The Warsh Fed Will Look Nothing Like Before | Joseph Wang

Summary

Joseph Wang discusses Kevin Warsh's first FOMC meeting as Fed Chair, which was hawkish and marked the end of forward guidance. He analyzes new task forces that could reshape Fed communications, balance sheet, data, AI productivity, and inflation framework. Wang interprets the market reaction and growing speculative excess as signals for a potential meaningful decline in risk assets, notably pointing to froth in US equities and a doubled Korean stock market.

• Kevin Warsh debuts as hawkish Fed Chair, kills forward guidance and delivers a brief, price-stability-focused statement.
• Task forces announced on communications reform, balance sheet reduction, data modernization, AI productivity, and inflation framework review.
• Market reaction: US equities sold off, bonds fell, gold dropped, dollar rallied; rate hike odds increased.
• Wang sees task forces as bureaucratic cover for big changes, including potential power consolidation and a smaller Fed balance sheet.
• He highlights widespread speculative excess: high equity issuance, extreme private valuations, and leverage.
• Korea's KOSPI has doubled in the past year, another sign of global froth and a potential top.
• Wang forecasts a sustained and meaningful decline in risk assets, though acknowledges uncertainty and recent misforecasts.