Episode summary
Welcome to the Party, Mr. Warsh (FvF Ep. 188)
Facts vs Feelings
· · 54 min · Hosts: Ryan Detrick, Sonu Varghese
Summary
The hosts frame Kevin Warsh’s arrival as the new Fed chair against a bond-market challenge rather than an equity-market one: the 30-year Treasury yield is above 5%, the 10-year has climbed to about 4.60%, and the market is effectively pricing a Fed that may be behind the curve. They argue that this is an inflationary-growth regime, not a recessionary one, and that higher yields reflect both stronger domestic inflation and weaker foreign demand for U.S. Treasuries as yields rise in Japan and elsewhere.
They spend much of the episode on hard economic data that contradicts a softening-economy narrative. Manufacturing output, high-tech equipment production, defense equipment, and broad industrial production are all running hot in real terms, while retail sales are up sharply on a three-month annualized basis. The host and the guest also highlight that the consumer remains sturdy: household debt payments are current on 95.2% of balances, delinquencies are not deteriorating, and the labor market remains historically healthy.
Earnings are another major theme. With 91% of S&P 500 companies reported, earnings growth is running far above expectations, led by huge upside surprises in consumer discretionary and communication services. The guest argues that this helps explain momentum in equities, even if some areas may pause after a strong seven-week rally.
Key takeaways
- The hosts say the bond market, not equities, is the Fed’s immediate stress test, with the 30-year Treasury yield above 5% and the 10-year near 4.60%.
- They argue the U.S. is in an inflationary-growth regime: manufacturing, industrial production, and retail spending are all running hot in real terms.
- The guest says foreign demand for Treasuries is weakening because Japan and other developed markets now offer higher yields, reducing the old ‘search for yield’ bid for U.S. bonds.
- With 91% of S&P 500 companies reported, the host says earnings growth is running around 27% versus 13% expected, supporting the bull case for stocks.
- The guest says the consumer remains resilient, pointing to a 95.2% on-time debt payment rate and no meaningful deterioration in delinquencies.
Notable quotes
“welcome to the party, Mr. Worsh. So, do you think about bad first days”
“it's not the equity market, it's the bond market. That's the big story of last week”
“industrial production. This is our data. And by the way, this is real. It's inflation adjusted since it measures volumes”
How the episode opens
Welcome to the Facts Versus Feelings podcast. I'm your host, Ryan Dietrich, and I'm joined by my co-host, Sonar Geese. Cutting through the noise each week with Ryan Dietrich, chief market strategist, and Sonar Geese, chief macro strategist.
taking out the boring and helping investors focus on what really matters. Well, welcome to the party, Mr. Worsh.
So, do you think about bad first days? I know it's not as technically his first day. you're going to explain all this, but it's he's he's coming and yields are giving him a very rude awakening, which we're going to uh talk about here.
Uh episode 188 of Facts Versus Feelings, Ryan and Sonu, who is always Well, they said first off, is Wars in charge? Who Who's in charge of the Fed? Sonu, because I heard Friday was Pal's last day, and you and I just talked, you said not really.
What's going on?
Powell's in charge. I the Senate — Yet to confirm or confirm them, but he's yet to take office. So we'll just put it that way. And chair. Yes. And so Powell remains in place until Walsh walks in. But yeah, for all practical purposes, he's the new Fed chair. And welcome to the party.
Right. Look, every I I feel like almost every time a new Fed chair comes in, the market tests the Fed, — But usually it's the equity market that tests the Fed chair. Greenspan was it 1987? — Greenspan 87. I forget when Bernani came in but Powell too, right? It was 2018
And there were policy changes that he wanted to make. He made and the market wasn't wasn't happy with that. And this time it's not the equity market, it's the bond market. That's the big story of last week.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed chair transition
- treasury yields
- japan yield repricing
- industrial production and manufacturing
- s&p 500 earnings
Companies and tickers mentioned
- NVDA
- Carson Group
- Nvidia
Watch the episode
Watch “Welcome to the Party, Mr. Warsh (FvF Ep. 188)” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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