"I know you think you understand what you thought I said, but I'm not sure you realize that what you heard is not what I meant." -Alan Greenspan, Former Federal Reserve Chairman

New Federal Reserve Chairman Kevin Warsh held his first major hearing, and if the market's reaction was any indication, plenty of investors walked away unsure of exactly what he meant. That confusion, layered on top of sharp swings in stocks, an unusually large currency intervention, a notable move in bond yields, and continued uncertainty in the Middle East, made for a week that underscored just how much structural change is underway.

On the tech side, South Korea's stock market gave us a preview of what deleveraging can look like: a 17% drop over three days, followed almost immediately by an 18% rebound. Our model equity portfolio has targeted about 1.7% in Asia ex-Japan assets and we certainly experienced a swing. Separately, a heavily leveraged tech-focused fund reported losses of roughly 46% for July alone, showing once again the problems when hedge funds trade on margin (and why we eschew margin). Meanwhile, Japan spent over $50 billion-with extra help from the U.S. and Korea-to prop up the yen, which had fallen to a multi-decade low before recovering somewhat.

Turning to the bond market, we think something important is finally being priced: the sheer scale of spending on AI and technology infrastructure is competing with government borrowing for a limited pool of capital, and that tension is pushing long-term yields higher. Some have blamed this on Warsh and his decision not to raise rates last week, but we would push back on that premise. The real driver is rising real interest rates, not inflation fears. If anything, the "confusion" around Warsh isn't a communication failure-it may be intentional. He appears to be deliberately moving away from the Fed's old habit of heavily signaling its next move, instead giving several newly formed committees time to review how the Fed operates going forward. Markets aren't used to that kind of ambiguity from a Fed Chair, and it shows.

On the economic data front, the picture was mixed but generally reassuring. US inflation continues to come in a bit softer than expected across several measures, while inflation in Europe ticked up, increasing the odds of a rate hike there in September. Japan's central bank held rates steady despite hawkish language, which briefly rattled currency markets before the intervention mentioned above. China's factory activity weakened further, a reminder that China continues to face domestic challenges. Here at home, growth slowed a bit more than expected in the second quarter, but a couple of other indicators-regional business activity and consumer sentiment-came in stronger than forecast, and importantly, people's inflation expectations stayed steady.

In terms of market moves, it was a week of real divergence: Amazon's shares climbed while Apple's fell, and SpaceX shares dropped well below their IPO price. The yen swung from multi-decade weakness to a meaningful recovery. Longer-term US Treasury yields rose noticeably, and oil prices climbed to around $88 a barrel.

Looking ahead, we see three main things shaping US growth: (1) continued heavy investment in AI infrastructure, (2) how well consumers hold up, and (3) the economy's ability to absorb any shocks from geopolitics or financial markets. The biggest wildcard remains tensions between the US and Iran. Oil prices dropped early in the week on hopes of calm, then spiked over the weekend on reports of a possible joint US-Israel strike on Iranian energy targets-before easing again after President Trump indicated the strikes had been called off, at least for now.

We believe the worst of the recent tech-related market stress is likely behind us, though we would caution against assuming smooth sailing from here. Between the new Fed Chair still finding his communication style and markets still learning how to interpret him, some volatility and uneven performance across sectors is likely to persist in the weeks ahead. As always, we are staying close to the data and ready to adjust as the picture becomes clearer.