Surrender by the Fed is by no means assured simply because of the UK's capitulation, nor by acknowledging that other factors beyond the Fed's excess easiness preceding this tightening cycle, contributed greatly to inflation.

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A big 'surrender' was taken by the so-called Persian Gulf Oil fiefdom 'frienemies'.  

Neither POTUS nor Fed yet acknowledges the latter. So now with Oil headed higher, it's likely their fairly linear view will have them believing that requires a tougher and longer stance. Bostic already says they shouldn't ease up, and of course stay 'resolute' in lowering inflation. Again he thinks they have sufficient 'policy power' to achieve that, and in the current backdrop they actually don't. 

What that means is that the continued debate over cause & effect persists, as a theme about consumer 'resilience' also contributes to Fed toughness, even though there too they actually punish a huge swaths of citizens using credit. It is incredible how Saudi Arabia enriched itself today, while supporting Russia's war effort (whether their intent or not), and empowering the Fed hawkishness in the process, even though you know hiking rates is not the right response. I listened to the Saudi Oil Minister in Vienna, he was more slick than grease.

This was all true before this week's snappy rebound, but actually that's part of how the market rebounded, and may likely extend. Few believe the pain is over, fewer think this Fed will pivot 'soon' (although eventually of course they will), while at the same time a 'crowded short side' set-up the rebound. And the war goes on, with Russia very much on the defensive, and Putin a loose cannon. I expected an Oil rebound lately as you know, but the logic as they presented it .. incomprehensible. Maybe the Saudis should start buying Russian military gear. 

In-sum: 

The bears can be correct about a credit destruction impact on most of society, while the meaning to the market can temporarily be the opposite. It is also how we had the build-up to the rebound, but makes it trickier ahead. 

Combine the (greedy) OPEC+ output reduction ('headline of 2 million bbl daily but more like below 1 million reduction due to production limitations) which of course helps our Oil rebound regardless of variable consumption levels, and you have the Fed's mistaken (policy error) view that they can break inflation in this mixed economic and geopolitical environment. I suppose they can with a heavy hand, but the trick is not to wreck the economy while trying to save it.

As mentioned the other day, the rebound is impressive enough, alternating bull/bear debates about sustainability have so many variables that it's hard if not impossible to divine the near-term outcome. So, a bit more upside might set-up risk of something breaking, especially if the Fed-heads speaking are extremely linear (overtly hawkish) in their comments in the days just ahead. I hope that's not the case, but traders have to view the near-term realistically.

For the moment probably more upside to come.

In my comments I was pretty hard on Saudi Arabia, and I think justifiably so, especially during a wartime environment in which they should be doing lots more to help Europe, rather than pass the mantle further to us to do so. That they did this in their first recent 'live' OPEC meeting in Vienna is insulting too, as basically among Austrians who suffer from high energy concerns too. Even China should be dismayed at OPEC's move, and cool toward Russia too.

OPEC claims they are merely offsetting declining demand, and that's mostly a cop-out, especially since demand (including from China) should increase as it moves past the COVID lockdowns, which we're not hearing much about now. It seems 'as if' COVID is seriously on the wane (finally, which allows speculation what if anything China is trying to prove if they extend any of those closures.

We tend not to embrace the dour idea of 'teaching intentional austerity' to all their people, in-anticipation of tougher times during a prolonged struggle with Taiwan. With a little luck, China's Xi will look at Putin's experience and prefer not to emulate that, including realizing how ineffective Russia's weapons for the most part were -aside from the horrible civilian toll- given the PLA mostly uses Russian or basically Russian-designed weapons systems themselves.

Sorting-out the Ukraine war, including compromises that the Kremlin recently welcomed from Elon Musk of all people, is important (Musk's ideas were close to my own thoughts regarding Crimea, but mine were expressed earlier in this war, before the human toll makes it less palatable to Ukraine to consider that).

I believe there's a direct and indirect linkage between inflation, Oil prices and even the Dollar strength, that an end to the conflict would address helpfully, in addition to the Fed's policies which have had (as suspected) little real impact other than destroying credit for those who probably need it most in society.

Bottom-line: 

It's too early to be convinced (especially in October) that we're home free and don't have continued risk. However there is psychology that wants to have the recent low as a 'secondary test of the June low'. Sounds great but premature to conclude that, though I'd be thrilled if it were so.

Of course speculative shares bought near the lows are looking better, and in the case of the 'already crashed' stocks are likely less concerning that those monster-cap 'Grand Dame' stocks. The 'already-crashed' stocks may ebb and flow a bit, simply because bargain buyers collide with tax-loss sellers, but at the same time it can be in preparation for a good Q1 of 2023. Trouble is we're still in early October, and I suspect there's several battles still ahead.

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