Kevin Warsh gave a speech at Jackson Hole. Markets decided this meant rate hikes were coming. The same markets that thought Bed Bath & Beyond was a buying opportunity now think they've cracked the Fed's code by listening to a guy talk for forty minutes in Wyoming.
Warsh isn't even the Fed Chair anymore. He was Fed Governor until 2011. But facts don't matter when you're trading on vibes and a Bloomberg terminal you share with three other guys in a WeWork.
The headline says his speech might put the Fed "at odds" with Treasury. Two government entities disagreeing about monetary policy. Stunning development. Next you'll tell me the SEC and CFTC have jurisdictional disputes.
Analysts gathered at Jackson Hole to hear this speech and immediately updated their rate hike probabilities. They moved numbers in spreadsheets. They called clients. They used the word "hawkish" in seventeen different emails. Not one of them checked whether Warsh still works at the Fed.
September FOMC odds shifted higher. Traders who can't explain what FOMC stands for without googling it started repositioning. They sold bonds they didn't understand to buy stocks they understand less. Their stop losses are set at prices they picked because they end in zero.
The real story is that a former Fed official said something at a conference and the market moved like he still had a vote. Imagine getting fired fifteen years ago and people still trading on your PowerPoint presentations.
Treasury and the Fed being at odds means absolutely nothing for your portfolio, but it sounds important enough to justify panic-selling your tech stocks at 9:31 AM on a Tuesday. Warsh thanks you for your liquidity.
Photo by Markus Spiske on Unsplash
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