Comments based on information available as of 5:35am CT on 10/16/2025

Growth: 50 Shades Of Beige

The Fed’s Beige Book certainly didn’t paint a rosy picture for the US, but it also wasn’t bleak. Three of the 12 Federal Reserve Districts reported slight to modest growth, five reported no change, and four noted slowing. It’s not a rising or falling tide lifting or sinking all boats. Each state, industry, company, and individual has its own exposures to the various trade or geopolitical changes happening. As medical disclaimers often say, “Individual results may vary.”

Inflation: Another Day, Another Data Delay

While there are lots of alternatives to government provided jobs numbers, there aren’t nearly as many alternatives to the government’s inflation numbers. Each of us can see and feel inflation when we buy things, but those individual impressions aren’t a good guide for setting monetary policy. The Fed sets policy for the country as a whole, not for individuals. Generally, private-sector data is showing what we all probably already knew: imported goods prices are continuing to rise. But they’re not likely rising fast enough or far enough to worry the Fed–except for the optics around cutting rates while inflation is moving higher. Because the consumer price index is essential for determining the cost of living adjustment for Social Security benefits, we’ll at least get a little sip of that data during this data drought.

Policy: Locked in

Chair Powell pretty much eliminated all uncertainty about whether the Fed will cut when it meets next October 28-29. The labor market looked like it was on a downward trajectory when the Fed cut in September and they haven’t seen any evidence to suggest that trend has changed. Chair Powell also said quantitative tightening (the shrinking of the Fed’s balance sheet) might end within a few months. If the government shutdown ends and we get a deluge of data that has been pent up showing a weaker labor market, instead of delivering a jumbo-sized rate cut, the Fed might just speed the day they stop shrinking its balance sheet.

Looking Ahead: Canaries And Cockroaches

Big moves in high yield credit spreads are often thought of as the proverbial canary in the coalmine. If the canary dies, miners know they should probably get out of the coalmine. Jamie Dimon said some high profile defaults could be like a cockroach: when you see one, you know there’s not just one. Was he talking about his company specifically or the broader banking system? This past week, it looked like a handful of smaller banks had some cockroaches crawling around in their loan books. It’s better to have good oversight and regular treatments to keep cockroaches from coming in instead of having to have an exterminator visit to deal with an infestation. But banks make loan loss provisions and typically have plenty of capital to keep the cockroaches from causing structural damage. Based on earnings and data so far, it looks like this isn’t an infestation and the canary is probably passed out and not dead.