The hike is priced. Something else isn’t…

Today’s Big Picture

At 2 p.m. Eastern, the Federal Reserve will most likely raise interest rates for the first time since 2023.

A quarter-point move to 3.75% to 4.00% is priced near 90%. 

Within a day, the prime rate goes from 6.75% to 7.00%, card rates already averaging 22% climb higher, and your savings account pays a little more. 

Your fixed mortgage follows the 10-year Treasury, which touched 5% yesterday, so it may not move at all.

Here’s what beginners get wrong about days like this. 

A move everyone expects is already in every price. The rate on the screen at 2:00 is the least informative thing the Fed will say all afternoon.

The number is priced in. The sentence after it isn’t. 

The vote count, the new forecasts at 2:00, and what Chairman Warsh says at 2:30 about the Treasury buying its own bonds are the parts no one can price in advance.

Tan wrote on Friday that his orders were placed in July and don’t read the Fed. Today he explains what he will be reading instead, and why a central bank in 2008 is the pattern he’s watching for.

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Signal vs. Noise

The Clarity Act Died 49 to 50

• The noise: “the vote was close.”
• The signal: it needed 60. The seven Democrats who had negotiated the bill for months, Gillibrand and Warner among them, voted no, and so did Republican Susan Collins.

Senator Lummis’s verdict: “I think we’re done. It’s over.”

Bitcoin slid toward $77,000 and Coinbase fell 6.3%. With no vote scheduled and the midterms ahead, the rules for crypto in America now get written by the SEC and CFTC, case by case, rather than by Congress.

We previewed the odds yesterday at one-in-six.  The market had it about right.

A 20-Year Bond at 5.42%, and No One Rushed to Buy

• The noise: “stocks fell a third day.”
• The signal: the Treasury sold $13 billion of 20-year bonds at 5.42% and demand was thin, the opposite of last week’s 10-year auction. The 10-year touched 5.04% intraday, its highest since 2007. The Dow fell 328 points, the S&P 0.45%, the Nasdaq 0.78%.

Oil did the pushing. Brent settled near $109, up about 20% this month, with Saudi Arabia’s pipeline still shut.

Hold the two halves of this together. Last week the Treasury bought back $5.19 billion of its own long bonds to hold yields down, and yields rose anyway. Today the Fed raises the short-term rate to fight inflation.

Two arms of the same government are pulling in opposite directions, and Warsh will be asked about it at 2:30.

OpenAI Pushed Its IPO to 2027

The noise: “AI is slowing down.”

The signal: Sam Altman told Fortune that 2026 would be “an ill-advised moment to go public” and moved OpenAI’s listing to next year. Anthropic is still targeting late 2026 at up to $2 trillion. SoftBank fell 13% Monday on the slowdown chatter, while AMD and Qualcomm rose Tuesday.

Read it with last week’s IPO lesson in mind: the companies that wait longest to list are the ones that can. Retail sales land at 8:30 this morning, the last data point before the Fed, after July’s 0.6% drop.

Featured Contributor

Today’s guest is Tan Gera, co-founder of Decentralized Masters. Tan is a CFA charterholder and former investment banker who left traditional finance to pioneer his decentralized portfolio strategy.  His battle-tested strategies have helped thousands navigate any market condition. 

Ignore the 25. Read the Sentence After It.

At 2 p.m. today, a number will flash on every screen in finance, and it will be the least useful thing the Federal Reserve tells you all afternoon.

The number will almost certainly be a quarter-point increase. 

The market has priced that near 90% since the inflation report on Friday. It has been leaning that way since Chairman Warsh’s speech on August 28, which I wrote about in this newsletter the same afternoon.

A move that expected has already happened. 

• It’s in your mortgage quote… 
• In the 10-year Treasury at 5%... 
• In the price of every stock you own. 

By the time the Fed announces it, the announcement is history.

So I won’t be reading the number. I’ll be reading the sentence after it. Four sentences, in fact, and none of them can be priced in advance.

First, a pattern from 2008

On July 3, 2008, the European Central Bank raised interest rates. 

Oil was at $147 a barrel, inflation was running hot, and the vote was unanimous. On the data, the hike was correct.

Lehman Brothers failed ten weeks later. Within ten months the ECB had cut rates by 3.25 percentage points, undoing that hike and everything behind it.

The lesson I took from that year: a central bank can be right about the numbers and wrong about the world. 

Hiking into an energy shock is how that happens, because higher rates can slow demand, and no interest rate has ever produced a barrel of oil.

Today the Fed hikes with Brent above $100 and Saudi Arabia’s main pipeline shut. This is a pattern to check against, and I’ll be holding every sentence Warsh says up to it.

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The four sentences that matter

• The vote. 

In July the committee split 9 to 3, with three members wanting a hike they didn’t get. Today they get it. The question flips: does anyone vote against it?

A unanimous hike says the committee is together. A single dissent for holding, and Governor Waller is the name to watch, says the argument is still open, and open arguments become pauses.

• The December dot. 

At 2:00 the Fed also publishes where each member thinks rates end the year. In June, half of them saw at least one hike. Goldman expects today’s chart to show a bare majority for exactly one; JPMorgan expects two.

If the median implies a second hike, the market’s pricing of rates near 4.2% by December is confirmed. If it doesn’t, that’s the relief trade.

• The buyback question. 

Someone in the room at 2:30 will ask about the Treasury buying its own long bonds while the Fed raises the short-term rate. Stanley Druckenmiller called the buybacks “price management” in print.

Whether Warsh names the tension, sidesteps it, or defends it tells you how much the two arms of the state are coordinating. Nobody has priced his answer, because nobody knows it.

• How long he talks. 

This is a chairman who scrapped forward guidance, cut the statement to half its old length, and refused to submit his own dot in June. His line at Jackson Hole was “committed to a discipline, not to a decision.”

If the press conference is short and he declines to say what happens in December, read the brevity as the message. The market will have to price uncertainty it used to get handed for free.

What I do at 2 p.m.

Nothing.

My orders were written in July. Bitcoin (BTC) sells a slice at $81,000 and buys at $72,000 and below. Gold sells at $4,720 and buys lower.

The Fed is not one of my four signals, and neither is Warsh’s tone of voice. Whatever he says, a price fills or it doesn’t.

History is on the side of doing nothing. Since 1994, the first hike of a cycle has usually brought a rough six months and a median gain of 10.7% in stocks over twelve, according to LPL. The exception was 2022, when the Fed hiked into runaway inflation.

The first hike is rarely the story. The third one is.

So watch the number if you like. Then keep reading, because the number is the only part of the afternoon the market has already priced. The vote count and the December dots come with it at 2:00. The buyback answer and the length of the press conference come at 2:30. That's where today's information is.

- Tan Gera

Co-Founder, Decentralized Masters

“The best analysis I’ve read anywhere.”

‍

A paying DM member posted this during a webinar Tan was running on Sunday, in the chat of a live webinar.

Unprompted. Not on a testimonial page. Not part of any script.

What she named is what most macro writers get wrong.

They predict. Tan does not.

Tan explains exactly what is happening. Then he walks members through the scenarios that could follow, and pairs each with what the ABN system does about it.

Up. Down. Horizontal. Same discipline, different playbook per outcome.

That is the read members get twice a week.

See Everything That’s Included Right Here →

Testimonial reflects one individual member’s experience. Results and experiences are not typical and are not a guarantee of any particular outcome. Individual results may vary.

Final Thought

If you watch one thing at 2:30 today, watch the clock.

A long press conference means the chairman is still explaining himself. A short one means he’s decided the market can do its own explaining. Either way, the mortgage you’re quoted tomorrow will come from the 10-year, and the 10-year will be reading the same sentences Tan is.

Tan writes up the decision, position by position, in the next Macro Letter. Thursday’s issue here carries the vote, the dots, and what Warsh said.

See you tomorrow.

- Rami Al-Sabeq

Editor in Chief | Future Finance

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Disclaimer: This content is not financial advice, it is for informational purposes only. All investments involve inherent risk. Any financial decisions you make are solely your responsibility.