How To Trade The New Warsh Fed | Bob Sheehan

Summary

Bob Sheehan discusses the end of the Fed put under Kevin Warsh, ushering less forward guidance and more rate volatility. He outlines two trades: a near-term bear flattener in the yield curve and a longer-term bearish view on long-duration Treasuries driven by fiscal supply pressures. He recommends rotating into defensive equity sectors like healthcare and consumer staples.

• The Fed under Kevin Warsh has retired the 'Fed put', removing the implicit backstop for risk assets.
• Less forward guidance increases rate volatility and makes economic data even more critical for market participants.
• Bob sees two distinct trades: a bear flattener in the near term (short 2-year vs long 10-year Treasury futures).
• Over the longer term, he expects long-end Treasury yields to rise due to supply concerns and the fiscal doom loop.
• He recommends a defensive equity posture, favoring healthcare and consumer staples over long-duration tech names.
• He observes a dislocation of risk with gold and bitcoin selling off simultaneously, breaking historical correlations.