Market doesn't want to hear it, but Fed's Kevin Warsh is focused on balance sheet tightening: CIO

• Fed's Kevin Warsh is focused on balance sheet tightening, which the market is underestimating, while short-end yields have modestly declined.
• Underlying inflation (Trueflation) is below 2%, allowing the Fed room to wait, despite rising acyclical inflation.
• The market will adjust to higher long-term yields (e.g., 5% on 10-year Treasury) without disaster, similar to past periods of robust stock returns.
• Tengler is bullish on AI-related stocks, expecting strong performance from companies like Nvidia, Apple, Amazon, and Micron, due to significant backlogs and the early stage of the AI build-out.

Nancy Tengler of Laffer Tengler Investments believes the market is misreading Fed's Kevin Warsh, who is focused on balance sheet tightening rather than just rate hikes. She notes underlying inflation is already near 2% and the market will adjust to higher long-term yields. Tengler remains bullish on AI-related stocks, including Nvidia, Apple, Amazon, and Micron, seeing a long build-out trade ahead.