The market went into Tuesday expecting a sure thing — and for once, it got one.
Between a softening labor market and better-than-expected inflation data, economists had considered a rate cut as close to certain as Giannis Antetokounmpo putting up 20+ points a game.
They were right.
The Federal Reserve cut rates by a quarter point to a range of 3.75% to 4.00%, their lowest level in three years.
Stocks rallied early on the news… and then stumbled when Jerome Powell, ever the reluctant optimist, reminded investors that another rate cut in December is “not a foregone conclusion, far from it.”
“If there is a high level of uncertainty, then that could be an argument in favor of caution about moving,” Powell said, referencing the lack of economic data during the government shutdown.
With the Bureau of Labor Statistics shuttered, the Fed is essentially flying blind — forced to make monetary policy based on last week’s inflation data and state-level jobless claims.
It’s the first time in history that the FOMC has adjusted rates without a full employment picture.
By December, the Fed could be working with even less information if the shutdown persists. The White House has already warned that no consumer price data is being collected.
To make things more awkward, the committee remains split.
One member voted to hold rates steady, while new Shadow Fed appointee Stephen Miran wanted a bigger cut. Not one held the sensible classical economic opinion that the Fed should be hiking rates in the face of renewed inflation.
Powell admitted there are, “strongly differing views about how to proceed in December,” as the Fed tries to thread the needle between softening employment and inflation hovering near 3%.
In a separate move, the Fed said it would stop shrinking its $6.6 trillion balance sheet — a quiet but significant shift away from the tightening cycle it began three years ago.
“The easy part was cutting,” Bloomberg’s Matthew Boesler put it, “The hard part is pretending [the Fed] still has control.”
The Great Repricing with China
Donald Trump wrapped his Asia trip with what he called an “amazing” meeting with Xi Jinping at a military base in Busan, South Korea. The two men smiled for cameras, shook hands, and carved out a fragile truce in the ongoing trade war.
On Air Force One, Trump tried to outdo the 80s cult classic mockumentary Spinal Tap, suggesting on the scale of one to the talks were a “12.”
On a practical level, Trump announced that tariffs on Chinese goods linked to fentanyl production would be halved — from 20% to 10% — bringing the overall rate to 47% from 57%.
China, in turn, agreed to a one-year suspension of some rare-earth export controls, though it kept licensing restrictions on seven key minerals used in U.S. manufacturing.
No comprehensive deal emerged, but Beijing did resume soybean purchases. Trump, ever the showman, declared it “a beautiful start.” The market, hearing what it wanted, agreed.
“The world’s two largest economies have learned to trade without trust,” The Financial Times wrote this morning. “Each concession buys time, not stability.” The tariffs and trade barriers that were enacted before the talks are still in place, they’ve just been suspended “for a year.”
Trump agreed to visit Beijing in April 2026.
Big Tech’s Big Night
If Powell was the day’s cautious adult, Big Tech was the caffeinated teenager. Meta, Microsoft, and Alphabet all reported earnings after the bell — and the results offered a masterclass in investor schizophrenia.
Meta posted record Q3 revenue but still saw its stock slump in after-hours trading after warning of ballooning AI infrastructure costs and a hefty one-time tax hit. Our Mr. Packer over at the Grey Swan Trading Fraternity, closed out a Meta position with a 29% gain earlier in the week, anticipating some earnings-season volatility. Good call.
Meanwhile, Microsoft revealed plans to double its data-center capacity—sending its own shares lower despite a solid quarter.
Alphabet, meanwhile, broke through the $100 billion quarterly revenue mark for the first time ever. Its cloud division grew 34% year-over-year, proving that Google’s AI investments are paying off faster than expected. Its stock rose, even as it raised future spending guidance.
“Wall Street loves AI,” CNBC’s Deirdre Bosa quipped, “just not the capex bill.”
And as if earnings weren’t enough drama, Microsoft suffered an hours-long global outage yesterday, knocking out Azure, Microsoft 365, and even Xbox and Minecraft. The culprit? An “inadvertent configuration change.” Translation: someone fat-fingered the wrong button.
The incident froze airline systems and disrupted Vodafone’s network. Azure, which holds 23% of the cloud market to Amazon Web Services’ 32%, can’t afford many more of these “configurations.”
Silicon Valley’s Nuclear Ambition
There’s a new kind of startup fever in California — one glowing slightly green. Oklo, a Silicon Valley nuclear firm backed by Peter Thiel and MAGA donors alike, plans to flip the switch on its first reactor by mid-2026 as part of an Energy Department pilot program.
The design isn’t licensed yet, but its CEO, Jacob DeWitte, was in the Oval Office in May when Trump signed executive orders championing a “nuclear renaissance.”
Oklo’s stock is up 500% this year on speculation that AI-driven energy demand will force policymakers to embrace nuclear again.
“The new atomists are not engineers,” The Economist noted this week, “they’re evangelists.”
Cheerleaders.
The Trillion-Dollar Mindset
OpenAI is preparing for an IPO that could value it at $1 trillion, Reuters reports — a figure once reserved for empires, not startups.
The company’s restructuring deal with Microsoft now makes a public offering possible.
At the same time, CalPERS, the nation’s largest pension fund, says it will vote against Elon Musk’s proposed $1 trillion compensation deal at Tesla, which ties his pay to growing the automaker’s value to $8.5 trillion.
“The market is rewarding imagination,” Barron’s opined. “But imagination can’t pay interest.”
A Bubble Dependent Boom
Nvidia’s $5 trillion market cap now eclipses the GDP of every country except the U.S. and China. The Economist calls the surge “an astonishing boom fueled by faith in AI.”
Price-to-earnings ratios across the S&P 500 now hover near 40 — levels unseen since the dot-com top in 2000.
Charlie Bilello highlights the familiar signs: SPACs are back, meme stocks are moving, and Gemini is offering 100X leveraged crypto futures. Optimism has crossed into lunacy.
As one Bloomberg Opinion piece put it, “We’ve reached the stage of the cycle where people stop asking if something’s overvalued — and start asking if it can go to twelve.”
In Washington, a quieter story: Peter Williams, a former director at defense contractor L3Harris, pleaded guilty to stealing $35 million in cyber-espionage tools and selling them to a Russian broker. Prosecutors called it “a betrayal both deliberate and deceitful.”
When information itself becomes currency, even patriotism is for sale.
~Addison
P.S. Today on Grey Swan Live! we’re pivoting to Trump’s economic nationalism and America’s readiness for future conflicts.
We’ll be joined by John Robb, former consultant to the Joint Chiefs of Staff and one of our sharpest thinkers on drone warfare, autonomous systems, and the networked insurgencies reshaping modern geopolitics.
With markets rallying on signs of a U.S.–China thaw, John will help us read what comes next—where technology, defense, and money meet at the edge of the modern empire.
