Anyone expecting a smooth ride into November just got a wake-up call.
Fed Chair Jerome Powell came out Tuesday and didn’t mince words: There is “no risk-free path ahead.”
Translation: Monetary policymakers are walking a tightrope between too much inflation and too little growth, and they might not have a net below them.
Inflation is still hotter than anyone at the Fed wants to admit.
The labor market, once the poster child of resilience, is wobbling.
And to make things messier, the Fed itself is split.
You’ve got Powell tapping the brakes on optimism, while Trump economic advisor Stephen Miran says the Fed already should’ve slashed rates by two full points.
As a reminder, Miran only joined the FOMC’s Board of Governors after a hasty approval process earlier this month. He’s on “paid leave” from the White House while he finishes the term of a Fed governor who resigned in August.
Miran was also the lone dissenter on Sept. 17 when the group cut rates by 25 basis points. He had wanted a 50 bps cut.
So, who’s right?
Well, that depends on whether you’re more worried about prices staying too high … or jobs disappearing too fast.
Here’s what I think about all of this.
No Easy Way Out
Powell did just cut rates, but he’s also signaling that the Fed isn’t anywhere near consensus on the path forward.
On one side, you’ve got the inflation hawks who want to keep rates higher to crush sticky prices.
On the other are the doves like Miran, who believe current rates are already choking the economy and will spark more job losses.
What Powell’s really saying is this: Either we cut and risk another inflation spike, or we don’t and watch unemployment tick up.
Neither option is “safe,” and both carry big consequences heading into the November election.
And if you’re trading this market, this split matters.
Markets love clarity, and this isn’t that.
Why Miran’s Comments Matter
Stephen Miran isn’t just some talking head.
He’s been in the trenches at Treasury (during Trump’s first term), and when he says we’re being too restrictive, traders should take that seriously.
His call for a 2% rate cut is aggressive and flies in the face of the Fed’s more cautious tone.
Miran’s argument is pretty simple: The labor market is softening faster than the Fed wants to admit.
Wage growth is slowing while job openings are falling.
Layoffs are starting to rise.
He’s worried that by the time the Fed finally cuts deep enough, the damage will already be done.
And he’s not alone.
Markets are still pricing in more cuts by early next year, even though Powell keeps acting like the next move is TBD.
Chicago Fed Steps In
Adding more fuel to the fire, the Chicago Fed just rolled out a new Labor Market Indicator on Tuesday — their way of getting ahead of Thursday’s jobless claims data.
It’s designed to offer a real-time look at labor trends, and frankly, it’s coming at the perfect moment.
There’s growing concern that the old job data we’ve been relying on is lagging.
By the time it tells you the labor market’s in trouble, it’s too late to do anything about it.
That’s exactly what Miran’s warning about, a Fed that’s flying blind while the crash already happened.
What This Means for Traders
This is the kind of uncertainty you can either complain about … or trade the hell out of.
Here’s what I’m watching:
- Volatility is back on the menu. Don’t expect smooth sailing into year-end. Policy splits like this create pockets of opportunity — especially in rate-sensitive sectors like tech, housing, and small caps.
- Longer-dated puts on high-beta names might be smart insurance here. If unemployment ticks up and earnings get crushed, some of these overextended names are going to pay the price.
- Gold and bonds could get a second wind if the Fed pivots too late and job losses spike. Don’t sleep on the rate-sensitive plays if recession fears heat up again.
- And politically, this mess puts the Trump administration in a tricky spot. If layoffs pick up while inflation stays sticky, it’s a worst-case scenario into election season. That means more pressure on the Fed to “do something,” fast.
Bottom line: Powell’s telling you there are no easy answers ahead.
The Fed’s internal split just made that crystal clear.
And while markets might want clarity, traders don’t need it. They just need to know how to move when others freeze.
Keep your eyes on the labor data this week.
If it confirms Miran’s fears, you could see rate expectations — and markets — pivot fast.
Stay street smart,
Jeff Zananiri
Want to hone your edge in this market? Join Danny Phee today at 2 p.m. ET in the APEXWar Room, where he’ll break down the trades he’s watching, what’s moving right now, and how to position smartly in this environment.
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