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MARKETS AT RECORD HIGHS AS HOT CPI MEETS A NEW FED CHAIR

On Monday, the S&P 500 .SPX scored its 16th record closing high of 2026. By Tuesday, however, data showed U.S. consumer prices rose briskly for a second straight month in April, pushing annual inflation to its highest level in nearly three years. Stocks are now pulling back.

Meanwhile, the Federal Reserve is preparing for a leadership change this week.

According to Mike O’Rourke, chief market strategist at JonesTrading, incoming Fed chair Kevin Warsh is walking into a tricky situation. Inflation is picking up, the Fed has missed its inflation target for five straight years, and he’ll be serving under a president who has been very clear - and very vocal - about wanting lower interest rates.

O’Rourke notes that anyone familiar with Warsh’s past work knows he’s not a rubber-stamp kind of guy. In his view, Warsh could end up being the most hawkish - or, perhaps more accurately, the least dovish - Fed chair since Paul Volcker. That, O’Rourke argues, says as much about the persistent dovishness of Fed leadership over the past four decades as it does about Warsh himself.

O’Rourke also points out that the blowoff in precious metals, particularly silver, that peaked in January began to unravel once news of Warsh’s appointment hit.

Looking back at Warsh’s confirmation hearing, O’Rourke highlights his emphasis on shrinking the Fed’s balance sheet. The broader idea, as he sees it, is to pair a smaller balance sheet with lower interest rates. But today’s elevated inflation could complicate that plan, potentially delaying both steps in the near term.

Bottom line? O’Rourke cautions that while “running it hot” might seem like a green light for a speculative frenzy, investors piling into the world’s biggest companies at 35 times earnings are taking on real risk - and, as he puts it, they “do so at their own peril.”

(Terence Gabriel)

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