by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with a few words on the apparent stabilization of global stock markets this morning after Friday’s selloff. We specifically address whether the selloff might have represented the end of the artificial intelligence frenzy. We next review several other international and US developments that could affect the financial markets today, including more signs that the war in Iran is set to continue and a planned lobbying and public relations push by AI firm OpenAI to begin after tomorrow’s midterm elections.

Global Stock Markets: Shortly before market open, US stock futures prices suggest both the broad-based S&P 500 index and the tech-heavy Nasdaq 100 index are set to recover modestly from their rout on Friday. However, some of the recovery may simply reflect that oil prices are down so far this morning on optimism over back-channel peace talks in the Middle East (we are less optimistic, as shown in the following paragraph). Still, the selloff on Friday has raised questions about whether the long-expected end of the AI investment boom may be nigh.

• In our view, it’s too soon to know for sure whether the AI boom is going into reverse. Frenzies or bubbles can continue longer than investors expect, even if they suffer short-term pullbacks.
• All the same, we continue to see many possible factors that could trip up the AI frenzy at some point, including the competitive threat from Chinese AI models, popular pushback against data centers, concern about rogue AI agents, and the threat of onerous regulation.
• Given that these factors will probably call into question the prospects and valuations of today’s AI assets over time, we think it’s a fine time for investors to ensure that their portfolios are well diversified and positioned to take advantage of the eventual rotation toward recently lagging market segments, such as stable, well-run, dividend-paying value stocks.

United States-Israel-Iran: As signs increasingly point to the US and Israel launching a major attack on Iran after the midterm elections tomorrow, Iranian Supreme Leader Mojtaba Khamenei publicly told the country’s top three military commanders that any such attack “must be met with an immediate and effective response, without geographical limitation” in order to achieve “maximum deterrence.” While the statement could be mostly posturing, it does suggest that Iran is prepared to keep fighting back hard and that global energy supplies remain at risk.

European Union-Canada: Wrapping up the EU-Canada summit in Montreal on Friday, Prime Minister Carney said Canada would accept the EU’s offer of an “associate membership,” aiming to achieve “the deepest possible partnership short of accession.” The two sides hope to flesh out the relationship — including how much Canada will contribute to the EU’s budget — by next June, despite lingering disagreements in areas such as the EU’s deforestation policies and whether Canada will be able to participate in EU public procurement.

• The arrangement shows how the EU and Canada want to strengthen their non-US relationships to better insulate themselves from Washington’s more antagonistic, less cooperative policies.
• However, it isn’t clear how much the new relationship will help the EU or Canada diversify their trade away from the US. Canada still sends approximately three-quarters of its exports to the US, even with Washington’s new tariffs and other trade barriers since early 2025, which illustrates how hard it will be for Canada to replace much of its US trade with exports and imports involving other economies.

China-Taiwan-United States: The Chinese coast guard on Saturday announced that it has stepped up patrols around Taiwan, including in the waters east of the island. According to the Chinese, the increased presence is aimed at “strengthening control over the relevant waters to effectively ensure orderly navigation and activities.” However, the expanded patrols fit a pattern suggesting Beijing is taking advantage of the new “Comprehensive Strategic Stability” (CSS) policy, which the US and China adopted to reduce tensions.

• We examined the détente-like CSS policy in our latest Bi-Weekly Geopolitical Report, published on October 26, 2026.
• In the months since the CSS policy was put into place earlier this year, we have noted several instances in which the Chinese military has become more aggressive again in the South China Sea and elsewhere, suggesting it thinks it can now assert itself without fear of major US reprisals.
• Of course, the risk is that the Chinese could miscalculate and spark a confrontation with a US ally that would require Washington to act. Any such event could rekindle US-China tensions and would likely unsettle the global financial markets.

United States-China: The Federal Communications Commission late last week banned all Chinese laboratories from testing electronic devices destined for the US market starting in 2028. The ban will apply to devices including smartphones and computers. Since Chinese labs currently test and certify about 80% of such devices for the US market, the move has generated strong pushback from Beijing — another example of lower-level US agencies taking steps that could antagonize China and undermine the détente-like CSS policy.

China: Citing the latest satellite imagery, the Center for Strategic and International Studies said in an updated assessment last week that China’s latest aircraft carrier could be launched as soon as 2027. The new “Type 004” carrier would be the country’s fourth and is expected to be China’s first nuclear-powered carrier. Nuclear propulsion would give the ship much more power and range than current Chinese carriers.

• If the Type 004 carrier is launched in 2027, it will still have to undergo a long period of outfitting, operational testing, and training before being commissioned around 2030.
• China would still have far fewer carriers than the US, but it continues to shift its navy toward something more like the US’s “blue water” force. Over time, that will likely give China more geopolitical and military power to challenge US interests around the globe.

US Defense Policy: While the media this fall focused on the long, 321-day deployment of the carrier USS Abraham Lincoln before it finally returned home to San Diego on October 9, recent reports say the destroyer USS Spruance has now been deployed for a post-World War II record of more than 345 days, well above the US Navy’s standard of seven months. In our view, the long deployments suggest the US cut its defense budget too far after the Cold War and downsized its armed forces too much to defend its global security interests efficiently.

• US military assets — from troops, sailors, and airmen to ships and bombers — are therefore often being run too hard or for too long, creating morale, maintenance, and safety problems.
• A key question is whether Congress will keep increasing the defense budget. Even if it does, another question is how much it will pressure major defense firms to cut their prices or use more of their resources for investment in defense production.

US Artificial Intelligence Industry: In a scoop yesterday, Axios said AI modeler OpenAI plans to launch a major lobbying and public-relations effort right after tomorrow’s midterm elections, with the goal of favorably shaping any regulations from the new Congress and easing the public backlash against AI. Among other things, the program will push for mandatory brakes on cutting-edge models and try to rebrand “data centers” as “AI compute campuses.” If it affects the regulatory and popular environment for AI firms, the program could have an impact on AI-related assets.

Global Cybersecurity Industry: Just weeks after a flurry of suspected cyberattacks caused supermarket refrigerators and freezers to malfunction across France, a series of similar attacks has apparently been launched today in multiple other European countries, ruining food worth millions of euros. We have also seen reports that at least one freezer at a US military base has been hit. The attacks not only serve as a reminder that cyberattacks remain a threat, especially with the rise of AI, but also that cybersecurity firms are likely to see increased demand.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment begins with key takeaways from the latest ECB rate decision and leadership change. We then turn to geopolitics, examining the outcome of the recent Israeli elections. Next, we briefly cover the Binance security breach and Intel’s disappointing earnings report. As always, we conclude with a summary of key domestic and international economic data.

ECB Rate Decision: The European Central Bank faces a leadership shakeup following its latest policy meeting. After the ECB decided to leave its benchmark interest rates unchanged, President Christine Lagarde announced plans to step down before her term expires. Her impending departure could raise fresh questions about the direction of monetary policy and the ECB’s independence amid the prospect of a populist surge in next year’s elections.

• The ECB’s Governing Council left its deposit rate unchanged at 2.5% despite rising inflation. Policymakers said higher energy prices posed upside risks to inflation and downside risks to growth. However, underlying inflation remained broadly stable, and wages had not yet shown a material response to the energy shock, supporting a measured approach amid uncertainty surrounding the Middle East conflict and Russia’s war against Ukraine.
• Following the rate decision, ECB President Christine Lagarde announced her intention to step down in February 2027, nine months before her term was due to expire, amid growing concerns that a populist surge may install a controversial figure at the helm of the central bank. Ensuring a smooth and timely succession has therefore become critical to maintaining market confidence. Explaining her departure, Lagarde said she wanted greater freedom to express her political views.
• Her departure from the ECB will likely set off a race to find a suitable replacement. The European Council will be responsible for the selection, in consultation with the European Parliament. The leading candidates to take over are Spain’s Pablo Hernández de Cos and the Netherlands’ Klaas Knot, both of whom previously led their respective national central banks. The transition will be pivotal in determining whether the ECB deploys its emergency liquidity tool to prevent a sovereign crisis in France.
• While rate decisions will remain important for European bond markets, we suspect political uncertainty could play a bigger role. A credible ECB president could ease fears of a populist central bank abandoning its inflation mandate. However, the bigger risk lies in next year’s elections in Germany and France, which may bring to power parties the markets do not trust. Even so, the new central bank head could provide some support for the euro.

Israeli Elections: After days of vote counting, Israel’s election produced no clear winner. Prime Minister Benjamin Netanyahu’s bloc emerged as the largest, winning 53 seats but falling short of the 61 needed to form a government. In the coming days and weeks, political leaders will seek to build a governing coalition. The outcome could shape Israel’s relationship with the United States and its conflict with Iran.

• Although Netanyahu’s bloc was the top vote-getter, it did lose some influence. Following the 2022 election, the bloc had 64 seats, allowing it to hold a majority to form a government. This time around, however, it has given up 11 of those seats, while its main opposition has increased its total in the Knesset to 48. The biggest surprise appears to come from the Israeli Arab parties, which together garnered 19 seats, giving them influence over the formation of the next government.
• Following the result, which is still subject to minor change, the parties will have a chance to see whether they can form a government. In the coming days, Israeli President Isaac Herzog will decide which leader has the best chance of forming a government, a decision that should follow a round of consultations. So far, reports suggest that the opposition will get the first shot at forming a government. Despite that slight edge, Polymarket odds suggest that Netanyahu may have the advantage.
• The election outcome will shape Israel’s approach to Iran and its coordination with the United States, though a fundamental strategic shift appears unlikely. Israel’s opposition has criticized Netanyahu’s push for regime change as unrealistic, favoring a narrower objective focused on dismantling Iran’s nuclear program. It has also called for reducing Israel’s dependence on decisions made in Washington and for rebuilding bipartisan support in the US.
• Government formation could take several weeks, as neither bloc has a clear path to a majority. We do not expect Israel’s political process to affect Washington’s decision on whether to mount an offensive against Iran. However, it may encourage more restraint on escalatory measures while the US waits for a government with which it can coordinate. While the outcome remains uncertain, it could affect oil markets.

Binance Hack: Binance, the world’s largest cryptocurrency exchange, announced that it had been hacked, with an estimated $6.3 billion in digital assets affected, in what would be the largest crypto heist on record. The company has suspended deposits and withdrawals. While Binance has released few details about the breach, blockchain intelligence firms have linked the attack to North Korea. The incident comes amid heightened concerns that AI-enabled cyberattacks could pose a threat to the financial system.

Intel Slump: Intel shares fell sharply after the chipmaker issued a disappointing outlook. Although Intel’s third-quarter results beat estimates, its fourth-quarter revenue and earnings forecasts fell short of expectations, as rising memory chip prices weighed on its PC business. Its AI-related data center business remained strong. The company’s performance has improved since it received support from the Trump administration last year. The market’s reaction to Intel highlights the importance of earnings in sustaining the AI rally.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment opens with our takeaways from the latest FOMC meeting. We then turn to geopolitics, examining efforts to bring Iran to the negotiating table before the midterm elections. Next, we discuss Federal Reserve Chair Kevin Warsh’s changes to the meeting schedule, the implications of Alphabet’s earnings for market sentiment, and the UK’s efforts to rein in government spending. As always, we conclude with a review of recent domestic and international economic data.

Serious and Sober Discussion: Federal Reserve officials delivered no surprises with their latest decision to leave the benchmark interest rate unchanged, though the outlook for December remains far less clear. While the pause was widely expected, two policymakers dissented in favor of an immediate rate hike. However, this hawkish tilt was offset by the Fed chair’s reluctance to view AI as a trigger for further policy tightening. Thus, while a December rate hike remains possible, another pause is still very much in play.

• During the press conference, Warsh was tight-lipped about the specifics of the meeting. He described the session as a serious and sober discussion in which all participants aired their views in what he called “a good family fight.” He suggested that the committee is weighing the geopolitical conflict and will closely monitor incoming data. His comments implied that a de-escalation of the war in the Middle East could open the door to extending the Fed’s pause in policy tightening.
• Although Fed Chair Warsh adopted a noncommittal tone regarding future rate hikes, hawkish sentiment is clearly building across the committee. Leading the push for higher rates were Fed Governor Lisa Cook and Cleveland Fed President Elizabeth Hammack, both of whom cited the expansion of AI as a major contributor to persistent inflation. Even Chair Warsh hinted at AI’s growing influence on price dynamics by noting that he is keeping a close eye on how South Korean tech imports are affecting inflation.
• While the Fed has made it clear that its goal is to contain inflation, it has been less transparent about its willingness to tighten policy in response to the AI buildout. During the press conference, Warsh initially sidestepped a question about whether AI-related investment could add to demand pressures but was compelled to answer when a reporter repeated it. His comments suggested that the central bank has not settled on how it would respond, with Warsh saying it is not the Fed’s goal to “throw sand in the gears of the economy.”
• Market pricing for the December rate decision may be underestimating near-term policy risk. Although consensus aligned around a pause following the recent FOMC meeting, Warsh’s remarks on AI introduce a critical variable. To the extent Warsh considers imported cost pressures a larger inflation risk than capex-driven expansion, he could lean on trade indicators as a forward-looking proxy for price stability, thereby establishing a justification to avoid further monetary tightening.

Iran Talks: The White House has reached out to Iran in an effort to help end the conflict in the Middle East. Earlier this week, Vice President JD Vance sent a letter to a noted Iranian hardliner to help reopen peace negotiations. This outreach comes as the administration considers another round of strikes on Iran following the midterm elections. While it is unclear whether Iran is open to talks, the letter signals that the White House still favors a diplomatic pathway toward de-escalation.

• The letter was sent to Mohsen Rezaei, the secretary of Iran’s top security body, the Supreme National Security Council. Rezaei is set to become a key figure in discussions over the coming weeks. The message sent by Vice President Vance did not include specific proposals, but it did provide a framework to restart talks. Rezaei, seen as a key voice of resistance within Iran, has argued for prolonging the conflict unless Washington meets core Iranian demands.
• Vance’s letter to Rezaei appears to be part of a broader effort to restart negotiations regarding Iran’s nuclear capabilities. Alongside the vice president, regional leaders in the Middle East have been working to convince Tehran to make concessions. Most recently, Qatari mediators have sought to persuade Iran to allow UN inspectors access to its nuclear facilities in exchange for sanctions relief.
• Publicly, Iran appears unwilling to make concessions to the US, even as momentum builds for potential US strikes following the midterm elections. Overnight, both sides seemed to dig in their heels, with Iran rejecting Qatari proposals and launching strikes on vessels in the Strait of Hormuz. At the same time, the White House has warned its Gulf allies to prepare for Iranian retaliation in the event of a renewed US offensive.
• Although the timing and outcome of the war are still uncertain, the White House clearly favors ending it sooner rather than later. Diplomatic windows are rapidly closing, though talks could regain momentum if a US offensive yields results. Regardless, oil markets will closely follow the trajectory of the conflict  after the midterms. We remain cautiously optimistic about a resolution, but the risk of a protracted conflict is still high.

Fed Change: In addition to the rate decision, Fed Chair Warsh announced a shift in the FOMC’s meeting schedule beginning next year. While the Fed will maintain its standard schedule of eight annual gatherings, the number of rate-setting meetings will decline to seven in 2027 and six by 2028. The remaining sessions will be dedicated to broader strategic policy discussions, formalizing ideas Warsh had floated as early as July. This structural shift could impact futures contract markets tied to those meeting dates.

AI Concerns: Disappointing results from Google’s parent company, Alphabet, will likely weigh on market sentiment. The company reported that third-quarter sales, excluding partner payouts, missed expectations, while ad sales, its core business, grew at their slowest pace in over five quarters. This weaker-than-expected performance comes as the tech giant continues to aggressively fund massive infrastructure projects to expand its AI capabilities, renewing concerns among investors about capital discipline.

UK Budget: UK officials are seeking to rein in the country’s budget deficit as higher energy costs and debt-servicing expenses strain public finances. Following Wednesday’s budget release, Chancellor John Healey pledged to reduce welfare spending, although the timing and details have yet to be announced. The budget also included support for households facing higher energy bills, highlighting the government’s challenge of balancing short-term relief with longer-term fiscal discipline.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment opens with the latest developments in the Russia-Ukraine conflict. We then turn to AI and how Anthropic’s IPO could influence sentiment toward the sector. Next, we briefly cover the preliminary results of Israel’s election, Iran’s threat against South Korean shipper Sinokor, and Flávio Bolsonaro’s decision to flee to the US. As always, we conclude with a review of recent domestic and international economic data.

Ukraine Progress: Russia remains intent on negotiating a Ukrainian peace deal exclusively with the US, effectively brushing aside European efforts to join the talks. Reports also point to discussions with the White House aimed at paving the way for American companies to re-enter Russia. Moscow’s refusal to engage the EU highlights its deep distrust of mainstream European leadership and its strong preference for dealing with more accommodating Western political figures.

• Talks between Russian President Vladimir Putin and European leaders were largely performative and unproductive. While European leaders intended to discuss Ukraine’s conditions for ending the conflict, Putin spent most of the conversation attempting to justify Russia’s claim to Ukrainian territory. Following the meeting, the Russian foreign minister dismissed Europe’s mediation efforts and hinted at a possible escalation between the two sides.

• At the same time, the White House appears to be preparing for an eventual resumption of ties between the US and Russia. The two sides are reportedly working on a joint venture that would allow American firms to invest in pipelines to supply Europe directly. These discussions seem aimed at creating a pathway for Russia to re-establish international relations. Additionally, the two nations are discussing allowing US commercial flights over Russian airspace and exploring cooperation on titanium production.
• Russia’s contrasting relationships with the EU and the US are largely driven by its strategic preference for right-wing populist movements. Moscow appears to have concluded that it cannot reach what it considers a fair compromise with Western establishment parties. As a result, if current political trends persist and populist parties such as Germany’s AfD and France’s National Rally gain significant power over the coming years, we could see renewed efforts to reintegrate Russia into the global economy.
• Progress toward ending the war in Ukraine remains a very real possibility. While a resolution is still a long way off, a successful peace deal could provide a noticeable economic tailwind. A key political obstacle to an agreement may be a shifting US Congress, as current polls suggest Democrats could gain ground in the midterm elections. Nevertheless, a final settlement would likely help lower global oil prices, benefiting equities both domestically and internationally, particularly in Asia and Europe.

IPO Lifts Optimism: AI is riding a new wave of optimism as Anthropic prepares to go public. Earlier this week, the creator of Claude officially filed its highly anticipated S-1 and kicked off its investor roadshow to build demand for the initial public offering (IPO). Aiming for what could be the second-largest market debut behind SpaceX, Anthropic’s public offering will serve as a crucial test of Wall Street’s continued appetite for capital-intensive AI ventures.

• The company’s results point to improved performance in recent months, but its growing spending commitments raise questions about its financial flexibility and path to returns. In the first half of the year, it generated $3.45 billion in positive cash flow — a marked improvement from the negative cash flow reported in previous periods. However, its commitments total $657 billion, with 76% classified as noncancelable, creating substantial future obligations that could constrain that progress.
• Investors are increasingly focused on AI providers’ overall spending relative to revenue as they evaluate the long-term viability of the industry. According to data tracked by IsAIProfitable.com, the sector has poured $1.9 trillion into AI infrastructure while generating only $972 billion in revenue. The disparity is even more pronounced given that much of that revenue is concentrated among chipmakers, while application and software companies continue to post heavy operating losses.
• AI companies are accelerating plans to go public amid a sharp divergence between equity and debt markets. Firms are capitalizing on elevated equity valuations to raise capital at a premium, even as fixed-income investors continue to demand higher compensation for bonds. SpaceX exemplifies this dichotomy, trading at a staggering P/E ratio of 646x on the equity side, while spreads on its debt issuances have widened to a record high.
• Anthropic’s push toward an IPO will serve as a critical litmus test for investor appetite across the AI landscape. A successful public debut could reinvigorate optimism, bolstering the AI trade in the near term. Conversely, a disappointing launch could trigger a broader reassessment of risk tolerance. Given the ongoing uncertainty surrounding AI’s long-term commercial sustainability, maintaining a well-diversified portfolio could guard against a shift in market sentiment.

Israeli Elections: Israel faces political deadlock as election counts leave both main blocs short of a 61-seat majority. Prime Minister Benjamin Netanyahu’s bloc holds a projected 54 seats against 49 seats for Gadi Eisenkot’s opposition alliance, with Arab parties holding 17 seats. Coalition negotiations will be critical to breaking the stalemate, placing potential support from Arab parties at the center of those talks. Meanwhile, Polymarket odds for Netanyahu to secure the premiership have risen to 45%, recovering from around 30% leading into the vote.

Iran Threats: Iran is moving to enforce control over the Strait of Hormuz by threatening legal action against South Korean shipping firm Sinokor beginning November 1. The warning reflects Tehran’s broader push to validate its Persian Gulf Strait Authority (PGSA), which was created in May to manage vessel passage. Although Iran has not launched missile strikes against every noncompliant ship, it explicitly warned that vessels committing transit violations could be treated as legitimate targets.

Bolsonaro Flees: Defeated right-wing presidential candidate Flávio Bolsonaro has left Brazil after defying a court order to surrender his passport. Before the election, Bolsonaro was under investigation for corruption and a money-laundering scheme involving fundraising for a biographical film about his father. Reports that the US is granting him asylum are expected to cool US-Brazil relations, complicating Washington’s push to deepen diplomatic engagement in the region.

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by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with news of a European Union subsidy for aircraft maker Airbus that the US administration has warned could be a violation of the recent US-EU trade deal. We next review several other international and US developments that could affect the financial markets today, including proposed new US investment curbs that could undermine the current effort by President Trump and General Secretary Xi to ease bilateral tensions and a preview of the Federal Reserve’s policy meeting, which starts today.

United States-European Union: Yesterday, US Trade Representative Jamieson Greer accused the European Investment Bank of failing to share details about the $3.4 billion loan that it made to airliner manufacturer Airbus in June, despite “ongoing requests.” Greer also warned that the money could lead to market distortions constituting a violation of the recent US-EU trade deal. His complaint is a reminder that trade tensions and retaliatory measures between the US and its trading partners are still a risk and could drive down the stock prices of targeted companies.

United States-China: In a little-noticed proposal late last week, the Treasury Department said it wants to tighten its curbs on US investments in Chinese technology firms. The proposed rule would broaden the Treasury’s current investment restrictions to include radiation-hardened integrated circuits (ICs), photonic ICs, high-bandwidth memory, “additional categories of advanced ICs,” algorithms or applications for quantum computing, and biotechnologies.

• As we’ve mentioned before, US President Trump and Chinese General Secretary Xi have adopted a new, détente-like policy of “Constructive Strategic Stability” (see our latest Bi-Weekly Geopolitical Report) to cool tensions.
• Nevertheless, the two leaders’ bureaucracies continue to take steps that might rekindle conflict between the two sides. That, in turn, could serve to undermine the prospects for Chinese stocks or for US firms that do a lot of business in China.

Israel: The country will vote in parliamentary elections today, with polls showing that neither incumbent Prime Minister Netanyahu nor his leading opponent, former army chief of staff Gadi Eisenkot, would likely garner enough votes to form a coalition government outright. Final results may not be available until Wednesday or even later, after which President Herzog will designate the politician who he believes has the best chance to form a government. That means it could be some time before Israel’s new prime minister is known.

France: Trying to quell the recent mass demonstrations against the cost of living and poor education services, the government yesterday offered several concessions. For instance, freshman classes at public high schools will be capped at 28 students. The government will also create 15,000 new places in universities and offer regional authorities 4 billion EUR ($4.5 billion) in loans for school renovations. Protest leaders have said the government’s proposed measures are a step in the right direction, but not enough.

• The lukewarm response from protest leaders suggests more demonstrations may be in store this coming weekend. If the political unrest continues, it will likely help bolster support for right-wing populist leader Marine Le Pen as she campaigns against the centrist establishment for the presidential election in 2027.
• The expense of the government’s promises and the threat of further political unrest may well prompt investors to continue their recent heavy selling of French government bonds, driving yields even higher.

Brazil: As expected, investors yesterday dumped Brazilian assets in response to President Luiz Inácio Lula da Silva’s surprise re-election win on Sunday. The Brazilian stock market’s main price index dropped 13.9%, while the Brazilian real plunged 8.5% against the dollar. The renewed term for Lula will probably refocus investors on his campaign promises, from debt forgiveness to increased welfare benefits, and on the country’s huge government budget deficit, which equals about 9.5% of gross domestic product.

US Monetary Policy: The Fed begins its latest two-day policy meeting today, with its decision due on Wednesday at 2:00 PM ET. Based on current interest-rate futures prices, investors are nearly unanimous in expecting the policymakers to hold the benchmark fed funds interest rate steady at a range of 3.75% to 4.00%. However, since price inflation remains uncomfortably high, we believe they will probably hike rates one or two more times in the coming months, with the next move likely coming in December.

US Elections: In a social media post yesterday, President Trump said anyone who reports an instance of voting fraud in past elections or the upcoming midterm races will be entitled to a payout of $1 million if it leads to an arrest and conviction. The president’s offer marks the most recent in a series of promised cash payouts for political support. It isn’t clear how such a program would be funded, and the offer could help generate further political controversy around the upcoming election.

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