This report is going out after a two-week gap. Travel and a move into a new apartment in Santa Barbara meant the last two Sunday editions did not get written. I am now settled in, and I expect to be back on a regular Sunday schedule from here. This edition covers the week that just ended and looks ahead to the week to come.
Weekly Recap
The Fed dominated the week. On Wednesday it raised rates by 25bps to a range of 375 to 4.00 bps, its first hike in three years. The hike itself was almost fully priced going in. What moved markets was the Summary of Economic Projections, where 16 of 18 officials signaled at least one more hike before year end, along with a hawkish press conference from Chair Warsh. Stocks flipped from gains to losses after the decision, recovered most of that on Thursday as oil and yields eased, and ended Friday's triple witching roughly where they started. The S&P 500 finished the week slightly lower, the Dow lost more than 1.5%, and the Nasdaq managed a small gain.
Underneath the Fed, rates, oil and AI all pulled on markets. The 10-year Treasury yield touched 5.04%, its highest since 2007, and ended the week near 5% as traders added to bets on an October hike. Brent crude traded above $105 after attacks on shipping in the Strait of Hormuz, which kept inflation at the center of the rate debate. Chipmakers sold off hard early in the week after leaders of the two largest frontier AI labs called for an industrywide slowdown in AI development, dragging on Nvidia (NASDAQ: NVDA) and Broadcom (NASDAQ: AVGO). They rebounded by Thursday, led by Advanced Micro Devices (NASDAQ: AMD) and Intel (NASDAQ: INTC), which is why the Nasdaq held up better than the broader market.
What I'm Watching Next Week
The calendar is quieter this week, which is welcome after the last one. The focus stays on rates, with the 10-year near 5% and the market now pricing a real chance of a second hike in October. Warsh is declining to give forward guidance, so each data point carries more weight than usual. That makes Friday's August Durable Goods Orders worth more attention than it would normally get, with consensus at -0.5% after a 1.1% gain the month before. Outside the data, President Xi arrives in Washington on Wednesday for a summit with President Trump, with trade, tariffs, AI and critical minerals on the agenda.
On earnings, the one I am watching is Costco (NASDAQ: COST), which reports fiscal Q4 on Thursday after the close. Consensus sits at $94.9B in revenue and $6.55 in EPS, but the headline matters less than usual because Costco has already reported Q4 net sales of $93.9B, up 11.3%. The more useful signals are the membership renewal rate, which is a key read on how members took the fee increase, and margins. On margins, Oppenheimer has warned that core earnings could fall short once tariff refunds are stripped out. The stock heads into the print near $894, roughly 18% below its 52-week high of $1,096.50. Costco options have historically priced the name for calm, which makes it a clean test of this week's theme: when the number is known in advance, any move comes from what nobody expected.
Research
If everyone knows the answer to a test before it starts, the grades will not surprise anyone. That is roughly what happened on Wednesday. By that morning, futures put the odds of a 25bps hike above 90%, so when the Fed delivered exactly that, the decision added almost no new information. The market had already copied the expectation into prices, and the Fed pasted it back. What did move markets was the part nobody had copied yet. The projections showed 16 of 18 officials expecting at least one more hike this year, and Warsh offered no reassurance in the press conference. Stocks were higher before 2pm ET and lower after it. It is the same pattern as the September 1 edition, when Nvidia (NASDAQ: NVDA) sold off on guidance despite beating the quarter. The scheduled number rarely moves the price. Information about what comes next does.
For options, this matters more than direction. Ahead of a known event, sellers charge a premium for the uncertainty, so implied volatility rises into the date. Once the event passes, that premium comes out whether the outcome was good or bad, which traders call a volatility crush. If you buy options into an event the whole market already expects, you are paying for uncertainty that no longer exists, and you can be right on direction and still lose money. The better question before any scheduled event is not which way the market will go, but whether options are pricing a bigger move than is likely. When the answer is yes, the edge usually sits with the seller, not the buyer.
Friday was the week's other scheduled event. Four times a year, on the third Friday of March, June, September and December, stock options, index options and index futures all expire on the same day, known as triple witching. This September's expiry landed two days after the Fed, so many of the hedges built for the decision expired together. As those positions are closed or rolled into the next contract, volume surges and prices can swing sharply into the close, without any change in the underlying view of the market. Like the Fed decision, the date was on every calendar, so what it produces is positioning rather than information. It is also why a week like this can look dramatic day to day and still end roughly where it started, as it did for the S&P 500.
The practical takeaway is to split any scheduled event into two lists before it happens. The first is what is already copied into the price: the date, the headline decision and the expiry. The second is what can still surprise: the projections, the guidance and the tone. The move comes from the second list, and that is the only part worth paying for.
Personal
The last few weeks have been a reminder of how much trading depends on routine. Between Hong Kong, London and now California, I spent most of the past month moving across time zones, and it showed. When you are waking up at different hours every few days, the market opens at a different point in your day each time. Your sleep is off, your focus is off, and the habits that keep you disciplined, like reviewing positions before the open and sticking to a plan once you are in a trade, become harder to keep. None of that shows up on a chart, but it shows up in decisions. The trades I am least happy with from the past month were not bad ideas. They were ideas I was not in the right headspace to manage well.
Being back at UCSB is something I have been waiting for. The goal for the coming weeks is to rebuild the basics: a consistent sleep schedule, the same preparation before every open, and a regular Sunday for this report. Good habits compound quietly, and the easiest way to lose them is to assume they will survive a disrupted routine on their own.
The same idea carries over outside of markets. This past week I completed the Alcatraz swim, and I am now training for the Long Beach Marathon. Open water leaves no room to improvise on the day, so the result mostly reflects the preparation behind it. The marathon works the same way: progress comes from showing up on schedule, not from any single session. Training, trading and writing all reward the same thing, and with a stable base again, I plan to keep all three on a steady weekly rhythm.
Disclaimer: Everything here reflects my own opinions and is shared for informational purposes only. It is not financial advice, and nothing in this report is a recommendation to buy or sell any security.