Powell cracks the vault: Markets bet on insurance cut as September becomes destiny

Jackson Hole’s insurance policy

Powell walked onto the Jackson Hole stage and cracked the vault wide open. In one sweep of words—“the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance”—he flipped the market’s playbook. The Fed chair wasn’t coy; he was explicit. Risks have shifted, implying the Fed’s dual mandate is tilting away from inflation vigilance and squarely toward job protection. In trader-speak, that was the green light. What had been a cautious market leaning toward September odds suddenly found itself staring at a near-certainty: the CME FedWatch probability of a quarter-point cut vaulted to 83% from the low 70s in just 24 hours. The bar for the Fed not to deliver is now sky-high.

That subtle rhetorical pivot was all the spark Wall Street needed. The Dow ripped to fresh record highs, the S&P 500 surged 1.5%—its best day since May—and the Nasdaq caught a tailwind as the full tech megacap roster lit up green. Even the small-cap Russell roared, up 4%, as traders piled into every pocket of beta that benefits when borrowing costs slide. Banks screamed to new all-time highs, crypto rode the liquidity wave, and suddenly the tape looked like Powell had handed out free leverage.

Bonds sang the same tune. Two-year Treasury yields dumped 10bps, the whole curve followed suit, and the dollar cracked lower, down about 1% on the day. Powell’s line that policy remains “in restrictive territory” was code for: we’ve done enough on inflation, now jobs risk is our compass. It’s not perfection on CPI that the Fed is waiting for—it’s a weakening labor market that has them sharpening the scissors.

This wasn’t just dovish shading—it was Powell out-dovving the pre-market lean into the event. By shifting the fulcrum of risk toward employment, he flipped the mandate mid-flight. Traders who came into Jackson Hole positioned for caution were steamrolled by a chair who all but guaranteed September easing.

Powell didn’t just lean dovish at Jackson Hole; he sold the market an insurance policy. That’s how I see it — an insurance cut. But you’ll find no shortage of talking heads claiming he’s boxed himself in, essentially pricing the Fed into a corner. Maybe. But the way the tape traded, the nuance didn’t matter. Stocks, bonds, and FX all got the same memo: September is cut or bust.

The split inside the Fed, though, is far from resolved. The doves—Waller, Bowman, and soon Miran—are circling, ready to front-run a slowdown. But the hawks remain perched. Cleveland’s Hammack flat-out rejected cuts this week, Kansas City’s Schmid even raised the specter of hikes, and Bostic keeps banging the “one-and-done” drum. Kashkari waved the “move and wait” flag, but warned that waiting too long risks turning labour-market cracks into a landslide.

So, where does this leave traders? Powell has thrown open the door, but he hasn’t promised what’s on the other side of September. A 25bp trim is the base case. A 50bp slash is a bridge too far—it would reek of political interference and risk unanchoring inflation expectations, sending long-end yields spiking just when risk assets need them calm. A one-and-done remains plausible if August jobs or CPI bounce. But if the job’s weakness snowballs, the doves will press their advantage.

For now, the takeaway is simple: Powell just shifted the center of gravity from inflation vigilance to employment protection. That’s why stocks exploded, bonds melted, and the dollar cracked. Markets trade the road ahead, not the rearview mirror—and right now, that road points to a September cut with flashing neon arrows.

Uncle sam buys the dip: Washington turns portfolio manager at Intel

The White House just strapped on a new pair of boots and marched straight onto Wall Street’s turf—no longer just referee but now player, shareholder, and portfolio manager rolled into one. Call it state capitalism with an American accent. Washington is cutting an $8.9bn check for Intel, snagging nearly 10% of the company in what’s pitched as national security but priced like a distressed PE raid. Uncle Sam isn’t just underwriting the future of chips—he’s buying a seat at the table, trading free-market orthodoxy for deal-flow swagger.

The White House just strapped on a new pair of boots and marched straight onto Wall Street’s turf—no longer just regulator, no longer just banker, but now a shareholder. Call it state capitalism with an American accent. Washington is writing a fat check and walking away with nearly 10% of Intel, a $8.9bn bet wrapped in the rhetoric of national security but executed like a distressed private equity deal.

Intel’s deal with Uncle Sam is straight from the Chips Act playbook, except instead of a handout, it’s equity at a discount. Treasury gets shares at $20.47 apiece—well below the $24.80 close—and a five-year warrant that could unlock another 5% stake if Intel spins off its loss-making foundry. That’s no small condition: the foundry is bleeding billions ($13bn operating loss last year), and more than a few investors want it jettisoned. SoftBank’s Masayoshi Son already sniffed around, and Tokyo piled in with $2bn of stock. Lip-Bu Tan, Intel’s new chief, insists he’s committed to keeping fabs on American soil, though he’s hedging his bets with hints that he could walk away from the bleeding edge if customers don’t show up.

This isn’t just about Intel. Trump has made it clear: he’s turning the Oval Office into a deal desk. His “great deal for America, great deal for Intel” pitch on Truth Social wasn’t bluster—it was a policy signal. Earlier, Washington grabbed a golden share in U.S. Steel, muscled Nvidia and AMD into revenue-sharing arrangements over China sales, and now it’s treating semiconductors as both an industrial policy and a geopolitical weapon. Free-market orthodoxy is giving way to something closer to Gaullist France circa 1960 than Reagan’s America circa 1980.

Intel shareholders didn’t complain—stock popped 5.5% Friday—but this pact does more than pad near-term equity value. It relieves Intel of grant-trigger milestones under the Chips Act, critical after the company slowed construction in Ohio and raised doubts over its $10.9bn in federal subsidies. Now, with government equity in its veins, Intel gets breathing room while Washington locks in a seat at the table, albeit a passive one with no board rights.

Contrast that with TSMC and Samsung, who won’t be so pliant. Their Chips Act subsidies are a rounding error compared to their trillion-dollar valuations, and they’re already building out fabs in Arizona without entertaining the idea of Washington as a shareholder. For them, Uncle Sam is a landlord at best. For Intel, he’s now a partner.

The symbolism is louder than the numbers. America is effectively saying: our chips, our soil, our stake. A struggling champion is being propped up not with subsidies alone but with equity—skin in the game. It’s both sane and absurd: sane because semiconductors are the new oil, absurd because Washington is now playing the dual role of referee and competitor in a market it regulates.

And make no mistake—Trump’s not done. “We do a lot of deals like that: I’ll do more of them,” he quipped. Believe him. The White House has just opened the door to a new model of American capitalism: portfolio management by executive order, where Washington doesn’t just set the rules, it takes a piece of the action.

Shanghai ignites: Golden cross, liquidity flood, and retail mania fuel breakout frenzy

Shanghai ( SHCOMP) isn’t just rallying — it’s tearing down the track with afterburners on, leaving cautious hands choking in the dust. This isn’t your garden-variety grind higher; it’s the kind of upside mania where gravity feels optional, and prices hang in the air far longer than skeptics think possible. Overbought doesn’t mean over — it means the tape has gone weightless, and anyone betting against it risks getting torched.

The breakout is unmistakable. Shanghai has blown past levels that fenced it in for nearly a decade and is now drifting in uncharted airspace. Moves like this aren’t about pretty patterns — they’re about raw momentum, the kind of surges that in the past have morphed into outright panic buying and left bears scrambling for cover.

And the accelerant is everywhere. Beijing just opened the liquidity floodgates, hosing ¥1.37tn into the system — the biggest injection since January. At the same time, the AI drumbeat is deafening: DeepSeek V3.1 is being hyped as the next-gen engine for domestic chips, feeding the dream of a homegrown software-hardware supercycle. And the retail army has gone berserk — brokerages are seeing 200–300% jumps in new accounts, a flood of fresh punters bringing tinder to an already roaring fire. The volumes back it up: this squeeze is being driven on monster turnover, not whispers in the dark.

Meanwhile, across the border, Hong Kong tech is finally stirring awake. After lagging Shanghai’s sprint, the sector now looks like a coiled spring. KWEB sits on the edge of a wide-open range, a breakout waiting to happen. The logic is simple: call spreads give cheap optionality if the lid finally blows. The local bullish case is clear — tariff risks already priced, earnings growth for 2025–26 that can stand toe-to-toe with global leaders, plus AI capex and loosened chip restrictions creating a tailwind cocktail strong enough to rattle the rafters.

Speculation, naturally, breeds more speculation. ChiNext is grinding higher, but margin debt is running even faster — the truest pulse of animal spirits. And then there’s the STAR 50, up 8.5% in a single thrust, throwing off the kind of surge that traders remember years later. These aren’t sleepy SOEs — these are the poster children of Chinese innovation, and right now they’re the names everyone wants stamped in their book.

This isn’t a tourist rally. This is native demand, driven by liquidity, retail fervor, and a heavy dose of narrative rocket fuel. Shanghai is squeezing hard, and the move has that dangerous, intoxicating texture of something that can run much farther — and climb much higher — than rational models will ever dare admit.

Chart of the week

China stocks hit new ten year high, on verge of historic breakout

Overnight, the SHCOMP made fresher 10-year highs, now reclaiming the 3800 level just days after breaching 3700. Or, as Goldman trader Fred Yin points out, "it took about 3 weeks from 3500 to 3600, another 3 weeks from 3600 to 3700" and then 3 days to go from 3700 to 3800. Clearly, the move in China is accelerating.