Futures markets have repriced to expect at least one Fed rate hike in 2025 after new Fed Chair Kevin Warsh signaled an aggressive anti-inflation stance. This hawkish pivot scrambles the soft-landing consensus and reopens the bear case for rate-sensitive equities and long-duration bonds.
If incoming inflation data decelerates materially, the one-hike pricing could unwind rapidly, providing a sharp relief rally for TLT and rate-sensitive equities that have already absorbed some hawkish premium.
Warsh has a documented inflation-hawk track record and futures markets are still in early stages of repricing — if CPI remains sticky, the market may need to price in multiple hikes, driving TLT and rate-sensitive sectors meaningfully lower from current levels.