DoubleLine Capital Sep 19, 2026 22m 8m saved
With Mark Kimbrough, Analyst on the Macro Asset Allocation team at DoubleLine Capital · Ryan Kimmel, Strategist on the same team and a member of its Fixed Income Asset Allocation Committee
The Federal Reserve raised its policy rate a quarter point on Wednesday and not one of the 18 officials voted against it. Sixteen of them marked at least one more increase before the end of the year.
The hike itself was not the surprise. Markets had priced roughly a 90% chance of it going in, and most economists expected one or two policymakers to vote for a hold. What moved prices was how much support there turned out to be for doing it again.
"And he said this phrase I think three times which implies that you know monetary policy was currently at an accommodative level or not restrictive."
Mark Kimbrough and Ryan Kimmel sit on DoubleLine Capital's Macro Asset Allocation team, which sets the firm's cross-asset views, and they have co-hosted its weekly Minutes podcast for years. Kimbrough joined the firm in 2012 from Western Asset Management's risk department; Kimmel joined in 2013 from the proprietary trading desk at Gelber Group and sits on DoubleLine's Fixed Income Asset Allocation Committee.
The full episode is covered here so you can skip it. 22 minutes of audio, 14 minutes of reading.
Here are the 10 numbers that matter.
Key Takeaways
The first Fed hike since 2023 was unanimous, and 16 of the 18 officials penciled in at least one more before year-end
Four of them marked at least two more
Kevin Warsh described the move as removing a dose of accommodation, and used the phrase three times
Which says policy was not restrictive to begin with
The market now prices 1.3 more hikes by December and as many as four over the next 12 months
The 10-year Treasury closed above 5% on Tuesday, its first close above the October 2023 high
The 30-year reached 5.37%, the highest since June 2007
Implied interest-rate volatility is well below 2023, so traders are treating 5% as the middle of a range rather than a ceiling
The S&P 500 lost only 41 basis points on the week because technology was one of just two sectors that rose
The equal-weighted index fell 1.2%
WTI crude is above $100 a barrel and energy is up 37% since the end of June
Gasoline stations take a smaller share of US retail spending than before 2008, even at these prices
The August retail sales control group rose 1.4% against a consensus of half a percent
Continuing jobless claims fell to 1.73 million, the lowest since the first week of 2024
1. A Down Week, Barely
Kimbrough opened with the tape as of 10 a.m. Pacific on Friday, September 18. The S&P 500 was down 41 basis points on the week and 74 basis points on the month.
The index has been drifting lower since its high a month ago
The S&P has been in a little bit of a short-term downtrend since hitting its all-time high about a month ago.
Mark Kimbrough
On the day of the Fed announcement the index bounced off its 100-day moving average and reclaimed that level the following day. By Friday it was sitting within a few points of its 50-day moving average.
Underneath, almost everything fell. Healthcare rose 1.6% and was the only large gainer. Technology added 11 basis points and spent the morning switching between up and down on the week. Utilities lost 2.9% and financials 2.4%.
Only two sectors finished the week higher
Actually outside of consumer staples, which were down 30 bips, all other sectors are down at least a percent if not two.
Mark Kimbrough
Large caps fell 47 basis points against a 1.8% decline in small caps, reversing the pattern of the year so far. Growth, the year's laggard at 4% year to date, added 33 basis points on the week. The equal-weighted S&P 500 fell 1.2%, well behind the version weighted by market value.
The concentration is what held the headline index up
Not all that surprising when you have such an outsized weight in tech in the S&P and that being one of the only up sectors, positive sectors on the week.
Mark Kimbrough
2. A Bear Flattener
Kimmel took the bond market and started with the same point about breadth. Only two sectors of the S&P 500 are up so far in September, the equal-weighted index is trailing the cap-weighted one for the month, and small caps are showing the strain of higher borrowing costs while money goes back into the largest names.
Short-dated yields rose more than long-dated ones, which traders call a bear flattener.
Two-year yields rose 11 basis points, 30-year yields fell 2
We had the Treasury the three-month Treasury was up seven bips. The 2-year up 11 bips on the week, the 5-year was up seven basis points. The 10-year up three, and the 30-year was actually down two bips on the week.
Ryan Kimmel
Two levels were passed during the week.
The 10-year closed above 5% for the first time since 2023
On Tuesday the 10-year closed above 5% and that's breaking the prior closing high of 4.99% we saw back in October of 2023.
Ryan Kimmel
By the time they recorded, the 10-year was back at 4.999%, which Kimmel rounded up himself. The 30-year note hit a new local high the same day.
The 30-year is at its highest since 2007
the 30-year hit a new local high of 5.37% and that is the highest since June of 2007
Ryan Kimmel
Across the bond market the coupon income offset the price moves. The Bloomberg US Aggregate index was down a single basis point on the week: government bonds fell 8 basis points, agency mortgage-backed securities 2, and investment-grade credit was unchanged. The riskier parts did worse, with high-yield bonds down 37 basis points and emerging-market debt down 45, both still positive for the year.
Bank loans were the week's winner
Your big winner was bank loans up 15 bips up 3.3% on the year
Ryan Kimmel
Floating-rate loans reprice upward as short rates rise, which is why that sector has held up through a year of rate increases.
3. A New Range Around 5%
Kimbrough said the week's real movement was in rates rather than stocks, and that what stood out was how calm it had been. Implied interest-rate volatility, the price traders pay to hedge future moves in yields, is well below where it sat in 2023 even though yields are back at the same levels.
Traders are treating 5% as the middle of a range, not a ceiling
the market thinks we're maybe in this kind of you know new regime new trading range maybe you plus or minus 25 basis points around this 5% level
Mark Kimbrough
Kimmel agreed and put it in the language of chart levels.
A broken ceiling usually becomes a floor
usually once we've established that resistance becomes support
Ryan Kimmel
4. Commodities Hold Gains
The Bloomberg Commodity Index added 4 basis points on the week and is up 36% on the year, off the local high it set the week before. Oil gave back some ground in the final days without losing the week.
WTI crude is over $100 a barrel
You've got WTI crude now at over $100 a barrel, just shy of 101.
Ryan Kimmel
Energy has run 37% since the end of June
It bottomed just shortly after the end of the second quarter and we're up 37% quarter to date.
Ryan Kimmel
Kimmel flagged that quarter as something the Fed is watching. Agriculture and livestock were the only groups down, 1.8% and 3.7% respectively. Copper rose about 2.3% on the week. Precious metals gained just under a percent, with gold just short of 4,400 and up 38 basis points. The dollar, measured by the DXY index, is up 2% for the year and rose 1.2% in the week to sit just above 100.
5. Diesel at an All-Time High
Kimbrough moved from the oil price to what it costs at the pump, and framed it as a political problem rather than a market one: a pain point for voters heading into the midterm elections. He said the national average retail price of diesel is now almost $6.50 a gallon, an all-time high on the AAA data series he had been reading, and that California diesel is at $8.39.
Even without a diesel vehicle, a tank now costs three figures
Thankful to not have diesel, but I just filled up my tank this week and it was over 100 bucks.
Ryan Kimmel
Kimmel then argued against his own complaint, using a chart he had published earlier in the week.
Gasoline is a smaller part of the consumer's spending than it looks
but I just still find it so stark to look at the weight of gasoline station spending in the retail sales report
Ryan Kimmel
Spending at gasoline stations has risen from about 7% to about 8% of US retail sales. Before the 2008 financial crisis the share was above 10% and peaked just short of 13%. On his reading the current mix looks more like the 1990s than the 2000s, and the difference is what hybrid and electric vehicles have done to the amount of fuel a household buys.
The context does not make the price any easier to pay
it's not very comforting because I still know it hits everyone pretty hard at the pump
Ryan Kimmel
Kimbrough's answer was that a smaller fuel share should also mean a smaller pass-through from oil prices into the official inflation measures the Fed watches.
6. A Unanimous 25bps Hike
The Federal Open Market Committee raised rates on Wednesday for the first time since 2023. Going in, Kimbrough said, the market had priced the move at about 90% and possibly higher, and most forecasters expected one or two officials to dissent in favor of holding.
Nobody dissented
For one, you know, the decision was unanimous to hike rates 25 basis points to 3 and 3/4 to four percentage points.
Mark Kimbrough
The committee's Summary of Economic Projections, the chart of individual rate forecasts known as the dot plot, went further than the vote. Sixteen of the 18 officials marked at least one more increase by the end of the year and four marked at least two. Kimbrough said that combination is what made the meeting read as hawkish against expectations.
The press conference afterward was unusually brief.
It was the shortest on record
the press conference which was I think it was at 30 minutes the shortest press conference on record since they started doing them regularly
Mark Kimbrough
Regular post-meeting press conferences began in 2011 under Ben Bernanke. Kimbrough read the brevity as deliberate, part of Fed Chair Kevin Warsh's move away from forward guidance, and said he thinks Warsh would ultimately like to stop holding them.
7. Removing Accommodation
The line traders picked out of the press conference was about what the quarter point actually did.
The chair called it removing a dose of accommodation
they were by, you know, hiking 25 basis points, they were removing a dose of accommodation
Mark Kimbrough
He used the phrase three times
And he said this phrase I think three times which implies that you know monetary policy was currently at an accommodative level or not restrictive.
Mark Kimbrough
Kimbrough read out a second line from Warsh directly.
I would be hard-pressed to describe broad financial conditions as restrictive and this view was widely shared by the committee.
Kevin Warsh, quoted by Mark Kimbrough
If policy was accommodative before the meeting, one quarter point does not obviously make it neutral, and Kimbrough did not claim to know where it leaves things.
Nobody knows where policy sits now, only that it is not tight
Are we in neutral? Are we still accommodative? We don't know. But it doesn't sound restrictive by any means.
Mark Kimbrough
The reason the shift landed hard is that Warsh has been hard to read since taking the job.
His first two meetings pointed in opposite directions
You had the June meeting where he was like incredibly hawkish, you know. With a you know significant emphasis on kind of price stability and then you had the very dovish posturing at the July meeting
Mark Kimbrough
September looked like the June version. Short-dated yields sold off as more increases were priced in, the yield curve flattened, and Kimbrough said a lot of people put the rally in long-dated bonds down to the Fed recovering some credibility on inflation.
8. What the Market Prices
Kimmel took the pricing. The next meeting is on October 28.
The market prices 1.3 more hikes this year
for the October 28th meeting, just under 60% probability of another hike. 1.3 hikes are expected by the end of the year.
Ryan Kimmel
And as many as four over the coming year
it seems like market is pricing in maybe as much as three maybe four hikes over the next you know 12 months.
Ryan Kimmel
The median dot for next year was unchanged, but Kimmel said that weighting the individual dots rather than taking the middle one points to a further increase, which gets to roughly three hikes in total through the end of next year. He also made a joke about the dot plot's own future under a chair who is trying to give the market less guidance.
The dots may not survive the year
we'll get to enjoy them while we still have them
Ryan Kimmel
9. Retail Sales Surprise
Kimbrough called the rest of the week's data second tier, then described a retail sales report that was anything but. August sales came in broadly stronger than expected, with gains across most categories and a headline increase of 1.2% on the month.
He watches one component in particular.
The control group is what feeds the GDP estimate
I like to look at the control group which is the component that the BEA uses to estimate subcomponents of consumption in GDP
Mark Kimbrough
That control group rose 1.4% on the month, a rebound from a decline in July.
Forecasters were looking for less than half of it
Consensus is only expecting a half a percent increase.
Mark Kimbrough
Non-store retailers, meaning online sales, rose 2.6% and drove much of the rebound, though Kimbrough noted that line has been volatile over the summer on what may be residual seasonality in the adjustment. The Atlanta Fed's GDPNow tracker has the headline third-quarter growth estimate at 5%; stripping it back to personal consumption and investment, which he uses as a core reading, gives about 4 percentage points.
Consumption is carrying the quarter
So, pretty strong momentum right now in the economy.
Mark Kimbrough
10. Imports, Claims, Output
August import prices, released the same day, rose 0.7% on the month against a 0.5% consensus, another rebound from declines the month before.
Import prices are going the wrong way for the Fed
import prices are up 7%. So, you know, that is not moving in the right direction for the Fed.
Mark Kimbrough
Economists feed import prices into their estimates for the personal consumption expenditures price index, the Fed's preferred inflation measure, which is due at the end of the month. The current forecast is about 0.3% on the month for the core reading, which would put the 12-month rate at 3.2%. Kimbrough cautioned that annual revisions land with this release, and that they could revise the year-over-year figure slightly lower.
Thursday's weekly jobless claims gave the Fed nothing to worry about. Initial claims fell 10,000, taking the four-week average to 203,000, and continuing claims dropped to 1.73 million, below consensus and the lowest since the first week of 2024.
The layoff cycle has not started
So really not seeing any sort of indication of like a rise in layoffs at least based on the weekly jobless claims data.
Mark Kimbrough
The one soft number came out on Friday morning. Industrial production for August was flat against a consensus of a 0.3% rise, with manufacturing down 30 basis points on the month. Kimbrough said autos drove most of that weakness and a rise in utilities output offset some of it.
Bonus Insights
The coming week is light on data. Wednesday brings S&P Global's preliminary September purchasing managers' indexes for manufacturing and services.
Both small declines from the prior for those estimates but still in healthy territory.
Mark Kimbrough
Thursday brings weekly initial and continuing claims again. Friday brings durable goods orders together with capital goods orders and shipments, the last of which feeds directly into the GDP calculation.
So, it's been those numbers have been running a little hot in a great way.
Mark Kimbrough
Kimmel was already using points on that fill-up. He said the tank that cost him more than $100 was priced after he applied points to it, and called that trying to be economical.
The week's news was not the quarter point but the support behind it: a unanimous vote, 16 of 18 officials marking more to come, a chair who will not call financial conditions restrictive, and a bond market that has stopped treating 5% on the 10-year as a ceiling.
Products, Companies & Tools Mentioned
S&P 500 (Down 41 basis points on the week, with healthcare and technology the only two sectors higher and the equal-weighted version down 1.2%)
Bloomberg Commodity Index (Up 4 basis points on the week and 36% on the year, off the local high it set the previous week)
ICE US Dollar Index (The DXY, up 1.2% on the week and 2% on the year, sitting just above 100)
Bloomberg US Aggregate Bond Index (The Agg, down a single basis point on the week as coupon income offset the rise in yields)
DoubleLine (The firm both speakers work at, and the publisher of the Minutes podcast)
Books & Resources Mentioned
AAA fuel price data (Kimbrough's source for the claim that national average diesel is at an all-time high, close to $6.50 a gallon and $8.39 in California)
Atlanta Fed GDPNow (The 5% headline estimate for third-quarter growth Kimbrough checked, which he strips back to consumption and investment for a core reading)
Bureau of Economic Analysis (Uses the retail sales control group to estimate components of consumption in GDP, which is why Kimbrough watches it)
FOMC Summary of Economic Projections (The dot plot, where 16 of 18 officials marked at least one more increase this year)
S&P Global PMI (The preliminary September manufacturing and services readings due the following Wednesday, both expected slightly lower but still healthy)
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