It’s gonna be a big week. Who’s excited?!
No, seriously. This is a crucial week for markets, where traders are on high alert for any sign that escalatory decompression at the bottom of the credit ladder might work its way up. Or spill over into broader risk sentiment, which is anyway shaky.
The Fed’s on deck Wednesday. As discussed in my FOMC preview, that should be a non-event. But it’s possible Kevin Warsh botches the press conference, like he did in July.
I’m not sure what a botched presser would look (or sound) like in the current circumstances, but… well, suffice to say if his first three pressers are any indication, I’m on board with Warsh’s idea to hold fewer of them. That’d spare us all his disingenuous pretensions to putting price stability over politics.
On the macro front, the marquee releases are Thursday’s advance read on Q3 US GDP and update on PCE prices for September.
Consensus is looking for 3.2% from the GDP readout. That’d be a pickup from Q2 and the quickest pace in a year.
Under the hood, all eyes will be on business spending and sundry aggregates that capture the scope, rapidity and impact of the AI buildout. The narrative around the world’s largest economy says everything hinges on AI either directly, via data center capex, or indirectly, as stock gains tied to the tech revolution leave high-income households well-positioned to spend.
The BEA will release September’s personal income and spending breakout at the same time as the GDP release (thanks a lot for making my Thursday morning unduly hectic). As usual, the most important print is the MoM core PCE price readout, seen by economists at an uncomfortable 0.3%. (The whisper number on the unrounded print is 0.33%.)
As the figure below reminds you, the YoY pace for the Fed’s preferred metric was adjusted lower as part of an annual revision process implemented last month. If you think that’s convenient for the Fed, just wait until you see how low it goes after Warsh’s inflation “task force” gets done with it. (I’m just joking, Kevin. I’m sure those panels have the best interests of all Americans in mind, not just those of the one in the Oval Office.)
The YoY print for September’s seen at 3.1% which, if my math’s right, isn’t 2%. But who’s counting anymore? I mean, people for whom the price of goods and services matters are counting, but since when has the US economy been designed to work for them? Not since I’ve been alive, that’s for sure.
“The September consumer price data will already be incorporated into the Fed’s official messaging on Wednesday, making the release unlikely to shift the monetary policy outlook,” BMO’s Ian Lyngen and Vail Hartman remarked. “Against the backdrop of renewed concerns surrounding the durability of the AI boom and positive wealth effect, the incoming growth data may prove more consequential than the inflation figures.”
In addition to the GDP and inflation updates, markets will get, in order of importance, Conference Board Confidence for October (Tuesday), the Employment Cost Index for Q3 (Friday), new home sales covering September (Tuesday) and two-month-old updates on the two marquee national home price indexes (Tuesday).
On the earnings front, Alphabet, Amazon and Microsoft loom. Geopolitics will be in the news too, as the world digests the runoff in Brazil and the results of elections in Israel.
That’s a nice touch, replacing the ankle-biting dog with a briefcase. You don’t have to be a professor of symbology to know The Fool when you see it. There’s a joke buried in there, but rather than leaving it interred, I’m going to dig it out so it can be properly appreciated.
There’s no such thing as “Symbology,” regardless of Dan Brown making his main character a professor of just that. There is, however, such a thing as semiotics, of which Umberto Eco was a professor. Eco wrote “Foucault’s Pendulum,” which is both one of the most challenging and one of the most rewarding novels I’ve ever read. It’s also the novel of which Brown’s “Davinci Code” is a flacid, pale imitation.
I say “imitation” rather than “rip-off” because I like to imagine Brown made his main character a professor of … sigh … symbology … as an homage to Eco. I even like to imagine Brown deserves more credit for erudition and originally wrote his character as a semiotics professor, but his editors made him change it to “symbology” on the (certainly correct) assumption that the vast bulk of his target audience had never heard the word semiotics. So that was the joke. I didn’t say it was a good one.
For years, my profile picture on socials was a picture of Card I (specifically a beautiful image from a 17th century French deck. Just call me “Le Fou” if we ever meet). It’s all nonsense of course, but then, what isn’t? That’s kind of the point. Actually, I have a better question for you all. Who does the Fool represent in the greater context here?
I’ll leave that question unanswered.