike; fading that reaction would favor rate-se
The article says the Nasdaq's 1.3% selloff was driven by an overdone hawkish interpretation, while the full speech was balanced and data do not support a hike; fading that reaction would favor rate-sensitive equities.
Risk: Equities remain vulnerable if the 68% September hike probability starts to be validated by incoming data.
This newsletter, published August 31, 2026,
features Geo Chen
discussing UUP, TLT, QQQ.
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