US Equity Strategy: Weekly Warm-up: Mixed Messages as Warsh Pushes for Fed Credibility

Research evidence excerpt

US Equity Strategy: Weekly Warm-up: Mixed Messages as Warsh Pushes for Fed Credibility

Idea

June 22, 2026 04:01 AM GMT

Morgan Stanley & Co. LLCMUS Equity Strategy | North America Michael J Wilson

Equity Strategist

Weekly Warm-up: Mixed M.Wilson@morganstanley.comAndrew B Pauker +1 212 761-2532

Andrew.Pauker@morganstanley.com +1 212 761-1330

Messages as Warsh Pushes for Michelle M. Weaver, CFA

Michelle.M.Weaver@morganstanley.com +1 212 296-5254

Fed Credibility Diane Ding, Ph.D.

Quantitative Strategist

Qian.Ding@morganstanley.com +1 212 761-6758

In February, we noted our view that Kevin Warsh was the right Nicholas Lentini, CFA

choice to fortify market credibility for the Fed, a critical element EquityNick.Lentini@morganstanley.comStrategist +1 212 761-5863

for the eventual success of the administration's plan to grow out

of the debt problem. The rally in S&P/Gold is supportive of that

view as is last Wednesday's FOMC meeting.

• Short-Term Pain for Long-Term Gain...We continue to view the Warsh

nomination and subsequent appointment as a market-stabilizing event even

if it leads to some short-term turbulence. Following on from a note we

wrote in February, the roughly 40% rise in the S&P 500/Gold ratio since his

nomination reinforces our view that markets are giving him the benefit of the

doubt. Specifically, we think markets are signaling that Warsh can shake up

the Fed, reduce reliance on the balance sheet as a policy tool, and help re-

establish confidence in policy makers. Last Wednesday's price action

suggests that transition is off to a good start, but could be a bit messy for

stocks in the short term alongside the initial reaction of a sharp bear

flattening of the yield curve, a stronger dollar and weak precious metal

prices.