June 17 – Markets

Fed Says “Inflation Is a Choice” While the Dots Go Full Hawk

Fed communications under new Chairman Kevin Warsh marked a sharp pivot. The dot plot showed nine of 18 officials projecting at least one rate hike this year, with six of those forecasting multiples; only one projected a cut and Warsh submitted no SEP. The statement underwent a full rewrite, shorter, with repeated emphasis on delivering price stability. Warsh described inflation as a choice the FOMC is going to fix after missing for five years. Markets registered the shift: bond pricing moved from two cuts to two hikes at the start of the year, a roughly 1% swing, with the 2-Year Treasury yield closing at 4.21% after starting the year at 3.48%. Likelihood of a July hike jumped sharply per CME data. Atlanta Fed GDPNow nowcast for Q2 rose to +3.0%. Year-ahead business inflation expectations edged down slightly to +2.3%.

Zerohedge reported on the Trump-Iran MOU signed ahead of schedule, with Iran confirming terms including no US troop boosts or new sanctions for 60 days and US responsibility to enforce Israeli compliance. Separate items covered UAE efforts to achieve zero Hormuz dependency by rewiring energy flows, a fire at a major Southern California food storage warehouse, Korean banks seeing 10-year high demand deposit turnover as investors shift liquidity toward stocks, a US Embassy jet ski warning in the Bahamas, and states starting to register panic over AI taking over.

In AI commentary, Chamath Palihapitiya highlighted an NYT essay questioning why AI makers continually warn of world-ending risks, noting it won’t happen. He also flagged rapid progress in open-weight models, with GLM-5.2 jumping to first on Design Arena benchmarks and closing gaps on closed-source systems; recursive RL expected to shrink deltas further toward convergence. David Sacks pushed back on narratives downplaying his stance on Anthropic’s Mythos cyber preview, clarifying he treated the threat as real and urged immediate hardening of systems and patching while critiquing scare tactics. Chamath additionally touted his current team as the best he has recruited—based, cracked, humble, wicked smart, honorable—with many rising from interns—and promoted 8090’s Software Factory as an emerging enterprise control plane.

Other notes: Intel trading at extremes (over 11x sales today versus under 2x a year ago, over 100x expected profits despite recent losses). Profplum99 shared parenting advice on building an affection reservoir between ages 2-12. Ray Dalio reminded that any single dot is one data point from one moment and should not be overweighted. Charlie Bilello underscored that promises of money-market stability with market-leading returns do not exist and that higher returns carry higher risk.

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