The euro zone is facing risks to the inflation outlook in both directions, European Central Bank Governing Council member Olli Rehn said, highlighting that he and his colleagues retain full flexibility on interest rates https://t.co/1Qn8PeUCoz ...

Economic Data Overview - The latest NAHB housing market index shows a slight improvement, coming in at 37, above the expected 33, but still indicates a contractionary sentiment in the housing market [2][3] - The Philly Fed manufacturing index has turned negative, dropping 36 points to -12.8%, the lowest since April, with significant declines in shipments [6][7] Housing Market Insights - The housing market remains in a dismal state, with any index below 50 indicating pessimism; however, there are signs that future interest rate reductions could stimulate buyer activity [3][4] - Inventory levels are increasing, which may lead to lower prices in the housing market [4] Manufacturing Sector Analysis - New orders in the manufacturing sector increased by six points, while the employment index slightly decreased to 4.6% [8] - The manufacturing landscape shows variability across different regions, with the Empire State manufacturing index performing better than the Philly Fed index [8] Commodity Market Trends - Gold prices are reaching new all-time highs, driven by FOMO trading and market volatility, with significant inflows into gold ETFs [11][13] - The energy sector is experiencing downward pressure on prices due to economic growth concerns, with natural gas prices also declining [15] Oil Market Dynamics - The oil market is skeptical about claims from India regarding reducing Russian oil imports, as alternative supply sources are not clearly defined [17][18] - A potential meeting between President Trump and Ukraine's president could lead to an LG deal, which may positively impact oil prices due to the correlation between LG demand and oil prices [19][20]

Treasury is moving this morning on these comments from Fed Governor Chris Waller, who uh casts a little doubt on further rate cuts after October. It's a subtle thing, but let's go through it. He says the Fed should reduce 25 base points in October.No question about that. Beyond that, he says he needs to see how you reconcile this issue of strong GDP on the one hand and a soft labor market on the other hand. He has said something has to give here and that's going to determine what he does beyond October.the ...

🇺🇸 FOMC: Polymarket users now predict a 95% chance the Fed will cut rates 25bps later this month (Oct 29th) https://t.co/c9NZ3V7hap ...

Valuation Concerns - The Shiller PE ratio of the S&P 500 is currently just under 40, indicating that investors are paying excessively for historical earnings [2][3] - Historical benchmarks show that when the Shiller PE exceeds 32, significant market downturns have followed, including the Great Depression, the Dot-Com Bubble, and the 2021-2022 correction [4][6][9] Historical Context - In September 1929, the Shiller PE reached approximately 32.6, leading to an S&P 500 decline of over 83% during the Great Depression [6] - The Shiller PE peaked at 44.19 in December 1999, resulting in a 49% decline in the S&P 500 from its high in March 2000 to its low in October 2002 [8] - The Shiller PE was around 38.6 in late 2021, with the S&P 500 falling 25% from its peak in January 2022 to its low in October 2022 [9] Current Market Implications - The current S&P 500 level of 6,671 suggests potential downside risks of 25-50%, with historical corrections indicating similar valuation levels [10][13] - Extreme valuations are compounded by various macroeconomic challenges, including persistent inflation, high interest rates, trade war uncertainties, and rising US debt [11][14] Investment Strategies - The Trefis High Quality Portfolio has outperformed its benchmark by generating returns exceeding 105% since inception, suggesting that diversified strategies may mitigate risks associated with high valuations [5][18] - The Trefis Reinforced Value (RV) Portfolio has also surpassed its all-cap stocks benchmark, indicating that a diversified approach can leverage favorable market conditions while limiting losses [18] Market Dynamics - The current market environment is characterized by a confluence of risks that could amplify one another, creating a "perfect storm" scenario for potential downturns [11][22] - Despite historical evidence indicating significant downside risk, markets have often defied expectations, raising questions about whether current valuations are justified or indicative of speculative excess [19][20]

Monetary Policy & Economic Outlook - The speaker advocates for a cautious approach to interest rate cuts, suggesting a 25 basis points reduction at a time, to avoid potential mistakes given conflicting data on the labor market and GDP growth [6][9][10] - The speaker believes the labor market is weak, contrasting with stronger GDP growth, creating a puzzle that requires either GDP numbers to decline or the labor market to rebound [7][8] - The speaker notes that tariff uncertainty and firms waiting to assess the impact of AI are contributing to the slowdown in hiring [11][12][13] - The speaker suggests that current financial market conditions are bifurcated, with loose conditions for corporate America but tighter conditions for Main Street America due to higher mortgage, auto loan, and credit card interest rates [15][16] - The speaker acknowledges the risk of being "lulled" into reducing rates based on weak payrolls data, potentially fueling financial market excesses, but emphasizes the Fed's mandate of maximum employment and stable prices [21][22] Inflation & Sectoral Reallocation - The speaker is not overly concerned about inflation, including tariff-induced or AI-induced inflation, as sectoral reallocation may offset demand increases in one sector with decreases in others [25][26][27][28] - The speaker estimates inflation is running at approximately 25%, and suggests focusing on core inflation to avoid volatility from energy prices [28] AI Impact & Structural Changes - The speaker expresses concern that the potential impact of AI on the labor market could be a structural change, which monetary policy is not designed to address [35] - The speaker differentiates the current situation from the previous year, citing tariff uncertainty and the AI factor as key differences, with unemployment not being a major concern last year [34]

Euro-area inflation is likely to slow less significantly below the ECB’s 2% target in 2026 than feared, supporting the case for a steady hand on interest rates, Primoz Dolenc says https://t.co/wuXHfeNe8F ...

Australian unemployment jumped more than expected, and the economy added fewer jobs, signaling the labor market is loosening and adding to the case for the Reserve Bank to resume lowering interest rates as soon as next month https://t.co/ltcJDV0JB1 ...

Uh, Victoria, we we got the S&P 500. It's up modestly. We're still about a percent and a half below last week's record high after that wobble we had on Friday.Has anything in terms of the underpinnings of this rally. You know, a steady economy, Fed going to cut rates, the AI excitement. Is anything changed or have there been reasons you see to question those premises.>> Yeah, Mike, I don't think there's been a huge change in what we've seen. Now, we have had some of the momentum, that underlying momentum in ...

Group 1: Stellantis and Canadian Backlash - Stellantis N.V. is facing significant opposition from Canada due to its decision to shift Jeep Compass production from Brampton, Ontario, to Illinois, threatening approximately 3,000 jobs [2][6] - Canadian Prime Minister Mark Carney stated that the production move is a "direct consequence" of existing U.S. tariffs, impacting the auto sector until a new North American trade agreement is reached [2][6] - Ontario Premier Doug Ford expressed disappointment and confirmed that no provincial funding would be allocated to Stellantis until assurances regarding the Brampton plant's future operations are provided [2] Group 2: Federal Reserve Insights - Federal Reserve Governor Stephen Miran projects a "material decline" in services inflation in the coming quarters, primarily driven by easing housing costs [3][6] - Miran believes that two more interest rate cuts this year are "realistic" and emphasized the urgency of reaching a neutral interest rate quickly, estimating it at approximately 0.5% [3][6] - Miran dissented at the recent FOMC meeting, advocating for a larger 50 basis point rate cut instead of the adopted 25 basis point reduction [3] Group 3: Oracle and TikTok - A ByteDance executive acknowledged Oracle's "vital role" in TikTok's expansion, with Oracle leading a proposed deal to control approximately 80% of TikTok's U.S. business [4][6] - The arrangement aims to address U.S. national security concerns regarding potential Chinese government access to user data [4][6] - Under the proposed deal, Oracle would manage and safeguard U.S. user data under its existing "Project Texas" initiative [4] Group 4: Prologis Market Activity - Prologis Inc. CEO Hamid R. Moghadam announced discussions for nearly 30 million square feet of new deals, following a strong third quarter with record lease signings totaling 62 million square feet [5][6] - The company reported a period-end occupancy rate of 95.3% and is expanding its strategic focus into data centers [5] Group 5: Turkey's Rare Earth Element Development - Turkey is in advanced talks with the United States to jointly develop its substantial rare earth reserves in Beylikova, Eskişehir province, which are considered the world's second-largest after China's [8] - This strategic pivot towards the U.S. follows stalled negotiations with China and Russia over technology transfer demands [8] - Ankara is prioritizing local refining capacity and technology transfer in any new agreement [8] Group 6: Ukraine's Energy Needs - Ukraine is seeking U.S. gas supplies via Greece, with discussions between Ukrainian President Volodymyr Zelensky and Greek Prime Minister Kyriakos Mitsotakis [9] - Ukraine's state-owned Naftogaz reported recent Russian attacks on its gas production infrastructure, necessitating a need for at least 13.2 billion cubic meters in gas storage for the upcoming winter [9] - Greece aims to replace Russian gas imports with American LNG and facilitate its onward transmission to Ukraine through the North-South corridor [9]