Warsh's Way: More Front-End Vol, Less "Jump Risk"

DoubleLine Portfolio Manager Jeff Mayberry and Macro Asset Allocation Strategist Ryan Kimmel review the market week ended June 26. Trading was marked by new leadership from neglected stock sectors (00:22), significant Treasury curve flattening (5:02) on a more hawkish than expected Kevin Warsh and weak commodities (6:41) as the dollar joined the long bond in cheering the new presumed hawk at the Fed. Appraising the previous week’s FOMC meeting (9:21) and Warsh’s first news conference as Fed chair, Jeff observes the futures market upped its fed funds expectations to 1½ rate hikes in the remainder of 2026. “With less emphasis on forward guidance,” Ryan notes, “I think that will put a little more volatility into the front end. Markets will be a lot more dependent on incoming economic data. But ultimately, that will reduce the jump risk.” In the past, he explains, Fed officials could “get cornered into one position and then eventually have to change course,” producing “gappy markets.” In the absence of past guidance, he says, FOMC members won’t be tied to past public positions.