Dear Friends and Colleagues,

I have been watching the Fed for about 25 years now. And I cannot recall a meeting with so much uncertainty as the one on September 18. The market is split on whether the Fed will do 25bp or 50bp. And there is even more uncertainty about where the Fed is ultimately heading. 4%, 3%, 2%, something different?

Given all the uncertainty about the the outlook, this is a great time for unique conceptual thinking and thoughtful data tracking. This is how to stay ahead of the competition. Uncertainty is also opportunity.

And over the last few months, we have indeed been highly focused on analyzing the destination of rates in the coming cutting cycle. Many of the theories used in 2022-2023 to argue for sustained higher rates (de-globalization, structurally higher commodity prices, pressure from supply) have been hard to match with the reality in the data picture in 2024. Relatedly, China continues to face a historical economic challenge, which could have a sustained deflationary effect, as already observed in global goods prices. And finally, but not least, we are going through an AI revolution. Initially, this has impacted the US economy via additional CAPEX. But in the coming years, the effects of LLM/AI technology will be seen much more broadly, and we will likely entail reduced labor demand in many services industries. While this is not the focus for this week; this will eventually matter for the Fed too.

One of our most well attended Exante Data client calls was our recent call on R-star (only exceeded by our call on Trump II, with participation from Scott Bessent, who is potentially the next Treasury Secretary).

Looking ahead, what is coming up:

1. We will continue to focus on the impact of the AI revolution on the economy, and our next client call will have that focus.
2. We will be hosting several events around IMF meetings in DC (a NYC lunch on October 18, and a DC cocktail event on October 23)
3. We will also soon be formally launching our new FlowPro service, which offers a unique perspective on positioning down to the fund level. This service is initially covering all EM markets, and later expanding to G10. If you are interested in early access, you can sign up for more information here.

In general, if you have any questions and comments, please let us know.