Weekly Squawk, written by Stewart Dando.

Hot Topic

Warsh keeps markets guessing…

Federal Reserve (the Fed) Chair Kevin Warsh used his closely watched Jackson Hole speech last week to deliver an unusual message to financial markets: stop expecting the Fed to tell you what it plans to do next.

Warsh criticised the central bank's longstanding practice of providing extensive 'forward guidance' on future interest-rate decisions, arguing that monetary policy should instead respond to economic conditions as they evolve. However, while he deliberately avoided signalling the Fed's next move, investors found plenty of clues in what he did say.

Markets certainly interpreted the speech as hawkish. Expectations for a 25-basis-point interest-rate increase jumped sharply, with futures markets pricing the probability of a hike at around 60%, compared with approximately 35% before Warsh spoke.

At the heart of his message was inflation.

Despite recent consumer and PCE inflation readings coming in better than expected, Warsh cautioned against declaring victory too early.

"While this summer's PCE and CPI readings were better than expected, they do not tell me that underlying trends have meaningfully improved," he said.

Warsh also firmly rejected any suggestion that the Fed might tolerate inflation above its existing objective.

"The Fed's price stability objective of 2%, as measured by the PCE price index, is a firm, fixed target."

This matters because the other side of the Fed's dual mandate—the labour market—currently gives policymakers some room to manoeuvre. Unemployment remains relatively low and, despite slower hiring, Warsh believes employment conditions remain consistent with the Fed's full-employment objective.

Inflation, therefore, remains the bigger concern.

Warsh stopped short of explicitly advocating another rate increase, but his warning was difficult to misinterpret: "We must be confident that underlying inflation is moving to our objective clearly and at sufficient speed. Otherwise, we have work to do."

For investors, that may be the most important sentence from Jackson Hole.

Warsh may have abandoned forward guidance, but he hasn't abandoned guidance altogether. The Fed's reaction function is becoming increasingly clear: if inflation continues moving convincingly towards 2%, rates can remain unchanged. If it doesn't, further tightening remains firmly on the table.

The Fed may no longer tell markets where interest rates are going. But it has told them exactly what to watch.

The opinions and views expressed in this newsletter are those of the author and do not necessarily represent those of the attooh! Group or its affiliates. Content stated as fact was fact at the time of writing. The information in this newsletter is not intended to constitute financial advice as contemplated in the Financial Advisory and Intermediary Services Act.

Interesting Stuff

The week ahead: Global markets are underpinned by long-term interest rates, which remained elevated at the turn of September amid high energy prices, ample AI-related corporate debt issuance, and wide budget deficits against signs of resilient economic growth.

Economic data from the US will be centered on the labour market as FOMC members note the US is at full employment, headlined by the BLS Employment Situation report. ISM PMIs are also featured. In Europe, Eurozone inflation and unemployment rates are awaited. PMIs will also be the focus in China for its first batch of August data. A busy week in Japan will include retail sales, the unemployment rate, industrial production, and consumer confidence. GDP data is due from Brazil, India, and Australia, while central banks in Canada and New Zealand will decide on policy.

As expected: The US economy expanded at an unrevised 1.5% pace in the second quarter, though underlying details showed stronger consumer spending and business investment than initially reported.

The annualised gain in inflation-adjusted gross domestic product compares with a 2.1% advance in the first quarter, according to the second estimate issued Wednesday by the Bureau of Economic Analysis.

Consumer spending, which comprises more than two-thirds of economic activity, increased an annualised 3.4%, stronger than the initially estimated 3.2% gain. Non-residential fixed investment climbed at an 8.5% pace. A narrower gauge of underlying demand, final sales to private domestic purchasers, rose a revised 4.2% in the second quarter — the strongest in more than three years and compared with an initial estimate of 3.9%. The measure excludes net exports, inventories and government spending.

Government spending declined an annualized 1% in the second quarter, reflecting a steep drop in nondefense-related outlays.

Meanwhile, in Canada: Canada's economy expanded 0.8% in the second quarter of 2026, following an upwardly revised 0.1% increase in the previous three-month period, driven by stronger exports, household spending and business capital investment. Exports rose 3.6%, the largest increase since Q1 2023, led by a 27.0% jump in passenger cars and light trucks as Canadian auto production rebounded.

Higher exports of metals, energy products, and industrial machinery and equipment also supported growth. Household spending rose 0.8%, led by higher spending on investment services, passenger vehicles and rent. Business investment strengthened, with engineering structures up 2.3% and machinery and equipment spending reaching its highest level since Q2 2024. Investment in computers and peripherals surged 16.7%, mainly due to higher imports of processing units used in data centres. On an annualized basis, the economy grew 3.3%, the fastest pace since Q3 2024 and broadly in line with market expectations of 3.4%.

We must be confident that underlying inflation is moving to our objective clearly and at sufficient speed. Otherwise, we have work to do

The Week in the Media

Jargon of the week

What is 'Forward Guidance'?

Forward guidance—also called expectations management—is when a central bank communicates its likely future policy direction, especially on interest rates, to influence current financial decisions and market pricing. Rather than waiting for an actual rate move, investors, businesses, and consumers can adjust borrowing, saving, investment, and spending plans based on the central bank's stated outlook. This can help reduce policy response lags by influencing expectations early.

Source: Investopedia

Article of the week

The butterfly effect: the future is unpredictable

The question is not whether the next butterfly will flap its wings or not. The question is whether your financial plan has been constructed to withstand the subsequent storm.

Read full article on Moneyweb →

In Conclusion

No end in sight…

Nvidia's latest earnings announcement on Wednesday last week followed a familiar script: After weeks of nervous anticipation, Nvidia delivered results that beat expectations, CEO Jensen Huang made the bull case for AI and Wall Street breathed a collective sigh of relief. Only this time, even investors were left impressed. Where Nvidia's share price had repeatedly slumped post-earnings in the recent past, the company's stock soared this time around, bringing Nvidia's market cap close to $5.5 trillion.

A look at the results reveals why investors were left bullish. Despite having tripled its revenue over the past two years, the company's growth accelerated once more, returning to triple-digits for the first time in two years. In the three months ended July 26, Nvidia's revenue grew 106% from the same period last year, reaching $96.2 billion and beating its own forecast of $91 billion as well as analyst expectations.

Once again, Nvidia's data centre business was at the heart of the company's record-breaking quarter, as it saw a 117% increase in revenue versus a year ago and accounted for more than 90% of total sales. Net income more than doubled to $59 billion, putting Nvidia safely on track to become the first company to surpass $200 billion in annual profit. For the current quarter, Nvidia expects revenue of $108 billion, which would be equivalent to 89% growth.

Nvidia Doubles Revenue and Profit as Growth Accelerates — Statista — Source: Nvidia via Statista

In his comments accompanying the earnings release, Nvidia CEO Jensen Huang didn't temper his optimism. "AI has reached its inflection point. It's doing useful work. Its tokens are productive and profitable. Now, compute is revenue," he said, adding that demand was accelerating rather than slowing down. "This time last year, one lab alone was driving the buildout; today, we have a golden age of new AI labs and startups, multiple frontier labs scaling in parallel, a thriving open-model ecosystem and physical AI coming online — with strong momentum across the US and around the world."

Monarch Minute

Marc Thomas

Head of Investments for attooh!

Which Monarch Model Portfolio is right for you?

A question that naturally follows from our previous articles on the Monarch Model Portfolios is this: with each of the five models holding a different mix of assets, how do you decide which is the right one for you? The answer starts with recognising that an investment goal can differ in three ways at once: the time available before the money is needed, the return the goal requires, and the short-term fluctuation that can be tolerated along the way. Not only this, but an investor can have multiple goals at once, so a single portfolio cannot be the right answer across all of them.

These three are inseparable. A higher return objective requires greater exposure to growth assets, which brings greater volatility, which in turn demands more time before the money is needed. Each Monarch model is a deliberate combination of the three, from the Conservative portfolio, which pairs low volatility with a horizon of one to two years and lower return, through to the Aggressive portfolio, which pairs higher return potential with a horizon of seven to ten years but comes with higher volatility. Five models are needed to cover this range of requirements.

Choosing between them starts with the time horizon and growth required of the goal, rather than the investor's tolerance for volatility. When will it be needed, and what return does the goal actually require? Those two answers narrow the range to one or two models on their own. Money needed in two years cannot sit in an aggressive mandate, however attractive its long-term returns, because the time to recover from a fall is not there.

This is where your own risk profile enters. Two questions matter. Your risk capacity asks whether a poor few years would derail the goal, taking into account your other assets and the security of your income. Your tolerance for volatility asks how much short-term capital fluctuation you can live with without being tempted to sell. Where the time horizon would permit more growth exposure than your tolerance allows, tolerance should govern, because an investor who sells at the bottom never receives the return the model was built to deliver.

Five models exist so that every goal, and every risk tolerance, is catered for, and the right model is the one you can stay invested in for as long as the goal requires.

Monarch Model Portfolios — which model is right for you

Warsh Keeps Markets Guessing, Respite for the Long End Was Brief, and Nvidia's Results Don't Disappoint, as Wall Street Breathes a Collective Sigh of Relief

Jargon of the week

Article of the week

Quote of the week

No end in sight…

Which Monarch Model Portfolio is right for you?