{"id":256727,"date":"2026-09-18T13:17:13","date_gmt":"2026-09-18T17:17:13","guid":{"rendered":"https:\/\/ibkrcampus.com\/campus\/?p=256727"},"modified":"2026-09-18T13:55:58","modified_gmt":"2026-09-18T17:55:58","slug":"it-turns-out-that-they-loved-warsh","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/ibkr-market-insights\/it-turns-out-that-they-loved-warsh\/","title":{"rendered":"It Turns Out That They Loved Warsh"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">I feel remiss that I could not comment in real time on yesterday\u2019s stunning rally, but I was privileged to be invited to participate in the <a href=\"https:\/\/www.sec.gov\/newsroom\/meetings-events\/roundtable-preparations-24-hour-trading\">SEC\u2019s Roundtable on Preparations for 24-Hour Trading<\/a> and thus fully committed to that event.&nbsp; There was indeed a stunning turnaround after the lukewarm response to Chair Warsh\u2019s press conference, though the magnitude may have had more to do with traders\u2019 continuing propensity to chase rallies than a sober reassessment of the fundamentals.&nbsp; And this morning\u2019s very modest profit-taking amid sharply higher yields is another sign of the \u201c<a href=\"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/ibkr-market-insights\/the-peace-ratchet\/?query=ratchet&amp;requestId=4bca247a-7f97-44aa-bbd0-01e396eb3d90\">ratchet effect<\/a>\u201d.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It was interesting to piece together yesterday\u2019s action with limited access to market data (I had my phone off through the sessions).&nbsp; On Wednesday, I undoubtedly annoyed some of my fellow train passengers when I received numerous calls asking why stocks and bonds seemed to be reacting negatively to Warsh\u2019s comments.&nbsp; At one point, the S&amp;P 500 (SPX) was off by more than 1%, which would have made it the third straight decline of that magnitude after a Warsh FOMC presser.&nbsp; But we dutifully bounced off the lows, and it was more than simply dip-buyers\u2019 catnip.&nbsp; Warsh switched from talking tough about inflation to actually doing something about it, restoring a key dose of credibility to the central bank.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Remember, traders react but investors consider.&nbsp; I had dinner on Wednesday with a friend, a (happily) retired hedge fund manager who expressed a dose of relief about the FOMC\u2019s rate action and Warsh\u2019s messaging.&nbsp; I agreed, acknowledging that 25 or 50 basis points should not be sufficient to upend a healthy economy if modest hikes help suppress inflation.&nbsp; The markets seemed to concur as well, certainly by the next morning when stock futures recovered their losses and bond yields fell.&nbsp; Stocks continued to rally as 10-year yields dropped, with SPX closing 1.1% higher and 10-year yields dropping by 9 basis points from 5.02% to 4.93%.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The relationship between stocks and bonds was quite solid yesterday but has largely unraveled today.&nbsp; As I type this, 2-year and 10-year yields are about 7 bp higher, with the latter once again flirting with the key (psychological) 5% level.&nbsp; At the same time, SPX is down by less than 0.2% while the Nasdaq 100 (NDX) is essentially unchanged.&nbsp; This is why I referred to the \u201cratchet effect.\u201d&nbsp; Stock traders used the positive developments as a reason to rally but didn\u2019t seem to care when those developments turned unfriendly.&nbsp; Indeed, today we see NYSE decliners outpacing advancers by about 2.5:1 and SPX net decliners leading by about 250.&nbsp; The selling is a bit more broad-based than it looks.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Two breaking news items have hit markets while I was typing this.&nbsp; First, we had a big rally in cryptocurrencies on reports that the CFTC will be writing a set of new crypto regulations.&nbsp; That caused bitcoin to recoup the $80,000 level that it lost when the legislative efforts failed earlier this week.&nbsp; Second, the yen was in the midst of a steep decline this morning, despite a 25 bp hike from the Bank of Japan.&nbsp; Most of those losses reversed when the BOJ was said to be doing a \u201crate check\u201d, a move that can precede an intervention.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Bottom line: the bullish sentiment remains ingrained in the equity markets, even if other key influences are quite a bit more tenuous.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>I feel remiss that I could not comment in real time on yesterday\u2019s stunning rally, but I was privileged to be invited to participate in the SEC\u2019s Roundtable on Preparations for 24-Hour Trading and thus fully committed to that event.  There was indeed a stunning turnaround after the lukewarm response to Chair Warsh\u2019s press conference, though the magnitude may have had more to do with traders\u2019 continuing propensity to chase rallies than a sober reassessment of the fundamentals.  And this morning\u2019s very modest profit-taking amid sharply higher yields is another sign of the \u201cratchet effect\u201d.<\/p>\n","protected":false},"author":4,"featured_media":184479,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[14700,18,6,8,9,26,3],"tags":[],"contributors-categories":[13576],"class_list":["post-256727","post","type-post","status-publish","format-standard","has-post-thumbnail","category-ibkr-market-insights","category-macro","category-north-america","category-region","category-securities","category-text-articles","category-traders-insight","contributors-categories-interactive-brokers"],"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast SEO v28.5) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>It Turns Out That They Loved Warsh | Traders&#039; Insight<\/title>\n<meta name=\"description\" content=\"I feel remiss that I could not comment in real time on yesterday\u2019s stunning rally, but I was privileged to be invited to participate in the SEC\u2019s...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.interactivebrokers.com\/campus\/wp-json\/wp\/v2\/posts\/256727\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"It Turns Out That They Loved Warsh | IBKR Campus US\" \/>\n<meta property=\"og:description\" content=\"I feel remiss that I could not comment in real time on yesterday\u2019s stunning rally, but I was privileged to be invited to participate in the SEC\u2019s Roundtable on Preparations for 24-Hour Trading and thus fully committed to that event. 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And this morning\u2019s very modest profit-taking amid sharply higher yields is another sign of the \u201cratchet effect\u201d.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/ibkr-market-insights\/it-turns-out-that-they-loved-warsh\/\" \/>\n<meta property=\"og:site_name\" content=\"IBKR Campus US\" \/>\n<meta property=\"article:published_time\" content=\"2026-09-18T17:17:13+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-09-18T17:55:58+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2023\/02\/federal-reserve-system-featured-img.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1000\" \/>\n\t<meta property=\"og:image:height\" content=\"563\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Steve Sosnick\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" 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