Is Risk-On Too Risky? | Macro Mondays: August 31, 2026

**Mikkel Rosenvold** (0:22)
It's Monday, it's time for Macro Mondays on Real Vision. My name is Mikkel Rosenvold, As usual, I'm joined by Andreas Steno. Welcome to the show, Andreas.

**Andreas Steno** (0:31)
Thanks, Mikkel. Good to see you.

**Mikkel Rosenvold** (0:33)
Yeah, you too. So Andreas, I'm going to dive right into it, and then we're going to catch up a bit more on the Kevin Warsh speech and everything, and take a deep dive into it. But let's get the headline straight here.
Surprisingly hawkish rhetoric, maybe, from Kevin Warsh, at least in the opinion of many pundits. Is this the time to pull the brakes on some of your risk trades, Andreas? Let's start there.

**Andreas Steno** (0:58)
No, you wanted to say yes or no, I guess.

**Mikkel Rosenvold** (1:01)
Absolutely.

**Andreas Steno** (1:02)
But the longer answer is that I'm more in doubt than a week ago.

**Mikkel Rosenvold** (1:09)
Okay, Andreas, we'll dive much more into that. Jackson Hole speech and the outlook for equity markets. We're going to take a look at the state of the US economy and the warspecent war going on. War is perhaps a bit much when we look at what's going on in the Middle East. That's a true war.
And we're going to talk a little bit about that. If the war is restarting with the attacks on the Larak Island that we have over the weekend, Andreas, always great to learn new geography when the geopolitical show goes worldwide.
So Andreas, I know you run a language processing model on the Fed sentiment based on the actual words uttered by whomever is in charge at this point, Kevin Warsh. So could you maybe in the light of that, what did you learn from his Jackson Hole speech last week?

**Andreas Steno** (2:01)
So, at first glance, it was admittedly a hawkish speech. But was it more hawkish than what we've seen from various of the lieutenants in the weeks prior to the Jackson Hole? According to this language processing model, no. And that was actually quite a surprise to me when I ran the numbers. It wasn't more hawkish than what we've seen from the Fed over the past few weeks. It wasn't more dovish either. It was more or less just the same. I guess the true surprise for many, if we look at market pricing, was that he didn't really lean into the soft inflation prints that we've had. Say, in July, for example, and in contrast to what he said during the July press conference, he essentially reestablished crystal clear guidance around the PCE index being the one to follow or the one to track in terms of inflation, which was up in the air, to be honest, after that July press conference, we talked about new measures coming.
It wasn't clear to me whether the inflation mandate was strictly tied to the PCE index after that press conference. It is now back to where it was ahead of that press conference. We're watching the PCE index. And the PCE index looks hot. There's no doubt about that. So the big question here is whether the PCE index is onto something relative to, for example, the CPI index. The CPI index, another inflation measure, is a lot softer than the PCE index right now. And obviously, since Warsh has now put the PCE index back in the limelight, I've spent my weekend digesting that exact inflation number. So what do we make of this extreme divergence between PCE and CPI? It's on page seven in our slide. And remember, you can download the slides after this. Well, if you look at it in core terms, to begin with, we're talking about the second-hardest spread. So PCE higher than CPI since 1960 And we only have one more extreme observation. That was in 1983
And how do we characterize 1983 from an inflation standpoint? Well, it was an inflation that fell off a cliff, basically. It was an inflation landscape that went from very hot to a lot less hot.
I think that's very fair to assume that it's the same case that we have now.
Given this historical study, my best assumption, and I've reiterated that for at least a handful of weeks in a row now, is that the CPI is the directional guide, while the PCE is slower in changing inflation regimes.
There are quite a few reasons why. I mean, the PCE adapts a few of the categories from the PPI index instead of the CPI index. It has less focus on shelter costs, and shelter costs have looked very soft over the summer. Those are some of the reasons why the PCE prints at much higher levels than the CPI. So, all in all, I'm tempted to say that he kind of solidified the mandate around PCE again, right when the PCE is about to roll over. So what does that mean for the outlook?