Investment Insights — Week of August 31, 2026

Hi, I'm Tim Gereg, Head of Capital Solutions at Texas Capital.

The biggest news out of last week was Kevin Warsh's speech Friday morning at Jackson Hole, a day that also marked his 100th day as Fed Chair. For all his open opposition to providing forward guidance, he certainly gave us a lot of clarity on how he and the committee view the current environment. 

A few points from his speech that I think are worth highlighting: Number one, the Fed Chair reaffirmed that the Fed's preferred measure of inflation is a 12-month change in PCE, and that the target is 2.0%. Number two, while PCE is clearly above target, last week's print actually showed 3.7. Even core measures of PCE and CPI are "elevated." Thirdly, labor markets are consistent with full employment. Number four, he does not view current financial conditions as restrictive. And number five, short-term rates are the primary tool to achieve the dual mandate. So, we know the Fed is squarely focused on price stability. We know their target, and we know the tool that they will use to get there.

That said, Warsh did temper his hawkishness by pointing out two things. One, only 54% of goods and services within PCE have increased over 3% in the past year. That's almost exactly halfway between the post-pandemic peak and the average over the past two decades. And second, inflation expectations do seem to be well-anchored. The market is currently pricing in just over a two-thirds chance of a hike in September. My crystal ball hasn't worked in years, but I personally think the odds are at least that high.

This week we get August jobs data, and the market is expecting a benign 55,000 added in August and an unemployment rate unchanged at 4.1%. My view is the market will largely look through that data to CPI and PPI coming at the end of the following week. 

Other wild cards are still very much in focus, namely, the Iran War, which, the latest reescalation this last weekend has brought front month WTI back up to $85. And while Bessent's recent buyback announcement didn't do much in terms of materially lowering bond yields, it will be noteworthy to see if the Treasury uses cash from the general account to fund these purchases. That's it for now. As always, please reach out if we can help.