Hedgie's Market Edge - September 15, 2025

Welcome back! This week brings the most anticipated Federal Reserve meeting in months, with Wednesday's rate decision poised to either validate market expectations or deliver a reality check that current positioning isn't prepared for. While a quarter-point cut seems certain, the real drama centers on what Powell signals about the pace of future easing.

Markets have been on a tear since last week's dismal jobs data, with stocks hitting fresh records and Treasury yields plunging to yearly lows. The S&P 500 closed Friday at new highs, while the 10-year Treasury yield briefly touched 4.0% - matching April's lows. But this optimism assumes the Fed will deliver aggressive easing extending well into 2026.

The question isn't whether Wednesday brings a cut, it's whether the Fed pushes back against expectations for sustained aggressive easing while core inflation sits at 3.1%.

The Employment Crisis That Changed the Narrative

Last week's jobs revision fundamentally altered the economic landscape. The Bureau of Labor Statistics revealed that 911,000 fewer jobs were created through March than originally reported - the largest downward revision in modern history outside of recessions.

This wasn't just a data quirk. It exposed systematic overestimation of economic strength for an entire year, meaning the "soft landing" narrative was built on fundamentally flawed information. When you exclude post-election hiring surges, job gains may have averaged just 40,000 monthly - virtual stall speed for the US economy.

Initial jobless claims jumped to 263,000 last week, the highest in four years, while unemployment sits at 4.3%. The breadth of hiring across industries has narrowed to recession-warning levels, creating the conditions that have markets pricing aggressive Fed intervention.