Warsh's Hawkish Turn: What It May Mean for Investors

Collin Martin and Liz Ann Sonders discuss Kevin Warsh's Jackson Hole speech as Fed Chair, which they describe as more hawkish than investors expected and which raised the likelihood of another rate hike while the Fed stays focused on persistent inflation. They argue the speed and purpose of rate hikes matter more than any specific interest-rate level, and they describe the possibility of a new era of higher inflation volatility, shifting stock-bond relationships and greater market sensitivity to economic data. They close by looking at the indicators and data likely to matter to investors in the coming week.

1. Warsh's Jackson Hole speech struck a more hawkish tone than investors expected, increasing the likelihood of another rate hike.
2. The Fed remains focused on persistent inflation, per the discussion.
3. The speed and purpose of rate hikes matter more than any specific interest-rate level.
4. Investors may be entering a new era of higher inflation volatility, shifting stock-bond relationships and increased market sensitivity to economic data.