Video: NY Fed 1-yr expectations rose in Sept, reflecting anticipated tariff impacts, but the longer-term remained stable at 3%. This is positive. And coupled with the lingering shutdown, sets up for Fed to lean dovish this month into FOMC.
Please click here to view our Macro Minute (duration: 3:38).
Prediction markets are showing a 96% probability that the shutdown lasts beyond 9 days. While at first glance, this might sound like bad news, we know gov’t shutdowns do not tend to have lasting equity market impacts. But the reaction from the Fed would be different — as discussed below, this would likely be dovish.
- This would be dovish for several reasons:
– economic data would weaken, particularly jobs market and consumer confidence
– hence, Fed would likely lean dovish
– even without having an inflation or jobs report on hand
- The NY Fed 1-yr inflation report today also leans on-balance dovish. While near-term expectations rose to 3.4% from 3.2% last month, long-term remained at 3.0%. Meaning, consumers are viewing near-term tariff driven inflation as transitory. This is a good thing.
- Tomorrow Sept FOMC minutes are released. And the economic picture is incrementally less certain. First, is the unknown consequences and duration of the government shutdown. Second, the labor market was leaning soft and now we have uncertainty around the jobs report. Linkup.com is showing jobs probably are worse in Oct than Sept = dovish. Carlyle released their own estimate of jobs and it shows 17,000 estimated jobs, way down from September.
- As for the shutdown, Polymarket.com prediction market shows the following probabilities:
– 70% shutdown another 10-29 days
– 26% shutdown beyond 30 days or longer
– 4% shutdown ends within 9 days - This means we will not see key economic data before the Oct FOMC rate decision at the end of October. And for those doubting prediction markets, keep in mind polymarket.com markets got the 2024 Presidential election spot on, calling every state election outcome correctly.
- This week is light on data, most notable are the minutes from the September FOMC Meeting on Wednesday:
–10/7 Tue 8:30 AM ET: Aug Trade Balance -61beDelayed due to Shutdown
– 10/7 Tue 9:00 AM ET: Sep F Manheim Used Vehicle Index 207.0
– 10/7 Tue 11:00 AM ET: Sep NY Fed 1yr Inf Exp 3.38%
– 10/8 Wed 2:00 PM ET: Sep FOMC Meeting Minutes
– 10/10 Fri 10:00 AM ET: Oct P U. Mich. 1yr Inf Exp - Lastly, we are entering the strong seasonal 4th quarter and the median gain is 4.3%. This implies S&P 500 of at least 7,000. But as we noted in prior notes, 2025 is similar to 1998 and 2024, where the Fed was on extended pause until September. This dovish pivot argues for stronger upside into year-end beyond 7,000.
BOTTOM LINE: Still “most hated rally”
This still remains the “most hated” V-shaped stock rally. As for what we would buy
- MAG7 & Bitcoin & Ethereum
- Industrials
- Financials: Large-cap and regional banks
- Small-caps
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Key Incoming Data October:
10/1 9:45 AM ET: Sep F S&P Global Manufacturing PMITame10/1 10:00 AM ET: Sep ISM Manufacturing PMITame10/2 10:00 AM ET: Aug F Durable Goods Orders MoMDelayed due to Shutdown10/3 8:30 AM ET: Sep Non-farm PayrollsDelayed due to Shutdown10/3 9:45 AM ET: Sep F S&P Global Services PMITame10/3 10:00 AM ET: Sep ISM Services PMITame10/7 8:30 AM ET: Aug Trade BalanceDelayed due to Shutdown10/7 9:00 AM ET: Sep F Manheim Used Vehicle IndexTame10/7 11:00 AM ET: Sep NYFed 1yr Inf ExpTame- 10/8 2:00 PM ET: Sep FOMC Meeting Minutes
- 10/10 10:00 AM ET: Oct P U. Mich. 1yr Inf Exp
- 10/14 6:00 AM ET: Sep Small Business Optimism Survey
- 10/15 8:30 AM ET: Sep Core CPI MoM
- 10/15 8:30 AM ET: Oct Empire Manufacturing Survey
- 10/15 2:00 PM ET: Fed Releases Beige Book
- 10/16 8:30 AM ET: Oct Philly Fed Business Outlook
- 10/16 8:30 AM ET: Sep Core PPI MoM
- 10/16 8:30 AM ET: Sep Retail Sales
- 10/16 10:00 AM ET: Oct NAHB Housing Market Index
- 10/17 9:00 AM ET: Oct M Manheim Used Vehicle Index
- 10/17 4:00 PM ET: Aug Net TIC Flows
- 10/23 8:30 AM ET: Sep Chicago Fed Nat Activity Index
- 10/23 10:00 AM ET: Sep Existing Home Sales
- 10/23 11:00 AM ET: Oct Kansas City Fed Manufacturing Survey
- 10/24 9:45 AM ET: Oct P S&P Global Services PMI
- 10/24 9:45 AM ET: Oct P S&P Global Manufacturing PMI
- 10/24 10:00 AM ET: Oct F U. Mich. 1yr Inf Exp
- 10/24 10:00 AM ET: Sep New Home Sales
- 10/27 8:30 AM ET: Sep P Durable Goods Orders MoM
- 10/27 10:30 AM ET: Oct Dallas Fed Manuf. Activity Survey
- 10/28 9:00 AM ET: Aug S&P CS home price 20-City MoM
- 10/28 10:00 AM ET: Oct Conference Board Consumer Confidence
- 10/28 10:00 AM ET: Oct Richmond Fed Manufacturing Survey
- 10/29 2:00 PM ET: Oct FOMC Decision
- 10/30 8:30 AM ET: 3Q A GDP QoQ
- 10/31 8:30 AM ET: 3Q ECI QoQ
- 10/31 8:30 AM ET: Sep Core PCE MoM
Economic Data Performance Tracker 2025:
Economic Data Performance Tracker 2024:
Economic Data Performance Tracker 2023:
