The October edition of the CAPIS Monthly Research Briefing featured insights from Markets Policy Partners’ Brendan Walsh and John Fagan, moderated by CAPIS’ Ed O’Dowd. The conversation explored the evolving U.S.–China trade war, rare earth supply risks, government shutdown dynamics, the Federal Reserve’s shifting posture and fiscal uncertainties tied to tariff policy.
Below is a timestamped recap of the key themes discussed.
00:52: U.S.–China Trade War
The discussion opened with a look at U.S.–China trade dynamics ahead of the Trump–Xi meeting at APEC.
● Face-saving deal expected: John Fagan noted that despite brinkmanship, the most likely outcome is another 90-day extension on tariff threats, allowing both sides to declare progress without fundamental shifts.
● China tightens rare earth restrictions: Brendan Walsh outlined new export controls on heavy rare earth elements and dual-use technologies — a structural move, not a short-term negotiation tactic.
● Tariff and semiconductor tensions: Additional U.S. restrictions on semiconductor exports are expected to heighten trade frictions.
● Messaging over substance: Fagan underscored the Trump administration’s pattern of emphasizing optics and victory framing, even when compromises are modest.
09:00 – 13:30: Government Shutdown: Pressure Points on the Horizon
The conversation then turned to the ongoing government shutdown and potential political pressure points.
● Walsh highlighted two key areas to watch:
○ Obamacare premium deadlines at month-end
○ Soybean harvest season coinciding with farm aid depletion, which could elevate political pressure in agricultural states.
● Fagan emphasized that both parties remain entrenched for now due to low short-term costs, but expects Republicans to ultimately concede on some terms — paired with strong messaging around immigration and fiscal responsibility.
13:30: Fed Update: Dovish Tilt Before a Leadership Transition
With Chair Jerome Powell’s term ending in May 2026, Markets Policy Partners expects the Federal Reserve to deliver additional easing before a likely policy handoff.
● Two more rate cuts expected — in October and December — followed by a pause in early 2026 to give the incoming chair flexibility.
● Leading candidates to succeed Powell include Christopher Waller and Kevin Warsh.
● End of quantitative tightening is likely as the Fed begins its easing cycle.
● Persistent stagflationary pressures remain, with inflation expected at 3.1%, keeping policymakers cautious even amid labor market softening.
● Housing market weakness continues to amplify the case for lower rates.
22:46: U.S. Fiscal Outlook
The discussion shifted to U.S. fiscal risks, particularly the role of tariffs.
● The national debt surpassed $37 trillion, with gold outperforming as investors seek safety.
● Tariffs have become a significant revenue source for the administration, raising the stakes of an ongoing Supreme Court review of emergency tariff powers.
● A ruling against the administration could force the government to refund collected tariffs, creating what Walsh called a “logistical and fiscal nightmare.”
● Even future administrations may maintain the tariff structure for budgetary reasons, regardless of political stance.
Walsh and Fagan closed with a brief look ahead to the midterm election cycle and broader political volatility as markets remain sensitive to policy signals and legal rulings.
31:02 – 31:53: Closing Thoughts
Ed O’Dowd thanked participants and noted that next month’s session will feature Fairlead Strategies’ Katie Stockton, who will provide a technical analysis on market structure and momentum trends.