Government Shutdown Impact on Data & Fed Policy - The government shutdown complicates the Fed's decision-making process due to the lack of hard data, including government jobs data and inflation data [1] - The Fed faces a dilemma: whether to rely on existing labor market data with alternative datasets or pause and wait for the release of delayed data [3] - Data delays have ripple effects, potentially impacting the quality of CPI data for October, November, and December [4] - The shutdown leads to murkier data, with a higher percentage of CPI goods being estimated by staff [4] Economic Impact - The shutdown is estimated to drag quarterly GDP by approximately 10 basis points per week [6] - Federal workers are losing approximately $400 million per day in compensation, impacting consumer spending [6] Market Reaction - Markets are likely to react negatively if the Fed pauses due to the government shutdown, as rate cuts have already been priced in [9] - Alternative data sets do not fully compensate for the lack of government data, particularly in gauging the magnitude of economic changes [10][11] - The range of estimates for the September payroll report varies widely, from as high as 60,000 to as low as negative 30,000 [11] Investment Strategy - The government shutdown has not caused dramatic shifts in investment strategies, as underlying earnings remain strong [14] - Q3 earnings growth estimates have ticked up from 8% to 88%, indicating underlying strength in the markets [16]

Federal Reserve Policy & Interest Rates - The Federal Reserve (Fed) considered lowering interest rates, with debate primarily focused on the number of cuts this year, potentially two or three [1] - The Fed decided to lower interest rates by 25 basis points (0.25%) on September 17th [1] - One expert suggests the Fed should not cut interest rates and should have considered hiking them by 0.25% [2] - There are concerns that the Fed's September to December rate cuts last year were premature, based on a potentially flawed assessment of inflation [3] - All 12 voting members cut interest rates by 0.25%, raising questions about the Fed's priorities [4] Dual Mandate & Economic Objectives - The Fed's dual mandate (controlling both inflation and employment) is seen as an inconsistency, hindering its ability to effectively manage either objective [5][6] - The European Central Bank's single objective (inflation) is contrasted with the Fed's dual mandate [6] - The current administration is focused on maintaining a strong economy and low unemployment [7] - There's a divergence between the administration's focus on economic growth and the Treasury Secretary's desire to reduce the Fed's balance sheet, potentially creating conflicting objectives [8] Economic Strength & AI Impact - While growth numbers suggest a strong economy, employment figures may not reflect this strength [9] - The AI sector is significantly supporting the economy, but there are concerns about the sustainability of this boom and the potential for a "hiccup" [10] - AI is expected to be a significant long-term phenomenon, but there will be failures along the way, with potential hype exceeding actual value [12] - A potential failure of some AI companies in the next six months could have a stock market-wide impact [13] - The non-AI economy is underperforming, raising concerns about stagflation (weak economy with rising inflation) [13] Inflation & Monetary Policy - The Fed's 2% inflation target is not being met, with inflation running at 3% [13] - The New York Fed's survey of consumers indicates an increase in inflation expectations from 3.2% to 3.4% over the next year [13] - The Fed should prioritize dollar stability by maintaining a low and stable inflation rate [14][15] - Employment should be the responsibility of the US Treasury [15]

Market Impact of Government Shutdown - The market has historically performed reasonably well during government shutdowns [2] - Current market strength is attributed to AI excitement, global rallies, and certainty about interest rates [3][4] - Equity investors may not have the longest attention span, focusing on immediate impacts like the potential for an October Fed rate cut [23] - The equity market is currently placid about the government shutdown, caught up in its own preoccupations [25] Economic Data and Analysis - Government shutdown leads to upgrading the priority and significance of available non-government data [6] - There's a risk associated with relying on non-government data, which may not be as reliable as government data [8] - Economists are focusing on broader themes rather than specific monthly numbers due to data uncertainty [15] - The economic data is deferred, not derailed, but the shutdown highlights changes in the economic profession [17] Debt and Deficits - The US has $375 trillion in debt, a $2 trillion budget deficit, and over $1 trillion a year to service the debt [9] - The government shutdown is fundamentally about spending more money than the country has [10] Impact on Employment - A general rule of thumb is a 01 percentage point impact on the economy for each week of the shutdown [19] - If the shutdown extends beyond October 17th, there could be a significant impact on the October unemployment rate, potentially as high as 48% [19] - The US needs to create 40000 jobs to keep the unemployment rate stable [29]

Monetary Policy Stance - The speaker believes the neutral rate is in the mid-2% range and advocates for a swift adjustment to this level [1] - Policy is becoming tighter daily as fiscal and border policies take effect [5] - The speaker does not foresee an imminent economic collapse or labor market crash [5] Factors Influencing Neutral Rate - Fiscal policy is driving up net national borrowing and decreasing net national savings [3] - Immigration policy has caused a significant shift from positive to negative population growth [3] - These shifts in national savings and population growth have implications for the economy's fundamental structure and the neutral rate [3] Risks of Overly Restrictive Policy - Maintaining an excessively restrictive policy for too long poses downside risks to the economy [6] - Prolonged restrictive policy could lead to a meaningful increase in the unemployment rate and failure to meet the employment mandate [6] - The speaker argues that policy was not as tight as perceived last year, but is now tighter than believed due to the declining neutral rate [4]

Now that we've heard from the president of the UN, let's start on the next big focus for the market and that will be the Fed chair's speech this afternoon that follows the Fed's quarterpoint rate cut just last week. Joining us this morning, chief economics correspondent of the Wall Street Journal, Nick Timos is with us. Nick, good to have you.Welcome back. Thanks for having me, Carl. We always sort of have I don't know when pal speaks expressor kind of low expectations.His remarks might not get to monetary ...

The Chicago Fed introducing new labor market indicators this morning that com combine private sector data with official labor statistics for a real time view of hiring layoffs uh and other job information. And join us now Chicago Fed President Austin Goulby. We How you doing, Mr.. President. It's good good to have you on. We got some new data.I'm excited. And you know why I like it. because, you know, say what you will about, you know, the big kurfuffle with the the BLS firing and all that stuff.It did high ...

So what did you make of the quarterpoint cut and also some of the commentary from J Pal uh just talking about the dispersion the summary of economic projections and also our Steve Leeman asked a great question are we on a path for cuts and JP pal came back and said well we're more data dependent something he obviously has said in previous meetings >> well the meeting turned out to be what most of us expected to have happen the 25 basis point cut >> I think what was would have been more problematic was we di ...

In support of our goals and in light of the shift in the balance of risks today, the Federal Open Market Committee decided to lower our policy interest rate by a quarter percentage point. We also decided to continue to reduce our securities holdings. While the unemployment rate remains low, it has edged up.Job gains have slowed and downside risks to employment have risen. At the same time, inflation has risen recently and remains somewhat elevated. ...

Joining me now are Michael Gapen, chief US economist at Morgan Stanley Anastasia Amaroso, chief investment strategist for private wealth at Partners Group. Thank you both very much for being here. Uh Michael, let's start with you because we were just discussing with Steve that there's uh you know expected to be some dissent over the quarter point cut.Uh, do you think that's more emblematic of the macro uncertainty that's out there or just the the fireworks and the politization and all the various headlines ...

Tomorrow, a Federal Reserve committee will meet to talk over a possible interest rate cut. But the big question is, will Lisa Cook join her fellow Fed governors for that meeting. For now, Cook remains on the board after a federal judge blocked President Trump's dismissal.And tonight, the Senate is expected to confirm Trump's latest appointment to the Fed board, Steven Myron. If the vote goes as expected, Myron will join the board in time for this week's meeting. He will not be replacing Cook though, in case ...