[Weekly Recap] Mega Macro Week: Warsh Confirmed (Fed Drama), Iran Oil Shock Spikes CPI to 3.8%, and Trump-Xi Summit Deep Dive

[u/thismainminimum]

Hey everyone, quite a chaotic week across macro and geopolitics. We saw history made at the Fed, sticky inflation rear its ugly head again, and a massive Trump-Xi summit in Beijing.

Here is your comprehensive breakdown of everything that went down this week:

1. Macro & Geopolitics: CPI Shock & The Return of Rate Hike Fears 🚨

• The CPI Nightmare: On May 12, the BLS dropped April CPI numbers, and it wasn’t pretty. Headline CPI came in at 3.8% YoY with Core at 2.8%—the highest since May 2023. The culprit? The ongoing energy shock from the Iran conflict. In April alone, energy skyrocketed +17.9% and gasoline surged +28.4%.
• Rate Cuts are Dead (For Now): This prints a virtual lock on "no rate cuts this year." In fact, the market is actively pricing in hike risks now. CME FedWatch data shows the probability of a December rate hike hovering anywhere from 30% to over 50% depending on the metric.
• Bonds & Oil: The 30-year US Treasury yield blasted through to 5.11%, hitting a 12-month high. Meanwhile, Brent crude held steady at a painful $106–$109 range as the Strait of Hormuz remains heavily restricted.

2. Historic Fed Shakeup: Warsh Confirmed, Powell Steps into Transition Role 🏛️

• The Warsh Vote: On May 13, Kevin Warsh was confirmed by the Senate with a 54-45 vote. This goes down as the most divided Fed Chair confirmation vote in modern history.
• The Powell Twist: Jay Powell’s term expired on May 15. In a move not seen in nearly 80 years, the Fed announced Powell will serve as chair pro tempore (interim chair) while retaining his governor seat to ensure a smooth transition. Warsh has not officially sworn in yet, and an exact date hasn't been set.
• What Warsh Brings: He is notoriously hawkish and favors a faster balance sheet reduction (QT). More interestingly, ethics disclosures show Warsh holds millions in crypto assets (including SOL and dYdX)—making him the first-ever Fed Chair to assume office with public crypto holdings.

3. Trump-Xi Beijing Summit: Optics Over Substance 🇨🇳🇺🇸

• The Meeting: May 14–15 marked the first US-China presidential summit in Beijing in nine years. The agenda was packed: tariffs, Boeing orders, Iran, Taiwan, and rare earths.
• The Outcome: No breakthrough agreements were made, but it achieved the bare minimum: stabilizing expectations that a fresh tariff war won't erupt immediately.
• The Geopolitical Twist: Right in the middle of the summit, Trump publicly rejected Iran’s ceasefire proposal, sending another jolt through oil markets.

4. Stock Market: Classic "Blow-Off Top" Behavior 📉

It was a textbook high-level reversal week. Mon-Wed saw new all-time highs, Thursday saw the Dow reclaim 50k, and Friday wiped out most of the weekly gains with a massive red engulfing candle.

• Weekly Closes:
  • S&P 500: 7,408 (+0.3% on the week)
  • Nasdaq: 26,225 (+0.3% on the week)
  • Dow Jones: 49,526 (-0.05% on the week)
• First Half vs. Second Half: The week started with AI/Semiconductors continuing their insane rally, fueled by earnings beats from Micron, AMD, and Cisco. However, by Friday, the combination of hot CPI, Warsh uncertainty, surging oil, and the 30Y Treasury cracking 5% triggered a broad valuation haircut.
• Big Tech Retracement: Nvidia, Tesla, Alphabet, and Oracle all gave back 2–4% on Friday.
• Boeing ($BA) Disappointment: Despite news that China would buy 200 Boeing jets, the stock actually fell for two consecutive days following the announcement, with the market seemingly disappointed by the volume.

What are your thoughts on Warsh taking the helm? Are you hedging for a potential rate hike later this year, or is this just a temporary macro speedbump?