Fed Day,
Let the Overanalyzing Begin

U.S. Futures & World Markets

US equity futures are higher as we head into Fed Day. Consensus expectations are for a 0.25% interest rate hike, but the market is craving more guidance from Warsh on how the Fed is thinking about inflation.

We know we're getting a rate hike today, but the market is a forward-looking beast. The bigger question is what comes next — two hikes? Three in the next six months? That's where the real market action will come from.

On the bright side, the economy sits on solid ground and earnings growth looks exceptional. Let's see if we can get to a better place on oil prices and Treasury yields. That would go a long way toward helping us climb the Wall of Worry.

CORE Headlines

• EU looking to make Canada an associate member. — Reuters
• CEOs from Meta and NVIDIA reject AI slowdown calls. — FT
• SK Hynix may contract Intel to fabricate chips. — Reuters
• Mortgage rates closing in on 7% for the first time since early last year. — WSJ
• American oil executives say the fuel crisis from the Hormuz closure has arrived. — WSJ
• Revolut handed hundreds of customers' data to someone posing as a government agency. — WSJ
• Beijing imposed sweeping exit restrictions on Chinese citizens and new rules for foreigners entering China. — WSJ

Charts & Data

Since WWII, in 12 hiking cycles with at least five hikes, stocks were usually higher during the cycle but muted returns were common. Ryan Detrick via Daily Chartbook.

Nominal GDP is growing about as fast as it ever has since the 1980s, once pandemic distortions are excluded. John Authers, Bloomberg via Daily Chartbook.

Central bank watchers now overwhelmingly expect not only a rate increase this week, but a second hike before the end of the year. @nicktimiraos via Daily Chartbook.

The 10-year has risen in every modern hike cycle. Unless this is a 'one and done' hike, history suggests the 10-year will rise as the cycle progresses. @warrenpies via Daily Chartbook.

Deutsche Bank: once the Fed embarks on tightening, it generally continues, and yields continue to rise by more than a percentage point. Brace for the 10-year to reach 6% before the Fed is done. Jim Reid via Bloomberg: the most aggressive rates call in the note.

Bond positioning has sunk to the 5th percentile. If history rhymes, yields are near a short-term peak. Deutsche Bank via Daily Chartbook.

Pure Growth, Utilities, and small caps are lagging this quarter. Pure Value and Financials — segments that benefit in rising-rate environments — are outperforming. Euan Smith, S&P Global via Daily Chartbook.

Hormuz oil flow now nearly 12 MMbpd — easily the fastest since the post-MOU June-July breakout — and this time there's virtually no Iranian crude. @rory_johnston via Daily Chartbook.

Fund managers now expect up to 50bps of rate hikes before year-end. The air of confidence from August has evaporated in September. Chris Williamson, S&P Global via Daily Chartbook.

Interesting Reads

• The small-business owners with curiously large fortunes — The Atlantic
• China's biggest concerns on AI risk — X

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