In this issue of the Steady Investor, we spotlight the stories and signals moving markets this week, including:
Fed Cuts Rates, but Future Path Uncertain – As widely expected, the Federal Reserve cut its benchmark fed funds rate again, pulling the rate to 3.75% to 4%. The Fed also announced they would end their Treasury runoff on December 1. The vote featured split dissents, one governor preferring no change, another favoring a larger cut. The range of divisions underscores the uncertainty of the path ahead for rates. On one side, the ‘hawks’ see resilient spending, lofty equity markets, and an AI-driven capex cycle that argue for a slower glide toward “neutral,” especially with inflation hovering near ~3%. On the other side, the ‘doves’ see a marked hiring downshift, with three-month average job gains near 29,000 versus ~82,000 a year earlier. Tariff-related price noise and tighter financial conditions also point to some downside risk if policy eases too slowly, according to this faction. Complicating matters, the shutdown’s data blackout has thinned the usual run of labor and inflation reports that often help narrow internal disagreements between meetings. Officials are also parsing whether cooler payroll growth reflects weaker labor demand or a smaller flow of new workers (immigration shifts), a distinction that matters for how much stimulus is warranted. Chairman Powell signaled openness to act again if the jobs data soften further, but also a willingness to pause if spending stays firm and inflation progress stalls. For now, December is a closer call than markets assumed a week ago.1
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What Do We Know About the Current State of Inflation in the U.S.? September’s Consumer Price Index (CPI) arrived late due to the shutdown and showed headline inflation at 3.0% year-over-year, up a tick from August’s 2.9% and a shade cooler than the 3.1% consensus. Gasoline did much of the monthly lifting (roughly +4% m/m). Core CPI eased to 3.0% y/y from 3.1%.
Tariff fears continue to loom larger in headlines than in the data. Core goods prices have risen modestly for several months but are up only about 1.5% y/y, and they are a small slice of the CPI basket. Business surveys hint that many firms are absorbing higher import costs rather than pushing them through to shoppers. By contrast, services, especially shelter, the heavyweight, are losing steam. Core services inflation is running near 3.5% y/y, the slowest since 2021. With home-price growth cooling and typically feeding into rent measures with a long lag, that trend should keep leaning disinflationary. Meanwhile, broad money growth has settled back toward pre-2020 norms, arguing against a sustained, economy-wide price surge.3
Private Credit Under the Microscope – A few recent high-profile bankruptcies have sparked a PR blitz from private-credit giants, hoping to preserve reputation. This is fair, since the troubled borrowers weren’t financed by the plain-vanilla direct-lending funds most people associate with the space. Private-credit default rates tracked by major ratings firms are running in the low- to mid-single digits and haven’t surged this fall. Many managers also tout long histories with minimal realized losses in core direct-lending strategies. Still, the industry is much larger and more diverse than it was even five years ago, making past results a shakier guide to future outcomes. For now, the market is turning cautious, eyeing funding conditions and realized loss trends.4
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Disclosure