Gurshawn Jagpal

• Markets are a bit weaker after Fed Chair Kevin Warsh’s Jackson Hole speech. He said inflation is still too high. That landed as slightly hawkish.
• I appreciate how Warsh wants the market to look at more real time data on the path of monetary policy rather than the FOMC forward guidance. This is, in my opinion, more natural.
• In my opinion, Warsh talks more about technology’s effect on policy than other recent Fed chairs.
• He is more cognizant about how technology can affect monetary policy.
• Warsh is a little hawkish. However, it’s too early to tell if he will hike rates or not.

The Fed wants clear market signals and here is what Warsh has said

• “The level and change in asset prices”
• “Prices and trading volume of Treasury Securities”
• “The level and change in asset prices across sectors”
• “Foreign exchange value of the dollar”
• “Cost and Availability of Credit”
• “The price of a broad set of commodities”

Commodities such as Gold, silver, copper, rare earth metals (via $REXC) sold off.  

• However, I still think that commodities are in a secular bull market.
• Nvidia and other semiconductors sold off. The market just took profits off the table due to Warsh being a little hawkish.
• Nvidia earnings show the AI investment buildup is still here to stay.

Software stocks as evidenced by ServiceNow, Microsoft, Salesforce, etc. went up. Salesforce earnings put rumor on the death of software by AI as overblown causing investors to enter the space again.

• This reminds me of the time when investors sold off healthcare stocks due to fears of the new Ozempic pill causing everyone to be healthy. Healthy to the point that no one will require medical services anymore.
• I noticed this year that when high-quality names like Visa, Mastercard, Microsoft, and salesforce were down in double digits while the S&P 500 was up, I added to those names during the sell-off.
• My theory of why high-quality stocks or sectors suddenly sell-off is due to the algorithmic trading powered by AI models that just trade off momentum. In the past, value investors of Warren Buffett would buy any technical dips on fundamentally strong companies. Now, algos will just sell and they will keep shorting the names.
• I will watch out for any sectors selling off irrationally and will add to strong names in those weak sectors.
  
  

Working notes. I used AI only to clean grammar. The views are mine. Not investment, tax, or legal advice.