U.S. Equity Outlook

Fed's hawkish pivot under Warsh intensifies — July 2026 outlook shows PCE at 3.6%, rate hikes back on the table. Energy price shocks from Iran and resilient labor are key drivers. Fed semiannual report confirms sticky inflation (PCE 4.1%) driven by tariffs, energy shocks, and AI demand. Fed minutes explicitly cite AI as an inflation driver. Warsh's first report mentions money supply again, rate hike expectations rising. Fed held rates steady at 3.5-3.75% (fourth consecutive pause), hawkish tilt with some officials projecting a 2026 hike; 2-year yield jumped 15bp to 4.21%, near 17-month high. Markets now pricing tighter path; September hike odds remain elevated. Fed minutes reveal deep division: 9 of 18 officials now see a rate hike by December. New Chair Warsh reshaping communication—no dot plot, shorter statements, scenario-based approach. Iran ceasefire collapse adds energy-price risk. Softer jobs data (57k payrolls, 4.2% unemployment) fuels rate-cut hopes, 10-year yield at 4.47%. NFP miss reduced hike odds to ~22%. July CPI key. NY Fed survey shows higher inflation expectations (3.7% one-year). Oil spike on US airstrikes against Iran adds inflation uncertainty. Higher-for-longer narrative persists. This week: June CPI/PPI (Tuesday), Warsh testimony, Q2 earnings kickoff. A critical take on the Fed's semi-annual report highlights contradictions and a credibility gap. Warsh's 'deliver price stability' statement is a potential game changer for Wall Street, directly challenging the rate-cut narrative. Multiple weekly previews confirm this is the most critical macro week of the quarter. US-Iran escalation adds energy-price risk to inflation outlook. New: Rabobank previews June CPI expected to ease to 3.8% y/y, core 2.8%, plus Warsh testimony and multiple Fed speakers. New: Warsh faces political pressure in Congress; July rate hike odds jump to 46.5% on oil shock and Waller's hawkish comments; Barclays notes AI-induced price hikes as new inflation driver. Goldman Sachs drops new warning on rate hikes, adding macro risk ahead of CPI and Warsh testimony. Latest: Dallas Fed President Logan calls for 'modestly higher' rates — first Warsh-era official to publicly advocate a hike; sets up potential dissent at July 28-29 meeting; money market funds turn defensive, shortening maturities and piling into FRNs/repos. New: SMBC's Joe Lavorgna says Fed has to hike this year, reinforcing hawkish narrative. Newsquawk wrap confirms Logan's rate-hike call and macro data. SF FedViews confirms inflation elevated at 4.1%, labor market balanced, markets pricing a rate hike in H2 2026. US Market Open article ties cooling CPI and oil spike to Fed policy. Latest: A piece on traders changing their tune on interest rates suggests a potential pivot in rate expectations, contrasting with recent hawkish Fed rhetoric. New: Fed's Jefferson signals openness to hike if inflation stays elevated; September rate hike probability at 52%. Latest: More Fed officials see hikes ahead, reinforcing hawkish outlook. U.S. stocks fall as more Fed officials see hikes ahead. **New: Warsh's testimony is the clearest signal yet that the Fed is considering rate hikes if inflation persists, but he stops short of explicit guidance, focusing on AI-driven price pressures and commitment to independence. The uncertainty itself is the story: markets are used to Fed guidance, but Warsh is not playing that game. Logan's explicit hike call and the dot plot shift confirm hawkish tilt, yet cooler CPI data keeps July unlikely. This forces investors to position for either outcome, amplifying volatility.**