Matt Hougan on Warsh's Federal Reserve Press Conference: A More Moderate Fed Will Let the Market Lead
Matt Hougan stated that Warsh demonstrated capability and rationality at the Federal Reserve press conference, and the market should feel reassured by his leadership.
Under Warsh's leadership, the Federal Reserve is more moderate and will no longer dominate market fluctuations as it has over the past 15 years. The Fed remains important but will reduce its artificial intervention in the market, allowing market forces to take the lead.
Funds are shifting from "Fed expectation trades" to fundamentally driven assets, with decreased volatility benefiting stocks and credit bonds. Traditional macro hedge funds are under pressure, while fundamental stock-picking strategies benefit.
Kevin Warsh will assume the role of Federal Reserve Chair in June 2026, emphasizing in his first press conference that "Fed policy suppresses economic prosperity" and advocating for reduced intervention to allow the market to self-regulate.
Source: Public Information
ABAB AI Insight
Historical Behavior
Kevin Warsh's historical role at the Federal Reserve dates back to the 2008 financial crisis, where he participated as an insider in the design of TARP and quantitative easing. However, he publicly criticized "excessive easing" multiple times in the 2010s, and in 2019 wrote that "low interest rates create asset bubbles." Nominated by Trump in 2025, he will take office in June 2026. His historical behavior reflects a "market-oriented" stance—believing in market self-regulation and opposing "excessive central bank intervention." In contrast to Powell's (2018-2026) "data dependence + forward guidance," Warsh leans towards "rules-based + reduced intervention."
Capital Path
The policy path under Warsh's leadership is clear: at the first FOMC meeting in June 2026, the interest rate will remain unchanged at 3.5-3.75%, but signals of "possible rate hikes within the year" will be released. In Q2 2026, inflation is projected at 3.8% (target 2%), and the unemployment rate at 4.1% (natural rate 4.5%), with the economy in a "heated but not out of control" state. Warsh advocates for "letting the market price inflation expectations" rather than forcibly anchoring them through forward guidance. Funds are shifting from the "Fed Put" narrative to "market self-clearing"—investors no longer rely on the Fed to rescue the market, resulting in more realistic risk pricing.
Analogy + Industry Position
Similar cases include: after Greenspan's "rational exuberance" speech in 1987, the Fed reduced intervention, leading to increased market volatility but higher long-term returns. During Bernanke's "inflation targeting" period from 2000-2006, the Fed stabilized expectations through forward guidance, resulting in decreased market volatility but the accumulation of asset bubbles. Warsh is currently in the "post-quantitative easing era"—compared to 2010-2020 (QE dominated liquidity), liquidity in 2026 will be driven by fiscal deficits ($3.5 trillion/year) and private credit ($15 trillion). The industry position belongs to the "central bank exit dominance period"—the market is shifting from "central bank dependence" to "fundamental pricing."
Structural Judgment
Essentially, this reflects a regulatory change leading to a reconfiguration of pricing power. Over the past 15 years (2010-2025), the Federal Reserve dominated asset pricing through QE and forward guidance, with 70% of U.S. stock volatility driven by "Fed expectations." Warsh's "more moderate" stance essentially signifies the "central bank exiting the pricing center"—allowing fundamental factors such as inflation, growth, and profits to re-dominate pricing. This explains why Hougan states that "the market will lead"—when the Fed no longer "artificially smooths volatility," market volatility rises, but pricing efficiency improves. This drives a "return to fundamentals"—macro trading (betting on Fed policy) yields decline, while individual stock alpha returns rise.
ABAB News · Cognitive Laws
The era of central bank dominance ends, fundamental pricing returns
The Fed Put disappears, risk pricing becomes more realistic
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