A New Era Is Beginning In Markets | Weekly Roundup
The hosts discuss Kevin Warsh's first FOMC meeting as Fed Chair, marking the end of 'forward guidance' as a policy tool and introducing a more hawkish-but-data-reactive stance. They analyze the implications for rate expectations, global liquidity, the AI capital expenditure cycle, and MicroStrategy's deteriorating balance sheet, while arguing that peak hawkishness has likely been reached.
Summary
The episode opens with the hosts rebranding their show from 'Forward Guidance' to 'Task Force' in response to Kevin Warsh's first FOMC meeting, where he dramatically cut the length of the Fed statement and signaled the end of forward guidance as a monetary policy tool. The hosts note that the committee issued a hawkish dot plot suggesting two hikes by mid-2027, which came ironically as oil prices dropped 30% from prior meetings and inflation components like shelter and energy appear to be rolling over. They argue this hawkish pivot is largely performative — designed to establish Fed independence from Trump — and that actual hikes are very unlikely given the disinflationary trends underway.
The discussion then turns to market structure implications. The hosts argue that removing forward guidance will structurally increase rate volatility, since the tool was originally introduced by Bernanke at the zero lower bound to suppress volatility and encourage leveraging. They see the current extreme short positioning in SOFR futures as a classic contrarian setup, with the trade being to fade the hawkishness. They also note the dollar is breaking out, the yen is at multi-decade lows, and the yield curve is flattening — all signs of tightening global liquidity — while credit spreads remain near lows, keeping the AI capex cycle intact.
On the macro picture, the hosts discuss Warsh and Bessant's likely coordinated strategy to flatten the yield curve, which would lower long-term borrowing costs for corporate bond issuance funding the AI buildout, and also lower mortgage rates to unlock the housing market. They speculate that the real game plan is to move monetary policy transmission from the public sector (Fed balance sheet expansion) to the private sector (market-based price discovery), which could be transformative but takes time to play out.
The AI capex discussion highlights a slowdown in year-over-year growth rates for hyperscaler spending, but the absolute dollar amounts through 2030 remain massive. The hosts note capital is rotating out of hyperscalers and into AI bottleneck/infrastructure names, and that as long as high-yield credit spreads stay tight, this theme has legs. They also discuss the political inevitability of some form of public ownership stake in frontier AI companies, with both parties converging on the idea.
On MicroStrategy, the hosts argue Saylor overcomplicated and over-levered a originally smart arbitrage strategy. The preferred share issuances (STRK, STRC) are diluting common equity holders, and dividends are creating a growing cash drain on a zero-revenue business while Bitcoin prices fall. They argue the fix is straightforward — raise cash to cover liabilities rather than continuing to buy Bitcoin — but management is refusing to do the necessary hard thing. The broader point is that Bitcoin faces macro headwinds as AI represents a genuinely productive use of capital that competes for the same risk-seeking flows that previously had 'no alternative.'
The episode closes with a bullish contrarian setup in gold, where CTA positioning has collapsed to near the 1st percentile on a one-year lookback and put/call skews are near 10-year highs, suggesting an attractive mean-reversion opportunity. The hosts also note positive summer seasonality, record quadruple witching, and significant household cash on the sidelines as tailwinds for a low-volatility grind higher in equities through summer.
About this episode
A new era at the Federal Reserve may be reshaping how markets think about rates, volatility, and the role of central banks. But is the market interpreting Kevin Warsh's first moves correctly? This week, we break down Warsh's first FOMC meeting, the end of traditional forward guidance, and why they believe peak hawkishness may already be behind us despite the Fed's messaging. We also discuss the AI capex boom, the future of Bitcoin and MicroStrategy, tightening liquidity, housing affordability, and whether markets are entering a fundamentally different regime. Enjoy! TIMESTAMPS: 00:00 Intro 01:13 Forward Guidance Is Dead 08:28 Rate Volatility Returns 13:08 Why Hikes Won’t Happen 18:33 Liquidity Gets Tight 26:15 The AI Buildout Meets The Fed 35:55 The Summer Market Setup 42:39 MicroStrategy's Market Test 46:18 Bitcoin’s AI Opportunity Cost 53:29 Crypto Needs To Adapt 01:00:46 Gold Sentiment Hits Extremes FOLLOW THE SHOW › Forward Guidance – https://x.com/ForwardGuidance › Felix – https://x.com/fejau_inc › Quinn – https://x.com/qthomp › Tyler – https://x.com/Tyler_Neville › Telegram – https://t.me/+CAoZQpC-i6BjYTEx › Blockworks – https://x.com/Blockworks RESOURCES › Weekly Roundup Charts – https://drive.google.com/file/d/1yGHU0SgEjUNE1cDKP280F60FsRrcBqOh/view?usp=sharing EVENTS › Join us at Digital Asset Summit 2026 Asia October 7th & Digital Asset 2026 London November 10-11th https://blockworks.com/events Blockworks recently acquired Messari. For more information, please visit: https://blockworks.com/insights/blockworks-acquires-messari DISCLAIMER Nothing said on Forward Guidance is a recommendation to buy or sell securities or tokens. This podcast is for informational purposes only. Any views expressed are opinions, not financial advice. Hosts and guests may hold positions in the companies, funds, or projects discussed.
Key Insights
- The hosts argue Warsh's hawkish dot plot is largely performative Fed independence theater, designed to distance himself from Trump rather than reflecting genuine inflation concerns, given that oil is down 30% from prior meetings and shelter inflation is rolling over.
- Forward guidance was originally a zero-lower-bound innovation by Bernanke to suppress rate volatility and encourage leveraging; removing it will structurally raise rate volatility going forward, which the hosts view as a net positive for price discovery.
- The hosts claim the record short position in SOFR futures from the fund category represents a classic contrarian setup — the trade is to fade the hikes because actual rate hikes at year-end are seen as virtually impossible given disinflationary macro trends.
- Tyler argues that Warsh and Bessant are coordinating to flatten the yield curve not primarily through rate policy but by reducing Fed balance sheet duration, which would lower long-end yields to support both corporate bond issuance for the AI buildout and mortgage rates to unlock housing affordability.
- The hosts identify a sequencing in how global liquidity tightening transmits: FX volatility comes first, then yield volatility, then credit spread widening, then PE multiple compression — and currently they are at the early FX stage with credit spreads still near lows.
- Quinn argues MicroStrategy's problem is self-inflicted and fixable: Saylor needs to raise cash to cover preferred dividends and near-term debt maturities rather than continuing to buy Bitcoin, but management's refusal to do the hard thing is causing a slow bleed in the entire capital structure.
- The hosts contend that the STRK/STRC preferred share issuances marked the top in MSTR common equity, as every issuance transfers value claims away from common shareholders to preferred holders, a dynamic they argue the market failed to initially understand.
- Tyler argues Bitcoin's macro headwind is structural: for years there was 'no alternative' to Bitcoin for risk-seeking capital because the economy had no genuine productivity growth, but the AI buildout now represents a genuinely productive use of capital that competes directly for those flows.
- The hosts claim Warsh's move to shorten the Fed statement and eliminate forward guidance is effectively trying to privatize monetary policy transmission — letting market prices rather than Fed jawboning allocate credit — which takes time to change market participant behavior.
- Felix argues that one-year inflation swaps have reverted to pre-war levels, and that headline CPI will look very low next month given current oil prices, suggesting the market's hawkish re-pricing was based on transitory inflation data that is already reversing.
- The hosts highlight that gold CTA positioning has collapsed to near the 1st percentile on a one-year lookback while put/call skews are near 10-year highs, which they view as a strong contrarian mean-reversion setup after Tyler's self-described top-tick dancing meme.
- Quinn warns that Warsh's hawkishness is easy to maintain while stocks are at all-time highs, but the real test of his inflation resolve will come when adverse credit conditions emerge and he faces pressure to ease — that moment, not now, will reveal whether the policy shift is genuine.
Topics
Transcript
We have to have a new name now. Ford Guidance is dead. So introducing... Task Force. The market right now is pricing in two hikes by mid-2027. Their hugely hawkish pivot comes at a time when oil prices are down dramatically from their last two meetings. We've got the high CPI print, peak hawkishness, Ford Guidance, and now everything's kind of collapsing. I'm still a big believer that we're hitting peak hawkishness, forward guidance, and now everything's kind of collapsing. I'm still a big believer that we're hitting peak hawkishness here, but I think volatility is gonna go higher at the same time. It's easy to be hawkish when stocks are at all-time highs and everything's rosy. Man, this hurts.…
Full transcript available for MurmurCast members
Sign Up to AccessMore from Forward Guidance
The Warsh Fed Will Look Nothing Like Before | Joseph Wang
Joseph Wang and the host analyze Kevin Warsh's first FOMC meeting as Fed Chair on June 17th, noting a surprisingly hawkish tone, dramatically simplified communications, and the announcement of multiple task forces signaling major structural changes to the Fed. Markets reacted by pricing in rate hikes despite no actual policy change, reflecting a shift in the perceived Fed reaction function under Warsh.
Blockworks Acquires Messari
Blockworks co-founders announce the acquisition of Masari, a leading crypto data platform, explaining how the two companies' complementary strengths in on-chain data, standardized metrics, and investor relations create a more complete offering. They argue that crypto's core problem is a lack of standardized disclosures and trusted data, which is holding back institutional adoption. Together, they aim to become the system of record for all on-chain businesses.
Policy Intervention Is Keeping The Bull Market Alive | Weekly Roundup
The Forward Guidance roundup panel discusses how Trump's geopolitical maneuvering (particularly around Iran) appears timed to stabilize markets ahead of the SpaceX IPO, while analyzing derivatives positioning, the underperformance of Mag7 stocks, and the broader implications of centralized asset management and AI policy.
Warsh Must Choose The Dollar Or The Bond Market | Luke Gromen
Luke Gromen, founder of Forest for the Trees, argues that incoming Fed Chair Kevin Warsh faces an impossible binary choice between defending the dollar or the bond market, complicated by the ongoing Iran war driving inflation. He believes the US fiscal situation is fundamentally unsustainable without Fed monetization, and that near-term risk assets face significant downside despite longer-term inflationary tailwinds.
Why This Economy Refuses To Break | David Cervantes
David Cervantes of Pinebrook Capital argues that the U.S. economy remains recession-proof due to the massive AI infrastructure buildout (~$1 trillion in CapEx) and historically large government deficits (6-7% of GDP). He contends that inflation is broadening beyond just energy prices, making rate hikes increasingly likely, while the consumer remains resilient through wealth effects, boomer wealth transfers, and reduced mortgage burdens.