Lipstick On A Pig.

Geopolitics was very much on the market’s mind after record electoral successes for extremist parties in weekend German regional elections and attendees gathering in New York for the annual United Nations General Assembly (UNGA) - but notably not the leaders of China, Russia, India or Palestine - while the Iran war rumbles endlessly in the background. However, China’s premier Xi Jinping skipping the UNGA to meet with Trump in Washington was set to be the week’s pivotal event, covering issues from tariffs to technology related to the relationship between the world’s two largest economies. Wall Street was in a very cheerful mood on Monday after the oil price dipped back below $100 and interest rates fell sharply with the important 10-Year Treasury rate briefly dropping back below 5% again as Federal Reserve officials began to publicly explain their decision the previous week to raise the Fed Funds Rate. The indexes roared higher and closed within touching distance of new all time-highs, particularly the NASDAQ 100 which was strongly boosted by surges in Meta, Intel and AMD as AI enthusiasm returned with a vengeance with Trump inviting all his tech bro CEO buddies to Thursday’s lavish dinner with Xi, along with senior executives from the big banks. Energy prices continued to drift lower on Tuesday morning with flickering hopes of some kind of move towards a diplomatic resolution to the Iran war resulting from meetings on the sidelines of the UNGA. The exception was diesel, potentially the most damaging price victim of the current war, which moved to new record highs. Trump’s rambling, belligerent and conceited address to UN delegates, which included a threat to “annihilate” Iran, was met with stony silence, eye-rolls and some walkouts but contained nothing of value to markets other perhaps than his bizarre idea to change the name of Artificial Intelligence (AI) to Super Intelligence (SI). Stocks and bonds shrugged off the speech as irrelevant and it was essentially momentum from Monday’s big jump that pushed the indexes upwards and the NASDAQ-100 closed at another new all-time record high. The Organization for Economic Cooperation and Development (OECD) released its outlook for 2026 and 2027 with the US blowing away the rest of the world in projected economic growth. Tuesday’s giddy optimism gave way to negativity, however, on Wednesday as markets digested the complete lack of anything constructive in Trump’s speech, a defiant response at the UN from the Iranian president, rapidly waning expectations of anything meaningful coming out of the Trump/Xi summit and the potential domestic and international fallout from the growing risk that the US may soon cease exports of diesel. After taking a short break, interest rates aggressively resumed their upward march as traders doubled down on bets of another Fed Funds Rate increase next month (see INTEREST RATE EXPECTATIONS below) and are repricing the entire curve higher (see INTEREST RATES below). The key 5-year Treasury rate broke through 5.00% for the first time since 2007 and the 30-year reached its highest level since 2004, closing in on 5.50%. Stock indexes dropped precipitously from their record levels on what was a pretty ugly day all around for financial markets. The bond rout deepened overnight with interest rates around the world continuing to soar driven by rampant bond vigilantes. The US and China agreed to kick the can down the road again by extending their trade truce until January 10th but AI competition, the war in Iran, Taiwan and critical minerals were still on the table to be discussed at the Trump/Xi summit. Stocks recovered from a rocky start on Thursday to close a muted session unchanged with negotiators apparently exploring some kind of a phased deal to reopen the Strait of Hormuz. As expected, little of consequence came from the Trump/Xi extravaganza despite the pomp and pageantry, but of course that didn’t stop both sides making desperate but ineffective PR attempts to try and put lipstick on a pig for their respective domestic audiences. Shorter term interest rates and oil prices did stabilize somewhat on Friday and the stock indexes got back some of their mojo, closing moderately higher for the session, led once again by tech names. For the week, the S&P 500 and NASDAQ 100 large cap indexes and international stocks all finished nicely in the green but US small caps were lower. It’s still very much a bull market in stocks. But the bears are starting to find a few things to feast on, particularly in the chaotic state of the bond market. Anglia Advisors clients are now able to access customized model portfolios in managed investment accounts which exclusively use ETFs, many of which carry no management fee - contact me for more details. If you are not yet a financial planning or investment management client of Anglia Advisors and would like to explore becoming one, please feel free to reach out to arrange a complimentary no-obligation discovery call with me. ARTICLE OF THE WEEK: “While you weren’t looking, the stock market went and put all your eggs in one basket.” Diversification using straight up index funds is becoming harder. .. AND I QUOTE: “Great to welcome Jake Paul to the Treasury Department today.” US Treasury Secretary Scott Bessent, in a ludicrous post on X, a message that would have been unthinkable until recently. It was naturally treated with the mockery it deserved. LAST WEEK BY THE NUMBERS: * SPY is a US Large Cap ETF that tracks the S&P 500 index, made up of 500 stocks from a universe of the largest US companies. * Up by 1.3% last week * Up by 0.7% over the past month * Up by 5.8% over the last three months * Up by 13.1% so far this year * QQQ is a US Large Cap ETF that tracks the NASDAQ-100 index, made up of the largest 100 non-financial companies listed on the tech-heavy NASDAQ exchange. * Up by 3.2% last week * Up by 4.7% over the last month * Up by 5.4% over the last three months * Up by 21.2% so far this year * IWM is a US Small Cap ETF that tracks the Russell 2000 index, made up of the bottom two-thirds in terms of company size of a universe of 3,000 of the largest US stocks. * Down by 0.8% last week * Down by 5.7% over the last month * Down by 6.0% over the last three months * Up by 14.6% so far this year * VXUS is an International Non-US ETF that tracks the MSCI ACWI Ex-US index, made up of over 8,500 of the largest names from a universe of stocks issued by companies from around the world excluding the United States, in both developed and emerging markets. * Up by 0.6% last week * Down by 1.7% over the past month * Up by 2.2% over the last three months * Up by 14.5% so far this year * BRENT CRUDE OIL .. $104.38 (up by 1.0% last week) * GOLD .. $4,321 (down by 2.2% last week) * BITCOIN .. $ 84,500 (up by 3.9% last week) Data courtesy of finviz.com as of Friday’s close. S&P 500 INDEX: WALL STREET ANALYSTS’ 2026 YEAR-END PRICE TARGETS: Average: 7,970 .. 2.9% above Friday’s close of 7743 (last week: 3.3% above) Data courtesy of LSEG Datastream. AVERAGE 30-YEAR FIXED MORTGAGE RATE: Data courtesy of Mortgage News Daily which calculates a daily average 30-year fixed mortgage rate from several different sources including surveys from Mortgage News, Freddie Mac, the Mortgage Bankers Association and the Federal Housing Finance Agency. INTEREST RATES: * FED FUNDS RATE * 3.875% (3.875% a week ago) * PRIME RATE ** 7.00% (7.00% a week ago) * 3 MONTH TREASURY 4.24% (4.14% a week ago) * 2 YEAR TREASURY 4.81% (4.76% a week ago) * 5 YEAR TREASURY 5.01% (4.86% a week ago) * 10 YEAR TREASURY *** 5.18% (5.01% a week ago) * 30 YEAR TREASURY 5.50% (5.34% a week ago) Data courtesy of the Federal Reserve and the Department of the Treasury as of Friday’s market close. * Decided upon by the Federal Reserve Open Market Committee at periodic meetings 8x a year. Used as a basis for overnight interbank loans and for determining high yield savings interest rates. ** Wall Street Journal Prime Rate as of Friday’s close. Moving in lockstep with the Fed Funds interest rate, this measure is used … This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit simonbrady.substack.com