Author: Kunal Arora
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The Fed Hiked… And Yields Fell?
The Federal Reserve raised rates by 25 basis points, lifting the target range to 3.75%-4%. It’s the first hike since 2023 and the dot plot implies it might not be the last one we see this year. The majority of the FOMC thinks at least one more is coming. The 2 year jumped 7 basis…
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The Fed is Late, and the Bond Market Knows It
Kevin Warsh’s initial address as Fed Chairman emphasized that inflation remains a priority, indicating ongoing central bank efforts. His speech led to sharp rises in Treasury yields, reflecting pre-existing inflation and geopolitical pressures, rather than new problems. Higher borrowing costs resulting from sustained yields will impact various sectors, including the AI buildout.
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TJX Earnings Update
TJX reported revenue of $15.2B, a 5% YoY increase, and adjusted EPS of $1.22, up 11% YoY, both exceeding estimates largely due to tariff refunds. Segment growth varied, with Marmaxx slowing but international performances strong. Despite these fundamentals, the stock declined post-earnings, though management increased long-term store growth targets.
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The National Debt Matters More Than You Think
The U.S. national debt perpetuates a cycle of deficit spending, increasing inflation, and rising interest payments. With more bonds issued to finance deficits, their value drops, leading to greater economic strain. Potential solutions, such as spending cuts and tax increases, face political resistance, complicating efforts to stabilize the economy.
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My Thoughts on the CPI
Headline CPI increased 0.1% in July, with an annual rate of 3.4%. Core CPI rose 0.2%, indicating potential inflation trends. Despite weakening in the job market, experts are divided; some suggest a rate hike may be necessary. The ongoing Iran conflict adds complexity to the Fed’s decision-making process.
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$BOOT Earnings Update
Boot Barn Holdings reported strong Q1 FY2027 earnings, exceeding expectations in revenue, EBITDA, EBIT, and EPS. Despite a temporary slowdown in year-over-year same-store sales in early Q2, the company’s omnichannel growth and exclusive brands contribute to margin expansion. Overall, the investment thesis remains robust, supported by strong cash returns and zero debt.
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My Thoughts on the Fed Decision
The Federal Reserve maintained its benchmark rate between 3.50% and 3.75%, despite three dissenting members seeking a rate hike, indicating discord within the committee. While growth appears stable, persistent inflation, primarily driven by volatile energy prices, complicates the outlook. Maintaining current rates is deemed appropriate unless energy issues escalate.
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The Mechanics of Interest Rates
The Fed does not set interest rates. That may seem contradictory at first, since when we mention rates now, we mention the Fed too. But this is a common misconception, one that’s imperative to understand to grasp the most important set of numbers in finance. So, What Does the Fed Actually Do? To understand interest…
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The Foreign Exchange
The Foreign Exchange (ForEx) market is vital for understanding currency relationships driven by supply and demand. It influences purchasing power, corporate earnings, and commodity prices like gold and oil. Events like changes in interest rates can cause significant market reactions, affecting both investors and economies globally.
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Understanding a Gamma Squeeze
A gamma squeeze occurs when traders buy a significant number of call options on a stock, leading market makers to buy shares to hedge, which drives the stock price up further. This self-reinforcing cycle can result in rapid price increases, masking the stock’s fundamental performance and creating potential for sharp losses when the buying pressure…
