LARRY KUDLOW: Can Kevin Warsh have his cake and eat it too?

Fed chairman Kevin Warsh framed inflation as a monetary-policy failure and pushed for “regime change,” while a CPI drop (first in six years) and easing core trends reduce near-term odds of a rate hike. The article cites June CPI down 0.4% (with energy/gas driving most of the decline) and core inflation at a 2.6% 12-month rate, plus services flat and goods prices nearly flat for a year. Futures have already taken at least one hike off the table, and the piece argues rates can fall once inflation returns to ~2% while growth remains supported by investment in advanced tech (AI, etc.).

Analysis

The market’s real signal is a lower discount-rate regime, not the CPI print itself. If the Fed has shifted from tightening risk to policy patience, the first beneficiaries are long-duration equities whose valuation depends more on terminal multiples than near-term earnings; QUBT is the cleanest expression here because its cash-flow story is far out on the curve. This is a sentiment trade first and a fundamentals trade second, so it can reverse quickly if the next services or PCE prints stay sticky.

For TGT, the cleaner mechanism is margin relief: lower freight, fuel, and commodity inputs can lift gross margin even if traffic is only flat. But the same disinflation that helps gross margins can also be a warning that consumer demand is softening, which means the market may be overestimating how much of the benefit flows through to EPS versus just protecting profitability. CBSU and TSTS do not have enough disclosed rate sensitivity here to justify forcing a single-name view.

The contrarian risk is that investors treat lower inflation as unambiguously bullish. If the slowdown is demand-led rather than supply-led, you get lower rates and lower earnings, which is a poor setup for cyclicals and commodity-linked names. The key falsifier is one or two sticky services prints or a hawkish Fed pushback; if that happens, the rate-relief trade should fade first in the most crowded duration and innovation proxies.

Key Decisions for Investors

• Long QUBT on pullbacks over the next 1-3 sessions; use a small equity position or call spread. Upside comes from multiple expansion if yields keep drifting lower; stop if core services reaccelerate or the 10Y Treasury reclaims recent highs.
• Pair trade: long TGT / short XLE for a 1-3 month horizon. Thesis is retailer margin relief versus energy earnings pressure if disinflation broadens; risk/reward is roughly 1:2 if crude stays soft, invalidated by a rebound in oil or weak TGT comps.
• Avoid buying commodity-input names on dips until the next CPI/PCE confirms breadth of disinflation. The move can compress earnings revisions in energy, farm inputs, and industrials even if headline inflation keeps falling.
• Keep CBSU and TSTS on watch only; no position until there is evidence of meaningful duration or capex/refinancing sensitivity. Missing data: business mix, debt maturity, and exposure to falling rates.