Scott Bauer puts last week's equity decline at 70% interest rates and 30% energy, and says the correlation between oil, yields and stocks is the tightest he has seen in some time.
The market spent the week watching crude. He said a resolution with Iran and a fall in oil prices would lift stocks, but by less than the Federal Reserve simply saying it was finished raising rates.
"I just saw this morning that 30-year rates are now back over 7%."
Bauer runs Prosper Trading Academy and spent more than 30 years trading equity and index options at the Chicago Board Options Exchange and the Chicago Mercantile Exchange, latterly in S&P 500 options and before that as a vice president in Goldman Sachs's equities division.
The full episode is covered here so you can skip it.
Here are the 4 calls that matter.
👤 Guest: Scott Bauer, CEO of Prosper Trading Academy, who traded equity and index options at the Chicago Board Options Exchange and the Chicago Mercantile Exchange for more than 30 years and was previously a Vice President in the equities division at Goldman Sachs
🎙️ Host: Jeff Praissman of Interactive Brokers, who runs the firm's podcast studio and has Bauer in roughly every other Wednesday
📰 Published: 16 September 2026 on YouTube (Interactive Brokers) · recorded before the Fed decision
🔴 YouTube | 🔗 Episode page | ⏱️ 7 min
Key Takeaways
He splits last week's decline 70% interest rates, 30% energy, and says oil, yields and equities are moving together
A Federal Reserve that said it had stopped raising rates would move stocks more than a resolution with Iran and cheaper oil
Friday's rebound was mostly repositioning, and the artificial-intelligence news that landed after the close put risk-off back into the market
The probability of a second increase in October, on top of this one, is around 45%
What the chair says about October and December matters more than the decision itself
A unanimous vote would be the hawkish signal, because some members opposed the last increase
30-year mortgage rates are back above 7%, which will not show up in this week's housing data but will later
1. 70% Rates, 30% Energy
Praissman opened on the previous week — oil prices surging again, Treasury yields climbing and the major stock indexes finishing lower — and asked whether that was an energy-driven selloff or a reassessment of inflation and interest rates. Bauer said both, and put a number on the split.
"I think it's a little bit of a combination between energy and interest rates," he said. "If I had to give it a percentage, I'd probably say 70% interest rates, 30% energy."
His reason for treating them together is that they are moving together. He described a "very tight correlation these days" between oil prices and equities, and between interest rates and equities.
"I would say that those two things are absolutely driving the equity markets here," he said.
Praissman noted at the top that "this is being recorded before that's been announced," meaning the Federal Reserve decision due at 2 p.m. that day.
2. The Fed Beats an Oil Fix
Bauer then ran the counterfactual himself: suppose the Middle East situation resolves and oil falls. His answer was that it would help, but less than the rates story.
He said the market would probably react positively and higher on a resolution with Iran and lower oil prices.
"But in my opinion, not as much as if, let's say, the Fed comes out and they say we're not raising rates," he said — and if inflation were visibly falling alongside it, "That to me would have more of an impact on the market."
Asked whether Friday's rebound after several consecutive declines was renewed confidence or repositioning ahead of the meeting, he said it was partly repositioning, and pointed at what happened next.
The weekend's artificial-intelligence news landed after the close and reversed it: "That was after the market closed on Friday." "Had we not gotten that news, my guess is the markets probably would have just held those gains."
"So, we talked about rates, we talked about inflation, we talked about energy, but now the AI story, is there again kind of putting that risk off mode back into the markets a little bit," he said.
3. What to Listen For
Praissman said prediction markets had the increase at over 90% and asked what investors should listen for in the statement, the projections and the press conference rather than in the number itself.
Bauer's answer started with who is trading the first seconds: "Well I think the algos and the HFTs are going to know what to listen for specific words, specific inflection from Warsh." Those are the automated and high-frequency trading systems that react to the wording before a person can read it.
The substance he is listening for is the path, not the move: "But more importantly is what he says about October, December going into next year."
The reason is that a second increase is now live. He put "the possibility or probability of an October hike in addition to today" at "upwards of about 45%."
"So, it is definitely going to be what he says," he said.
The second signal is the vote: "And, also I think what's going to be very important is how is the entire committee going to vote on this?"
"If it's a unanimous vote and you've got some of the FOMC members from last time that were not in favor of a hike, if they're now in favor, that could lean this a little bit more hawkish," he said.
4. Mortgages Back Over 7%
Praissman turned to the rest of the week's calendar — housing starts, building permits, jobless claims and regional manufacturing data — and asked whether those reports would confirm resilience or start to show the pressure from higher borrowing costs.
Bauer expects the pressure to show in housing, with a caveat about the lag: "I would think even though the housing data is old, right? It's in the rearview mirror."
The number he flagged is current, not lagged: "I just saw this morning that 30-year rates are now back over 7%."
"That's not going to be reflected in tomorrow's data, but certainly moving forward," he said.
His call on the prints themselves: "So, I think we're going to see some weak housing numbers, which could impact the market negatively, but it's a matter at this point is how much is the market already pricing in maybe some of this weak economic data."
Bonus Insights
The episode was recorded on a Wednesday morning ahead of the decision, and Bauer opened by joking that he had heard something might be happening at 2 o'clock.
Bauer is a regular on the show, appearing roughly every other Wednesday, and Praissman closed with "Scott, this has been great as always."
Bauer did not give a view on where the Federal Reserve should go. Every claim he made was about what the market is pricing and what would move it.
Bauer's bottom line is that rates rather than oil are doing most of the damage to equities, that the decision itself is already priced and the information will be in what the chair says about October and December and in how the committee voted, and that 30-year mortgage rates back above 7% will show up in housing data after this week rather than in it.
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