Good morning, investors. I had a blast meeting many of you in person in Huntington Beach, California this week at Future Proof.
I spoke on stage Wednesday for two different sessions — I’ll be posting them as Full Signal episodes in the coming days, be sure to subscribe on Spotify, Apple Podcasts, or YouTube to tune in!
Fed hiked
Trump-appointed Fed Chair Kevin Warsh has established that he will not merely go along with what the president wants to happen with interest rates.
The central bank lifted its benchmark rate by 25 basis points into the 3.75-4% range Wednesday with a unanimous vote, marking its first move higher since July 2023.
When three officials dissented in favor of a hike in July, Warsh had called it “a good family fight.”
This time the family agreed that borrowing costs needed to go up. Markets had seen more than a 90% likelihood of the move.
The numbers behind it:
Brent crude hovers above $100 a barrel
Consumer prices running above the Fed’s 2% target for 5 years
Unemployment rate holding near historic lows
“The plain fact is that inflation is too high and has been for too long,” Warsh said Wednesday.
President Trump, meanwhile, took to Truth Social to express his disagreement, though he did not name Warsh explicitly.
“Interest Rates in the United States should be 1%, or less, because we are the Best Credit in the World — BY FAR,” he said.
“Ultimately, we think today’s hike was largely about maintaining credibility in the face of the Fed and, more importantly, the market, losing patience with inflation,” said Stephanie Roth, chief economist for Wolfe Research.
“Warsh accomplished that today.”
Importantly, the Fed signaled that this will not be a “one and done” rate hike. The median Fed official now sees one more hike before the end of the year.
But as I wrote Wednesday, that does not necessarily mean bad news for the stock market.
Indeed, the S&P 500 has been higher a year after the Fed’s first rate hike five the last six times dating back three decades, according to data from LPL Financial.
At any rate, Warsh — even without sharing forward guidance — is reminding markets that he’s not here to be jawboned by the president or Wall Street.
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Elsewhere
📊 Retail sales rose 1.2% in August in the biggest monthly gain since March. Total sales hit $773.9 billion, blowing past the 0.7% forecast. (Yahoo Finance)
🏦 The 10-year Treasury yield rose back above 5%. Long-dated yields surged after Warsh signaled a "timelier return" to the Fed's 2% inflation target, with the 30-year yield climbing to 5.35% and the 2-year to 4.67%. (CNBC)
🏦 Goldman Sachs CEO David Solomon warned that higher costs are here to stay. He flagged persistent pressure on operating expenses and wages, telling investors that the era of easy disinflation is over even as the Fed leans harder on the brakes. (Yahoo Finance)
Full Signal
Luke Kawa is a veteran strategist and the markets editor at Sherwood News. He joined me to unpack the best opportunities in the market today and the 10 charts that explain the equity and macro backdrop.
Tune in on Spotify, Apple Podcasts, or YouTube.
Rapid-fire
Jeff Gundlach argued the Fed should have hiked more aggressively (CNBC)
SK Hynix shares jumped after reports of a potential memory chip deal with Intel (Yahoo Finance)
This legacy financial giant can rally 23% as capital markets activity fuels its re-rating (Best Ideas Club)
SpaceX shares popped ahead of the next Starship launch attempt (Yahoo Finance)
The House passed a sweeping Russia sanctions bill honoring Lindsey Graham (CNBC)
Jamie Dimon said small businesses are experiencing a mini boom (Yahoo Finance)
On this day
🗓 September 17, 2001: The New York Stock Exchange reopened for the first time after the September 11 attacks.
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