Fed Raises Rates to 4%: Warsh’s Warning Sends Banks and the S&P 500 Plummeting
The interest rate hike had been expected, but Kevin Warsh’s message hit the markets with full force. On September 16, the US Federal Reserve unanimously raised its target range by 25 basis points to 3.75–4.00%. It was the first hike since July 2023. The S&P 500 subsequently slipped intraday from around 7,615 to as low as 7,519 points, but recovered to 7,630 points by the end of yesterday.
Warsh attributed the move not to a weak US economy, but to a resilient one. Consumer spending, investment, and the labour market showed strength. At the same time, he noted, financial conditions could hardly be described as restrictive. The Fed had therefore removed a “dose of monetary easing”. Even more significant was his warning about inflation: inflation was too high and had been for too long. The summer data showed no significant improvement in the underlying trend. His benchmark, that inflation must move clearly and at a sufficient pace toward the 2% target, had not been met. The Fed’s focus is thus clearly on price stability.
Warsh nevertheless avoided making any firm commitment to further rate hikes. The projections, however, speak for themselves: the median policy rate is projected to be 4.1% at the end of both 2026 and 2027. The 2% inflation target is not expected to be reached again until 2029. The market also anticipates further increases. For the next meeting on October 28, the CME FedWatch Tool indicates roughly an even split between holding rates steady and another hike. However, the probability of rates remaining unchanged at 3.75 to 4.00% through the December 9 meeting is only 11.5%. The market is pricing in a 49.5% probability of a hike to 4.00–4.25%, and a 39.0% probability of a rise to 4.25–4.50%. Taken together, the market thus sees an 88.5% probability of at least one more rate hike by December. Expectations for the end of 2027 also point to higher interest rates compared to today’s levels, though they are particularly uncertain over such a long period.
The Dollar Index jumped to 100.33 points, while 10-year US Treasury bonds yielded around 5.02% and 30-year bonds yielded 5.36%. Gold also turned sharply lower following the Fed’s decision. The spot price fell more than 1% and briefly dropped to around USD 4,240 per ounce, but buyers quickly stepped in, and an ounce of gold now costs USD 4,325 again. The sell-off in financial stocks was particularly notable. JPMorgan Chase (WKN: 850628 | ISIN: US46625H1005 | Ticker: CMC) lost 1.01%, Bank of America (WKN: 858388 | ISIN: US0605051046 | Ticker: NCB) 2.72%, and Goldman Sachs (WKN: 920332 | ISIN: US38141G1040 | Ticker: GOS) 3.96%. While higher interest margins are helping, weaker credit demand, rising default risks, and losses in bond portfolios are weighing on the sector.
At Realty Income (WKN: 899744 | ISIN: US7561091049 | Ticker: RY6), refinancing and valuation risks are rising at the same time. The same applies to other real estate companies, highly leveraged firms, and highly valued growth stocks. Germany remains indirectly affected: Higher US yields could further drive up European financing costs, thereby exacerbating the consequences of the ECB’s latest rate hike.
Lahontan Gold Poised to Move into the Next Phase
In 2026, the gold sector is operating in a contradictory environment that remains highly attractive for explorers and project developers. While high interest rates traditionally dampen the appeal of non-interest-bearing, non-dividend-paying public companies, concerns about inflation, geopolitical uncertainty, and demand for real assets are simultaneously supporting high price levels. For Lahontan Gold (WKN: A3DKKY | ISIN: CA50732M1014 | Ticker Symbol: Y2F), this is a favourable window of opportunity to credibly underpin its transition from a gold explorer to a mine developer. The focus is on the Santa Fe project in Nevada, which is maturing from a project with a history of resources and exploration alone into one that can be planned for operations. The key factor for this project is less short-term speculation about the gold price than whether gold deposits, gold grade, infrastructure, and the necessary financing can be brought together to support predictable mine development and a gold mining operation.
The resource estimate updated in August already provides a strong foundation. Lahontan now reports indicated mineral resources of 1.195 million ounces of gold equivalent and inferred mineral resources of 1.19 million ounces for Santa Fe. Furthermore, the company plans to commence gold production by the end of 2027. Notably, the Santa Fe project has been in production in the past and was operated as an open-pit mine using heap leaching. For investors, this provides greater assurance that production can be made profitable again, though it does not yet replace a preliminary economic assessment (PEA). Only the updated PEA will show whether the resource expansion can also lead to calculable returns on equity. By systematically incorporating gold-bearing sulphides in addition to oxide material, Lahontan expands the scope for gold production but also increases demands on process design and capital discipline.
The story gains additional credibility through the recently agreed-upon acquisition of Emergent Metals. According to Lahontan, this secures the company 100% ownership of the West Santa Fe project. In addition, existing royalties on West Santa Fe and the York Claims are eliminated, and the regional land package in Nevada’s Walker Lane is expanded to more than 93 km². From an economic perspective, this is more than just land consolidation: Future cash outflows of approximately USD 1.73 million are eliminated, roughly 2 million previously issued Lahontan shares are returned to the company, and the New York Canyon Project adds an adjacent exploration area. The consideration is moderate for Emergent shareholders, representing an implied stake of only 4.7% in the combined company, suggesting a relatively favourable transaction for shareholders. Strategically, this transaction strengthens Lahontan Gold’s position and the Santa Fe Project, and enhances exploration and development potential in the consolidated area.
A new operational aspect has been added that should not be underestimated in terms of the project’s value: At Heap Leach Pad Two (HLP Two), Lahontan reported, among other results, 16.5 m grading 2.72 g/t gold and 2.8 g/t silver from the first ten Sonic drill holes; the weighted average of all samples to date stands at 0.50 g/t gold and 3.3 g/t silver, or 0.54 g/t gold equivalent. This is significantly higher than the expected residual grade of the historic heap leach material, which is approximately 0.32 g/t gold equivalent. This suggests that reprocessing the old heap leaching areas could be much more economically viable than previously assumed. For the Santa Fe project, this is strategically significant because additional, previously mined material could be processed using potentially conventional cyanide leaching, making an earlier contribution to earnings through gold sales conceivable.
So far, the stock market has barely reflected this progress. Based on the September 16 closing price, Lahontan traded at CAD 0.365, with a market capitalization of about CAD 160 million and 432.5 million shares outstanding. Given the expanded mineral resource base, the existing infrastructure, and the ongoing clarification of the ownership and royalty structure, the current valuation appears very attractive. However, it remains contingent on three conditions: robust regulatory approvals, viable project financing, and confirmation of the project’s economic viability in the upcoming PEA. This is precisely where the risk-reward profile lies. If the company can demonstrate that the project is financeable, the market is likely to value Lahontan more as a future producer and less as a traditional explorer. Those willing to take this bet should take advantage of the stock’s current consolidation phase, during which it has been fluctuating between CAD 0.30 and CAD 0.44 since March 2026.
BayWa on the Verge of a Rescue: But Things Are About to Get Really Tough for Investors
BayWa (WKN: 519400 | ISIN: DE0005194005 | Ticker: BYW) is once again in the spotlight. The struggling agricultural, energy, and building materials group has achieved a breakthrough in its restructuring. Nearly all financing partners now support the new rescue plan. But the agreement comes at a high price: Holders of the BayWa hybrid bond face the prospect of an almost total loss. According to the Munich-based group, 267 of the 268 required financing partners have approved the so-called term sheet. Together, they represent approximately 99.98% of the affected financial liabilities. Only one small creditor remains. However, BayWa expects to reach an agreement with this creditor soon as well.
Holders of the BayWa hybrid bond (WKN: A351PD | ISIN: DE000A351PD9), issued in 2023, are being hit particularly hard. The bond has a volume of EUR 100 million and carries a coupon of 7.75%. Following the latest announcement, the price on the Frankfurt Stock Exchange temporarily plummeted to just 3.655% of face value. For every EUR 1,000 of notional face value, the bonds were thus worth only about EUR 36.55. Previously, the price had been around 29%—a drop of about 87%. However, the bond is illiquid so that prices can vary significantly across exchanges.
Nevertheless, the market is pricing in an almost complete default. Under the current restructuring plan, creditors must forgo nearly the entire principal amount and all accrued interest—apparently without any corresponding compensation. This drastic step underscores just how serious the situation remains. BayWa is burdened by billions in debt. A costly international expansion, high interest expenses, and problems at its green energy subsidiary BayWa r. e. had thrown the original restructuring plan into disarray. The restructuring period was therefore extended through the end of 2030.
Major shareholders must also make sacrifices. Their approximately 67% stake is to be temporarily transferred to a trustee. They can reclaim their shares only if at least EUR 220 million is made available for a capital increase by 2029. In addition, banks are to convert up to EUR 700 million in liabilities into subordinated financial instruments. The crisis has long been evident on the stock market. BayWa common stock was last trading at EUR 8.50 and now has a market capitalization of only about EUR 261.14 million. Since the beginning of the year, the stock has lost 47.53% of its value. Over the course of a year, the share price has plummeted by as much as 55.15%.
The chart also remains concerning. The stock is trading below its key moving averages and thus remains in a clear downtrend. Only a sustained return above EUR 10 could brighten the short-term outlook somewhat. For shareholders, the news remains a double-edged sword: The risk of insolvency could decrease, but potential capital increases threaten to significantly dilute existing holdings. Until a binding restructuring agreement is in place, BayWa shares remain a high-risk bet on a successful rescue.
JPMorgan Chase, like other US banks, is coming under pressure because while higher interest rates are supporting margins, they are simultaneously weighing on credit demand, bond valuations, and default risks. Lahontan Gold is gaining increasingly more substance with Santa Fe, the Emergent acquisition, and strong results from its stockpile drilling, but it must next deliver a convincing PEA. BayWa is facing a potential rescue, but the restructuring remains painful for shareholders and bondholders because of the threat of significant dilution and substantial loss risks.
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