Sticky Inflation. Cheap Volatility. A Less Predictable Fed. Why Aren’t Markets More Worried?

**SPEAKER_1** (0:00)
We are excited to announce the launch of a new podcast, Last Call. While many market rap shows can cover the same ground, we wanted to try something different. We wanted to get away from what the market did in the past month and instead bring in some of our friends who offer truly unique perspectives and data. And we wanted to have some fun along the way. In this episode, Kevin Muir explains why midterm volatility may be significantly underpriced. Aahan Menon looks beneath the headline inflation data to show why demand-driven inflation may remain sticky, Ben Hunt breaks down the sharp deterioration in the Fed credibility narrative, and Brent Kochuba looks at what low-put ownership and cheap implied volatility are saying about how investors are actually positioned. You can subscribe to Last Call on all major podcast platforms using the links in this episode description. Thank you for listening. We hope you enjoy the show.

**Matt Ablan** (0:43)
You're watching Excess Returns. This is Last Call, our monthly market rap show, where we look backwards to look forwards. We get some of our favorite people to come in, give us a fresh piece of content. I'm here with Jack Forehand. How are you doing, Jack?

**Jack Forehand** (0:56)
I'm doing good. Well, I realized, Matt, after we did this last time, we usually put clips at the front of this, and there will be clips at the front of this one. But I realized that when you put us in the private jet at the front of this thing, it definitely hurts the viewership because I think people do not necessarily realize that that is an AI video and a joke and that I think people might have thought we were like these hardcore treaters who were showing off our wealth or something like that. So I've got to kind of reverse this time.

**Matt Ablan** (1:19)
We're flexing too hard to start and I ran it by the Wall Street Journal op-ed committee. They had no problem. They were like, this looks like straight out of the Odyssey. We love this.

**Jack Forehand** (1:30)
Well, I mean, I thought the ridiculous Let's Go I put in there for you at the end would probably tell people that this is not real, but I guess not. That's crazy.

**Matt Ablan** (1:37)
A lot of people see me out there yelling, let's go at them. So we've got great conversations. These are brand new, exclusive conversations for Excess Returns from some of our favorite people to talk to on what just happened, what they're looking forward to. We've got Kevin Muir with us today.
Ben Hunt is with us, Aahan Menon and Brent Kochuba. You're going to want to hear what they have to say.

**Jack Forehand** (1:58)
Yeah. And if you want to look at the market through all the different lenses you can look at it through, we've got that today. We've got the macro, we've got data, we've got options, we've got narrative, we've got it all.

**Matt Ablan** (2:09)
Let's talk for a second before we start running these clips because I think in context, what Warsh just said at Jackson Hole is top of mind for us as investors. This forward guidance going away thing is very, very real.
I appreciate the framing of, what was it, play the ball, not the referee, that idea that's been seen in some of the podcasts. I appreciate that framing. I want markets to function like markets and find their own prices here, but I still find this unsettling for some reason. What are you thinking?

**Jack Forehand** (2:40)
Yeah, and I don't know what it means, but it's gonna change the way we've looked at these Fed meetings throughout our career because the vast majority of Fed meetings in our career have been very, very high percentages in terms of what they're gonna do and they always did whatever the percentages said. And now the last meeting was not that way. This next meeting is not that way. I mean, I think Brent's gonna bring it up when we talk to him, but I think it's like 55-45 in favor of a hype right now at the next meeting. And so we're gonna go into these meetings not knowing what's happening. And so like, we're gonna have less guidance in terms of like really smoothing this out and we're gonna have more volatility.
And I don't know what that necessarily means. I mean, I think it definitely means some more volatility around the short end. It probably means some more volatility in stocks too, because stocks obviously react to all this stuff as a Fed and it's beyond my pay grade to think about whether it's good or bad. And I know you guys on Unclick Beta dealt with this idea of whether it's good or bad. But it is just, to me, is very interesting that that tool, which has been a huge tool for the Fed, this forward guidance tool, is not going to be used anymore. And it just changes the way we look at all this stuff.