Waiting on Warsh

This Week in Context

Week 21. 2026.

Kevin Warsh became Fed Chair on Friday. The Senate confirmed him 54-45 on May 13, the most divisive Fed Chair vote in history. His first Federal Open Market Committee meeting is June 16-17.

The 10-year Treasury yield closed Monday at 4.61%, the highest in a year. Brent crude pulled back from $114 to about $110 on Trump's Iran-deal back-and-forth, but the December 2026 oil futures contract is still pricing $90 a barrel for the rest of the year. Bitcoin broke below the $80,000 shelf and is testing $76,500. Equity indexes are flat to down small on the week.

The book was built to absorb this exact tape. No moves.

the position

27% VOO, 8% VWO, 13% GLD, 5% SLV, 7% BTC, 40% BIL. Holding all six. No buys. No trims.

Macro Landscape

The bond market is loud this week. The 10-year yield rose 12 basis points on the week to 4.61%, the biggest weekly jump since the April 2025 tariff scare. Japan's 30-year yield set a record. The global government bond market is pricing in higher-for-longer.

Two forces are pushing yields higher together, and neither is friendly to long duration.

The first is oil. The December 2026 Brent contract is at a new high, and the June 2027 contract is at a new high. The futures curve is saying crude stays above $90 a barrel through year-end and above $80 a barrel into next year. Oil-driven inflation is the operating reality for the inflation conduit.

The second is the Federal Reserve handoff. Warsh inherits a divided committee. The April vote was 8-4, the widest dissent split since 1992. He said during his confirmation hearing that he wants "messier" interest rate meetings where a "good family fight" can lead to better economic decisions. The committee was already messy. Now the chair is openly inviting more dissent.

Markets are pricing less than 3% probability of any rate cut at the remaining Federal Open Market Committee meetings this year. The forward guidance still says two cuts. The reconciliation gap has to close before Warsh can move, and the May to June Consumer Price Index prints are the input that decides which direction.

I am not buying long bonds. The 10-year is in no-man's land and the structural inflation pipe is firming, not fading. Cash that pays still beats duration that does not.

Large allocators have begun upgrading developed-market equities and downgrading high yield credit this week, with the framing that artificial-intelligence earnings momentum is strengthening and growth risk is better priced in stocks than in junk bonds. That is consistent with the AI productivity story I have been carrying through VOO. The catch is the same as it has been all spring: the macro pipe still caps how much equity beta I want on top of the AI exposure I already own. 27% in VOO is the size that says yes to the productivity story and no to chasing it through a rate scare.

Sector Spotlight: The Bond Selloff

Yields rose because the structural inflation case is winning the argument with the structural growth case.

The data this week supports the structural inflation side. The April Consumer Price Index print at 3.8% year-over-year is the fifth full year above the 2% target. The May print is the next test. If May headline stays above 3.5%, the rate-cut path collapses and the 10-year retests 4.7%.

A widely-followed Bank of America fund manager survey out this week added the contradiction. Equity allocations surged a record amount on the month, and 40% of those same managers said a second wave of inflation is the biggest tail risk. Equities as an inflation hedge has not worked over long stretches of history, and that is exactly the trade managers are crowding into. When professional money is positioned long stocks specifically as protection against inflation, the position itself is the vulnerability.

the trade I am avoiding

Long bonds for a credible disinflation that has not arrived. Long high yield credit at spreads that no longer pay for the risk.

I considered adding the United States Oil Fund (USO) again this week. The case is real. Oil curves are pricing sustained crude above $90 a barrel through the end of the year, and the December 2026 contract is at new highs. Sources on the fixed income side are explicitly saying oil is now the bond market's main driver.

I declined again. The 25% hard-money sleeve (gold, silver, Bitcoin) already carries the inflation thesis. United States Oil Fund roll cost in backwardation is still real. $110 Brent is buying after a $40 run from below $70, not buying weakness. The trigger to re-evaluate is the same: a pullback to $95 to $100 Brent, or a genuine escalation that closes Hormuz again on a sustained basis.

Crypto Corner

Bitcoin lost the $80,000 line on Monday and is testing the cycle confirmation level near $76,000 this morning. Bitcoin opened Tuesday at $76,952, its lowest opening price since May 1, after a worst week since February.

Spot Bitcoin exchange-traded funds saw their largest outflow day since the February capitulation event, with about 7,500 Bitcoin leaving the spot vehicles in a single session. The framing matters: this is not a structural sell that broke the cycle, but it is the largest air pocket on the spot side in three months. The signal is that the late-comers who bought the $80,000 break two weeks ago are getting shaken out by the rate scare.

The cycle frame I track says holding above $76,000 keeps the bull-market structure intact. Below $76,000, the scale-in window into the $65,000 to $70,000 fair-value zone opens. 7% is the right size for that mix. No add at spot. If price retraces another 10% to 12%, the scale-in target activates.

Looking Ahead

Watchlist into next week.

May Consumer Price Index. Releases in the back half of the month. Headline above 3.5% closes the rate-cut path and pulls the 10-year to 4.7%. Headline below 3.5% reopens the cut path and is the catalyst for an emerging markets add.

Iran deal noise. The president called off a planned attack on Monday afternoon. The reported window is "two or three days, maybe early next week." Oil swings on each headline. December 2026 Brent at new highs is the structural read; the spot tape is the noise.

Warsh's first communication. Speeches, written remarks, or interviews from the new chair in his first two weeks are the single highest-information events of the month. Markets are betting on continuity. A 54-45 confirmation vote is not continuity.

Bitcoin's $76,000 line. Holds, and the cycle frame stays intact. Loses it, and the scale-in window into $65,000 to $70,000 opens. Either way, no chase at spot.

The book opened from cash on April 20 has now run four weeks. The cash sleeve absorbed this week's drawdown. That is what 40% in short-term Treasury bills is for.