*****************************************************************************

* FIEND'S SUPERBEAR MARKET REPORT *

* September 4, 2026 *

* *

* e-mail: fiendbear@fiendbear.com *

* web address: http://www.fiendbear.com *

*****************************************************************************

Fiend Commentary
================

The Fed Finds Another Reason to Wait

Kevin Warsh spent Jackson Hole putting the hawk costume back on. Less than a week later, Fed Governor Christopher Waller reminded Wall Street that the Fed still has plenty of ways to avoid actually raising rates.

Waller said Thursday that although inflation remains meaningfully above the 2% target, recent data are finally showing some signs of disinflation. If that continues, he would favor holding rates steady at the September meeting. The reaction was immediate. September hike odds fell from roughly 63% to about 50%, the 10-year Treasury yield retreated from 4.82% toward 4.76%, and the Dow, S&P 500 and Nasdaq all rallied more than 1%.

Gold and silver surged, Bitcoin moved above $80,000, and the dollar weakened. In other words, one Fed governor managed to unwind much of Warsh's Jackson Hole message without the Fed doing anything at all.

The trick continues to be talking.

Give Disinflation a Chance

Waller's argument is reasonable on its face. Monetary policy works with a lag, and a central bank should not mechanically raise rates every time inflation remains above target. His phrase was essentially to "give disinflation a chance." If the next inflation reports show continued improvement, he sees little reason to tighten further.

The problem is that the definition of improvement keeps getting easier.

Headline PCE inflation remains at 3.7%, far above the Fed's stated 2% objective. Oil is above $90. The Middle East war remains unresolved. Tariffs continue filtering through the economy. Yet a few reports that fail to get worse are already being treated as sufficient reason to wait.

That is exactly how the supposedly likely September hike has been disappearing.

FedWatch had the probability near 80% earlier this summer. Weak employment and moderate inflation reports pushed it toward 30%. Warsh's Jackson Hole speech drove it back above 60%. Waller spoke Thursday and it immediately dropped toward 50%.

No rate has changed.

Only the speeches have.

Friday Could Finish Off September

Now comes the employment report.

Consensus expectations are for only about 56,000 new jobs in August, with unemployment near 4.1%. That would already be weak by historical standards after July's outright job loss and substantial downward revisions to previous months.

If Friday produces another poor number, the case for a September hike becomes extremely difficult. Another negative payroll print, rising unemployment or large downward revisions could push the odds well below 50% before Wall Street finishes its morning coffee.

The September CPI report on September 11 would still matter. A truly ugly inflation number could revive the debate. But barring that, weak employment would give the Fed exactly the escape route it appears to want: inflation remains too high, but the economy has become uncertain enough to justify patience.

Warsh could then maintain his hawkish rhetoric without actually pulling the trigger.

That would give WACO — Warsh Always Chickens Out — another month to live.

The Market Knows the Fed's Preference

What Thursday showed is that investors increasingly understand the Fed's institutional bias.

The central bank is willing to tolerate inflation above 2% for a long time. It is much less comfortable tightening into a weakening labor market, falling stocks or stressed credit markets.

That asymmetry matters.

Warsh can say inflation is unacceptable. Waller can say disinflation deserves more time. John Williams can point to encouraging recent data. All of them can insist that future decisions remain data dependent.

The result is a Fed that sounds tough collectively while always maintaining enough internal disagreement to justify doing nothing.

That may explain why stocks loved Thursday's comments so much. The Dow gained about 624 points, the S&P 500 rose 1.1%, and the Nasdaq climbed 1.4%. Investors did not receive a rate cut. They simply became less worried about a hike.

In today's market, no tightening is easing enough.

Gold, Silver and Bitcoin Heard the Same Message

The hard-asset response was even more revealing.

Gold rose more than 2% Thursday, with futures settling around $4,540. Silver gained roughly 3.5% to about $67, while Bitcoin surged toward $81,000.

These assets are very different, but they all benefit when markets conclude that the Fed is less likely to tighten and the dollar is likely to remain under pressure.

The metals have followed this policy debate almost perfectly. Gold and silver were crushed when investors believed Warsh might actually become a serious inflation fighter. They rebounded when that assumption faded. Jackson Hole knocked them down again, and Waller's comments immediately brought the buyers back.

The market does not need a rate cut to restart the metals rally.

It merely needs to conclude that the promised rate hikes will never arrive.

Friday could provide that conclusion.

Bonds Got Relief, Not a Solution

The 10-year yield dropped from Wednesday's 4.818% high to roughly 4.76% Thursday, while the two-year fell toward 4.34%.

That was enough to cheer stocks, but it hardly solves the bond-market problem. The 10-year remains close to 5%, while the 30-year remains above 5%. Federal debt is above $40 trillion, deficits remain enormous and Treasury issuance keeps growing.

A weak employment report will probably push the two-year yield lower because the short end is tied closely to Fed expectations.

The long end will be more interesting.

If payrolls are weak, September hike odds collapse and the 10-year and 30-year refuse to fall much—or quickly rebound—that would be another warning that bond investors are worried about the consequences of Fed patience.

The short end would be saying: the Fed won't hike.

The long end could be saying: that's why we still want 5%.

That is not a healthy contradiction.

Oil Is the Problem Nobody Can Wish Away

Oil also refuses to cooperate with the soft-inflation narrative.

Brent ended Thursday around $95.52, while WTI settled at $91.30. Renewed fighting and continuing uncertainty around the Strait of Hormuz have kept energy prices elevated even as markets repeatedly price another peace agreement.

This is no longer a brief spike that occurred months ago. Oil has migrated into a higher trading range.

A sustained move toward $100 would begin feeding more visibly into gasoline, freight, food and consumer inflation during the fall. That would arrive just as the Fed is trying to justify remaining on hold because employment is weakening.

The timing could hardly be worse.

If oil rises and employment weakens, the Fed faces stagflationary pressure: too much inflation to cut and too little growth to hike comfortably.

The market's solution is to assume Warsh does neither.

That may indeed be what happens.

One More Weak Number

Friday therefore has unusually high stakes.

A strong employment report would revive September hike expectations, pressure metals and Bitcoin, strengthen the dollar and probably push Treasury yields higher again. Warsh would then face considerably more pressure to follow through on his Jackson Hole rhetoric.

A weak report would probably produce the opposite reaction. Hike odds could collapse, gold and silver could extend their rebound, Bitcoin could continue higher and Wall Street would celebrate the Fed's inability to tighten.

The strange part is that weak employment would not actually be good economic news.

It would simply be good Fed news.

That distinction has become almost meaningless to Wall Street.

The Fed wants 2% inflation.

The economy may be weakening.

Oil is above $90.

The long bond remains near historic yield levels.

Yet Thursday's rally showed exactly what investors want most: another reason for the Fed to stand still.

Warsh talks tough.

Waller says wait.

Friday's jobs report may decide which voice wins.

And if the number is weak, the great September rate hike may disappear almost as quickly as all the previous ones.

---

Weekly Market Summary Page
[Return to the Fiend's SuperBear Page]