Memory’s Micron Moment, Congressional Clash, and Just a June Swoon? 6/24/26

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**Kelly Evans** (1:00)
Thank you very much, Scott, and welcome to The Exchange. I'm Kelly Evans. Stocks are rising today as oil prices and bond yields fall. WTI dipping below $70 a barrel. We're just a hair above that level right now. By the way, gasoline prices nationwide are well below $4 a gallon. All of this generating some interesting shifts in the market. The US dollar is at more than a one-year high as chatter about a hawkish Fed picks up. And the Dow is outperforming again as investor concern shifts to the outsize importance that chip stocks have taken in the market. They now make up 18% of the S&P 500's market cap and we'll get an important test of that when Micron reports after the bell today. Let's talk about all of it in our opening exchange with Barry Knapp, Ironsides Macroeconomics Director of Research. Barry, it's great to see you. I hope I sound normal, you know, and not the way that I feel.
So talk me through this one. Are you with the kind of rise of the rest? I love, you know, the little Steve Cage's phrase there.
Or are there important ships happening in the market right now, Barry?

**Barry Knapp** (2:05)
Well, financial conditions clearly tightened after Orsh's press conference last week, but I think the market really got this wrong.
My tendency is to think people viewed this within the lens of the Powell, Yellen, Bernanke Fed, which if you had a dot plot that moved towards rate hikes, you would have assumed, okay, there's going to be rate hikes. But, you know, there's a couple of important things that happened. First of all, when asked about policy broadly, Kevin Warsh talked about policy being uneven. This is a concept you and I have talked about for years now that the Fed's balance sheet is providing accommodation. There's also accommodation being provided for long-term fixed rate borrowers, like hyperscalers, from tax policy. If that's your concern about the source of inflation, the way to address it is with the balance sheet, not with rate policy. Because when talking about rate policy, conditions are actually tight as evidenced by things that are going on in the housing market. I'm not just focused on the demand side of the housing market and mortgage rates, but housing developers, who of course take out short-term loans based on the financing.

**Kelly Evans** (3:25)
Can I ask you about that? For one second, let's show the XHB today. It's up 6 percent, and is that on the back of the drop in the 10-yield?
I mean, it's one thing if you say, okay, it's up one, two, it's up 3 percent. It's up almost six right now.

**Barry Knapp** (3:41)
Yeah, no, and that's 100 percent what's happening today is a bit of a rethink.
I presume it's people coming around to my way of thinking about all this and others, that the Fed has really no intention of raising the policy rate, that if they really do need to address inflation, they would more likely address the balance sheet. But the broader issue, Kelly, from my perspective is, if the Powell Fed is going to integrate market pricing into their forecasts, and this is a chart I published in my weekly last week, you've got the breakeven inflation curve from one year all the way out through almost 10 years below where it was when they started easing in September. So the markets are telling you, this was a transitory price level shift for energy.

**Kelly Evans** (4:34)
We're showing it right there. 2.3% is kind of the implied inflation rate over the next 10 years, which is all of our viewers can see on that chart there, is lower now than it was a few months ago.

**Barry Knapp** (4:44)
That's exactly right, and lower than it was almost at any major inflection point in the entire Trump presidency. So you look at that and you say, well, a market's moved on from this inflation risk, so should the Fed. And by the way, I think it's super notable this week that we've had almost no Fed speak. Now I know you're going to go to Chicago and speak to Goolsbee, and he can't help himself. He's always going to talk.