Nvidia answers on earnings, Warsh decides on valuations: How does Jackson Hole impact US stocks?

Every late August, central bank officials, economists, and financial market participants from around the world turn their attention to Jackson Hole, Wyoming.

This year is no exception. The annual Jackson Hole Economic Policy Symposium is about to convene, with this year's official theme being "Financial Innovation: Implications for Payments and Policy."

But for the current US stock market, a more pressing question than payment innovation is: In an environment where inflation remains above target, long-term interest rates are stubbornly high, and global capital demand is expanding rapidly, how does the Federal Reserve plan to contend with increasingly expensive capital?

Moreover, there's a unique twist this year—Kevin Warsh will step onto the main stage at Jackson Hole as Fed Chair for the first time.

Since taking office in May, Warsh has significantly reduced the forward guidance markets had become accustomed to, and has rarely hinted in advance at what the next FOMC meeting should do. This speech could become the first major window for markets to systematically understand the "Warsh-era Fed" policy framework.

And the environment he faces is far from easy. The Middle East conflict and risks surrounding the Strait of Hormuz have not been fully resolved; the US 30-year Treasury yield recently broke above 5.3%, hitting its highest level since 2007; the US Treasury has unusually expanded its long-term bond buyback program; and both AI companies and the US government are entering the bond market to raise funds at an astonishing pace.

Add in this week's Nvidia earnings report, and this Jackson Hole may offer much more worth listening to than just a simple "hike or no hike" narrative.

1. With Oil Pushing Past $90, How Does Warsh Define This Inflation Cycle?

First, energy.

On August 18, Brent crude briefly reclaimed the $90 level, settling at $91.02 per barrel. Although oil prices have since retreated to around $86–$87 as of August 26, following renewed discussions between Iran and Oman regarding Strait of Hormuz transit arrangements, the energy shock that has built over the past six months hasn't truly disappeared.

What deserves more attention than crude oil itself is refined products.

Since the conflict erupted in February, US gasoline price indicators have risen roughly 60%, while European diesel prices are up over 70%. This means the energy shock is no longer confined to crude oil—it's propagating further into refined products, transportation, and end-user costs.

This is precisely the type of inflation the Fed finds most difficult to manage. If oil prices merely spike temporarily, the Fed could reasonably treat it as a supply-side disturbance and avoid overtightening in response to a transient price shock.

But if energy prices remain elevated for an extended period, they can ripple through transportation, manufacturing, food, and services costs, ultimately shaping consumer inflation expectations.

Therefore, the first key question to watch from Warsh at Jackson Hole is whether the Fed defines this energy-driven inflation as a temporary supply shock or as a structural risk that could re-align the inflation path.

As of August 24, interest rate futures showed the market remained relatively cautious about an immediate September rate hike, but the implied probability of at least one hike by year-end had risen to roughly three-quarters.

And the internal divisions at the July FOMC meeting were already pronounced.

At that meeting, the committee voted 9:3 to hold the federal funds rate at 3.50%–3.75%, but three members already supported a 25-basis-point hike. The subsequently released meeting minutes further indicated that "many" participants believed further tightening would likely be necessary if inflation did not continue to fall back toward the 2% target.

At the end of the day, what the market really needs to assess is not merely whether Warsh will signal a rate hike, but how high his inflation tolerance actually is.

2. What's Really Pressuring Tech Stocks: Rising Long-Term Treasury Yields

This is also, in my view, the point the market is most likely to overlook right now.

Compared to short-term policy rates, what has actually been weighing on tech stocks lately is the long end of the yield curve.

On August 18, the US 10-year Treasury yield rose to approximately 4.75% intraday, and the 30-year touched 5.34%—the highest level since 2007. Meanwhile, Japan's 10-year yield briefly approached 3%, a level rarely seen since the 1990s. Long-term financing costs across major global economies are rising in tandem.

According to MSX Research, this rise in long-term yields cannot be simply attributed to "the market expecting the Fed to hike." The deeper shift is that the world is witnessing an increasingly intense competition for long-term capital.

Over the past decade and a half, markets grew accustomed to Ben Bernanke's "Global Savings Glut"—an environment of abundant capital, insufficient investment demand, and central bank bond purchases that kept real interest rates persistently low.

But today's landscape is changing.

The US government needs to finance ongoing fiscal deficits; Europe requires investment in defense, energy, and infrastructure; aging populations are adding to public fiscal pressures; and simultaneously, AI has kicked off a capital expenditure cycle of unprecedented scale.

Alphabet, Amazon, and Meta alone have issued nearly $220 billion in bonds since 2026—more than double the $108 billion they issued throughout all of 2025. Meanwhile, the US fiscal deficit is expected to remain around 6% of GDP.

In other words, it's not just governments that need money now—AI also requires enormous capital. This is why the current rise in long-term debt deserves serious attention from tech investors.

Long-term rates determine not only government financing costs but also impact mortgage rates, corporate debt financing, capital costs for data center projects, and—most importantly—the discount rate applied to future cash flows of growth stocks.

For tech stocks whose valuations rely heavily on distant-future earnings, a 30-year Treasury yield above 5% versus a 3%–4% long-term rate environment represents two entirely different valuation regimes.

So even after Jackson Hole, if markets begin to expect a more dovish short-term policy stance, as long as the 30-year Treasury yield remains firmly anchored near 5%, tech stocks may not be able to return to that simple "falling rates, expanding valuations" trade logic of the past.

Short-end easing does not necessarily mean looser financial conditions. This may be the most important reframing for the current US stock market.

3. After Bessent's Move, What Will Warsh Do?

There's also a very unusual development in the Treasury market recently.

On August 19, the US Treasury announced it would increase its liquidity buyback program for 10- to 30-year bonds from the previously planned $2 billion per operation to at least $4 billion, with the new arrangement to run from September 9 through November 4.

Following the announcement, the 30-year Treasury yield quickly fell from above 5.3% to around 5.18%.

Notably, the Treasury's official rationale for this operation remains improving liquidity in the long-end Treasury market—not directly controlling yields.

This distinction matters enormously.

Because whether the buyback size increases from $2 billion to $4 billion, it remains a very small figure within a US Treasury market that exceeds $30 trillion.

It can improve market structure, alleviate short-term selling pressure, and signal to investors that "the Treasury is paying attention to the long end," but it cannot change the deeper issues of fiscal deficits, debt supply, and rapidly growing long-term capital demand.

US federal debt surpassed $40 trillion for the first time in August. On top of that, the US government now has to compete with AI giants aggressively issuing debt for the same pool of global long-term capital.

This leaves Warsh facing a policy environment far more complex than a simple "hike or not" decision. So this Jackson Hole, what truly needs to be heard boils down to three questions.

• Under what conditions would the Fed raise rates again: What the market needs is no longer just a "data-dependent" phrase—what really matters is what combination of core inflation, employment, energy prices, and inflation expectations would lead Warsh to conclude policy must tighten further;
• How Warsh views long-term rates: If he believes a 30-year yield above 5% is already actively tightening financial conditions, then the urgency for the Fed to raise short-term policy rates may be relatively reduced. Conversely, if he believes the rise in long-end yields itself reflects inflation expectations or policy credibility issues, then markets may receive a completely different answer;
• How the Fed intends to handle its increasingly complicated relationship with fiscal policy: The Treasury has begun managing long-end liquidity more proactively, while the Fed itself needs to maintain its anti-inflation credibility and policy independence. With US debt surpassing $40 trillion, the importance of this issue is rapidly escalating;

For Warsh, who has only recently taken office, this may be the most important task of his first Jackson Hole speech:

He doesn't need to give the market the answer to the next FOMC meeting in advance, but he must make the market understand what kind of policy framework he intends to build.

Final Thoughts

If I had to sum up the two most important events of this week in a single sentence, I'd put it this way:

Nvidia determines how much further earnings can grow; Warsh determines how much the market is willing to pay for those earnings.

Nvidia answers whether AI demand, capital expenditure, and corporate earnings can continue to move higher. Warsh answers how much valuation the market is willing to assign to those earnings in an environment where long-term Treasury yields are near 5% and inflation remains above target.

One decides the profits; the other decides how many times those profits are priced.

If Nvidia continues to prove strong AI demand, energy prices ease further, and Warsh simultaneously convinces the market that inflation is under control—allowing long-term Treasury yields to genuinely decline—then tech stocks still have room to move higher.

But if earnings remain strong while long-term capital becomes increasingly expensive, the US stock market may gradually enter a different phase than previous years—corporate earnings keep growing, but valuation expansion starts to hit constraints. Alpha will depend more on companies that can actually deliver cash flow and earnings growth, rather than merely the "broad lift from falling rates."

So at this Jackson Hole, what's truly worth listening for is: with governments and AI giants competing simultaneously for capital, and long-term rates reasserting themselves at elevated levels, what is the US stock market actually worth?