Bob Elliott, who runs Unlimited Funds and had written that Kevin Warsh's Jackson Hole speech looked less hawkish than lazy, tells Bloomberg Surveillance that the Taylor rule calls for 100 to 200 basis points of hikes, that the odds of getting them are de minimis, and that gold rather than the 30-year yield is the honest read on how credible the Fed still is. This summary covers his segment of the hour; CJ Muse and Paul Sankey, who followed him, are written up separately.
👤 Guest: Bob Elliott, co-founder, chief executive and chief investment officer of Unlimited Funds, which packages hedge-fund strategies into ETFs
🎙️ Hosts: Jonathan Ferro, Lisa Abramowicz and Annmarie Hordern, who anchor Bloomberg Surveillance on Bloomberg Television weekday mornings from 6 to 9 a.m. Eastern
📰 Published: 31 August 2026 on the Bloomberg Surveillance podcast feed
🟣 Apple Podcasts | 🔗 Episode page | ⏱️ 25 min
Key Takeaways
The question is not September, it is whether Warsh does what his own rhetoric implies
"And I agree with this basic idea that maybe he's boxed himself in, in terms of if you've missed your target for 60-plus months and inflation is above what your mandate is by a lot, and the employment conditions are not so bad, it seems like they should hike."
His framing of the market's doubt: "Or is this, as they say out West, all hat and no cattle from the new Fed chairman?"
Every simple Taylor rule says short rates belong 100 to 200 basis points higher, and the market knows it
The Atlanta Fed publishes a whole range of estimates, which he read as a message to the Eccles building
"The data is unambiguous. It's meaningful hikes relatively quickly. And the odds that we get that are de minimis at this point."
Refusing to hike would kill forward guidance, but credibility is the thing the Fed cannot afford to lose
"Sure. I mean, incompetence can be a way to kill forward guidance, right?"
The cost is that the market prices the tightening in longer maturities instead
Gold, not the 30-year yield, is his credibility gauge
"Well, I think I wouldn't necessarily just look at the 30-year yield in terms of Fed credibility. I'd be looking at gold."
"But the general trend here is for all the effort that the administration is doing to try and keep rates low, they're basically just flowing money into crypto and gold these days."
The trade is hard assets over soft assets, and it is not the same thing as being short the dollar
"Because I think the challenge when you think about the dollar is a dollar against what?"
Gold and oil strong, stocks and bonds soft, with copper at new highs alongside them
Only one thing reverses it, and he does not expect it
"A credible 200 basis points of tightening. But it ain't going to happen."
Warsh's two new inflation indicators are an escape hatch, not a tightening signal
The speech read hawkish at face value, and the market priced a little of that
"But the reason why I didn't go further is because Warsh was opening the door to torturing the data to find the path that was necessary, so that he didn't necessarily have to hike."
High nominal growth is not a green light for stocks when 25% earnings growth is already in the price
"I mean, we've priced in 25% earnings growth for the next two quarters"
Even Nvidia's guidance bought a pop and then a fall, which he read as exhaustion rather than strength
The consumer is the trade nobody is watching, and the high-frequency data is already turning
"Very few people are talking about what's going on with the consumer."
"And more timely numbers, whether it be TSA or Bloomberg Second Measure measures, suggest actually the consumer is starting to fade pretty quickly."
Warsh Has Boxed Himself In, and the Market Is Asking Whether He Will Deliver
The hour opened with stocks little changed while the market digested Kevin Warsh's Jackson Hole message. The program read Elliott's own note back to him — that the speech was taken as a tad hawkish but looked more like continued policy ineptitude, relying on rhetoric rather than clear action — and asked whether he was looking for a hold in September.
Elliott said the September call is the wrong question. What matters is follow-through.
The mandate arithmetic points one way. "And I agree with this basic idea that maybe he's boxed himself in, in terms of if you've missed your target for 60-plus months and inflation is above what your mandate is by a lot, and the employment conditions are not so bad, it seems like they should hike."
Against that, he said, sits all of the ambiguity in the speech itself
The market's question is about credibility rather than direction. "The market is looking at this and saying, is this a Fed that's actually credible in delivering the tightening?"
"Or is this, as they say out West, all hat and no cattle from the new Fed chairman?"
Every Taylor Rule Says 100 to 200 Basis Points, and the Odds of Getting Them Are De Minimis
Asked where the credibility gap sits in the market right now, Elliott went to the rules-based benchmarks.
"I think the basic idea is if you look at any sort of simple Taylor rule here, you'd expect interest rates on the short end to be up 100 or 200 basis points."
He read the Atlanta Fed's publication of a whole range of Taylor rule estimates as a pointed message. "It's almost like they're trolling those folks in the Eccles building saying, hey, look, if you're going to actually deliver monetary policy consistent with what we've talked about that's credible, you've got to be raising rates."
The debate the market is actually having is far smaller than the one the data implies. He described it as an argument over whether the odds of a September tightening are 40-60 or 60-40
"The data is unambiguous. It's meaningful hikes relatively quickly. And the odds that we get that are de minimis at this point."
So the adjustment happens further out the curve. "And so the real question is, when the market is looking at that, they're basically pushing the long end to basically penalize the Fed not doing their job on the short end."
Not Hiking Would End the Line-by-Line Parsing, but Credibility Matters More Than Guidance
A host put a contrarian case to him: would a hold be a good way to kill forward guidance and stop the market parsing every line of a Fed speech for signal?
Elliott conceded the mechanism and rejected the trade-off.
"Sure. I mean, incompetence can be a way to kill forward guidance, right? That's certainly a way in which they could do it."
"But the reality is what the Fed needs is to be credible."
"And when you stand up there and you say, we failed at our mandate for 60-plus months and you don't deliver based upon the data, that's the thing that's actually, the credibility is what matters a lot more than the forward guidance."
Look at Gold, Not the 30-Year, for the Read on Fed Credibility
The program raised the curve's own reaction and cited Academy Securities' Peter Tchir on the supply of investment-grade issuance ahead. The question, quoted here as it was put: "And the irony, perhaps, is the 10-year yields were initially moved lower on the speech from this chair and ended the day higher." followed by "Is the 30-year yield really a read on Fed credibility at this moment?"
Elliott moved the question to a different asset.
"Well, I think I wouldn't necessarily just look at the 30-year yield in terms of Fed credibility. I'd be looking at gold."
He said what gold is signaling is doubt about the policymaking institutions generally — the Treasury, the Fed and the administration — rather than about the Fed alone
"And it's saying, despite all these efforts to try and keep rates low, gold is pushing higher." Friday brought a small sell-off, he noted, without changing the trend
"But the general trend here is for all the effort that the administration is doing to try and keep rates low, they're basically just flowing money into crypto and gold these days."
The Trade Is Hard Assets Over Soft Assets, Which Is Not the Same as Short Dollar
The show's own read of the month: "Gold up 10% so far this month. At one point, up 16." Asked whether the gold trade is back on, Elliott said it is, and set out the wider version of it.
The pressures he listed were the Middle East conflict and what he called the administration's lack of credibility across several areas of policymaking
"this is setting up an environment where hard assets are outperforming soft assets, right. Where you see gold and oil continuing to be strong, where you see bonds and stocks soft in this sort of environment."
Asked whether that is just a short-dollar position in other clothes, he said the dollar is the wrong unit. "Because I think the challenge when you think about the dollar is a dollar against what?"
"I mean, the dollar against the yen just keeps falling every day." The euro, he said, sits on a pretty soft economy of its own
"And so I think investors are starting to move away from trying to express the U.S. dollar and the fiat currency trade across crosses. And they're moving more to hard assets."
What reverses it is the tightening he does not expect. "A credible 200 basis points of tightening. But it ain't going to happen."
Taking the Pain Is a Choice the Central Banks Are Not Making
Pressed that hikes would not remove the geopolitical risk he had described, Elliott said the point of tightening is not to remove the shock but to absorb it.
Delivering the tightening would amount to saying the US economy and other developed economies are willing to take the pain in response to geopolitical and inflation pressures — pressures he located in oil and, he added, in other commodities, with copper reaching new highs
"The question is, are we going to fulfill the mandate of these central banks in the U.S. and Europe and Japan? Or are we going to keep things easy and not take the pain and allow these inflationary pressures to build globally?"
"And that's basically what we're seeing."
Speed and Breadth Are an Escape Hatch, Not a Tightening Signal
A host raised the part of the Warsh speech that introduced two new inflation indicators — "He brought in two new indicators for us, speed and breadth." — and asked whether that changes how the inflation data should be read: not the headline number, but what the components look like and how quickly the rate is getting back to 2%.
Elliott treated the new indicators as the tell.
He called the speech equivocal, and said the face-value reading missed it. Many people looked at it and said it looked hawkish, and some of that showed up in market pricing
"But the reason why I didn't go further is because Warsh was opening the door to torturing the data to find the path that was necessary, so that he didn't necessarily have to hike."
The mechanism he described is component selection. Take a certain number of components and the derivative of how their share is moving relative to target, and a case can be made against 100 to 200 basis points of tightening
"But everyone in the market knows the reality, which is nominal growth is too high, inflation is too high for the Fed's mandate. And if he won't deliver the goods, then the market is going to figure out other ways to express that circumstance."
Nominal Growth of 5% to 6% Is Not a Green Light When 25% Earnings Growth Is Already Priced
The program put the bull case to him directly: nominal GDP running at 5% to 6%, inflation above target, and a Fed he does not think is credible — "Isn't that a green light to buy stocks?"
"Well, except for the extraordinary expectations that are already built in."
"I mean, we've priced in 25% earnings growth for the next two quarters", which he said would be an extraordinary run and sets a very high bar
The tell is in the high-flying names' reaction to good news. "And that gives you sort of an indication, even Nvidia, that which ostensibly gave the best guidance they could plausibly get, got a pop and then a fall on the backside of it."
"And I think that highlights just how overextended this market is."
"They're basically using all sorts of tools in one way or another in terms of leverage in order to get higher and higher exposure to these assets and to stocks, the high-flying stocks. And at some point, you reach some exhaustion."
The Consumer Is the Trade Nobody Is Watching
Elliott closed on the part of the market he said is getting almost no attention.
"Very few people are talking about what's going on with the consumer."
"Because the consumer, whether you like it or not, the US economy is a consumer economy, and that's what's driving it."
The official data has already softened. "I mean, the PCE numbers were pretty weak. The retail sales numbers were pretty weak. Suggests some exhaustion."
The high-frequency data is worse. "And more timely numbers, whether it be TSA or Bloomberg Second Measure measures, suggest actually the consumer is starting to fade pretty quickly. That would be a big surprise for the equity market in the second half."
A host agreed that it would be a major surprise going into year end
Elliott's bottom line is that the Fed will not deliver the tightening its own mandate implies, so the market keeps extracting the adjustment in longer-dated yields and in gold — and the thing that would genuinely surprise equity investors is not the Fed at all, but a consumer that fades before the year is out.
Products, Companies & Tools Mentioned
Unlimited Funds (Elliott's firm, which packages hedge-fund strategies into ETFs; his published note on the Warsh speech is what the program opened the segment with)
Academy Securities (Peter Tchir's firm — the host cited his point about the volume of investment-grade issuance coming to market as an alternative explanation for the move in yields)
Nvidia (His example of a market that no longer rewards good news: the best guidance the company could plausibly give bought a pop and then a fall)
Bloomberg Second Measure (One of the two high-frequency consumer datasets he says is already showing the consumer fading, alongside TSA throughput)
Books & Resources Mentioned
Taylor Rule Utility – Federal Reserve Bank of Atlanta (The range of rule estimates he says amounts to the Atlanta Fed telling the Board what the data implies)
TSA passenger throughput (The other timely consumer series he named against the weaker PCE and retail sales prints)
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