The Strait of Hormuz will decide the Fed's December meeting, and the American tape is spending today on Microsoft's cloud margins instead. Good morning and welcome to today's market chronicle. It's Wednesday, October 28, 2026.
Yesterday's close was pleasant and almost meaningless. The S&P added about six tenths of a percent, the Dow did essentially nothing, and overnight the futures split along the familiar line, Nasdaq up a third, Dow lower, everyone agreeing that two o'clock this afternoon is the event of the day. The committee will hold at three and three quarters to four. Nine in ten say so. The live question is December, where roughly three quarters of a hike is priced.
That hike is not a story about American demand, it is the Strait. Tankers burning, the Houthis still hitting Saudi infrastructure, and a war premium that has walked directly into an inflation print running at 3.7 percent. Warsh will be asked about energy this afternoon and he will say, correctly, that the Fed does not forecast geopolitics. Which is also a confession that American monetary policy is currently being set by whoever happens to be in the room in Tehran this week. Saudi, Turkish and Pakistani officials flew in to discuss reopening the waterway, conditionally. No equity desk in New York has that meeting on its calendar.
I spent twenty minutes before five this morning reading about those envoys and nothing at all about Microsoft (MSFT) capex, which tells you where my head is and possibly why I have trailed the index since August. I keep reaching for 1979. Oil shock, a hawkish Fed, gold doing something violent. Except that in 1979 gold went up and kept going, and this autumn gold has lost about fourteen percent from its August high while a shooting war runs in the Gulf, because real rates rose and the metal obeyed the discount rate rather than the headlines. The parallel dies there. I will probably reach for it again next week.
Ahead today: the Fed at two, Alphabet (GOOGL) after the close, Microsoft half an hour behind it, and an evening of grown adults reading Copilot seat counts like entrails. Thursday is the paper that actually matters, first-estimate third quarter GDP and September PCE, plus the ECB. The midterms are next Tuesday and nobody has mentioned them to me in a week.
No single trade earned the paragraph today, which is itself worth saying. So the shape of the Mosaic Mid-Horizon sleeve instead. Thirty-eight percent sits in the Vanguard S&P 500 ETF (VOO), and after that nothing exceeds eight percent: momentum, US small-cap value and quality at eight each, then six apiece in SPDR Gold MiniShares (GLDM), the iShares MSCI Israel ETF (EIS) and developed international. Semiconductors, energy, Asia and international small-cap value hold five each. Last rebalanced in August, still drifting toward more Asia and lower fees.
Gold is around $4,060 and flat, WTI a shade under $100 with Brent near $114, Bitcoin at $80,850, S&P futures at 7,766.50 and the ten-year at 4.99 percent, still refusing to print a five in front of a room this nervous.
A central bank that cannot say the word Hormuz out loud will spend the winter being surprised by it. Stay sharp.
Salomon