David Hunter: The Fed Just Hiked Rates: Here's What You Need to Know | The Outlier Podcast

Summary

• David Hunter saw the 25bp hike — the first in three years — as fully priced and correctly executed, with the selloff coming only at the hawkish presser, not the print. With 90% of traders expecting it, “it’s usually not a good idea to go against that,” and Warsh’s talk of price stability as the Fed’s “biggest goal” and policy not being restrictive enough briefly rattled E-minis and small caps. Hunter’s bigger tell: the economy absorbed oil going from the low 60s to over $100 and $6+ diesel with the S&P only ~3% off all-time highs — any selloff should be “pretty short-lived.”
• Hunter’s out-of-consensus call: this may be a one-and-done, and rates are at a three-year top. Core CPI at 2.4-something says underlying inflation is contained, 30-year mortgages around 7.17% and possibly above 7.2% are already slowing housing in Dallas, Atlanta and other Southern markets, and the ~52% December-hike odds will “trend down, not up.” Rates around 5.016% have moved just through the October 2023 5% level — “we’re in the area of a top” — and in the coming global bust “you could get a 0% 5-year. I’m either gonna be dead right or dead wrong.”
• All melt-up targets stand: S&P 10,000, Dow 70,000, Nasdaq 36,000, Russell ~4,000 — with the only Q3 revision being copper from $8 to $9. His contrarian logic rests on sentiment: Wall Street is full of “closet bears” with “one foot out the door,” and “you don’t get tops when that many people are nervous.” No catalyst is needed — softer data plus lower rates and a weaker dollar can restart the run, and a 35–40% move could happen within four to six months.
• The most aggressive call is metals: silver to 200 — “basically a triple” — and gold to 7,000, both within roughly 3–6 months. Silver’s pullback from 72 to 61–62 matched his forecast 10–15% correction and it’s back to the mid-60s; gold bottomed just below 4,000 in July and sits at 4,300. These are “at the top of the performance list for this last run before we top out,” with copper “pretty much a no-brainer” on low inventories, limited supply and data-center demand.
• Sector map: SMH to 800 (~40%+ from 543), XLB to 85 (~70% upside), plus financials and biotech/healthcare — while disfavoring consumer staples and utilities. His staples cynicism is structural: cereal went “from $2.50 a box to $7.50” via endless 25-cent hikes — “it’s not a unit growth story” — and the K-shaped consumer is substituting into generics while MAHA pressures names like Campbell Soup.
• AI remains the earnings engine, but Hunter warns against straight-lining it: “I’ve got that canyon in between.” He views the recent AI/semis pullback as a good correction and expects higher highs in both, with data-center construction, power, reshoring, Taiwan chip concentration and rare earths providing visibility through the decade — but a “pretty darn big correction in AI” can come before the next cycle when the market tops.
• Midterms are the tail risk: if Democrats take both houses with a working margin — court packing, Electoral College abolition and Puerto Rico statehood — Hunter warned, “we could be seeing the end of America as we know it.” The host pushed back that extremes are loud but small in number, and compared it with the left’s fear of a Trump third term. The host later linked the sovereignty concern to a “New World Order.” Hunter remained bullish anyway: “it’s hard for me to believe that the election is going to mark the top.”

Deep dive

1. The hike was priced; the hawkish presser wasn’t

• Hunter expected the quarter-point: 90% of traders had it priced, and “if you’ve got that kind of strong expectation, it’s usually not a good idea to go against that.” Warsh insists he’s “not hostage to the markets,” but Hunter’s read is that the Fed rarely defies a consensus that strong — and the hike was described as unanimous.
• Host Eric’s tape observation: everything stayed green after the print; E-minis and small caps only dipped negative during the presser — and small caps had trended unusually lower into the event versus a typical FOMC lead-in. Hunter’s explanation: Warsh’s insistence that price stability is “our biggest goal,” that the committee felt it was behind and policy was not restrictive enough, and that the economy and inflation are strengthening, not weakening, “may have taken the market a little bit aback.”
• The stronger signal for Hunter is what didn’t happen: the economy absorbed oil going from the low 60s to over $100 and $6+ diesel, with the S&P only ~3% off its all-time high. That “speaks to the strength of the underlying market” and to earnings still propelling it — “a quarter point hike is not going to get in the way of this bull market.”

2. One-and-done, and rates are topping

• Against the CNBC line that “they’re called Fed hiking cycles for a reason,” Hunter disagrees: core CPI at 2.4-something says underlying inflation is contained once the Iran-war oil spike and other volatility are separated out, expectations aren’t running away, and rate-sensitive housing is already slowing in some markets — 30-year mortgages at 7.17%, maybe over 7.2% today, with slowdowns in Dallas, Atlanta and the South. December odds of 52% for another hike “probably make sense” today, but “that number is going to trend down, not up.”
• His rates call is unchanged and stark: rates around 5.016% have moved just through the October 2023 5% level — “with lots of tops and bottoms, you go through that level by a little bit and then reverse.” Ultimately he sees a global bust, recession, “and ultimately something worse than that because of leverage,” in which “you could get a 0% 5-year. I’m either gonna be dead right or dead wrong.”
• On transmission mechanics: a quarter point “is not something that’s going to stop an economy on a dime” — it’s primarily a psychological signal outside mortgages. Market discounting can happen in a day or two or three; the reaction to the presser usually plays out over the next 24 hours or a little more. Minutes on a unanimous hike matter about as much as “a revision on GDP… by the second or third revision, it doesn’t matter.”

3. Killing forward guidance: Warsh versus the spoon-fed

• Hunter backs the removal of forward guidance: Warsh doesn’t want markets setting rates off Fed hints — “I want the markets to figure that out based on their analysis of the economy and data.” The critics still fighting it “want to be spoonfed,” with Steve Leeman and CNBC “cheerleading it along… they have their biases and you see them in their commentary.”
• The veteran’s context: a Fed watcher since 1973, Hunter recalls the era when “all we cared about every Thursday was what’s M1” — regimes change and markets take a while to adjust. His deeper conviction: “the law of large numbers… I put more faith in what the market tells me than any Fed chairman or any Fed member.”

4. Iran, oil, and the midterm overhang

• Crude ran from the high 80s to 105.6 in days, and Hunter concedes “the burden of proof is on people like me who think oil prices are going to head lower.” But he rejects the “another Iraq” or “just like Ukraine and Russia” framing: Iran’s leverage is the midterm election itself, and after the midterms “they lose their leverage” — Trump gets a couple-month window before new members take office. At the close, Eric noted that oil had already fallen from the hundreds to $68 in an earlier move and thought it could do so again.
• The election scenarios: if Republicans hold the Senate but lose the House, Hunter sees that as “still a bullish thing” — gridlock, and Trump “hasn’t gotten a lot of cooperation from his own party” anyway. Hunter singles out Thune lining up senators to block recess appointments and describes “an awful lot of RINOs” as loyal to “that Washington swamp.” But he warned that a sufficiently large Democratic majority could enable impeachment efforts, court packing, Electoral College abolition and Puerto Rico statehood; under that combination, “there will never be a Republican president again.”
• Eric’s pushback — worth keeping: “both the extreme left and right tend to be pretty loud but smaller in number… I imagine it’s the same fear the left has if Trump goes for a third term, which he himself has said, which is crazy.” In the exchange, the host linked the broader sovereignty concern to a “New World Order.” Hunter continued to warn about the risks but remained bullish: “it’s hard for me to believe that the election is going to mark the top. That’s not typically what drives markets. Earnings are still going to be strong.”

5. Targets unchanged: S&P 10,000, and sentiment says no top

• All numbers stand from June: S&P 10,000, Dow 70,000, Nasdaq 36,000, Russell ~4,000; the only Q3-letter change was copper from $8 to $9. “Everything I see says full speed ahead… bullish as bullish can be.”
• The contrarian core: Wall Street is full of “closet bears” who have had “one foot out the door” for years — “you don’t get tops when that many people are nervous, skeptical.” He explicitly doesn’t need a catalyst: slower data, a small bond rally, a weaker dollar — “next thing you know, the market’s up.”
• On AI, the week’s “end of the world by 2030” chatter doesn’t move him: he thinks there has been a good correction in AI and semiconductors and still expects higher highs in both. But the buildout isn’t linear — “I’ve got that canyon in between” — a sharp AI correction at the market top, then a next cycle built on power, reshoring, rare earths and semiconductor plants onshore, because “Taiwan Semiconductor produces such a big percentage of chips and China’s threatening to go into Taiwan.”

6. Sector map: semis and materials over staples

• Concrete levels: SMH target 800 against ~543 — “40-something percent upside” — with the Magnificent 7 and tech offering potentially similar upside; XLB target 85, roughly 70% up, as nervous AI-concentrated money broadens into materials; financials remain another area he favors; biotech/healthcare “has certainly picked it up” despite not historically being on his list; staples are an area to underweight and utilities typically perform below average.
• His staples takedown is the episode’s best micro riff: “your cereal that used to sell for $2.50 a box sells for $7.50” through 25-cent increments — “it’s not a unit growth story, it’s just earnings growth coming through pricing” — and now the K-shaped consumer is substituting generics while Make America Healthy Again pressure hits names like Campbell Soup. P&G or Colgate have brand-extension flexibility; “a Campbell Soup or a General Foods, I’d be more concerned.”
• Eric’s addendum on the changing defensive playbook: “a lot of defensive rotation is now into Apple” rather than staples. Hunter said he did not track the trend closely enough to assess that shift, but reiterated that staples may not even sustain their slow growth.

7. Metals triple, and the parabolic you only see in hindsight

• The biggest coming story is metals: silver got down to 55, ran to 72, then delivered almost exactly Hunter’s forecast 10–15% correction, to 61–62; it’s back in the mid-60s. Target: 200 — “basically a triple” — within 3–6 months, “probably less.” Gold bottomed just below 4,000 in July, sits at 4,300, and goes to 7,000 on the same horizon. “Those are the areas at the top of the performance list for this last run before we top out.”
• Copper at $9 is “pretty much a no-brainer” — low inventories, data-center demand and limited supply. Agricultural commodities — corn, wheat and soybeans — have finally moved up from dormant lows, but “I’d be careful because I’m not sure there’s a lot of upside from here” for the trend-followers jumping on.
• His closing frame on timing: on the monthly chart, the market has continued making higher highs and higher lows since the move that began at the end of March, and “parabolic is something you’ll see when you look back and say, look at that last leg, that was almost vertical.” A 35–40% S&P move in four to six months “is a hell of a run” — no calendar deadline. Hunter said rates need to roll over; Eric said oil prices need to roll over and expected more clarity in the next week or two on whether October could be a bullish month.