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Yesterday morning, Kevin Warsh gave a speech on his plans as a Fed Chair candidate. Historically, any time the Fed Chair speaks in public, there's some kind of reaction across financial markets. But the reaction is never really uniform. It depends entirely on what the speech actually says, and different parts of the market respond in different ways.
The major sentiment from yesterdays speech was tough on inflation. Warsh stated he wants inflation low enough that “Nobody’s talking about it”. He also wants the Fed to pull money out of the economy and stop promising markets future rate cuts.
From the last 584 Fed chair events, whenever a Fed chair speaks harshly on inflation, the S&P 500 historically bounces within a 10 day period, around 73% of the time.
**Disclaimer**: This is all based on personal data analysis so trust it at your own volition (if you want, lol). I’ll provide my methodology with Claude later, but I just want to emphasize this is not financial advice by any means. Just viable trades I'm basing off my analysis of this event.
From those same events, long-term treasury bonds fall in every time window (1 to 30 days). Tough-on-inflation talk means interest rates stay higher for longer, and bonds drop when rates stay high.
In most events, bank stocks stay down after 30 days, and gold drops -2.86% but rises back by 2.26% after 30 days.
The three trade setups im looking at:
1. SHORT TLT at $86.57, cover in 10 days; in 10 of 15 past events, bonds keep falling.
2. LONG SPY at $704.08, close in 10 days; in 11 of 15 past events within this time window, spy bounces.
3. SHORT XLF at $52.30, cover in 30 days; banks were the only group that stayed weak a full month out.
The one exception was 2022 at Jackson Hole, when Jerome Powell said “some pain ahead”, SPY didn't bounce in 10 days, but stayed under 11% over the 30 days.
**My methodology** (you can skip this part if you're not interested in the data itself):
**Note:** The following analysis was conducted with Xynth (Claude but for stocks), so if you wanna see each dataset to confirm its validity i can link that below
1. Started with every US economic event on the calendar since 2015, 237,000 of them.
2. Filtered down to just the ones where the Fed Chair was actually speaking in public (speeches, testimony, press conferences). That left 584 events.
3. filtered each for a SPY price movement of at least 0.5%. That left 158
4. Then Xynth read the news headlines from each of those specific days to confirm the Fed Chair's words were the reason, and not something else. That left 59 clean Fed-Chair-driven shocks.
5. Of those, 15 were tough-on-inflation speeches and testimony
This is a chart of every SPY movement after a hawkish speech by a fed chair:
https://preview.redd.it/60hks0ry2uwg1.png?width=1584&format=png&auto=webp&s=ec0f50e0114a620d16abd867cdd4b93f726add31
Average 30 day return:
https://preview.redd.it/6pnrvzqy2uwg1.png?width=1748&format=png&auto=webp&s=1f4669f07349aab6f8525cd91f995b81d8b4679e
Trade Setups:
https://preview.redd.it/lfrcvzqy2uwg1.png?width=1806&format=png&auto=webp&s=cf8f3dbec0be6419de6966306e2ab95ab2cfdb7e
AGAIN, none of this is financial advice, so feel free to criticize any methodology or parts of my analysis. Also, if you're interested in the in-depth dataset, I can drop it under the post.
That's all from me.
Cheers!