Lurking In The Background.

Faced with rapidly escalating public fury aimed at all sides over the shutdown, Senate Democrats blinked first in the standoff over the weekend, allowing a procedural vote to go through on Sunday night which passed the buck over to the House and the beginning of the end finally came into view. Wall Street celebrated when markets opened on Monday morning and attention turned to exactly when the upcoming deluge of backed-up economic data can be expected relative to the December 10th Fed Funds Rate announcement and quarterly Dot Plot publication and how reliable the quality of that data will be. Stocks soared (with the notable exception of health insurance companies), scoring their best one-day performance since May with the S&P 500 and NASDAQ both recovering about 2/3rds of the previous week’s losses in just one session. The monster reaction rally faded on Tuesday, however, as traders tried to wrap their heads around the inflationary effects of ideas like 50 year mortgages (see ARTICLE OF THE WEEK below) and a deficit-busting $2k per person handout (aka an electoral bribe) in the lead-up to next year’s midterms. Having absurdly insisted the tariffs would not affect consumer affordability, the administration set about walking back selected tariffs on certain household items in the name of .. increasing affordability. The political silly season is clearly beginning to move into high gear. A degree of AI skepticism was still lurking in the background, with Softbank bailing on its entire Nvidia stake and Coreweave stock falling hard on weak guidance despite a generally satisfactory Q3 earnings report. A retreat in software and semi-conductor names saw the NASDAQ close lower, but the somewhat less tech-heavy S&P 500 made light gains, highlighting a noticeable growing investor rotation from momentum-driven, high risk, lower quality, growth-oriented names in favor of lower volatility, higher quality and more defensive value-oriented ones. Tiny bit by tiny bit, some risk is being gently eased off the table. This pattern repeated itself on Wednesday as tech and tech-adjacent sectors (including Bitcoin) skidded further, while the rest of the market had another slightly positive day and relatively tech-light European stocks finished at fresh all-time highs. Mainly because it’s a stupid index, I rarely mention the still-popular-for-some-reason Dow Jones Industrial Average, but I’ll reluctantly break that rule for once by pointing out that it closed above 48,000 for the first time on Wednesday. After the market close, the House put the final nail in the coffin of this particular 43-day shutdown, ensuring federal government funding at least through January 30th of next year. The sense that developed on Thursday was that it could easily be mid-to-late Q1 2026 before any economic data releases become clean or trustworthy (and, according to the White House, we will never be told what the October unemployment rate was). So markets and the Fed will still be flying relatively blind for a while yet and one outcome could well be that the originally-assumed Fed rate reduction next month may not now happen as the futures market-driven probabilities of a cut fell to below 50% just two weeks after being at over 90% (see INTEREST RATE EXPECTATIONS below). This anxiety was intensified by Fed officials sounding very cautious about the idea in a number of speeches. Stocks suffered a very ugly sell-off as a result which only accelerated as Thursday’s session wore on. Once again, the AI, software and semi-conductor big dogs led the charge south, but no corner of the market was spared this time, with the S&P 500 giving back all of Monday’s gains. Interest rates jumped higher. Asian and European markets dutifully tumbled on Friday and the losses piled up again for risk assets when New York opened with the NASDAQ initially getting walloped again as traders anticipated turbulence linked to the upcoming dubious-quality economic data dump in the coming weeks. But then the cavalry arrived in the form of aggressive bargain-hunting dip-buyers who emerged to offset the worst of the declines and even carry the bruised and battered NASDAQ fractionally into the green by the close, with the S&P 500 little changed on the day. Prices and vibes seemed to be shaping the narrative rather than the other way around with no tangible single catalysts for this week’s tech-fueled decline beyond a sense of excess froth and a growing number of unanswered questions about AI and its long term return-on-investment potential. Oh, and by the way, this week we get the Nvidia Q3 earnings report as well as those of the major retailers. Fasten your seat belts. Check out the Angles homepage for my new explainers on workplace benefits, new 401k/IRA contribution limits and tax brackets, HSAs, FSAs, BackDoor IRA and Mega BackDoor 401k contributions - all freshly updated for 2026. 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 .. I could not believe that I heard this as even a semi-serious suggestion last week. The utterly bonkers idea of a 50 year mortgage. The Wall Street Journal was also unimpressed. .. AND I QUOTE .. “Definition of an ideal level of wealth: You can wake up every morning realizing that you are able to spend your time doing what you want, with whom you want, for as long as you want.” Morgan Housel, author and co-founder of Collaborative Fund LAST WEEK BY THE NUMBERS: Last week’s market color courtesy of finviz.com Last week’s best performing US sector: Healthcare (two biggest holdings: Eli Lilly and Johnson & Johnson) ⬆︎ 3.9% for the week Last week’s worst performing US sector: Consumer Cyclical (two biggest holdings: Amazon, Tesla) ⬇︎ 2.1% for the week * SPY, a US Large Cap ETF, tracks the S&P 500 index, made up of 500 stocks from a universe of the largest US companies. Its price rose 0.1% last week, is up 14.6% so far this year and ended the week 2.6% below its all-time record closing high (10/29/2025). * IWM, a US Small Cap ETF, 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. Its price fell 1.7% last week, is up 7.5% so far this year and ended the week 6.1% below its all-time record closing high (10/15/2025). * VXUS, a Global Non-US ETF, 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. Its price rose 1.0% last week, is up 27.2% so far this year and ended the week 1.3% below its all-time record closing high (11/12/2025). INTEREST RATES: * FED FUNDS * ⬌ 3.875% (unchanged from a week ago) * PRIME RATE ** ⬌ 7.00% (unchanged from a week ago) * 3 MONTH TREASURY ⬆︎ 3.95% (3.92% a week ago) * 2 YEAR TREASURY ⬆︎ 3.62% (3.55% a week ago) * 5 YEAR TREASURY ⬆︎ 3.74% (3.67% a week ago) * 10 YEAR TREASURY *** ⬆︎ 4.14% (4.11% a week ago) * 20 YEAR TREASURY ⬆︎ 4.73% (4.65% a week ago) * 30 YEAR TREASURY ⬆︎ 4.74% (4.70% a week ago) Data courtesy of the Federal Reserve and the Department of the Treasury as of the market close on Friday * 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. Used as a basis for determining many consumer loan interest rates such as credit cards, personal loans, home equity loans/lines of credit, securities-based lending and auto loans. *** Used as a basis for determining mortgage interest rates and some business loans AVERAGE 30-YEAR FIXED MORTGAGE RATE: * ⬆︎ 6.24% One week ago: 6.22%, one month ago: 6.28%, one year ago: 6.78% Data courtesy of Freddie Mac Primary Mortgage Market Survey INTEREST RATE EXPEC… 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