This week’s data docket in the US isn’t exactly sparse, but nothing sticks out as eminently tradable.

An update on consumer spending and the PCE price gauges Friday will garner headlines, but with CPI and the new Fed dots already in the price, it’d take a multi-standard deviation surprise to move markets materially.

I suppose we should cherish this week’s releases. They may be the last ones we see for a while. House Republicans are angling for a government shutdown. They seem hell-bent on it.

The simple figure above shows the history of funding gaps, by length. The years are fiscal years, and the length is the duration of the gap.

In the event of a two-week closure, markets would likely be deprived of the NFP and CPI reports, a suboptimal scenario to put it diplomatically. If any shutdown lasted for the entire month of October, it’s hard to see how a data-dependent Fed could confidently hike rates in November. Yes, they’d have a bevy of private sector economic releases to consult, and also regional Fed surveys, but in a situation where September’s government reports aren’t produced and disseminated by the time the Committee meets for the November decision, Jerome Powell would be operating without NFP, CPI, JOLTS, PPI, retail sales, housing starts, new home sales and the first estimate of Q3 GDP. He’d also be missing a PCE report.

Out of 21 shutdowns in 50 years, the longest famously lasted 34 days, beginning in late December of 2018. Powell remembers that unfortunate episode all too well. It coincided with the final Fed hike of the last cycle, and the worst December for US equities since the Great Depression. The problems began three months previous, when Donald Trump escalated America’s trade war with China and Powell committed his infamous “long way from neutral” communications faux pas. By Christmas, Trump was livid. Reports suggested Steve Mnuchin had to talk him out of pursuing legal “remedies” for the situation, where that meant finding a way to fire Powell or, failing that, demote him. Powell pivoted to a softer stance on January 4, 2019, setting the stage for so-called “insurance cuts” later that year. Fed critics, a group which often overlaps with Trump supporters in market circles, blamed Powell, not the Twitter-addicted US president demanding rate cuts.

Consensus expects 0.2% from the upcoming MoM core PCE reading and, notably, a sub-4% YoY print.

Headline price growth, by contrast, probably accelerated thanks to rising energy costs.

As long as the data is roughly in line with consensus and not completely out of step with the CPI report, it won’t move policy expectation needles, particularly given the new dot plot skewed hawkish anyway. In other words: Markets have already decided how to trade the Fed’s renewed “threat” of another rate hike in 2023, and also how to price shallower projected 2024 cuts (50bps in the September SEP versus 100bps in the June projections). The bar for the PCE data to tilt the market incrementally hawkish on top of that repricing is high.

That said, an above-consensus read on real consumer spending could conceivably embolden bearish rates bets given that consumption is synonymous with demand, and demand ultimately explains still robust hiring. Speaking of hiring, the labor differential in the Conference Board confidence survey (due Tuesday) is perhaps even more germane than usual: If a shutdown nixes JOLTS and NFP, that spread (the labor differential), anecdotal though it is, would be one of the few indicators markets could reference in forming a timely opinion on the evolution of the labor market.

Separately, the remainder of this month’s housing data is due, including stale reads on the national price indexes (July FHFA and Case-Shiller) as well as new home sales and pending home sales for August. The final read on Q2 GDP will be released on Thursday.

Traders will focus on the bond market, and the prospects for the recent bearish repricing to extend. There’s a fairly vociferous debate unfolding around the long-end, which is either uninvestable or a screaming buy, depending on who you listen to and, more importantly, how they’re positioned.

I’m inclined to fade the idea that yields are a one-way ticket higher (i.e., the notion that bonds are a slam dunk short). I agree with Larry Summers that the Fed’s overplaying the “higher for longer” card, I think the notion that supply concerns will outweigh the “buy bonds” muscle memory in a recession (or in a risk-off event) is probably dubious and I think bond shorts are overconfident in a structural narrative which, while entirely plausible, won’t be entirely linear.