Danielle DiMartino Booth: Nobody's Happy, Cracks Are Showing, & the Bond Market Already Tightened

Summary

Danielle DiMartino Booth breaks down the FOMC meeting under new Fed Chair Kevin Warsh, where rates were held with three dissents. She reads Warsh as abandoning forward guidance and pushing the Fed to stop being the market's referee. Beneath the surface, she sees a K-shaped economy propped up by the top 10% and AI investment, but with mounting cracks in credit (CCC spreads gapping, bankruptcies at 15-year highs), consumer spending (record luxury apartment concessions, softening wage growth), and freight demand. She positions around gold as credit tightens and warns that a stutter at the top of the K, driven by an AI bubble deflation, would bring broad pain.

• Fed Chair Kevin Warsh holds rates, abandons forward guidance, and wants the Fed to stop being the market's referee.
• Three FOMC dissenters highlight a split between district bank presidents and governors; Waller stands with Warsh.
• Economy is K-shaped: bottom half struggling, top 10% and AI investment keeping GDP positive.
• CCC high-yield bond spreads are gapping out; bankruptcies hit a 15-year high, signaling credit stress.
• Luxury apartment concessions reach record highs, revealing cracks even among higher-income consumers.
• Freight demand weakens: truckstop.com data turns down, ocean freight rates decline for three weeks.
• Gold is a buy as credit conditions tighten; an AI bubble deflation could trigger a top-of-the-K stutter and broader downturn.