A preface to the newsletter: It was a bit of a bumpy ride for the markets this past week as both stocks and bonds rose and fell. There was some economic news, with inflation data for April coming in hotter than expected, but for the most part the headlines this past week were mostly a continuation of the status quo. Investors used this opportunity to take some profits and adjust their inflation forecasts.
In this week's newsletter I touch on the recent inflation data and how Kevin Warsh will have a difficult needle to thread with interest rate policy. I also go into detail about what appears to be a Gamma Squeeze occurring in tech stocks currently and how investors can get caught in it if they aren't careful. Lastly, in this week's Longevity Science Foundation spotlight, I summarize an article they published on common forms of Cancer in Women.
As always, please don't be shy about sharing any feedback and please feel free to forward this on to anyone else who might be interested in reading it.
Have a nice week ahead,
Kevin
Stocks
Stocks ended the week essentially flat, but not without some dramatic swings along the way. The S&P 500 crossed 7,500 for the first time ever mid-week, only to pull back sharply on Friday as investors worried about rising inflation. By the week's end, the S&P and Nasdaq were up just slightly, while the Dow was nearly unchanged.
Bonds
Bonds had a rough week. When inflation worries grow, bond prices tend to fall, and that's exactly what happened. The interest rate on the benchmark 10-year U.S. Treasury note climbed to 4.5%, its highest level since early 2025, meaning bond prices dropped considerably. This was the biggest weekly move in bond rates in over a year.
Oil
Oil prices remained elevated above $100 per barrel, adding to stock market volatility. The ongoing conflict in the Middle East continues to disrupt global energy supplies and is expected to have a lasting effect through the summer.
Inflation came in hotter than expected this week
Inflation jumped to its highest level in nearly three years. The government reported that consumer prices rose faster than expected in April, driven largely by surging gasoline and food costs tied to the U.S.-Iran conflict. Both the prices consumers pay (CPI was up 3.8%) and the prices businesses pay (PPI was up 1.4%) were much higher than economists predicted. While this news is uncomfortable, it's important to remember that energy-driven inflation tends to be temporary; once the underlying cause stabilizes, prices typically follow. I'm keeping a close eye on how the situation evolves.
Kevin Warsh was confirmed as the new Federal Reserve Chairman, replacing Jerome Powell
The Senate confirmed Kevin Warsh as the new Fed Chair this week, taking over from Jerome Powell whose term ended Friday. Warsh now leads the committee that sets interest rates for the entire country. Warsh believes "inflation is a choice" and hasn't committed to cutting interest rates anytime soon. This change in leadership could mean a more cautious approach to lowering rates, which explains why bond prices fell this week. However a leadership change at the Fed isn't a reason to change your investment strategy. Markets had expected this transition, and Warsh is widely viewed as a thoughtful, disciplined policymaker. What will be interesting to watch is how Warsh communicates policy expectations at his first Fed meeting next month, and whether he will continue his past hawkish approach on inflation or kowtow to President Trump's demands to lower rates.
President Trump met with China's President Xi in Beijing
The two-day summit ended without major breakthroughs, though both sides agreed the Strait of Hormuz must remain open. Markets had hoped for more concrete progress on the U.S.-Iran conflict though, and the lack of a clear resolution disappointed investors on Friday and contributed to the pullback. On a side note - President Trump also approved sales of Nvidia's advanced computer chips to several major Chinese technology firms that had previously been prohibited from using the newest American semiconductor technology.
"Inflation is taxation without legislation." - Milton Friedman, Nobel Prize winning economist
Inflation quietly erodes the purchasing power of your money without anyone ever having to vote on it. When governments spend more than they take in, they can print more money to cover the gap, but... more dollars chasing the same amount of goods means each dollar buys less. Your savings, your paycheck, your Social Security or fixed pension - all slowly become worth less than before. Nobody passed a law raising taxes, but the impact on your financial situation is the same. Governmental policies that cause inflation, such as tariffs or geo-politically driven supply chain disruption, are effectively the same as the government charging a tax without ever having to ask permission.
Are Tech Stocks in the Middle of a Massive Gamma Squeeze?
What is a Gamma Squeeze?
Simply put, a Gamma Squeeze is when a surge in demand for call options creates a feedback loop that drives up the share price of the underlying stock.
Think of it like a snowball rolling downhill. When large numbers of traders rush to purchase call options on a stock (placing bets that the price of a stock will rise by a certain date) the financial firms on the other side of those bets are required, by rule, to buy actual shares of the stock to protect themselves. That buying pushes the share price higher, and a higher price forces them to buy more shares. That sharp increase in demand then pushes the share price even higher, which in turn forces the financial firm to buy even more shares. Around and around it goes driving up stock prices, not because the company is suddenly worth more, but because the mechanics of the options market are creating an artificial buying frenzy. In these environments, price action can start to justify itself. Momentum builds, narratives expand, and investors begin to reinterpret valuations as reflecting future potential rather than current reality. And it's important to note that the same mechanism that drove the price up can also quickly reverse.
Are Tech Stocks in a Gamma Squeeze Right Now?
The short answer is: yes, to some extent. Analysts have noted that current overbought conditions in semiconductor and AI stocks are being driven by aggressive call option buying and gamma squeezes, notably in stocks like Micron and AMD. A record $2.6 trillion in notional options value has traded on the S&P 500, with an overwhelming skew toward call buying, creating a textbook gamma squeeze.
The AI boom is the narrative fueling all of this excitement. And although the AI story is real, there's a meaningful difference between a good story and a fairly priced stock. Analysts are asking whether stock prices have gotten too far ahead of fundamentals, with tech stocks already pricing in 2027 and 2028 growth expectations. Fundamentals still matter over the long term, but in regard to short term price movements, the options tail is increasingly wagging the equity dog in tech stocks.
What Should Investors Do?
First off, take a deep breath and don't panic. The market is driven by fear and greed and the smart investor never let's either of those emotions take over. Here is some advice that I'm sure many of my clients have heard me say ad nauseum: have a plan and stay disciplined. Don't chase the rally. If you see that a stock has jumped up recently, you probably already missed the boat. You don't want to be the Johnny-come-lately who is the last one to buy in before the stock drops. Similarly, don't panic-sell out of quality companies either. Understand the fundamentals of the stocks you are investing in and take profits when appropriate, but don't sell out of a good company just because of a short term price decline. If anything, that price drop might even be a good buying opportunity! Do your homework; research company fundamentals, have a portfolio model with target allocation weights, and keep a cool head while everyone else is losing theirs.
A different way to think about agency in long term health & philanthropy
Cancer in Women: Recognizing Signs & Risks
Cancer affects women differently than men, but medical research has historically been built around male data, putting women at a disadvantage for early detection and treatment
Lung cancer is the #1 cancer killer in women, yet often flies under the radar because many assume it's only a smoker's disease. Women develop lung cancer at higher rates than men even without ever smoking.
Colorectal cancer tends to appear on the right side of the colon in women, which is harder to detect with standard screening, leading to later, more dangerous diagnoses.
Melanoma strikes women under 30 more commonly than men, and typically shows up on the legs rather than the torso. Often this leads to looking in the wrong places for the usual warning signs.
Liver cancer risk is higher in women even at lower levels of alcohol consumption, because women metabolize alcohol differently and sustain more liver damage per drink than men do.
What you can do:
Cancer doesn't discriminate by gender, but it does behave differently in men and women. Awareness of those differences can mean earlier diagnosis, better treatment, and more healthy years.
To learn more, go to: Cancer in Women: Recognizing Signs & Risks
Inflation continues to be a nagging problem for the Fed (and for the rest of us as well). Although we haven't seen a significant drop in consumer spending yet, the fear is that at some point prices will outpace wage growth. People living on a fixed budget or with low disposable income are already having to make tough choices between filling up the gas tank or the grocery basket, and I don't expect prices to come down any time soon. The Fed will eventually have to make a tough choice of whether or not to raise/lower interest rates, and right now the market consensus is that rates are more likely to go up.
Just as external forces are driving up the prices of consumer goods (tariffs and the U.S.-Iran conflict), a similar, albeit unrelated, situation is occurring with outside forces driving up tech stock prices (gamma squeeze). In both cases, when the external factor causing the price run up abates, then we are likely to see prices fall to some degree. The best advice for either situation is to have a plan and stay disciplined with it. Have a budget and know where you can cut back if needed. Research your stocks, understand their fundamentals, and know what you are going to do in advance if prices move away from fair value (either to the upside or downside). Plan for everything and panic about nothing.
Have a nice week ahead!
Kevin