Removing the Punch Bowl, The Case For Tighter Monetary Policy

In this episode, Scott Slayton, Partner and Chief Strategist at Capital Creek Partners, breaks down three key market themes for the week.Scott opens with a contrarian case for Fed tightening, arguing that a rate hiking cycle beginning later this year is more likely than markets are pricing. He points to a two-year Treasury yield sitting roughly 60 basis points above the fed funds rate, a confirmed uptrend in the ECRI Future Inflation Gauge, the stimulative effects of the Iran war, and a Taylor Rule calling for meaningfully tighter policy making the case that the Fed risks falling behind the curve before inflation forces their hand.Scott then turns to Broadcom's fiscal Q2 2026 earnings, using the results as a lens on the AI CapEx cycle. Full-year AI semiconductor revenues are tracking toward $56 billion up 180% year over year with management guiding for revenues well above $100 billion in fiscal 2027 and expressing high visibility through 2028. A book-to-bill ratio approaching three and accelerating average selling prices reinforce Scott's view that the AI infrastructure boom remains firmly intact.Scott closes with the May nonfarm payroll report, which came in at 172,000 nearly double the Street's consensus of 88,000 with April revised sharply higher to 179,000. The three-month average now sits at 188,000, well above the Fed's estimated equilibrium. Scott frames this as a labor market that continues to run hot and notes the report sets up Chair Warsh's first FOMC meeting on June 17th as one to watch closely.