The Week in Review: August 3, 2026
A Murky Fed Message
"All hat and no cattle" is a traditional cowboy phrase—especially popular in Texas—describing someone who is basically a poser: plenty of talk, lots of sparkle, but little to back it up.
It’s all talk and no action, and that’s the takeaway from Federal Reserve Chair Kevin Warsh’s second Fed meeting and subsequent press conference.
In a 9-3 split decision, the Federal Reserve left its key rate, the fed funds rate, unchanged at 3.50–3.75%. While it wasn't entirely unexpected, Warsh's tough talk in June raised the possibility that the Fed might raise its key rate last week.
The three dissenters favored a quarter-point hike.
Once again, Warsh came out swinging against inflation, insisting that the Fed will deliver on its goal to bring down inflation. He pointed out that inflation has been above the Fed’s target of 2% for over five years. His rhetoric and posture were unwavering and resolute.
But achieving the Fed’s goal of price stability hasn’t been easy. The Fed’s tools aren’t perfect. It’s not like a recipe. You know, mix several pre-measured ingredients and bake at a set temperature for a set amount of time.
Historically, the preferred tool in its toolkit has been interest rates.
But the lack of a rate hike on Wednesday, no hint of a rate hike in September, and a vague explanation as to why the Fed isn’t backing up its tough talk with action left investors, especially bond investors, with a feeling that the Fed’s bark is louder than its bite.
Warsh’s comments seemed to suggest the bond market was doing the heavy lifting for the Fed. He pointed out that the intra-meeting rise in bond yields was "among the most significant in the last two decades.”
The graphic below illustrates the rise in longer-term bond yields between the two meetings. And yields have edged higher since the Wednesday meeting.
Notably, the 30-year Treasury yield, a bond primarily purchased by institutional investors such as pension funds, is at its highest level since 2007, per Bloomberg.
In other words, bond investors have gradually backed away from bonds (bond prices and bond yields move in opposite directions) amid worries about inflation and the Fed’s credibility in its fight against inflation.
Additionally, the large federal deficit and enormous need for capital for the AI buildout may also be playing a role.
Perhaps investors simply need to adjust to his style. Over the last two decades, investors have grown accustomed to guidance, signaling, and plain talk about the Fed's intentions.
That’s not Warsh's style.
Maybe the Fed chairman simply didn’t have the votes to raise rates. But I can’t stress enough how unusual it would be for a Fed chairman to side with the minority. It's never happened.
There are those who believe inflation has peaked, and rate hikes aren’t needed. And Fed policy can’t produce one drop of oil.
Even so, the lack of congruence between tough talk and inaction left investors questioning the Fed’s commitment to its message.
Market summary
TWO FOR THE ROAD
An analysis by The Economist finds that, for the first time in its 25-year dataset, over half of global billionaire wealth is now held by self-made billionaires who made their fortunes through “competitive activities,” meaning by providing goods and services in competitive markets, as opposed to inheriting their wealth or accumulating it in politically connected industries. – The Economist, July 23, 2026
Science Corporation, a startup developing novel brain-computer interfaces (BCI), won approval from Europe’s medical device regulator to begin selling a device that restores vision lost from age-related macular degeneration. – TechCrunch – July 22, 2026
I hope you have a great week!
Warmest Regards,
Bill Stordahl, CFP®
Managing Director
Stordahl Capital Management
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