The Fed Kevin Warsh Era began with a bang. Starting with the Federal Open Market Committee (FOMC) communique (see below), which was drastically reduced to avoid forward-looking guidance. That was just the beginning.

New Sheriff in Town

Warsh began the press conference with prepared remarks that were subtle, but they set the stage for an onslaught of questions once he opened the question-and-answer portion.

The reporters in the room were livid about a lack of forward guidance and the goal of limiting communication altogether. One asked if there would be future FOMC press conferences. 

Initially, Warsh was stiff reading the prepared remarks, but morphed into a moderator when fielding the questions. The shots across the bow: the organization unveiled five task forces.

“The task forces will share an objective: a Fed that is clear-eyed about its mission, fit for purpose, and focused on the future. They are likely to begin work in the next couple of weeks and conclude year-end.” - Fed Warsh

Headlines focus on changes in the Summary of Economic Projections (SEP), especially for inflation. But the past 48 hours suggest these numbers are too aggressive. Ironically, adjusting them lower could be the catalyst for rate cuts.

Investors Rebel

There was something akin to a temper tantrum yesterday, as the market sold off, giving Warsh the “dubious distinction” of the worst market reaction to the first meeting as chair.

Each sector in the S&P 500 (SPX) finished in the red, with Communication Services (XLC) leading the drawdown.

Consolidating Gains

It's easy to think the market is consolidating gains here after the huge April-May rally, but the nature of those gains undermines that narrative.

Large-Cap Momentum

The thing is that the biggest gainers this year were also higher yesterday. Large-cap momentum keeps charging higher. The market niches that should have fetched some action were hit hard, including quality, value, and low-volatility. 

Semiconductors Rule

Global fund managers load up on semiconductors (SOXX), even as a record 80% consider it the most crowded trade.

Semiconductor & Other Hot Niches

There are a number of niches and specialized industries inside the semiconductor complex. For the most part, they are all on fire:

• Compute
• Memory
• Foundries
• Lithography
• Packaging
• Design Tools
• Next Gen
• Analog

• Space fared well even during the first down session for SPCX
• Defense continues to rally, along with rare earths
• Fertilizers are rebounding
• Nuclear power is acting better

The theme that caught my attention most was 3D Printing. After getting hammered in these names a decade ago, I’m not sure I want to take the bait this time around.

The Day After

Watching closely the day after. Everyone has had a chance to go home and consider everything that happened yesterday, and the meaning of the Warsh Fed.

Quick Note

Moms deserve all the love we give them, but now and then, throw dad a bone. I’m happy to see folks are spending more on Father's Day, but it would be even better if you went to his house and made homemade ice cream, too.

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