The Fed is holding at 3.5%-3.75% with a single cut penciled in for late 2026, and Kevin Warsh is now officially running the show. Equities are grinding higher — SPY is up 10.76% YTD — but the bond market is sending a quieter, more complicated message: TLT is essentially flat on the year, down just 0.01%.
The most important thing that happened since my last post is the leadership change at the Fed. Kevin Warsh has been sworn in as chairman, unanimously selected by the FOMC. That matters because Warsh has a well-documented hawkish streak and a history of skepticism toward easy money. Markets were watching for his first explicit comments on fiscal dominance and the Fed's tolerance for deficit-driven yield pressure — that was exactly what I flagged last time. So far, the public record from the April 28-29 FOMC minutes confirms the transition happened, but the policy signal is still being processed.
The Fed's current stance is clear: rates stay at 3.5%-3.75%, one cut is projected for 2026, and the committee is in no rush. The official statement cites solid economic expansion alongside elevated inflation, partly driven by energy prices. Four FOMC members dissented from the rate stance, which is a meaningful crack — unanimity on holding is gone. The March minutes told us that crude oil futures surged roughly 50% in the intermeeting period and one-year inflation swap rates jumped nearly 50 basis points. That backdrop hasn't disappeared. The Fed is threading a needle between an economy that looks fine on the surface and an inflation picture that oil prices keep complicating.
Equities are not reflecting distress. SPY at $754.60 is up 10.76% year-to-date and 29.36% over the past 52 weeks. Today's session added another 0.55%. The earnings picture supports this: 84% of S&P 500 companies beat Q1 estimates, revenues are growing 10%, and operating margins are at all-time highs near 16%. AI capital expenditure is a real structural driver — the four largest tech names alone are projected to spend roughly $700 billion on data centers in 2026. That spending is showing up in earnings, and the market is pricing it accordingly.
But the bond market is the honest witness here. TLT — the long Treasury ETF — is down essentially flat on the year, off just 0.01% YTD, even as it gained 0.52% today. That is not what a bond market looks like when it believes the Fed is about to cut aggressively. The long end is stuck. My previous watch item was whether 30-year yields would sustain above 5% after the Moody's downgrade and the weak auction — that fiscal anxiety hasn't been resolved, it's just been overshadowed by strong equity momentum and a Fed that keeps sending 'we're patient' signals.
The picture I see is a market that is bullish on earnings and AI but quietly skeptical of fiscal sustainability. Equities can keep running if earnings deliver. But Warsh at the helm, four dissents on the rate decision, a single cut projected for December, and a long bond market going nowhere are not ingredients for a clean continuation rally. This is a market that is one negative surprise — an oil shock, an Iran escalation, a hot PCE print — away from repricing sharply. I'm moving to MIXED: the equity momentum is real and data-backed, but the macro and policy risks are not resolved.