👋 ICYMI
The last piece of the puzzle landed Friday morning. It didn't make the picture any clearer. The August CPI report showed headline inflation at 3.4% annually and 0.4% monthly — both matching expectations. On the surface, nothing alarming. But underneath, the core reading — stripping out food and energy — came in at 0.3% monthly, above the 0.2% consensus and up from July's 0.2%. That hotter-than-expected core number is the one the Fed cares about most. And it landed four days before the most important rate decision of the year.
"The Fed is looking for confirmation that the disinflationary trend is back on track, and this report shouldn't give them that confidence," said Collin Martin, Schwab's head of fixed income research.
Markets ended the week lower overall but rallied on Friday as oil prices dipped, lifting stocks despite the mixed CPI data. The S&P 500 fell roughly 0.5% for the week — its second consecutive losing week — but bounced on Friday's final session. The Nasdaq and Dow also declined during the week.
Rate hike odds sit at 59% for the September 15–16 FOMC meeting, according to CME FedWatch. "If you have a CPI reading that surprises to the upside, that's going to really make it difficult for them not to hike rates," warned Mark Hackett, Nationwide's chief market strategist, earlier in the week. The core CPI didn't blow out — but it didn't cool either. Warsh now has the data he needs to make his case either way.
Consumer inflation expectations surged. The University of Michigan's one-year inflation outlook jumped to 4.6% from 4.0% — the highest since June. Longer-run expectations edged up to 3.4%. "With a resurgence in fuel prices and trade tensions, consumers anticipate greater pressures on their pocketbooks to come," said survey director Joanne Hsu. Consumer sentiment is now 16% below where it stood in February, before the Iran war began.
The 10-year Treasury yield hit 4.818% midweek — its highest level since November 2023 — before easing slightly on Friday. U.K. and Eurozone yields also rose to multi-year highs. The global bond market continues to price higher-for-longer.
Consumer discretionary stocks are down 6.5% since mid-August. Energy is the only S&P 500 sector with gains over the last month. Sector breadth is deteriorating — a sliver of the index that mostly reflects rising oil pulling money out of consumers' pockets.
🔁 Market Movers
📊 August CPI: Headline In Line, Core Hotter Than Expected
The headline CPI at 3.4% annual and 0.4% monthly matched forecasts. But core CPI's 0.3% monthly gain — above the 0.2% consensus — suggests underlying price pressures haven't fully cooled. The acceleration from July's 0.2% core reading is the detail that matters most for the Fed. Shelter costs remain elevated. Services inflation is sticky. And the 0.4% monthly headline — up from 0.1% in July — shows that energy prices are re-accelerating through the consumer economy.
📉 Second Consecutive Losing Week — RSI Approaching Oversold
The S&P 500 declined roughly 0.5% for the week — its second straight weekly loss — amid relentless pressure from rising yields and oil. The index's RSI dropped to 43, down from 65 just a month ago and approaching the 30 threshold that signals oversold conditions. Consumer discretionary led losses, down 6.5% since mid-August. Energy was the only sector positive over the past month. Friday's rally, driven by falling oil, prevented a worse weekly loss.
🛢 Oil Remains the Inflation Wildcard
Oil prices dipped on Friday, helping stocks rally despite the CPI data. But WTI remains near $85 and Brent near $90 — well above the sub-$70 levels reached in late June when the peace deal was fresh. The resumed U.S. strikes on Iran, combined with Strait of Hormuz disruptions that continue intermittently, keep energy costs elevated. The August CPI's 0.4% monthly increase was driven primarily by energy — and until oil sustainably breaks lower, headline inflation won't fall meaningfully below 3%.
📈 12-Month Inflation Expectations Jump to 4.6%
The University of Michigan's one-year inflation expectations surged from 4.0% to 4.6% — the highest reading since June and a sharp reversal from the gradual cooling trend that began in spring. Longer-run expectations rose to 3.4%. Rising inflation expectations are one of the Fed's biggest concerns — when consumers expect higher prices, they tend to demand higher wages, creating a self-reinforcing cycle that's harder to break.
👀 Signals I'm Watching
🏛 The Fed Meets Tuesday — Hike, Hold, or Surprise?
Kevin Warsh chairs his third FOMC meeting on September 15–16 with rate hike odds at 59%. The case for a hike: 162,000 August jobs, 3.4% headline CPI, 0.3% core CPI (above consensus), and 4.6% one-year inflation expectations. The case for a hold: consumer sentiment near historic lows, consumer discretionary down 6.5%, the RSI approaching oversold, and oil-driven inflation that could fade if the Iran situation stabilises. Edward Jones expects this to be a "live meeting" where both outcomes are genuinely possible. The dot plot and Warsh's press conference will matter as much as the decision itself.
📊 The Core CPI Problem Is Real
The headline CPI matching estimates gave the market temporary relief. But the core reading — which the Fed watches most closely — accelerated from 0.2% to 0.3% monthly. That's the wrong direction. If September's core CPI (due October 10) confirms the upward trend, the "transitory energy-driven inflation" narrative that has sustained equity valuations all year will be under severe threat. The Fed can tolerate headline inflation driven by oil because it's outside their control. Core inflation driven by services and shelter is inside their control — and demands a response.
📉 The Market Is Approaching Oversold — Which Can Be Bullish
The S&P 500's RSI at 43 — down from 65 a month ago — is approaching the 30 level that typically signals oversold conditions and precedes bounces. If the Fed holds on Tuesday, the relief rally could be sharp and swift, as positioning is deeply defensive. If the Fed hikes, the initial selloff could take the RSI below 30 — creating a technical buying opportunity for those with a longer time horizon
🏭 The Two-Speed Economy Is Getting Worse
Energy is up 43% year to date. Consumer discretionary is down 2.3%. Nike $NKE ( ▲ 0.49% ) is at a 20-year low. Travel stocks are at 52-week lows. But the S&P 500 is positive for the year and on track for its fourth consecutive annual gain. This divergence between the index (propped up by AI and energy) and the consumer economy (stressed by inflation and high borrowing costs) is the defining tension of 2026. The Fed's decision Tuesday will either ease that tension (hold) or intensify it (hike).
$ODD over the past five days
⚡️ Sharing my exact portfolio holdings and trades in real time is one of the core benefits of my Investment Club membership. This past week, my main contrarian position, Oddity Tech $ODD ( ▲ 14.18% ), surged over 30% after posting earnings results that were well ahead of analyst expectations.
Members knew about my position, average purchase price, and portfolio weighting — and were positioned accordingly.
The next earnings season is just around the corner. If you'd like to follow along, get full access to my deep dives, and join a community of long-term growth investors where I share my exact portfolio, now is a good time to become a member.
Thank you for your continued support,
George
⚠️ Red Flag to Note
The Market Isn't Pricing a Hike — It's Pricing Uncertainty
Rate hike odds at 59% mean the market is essentially a coin flip on the most important monetary policy decision of the year. That level of uncertainty, by itself, is the problem. When the market can't decide whether the Fed will tighten or hold, it underprices both outcomes — and the reaction to whichever one lands is amplified. A hold at these odds could spark a 2–3% relief rally. A hike could send the S&P 500 toward 7,400 or lower, with the selloff concentrated in the rate-sensitive sectors that have already been under pressure — consumer discretionary, housing, and small caps. The VIX's relative calm doesn't reflect the magnitude of what's at stake. Tuesday isn't just another Fed meeting. It's a 59/41 bet on the direction of markets for the rest of 2026.
🔍 Insider Transactions I’m Watching
Ticker | Insider | Action | Value | Why It Matters |
|---|---|---|---|---|
James Monroe III — Chairman | Buy | ~$7.72M | The Globalstar chairman purchased 5,080,416 shares at $1.52 between September 4–8 — a $7.7M buy in a satellite communications company that has partnered with Apple and stands to benefit from expanding low-earth-orbit connectivity demand. | |
John Fieldly — CEO | Buy | ~$494K | The Celsius Holdings CEO purchased shares on September 11 — CPI day. A CEO buying into his own stock on the day the data says consumers are feeling the most pessimistic is a bet that the macro headwinds are temporary. | |
Tim Archer — CEO | Sell | ~$9.58M | The Lam Research CEO sold shares on September 9 alongside a $3M director sale — a bearish cluster at a key semiconductor equipment maker days before the Fed meeting. |
📬 Closing Note
The data this week didn't make Kevin Warsh’s job easier. Headline CPI at 3.4% was in line. Core at 0.3% was hotter than expected. Inflation expectations jumped to 4.6%. The labour market added 162,000 jobs last month. And consumer sentiment is 16% below where it stood before the war.
Both sides of the debate have ammunition. The hawks have sticky core inflation, a resilient labour market, and rising expectations. The doves have deteriorating consumer spending, approaching oversold technicals, and the argument that oil-driven inflation is outside the Fed's control. The market is at 59/41. A coin flip with trillion-dollar consequences.
But here's what I keep coming back to: regardless of whether Warsh hikes or holds, the underlying forces that have powered this market all year haven't changed. AI demand is accelerating. Corporate earnings are growing 25%+. And the broadening of the rally means the bull case isn't dependent on a single stock or a single Fed meeting.
Stay patient. Stay selective. And let the data guide the story.
Until next Sunday —
