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From Kyiv to Jackson Hole: How Deal-Making and Fed Policy Are Reshaping Markets
From Kyiv to semiconductors, Washington is turning leverage into deals.
Kyiv’s $150B Framework — Europe Pays, America Sells
Ukraine is floating a $150B package: $90–100B in U.S. weapons financed largely by European partners, plus $50B in joint drone production with American firms. The aim: secure U.S. guarantees, tie Europe to long-term financing, and lock in U.S. industrial participation post-accord.
Investor read-through: Whether war drags on or peace takes hold, U.S. defense revenues are baked in.
Chips as Cash Register and Cudgel
Washington is weighing converting CHIPS Act (Biden-era legislation) subsidies into ~10% non-voting equity in Intel, while demanding a 15% skim on Nvidia’s China H20 revenues (with AMD reportedly in the mix). Subsidies become stakes; export licenses become toll booths.
Market angle: Intel cuts funding costs, its CEO gets out of Trump PR-jail, but the company inherits policy overhang. Nvidia preserves access to China at thinner margins, creating a precedent for license-conditioned economics.
Resetting Bargaining Power
Intel’s CEO drew rare public rebuke before reports of a U.S. stake surfaced. The sequence signals Washington’s tactic: first apply pressure, then attach capital and concessions. A similar logic shapes Ukraine—float peace terms, attach U.S. guarantees to industrial deals, shift financing burdens to Europe. After a disastrous first meeting at the White House, Zelensky learned the ropes: wear a suit (Trump asked nicely), and offer candy to the President.
Risk Map — Policy Volatility Premium
- Ukraine: Proposals touching Crimea or NATO renunciation collide with Kyiv’s constitution, sustaining demand for drones and air defense near term. Russia continues to pound Ukraine; Trump shakes his head, and Europe borrows at scale to fully re-arm.
- Policy volatility: Equity stakes, skims, and tariff threats can shift overnight. Watch CHIPS disbursement calendars and export-license reviews. This flatters China’s Made in China 2025 plan.
- Industrial crowding: Winners get capital and contracts; laggards face higher costs of capital and tighter scrutiny.
From Solyndra to Skims — The Policy Evolution
- Then (2011): Solyndra’s $535M DOE loan guarantee left taxpayers exposed to full downside with no upside levers. Bankruptcy cemented its infamy.
- Now (2025): Equity stakes, royalties, and conditional licenses tie support to performance. Taxpayers gain contingent upside, policymakers retain control.
Continuity: Public capital still steers industry.
Discontinuity: The model shifted from “guarantee the bet” to “own the option and meter the gate.”
Powell’s Jackson Hole Balancing Act
Navigating market sentiment, skewed toward a September rate cut, and his own focus on a legacy of not being Arthur Burns, Powell made the tightrope look like a suspension bridge and the markets cheered him all the way across.
Key Takeaways:
- He rationalized the tension in the data—CPI, PPI, and employment—with a classic bit of central banker-speak: “Distinguishing cyclical from trend is difficult.” Translation: reasonable folks can differ; the data can be confusing.
- He acknowledged the one-time price shock of tariffs. Yes, there’s uncertainty. Yes, impact is accumulating unevenly. But it’s “manageable,” and unless the labor market tightens, a wage-price spiral seems unlikely.
- GDP is slowing. Powell admits policy may be too restrictive.
- The neutral Fed Funds rate may be higher than we thought, but the time may be right to finally adjust policy.
But before we sign off on the full “Chairman Redemption” narrative, let’s check the history:
- Tightened too much in Q4 2018—then promptly U-turned.
- Eased too slowly in Q1 2020—late to the punch, pandemic edition.
- Tightened too late in 2021-2022—no one forgets “transitory.”
- Failed to adequately supervise in the lead-up to the regional banking crisis of 2023—“nobody saw it coming,” except, of course, the chart watchers.
Powell can’t pull legacy from the jaws of mediocrity just by #resisting Trump. But, he has baked in a cut for September.
How did the markets take it? Powell just lit a rocket:
- Stocks: bid
- Bonds: bid
- Precious metals: bid
- Bitcoin: bid
- USD: sell
Whatever the Fed’s gameplan, risk assets loved the vibe—at least for today. See asset table below for the play-by-play.
In The Markets — AI Rally Meets Reality
The AI trade hit turbulence. Earnings reality is replacing hype as capital rotates into balance-sheet strength and defensives. Regulators are tightening rhetoric on AI ethics. This week feels less like panic, more like a collective exhale — conviction over FOMO. And, to make a happy Friday, Powell took his foot off the brake—watch the markets burn some rubber.
Closing Thoughts
The only thing running harder than the market since April might be the collective imagination of AI boosters—until Sam Altman’s “pause” and Meta’s hiring freeze called time, and the markets paused.
Enter Powell, just in time to stop the slide. But in Jackson Hole or on Wall Street, remember: the 12 Fed governors are just hikers, navigating terrain the Teton-sized terrain of broader financial markets. They should hand the short-term rate decisions to the markets, but, for now, Powell has avoided a fifth policy mistake and kept the shadow of Arthur Burns at bay.
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