Group 1: Dollar Index and Economic Indicators - The dollar index rose by +0.63%, reaching a 2.25-month high, supported by higher bond yields and weakness in stocks, which increased liquidity demand for the dollar [1] - Fed Governor Michael Barr's hawkish comments on a cautious approach to further Fed rate cuts contributed to the dollar's gains [1][3] - The ongoing US government shutdown, now in its second week, poses a bearish outlook for the dollar, with potential negative impacts on the US economy [2] Group 2: Euro and Yen Performance - The EUR/USD pair fell by -0.64%, hitting a 2.25-month low, primarily due to dollar strength and weaker-than-expected German trade data [5] - Political uncertainty in France is negatively impacting the euro, although President Macron's announcement of a new prime minister could mitigate the need for a snap election [5] - The yen is also under pressure due to political risks in Japan, benefiting the dollar [1] Group 3: Federal Reserve Outlook - New York Fed President John Williams indicated support for lower rates this year if economic conditions evolve as expected, with inflation projected to rise to around 3% and unemployment increasing beyond 4.3% [4] - The market is pricing in a 95% chance of a -25 basis point rate cut at the upcoming FOMC meeting on October 28-29 [4] Group 4: European Central Bank (ECB) Stance - The ECB's September meeting minutes were slightly hawkish, indicating a decision against an interest rate cut due to upside inflation risks [6] - Policymakers suggested that maintaining the current policy rate is warranted given the materialization of upside risks [6]

Labor Market Analysis - Slower immigration reduces the need for strong job gains to maintain a stable unemployment rate [1] - Recent payroll declines may not be as concerning due to the immigration slowdown [1] Source - Federal Reserve Bank of Dallas research [1]

Labor Market Analysis - The US government shutdown has resulted in the BLS not releasing labor market data, including the unemployment rate which was expected to be around 43% [1][2] - The Chicago Fed estimates the unemployment rate for September to be 434%, slightly higher than the previous month's 432%, indicating a potential softening in the labor market [2][3][4] - Job openings saw a slight increase from 721 million to 723 million, remaining relatively steady over the past year [7] - Job quits have dropped back down to cycle lows of 19%, suggesting people are less willing to leave their jobs due to fear of not finding new employment [9] - Layoffs remain relatively low, at pre-pandemic levels, which may be contributing to the continued rise of risk assets [10] - Initial claims data was not released this week, but the previous spike to 264000 has since receded [11] - Job postings on Indeed continue to slowly decline [14] - Non-farm private payroll employment from ADP shows negative revisions, with the last month revised to -3000 and this past month at -32000, indicating a potential slowdown [20] - Construction employment is slowing down, with the year-over-year change starting to decrease, though not yet negative [26] Bitcoin Market Analysis - Bitcoin's current market cycle shows similarities to post-election years like 2013, 2017, and 2021, with a high in August, a low in late September/early October, and a potential rally into a market cycle top [30][31] - The current cycle also resembles 2020, with a Q1/Q2 capitulation low, sideways movement before the 21-week EMA catches up, and a potential Q4 rally [33] - The 50-week moving average is now at $100000, and a weekly close below this level could signal the end of the cycle [35][36]

Labor Market Assessment - Chicago Fed is trying to get better real-time measures of what's happening in the job market, rolling out the Chicago Fed labor market indicators using 11 different data sources including official data and high-quality private sector sources [3] - Chicago Fed estimated the unemployment rate to be 43%, unchanged [4] - Goldman Sachs estimated that in the absence of two states' data, the jobs number would have been 224,000 [5] - The best jobs data comes from the Bureau of Labor Statistics (BLS), and the economy still continues to point to a pretty stable labor market [6][7] Monetary Policy Implications - The market believes the trajectory is to cut interest rates, but the Fed's job is to act based on economic conditions on employment and inflation, not just react to market expectations [9] - The underlying economy can afford rates to come down over time gradually, but the uptick of inflation coupled with deteriorating jobs numbers puts the central bank in a sticky spot [11][12] - If inflation looks transitory, the employment side of the mandate would be dominant, but the uptick in services inflation makes the speaker wary about frontloading too many rate cuts [12][13] Data Reliability and Interpretation - BLS is considered the best data source, but all data, both private and public, are subject to bigger revisions and more noise due to falling response rates and question marks on immigration and labor force participation [6][14][15] - Overindexing on monthly aggregates like BLS payroll numbers or ADP as a measure of the business cycle can lead to mistakes, as seen in 2023 and 2024 [15]

The conventional wisdom is we shut down after midnight. And I'm assuming you don't see a way around it. What comes after the shutdown.Well, unfortunately, it looks like we are barreling towards a shutdown because Democrats like Hakeem Jeffries and Chuck Schumer have changed their position entirely on keeping the government funded and passing clean cars. Whether it was Joe Biden or Donald Trump, I voted for every single C. R.to keep the government open and funded while we negotiate a final appropriations pac ...

Bond Market Reaction & Fed Policy - The long end of the curve is considered cheap based on valuation metrics, but the front end could also move if economic data weakens due to a prolonged shutdown [2] - The market is pricing in gradual Fed cuts to neutral, but a worsening economy (unemployment rate above 45%) could lead to more aggressive Fed action [2] - An independent Fed is responding to data and aiming to reduce the level of restrictiveness, making bonds attractive [6] - The Fed is expected to cut rates to 3%, which is close to neutral, even without a significant slowdown [8] Auction & Demand - End-user demand for Treasury auctions remains strong, indicating structural positives in the US economy [5] - Structural positives in the US economy, such as AI capex and strong corporate fundamentals, are driving demand for US bonds [6] - People look at 55%-6% in high-quality bonds and they like it [6] Investment Strategy & Risk Hedge - The 5 to 10-year part of the curve is considered a sweet spot, offering a balance between yield and duration risk [3][14][15] - Bonds are still considered a hedge, especially with the Fed likely to cut rates more aggressively [12][13] - Investors may diversify into other assets like gold and cryptocurrency, but US Treasuries remain a safe haven [9][10][11][12] - High-yield market can offer yields higher than 5%-6% without taking on that much duration risk [15]

Economic Overview - The U.S. economy is experiencing an inflection point with the Federal Reserve cutting interest rates for the first time this month due to a weakening labor market, despite inflation remaining above the 2% target [1][3] - Increased uncertainty is attributed to changes in trade policy, tariffs, and immigration policy under the Trump administration, affecting economic growth, inflation, and unemployment forecasts [1] Economic Growth Projections - The Federal Reserve projects real GDP growth of 2.4% in 2024, with a slowdown expected this year before a rebound, showing an annualized growth rate of 1.6% in the first half of 2025 [5] - The Fed anticipates GDP growth of 1.6% in Q4 of 2025, rising to 1.8% in 2026 and 1.9% in 2027, before returning to 1.8% in 2028 [5] - The Congressional Budget Office (CBO) projects GDP growth of 1.4% for 2025, increasing to 2.2% in 2026, and returning to 1.8% in 2027 and 2028 [6] - The Trump administration's Office of Management and Budget (OMB) estimates GDP growth of 1.8% in 2025, rising to 3.2% in 2026 and 3.1% in the following two years [6] Inflation Projections - The personal consumption expenditures (PCE) index, the Fed's preferred inflation gauge, recorded a PCE inflation rate of 2.7% in August [7] - The Fed projects PCE inflation to rise to 3% year-over-year in Q4 of 2025, then decline to 2.6% in 2026, 2.1% in 2027, and return to the 2% target in 2028 [8] - CBO forecasts PCE inflation to reach 3.1% in Q4 of 2025, declining to 2.4% in 2026, and returning to 2% in 2027 and 2028 [8] - The OMB estimates PCE inflation at 2.4% by the end of this year, declining to 2% in 2026 and remaining there through 2028 [9] Consumer Price Index (CPI) Projections - CBO projects CPI inflation to hit 2.8% year-over-year in 2025, declining to 2.7% in 2026, and further to 2.2% in 2027 and 2028 [10] - OMB estimates CPI inflation at 2.5% this year, declining to 2.2% in 2026, then slightly rising to 2.3% in 2027, and returning to 2.2% in 2028 [10] Unemployment Rate Projections - The unemployment rate rose to 4.3% in August, with expectations for the Bureau of Labor Statistics to release the September jobs report soon [11] - The Fed projects the unemployment rate to rise to 4.5% in Q4 of this year, gradually declining to 4.4% in 2026, 4.3% in 2027, and 4.2% in 2028 [12] - CBO sees the unemployment rate at 4.5% in Q4 of 2025, declining to 4.2% in 2026, then rising back to 4.4% in 2027 and 2028 [12] - The OMB projects the unemployment rate to fall to 4.1% this year, declining to 3.9% in 2026 and 3.7% in 2027 and 2028 [13]

Market Broadening & Economic Improvement - Piper Sandler anticipates a broadening market, driven by improvements in both macro and microeconomic factors, rather than a significant surge [2][3] - The market broadening is expected to be more about breadth than magnitude, indicating wider participation across sectors [2] - Stabilized interest rates and subsequent rate cuts by the Federal Reserve are seen as catalysts for economic improvement, positively impacting smaller businesses, lower-end consumers, housing, and manufacturing [5][6] - The anticipation of improved economic conditions is leading to anticipatory indicators showing positive signs [6] Labor Market & Monetary Policy - A soft labor market has alleviated inflation fears, allowing interest rates to decline and the Federal Reserve to implement rate cuts [8] - The current economic backdrop is described as "Goldilocks" in a post-inflation shock world, characterized by a simultaneous increase in the unemployment rate and the stock market [11] - The Federal Reserve's data-dependent approach, particularly concerning the unemployment rate, has influenced market perceptions and expectations regarding potential rate cuts [9][10] Tariffs & Market Uncertainty - The market exhibits a diminishing sensitivity to fear and uncertainty, including potential tariffs, as investors have become accustomed to navigating a "wall of worry" [13] - Investors are adopting a "show me first" approach, reacting to concrete events rather than preemptively fearing potential negative impacts from tariffs or other uncertainties [13]

Labor Market Overview - US job growth likely remained slow in September [1] - The unemployment rate probably stayed at a near four-year high [1] - Labor market experienced a sluggish period [1]

Meanwhile, the Fed's preferred inflation gauge for August in line with expectations. CorePC holding at 2.9% on an annual basis. Our next guest though still thinks the Fed has an inflation problem.CNBC contributor Peter Bookfar is a chief investment officer at one point BFG Wealth Partners. Peter, good to see you. Um, it seems sort of stuck and this sort of limits what the Fed can do because they still have to be vigilant on the inflation front.Correct. The the biggest problem that lower to middle income con ...