Company Performance - Micron Technology's stock fell 2.8% despite reporting better-than-expected profit and revenue, indicating high market expectations as the stock had already gained 97.7% year-to-date [3] - Freeport-McMoRan's stock dropped 17% after the company revised its copper sales forecast down by 4% and gold sales by approximately 6% for the third quarter [4] - Lithium Americas' stock surged 95.8% following reports of potential U.S. government ownership stake in the company, which is developing a lithium project in Nevada with General Motors [4][5] Industry Trends - U.S. stock indexes experienced a slight decline after a significant rally, raising concerns about stock prices becoming too high if the Federal Reserve does not meet rate cut expectations [2] - Homebuilders saw gains as U.S. new home sales in August exceeded economists' forecasts, with Lennar rising 2% and PulteGroup and D.R. Horton both increasing by 0.7% [6]

Group 1 - The Federal Reserve Bank of Chicago President Austan Goolsbee indicated that if inflation decreases, there is potential for the central bank to lower its interest rate target [1][2] - Goolsbee suggested that the neutral rate could be approximately 100 to 125 basis points lower than the current target range of 4% to 4.25%, potentially settling around 3% with inflation at 2% [2] - The Chicago Fed's recent report projected that the unemployment rate likely remained steady at 4.3% in September [3] Group 2 - Goolsbee described the current Fed policy as "mildly restrictive" while acknowledging ongoing inflation risks [3] - He emphasized caution regarding aggressive interest rate cuts due to inflation being above target for over four and a half years [3]

Core Viewpoint - Stephen Miran, a member of the Federal Reserve Board, advocates for aggressive interest rate cuts, arguing that the current monetary policy is "very restrictive" [1][2]. Interest Rate Perspective - Miran believes the appropriate federal funds rate should be in the "mid-2 percent area," which is nearly two percentage points lower than the current rate, warning that inaction could jeopardize the Fed's employment mandate [2][6]. - He asserts that the real neutral rate of interest is "near zero," indicating that current policies are tighter than they appear due to various nonmonetary factors [3][5]. Economic Landscape Changes - Miran highlights recent policy changes, particularly in U.S. border policy, which he claims have reduced population growth and exerted downward pressure on rent inflation and the neutral rate [4]. - He also points to new tax and trade policies, including increased tariff revenue, which he estimates are enhancing national savings and consequently lowering the neutral rate [5]. Employment and Inflation Debate - Miran frames the discussion as a choice between maintaining the Fed's credibility in fighting inflation and protecting American jobs, warning that keeping interest rates too tight could lead to unnecessary layoffs and higher unemployment [6].

Core Viewpoint - The dollar remains steady as investors await insights from Federal Reserve Chair Jerome Powell's upcoming speech, particularly regarding future interest rate cuts following last week's reduction [1][2]. Group 1 - The DXY dollar index reached a three-and-a-half-year low of 96.218 last week but has since shown signs of recovery [2]. - Analysts generally expect Powell to maintain a consistent message and not significantly deviate from the post-decision press conference held last week [2].

Group 1: European Market Outlook - European stocks are expected to open higher, but gains may be limited due to bond market volatility and political uncertainty in France and Germany's increased debt issuance [1] - Key data releases on manufacturing and services sector activity in major European economies may influence trading later in the day [1] Group 2: U.S. Federal Reserve Insights - Investors are awaiting remarks from Fed officials, including Chair Jerome Powell, for insights on the interest rate outlook [2] - Fed Governor Stephen Miran advocates for aggressive rate cuts, while other officials express caution regarding further cuts [2][3] - The Commerce Department will release consumer price inflation data, which could affect future rate decisions, with expectations of a slower inflation growth [3] Group 3: Geopolitical and Economic Developments - Geopolitical tensions are impacting investor sentiment, particularly regarding EU actions against Russian supplies and Ukraine's military actions [4] - Asian stock markets showed mixed results, with significant declines in mainland China and Hong Kong, while oil prices fell due to oversupply concerns [5] Group 4: U.S. Stock Market Performance - U.S. stocks reached record closing highs, driven by positive sentiment around Fed policy and tech sector developments, including partnerships involving OpenAI and NVIDIA [6] - The S&P 500 and Dow saw slight increases, while European stocks closed lower following changes to the H-1B visa regime [7]

Core Viewpoint - The Federal Reserve is navigating a complex landscape of employment data, inflation pressures, and political influences as it considers future interest rate decisions [1][3][10]. Employment Data and the Fed - The Fed's focus on employment data is shifting due to slowed immigration under the current administration, which limits job growth potential [4][5]. - The variability in job growth data complicates economic analysis, as recent employment gains may not reflect true economic conditions without understanding immigration trends [5][6]. Inflation Data and the Fed - The Fed is closely monitoring inflation data, which is influenced by both underlying inflationary pressures and tariffs, making it challenging to determine the appropriate policy response [9]. - Recent inflation trends have raised questions about whether changes are temporary or indicative of a longer-term trend, complicating the Fed's decision-making process [9]. Politics and the Fed's Policies - Political pressures, particularly from President Trump, are influencing the Fed's interest rate decisions, with potential implications for the independence of the institution [11][15]. - The structure of the Federal Open Market Committee (FOMC) allows for political influence, especially if the president appoints members aligned with his agenda [12][15]. Future Interest Rate Decisions - The Fed is likely to continue small interest rate cuts into 2025 and 2026, influenced by recent employment weaknesses and political dynamics [16][17]. - The balance between maintaining the Fed's independence and responding to political pressures will be a critical factor in future interest rate decisions [17].

Core Viewpoint - Stephen Miran, a Federal Reserve Board member appointed by President Trump, advocates for a significant reduction in the Fed's key interest rate from the current 4.1% to approximately 2.5%, highlighting a stark contrast with his colleagues [3][4]. Group 1: Economic Indicators - Miran attributes the need for a lower interest rate to several factors, including sharp declines in immigration, increased tariff revenue, and an aging population [3]. - He suggests that reduced immigration could lead to more available housing and lower rental costs, which would help alleviate inflationary pressures [7]. - Tariff revenues are projected to exceed $300 billion annually, which could contribute to deficit reduction and lessen the necessity for high benchmark interest rates to control inflation [7]. Group 2: Policy Implications - Miran describes the current monetary policy as overly restrictive, potentially hindering economic growth and posing risks to the Fed's mandate of maximizing employment [5]. - His perspective indicates a divergence from the consensus among the other 18 members of the Fed's rate-setting committee, marking an unusual level of disagreement [3][4]. Group 3: Personal Context - Miran's appointment has raised concerns regarding the independence of the Fed, as he continues to serve as a top economic adviser to the White House while on unpaid leave [4]. - His term on the Fed's board is set to expire in January, with indications that he may return to the White House afterward [4].

The price of Bitcoin (^BTCUSD) on Monday fell more than -2% to a 1.5-week low, driven by long liquidation pressures. According to data from Coinglass, more than 407,000 traders liquidated positions over the past twenty-four hours.Fed comments today were on the hawkish side and negative for stocks. St. Louis Fed President Alberto Musalem said he sees limited room for additional Fed interest rate cuts amid elevated inflation and believes rates are now "between modestly restrictive and neutral." Also, Atlanta ...

Core Viewpoint - Vanguard is optimistic about corporate bonds despite high valuations, anticipating that potential risks from tariffs could be mitigated by further interest rate cuts from the Federal Reserve [1][5]. Group 1: Corporate Bonds and Credit Spreads - Investment-grade credit spreads have decreased to 74 basis points, the lowest since 1998, as investors seek higher yields compared to U.S. Treasuries [2]. - Vanguard's global head of fixed income stated that while credit valuations are stretched, they are justified due to healthy fundamentals, attractive yields, strong investor demand, and low recession risk [3]. Group 2: Economic Outlook and Tariffs - Vanguard estimates that one-third of the impact from President Trump's tariffs has already affected the economy, with half expected by year-end and the remainder by 2026 [4]. - The slow implementation of tariffs has allowed the economy to adjust, although risks to growth and inflation remain [4]. Group 3: Federal Reserve and Interest Rates - The Federal Reserve recently lowered interest rates by 25 basis points to a range of 4%-4.25%, with expectations of further cuts potentially bringing rates to around 3% by the end of 2026 [5]. - The firm believes that additional rate adjustments and Trump's policies, including tax cuts and deregulation, will likely counterbalance the negative effects of tariffs on U.S. growth [5]. - However, there is a caution that the Fed may not cut rates as much as the market anticipates unless a recession occurs [6].

It's time for the big picture. Let's welcome in the team from Charles Schwab. Very pleased to say we've got Kathy Jones, chief fixed income strategist, Schwab Center for Financial Research, and Nathan Peterson, director of derivatives analysis, Schwab Center for Financial Research.Very good morning to you both. Thank you so much for joining me this Monday. Kathy, let's start with you.Obviously, a bit of a consequential week as far as what these Fed speakers are going to say about what happened in that meeti ...