Tracey Manzi follows Kristina Hooper on Bloomberg Surveillance with the bond desk's read on Kevin Warsh's Jackson Hole speech: a chair cleaning up his own communication problem, and a September meeting that is genuinely live. Tom Keene and Paul Sweeney ask her what in the speech actually gave the market clarity, how she splits a portfolio between record-high stocks and coupons this size, and which sectors still screen well.
👤 Guest: Tracey Manzi, senior investment strategist at Raymond James, who covers the bond market and what it takes for yields to spike again
🎙️ 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 came to Jackson Hole to fix a communication problem, and she thinks he fixed it
"So I think Chair Warsh came in with a job to do. He really needed to clean up some of the communication missteps that he had back in July."
"He did come out with more of a hawkish tilt than I may have expected from Chair Warsh."
September is a live meeting, and the burden now sits on the data
"So that does put the onus on the data coming up to really deliver."
He added two things to how he reads inflation: how broad it is, and how fast it returns to target
He waved away two inflation prints that came in better than expected
"He said in his mind that didn't broadly change the trend."
He also reaffirmed 2% PCE as the target
The income available in bonds is the best in years, and the entry yield is the whole argument
"We always tell our advisors that the best predictor of forward returns in the bond market is the starting yield."
"And with yields on the ag close to 5% right now, you can have pretty good clarity that you can earn 5%."
A slowdown turns that income into a double-digit year
"But if we do get into an economic slowdown and rates did go back down to that 4% level or 375, you're looking at potentially double-digit returns."
A small rise in rates instead is absorbed by the income cushion, in her framing
After an equity run this size, rebalancing is being paid for rather than given up
"I think bonds look compelling. I know there's a lot of nervousness, but I wouldn't shy away from them."
Equity valuations are high and Raymond James still has the index higher in twelve months
"Well, there's no doubt that valuations are high in the stock market."
"Eighty two fifty is our S. and P. five hundred target"
Tech, industrials and health care are the three she likes, and the industrial case is an AI case
"We think that the AI build-out is going to have knock-on impact into the industrial sectors."
Warsh Had a Communication Problem From July, and Jackson Hole Was Where He Cleaned It Up
Sweeney opened by asking how the speech changes her market outlook. Manzi treated it as repair work first.
"So I think Chair Warsh came in with a job to do. He really needed to clean up some of the communication missteps that he had back in July." — and she said he did that, giving a lot more clarity on how he is looking at the market
September is genuinely live. That was the first of the three takeaways she said she came away with, and she said the onus is on the data to come in better than expected
He introduced two new elements into how he reads inflation. Not only is he taking a deep dive into the breadth of what is going on in inflation, she said, but also the speed at which inflation starts to get back down to target
What Actually Gave the Market Clarity: 2% Reaffirmed, and Two Good Prints Set Aside
Keene pressed her on the specifics. Which moments in the speech gave the clarity, given that much of it was material Warsh had said before, and yet the market traded as though it were new?
Some of the comments echoed what was heard in the July meetings, she said, but the tone was not what she expected: "He did come out with more of a hawkish tilt than I may have expected from Chair Warsh."
He reiterated that 2% PCE is the target
The comment she found interesting was a dismissal. He downplayed the two inflation numbers that had come in better than expected — "He said in his mind that didn't broadly change the trend."
"So that does put the onus on the data coming up to really deliver."
Her own forecast runs the other way. Looking ahead, she said the inflation outlook should start to improve, and that should give the Fed comfort that it is moving in the right direction
The speech was also simply more informative than the man has been. He had been very tight-lipped about how he views the economy in the last two press conferences after FOMC meetings, and here he gave more color
The Bond Case: Buy the Entry Yield, and Get Paid to Hold the Optionality
Sweeney put the allocation question to her — stocks are hitting all-time highs seemingly by the day, and the coupons on offer are large. How does she split it?
"Yeah, so what we're telling our advisors here at Raymond James is that that income story that you just talked about in fixed income is the best that it's been in years."
She acknowledged what has gone against bonds this year: rates have moved higher, and "We've had the war with the US and Iran. That's complicated, the inflation backdrop.", with growth running a little higher than expected
On her account yields have traded in a 3.75% to 5% range and are now back at the upper end of it
The firm's rule of thumb is the entry point. "We always tell our advisors that the best predictor of forward returns in the bond market is the starting yield."
"And with yields on the ag close to 5% right now, you can have pretty good clarity that you can earn 5%.", which she called a good rate of return
Rebalancing after an equity run is the practical version of that. An investor over-allocated to stocks after the run-up in equity prices is, she said, being paid to move back to a strategic allocation and hold the optionality
The asymmetry is what she likes. Rates can rise a little and the income cushion supports the position against losses
"But if we do get into an economic slowdown and rates did go back down to that 4% level or 375, you're looking at potentially double-digit returns."
"I think bonds look compelling. I know there's a lot of nervousness, but I wouldn't shy away from them."
Stocks Are Expensive, and Raymond James Still Has Them Higher in Twelve Months
Keene asked whether this is the end of a spectacular multi-year run.
"Well, there's no doubt that valuations are high in the stock market."
The market has just come through a very strong earnings cycle, she said, and the firm expects that to continue
The house target is unchanged in direction. On a twelve-month view she still sees equities moving higher: "Eighty two fifty is our S. and P. five hundred target"
The reasons she gave for it were the economy's resilience and the strength in corporate earnings
What Screens Well: Tech Again, Industrials Because of AI, and Health Care
Sweeney asked whether the call is a factor, a sector or an industry.
Tech, despite the run. Looking ahead, she said the sector is still posting the strongest earnings growth of all the sectors
Industrials, as the second-order AI trade. "We think that the AI build-out is going to have knock-on impact into the industrial sectors."
Health care rounds out the three she named
Manzi's bottom line is that with the aggregate bond index yielding close to 5%, an investor is being paid to take the rebalance that a two-year equity run has made overdue — and paid again if the economy slows.
Products, Companies & Tools Mentioned
Raymond James (Her firm, and the source of the advice she quoted to advisors: the income story in fixed income is the best in years, and the starting yield is the best predictor of what a bond portfolio returns)
The Bloomberg US Aggregate Bond Index ("The ag" in her answer — the benchmark whose yield near 5% is the basis of the whole bond argument)
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