The U.S. dollar slid on Tuesday as a slew of mixed economic data, some delayed and therefore dated, reinforced expectations that the Federal Reserve will cut interest rates next month.

The euro was last up 0.40% against the dollar at $1.1566, while sterling gained 0.45% to $1.3162.

The dollar index, a measure of its performance against its major counterparts, fell 0.31% to 99.83 following the release of September retail sales and producer price data, after it initially held on to its gains from last week when the index rose nearly 1%.

“Producer prices were stable and retail sales showed a modest consumer slowdown, and this keeps a December rate cut on the table,” said Scott Helfstein, head of investment strategy, at Global X, in emailed comments.

Data showed U.S. retail sales rose 0.2% in September, less than 0.4% forecast by economists polled by Reuters and slowing from an unrevised 0.6% gain in August.

Producer prices, on the other hand, increased 0.3%, in line with expectation, after an unrevised 0.1% drop in August; however, at the core level prices inched up 0.1%, below the consensus forecast of 0.2%.

In addition, the latest U.S. consumer confidence number declined to 88.7 in November, from an upwardly revised 95.5 in October, which further hurt dollar sentiment. Economists polled by Reuters had forecast the index edging down to 93.4 from the previously reported 94.6 in October.

“More worries about what lies ahead … hence, putting purchases for major items on hold,” wrote Jennifer Lee, senior economist at BMO in emailed comments.

The economic data followed dovish comments from policymakers in the past few days that helped cement rate cut expectations.

On Monday, Fed Governor Christopher Waller said the job market was weak enough to warrant another quarter-point rate cut in December, though action beyond that depended on a flood of data that was delayed by the federal government shutdown.

Waller’s comments followed similar remarks by New York Fed President John Williams on Friday.

Traders are now pricing in an 83% chance of a cut next month, up from 50% a week earlier, CME FedWatch showed. That huge swing underscores the challenge the market faces in pricing in near-term rates in the absence of economic data caused by the longest-ever U.S. government shutdown, which ended on November 14.

Francesco Pesole, currency analyst at ING, said some “year-end rebalancing flows before Thanksgiving may be getting in the way” of dollar weakening.

However, he added in a note to clients, “unless markets have a hawkish rethink, the dollar looks too strong relative to short-term rate differentials at these levels, and we see some material downside risks.”

In other currency pairs, the yen, which has been on the defensive since hitting 10-month lows last week, firmed on Tuesday to 156.09 per dollar, leaving the dollar down 0.51% against the Japanese currency.

Investors have been waiting for any signs of official buying from Tokyo to support its currency, which has weakened by nearly 10 yen since the start of October after fiscal dove Sanae Takaichi took over as Japan’s prime minister.

Pesole said thinner liquidity around Thanksgiving could present good conditions for the Bank of Japan to intervene in USD/JPY, ideally after a market-driven correction in the pair.

Read the full article HERE.

Key Points:

The first glimpse of official consumer spending data in two months is in: retail sales rose at a slower pace than expected in September.

Retail sales increased at a monthly pace of 0.2% from August to September. Economists polled by FactSet were expecting a 0.4% jump. Sales rose 0.6% in August from July.

Stripping out sales of vehicles, car parts, and gasoline, retail sales rose just 0.1%, below forecasts for a 0.4% increase.

The report was delayed because of the 43-day government shutdown, which ended mid-November. While the September data may be a bit “stale” this close to the end of the year, the results nonetheless provide insights about the health of U.S. consumers heading into the all-important holiday season.

The main takeaway is that while spending is resilient, growth slowed toward the end of the summer—particularly for discretionary purchases—as economic uncertainty weighs on consumers. Of the 13 categories that the Census Bureau tracks, five recorded monthly decreases in sales: sporting goods, hobby, instrument, and book stores; clothing and accessories stores, nonstore retailers, electronics and appliance stores, and motor vehicle and parts dealers.

“With wage growth slowing and tariffs now fully in place, we think higher prices will start to weigh on consumption,” wrote Michael Reid, senior U.S. economist at RBC Economics, ahead of the report.

Last week, many big-box retailers reported fiscal third-quarter earnings. The results were a mixed bag, with some topping analysts’ earnings expectations and others falling short. But given the dearth of official spending data, investors were more eager to hear what they had to say about the consumer economy.

The main takeaways are that Americans are selective in their spending and are prioritizing value as concerns over inflation and affordability mount among lower- and middle-income consumers.

Home Deport CEO Ted Decker said on Tuesday that macroeconomic pressures had hampered the home improvement market’s expected recovery in the third quarter.

“We were expecting interest rates and mortgage rates to come down, which they did, that would have been some assistance to housing,” Decker said. “But we really just saw ongoing consumer uncertainty and pressure in housing that are disproportionately impacting home improvement demand.”

Target’s Chief Commercial Officer Rick Gomez followed up on Wednesday saying that consumers remained cautious approaching the holiday season, with consumer sentiment ranging at three-year lows.

“Guests are choiceful, stretching budgets and prioritizing value,” he said. “They’re spending where it matters most, especially in food, essentials, and beauty, while looking for trend-right deals in discretionary categories.”

Retailers also flagged that spending had been slightly affected by the closure of the federal government—a fact that won’t be reflected until October and November’s data. The Census Bureau has yet to set a date for both releases.

Most official government releases have been pushed back or canceled altogether—a fact that has complicated matters for investors, economists, and policymakers.

The September data will likely provide Federal Reserve officials additional information as they decide whether to cut interest rates or not at their meeting in December. But unfortunately for the Fed, the timelier releases won’t come until after, Reid added.

Read the full article HERE.

Albert Edwards, the outspoken Global Strategist at Société Générale—a figure who even refers to himself as a “perma bear”—is certain that the current U.S. equity market, driven largely by high-flying tech and AI, is experiencing a dangerous bubble. (Société Générale, to be clear, does not hold the view that U.S. stocks or AI stocks are in a bubble, noting that Edwards is employed as the in-house alternative view.) While history often repeats itself, Edwards warned recently that the circumstances surrounding this cycle’s inevitable collapse are fundamentally different, potentially leading to a deeper and more painful reckoning for the economy and the average investor.

“I think there’s a bubble but there again I always think there’s a bubble,” Edwards told Bloomberg’s Merryn Somerset Webb in a recent appearance on her podcast Merryn Talks Money, noting that during each cycle, there is always a “very plausible narrative, very compelling.” However, he was unwavering in his conclusion: “it will end in tears, that much I’m sure of.”

Edwards told Fortune in an interview that previous theories about a bubble were “very convincing in 1999 and early 2000, they were very convincing in 2006-2007.” Each time, he said, the “surge in the market was so relentless” that he just stopped talking about bubbles, “because clients get pissed off with you repeating the same thing over and over again and being wrong,” only to change their tune after the bubble bursts. “Generally, when you’re gripped by a bubble, people just don’t want to listen because they’re making so much money.”

As he himself frequently points out, Edwards is known as a very bearish market strategist who has made some high-profile and dramatic predictions, often warning about major stock market crashes and recessions. His track record includes famously calling the dot-com bubble, but it also includes warnings that haven’t panned out, such as predicting a potential 75% drop in the S&P 500 from peaks—worse than the 2008 financial crisis lows. When The New York Times profiled Edwards in 2010, they noted that the chuckling, birkenstocks-wearing analyst had been predicting a Japan-style stagnation for U.S. equity markets since 1997 (a prediction he repeated in his interview with Fortune).

Still, Edwards insists that the current parallels to the late 1990s NASDAQ bubble are clear: extremely rich valuations in tech, with some U.S. companies trading at over 30x forward earnings, justified by compelling growth narratives. Just as the TMT (Technology, Media, Telecom) sector attracted vast, sometimes wasted, capital investment in the 1990s, Edwards argued that today’s enthusiasm echoes that earlier era. There are two key differences that could lead to a much worse outcome this time, though.

The Missing Trigger and the Meltup Risk

In previous cycles, Edwards explained, the catalyst for a bubble’s demise was usually the monetary authority’s tightening cycle—the Federal Reserve hiking rates and exposing market froth. This time, with the Fed lowering rates, that trigger is conspicuously absent. Bank of America Research has noted the rarity of central banks cutting rates amid rising inflation, which has occurred just 16% of the time since 1973. Ominously, BofA released a note on the “Ghosts of 2007” in August.

Instead of tightening, Edwards anticipates the Fed will move away from quantitative tightening and likely shift to quantitative easing “quite soon,” due to issues in the U.S. repo markets, another ghost from the Great Recession. The Fed itself issued a staff report in 2021 on repo issues, writing in 2021 that trading between 2007 and 2009 “highlighted important vulnerabilities of the US repo market.” Repo issues reemerged in the pandemic, with the Richmond Fed noting that interest rates “spiked dramatically higher” starting in 2019.

Edwards told Bloomberg that the absence of hawkish policy could lead to a “further meltup,” making the eventual burst even more damaging. Poking fun at himself, Edwards said, “I just got bored being bearish, basically rattling my chains saying, ‘This is all a bubble, it’s all going to collapse.’” He said that he can see how the bubble can actually keep going for much longer than a perma bear like himself would find logical, “and actually that’s when something just comes out the woodwork and takes the legs from out from under the bubble.”

“What’s more worrying about the AI bubble,” Edwards told Fortune, “is how much more dependent the economy is on this theme, not just for the business investments, which is driving growth,” but also the fact that consumption growth is being dominated far more than normal by the top quintile. In other words, the richest Americans who are heavily invested in equities, are driving more of the economy than during previous bubbles, accounting for a much larger proportion of consumption. “So the economy, if you like, is more vulnerable than it was in the ’87 crash,” Edwards explained, with a 25% or greater correction in stocks meaning that consumer spending will surely suffer—let alone a 50% lurch.

Edwards told Bloomberg he was concerned about the widespread participation of retail investors who have been dragged into the market, encouraged to “just buy the dips.” This belief that “the stock market never goes down” is dangerous, Edwards warned, arguing that a 30% or even a 50% decline is very possible. The inequality of American society and the heavy concentration among high earners whose wealth has been “inflated by the stock market” is a major concern for Edwards, who pointed out that if there is a major stock-market correction, then U.S. consumption will be “hit very, very badly indeed” and the entire economy will suffer. This view is increasingly shared by less uber-bearish voices on Wall Street, such as Morgan Stanley Wealth Management’s Lisa Shalett.

In many ways, Edwards told Fortune, we’re overdue for a correction, noting that apart from two months during the pandemic, there hasn’t been a recession since 2008. “That’s a bloody long time, and the business cycle eventually always goes into recession.” He said it’s been so long that his perma-bear instincts are confused. “The fact I’m less worried about an imminent collapse [right now] makes me worried,” Edwards added with a laugh.

Edwards told Fortune that he’s been through various cycles and bubbles and he gained his perma-bear status in the mid-1990s, when he felt a distant earthquake happening in Asia. “You’ve been around the block a few times, you just do become cynical,” he said, before correcting himself: “That’s not the right word. You become extremely skeptical of the full narrative.” He proudly repeats the story about how, when he was at Dresdner Kleinwort in the ’90s, he wrote with skepticism about Malaysia’s economic boom at the time, only to be surprised when Thailand blew up first. Nevertheless, he said, “we lost all our banking licenses [in Malaysia] because of what I wrote,” adding that the story is still proudly pinned to his X.com account.

“I had to sort of basically hide under my desk,” Edwards said of the inward reception to the emergence of his inner bear. “Corporate finance banking departments certainly didn’t appreciate losing all their banking licenses. But in retrospect, you know, they avoided a final year of lending to Malaysia before it blew up. They didn’t thank me afterwards.”

Fiscal Incontinence and Cockroaches

Beyond equity valuations, Edwards has been highlighting two other major underlying risks point to systemic vulnerability. First, Edwards highlighted the long-term risk of inflation in the West, driven by “fiscal incontinence.” Despite short-term cyclical deflationary pressure emanating from China—which has seen 12 successive quarters of year-on-year declines in its GDP deflator—Edwards said he believes the path of least resistance for highly indebted Western politicians will be “money printing.” At some point, the mathematics for fiscal sustainability “just do not add up,” forcing central banks to intervene through “yield curve control” or quantitative easing to hold down bond yields.

This is where Edwards’ long-held thesis about Japan comes in, what he calls “The Ice Age.” Around 1996, he said, he started thinking that “what’s happening in Japan will come to Europe and the U.S. with a lag.” He explained that the bursting of the Japanese stock bubble led to all kinds of nasty things: real interest rates collapsing, inflation going to zero, bond yields going to zero. Ultimately, it was a period of low growth that Japan still has not been able to break out of. The difference with the U.S., he added, is that Japanification actually started happening in 2000 with the dot-com bubble bursting, but “the relationship broke” between the economy and asset prices as the Fed began “throwing money” at the problem through QE. The U.S. has essentially been in a 25-year bubble since then that is due to burst any day now, he argued—it’s been due any day for a quarter-century.

“We’re going to end up with runaway inflation at some point,” Edwards told Fortune, “because, I mean, that’s the end game, right? There’s no appetite to cut back the deficits. We bring back the QE, if and when this bubble bursts, the only solution is more QE, and then we end up with inflation, maybe even worse than 2022.”

Edwards also sees a smoking gun in home prices. “You look at the U.S. housing market, you think, ‘Well, actually, is the Fed just too loose relative to everywhere else?’ Because why should other housing bubbles have deflated in terms of house price earnings ratio, but the U.S. is still stuck up there at maximum valuation or close to it?” In a flourish that shows why Edwards is so respected despite his broken-record reputation, he notes that in a Bloomberg Opinion piece from 2018, legendary former Fed chair Paul Volcker “eviscerated the Fed just before he died.” The central banker who famously slew inflation in the 1980s argued that the modern era’s loose monetary policy was “a grave error of judgment … basically just kicking the can down the road.” Edwards shared an OECD chart with Fortune to show just how much U.S. housing has decoupled from global markets because the Fed has been too loose.

The analyst also said he applied his skepticism to private equity, an asset class that he sees having benefited immensely from years of falling bond yields and leverage. Private equity’s advantage has been its tax treatment and the fact that “it doesn’t have to mark itself to market, so it isn’t very volatile.” However, the sector is highly leveraged, and if the global environment shifts to a secular bear market for bonds, he said that would be a “major problem.” Recent high-profile bankruptcies have started to leak into bond markets, prompting concern of “credit cockroaches,” as JPMorgan CEO Jamie Dimon recently labeled the issue.

Drawing on the metaphor that “you never have just one cockroach,” Edwards warned that these bankruptcies signal deeper issues in a highly leveraged sector that has spread its “tentacles… deeply into the real economy.”

Fortune notes to Edwards that more mainstream, less bearish voices are sounding similar warnings, Mohamed El-Erian at the Yahoo Finance Invest conference and Jeffrey Gundlach, the “bond king,” who takes a similarly skeptical view of private equity. Edwards agreed that something is in the air. “I would say there are more voices of skepticism. And again, this is one thing which makes me worry. This bubble can go on. If it is a bubble can go on quite a long while. Well, we can kick the can down the road many times. Normally, the skeptics are swept aside.”

For investors trapped between the fear of a collapse and the fear of missing a meltup, Edwards told advised investors to take him with a grain of salt but be mindful of potential warning sings. “I say that I predict a recession every year, don’t listen to me, but these are the things you should be looking out for.” Paraphrasing an infamous quote from former Citi CEO Chuck Prince that summed up the bubble mentality with a metaphor about a dance party, Edwards recommended: “In terms of dancing while the music’s still playing, you have to decide whether to be in front of the band, pogoing, or dancing close to the fire escape, ready to get out first.”

Read the full article HERE.

US consumer sentiment fell in November to one of the lowest levels on record as Americans’ views of their personal finances soured.

The final November sentiment index dropped to 51 from 53.6 in October, according to the University of Michigan. The figure was only slightly better than the preliminary figure.

The current conditions gauge slid 7.5 points to a record low of 51.1. Views of personal finances were the dimmest since 2009.

“Consumers remain frustrated about the persistence of high prices and weakening incomes,” Joanne Hsu, director of the survey, said in a statement.

Consumers expect prices to rise at an annual rate of 4.5% over the next year, easing for a third month, data released Friday showed. They saw costs rising at an annual rate of 3.4% over the next five to 10 years, compared to 3.9% in October.

While Americans’ inflation worries have ebbed, they remain anxious about the high cost of living and job security. The report showed the probability of personal job loss climbed to the highest since July 2020.

Continuing claims for unemployment insurance — a proxy for those receiving benefits — rose early this month to a four-year high, suggesting jobless Americans are finding it harder to land new jobs.

The University of Michigan report touched on the growing divide between wealthier consumers and those with less income.

“The wealthiest consumers appear equipped to continue spending, while the financial positions of non-stockholders are deteriorating,” Hsu said. “These trends indicate that aggregate economic statistics can obscure vulnerabilities within certain parts of the population.”

Consumers became slightly more downbeat about the near-term economic outlook despite the end of the longest government shutdown in US history. Buying conditions for big-ticket goods dropped to the lowest on record.

The survey was conducted from Nov. 3 to Nov. 17.

Read the full article HERE.

Having surged nearly 80% in 2025, platinum has become one of the best-performing commodities. The latest report from the World Platinum Investment Council (WPIC) indicates that although the market may move towards balance in 2026, fragile supply chains, volatile investment demand, and intense competition for physical metal between the US and China are pushing the platinum market into an unprecedented period of high volatility.

The core issue in the current platinum market is a persistent structural supply shortage. WPIC data shows that the global platinum market is expected to see a supply deficit of 692,000 ounces in 2025. Although this is slightly narrower than previous estimates, the tight situation remains severe.

South Africa, the world’s largest platinum producer, is plagued by soaring costs and operational disruptions, leading to a 5% year-on-year decline in global mine supply, which is 10% below the pre-pandemic five-year average. Despite a 7% increase in recycling supply to 1.619 million ounces, it still cannot compensate for the shortfall in primary supply.

On the demand side, while automotive sector demand (accounting for about one-third of the total) remains stable due to resilience in the fuel-powered vehicle market, industrial demand is expected to fall sharply by 22%. However, investment demand has emerged as a key variable driving prices, forecast to grow 6% to 742,000 ounces in 2025.

A new variable in the platinum market in 2025 stems from the competition for platinum between the US and China, which is reshaping the global supply chain and exacerbating market tightness. Tariff threats and the inclusion of platinum on the US critical minerals list have prompted large flows of platinum into US warehouses. In just the last three weeks, New York warehouses absorbed nearly 290,000 ounces of the metal. This phenomenon of “inventory transfer” rather than “inventory increase” has led to physical shortages in traditional trading hubs like London and Zurich.

As the world’s largest platinum consumer, China’s imports hit a record of 1.2 million ounces in the second quarter, consistently exceeding estimates of domestic consumption. The imminent launch of platinum futures on the Guangzhou Futures Exchange, which will for the first time publish inventory data, will enhance transparency in the Chinese market and could also strengthen China’s influence over international pricing.

Analysts point out that the tightness in the platinum market is most evident in lease rates. The recent one-month implied lease rate remains above 10%, down from a peak of 35% in July but still far above the normal level near zero. These “crazy lease rates” have sharply increased costs for industrial users, even causing market liquidity to dry up at times. Tim Murray of Johnson Matthey admitted that in his 36-year career, he has never seen such sustained tightness in the platinum market.

The WPIC forecasts that the platinum market will achieve a small surplus of 20,000 ounces in 2026, but this “balance” is actually very fragile. Firstly, if global trade tensions ease, an estimated 150,000 ounces of platinum is expected to flow back from US warehouses to London, creating an illusion of balance without solving the fundamental supply shortage. Secondly, prices need to rise significantly further to stimulate new production. Craig Miller, CEO of Valterra Platinum, stated that while about 90% of mines are now profitable, prices would still need to increase by about 50% to incentivize new project investment.

In conclusion, the platinum market is at a crossroads of structural transformation. On one hand, years of underinvestment and production challenges in South Africa limit supply elasticity. On the other hand, US-China geopolitical competition is distorting inventory distribution and amplifying physical tightness. Even if the market statistically moves towards balance in 2026, the fragility of the supply chain and the major powers’ scramble for strategic resources will likely keep platinum prices trading at elevated levels.

Read the full article HERE.

Key Points:

Gold is having a bad month. The struggles will likely turn out to be a blip rather than the start of a sustained downturn, Goldman Sachs says.

All in all it has been a great year for gold, with the precious metal up nearly 75%. Starting about a month ago, however, investors began to show some doubts. Gold reached a record high of $4,336 an ounce on Oct. 30. Since then, it’s tumbled about 6% to $4,062 on Tuesday.

One culprit has been a strengthening U.S. dollar. Since gold is priced in dollars, a stronger dollar makes gold more expensive for global buyers who need to swap out of local currencies to acquire the metal.

A separate, but related, factor is the outlook for U.S. interest rates. A month ago, markets were all but certain the Federal Reserve would issue another interest-rate cut in December. In the past few weeks, those odds have fallen below 50%. Higher U.S. interest rates help strengthen the dollar and make gold, which doesn’t pay any interest, comparatively less attractive than Treasuries.

The question weighing on gold investors: Is this just a bull market gut check, or the start of a bigger selloff?

Put Goldman Sachs clearly in the blip camp.

On Monday, the investment bank forecast gold prices would hit $4,900 by the end of 2026, representing a gain of about 21% on Tuesday’s price. The metal could go even higher, according to Goldman analyst Lina Thomas. She sees “significant upside if the private investors diversification theme were to gain more traction”—a reference to more U.S. and international investors buying gold to complement their stock-and-bond portfolios.

What’s behind all the bullishness? The current gold rally has been driven by heavy buying from two key sources—central banks and private investors, such as retirement savers, investment funds and more. Goldman doesn’t see either one changing their behavior.

Central banks began buying gold to move away from dollar-denominated assets in 2022, after the U.S. froze Russian assets in response to the country’s invasion of Ukraine. That rationale hasn’t changed, notes Goldman, which says central banks’ purchases appear to have ticked up in September, the latest month for which it has data.

Gold buying by investors, such as Main Street retirement savers, also appears to be on the rise. So far this year, investors have poured more than $41 billion into SPDR Gold Shares and other exchange-traded funds. While ETF investors have pulled some money out in the past month, the turnaround hasn’t been dramatic, with the funds seeing outflows of only around $1.2 billion. Thomas expects ETF investors, alongside ultrahigh net worth individuals who buy physical gold, to continue accumulating the metal.

Goldman isn’t the only one that remains bullish despite the pullback. Last week, strategists at UBS predicted gold could hit $5,000 in 2026 or 2027.

Read the full article HERE.

The S&P 500 was set for its longest losing streak since August, as a six-month rally shows signs of cracking following a $1.2 trillion selloff in cryptocurrencies and fears around stretched artificial intelligence valuations.

Futures tracking the S&P 500 were down 0.4% at 8:26 a.m. in New York after earlier dropping as much as 0.8%, putting the benchmark on course for a fourth day of declines as investors reconsider their optimistic expectations for Federal Reserve interest-rate cuts. Futures on the technology-heavy Nasdaq 100 Index also slipped 0.5%.

Asian and European stock indexes fell, while Bitcoin briefly dropped below $90,000 for the first time in seven months. Meanwhile, a Bank of America Corp. survey showed that fund managers’ cash holdings have fallen to low levels that have triggered a sell signal in the past.

“Appetite for AI is under pressure from circularity worries and bubble fears,” said Ipek Ozkardeskaya, a senior analyst at Swissquote. “The bad news is that some of the more bullish vibes — AI enthusiasm, massive government stimulus, dovish central-bank expectations — are starting to fade.”

The chorus of warnings about a possible AI bubble grew even louder on Tuesday after JPMorgan Chase & Co. Vice Chairman Daniel Pinto warned that valuations in the industry could be due for a correction. “That correction will also create a correction in the rest of the segment, the S&P and in the industry,” Pinto said at the Bloomberg Africa Business Summit in Johannesburg.

US stocks have come under pressure this month as investors worried the AI-led rally has run too hot. The S&P 500 is trading at about 22 times forward earnings, above its 10-year average of 19. Concerns are also rising about the economic impact of the longest US government shutdown.

Cryptocurrencies, meanwhile. have slumped, with many smaller coins nursing losses in excess of 50% for this year. Digital tokens have lost a combined $1.2 trillion of market value since Bitcoin peaked in October, figures from CoinGecko show.

Dip Buyers

Investors have so far been keen to buy the dip given underlying optimism about US economic growth. On Friday, the S&P 500 reversed losses of as much as 1.4% to end the day little changed and a similar swing looked possible on Tuesday too, as futures rebounded off their session lows.

“We tend to treat market retrenchments as a buying opportunity,” said Marija Veitmane, head of equity research at State Street Global Markets. “The economy is strong enough to support robust earnings growth and yet weak enough to warrant rate cuts.”

Still, results from Home Depot Inc. offered a warning to investors about the strength of US consumers after the world’s largest home-improvement retailer cut its full-year earnings outlook. There’s also higher demand for bearish bets on technology stocks, suggesting faltering confidence in a sustainable rally.

Heavy spending on AI is also raising worries about companies’ capacity to finance such bills. Credit spreads for Oracle Corp. have soared to the highest in nearly three years. In a further sign of growing worries about the space, Microsoft Corp. and Amazon.com, Inc. were both downgraded to neutral from buy at Rothschild & Co Redburn, which said the bull case for generative AI is no longer clear.

BofA’s warning of a potential sell signal came as fund managers’ average cash holdings fell to 3.7%, something that has only occurred 20 times since 2002. Stocks fell and Treasuries outperformed in the following one to three months each time that has happened in the past, BofA strategists said in a note. The survey also showed that for the first time in 20 years, investors said companies are overinvesting.

Nvidia Test

The S&P 500 is now about 3% below its October peak. On Monday, the benchmark index closed below its 50-day moving average for the first time since April. Market breadth has also weakened, with only 54% of S&P 500 constituents trading above their 200-day moving average, according to data compiled by Bloomberg.

All eyes are now on AI bellwether Nvidia Corp.’s quarterly earnings report due Wednesday. Meanwhile, swaps traders have pared bets on the possibility of a Fed rate cut in December.

For Matt Britzman, senior equity analyst at Hargreaves Lansdown, the longer-term outlook for stocks remains intact.

“Pullbacks are never fun but are often healthy, especially in a market that’s showing signs of frothiness,” he said.

Here’s what other market participants are saying about the outlook for US stocks:

Homin Lee, a senior macro strategist at Lombard Odier

“We believe that the nervousness will persist until the September employment report provides greater clarity. At the current juncture, a soft US labor market data or a large beat in Nvidia earnings could help.”

Ulrich Urbahn, head of multi-asset strategy and research at Berenberg

“Crypto market turmoil has increased equity volatility, while the Fed’s mixed signals on rates keep investors wary. AI remains a key growth driver, but concerns over potential earnings disappointments and valuation pressures persist. Overall, stocks face a delicate balance between positive AI momentum and macroeconomic caution as the year closes. We remain cautiously optimistic though, given likely strong buyback and flow support over coming weeks.”

Mary-Sol Michel, a director a Swiss Life Gestion Privée in Paris

“We were expecting a drawback to occur but a bit earlier earlier than this. We had therefore already cut some positions, notably on ASML and Alphabet. The selling isn’t usual in terms of seasonality as typically at this time of the year people are expecting a year-end rally. We’re staying invested in tech, but we decided to take profits to secure our performance this year. There’s a lot of nervousness in the tech segment.”

Eric Bleines, a fund manager at SwissLife Gestion Privée

“The question is whether the selloff will continue after Nvidia’s results: this will make the difference between the market just taking a breather or going for a correction.”

Joachim Klement, a strategist at Panmure Liberum

“Stock markets in the US and UK are still underpinned by solid fundamentals and in the US, weaker jobs data for September could revive the bets for a December rate cut by the Fed. US stocks will be supported by Fed rate cuts, though these will benefit US value stocks more than the expensive tech sector.”

Read the full article HERE.

Stocks have experienced only brief downturns over the past 16 years, creating dangerous complacency

“How bad do you think it’s gonna be?”

When Michael Corleone asks Clemenza in “The Godfather” about the mob war he’s about to start, he gets the sort of reassurance that comes with experience. “These things gotta happen every five years or so, ten years. Helps to get rid of the bad blood…been ten years since the last one.”

There’s no saying when the next major bear market will send Americans to the mattresses—maybe through the collapse of AI mania, or possibly just a garden-variety recession. There have only been minor scrapes the past 16 years, and that’s actually a problem.

A downturn like 2007-09 when U.S. stocks fell by more than half can be both awful and therapeutic. It took 66 months for the S&P 500 to regain its previous high. Investors with a long-term perspective pounced on what in hindsight were solid, boring bargains near the bottom.

The five brief downturns since then that met the unofficial definition of a bear market taught the opposite lesson. Momentarily terrifying, they encouraged investors to “buy the dip” quickly and recklessly—the junkier the stocks, the better.

Remember the summer of 2020 when Nikola, the fraudulent hydrogen-truck company, became worth more than Ford, or when bankrupt Hertz’s shares were touted on social media and soared?

This year’s Liberation Day swoon felt similar: It took just 4.3 months for the S&P 500 to reach a fresh high. The advance was led by the theme du jour, artificial intelligence, plus many unproven, unprofitable companies.

Long bear markets accompanied by a recession discredit the last boom’s wildest themes and its cheerleaders. They also remind us of what capital markets are for: matching mostly good businesses with patient savers’ nest eggs.

In the past century, there have been 26 bear markets, including some that barely met the definition, such as this year’s swoon.

The average time to reach the previous high when a bear market was accompanied by a recession was 81 months. It took just 21 without a recession. Over the past 16 years, downturns have lasted less than eight months before the old high was reached.

The model for buying the dip was set in the summer of 1998, after Russia defaulted and hedge fund Long-Term Capital Management collapsed. The Federal Reserve stepped in and the effect was electric, sending stocks back to a new high by that November.

The tech-heavy Nasdaq composite would go on to rally 255% over 17 months. In 1999 and 2000 combined, there were 631 technology initial public offerings, according to Jay Ritter, a University of Florida finance professor. Their average multiple of price-to-sales was nearly 50 when they began trading. Multiples of two to six are more typical.

That rewarding bounce made the tech bubble wilder, as did the fact that few people in the market in the late 1990s had personally experienced a really nasty, long downturn. 

Sort of like today: Hardly anyone younger than 40 now even had a 401(k) during the 2007-09 wipeout. Most Wall Street pros hadn’t graduated from college yet.

Bear markets are educational, but the tuition is a doozy.

Read the full article HERE.

Key Points:

After years of narrowing wage inequality, the workplace has become a tale of two economies again. This time, unlike in the postpandemic period, trends favor the top 25% of the U.S. workforce, whose wages are rising by 4.6% a year. That compares with annual wage gains of only 3.6% a year for the lowest quarter of the workforce, or roughly half the pace in 2022, according to the Federal Reserve Bank of Atlanta.

The reversal in fortunes has popularized the notion of a K-shaped economy, in which, like the letter, the upper arm rises while the lower arm droops. Fresh data about wages, spending, and credit conditions from banks, economists, and the Fed show the divergence widening this year. The U.S. economy is still expanding—gross domestic product is expected to grow by about 1.7% in 2025—but its health depends increasingly on more affluent households.

Bank of America data show that 29% of lower-income households are now living paycheck to paycheck, up from 27% in 2023. “Wages for lower-income earners have been easing relative to their higher-income counterparts since the beginning of 2025,” says Joe Wadford, a Bank of America economist.

Financial stress is also mounting among the less well off. Cox Automotive reported 1.7 million vehicle repossessions in 2024, up 43% from two years earlier and the highest level since 2009. This year is likely to be worse: The number of subprime borrowers at least 60 days behind on their auto loans rose to nearly 6.7% in October, the highest level on record, according to Fitch Ratings data.

TransUnion reports that more borrowers now cluster at credit score extremes: either superprime, with scores above 780, or subprime, below 600. “We are seeing a divergence in consumer credit risk, with more individuals moving toward either end of the credit-risk spectrum,” says Jason Laky, TransUnion’s executive vice president and head of financial services.

Mark Zandi, Moody’s chief economist, says spending among the bottom 80% of households, those earning less than $175,000, has kept pace with inflation since the pandemic. But the top 20% have done far better, and the wealthiest 3% “much, much, much better.”

Those high-income consumers are now powering growth. “As long as they keep spending, the economy should avoid recession,” Zandi wrote. “But if they turn more cautious, for whatever reason, the economy has a big problem.”

In a recent speech, Federal Reserve Governor Christopher Waller put more numbers around the growing imbalance. The top 10% of households account for 22% of all personal consumption, and the top 20% contribute 35%, he said in October citing Fed and Bureau of Labor Statistics data. The bottom 60% represent 45% of consumption. “This group has been affected by higher prices this year and is already changing its spending plans to find better value,” he said.

The K-shaped pattern changes the economy’s resilience. When wage gains cluster in the top income strata, growth becomes more sensitive to changes in the financial markets and less anchored to ordinary income.

Affluent households, which also control the greatest share of wealth, may keep spending, but their behavior is likely to swing with asset prices, exposing the economic expansion to greater volatility. According to Jared Bernstein, chair of the Council of Economic Advisers under President Joe Biden, the decline of a dollar in stock market wealth translates to two to three cents less in spending.

An increasingly unbalanced economy also changes the way economic weakness is reflected in data. Growing stress among lower-income households manifests in rising delinquency rates, shrinking buffers, and reductions in discretionary spending, which then hurt businesses that depend on widespread demand rather than high-margin customers. While the economy can continue to grow for some time while its foundations erode, policymakers are left with a clouded picture of its underlying condition.

Inflation is a particular drag for lower-income households, even if headline inflation has fallen to 3% or so from a high of around 9% in June 2022, as measured by the consumer price index. Joe Brusuelas, an economist at RSM, notes that shelter costs have risen 3.6% over the past year, utilities 5.8%, and beef nearly 15%.

Bank of America has found that inflation is outpacing after-tax wage growth for both middle- and lower-income earners. Tariffs are compounding the problem: Yale’s Budget Lab estimates an average effective tariff rate of 17.9%, the highest since 1934, which has lifted prices about 1.3% and cost the typical household $1,800 so far.

Federal Reserve officials have begun to speak more openly about the K-shaped economy, even if they don’t invoke the alphabet to describe it. Philadelphia Fed President Anna Paulson has said that nearly all net job growth this year has come from healthcare and social assistance. With lower-income consumers under strain, she warned, the economy is increasingly reliant on spending by affluent consumers, much of it tied to a narrow stock market rally driven by AI-linked companies.

“The relatively narrow base of support for the labor market, the importance of high-income consumers, together with the prominence of the narrative around AI for equities, adds up to a relatively narrow base of support for growth,” Paulson said. “Indeed, some business contacts are wondering where future demand will come from. This is something to watch closely.”

Fed Chair Jerome Powell has also expressed worries. “If you listen to the earnings calls or the reports of big, public consumer-facing companies, many of them are saying that there’s a bifurcated economy,” Powell said after last month’s Fed policy meeting. “Consumers at the lower end are struggling and buying less and shifting to lower-cost products. But at the top, people are spending.”

Business leaders are taking note. “We continue to see a bifurcated consumer base,” said McDonald’s CEO Christopher Kempczinski on the company’s most recent earnings call.

Traffic from lower-income consumers declined by nearly double digits in the third quarter, he said, “a trend that’s persisted for nearly two years.” Traffic growth among higher-income consumers, in contrast, “remained strong, increasing nearly double digits in the quarter,” he said.

Henrique Braun, chief operating officer of Coca-Cola, said on a recent analyst call that the company had leaned into “mini-cans” to appeal to cash-strapped consumers. “When we look from a consumer point of view, we continue to see divergency in spending between the income groups,” he said. “The pressure on middle- and low-end income consumers is still there.”

The bifurcation creates policy challenges for the Fed, which faces conflicting signals. The softening labor market argues for continued rate cuts to prevent further deterioration, while inflation that has run consistently above the central bank’s 2% annual target for the past five years argues for caution.

The Fed’s tool kit isn’t designed to address distributional problems. It can try to support the labor market broadly, but it can’t target specific wage groups. It can ease financial conditions, but that primarily benefits asset owners.

Brusuelas described September’s CPI report, which showed prices rising by a less-than-expected 3% on an annual basis, as “the perfect depiction of the K-shaped economy.”

Beneath the headline numbers, he said, “middle-class and down-market households experiencing slowing wage growth are having difficulty adjusting to persisting increases in the cost of living. For those households, it is about food, fuel, and utilities.”

Households exposed to assets will continue to prosper as rate cuts bolster equity prices, he wrote. Upper-income households with rising incomes and appreciating assets can capitalize on current conditions. “The upper spur of the Big K is a good place to be,” he wrote.

But the “Big K” itself is a troubling look for the broader U.S. economy.

Read the full article HERE.

Gold rose as traders weighed the US fiscal outlook following the end of the longest government shutdown in history.

Bullion climbed for a fifth session to trade near $4,230 an ounce, after US President Donald Trump signed legislation to end the longest government shutdown on record. However, the White House has warned that official jobs and inflation data for October are unlikely to be released.

The data void throughout the shutdown has caused investors to fly blind or rely on private statistics for a temperature check on the world’s largest economy. Gold has rallied in that environment, boosted by a string of weak private data releases. The October jobs and consumer price index reports may well never be published, even after the government shutdown.

“This data ‘blackout’ should continue to boost demand for safe haven assets like Treasuries and precious metals,” analysts at BMO Capital Markets wrote in a note.

There’s also the prospect of the Federal Reserve injecting further liquidity into the financial system, and a pivot to looser monetary policy that could benefit precious metals. The US central bank “won’t have to wait long” before purchasing assets to sustain desired liquidity levels, the Federal Reserve Bank of New York’s Roberto Perli said on Wednesday.

Last month, Fed officials announced they would stop shrinking their balance sheet — which drains liquidity — starting Dec. 1, amid volatility in short-term funding markets.

Combined with elevated US fiscal deficits, and further spending suggestions from President Donald Trump, that could bolster the so-called “debasement trade” theme — the retreat from sovereign debt and the currencies they are denominated in — over fears their value will be eroded over time.

That concern has helped power gold’s 60% rally this year, as investors and central banks step up purchases to hedge against growing fiscal unease in some of the world’s biggest economies. The precious metal remains on track for its best annual performance since 1979.

Though gold has yet to regain last month’s record above $4,380, several investors are forecasting another advance to $5,000 and beyond next year. China has been a leader among central-bank buyers, supporting its aim of building a world less dependent on US-centric financial markets.

Gold rose 0.8% to $4,227.96 an ounce as of 11:09 a.m. London time. The Bloomberg Dollar Spot Index fell 0.2%. Silver climbed toward a record high, while platinum and palladium also rallied.

Read the full article HERE.