The Bull's Schizophrenia Has a Name: Kevin Warsh

We spent Thursday watching Taiwan Semiconductor's CEO describe a $52–56 billion capex spend for 2026—a statement so bullish it nearly inverted gravity. Nvidia jumped 2%, the entire semiconductor ETF climbed 2%, and suddenly the AI spending narrative wasn't a bubble anymore; it was a fact you could bank on. Russell 2000 crushed the S&P 500 for a tenth straight session. Small-cap momentum. Risk on.

Then Friday morning Trump opened his mouth about the Federal Reserve chair, and the whole market spontaneously restructured itself.

Let me be clear about what actually happened: The president said he wanted to keep Kevin Hassett in his job as economic advisor. A single remark. Traders interpreted this as a signal that Warsh—suddenly the frontrunner on prediction markets—would get the gig instead. And because Warsh is perceived as less dovish than Hassett, rates expectations shifted. Treasury yields spiked. The S&P 500 finished the week slightly red. The Nasdaq closed down 0.06%, the Dow fell 0.17%.

This is what happens when your bull market is built on the assumption that an administration will beat the Federal Reserve into submission.

The real issue isn't Warsh or Hassett or even Jerome Powell (who's now apparently under criminal investigation, which markets shrugged off like a bad earnings miss). The issue is that we're running a 7,629-point S&P 500 target for 2026—that's 11% upside from here—on momentum, capex spending, and the idea that inflation is tamed enough for the Fed to cut rates without triggering a recession. Remove one leg of that stool and you're standing on air.

But here's where the schizophrenia gets interesting.

Bitcoin's doing something we haven't seen in months. After choking out a four-day winning streak near $97,000, it settled into consolidation around the $95,000 mark. Bitcoin's market dominance approached the 60% threshold, indicating that capital remains concentrated in BTC while altcoins weakened broadly. Ethereum staking hit 30% of total supply. Institutional money is pouring in through spot ETFs—$1.7 billion in Bitcoin ETF inflows just this week.

The crypto complex is acting like it believes the Fed will eventually have to ease. The stock market Friday was acting like it believes the opposite. Both can't be true. One will be wrong, and when the market figures out which one, you'll see real volatility.

Meanwhile, look at what's happening at the granular level.

Novo Nordisk's oral obesity drug hit 1.3% of all Wegovy prescriptions in its first week. This is a market that was supposed to cap out at $100 billion. Now you've got oral formulations, lower barriers to entry, price competition incoming. The wealth destruction potential for the first wave of winners is real. Dollar Tree stock is up 96% in a year on the back of multi-price-point strategy working better than anyone predicted. That's a small-cap outperformance story. TSMC's capex confidence is a technology concentration story. Energy is rallying on Trump energy policy and margin assumptions.

This doesn't look like a unified bull market anymore. This looks like a market desperately hunting for pockets of outperformance because the mega-cap tech narrative has become too crowded to drive gains.

Goldman Sachs hit all-time highs. Energy is hitting new highs. Small caps are crushing large caps. If this were truly a "AI revolution leading to double-digit gains for a third year running" story, tech would be running laps. Instead, tech is rotating into anything with a pulse and earnings that don't depend on GPU pricing or data center capacity.

By the way: the producer price index came in at 0.2% month-over-month. That's soft. Core PPI was flat against expectations for 0.2% gain. This should make the Fed case for easing—and by extension, the bull case for rates staying lower for longer. But Trump's remarks about the Fed chair walked that back instantly.

Here's my read: We're not in a bull market. We're in a political market. It's being steered by comments, tariff threats, and cabinet appointments rather than by cash flows or valuations or the actual state of the real economy. That's less stable than the narratives would suggest. It also explains why Thursday looked completely different from Friday—not because anything material changed, but because one comment reframed the entire apparatus.

The market wants to believe in AI-driven productivity gains and lower rates and small-cap rotation and new obesity drugs and energy policy tailwinds all at once. It might get some of these. But belief markets are fragile. They crack fast when reality intrudes.

Watch whether Bitcoin holds above $94,000 or whether it tests the $90,000 band. If crypto is truly pricing in eventual rate cuts, that level matters. If we break it, you'll know the market's conviction about Fed easing just collapsed.

The small-cap outperformance, the rotation into energy and industrials, the Novo Nordisk prescriptions exploding—these are real. But they're also the patterns you see when investors stop believing in one mega-narrative and start grasping at whatever's left. That's not a bull market. That's a market running out of ideas in a 11-year wealth concentration that finally needs something new to justify its price.