Recent dovish comments from some Fed members tells @CharlesSchwab's Kevin Gordon that the Fed is becoming more aware of market attentiveness to forward guidance on interest rates. While the housing market remains frozen as mortgage rates stay above 7%, Kevin points to signs of strength he believes won't influence the Fed's hawkish tilt. Nathan Peterson discusses how AI volatility has forced investors' hands in finding the "safest" stocks in the trade. CapEx from Alphabet (GOOGL), Amazon (AMZN), and Microsoft (MSFT) earnings will be the most important metric he's watching next week. Nate also...
What Kevin Gordon said
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Kevin Gordon of the Schwab Center for Financial Research discussed the market's reduced pricing of an October Fed hike (8% chance), attributing it to dovish comments from Fed officials Jefferson and Williams, which have 'overpowered' hot September inflation data. He argued the Fed likely prefers a slower, every-other-meeting pace, consistent with its focus on the labor market. Gordon described housing as 'absent' from the economy since the pandemic, in its own recession for 5-6 years, with pending home sales at an all-time low and homebuilder sentiment at a 12-year low, creating a 'frozen' market without a price collapse. He noted Fed policy tightening hasn't transmitted to the broader economy due to labor market resilience and strong business investment, reducing housing's influence on the Fed's hawkish trajectory. Gordon did not discuss neoclouds or AI trade specifics.
Key takeaways
Market prices an 8% chance of an October Fed hike, down from a coin flip, due to dovish Fed speak from Jefferson and Williams.
Fed likely prefers a slower, every-other-meeting pace of policy changes, not aggressive tightening.
Housing has been in its own recession for 5-6 years, with pending home sales at an all-time low and homebuilder sentiment at a 12-year low.
Fed policy tightening in housing has not led to tighter conditions for the overall economy, limiting its influence on the Fed's rate path.
0:00What do you make of how the market is currently pricing in the rate risk, given we had a triple dose of it last week with CPI, PPI, and import prices?
2:48But do they also send Alphabet's and Microsoft's CDS swaps up?
3:48So how much of a dilemma is the Fed in right now?
Percentage-wise, up 3.5% as we stand. All right, welcome back to Morning Trade Live. It's time now for the big picture. Charles Schwab Center for Financial Research. We are joined by Nate Peterson, Director of Derivatives Analysis, and Kevin Gordon, Head of Macro Research and Strategy. And Kevin, we are going to start with you today because we're looking at an 8% chance, pretty much, of an October hike now. That's come well off the coin flip we were looking at. What do you make of how the market is currently pricing in the rate risk, given we had a triple dose of it last week with CPI, PPI, and import prices?
Yeah, you know, I think a lot of the Fed speak, especially from two of the three members of the troika, from Jefferson and from Williams, their relatively dovish comments lately have been enough, I think, to kind of overpower some of the heat that you saw in the inflation data for September. So it does speak, I think, to the power of Fed speak and how, you know, some form of forward guidance that we're getting, at least from two of them, has been pretty potent enough to at least tamp down the market's expectation of an October Fed hike. And I think, you know, to some extent, maybe solidifies how this FOMC is thinking about wanting to take it at a slower pace, go maybe every other meeting, as opposed to being a lot more aggressive. And I think that is very much in keeping with how they've been viewing, you know, wanting to treat the labor market, not wanting to start the recovery... that seems to be what you're getting in terms of adding up all of the Fed speak the past couple of weeks.
All right, so the power of Fed speak in an era of forward guidance. Certainly interesting. Nate, getting over to you and the sell-off. We're seeing this sort of de-risking and, you know, rotation into other parts of the market. What do you make of it, given what we've heard from some of these big tech companies this morning?
Good morning, Sam. You know, if you look at the AI cohort, you know, go back to TSM and ASML, their earnings looked great. Beat and raise. If you look at SpaceX, their numbers were incredible. You know, perhaps I've got my eyes on basically the credit default swaps — Nvidia, SpaceX. Those are all hitting highs. So that's kind of one of your leading indicators. And it tells you about the sentiment around the AI trade. Let's go back — remember we had that 'situational awareness' money left AI, the broadening trade occurred, and that looked great and healthy for the market. Then you go back to August and interest rates started to go on this run up. Okay, let's get out of the broadening trade. Let's go back to AI, AI infrastructure, chips. We're looking really good. AMD hitting new highs. And then you get, you know, the Financial Times reports on CoreWeave's credit default swaps hitting record highs.
Okay, now we can't go to the AI trade, that looks vulnerable. The money's always looking for where is the greatest potential risk. And that's why we're seeing Treasury yields come down. So there's that rotation that's going on. But if we don't have the AI trade that's going to lead us out of here, I'm not sure if it's going to be health care and staples. I mean, those are defensive, recessionary-type sectors. That's not going to be enough for the market. So we're going to get the hyperscalers next week. I'm not sure what the market wants in terms of guidance on CapEx. If the CapEx is strong, that would be good for the chip trade, that there's a read-through on demand. But do they also send Alphabet's and Microsoft's CDS swaps up? I mean, so there is a lot of this fluctuation. Money is just kind of scrambling into a narrower and narrower cohort to find that relative safety. And so that's really what we have going on right now.
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Gordon, K. (2026, October 22). Inflation & Housing's Seesaw Effects on Fed; Mag 7 & Neoclouds Prove Me Story [Interview transcript]. Schwab Network. CEOInterviews.AI. https://ceointerviews.ai/interview/3112932/
MLA
Kevin Gordon. "Inflation & Housing's Seesaw Effects on Fed; Mag 7 & Neoclouds Prove Me Story." Schwab Network, 22 Oct. 2026. Transcript, CEOInterviews.AI, https://ceointerviews.ai/interview/3112932/.
BibTeX
@misc{gordon2026_3112932,
author = {Kevin Gordon},
title = {Inflation \& Housing's Seesaw Effects on Fed; Mag 7 \& Neoclouds Prove Me Story},
howpublished = {Interview transcript, Schwab Network. CEOInterviews.AI},
year = {2026},
month = {oct},
url = {https://ceointerviews.ai/interview/3112932/},
note = {Speaker-attributed transcript with timestamps}
}
