“What If the Fed Surprises? The Unlikely Oct. 29 Scenario That Could Hit Markets Hard”

Fed’s Oct. 29 Decision Looms as Data Blackout and Shutdown Add to Market Risks

Markets are heading into the Federal Reserve’s Oct. 29 policy meeting with record-high asset prices and an unusual degree of uncertainty. A prolonged government shutdown has halted key economic reports, leaving the central bank without vital data as it decides whether to continue cutting interest rates.

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Shutdown Freezes Critical Labor Data

The U.S. government shutdown that began on Oct. 1 has furloughed Bureau of Labor Statistics staff, delaying the September jobs report that typically anchors the Fed’s view on labor market strength and wage pressure.

With that data now missing, the Fed faces its next Federal Open Market Committee (FOMC) meeting on Oct. 28–29 “flying blind,” as analysts put it — forced to make a decision without clarity on whether inflation is cooling or not.

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Markets Stay Buoyant Despite Data Gaps

So far, investors remain upbeat. Gold closed at $3,886 per ounce on Friday, up nearly 48% year-to-date, driven by central bank accumulation, inflation hedging, and a global shift away from U.S. dollar assets.

Bitcoin traded around $123,196, hovering just below its record of $125,506, supported by continued ETF inflows and growing institutional exposure.

The Dow Jones Industrial Average finished at 46,758.28 and the S&P 500 at 6,715.79, both record highs, as investors bet on continued monetary easing.

Analysts note that with inflation still persistent globally, markets appear priced for more rate cuts and liquidity support through 2025.

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Futures Point to a 25 bps Cut — But the Fed Could Still Surprise

The CME FedWatch Tool shows a 96.2% probability that the Fed will deliver a 25 basis-point cut, while decentralized platform Polymarket assigns a 90% chance to the same outcome.

Still, the missing data increases the odds of a surprise. Without updated labor metrics, some FOMC members could push to pause cuts until more clarity emerges.

Historically, the Fed has leaned toward caution when operating without complete data, preferring to wait rather than risk reigniting inflation expectations.

The shutdown itself also complicates matters — weakening short-term economic activity while obscuring its full impact on growth and employment. A surprise pause could therefore shake both stock and crypto markets, which have rallied sharply on expectations of steady easing.

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Alternative Indicators Offer Limited Guidance

With official data unavailable, the Fed will rely more heavily on private and regional reports — such as ADP employment, ISM surveys, and regional Fed indexes — to gauge economic conditions.

If these hint at softening inflation and slower hiring, a 25 bps cut remains likely. But stronger numbers could tilt the decision toward a temporary hold, disrupting market assumptions just days before month-end.

Should the shutdown end in mid-October, the delayed September jobs report could still arrive in time, potentially confirming whether conditions justify further easing.

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Why a Larger Cut Is Off the Table

A 50 basis-point cut is widely ruled out. Inflation remains well above the Fed’s 2% target — particularly in services — and a larger move would risk signaling policy complacency.

Fed Chair Jerome Powell has repeatedly emphasized a “data-dependent and cautious” approach, making another moderate step the more credible option.

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Protecting Against a Surprise Pause

For traders, even a small deviation from expectations could jolt markets. Analysts suggest:

• Buying puts on Bitcoin or major equity indexes to hedge against sharp drawdowns.
• Reducing leverage or rotating into less volatile holdings.
• Adding exposure to gold or Treasuries for defensive balance.
• Using volatility products to capture sudden market swings.

Institutions employ these strategies routinely; retail investors now have easier access to similar hedging tools.

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Bottom Line

Markets are pricing in a clean 25 bps Fed cut — but with the government shutdown silencing key data, the central bank’s decision could still catch investors off guard. In a market this optimistic, even a small policy surprise could deliver outsized shocks across both Wall Street and the crypto market.

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