I thought that Fed Chairman Kevin Warsh gave an excellent speech at this week for the annual Kansas City Fed Conference. Warsh said that isn’t meaningfully slowing and vowed to bring it back “at sufficient speed” to the Fed’s 2% goal, which he described as a “firm and fixed” target. Furthermore, Warsh said that he believed that “the wiser course was to await new information,” particularly given “possible developments in supply chains, investment flows, and geopolitics … before deciding whether a change in interest rate policy was advisable.”
I was pleased that the Fed Chairman also talked about the AI boom and the incredible productivity gains it is unleashing. Warsh said his new task forces at the Fed are studying the impact of AI and productivity gains on the U.S. economy and implied that there appears to be no negative impact (e.g., inflation). Overall, Treasury yields were not significantly impacted by the Fed Chairman’s speech, but the U.S. dollar strengthened during Warsh’s speech, so that was a positive development.
The Labor Department on Friday revised down its calculation of payroll jobs by 79,000 in the past year through March. These payroll revisions have become common in recent years due to the fact that some people have two jobs and get counted twice. However, due to the downgrade in the number of payroll jobs, the Fed should be cautious with its monetary policy due to its unemployment mandate.
The order backlogs for AI-related stocks continue to rise. We cannot stop the AI boom since ChatGPT, Claude (Anthropic) and Grok (SpaceX) are all demanding more computing power. As a result, GE Vernona () has a massive $176 billion order backlog that is expected to continue to rise.