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The most important charts and themes in markets and investing…
1) The Rate Hikes Are Coming
Kevin Warsh’s Jackson Hole speech was yet another reminder that he is not going to be the extremely dovish Fed chairman that President Trump was looking for.
Quite the opposite.
He reinforced the Fed’s 2% inflation target as a “firm, fixed target” and stated unequivocally that it was “the Fed’s job to deliver stable prices.”
Have they been delivering it?
Absolutely not, as Warsh plainly acknowledged in saying the Fed bears “responsibility for 65 months of sustained, elevated inflation.”
And unless they are confident that underlying inflation is moving back to 2% at “sufficient speed,” Warsh believes they “have work to do.”
Translation: the rate the hikes are coming. The market is now pricing in a 60% chance of a Fed hike at the September 16 meeting, with the odds going up to 70% by the October meeting and 85% by year-end.
Will the Fed stop after one hike?
That seems unlikely if they want to send the message that they are actually serious about fighting inflation. The 2-Year Treasury yield has been a pretty good leading indicator of the Fed Funds Rate over the last decade, and it currently sits at 0.74% higher than the Fed Funds Rate.
The bond market is currently pricing in 2-3 rate hikes over the next year, and with Fed set to update their projections for 2027 at the September meeting, that number could increase if the Fed raises their projections.
2) “Money Matters”
The US Money Supply (M2) increased by over $9 trillion during Jerome Powell’s tenure and there wasn’t a single mention by him on how that contributed to the 4% inflation we saw in the last 6 years under his leadership.
Which it was why it was encouraging to hear Kevin Warsh say the following at Jackson Hole:
“Money matters. It’s not fashionable these days, but my view is that money has something important to do with monetary policy. We should pay attention to money created by the central bank and money that comes from the banking and financial systems.”
What could the Fed do immediately?
End QE and stop expanding their balance sheet, a policy at odds with their stated desire to fight inflation.
After that, all of their mortgage bond holdings should be immediately sold and they should acknowledge the damage they caused: by artificially driving rates down to unnatural levels in 2020/2021, they artificially inflated home prices which effectively froze the housing market for a generation. Congress should pass a law to ensure the Fed is never again allowed to manipulate the mortgage market and engineer an affordability crisis.
3) The Iran War at 6 Months
We are now 6 months into the Iran war.
The impact on inflation has been felt by everyone around the world, with the prices of food and energy spiking since the start of the War.
In the US, we saw a painful new record for American drivers: for the first time in history, the national average price of gasoline was above $4.00/gallon every single day in August. And heading into Labor Day at $4.15 per gallon, this will be the highest level ever on the holiday (prior record was $3.82/gallon set in 2012).
So why was the stock market up 13% in the first 6 months of the war?
I’ll repost what I wrote at the start of the war and again at the 3-month mark…
The best we can say in studying past military conflicts is that with the passage of time, the stock market has tended to rise – and the more time that has passed, the more it has risen.
There’s two reasons for this: 1) all wars eventually come to an end, and 2) the economy and earnings, even if impaired in the short run, still tended to grow in the long run despite these conflicts.
4) Nvidia Caps off Historic Earnings Season
Once again, all eyes were on Nvidia when they reported earnings and once again, they didn’t disappoint.
In fact, this was the 16th straight quarter in which Nvidia surpassed analyst expectations. Which means that Wall Street has consistently underestimated its growth for four years.
The reason for that is simple: we’ve never in history seen a company grow this fast, and we may never see this type of exponential growth again in our lifetimes.
Nvidia Q2 revenues surged to a record $96 billion, up 106% over the prior year.
Their revenue projection for Q3 2026 is $108 billion, which would be an 89% YoY increase.
Net Income hit a record $59.7 billion, up 126% YoY.
And Nvidia’s net profit margin of 66% so far this year is another all-time high.
The AI capex boom has made Nvidia the largest company in the world, with a market cap of $5.6 trillion. That’s over $1 trillion more than the market cap of all the companies in Germany and Italy … combined.
As for the the S&P 500 as a whole, it was a historic quarter, with the biggest upside surprise in history (52% YoY earnings growth vs. 23% expected entering the quarter) and a new record high for net profit margins (17%).
At the start of the year, analysts were forecasting 15% earnings growth for the S&P 500 in 2026. The current project: a 34% increase, which would be unprecedented growth this far into an economic expansion (6 years).
And that’s it for this week. Thanks for reading!
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Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. Read our full disclosures here.
PakarPBN
A Private Blog Network (PBN) is a collection of websites that are controlled by a single individual or organization and used primarily to build backlinks to a “money site” in order to influence its ranking in search engines such as Google. The core idea behind a PBN is based on the importance of backlinks in Google’s ranking algorithm. Since Google views backlinks as signals of authority and trust, some website owners attempt to artificially create these signals through a controlled network of sites.
In a typical PBN setup, the owner acquires expired or aged domains that already have existing authority, backlinks, and history. These domains are rebuilt with new content and hosted separately, often using different IP addresses, hosting providers, themes, and ownership details to make them appear unrelated. Within the content published on these sites, links are strategically placed that point to the main website the owner wants to rank higher. By doing this, the owner attempts to pass link equity (also known as “link juice”) from the PBN sites to the target website.
The purpose of a PBN is to give the impression that the target website is naturally earning links from multiple independent sources. If done effectively, this can temporarily improve keyword rankings, increase organic visibility, and drive more traffic from search results.
