A Tough One For the Fed

From last Friday's note:

"...this is the environment where a hike actually could lead to lower 10 and 30-year yields... If that's the case the Fed may be comfortable hiking next week, which may have me sympathizing with the consensus after all... Although there's still the mid-term election and federal debt issues I mentioned yesterday for the Fed to contend with."

Suffice to say that a hike is what's needed to bring down longer-term rates has become the consensus view... But only if it's followed by a statement and/or press conference that implies there'll be zero hesitation to hike again should conditions dictate... I.e., the language has to be sufficiently hawkish.

Quick Market Note

Heading out for a week’s vacation, but, again, I’ll stay connected enough to comment herein if I think readers could use some perspective on anything that crops up

In the meantime, here’s my note to our team after seeing this morning’s market reaction to CPI:

Oil Prices and Interest Rates

With oil at $100/barrel and producer prices not remotely letting up, fed funds futures are pricing in a 70% chance of a rate hike come next Wednesday.

While the Fed, under previous leadership, is known for not bucking market expectations, if there was ever a time for it to do so, it's now.

The Coulds That Could Happen

I said in last week's video that "the economy could help out the Fed by slowing."  Meaning, if the jobs data were to weaken, and if CPI next week were to soften, pressure to raise the fed funds rate would abate markedly, and of course risk markets would love it.

Well, Friday's jobs number -- coming in much better than expected -- indeed did not help, and markets -- albeit not terribly -- sold off accordingly.. Although I suspect the "not terribly" had to do with the fact that under the hood the jobs data really wasn't all that stellar.

Here's from the macro wrap below:

Chart of the Day

Internal log entry this morning:

9/5/2026:

I've been telling clients that China (huge oil inventory) largely explains how oil has remained contained relative to expectations given the Iran War... That may be ending:

Different Ballgame For Bessent (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.

A Few Things, and Your Weekly Macro Wrap

For our lead-in to this week's macro note I'd like to share a few key highlights from our internal market log... These essentially reflect our take on the current and go-forward global investment setup.

We've had, and will continue to have, multiple discussions internally about the potential market impact of the inevitable come-down off of the extraordinary spending commitment to AI infrastructure... While there's little if any sign of a letup over the near-term, we view this as a some-day -- in the not too-distant future -- not-small market event.

Our timeline falls on the shorter end of the 1-3 year range BCA expresses in comments below: