Markets sharply reduced the probability of an October Federal Reserve rate increase, but that shift should not be confused with a broad decline in long-term interest-rate risk.
The source article cited CME FedWatch probabilities showing the chance of another quarter-point increase at the October 28 meeting falling to 19.4% from 50.9% one week earlier. FedWatch estimates are market-implied probabilities derived from federal-funds futures; they can move quickly as prices and expectations change.
Two pieces of primary evidence support a more patient near-term view. New York Fed President John Williams said on September 29 that there was "no need for urgency" after the September policy action. The Bureau of Labor Statistics then reported that nonfarm payrolls increased by 29,000 in September while unemployment edged up to 4.2%. Softer hiring reduces the case for an immediate hike, but it does not settle the inflation outlook.
That distinction matters for investors. SPY can benefit when the expected path of short-term rates becomes less restrictive, yet a weaker labor market can also reduce earnings expectations. TLT is exposed to a different set of forces because its long-duration Treasury holdings respond to inflation expectations, fiscal borrowing and term premiums as well as the next Fed meeting.
A delay is therefore not the same as an easing cycle. Investors should watch the next inflation release, revisions to payroll data, Fed communications and the behavior of the 30-year yield. Short-dated bills carry much less price sensitivity than long bonds. The appropriate position depends on whether the thesis is about the next meeting or the full path of inflation and government financing.