① The team led by James van Geelen, founder of Citrini Research, forecasts that Federal Reserve Chair Kevin Warsh will take no action until the$S&P 500 Index (.SPX.US)$S&P 500 reaches 8,000 points; ② The report stated, “We believe Warsh will remain on hold until clear upside signals emerge within his established framework—and we do not see such a scenario unfolding in the near term.”
Caixin News, June 16 (Editor Huang Junzhi) — In February this year, James van Geelen, founder of Citrini Research, published a 7,000-word ‘AI horror story’ that unexpectedly triggered a sharp selloff in U.S. equities.
As newly appointed Federal Reserve Chair Kevin Warsh prepares to preside over his firstFederal Open Market CommitteeFederal Open Market Committee (FOMC) meeting this week, the team led by van Geelen has issued its latest insight into Fed policy: Chair Warsh—the ‘new steward’—will do nothing until the S&P 500 hits 8,000!
An undeniable wave of optimism is sweeping through Wall Street:$SpaceX (SPCX.US)$the IPO has gone even more smoothly than anticipated; after nearly four months of escalating tensions, the U.S. and Iran are finally nearing an agreement; and U.S. equities appear poised for a breakout.
Citrini Research’s latest report also expresses optimistic expectations, even suggesting a scenario they describe as one in which ‘the market could go completely berserk.’ The firm quantifies this as a further 10% to 15% rise in the S&P 500 and a doubling of the market capitalization of artificial intelligence-related stocks.
They further note that even if the market does not ‘lose its mind,’ no concerns will pose a material threat to the market cycle before the S&P 500 reaches 8,000 points.
The report explains that equity market volatility is influenced by thematic momentum and macroeconomic conditions. Last year, it was tariffs and growth concerns; this year, it is the Iran conflict—both of which have temporarily dampened enthusiasm for artificial intelligence.
Recently, a new concern has emerged in the macroeconomic landscape: markets now expect the Federal Reserve to begin raising interest rates this year—a shift that only started to appear in futures markets in May. Of course, there are multiple reasons behind this expectation, including rising inflation data, strengthening labor market indicators, and the Fed’s increasingly hawkish stance.
It now appears that the Strait of Hormuz may finally be reopening. However, this will not be immediately reflected in the data.
“The indirect and lagged effects of inflation will continue to manifest across different time horizons. Inflation data for June and July may appear elevated, but the underlying causes were already in place well before Memorial Day (May 25). We refer to this phenomenon as an ‘echo shock’—a situation where inflation readings peak just as actual price pressures begin to reverse at their source,” the institution stated.
In addition to developments concerning Iran, they also noted there is no evidence of wage-driven inflationary pressure. The report stated: “So far, this remains a purely supply-driven inflationary shock and is therefore unlikely to persist.”
The team led by Gilleen also offered criticism regarding the labor market, arguing that despite strong employment data, the labor market is not overheating. Data from the Job Openings and Labor Turnover Survey (JOLTS) is far less optimistic than headline employment figures suggest, and in any case, current levels of job growth are not unusually high by historical standards.
The report stated: “Even in the absence of major macroeconomic shocks such as Liberation Day tariffs or a war with Iran, macroeconomic data itself contains substantial noise. Therefore, we should avoid over-interpreting short-term macro data to draw strong conclusions.”
Based on these views, they believe the Federal Reserve, under current Chair Kevin Warsh, will take no action—neither raising interest rates nor immediately tapering its balance sheet.
“We believe Warsh will remain on hold until clear upward signals emerge within his established framework—namely, median and trimmed-mean consumer price indices, along with supportive evidence of deflationary technological trends—and we do not foresee such signals materializing in the near term,” they said.
Deflationary technological trends refer to an economic phenomenon wherein rapid advances in cutting-edge technologies—such as artificial intelligence and automation—significantly boost productivity, sharply reducing the marginal cost of goods and services and thereby exerting downward pressure on prices at the macroeconomic level.