July 2026 FOMC Preview Commentary – I Don’t Want to Talk About it

As we approach the last FOMC meeting of the summer, the Fed is busy in Washington conducting a “mid-year reset” that seemingly has the markets on edge. Fed Chair Warsh is now a couple months into the job and is already shaking things up in Washington and the markets. Most notably, he has removed the notion of forward guidance, limited his communications and set up five independent task forces to review core central bank policies, institutional practices, and monetary frameworks.

With the change in command at the Fed, we have had time to digest the recent economic developments, specifically the progress of inflation. Alongside a return to strict 2% inflation targeting, Fed Chair Warsh has guided his favoritism to the trimmed-mean PCE and median PCE over the popular core PCE gauge. As we can see by the graph below, both of Warsh’s preferred readings are showing signs of improvement to target.

Stepping over to the supply side of monetary policy, with a supply-side inflationary shock affected mostly by the Iran conflict, the U.S. Treasury 2-year yield has risen more rapidly than the 10-year Treasury yield, allowing the market to convey its voice of “higher for longer”.

Based on the current positioning of the Treasury curve and market-implied hiking expectations, we think the market has actually done the job for Kevin Warsh already in the short term. We view the need for less hikes in 2026 due to the follow simple factors:

• Upward sloping yield curve
• Policy rate is below the whole U.S. Treasury curve
• U.S. midterm elections after September FOMC

AI-related discussions have been ongoing as well as shown by the recent Fed minutes and Warsh communications. Warsh’s main thesis stems from supply-side productivity gains justifying lower rates in the longer term as described by the recent quote below:

“This is the most disruptive moment in modern economic history in the U.S. and the world. Today we call it artificial intelligence. Two years from now we’re going to call it business capex, and three years from now we’re going to call it just ordinary business.”
Kevin Warsh, during his testimony at the Senate Banking Committee Confirmation Hearing (April 2026)

At Wealhouse, the Voyager team continues to take cues from the M&A market and the direction of the 10-year bond yield, being defensive but selectively adding to positions that are undervalued and ripe for the taking in M&A. Just this month, Voyager holdings Polypeptide and Telecom Italia were given take out offers after meeting both companies earlier this year. Both are up over 50 per cent from their entry prices.

Notably, SpaceX was very topical for both our equity and credit teams with a $25bn multi-tranche bond issuance following their record-setting IPO. Our teammates joined forces by adding alpha on put spreads of the SPCX equity while actively profiting from the SpaceX and other hyperscaler IG bond issuances.

As we look ahead to the second half of the year, the market is now pricing in almost two hikes for the remainder of 2026. As discussed above, we believe the chances of two hikes in 2026 are overdone as the Treasury market is doing the heavy lifting for the Fed, implying greater surprise potential at any given FOMC meeting. Warsh will keep tight-lipped, giving the Fed time to slow play middle east tensions and other supply side inflationary shocks while Wealhouse will be ready to anticipate and react as needed.

*This Commentary expresses the views of the author as of the date indicated and such views are subject to change without notice. Wealhouse has no duty or obligation to update the information contained herein. This Commentary is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as an offering of advisory services or an offer to sell or solicitation to buy any securities or related financial instruments in any jurisdiction. Certain information contained herein concerning economic trends and performance is based on or derived from information provided by independent third-party sources. Wealhouse believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.