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🐯 Last Speech Before the Fed Blackout: What Do I Want to Hear From Warsh? Three Investments I Would Consider for Diversification
🌎 1. The Market Is Waiting for More Than an Interest-Rate Decision
As we approach Federal Reserve Chair Kevin Warsh’s scheduled appearance in Bangkok on October 16, I believe investors should pay attention to more than just whether the Fed will hike, hold or eventually cut interest rates.
What I really want to hear from Warsh is a clear explanation of the relationship between inflation, long-term Treasury yields, government debt and the direction of monetary policy.
According to the Federal Reserve’s calendar, Warsh is scheduled to participate in a fireside chat with IMF Managing Director Kristalina Georgieva in Bangkok. With the next FOMC meeting scheduled for October 27–28, his comments could become an important focus for investors before the meeting. https://www.federalreserve.gov/newsevents/2026-october.htm
Markets are trying to determine whether the recent increase in bond yields represents a temporary adjustment or a more persistent change in the cost of capital.
For me, the important question is simple: If the Fed pauses its rate hikes, will that be enough to support stocks if long-term Treasury yields continue rising?
I do not think investors should automatically assume that a Fed pause means the stock market will rally.
📈 2. Why Am I Watching the 10-Year and 30-Year Treasury Yields?
The screenshots highlight a major concern: long-term US Treasury yields have risen sharply, with the 10-year yield reaching approximately 5.36% and the 30-year yield approaching 5.73% on October 7.
These are the figures reported in the screenshots, rather than live market quotes.
Why does this matter to someone investing in stocks?
Imagine I have two choices.
I can buy a growth stock whose future profits may take many years to materialise, or I can purchase a Treasury bond offering a relatively attractive yield.
When government bond yields rise, investors may demand a larger potential return before taking the additional risk of owning equities.
This can put pressure on technology stocks, high-valuation companies and businesses whose expected profits are concentrated far into the future.
Higher yields can also increase borrowing costs for companies. Businesses that need to refinance debt, expand their operations or finance large projects may face more expensive funding.
Property companies can face additional pressure because borrowing costs matter to their profitability and property valuations.
However, not every stock will react in the same way. A company with strong cash flow, manageable debt and reasonable valuation may be better positioned than a company that depends heavily on cheap financing.
That is why I want to understand what is driving the rise in yields before making a major portfolio decision.
🏦 3. What Do I Want Warsh to Explain?
There are three things I would like to hear.
First, is inflation becoming more persistent?
If higher energy prices and geopolitical tensions continue pushing up transportation, electricity and production costs, inflation could remain elevated for longer than investors expect.
The Fed would then have less room to cut rates quickly.
Reuters reported on October 7 that concerns about oil prices, inflation and rising government debt were contributing to pressure in the Treasury market. https://www.reuters.com/business/wall-st-futures-slip-yields-oil-rebound-fed-minutes-focus-2026-10-07/
I would like Warsh to explain how the Fed distinguishes a temporary supply shock from inflation that could become embedded in the economy.
If inflation is only temporarily higher, policymakers may have more flexibility. If price increases spread across the economy, a more restrictive policy could be necessary.
Second, why are long-term yields rising even when investors are discussing a possible pause in rate hikes?
The Fed mainly influences short-term interest rates. Longer-term yields also reflect expectations about future inflation, economic growth, government borrowing and the compensation investors demand for holding bonds over many years.
In September, Warsh identified economic strength, competition for capital and geopolitical developments as important factors behind rising long-term yields. https://www.investing.com/news/economy-news/feds-warsh-lays-out-forces-driving-up-bond-yields-4904580
I want to hear whether these pressures are likely to persist.
Third, what is the Fed’s reaction function?
I do not need the Fed to promise a rate cut on a particular date.
I want to understand what would make policymakers more concerned about inflation, what evidence would justify keeping rates unchanged, and what economic deterioration would be necessary before rate cuts become appropriate.
Clear communication could help investors make better decisions, although no speech can eliminate uncertainty.
💵 4. Why a Fed Pause Does Not Automatically Mean Stocks Will Rise
Imagine the Fed keeps interest rates unchanged at its next meeting.
At first glance, that sounds positive for the stock market because investors may conclude that the tightening cycle is over.
But what if long-term Treasury yields continue rising?
Stocks could still struggle because the market’s cost of capital has increased. Mortgage rates could remain elevated, companies could face higher financing expenses, and investors could demand better earnings to justify existing valuations.
This is an important distinction: the Fed controls its policy rate, but it does not directly control every movement in the 10-year and 30-year Treasury markets.
If investors demand higher compensation for holding long-term government debt, yields can rise even without another immediate Fed hike.
On the other hand, if inflation cools, Treasury demand improves and long-term yields stabilise, equities could receive some relief even if the Fed does not cut rates immediately.
That is why I would rather follow several indicators instead of trading purely on the headline of a rate decision.
My watchlist would include Treasury yields, oil prices, inflation data, employment figures, corporate earnings and credit-market conditions.
🛢️ 5. My First Diversification Idea: XLE — Energy Stocks
Ticker: XLE
The first ETF I would consider is the Energy Select Sector SPDR ETF, which provides exposure to companies in the US energy sector. Its holdings include major oil and gas businesses such as Exxon Mobil and Chevron. https://www.ssga.com/us/en/institutional/etfs/state-street-energy-select-sector-spdr-etf-xle
Why would I consider energy when inflation and interest rates are causing uncertainty?
Energy companies may benefit when oil and gas prices rise, particularly when higher prices are supported by tight supply and strong demand.
If geopolitical tensions disrupt energy supplies, energy producers may become an important part of a diversified portfolio.
This could provide a different source of returns from technology stocks, whose valuations may be more sensitive to rising discount rates.
However, I would not assume that every increase in oil prices guarantees higher profits for every energy company. Production costs, hedging, capital expenditure, taxes and changes in demand all matter.
Energy prices can also fall sharply when geopolitical tensions ease or global economic growth weakens.
For investors who already hold substantial positions in technology companies, XLE is one way to explore exposure to a different sector.
My approach would be to study the oil market, company earnings and valuation before deciding how much exposure to add.
I would also avoid treating energy as a perfect hedge against inflation. It can help diversify certain risks, but it introduces commodity and sector-specific volatility.
📊 6. My Second Diversification Idea: RSP — Equal-Weight S&P 500 ETF
Ticker: RSP
The second ETF I would consider is the Invesco S&P 500 Equal Weight ETF.
A conventional market-cap-weighted S&P 500 ETF gives larger companies greater influence over the portfolio. In an equal-weight approach, companies receive approximately equal weights at each scheduled rebalancing.
Why does this matter?
Suppose a portfolio is heavily influenced by a handful of mega-cap technology companies. If those companies fall because of rising Treasury yields or concerns about expensive valuations, the overall portfolio may experience considerable pressure.
An equal-weight strategy spreads exposure more evenly across the companies in the index.
This can reduce dependence on the largest stocks and provide more exposure to smaller constituents of the S&P 500 relative to a market-cap-weighted approach.
However, equal weighting does not guarantee better performance. It can lag when the biggest technology companies outperform the rest of the market, and it still carries broad US equity-market risk.
I would consider RSP if I wanted to participate in the wider US stock market without allowing a few mega-cap companies to dominate my equity allocation.
For me, diversification is not about predicting which company will win every week. It is about avoiding a portfolio in which one investment theme determines almost everything.
💰 7. My Third Diversification Idea: SCHD — Dividend-Focused Stocks
Ticker: SCHD
The third ETF I would consider is the Schwab US Dividend Equity ETF.
SCHD focuses on US dividend-paying companies and uses a rules-based selection approach. Its holdings have included businesses such as Texas Instruments, Procter & Gamble, Chevron and Coca-Cola, although holdings and weights change over time. https://www.schwabassetmanagement.com/allholdings/schd
Why am I interested in dividend-oriented investments during a period of uncertainty?
I want part of my portfolio to focus on established businesses with cash-generating operations and a history of distributing profits to shareholders.
Dividends can contribute to total returns, particularly when share-price appreciation is modest. Reinvested dividends may also help compound returns over a longer investment horizon.
However, I would not buy SCHD simply because it pays dividends.
A dividend is not guaranteed, and a high dividend yield does not automatically mean a stock is cheap. Companies can reduce distributions when profits weaken, while share prices can fall by more than the income received.
Higher Treasury yields also create competition for dividend-paying equities because investors can earn income from government bonds without taking the same level of equity risk.
My preference would be to examine the quality of the underlying businesses, their balance sheets, earnings sustainability and valuation.
SCHD would be a candidate for the income-oriented portion of my portfolio, rather than a substitute for cash or government bonds.
⚖️ 8. How Would I Combine These Three Ideas?
I would not put all my money into XLE, RSP and SCHD just because the market is nervous.
Instead, I would first examine what I already own.
If my portfolio is concentrated in technology and growth stocks, I would investigate whether adding energy exposure or a broader spread of companies could improve diversification.
If I already hold substantial energy stocks, buying XLE might simply increase an existing concentration rather than reduce risk.
Likewise, SCHD and RSP both hold US equities, so their holdings can overlap. Owning all three does not mean I have eliminated stock-market risk.
I would also keep a suitable cash reserve and consider whether short-duration Treasury bills or money-market funds make sense for money I may need soon.
Treasury bills and money-market funds have their own risks and conditions, but they can serve a different purpose from long-term investments: preserving liquidity and keeping funds available for future opportunities.
I would avoid investing money needed for near-term expenses in volatile stocks.
For Singapore-based investors, I would also remember that US-listed ETFs involve currency exposure, brokerage costs and potentially different tax considerations depending on individual circumstances.
The right allocation depends on my time horizon, existing holdings and ability to withstand losses.
🐯 9. My Trading Plan: I Do Not Need to Predict Every Fed Move
I know that markets can react dramatically to a single sentence from a central bank chair.
One phrase may be interpreted as hawkish, another as dovish, and prices can move in either direction as investors reassess their expectations.
Rather than trying to guess the exact wording of Warsh’s speech, I would prepare for several possible outcomes.
Scenario A: Warsh sounds more hawkish than expected.
If inflation remains a concern and further tightening is possible, I would watch for another increase in Treasury yields and pressure on high-valuation equities. I would be cautious about adding to expensive growth stocks without a sufficient margin of safety.
Scenario B: Warsh sounds neutral and emphasises data dependence.
The market may continue trading according to incoming inflation, employment and earnings data. I would avoid making large portfolio changes based on the speech alone.
Scenario C: Warsh sounds more dovish than expected.
If investors become more confident that inflation is easing, equities could benefit. But I would still check whether long-term yields are falling and whether the economic outlook supports corporate earnings.
Even a dovish speech cannot guarantee a stock-market rally.
My goal is not to trade every headline. It is to have a plan that allows me to respond without making emotional decisions.
🎯 10. My Final Thoughts: Diversification Matters More When Everyone Is Watching the Same Thing
So, what do I want to hear from Warsh before the Fed blackout?
I want clarity on inflation, the reasons behind rising long-term Treasury yields, and the conditions that would lead the Fed to change its policy stance.
I do not need a promise that stocks will go up.
I need information that helps me judge whether the market is facing a temporary bout of uncertainty or a more persistent change in financing conditions.
My three diversification candidates are:
🛢️ XLE: Energy-sector exposure that may respond differently to oil prices and geopolitical developments.
📊 RSP: Equal-weight exposure to the S&P 500, reducing reliance on the largest companies relative to a conventional market-cap-weighted fund.
💰 SCHD: Dividend-focused equity exposure for investors who want to consider income and established businesses.
These are three ETFs, not three individual stocks, and none is a guaranteed hedge against a sell-off.
I would assess them alongside my existing holdings, cash reserves and investment horizon rather than buy all three blindly.
The lesson I take from this market is that I should not build my entire portfolio around one prediction about interest rates, oil prices or technology stocks.
I would rather own a portfolio that can cope with several possible futures than one that performs brilliantly only when my forecast is correct.
🐯 What about you? If Warsh sounds hawkish on October 16, would you prefer to hold more cash, add energy stocks, diversify into dividend-paying companies, or buy the dip in technology stocks?
Let’s discuss our strategies and learn from one another.
Note: This is a draft based on the screenshots and the scheduled speech. The market figures quoted above are historical figures shown in the screenshots, not verified live prices. XLE, RSP and SCHD are diversification candidates, not personalised financial advice.
$Invesco S&P 500 Equal Weight ETF(RSP)$
$Schwab US Dividend Equity ETF(SCHD)$ $Schwab US Large-Cap ETF(SCHX)$
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