Markets cheered a ceasefire and falling oil, but the latest Fed minutes reveal deeper concern about sticky inflation, fragile hiring, and the risk of policy whiplash.
KEY TAKEAWAYS
The latest FOMC minutes showed that some officials argued for language that would have signaled the possibility of rate hikes. That debate never made it into the public statement, creating a gap between the Fed’s public posture and its private discussion.
Inflation concerns inside the Fed remained serious, with participants warning that progress toward 2% could be slower than expected. Officials also worried that repeated above-target inflation could make long-term expectations more sensitive to energy shocks.
The labor market was described as more fragile than the headline unemployment rate suggests. Job growth has become concentrated in less cyclical sectors like healthcare, leaving the broader employment backdrop vulnerable to a sharper deterioration if shocks hit.
Two separate threats are now converging on hiring at the same time: geopolitical energy risk and AI-related caution from companies. That combination raises the odds of slower hiring even if headline market sentiment temporarily improves.
MY HOT TAKES
The market may have priced a clean resolution far too quickly. A two-week ceasefire is being treated like permanent clarity, which is a very generous assumption in the middle of an unstable geopolitical situation.
Fed watchers who only read the statement missed the more important story in the minutes. The internal discussion was materially more hawkish and materially more worried about labor fragility than the market seems willing to admit.
The unemployment rate is masking weakness rather than disproving it. When hiring is concentrated in defensive sectors, the labor market can look healthy right up until it suddenly doesn’t.
AI is no longer just a productivity story for markets to celebrate. It is now also showing up as a reason companies may slow or delay hiring, which makes the employment picture more complicated than the bullish narrative suggests.
The real risk is not simply inflation or recession on its own. The bigger problem is that both inflation pressure and labor softness can exist together, leaving the Fed with less room to deliver the easy-policy outcome investors keep trying to price in.
You can quote me: “The rave ended, but unfortunately, the hangover math still applies.”
What did you just say–I didn’t quite hear that? Wow, what a day. Why did I stay up late reading through piles of articles from all of my favorite sources–you know who you are? 😉 We have a ceasefire–or at least that was what was reported. I wrote about it yesterday and even recorded several videos about it. I went on national TV and talked about it. We do have a ceasefire…right? Unsure? Just check the markets. Stocks were up bigtime yesterday and crude oil–the cause of sheer pain for these past several weeks–fell by some -16% today. The VIX fear index fell to 21 from almost 25. Get out the bubbly for a toast. Yesterday’s trading session actually felt like some sort of endorphin-driven rave like the ones in the movies. The ones with the following scene featuring someone waking up on a park bench somewhere, or worse, with a Police photographer covering his mouth with a handkerchief. Yeah, it was like that–a 1300 point eruption on the Dow. Nothing could stop it, even Iran’s maybe-government saying that the Strait of Hormuz was closed again after a pontoon boat and few other random ships braved the narrows. Nope, stocks went up and stayed up while crude fell and stayed down.
I could just end this blogpost/newsletter here and call it a day. But no, it’s just not my style. I’m on the hunt for cracks in the foundation. Cracks which would disrupt my bull thesis–you know the one about the slingshot that I have shared on TV, the Press, and with, yes you, the more than 8 million people who get these notes daily. 🙏
During yesterday’s dance party–somewhere after the guy with the big mouse mask whipped the crowd into a frenzy and when the big robot-puppet-thing walked across the stage–or was it when the DJ threw a big cake at some willing audience member in the second row–I lost track–someone mentioned something about some meeting minutes from the Fed’s FOMC meeting last month. Wait, now it’s coming back to me. I warned you about these minutes and begged you to pay attention. Did you?
Well, I'm paying attention for you. And what I found buried in those twenty-one pages is going to make you set down your champagne glass and the glow sticks.
Let me start with what the Fed actually said about inflation, because the headline version–"Fed holds, sees one cut, nothing to see here"--is not the version that was argued inside that room three weeks ago. The most powerful bankers on the planet looked at each other and made the case for language in their public statement that would formally signal rate hikes could be coming. Not cuts. HIKES. Did you miss that? If you are unsure, read it again–it’s important. Some FOMC members argued for it–language about rate hikes. Thankfully, they lost the argument, and the statement that Powell walked out and read to the cameras said nothing of the sort. But the minutes–the actual transcript of what was debated behind closed doors–are now on the record. The public posture and the private deliberation are not the same thing. 👎 That is the first crack in the foundation I was hunting for.
Now before you tell me that a ceasefire changes all of that, let me stop you right there, because that's exactly what the market told itself today. Rate cut odds swung from near zero to 56% for year-end in a single afternoon. One session. Based on a two-week truce that Iran's own parliamentary speaker said yesterday night was already being violated. The minutes were released at 2 PM yesterday, right in the middle of the rave, and Wall Street barely looked up from the dance floor. I looked. And here is what the Fed was actually worried about three weeks ago, before any of today's euphoria, when oil was fifty percent higher than it was before this war started and nobody was talking about a ceasefire.
The inflation picture coming into that March meeting was not pretty. Core PCE was running at 3.1%. Core goods prices were elevated, tariffs were adding pressure, and non-housing services inflation was still running hot relative to pre-pandemic levels. The vast majority of participants said progress toward the Fed's 2% objective could be slower than previously expected and that the risk of inflation running persistently above target had increased. That's not a fringe view expressed by one dissenter. That's the overwhelming consensus of the room. And some of those participants went further and explicitly raised the concern that after several years of above-target inflation, longer-term expectations could become more sensitive to energy price increases…uh hmm…this means that even a temporary oil shock starts to do permanent damage to how businesses and consumers think about prices going forward. Today's ceasefire knocked oil down some -16%! But crude is still sitting roughly $25- $20 above where it was the day before this war started. The arithmetic of inflation is not resolved. The rave ended, but unfortunately, the hangover math still applies.
But here is where the minutes get genuinely alarming. It is not the inflation side of the equation. It is the labor market, and what the Fed described inside that room goes well beyond the benign summary that Powell offered at the podium. The vast majority of participants said risks to the employment side of the mandate were skewed to the downside. Many participants specifically cautioned that in the current environment of low job creation, labor market conditions appeared vulnerable to adverse shocks. They warned that the concentration of job gains in a few less cyclically sensitive sectors–and the dominant one they were pointing at is healthcare–was potentially signaling heightened vulnerability in the overall labor market.
Let me translate that out of Fed-speak, because this is important. The unemployment rate has been holding relatively steady. And on the surface that looks reassuring. But the jobs being created are overwhelmingly in sectors like healthcare that don't respond to economic cycles the way construction, manufacturing, or professional services do. Healthcare doesn't shed jobs in a typical downturn. So the headline number is being artificially propped up by a handful of defensive sectors while the rest of the labor market quietly deteriorates underneath! The Fed saw this three weeks ago. They called it out. And they warned that when an adverse shock arrives, the unemployment rate doesn't drift upward slowly and politely. It snaps. Because in a low-hiring environment, there is no buffer. One bad quarter and there is nowhere for displaced workers to go.
Now here is the part that should keep you up at night. The minutes reveal that two independent forces are converging on that same fragile labor market simultaneously. The first is the geopolitical energy shock from Iran, which was raising the risk that a protracted conflict would weigh on business sentiment and further reduce hiring. The second is AI. The Fed's own minutes note that many participants cited evidence from business contacts and surveys suggesting that firms were likely to delay or reduce hiring in anticipation of AI adoption. These two dynamics–a war-driven energy squeeze and a technology-driven hiring freeze–appear in the same paragraph of the minutes because to the people in that room, they are not two separate stories. They are one story. The labor market was already threading a needle before the first American bomb fell on Iranian soil. The war made it worse. And now the ceasefire has the market convinced the needle-threading is over and the easy money is back.
The minutes say otherwise. And the timing matters enormously. The next FOMC meeting is April 28th and 29th, about three weeks from now, landing right at the end of the two-week ceasefire window. If that ceasefire is fraying, which Iran's parliament suggested late yesterday it already is, the Fed walks into that meeting with a document on the record showing that some members already made the case for hike language, that the labor market is structurally fragile in ways the headline number disguises, and that two independent shocks are hitting it from different directions at the same time.
So yes, yesterday felt like a rave. The Dow rocketed higher by 1300 points, crude collapsed, and for a few hours it genuinely felt like the world had pulled itself back from the edge. I understand the relief. I felt it too. But I have been around long enough to know what comes after the rave. Someone wakes up on a park bench. The questions start. And the people who danced the hardest are the ones asking where they left their portfolio.
The constructive note I will close on is this. The minutes also make clear that the Fed has the tools and the awareness to respond to both scenarios–a softening labor market that warrants cuts, and a stubborn inflation picture that demands patience. They are not asleep. They are watching. The question is not whether they are paying attention. The question is whether you are. Read the minutes. Not the press release. Not the summary. The document. Because the rave is fun until the music stops, and right now the DJ is reading twenty-one pages of Federal Reserve deliberations that most of the crowd never saw. 👀
YESTERDAY’S MARKETS
Yesterday's session was the best day on Wall Street since April 2025, driven entirely by ceasefire euphoria and collapsing oil prices. The Dow surged by 2.85%, the S&P 500 gained 2.51%, and the Nasdaq added +2.80%. West Texas Intermediate crude posted its biggest single-day drop since April 2020, plunging more than -16% to close at $94.41 a barrel. The VIX fear index fell nearly 18% to close at 21.
NEXT UP
Personal Income (February) is expected to have increased by 0.3% after a 0.4% gain in January.
Personal Spending (February) may have risen by 0.6% after climbing by 0.4% in the month prior.
PCE Price Index (February…before Iran) is expected to have fallen to 3.0% from 3.1%.
Initial Jobless Claims (April 4th) is expected to come in at 210k, up from last week’s 202k claims.
Annualized quarterly GDP (Q4) may come in at 0.7%, in line with the last estimate.