Good Monday AM,

Finally, maybe some common sense and a little reprieve would be nice.

The Federal Reserve, set to approve another large interest rate increase early next month, is shifting to a debate over how much higher it can safely push borrowing costs, and how and when to slow the pace of future increases. As markets point to another large increase at the final policy meeting of the year in December, sentiment is finally building within the Fed to take a breather. While the process of raising interest rates is not yet finished, policymakers feel they may be at the point where further increases can be smaller in size, and are close to where they can pause altogether in order to take stock as the economy adjusts to the rapid change in credit conditions the central bank has set in motion.

The Fed has been using Nick Timiraos from WSJ to float their message and Nick over the last few days has been active spreading the word that the Fed is going to talk about future rate hikes and their size. All markets (other than crypto) are seeing a boost. We badly need one in the bond space. Some Fed speak has also been backing up Timiraos’ story. “This debate about exactly where we should go, and then become more data-dependent, is going to heat up in the last part of the year here,” St. Louis Fed President James Bullard said in a Reuters interview last week.

San Francisco Fed President Mary Daly added her voice to that debate on Friday during an event in Monterey, California. While acknowledging that high inflation made it “really challenging” for the central bank to step down from its rate hikes, Daly said “the time is now to start talking about stepping down. The time is now to start planning for stepping down.” Investors widely expect the Fed next month to raise its benchmark overnight interest rate by three-quarters of a percentage point for a fourth consecutive time, lifting it to a range of 3.75% to 4.00%.

In a speech earlier this month, Fed Vice Chair Lael Brainard offered a list of reasons to be cautious about further tightening without overtly calling for a slowdown or pause. In comments this week in Virginia, Chicago Fed President Charles Evans warned of outsized “nonlinear” risks to the economy if the federal funds rate is lifted much beyond the 4.6% level officials projected in September that they would reach next year. “It really does begin to weigh on the economy,” Evans said. Even with the existing rate outlook, it was a “closer call than normal” whether recession can be avoided. With that view becoming more full-throated, and more economists saying a U.S. recession is likely next year, the November meeting may well be when the Fed signals it is time to slow down – a moment Fed Chair Jerome Powell said in a Sept. 21 news conference would be approaching “at some point.” Powell has not spoken publicly about monetary policy since then. Keeping fingers and toes crossed.

The WSJ shared:

Home sales are collapsing, mortgage rates are rising fast and prices are high, just as the economy might be heading into recession. For some people, that’s a great time to buy a home. Some buyers are taking advantage of the slower market now that they don’t have to deal with bidding wars and sight-unseen offers. (BUY THE DIP).

Not meant to be a political statement, but it is sort of funny when the President acknowledges he is too old and is going to run for reelection. Biden challenged voters to pick another Democrat if they’re worried about his age ahead of the midterms. He’ll speak at DNC headquarters today. Americans favor Republicans over Democrats on the economy 38%-24% in an ABC News/Ipsos poll. And Nancy Pelosi advised Democratic candidates to focus on “kitchen table” issues as voters face challenging times.

And this was a great graph on Travel… The pink dots are a plus, the yellow’s a minus…

And last, President Xi Jinping has been chosen (not sure of how that all happens in China, reports seem to point to him choosing to stay rather than the country choosing him to stay) on for a third 5-yr term. Markets are not a fan as during the election conference, it appears President Xi is going to restrict China’s trade. The top 5 Chinese companies listed on American equity Exchanges have lost $500 billion in value… TODAY. And this is while the equities markets are broadly up.

Please remain safe and stay healthy, make today great!