The Fed held rates and announced fewer meetings, which is one way to reduce the number of times you disappoint people · Daily Briefing

In 30 seconds: The Fed held rates steady in a 10-2 vote with Cook and Hammack dissenting in favor of a hike, while Chair Warsh announced a restructured FOMC meeting schedule reducing policy-setting meetings in favor of strategy sessions in 2027-2028. The US trade deficit expanded sharply in September, driven by a surge in capital goods and chip imports linked to AI investment, while foreign buyers have been shifting away from US Treasuries toward equities. Western Canadian Select crude hit its widest discount to WTI in roughly eight years at $31/barrel, driven by expensive freight costs and a balkanizing global oil market, while European natural gas surged past €100/MWh for the first time since the 2022 energy crisis. China faces mounting economic headwinds including a third consecutive year of falling corporate profits, a record population decline of 3.39 million in 2025, and political instability as Xi's purges leave a record 23% of Central Committee seats vacant.

The Fed held rates at 3.75-4.00% in a 10-2 vote, with Hammack and Cook dissenting in favor of a 25 basis points hike. The statement described economic activity as expanding at a strong pace while noting that inflation remains elevated. In September, the Fed hiked unanimously at 12-0. Between that meeting and today, four voters have broken ranks in favor of hiking. The market now prices 86% odds of a second hike at next month's meeting. Warsh also announced a structural overhaul of the FOMC meeting schedule, shifting to a 7/1 split in 2027 — 7 meetings on monetary policy and 1 on strategy — before moving to a 6/2 split in 2028. The strategy meetings will not be "live," meaning no rate vote. The options market was pricing elevated uncertainty heading into the decision, with the SPX 0DTE straddle at 52.4 basis points at the open — well above the prior 20-day average of 38.5 basis points. Fewer policy meetings means more volatility concentrated around each one, particularly as forward guidance continues to be reduced.

The US goods trade deficit widened to $134.9B in September, overshooting the $130.2B estimate and topping the prior month's $132.1B. Goods imports rose 2.4% month over month while exports climbed 2.6%, so both sides of the ledger grew. The story here is chips, servers, and related capital goods. Imports of capital goods are up 77.2% year over year, and on a three-month seasonally adjusted annualized basis the pace is even more absurd: 144.3%. The seasonally adjusted monthly deficit swung from $83 billion a year ago to $135 billion now, a 50-billion-dollar widening that annualizes to roughly $600B, or close to 2 percentage points of GDP. In the raw, not seasonally adjusted data, imports are already back at their tariff front running levels, and the deficit is almost at its tariff front running peak. The month-over-month seasonally adjusted move was a more modest just under $3 billion, but the unadjusted figure jumped $14 billion. China is reducing its use of US custodians, following Russia's lead. Everyone, it seems, is now chasing equity-like returns. The Treasury foreign exchange report is formally due. The report is a pretty clean test of whether or not the Treasury wants to make 2027 into a year of foreign exchange diplomacy. If foreign exchange settlement is used as the intervention metric, China is automatically designated under the 2015 trade act unless Treasury changes its thresholds. Bringing balance back to the trading relationship will take a stronger renminbi and a revamped Chinese macroeconomic policy, while negotiated tariff rate quotas for individual products or sectors amount to little more than a stopgap measure.

The Canadian oil benchmark (WCS) discount to WTI has blown out to $31 a barrel, the largest discount in roughly 8 years. The discount at Hardisty, Alberta is priced to clear freight to Asia. If Alberta production curtailment becomes necessary, one analyst argues it would likely require a lot more than was needed to cut in 2019. Meanwhile BP's Whiting refinery and US Midwest refining industry is benefiting from quite cheap feedstock and incredibly high finished fuel product prices. Cheap heavy crude in, expensive gasoline and diesel out. Nice work if you can get it. On the supply side, Saudi Arabia is loading 9 supertankers carrying roughly 18 million barrels at Ras Tanura and Juaymah in the Persian Gulf. Riyadh is going all-out to push barrels out. US commercial petroleum inventories down 3 million barrels last week. Gasoline bucked the trend, building 3.9 million barrels. US natural gas futures settled at $3.03, up 12.2729% on the day. The European Commission is sounding the alarm about oil refineries closing, citing the pace of oil refinery closures in the region over the last 20 years. US retail diesel in October sat at $6.25 per gallon, or $263 per barrel, in the 97th percentile historically. The prior period had been the 32nd percentile. That is quite a jump.

There is a certain structural elegance to a country experiencing simultaneous crises in its people, its companies, and its governing apparatus. China is running the experiment. Start with the people. China's population fell by 3.39 million in 2025, the fourth consecutive annual decline. This is the kind of trend that compounds quietly and then loudly. Then the companies. Unitree Q3 revenue rose 70% year over year, which sounds great until you notice that net profit fell 17.4% over the same period, even as R&D expenses more than doubled. Revenue up, profits down, R&D spending more than doubled: this is the profile of a firm betting that the future will be kinder than the present. The present is not especially kind. Now the politics. Wang Huimin, former anti-graft chief at the China Securities Regulatory Commission, has been sentenced to death with a 2-year reprieve for taking more than 436 million yuan in bribes between 1998 and 2025. The anti-corruption chief at the securities regulator was himself spectacularly corrupt. That is a punchline, but the structural problem is bigger. Xi's sweeping purges are draining the pipeline he needs to staff senior roles next term. You cannot run a one-party state if the party keeps getting smaller. Combine a shrinking population, squeezed profits, and a hollowed-out political bench, and you get something that looks less like managed decline and more like something harder to manage.