Kristina Hooper opens Bloomberg Surveillance the Monday after Fed Chair Kevin Warsh's Jackson Hole speech, and reads it as deliberately vague but unmistakably hawkish. Tom Keene and Paul Sweeney push her on whether abandoning forward guidance changes anything, on whether higher-for-longer breaks the equity market, and on whether an investor still needs to take credit risk when government coupons pay what they now pay.
👤 Guest: Kristina Hooper, chief market strategist at Man Group, who covers the US and global economic outlook and the risks around it
🎙️ Hosts: Tom Keene and Paul Sweeney, who present Bloomberg Surveillance on Bloomberg Radio and Television
📰 Published: 31 August 2026 on YouTube (Bloomberg Podcasts)
🔴 YouTube | 🟢 Spotify | 🟣 Apple Podcasts | 🔗 Episode page | ⏱️ 26 min
Key Takeaways
Warsh has borrowed credibility on inflation and will eventually have to spend it
"Well, I think Fed Chair Warsh was sufficiently vague, which is what I had expected."
Markets have granted him the benefit of the doubt, and she said that is sustainable for a bit longer before he is forced to act
Taking away forward guidance does not change much now, and changes a lot later
"Not that meaningful a difference, but I think that it will seem like more of a difference as we move forward."
The cost shows up as volatility, bond-market volatility included
Higher for longer is a debt story, not a growth story
"Oh, I absolutely believe we'll be higher for longer because there are so many forces that are conspiring to keep yields elevated on the long end, not the least of which, of course, is an enormous amount of debt that's growing every day."
The deficit is bigger than expected because of the war in Iran, and she said it shows no sign of going away
Equities have lost the thing that was holding them up
"So we're actually at a crossroads right now where I think the environment could get materially worse for equities because it doesn't have that underpinning of lower rates."
The technology names carry the most sensitivity to that, in her framing
AI has produced spending, not yet results
"Certainly, they will go through periods of excitement, but the reality is that we haven't seen that much in the way of demonstrable change as a result of AI."
The disinflation many hope AI delivers has not arrived; the spending itself is inflationary in the shorter term
She would own the short end and take credit risk deliberately, away from AI
Investment-grade credit where some issuers are better rated than the US government
The opportunities she likes sit outside AI-related debt
One to two hikes this year, whatever the chair himself wants
"We'll probably get one to two rate hikes this year, even if Chair Warsh is inclined to sit on his hands."
"Keep in mind that some of the inflation we're seeing today is being driven by supply shocks, not demand."
Warsh Said Little, and What He Did Say Was Hawkish
Sweeney opened by asking what she heard at Jackson Hole and what it means for markets. Hooper said the speech was "Well, I think Fed Chair Warsh was sufficiently vague, which is what I had expected." — vague by design, and hawkish underneath it.
He reiterated how intolerant he is of above-target inflation, she said, and he is close to the point where he has to show he is actually tough on it
So far he has the credibility, and markets have given him credibility for it, which she said is sustainable for a bit longer before he is really forced to act
He also called the US economy quite resilient, which points one way. "So all signs point to a hike in the near term."
This was not a landmark speech. Fed chairs sometimes use Jackson Hole to launch a monumental new policy or signal a big change, and she said this was not that
The change he did signal is procedural, and she thinks it costs markets something. He alluded to less communication and to the end of forward guidance
"And I think that is likely to result in significantly more confusion for markets."
Keene: He Said No More Forward Guidance, Then Gave Some
Keene put the contradiction to her directly. Warsh said no more forward guidance, but by the end of the speech he appeared to give it — hawkish on inflation, confident in the job market — and the market traded as though it were forward guidance. Is there a meaningful difference?
"Not that meaningful a difference, but I think that it will seem like more of a difference as we move forward."
She framed the speech as an introduction: part of arriving as the new Fed chair is making sure people know he thinks where inflation has been for the last several years is not acceptable
The gap opens later. Going forward there will be more nuances, she said, and the market will find out where the deficits are precisely because the guidance is no longer there
She expects that to register as market volatility, bond-market volatility included
Higher for Longer Is About the Debt, and It Takes the Floor Out From Under Equities
Sweeney said the 10-year Treasury yield was at 4.72%, well above where it has been over the past year, and asked whether she believes in higher for longer and whether it is a headwind for equities.
"Oh, I absolutely believe we'll be higher for longer because there are so many forces that are conspiring to keep yields elevated on the long end, not the least of which, of course, is an enormous amount of debt that's growing every day."
She said it could be a very significant headwind for equities, and specifically for the long-duration ones such as technology
"So we're actually at a crossroads right now where I think the environment could get materially worse for equities because it doesn't have that underpinning of lower rates."
AI Has Not Delivered Disinflation, and the Spending on It Cuts the Other Way
Keene asked whether she still thinks that with all the excitement around AI and markets setting records for months on end.
She does. There will be periods of excitement, but the evidence is not there yet: "Certainly, they will go through periods of excitement, but the reality is that we haven't seen that much in the way of demonstrable change as a result of AI."
The lower-inflation environment many people are hoping for has not shown up as a result of AI, she said, even though she expects to get there at some point
What is happening instead is spending on AI, which she called inflationary in the shorter term
The bigger issue behind all of it is the debt. "We have a much larger fiscal deficit than had been anticipated because of the war in Iran.", and she said it shows no signs of going away anytime soon
The Fixed-Income Call: Short End, Thoughtful Credit Risk, Nothing Tied to AI
Sweeney put the trade-off to her the way a client would, reading government coupons off the screen: "I mean, again, you can just clip some of these government coupons in 430 on the short end of two years, 10 years, 470, 520 on the 30." Do you need to take credit risk beyond that?
"So I think, first of all, I would favor the shorter end of the curve for sure in this environment."
She would take credit risk, but deliberately. Some investment-grade credit carries better ratings than the US government does, which is why she said being well diversified matters
The opportunities she likes are outside the AI trade. There are significant opportunities in credit both within and, more importantly, outside any AI-related debt
One to Two Hikes, and an Inflation Problem Rates Cannot Reach
Keene asked her to join the two halves: if she expects inflation to come down, does that mean rates go up?
"We'll probably get one to two rate hikes this year, even if Chair Warsh is inclined to sit on his hands."
The committee, not the chair, is the hawkish force. She said this FOMC is far more inclined to hike in the shorter term, and pointed to the most recent FOMC minutes and to recent speeches as the evidence
Hiking will not fix it quickly, on her own account. Higher short-term rates are not necessarily going to combat inflation and get it to target anytime soon
"Keep in mind that some of the inflation we're seeing today is being driven by supply shocks, not demand.", and she said supply-driven inflation is a lot harder to control with monetary policy tightening
Hooper's bottom line is that the Fed will keep raising rates into an inflation it cannot fully reach, and that with the deficit growing and no forward guidance to lean on, the support that lower rates gave equities is gone.
Books & Resources Mentioned
FOMC minutes (Her evidence that the committee is more inclined to hike than the chair — the most recent minutes plus recent speeches from Fed officials)
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