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Digging Deeper into Recent Economic Developments

Kevin vs. Kevin: Markets Are Betting on the Next Fed Chair (Posted 1/26/2026)

Markets aren’t just pricing the next Fed Chair—they’re pricing the type of Fed that will emerge after Powell. Prediction market data reveal a sharp contrast: Kevin Hassett is associated with looser policy and higher inflation risk, while Kevin Warsh is priced as a stabilizing force that lowers inflation expectations and volatility. Subtle as it is, equity returns weakly suggest investors prefer credibility and lower uncertainty over aggressive rate cuts. 

I am Certainty Uncertain About an AI Bubble (Posted 1/19/2026)

Today’s elevated equity valuations may look like a classic bubble, but they are hard to understand without accounting for extreme uncertainty about AI-driven growth. Because valuation is convex in growth, large upside uncertainty can rationally sustain very high P/E ratios even when average growth effects are modest. In this sense, AI uncertainty may be “good” uncertainty—one that boosts prices without proportionally increasing systemic downside risk.