In today’s big story, we’re looking at how Wall Street’s dream of a soft landing for the economy might be dashed.

• Markets: A September report card from some top hedge funds.
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For what feels like the umpteenth time, the consensus on whether the US will fall into a recession has changed.

This go round, Wall Street’s dream scenario of a soft landing — taming inflation while avoiding a recession — is on life support, writes Insider’s Matthew Fox.

(If you’re looking for an exact number of flip-flops, famed economist Mohamed El-Erian pegged it as the sixth time consensus has shifted in the past 15 months.)

As Matthew details, the crux of the issue is three simple words: “higher for longer.” In the Federal Reserve’s fight against inflation, chair Jerome Powell has made clear his expectation to keep the benchmark Fed Funds rate above 5% well into 2024.

And while the S&P 500 was initially able to notch significant gains in the first half of the year, the wheels have started to come off as relief from high rates seems unlikely.

September was brutal for stocks, and the bond-market sell-off hasn’t helped. Soaring 10-Year US Treasury yields mean a risk-free investment offering nearly 5% returns, making stocks even more unappealing. And don’t look now, but bond yields could edge even higher.

You’re not wrong if that’s your initial reaction reading all this. Friday’s job report was indeed strong. The US added 336,000 jobs last month, nearly double what was forecast, while the unemployment rate held at 3.8%.

The US consumer, meanwhile, has been resilient, spending in the face of rising inflation. However, the cracks are starting to show in that foundation.

But therein lies the problem. If the economy continues to excel despite inflation, the Fed won’t feel comfortable lowering rates and losing the progress made.

Hence the will-it-won’t-it recession talk that has dominated market conversations for over a year.

If all this discussion of a recession is bumming you out, understand it’s not a foregone conclusion. While executing a soft landing has gotten considerably more complicated, it’s not impossible.

It’ll be a wait-and-see as all eyes are on the Fed’s rate decision on November 1. CME’s FedWatch Tool, which tracks the likelihood of the Fed’s decision according to interest-rate traders, favors another pause on hikes.

But if the past 15 months have been any indication, the only certainty seems to be more uncertainty.

🔔 Before the opening bell: US stock futures fall early Monday amid geopolitical risk after Hamas attacked Israel.

2. The bond-market bummer isn’t going anywhere. Market experts weighed in on what to expect amid a massive sell-off of government bonds. In short, yields will keep climbing.

3. What the return of student-loan payments means for the economy.  After a three-year hiatus, Americans’ federal student-loan payments are back. And while some have predicted the resumption as “a relatively contained headwind” to the economy, the number of ways to ease repayment could spread the impact over a longer period of time.

2. Meta’s Responsible AI team shrank amid layoffs and restructuring. Facebook’s parent company is among the major tech companies trying to develop new AI models and tools. Yet the team tasked with ensuring that new AI tech was “fair and inclusive” is half the size it was in 2021. Plus, the team now focuses more on compliance instead.

3. Apple’s HQ is in Cupertino, but its heart is in China. Many Apple devices are manufactured in China, and the country is a growing market for the company. But this is a growing problem for the iPhone maker as tensions grow between the US and China.

2. Only three extreme scenarios would return the US housing market to pre-pandemic affordability. The lack of inventory is keeping prices pretty elevated. For it to be considered affordable again, incomes would have to spike 55% or something else drastic has to happen.

3. Your boss wants you to know how to use AI. You don’t have to be a pro at it. But employers at least want people who are AI literate. Careers experts shared that it’s important to embrace the technology as it becomes more pervasive.

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• Arizona union claims TSMC is stalling an agreement that would make the Phoenix plant safer and more efficient.
• Instagram is trying to target Gen Z with new features like audio notes.
• The 52 most important VCs in Boston, according to other VCs.

• Indigenous Peoples’ Day is observed in most US states. South Dakota and Oklahoma observe it as Native American Day. While Hawaii observes it as Discoverers’ Day, and Alabama observes it as American Indian Heritage Day.
• Vegan Fashion Week kicks off in Los Angeles. It focuses on ethical fashion and tries to foster a more sustainable future.
• Happy birthday, Bella Hadid! John Lennon, Ben Shelton, and Sharon Osbourne were also born today.

Dan DeFrancesco, senior editor and anchor, in New York City. Diamond Naga Siu, senior reporter, in San Diego. Hallam Bullock, editor, in London. Lisa Ryan, executive editor, in New York.

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