Warsh holds, drops guidance, launches five task forces. Nine FOMC members project a hike this year. Norway's GPFG recovers $68bn from its Q1 rout.
Voiceover transcript
This is the Universal Asset Owners daily video brief for Thursday, June eighteenth. The Fed went quiet. Three things for the people who allocate long-horizon capital.
Yesterday afternoon Kevin Warsh held rates, dropped forward guidance, and announced five task forces to overhaul how the Fed operates. The new FOMC statement dropped all rate-path language. The institution that guided markets for sixteen years has gone quiet — deliberately.
But the dot plot wasn't retired yesterday — and the numbers moved. Median year-end rate: three point eight percent, up from three point four in March. Nine of eighteen members projecting a hike this year. Six projecting two hikes. The two-year yield jumped sixteen basis points to four point two. The S&P lost one point two percent.
And while markets processed the Warsh Fed, the world's largest sovereign fund reported its first-half results. Norway's Government Pension Fund Global recovered sixty-eight billion dollars from its Q1 rout — posting a five point seven percent return, with financial stocks doing the heavy lifting at sixteen point five percent.
Here's the recovery by asset class. Infrastructure leads. Equities solid. Real estate modest. Fixed income at three point three percent — barely ahead of where the Fed now projects inflation.
For a long-horizon owner, the loss of forward guidance is uncomfortable in the near term and potentially constructive in the medium. The transition between those two states — during which the Fed is less informative than at any point since 2008 — is the test of portfolio construction. The patient book carries it. The leveraged one may not.
The full brief, the chart, and The Universal Owner podcast are at universalassetowners.com. Markets are quiet today into Juneteenth. Back tomorrow.
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