Welcome to my latest video presentation. The article below is a transcript, edited for concision. For additional details and several charts, watch my video.

At its September meeting last week, the Federal Reserve sent Wall Street into the doldrums. Fed Chair Jerome Powell’s message was dour: the U.S central bank will continue to maintain elevated interest rates until inflation shifts more decisively toward the Fed’s 2.0% target.

Yes, the Fed hit the “pause” button and held rates steady at 5.25% – 5.50%, maintaining its projection of a peak federal funds rate of 5.6%. However, the Fed also suggested that at least one more rate hike is in the cards for 2023. What’s more, the Fed also reduced the number of potential rate cuts in 2024.

The upshot: Investors need to get accustomed to higher-for-longer.

Wall Street didn’t like what it heard. U.S. stocks had their worst week since March, with equities falling for a fourth straight session Friday, to close out the week in the red.

The main equity indices posted the following weekly losses: The Dow Jones Industrial Average -1.9%; the S&P 500 -2.9%; and the NASDAQ -3.6%.

Foreign stocks, as measured by the EAFE, fell 1.8% for the week, as overseas inflation showed signs of stubbornness and global investors continued to worry about China’s economic woes.

Crude oil prices slipped half a percentage point last week and settled above $90 per barrel. The recent surge in oil prices is a bonanza for the energy sector but an inflationary trend that signals elevated interest rates for a prolonged period.

The Fed last week provided an updated set of economic projections that were more optimistic than the June numbers. The economy has shown surprising resilience. The Fed now envisions U.S. gross domestic product (GDP) growth of 2.1% for full-year 2023, as opposed to the 1% number it posited in June.

However, this improved growth rate is a double-edged sword, because it shows only moderate economic cooling, which in turn means further tightening to quell inflation.

The benchmark 10-year U.S. Treasury yield last week edged toward 4.50%, its highest level since 2007, punishing growth-oriented investments. In particular, the interest rate sensitive technology sector took a beating.

That said, the yield on Friday dipped to 4.43% in what appeared to be the formation of a short-term top. If the yield breaches the resistance level of 4.50%, it would be bearish for stocks.

It’s clear that the stock market’s momentum has turned negative. The benchmark SPDR S&P 500 ETF Trust (SPY) last Thursday dipped below its 100-day moving average, a key support level, for the first time since March.

Investors also are rattled by the dysfunction in the GOP-controlled House. Republican leaders have been fighting like rats in a sack over the federal budget. The ultra-conservative Freedom Caucus is insisting on draconian cuts that would never pass muster with the Democratic-controlled Senate and White House. The GOP’s majority in the House is razor thin, which gives inordinate power to a far-right minority.

House Speaker Kevin McCarthy (R-CA) is loath to reach out to Democrats and moderate Republicans to forge a budget compromise, because in retaliation the far-right insurgents in his party would immediately oust him from his position under the new “motion to vacate” rules that he agreed to in January. Faustian bargains always come to tears.

Under the rules, a single House lawmaker can propose a motion to “vacate the chair,” i.e., trigger a House floor vote to oust the speaker.

The deadline to reach an agreement is September 30. If a budget isn’t approved by then, the federal government will shut down, throwing the economy and financial markets into chaos.

Then there’s the United Auto Workers (UAW) strike against the Big Three automakers. UAW workers started to walk off their jobs last Friday. Analysts estimate that the economic impact of a full-fledged 10-day strike against the Big Three would exceed $5 billion. A prolonged strike would dent U.S. gross domestic product, especially manufacturing output.

The week ahead…

Here are the major economic reports to watch in the coming days:

New home sales, S&P Case-Shiller home price index, consumer confidence (Tuesday); durable goods orders (Wednesday); initial jobless claims, GDP revision, Fed Chair Powell speaks (Thursday); personal income, personal spending, personal consumption expenditures price index (PCE), and consumer sentiment (Friday).

We face a busy week of economic data; the big news will be the latest reading of the PCE, which is the Fed’s preferred inflation gauge. The PCE is likely to show further moderation of inflation.

Politically, this a perilous moment. Until the funding impasse is resolved, stay defensive. Consider increasing your exposure to gold, the traditional safe haven during crises.

Also avoid the stocks of companies that are heavily reliant on federal government revenue, such as construction companies involved in public works, health care providers dependent on Medicare and Medicaid, and Pentagon contractors. If the federal government shuts down, these folks aren’t getting paid.

Meanwhile, if you’re looking for a steady source of income amid these uncertain times, consider the advice of my colleague, Jim Pearce.

Jim Pearce is the chief investment strategist of our flagship publication, Personal Finance. Jim has unearthed a once “secret” income power play that’s giving everyday investors the opportunity to collect huge payouts, regardless of Fed policy or the ups and downs of the markets. To claim your share, click here.

John Persinos is the editorial director of Investing Daily.

To subscribe to John’s video channel, click this icon:

This article originally appeared on Investing Daily.