Forward Guidance host Felix interviews Bob Sheehan, founder of Lighthouse Macro, in a technical deep-dive on how monetary policy is fundamentally changing under new Federal Reserve chair Kevin Warsh. Sheehan, who previously managed over a billion dollars at Bank of America before launching his own macro research shop, argues that the "Fed put"—the market's decade-long assumption that the Fed will backstop risk asset declines—is now dead. He points to Warsh slashing forward guidance communications by roughly half, from 340 words to 170, and abstaining from dot plot forecasts as evidence of a new regime prioritizing opacity over certainty. This shift, Sheehan contends, will increase volatility across rates and equities while forcing traders to rely on raw economic data rather than Fed signals. He lays out a two-stage thesis: the short end of the yield curve moves first on hawkish repricing (already underway), followed months later by the long end rising due to Treasury supply pressures and declining foreign demand. Sheehan's firm is positioned defensively, holding healthcare and consumer staples while avoiding long-duration tech, framing this as a pure duration trade. The conversation explores how reduced Fed transparency interacts with balance sheet policy, fiscal pressures from record-high interest expense on federal debt, and the difficulty of parsing simultaneous regime shifts in monetary policy, liquidity conditions, and fiscal dynamics. Sheehan emphasizes his data-driven approach, stressing that macro forecasts must be falsifiable and grounded in historical probabilities while acknowledging the inherent uncertainty of the current environment. The episode offers institutional-quality analysis on navigating what Sheehan calls "a new era of macro" that younger traders have never experienced.
Sheehan lays out a sequencing prediction where the short end of the yield curve moves first in response to hawkishness, followed months later by the long end rising due to supply pressures and reduced foreign buying. This bear flattener transitioning to a steepener represents his core macro thesis for how rates will evolve under the new Fed regime.
Read this moment →Fed communications under Kevin Warsh have been dramatically shortened, roughly halving the word count from prior press conferences. This reduction in forward guidance creates more uncertainty and volatility in markets, forcing traders to rely more on raw economic data rather than Fed signaling about future policy direction.
Read this moment →Sheehan's firm is actively positioned in defensive equity sectors like healthcare and consumer staples, avoiding long-duration tech names during the current uncertainty. He frames this as a duration trade where shorter-duration equities will outperform while markets adjust to the new Fed regime without clear forward guidance.
Read this moment →Bob Sheehan of Lighthouse Macro argues that the Fed's historical practice of stepping in to support falling risk assets has ended under new chair Kevin Warsh. This represents a major regime shift after a decade where investors relied on the Fed to backstop sell-offs with rate cuts and liquidity. Sheehan says this changes how traders should position, making defensive postures more necessary.
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