Quickly Evaporating.

After spending his weekend advocating for the breakup of the United Kingdom and watching golf, Trump resumed his relentless pressure on the Federal Reserve to slash interest rates to begin a week in which the central bank was widely expected to have to raise them for the first time since 2023 to fight inflation, putting him on a collision course with his own hand-picked Fed chairman. An Iranian-backed attack shut down a 7 million barrel/day Saudi pipeline on Sunday night, reducing Saudi oil production to its lowest levels in decades and triggering yet another big oil price spike. Existential AI safety concerns exploded and an openness to tighter regulation expressed by the OpenAI and Anthropic CEOs over the weekend sent tech hardware and chip stocks into a violent tailspin when US markets opened on Monday after pretty dreadful sessions in Asia and Europe. The indexes gradually recovered over the course of the day and closed only moderately lower. Interest rates resumed their climb with the impactful 10 year Treasury rate, which is the pivot for all sorts of consumer and business loans from mortgages to car loans to business lines of credit, breaking through 5% to its highest levels since 2007 right before the Great Financial Crisis. It has now risen by a full percentage point since the outbreak of the Iran war in February. Treasury Secretary Bessent was lambasted by members of the House Financial Services Committee (as well as some protesters) on Tuesday. Stocks tumbled to close lower again and interest rates continued to grind higher as traders watched him constantly fumble his lines and answer pointed questions very evasively, if at all. It’s clear that the confidence of both Congress and financial markets in his stewardship of the US economy is quickly evaporating. Retail sales data held up much better than expected on Wednesday morning as Americans continue to soothe their deep economic pessimism by spending money. Wall Street had priced in a 93% probability of a quarter-point Fed Funds Rate increase to 3.875% going into the FOMC interest rate-setting announcement. And lo, it came to pass and was a unanimous decision with no dissent on the committee. The quarterly Dot Plot projections were also released and showed that almost all the committee members are penciling in another rate increase at one of the two remaining meetings this year with maybe more to come in 2027 and they see further upside risk to inflation in the coming months with no achievement of the Fed’s 2% target for at least three years. Attention swiftly turned to the tone of Fed Chairman Warsh’s press conference. He gave clipped, pithy answers and dodged any questions about any contact from Trump and the fact that the Fed is now in apparent policy conflict with Bessent and the US Treasury and most certainly with the president, who quickly repeated his ridiculous assertion that interest rates should somehow be below 1% and concerningly claimed that he instructed Warsh how to cast his vote. These three powerful institutions normally work together harmoniously in a properly-functioning economy but are now completely out of sync. The market’s takeaway was that the quarter point hike could be the first of an upcoming series of increases. Shorter term interest rates shot higher, rising for a seventh consecutive session, longer term rates stabilized and stocks dumped with uncertainty lingering about how far and for how long Fed rate increases will go and traders shifted their gaze from this Fed meeting to the weeks and months ahead and didn’t particularly like what they saw. Dip-buyers finally stepped in on Thursday, taking advantage of a pullback in energy prices and interest rates retreated from their recent spike. Markets seemed to feel a little better about the expected rate hike and stocks bounced back hard, quickly erasing all of Wednesday’s losses to close solidly higher. Friday’s session was a quiet one as markets digested the events of the last few days with stocks mostly unchanged, but interest rates moved north again (see INTEREST RATES below). For the week, the NASDAQ-100 finished higher but the S&P 500, US small caps and international stocks closed lower. Some other things I’m thinking about .. * The S&P 500 closed right at its technically important and closely-watched 50-day moving average, but still above its 100-day. * Employing the “enemy of my enemy is my friend” principle, the European Union invited Canada to become a mostly symbolic associate member in a reaction to Trump’s toxic hostility towards them both. This naturally enraged the US president who threatened “very serious” new tariffs in response to this “hostile act”. 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: “96% of stocks are a waste of your precious time.” The math of stock-picking success is brutal. .. AND I QUOTE: “The only way to be sure of having tomorrow’s big winners in your portfolio is to own all stocks.” Professor Hendrik Bessembinder, Carey School of Business at Arizona State University in his landmark study, One Hundred Years In The US Stock Markets. LAST WEEK BY THE NUMBERS: * SPY is a US Large Cap ETF, tracks the S&P 500 index, made up of 500 stocks from a universe of the largest US companies. * Down by 0.3% last week * Down by 1.0% over the past month * Up by 2.0% over the last three months * Up by 11.7% so far this year * QQQ is a US Large Cap ETF, tracks the NASDAQ-100 index, made up of the largest 100 non-financial companies listed on the tech-heavy NASDAQ exchange. * Up by 0.9% last week * Up by 0.8% over the last month * Down by 2.6% over the last three months * Up by 17.4% so far this year * IWM is 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. * Down by 1.7% last week * Down by 5.8% over the last month * Down by 3.9% over the last three months * Up by 15.4% so far this year * VXUS is an International 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. * Down by 1.5% last week * Down by 1.3% over the past month * Down by 1.0% over the last three months * Up by 13.8% so far this year * BRENT CRUDE OIL .. $103.32 (down by 1.2% last week) * GOLD .. $4,416 (up by 0.6% last week) * BITCOIN .. $ 81,340 (up by 4.8% last week) Data courtesy of finviz.com as of Friday’s close. S&P 500: WALL STREET ANALYSTS’ 2026 YEAR-END PRICE TARGETS: Average: 7,901 .. 3.3% above Friday’s close of 7651 (last week: 3.3% above) Data courtesy of LSEG Datastream. AVERAGE 30-YEAR FIXED MORTGAGE RATE: Data courtesy of Mortgage News Daily which calculates an 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% (3.625% a week ago) * PRIME RATE ** 7.00% (6.75% a week ago) * 3 MONTH TREASURY 4.14% (4.00% a week ago) * 2 YEAR TREASURY 4.76% (4.56% a week ago) * 10 YEAR TREASURY *** 5.01% (4.95% a week ago) * 30 YEAR TREASURY 5.34% (5.37% 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 as a basis for determining certain consumer loan interest rates such as credit cards, auto loans, personal loans, home equity loans/lines of credit and securities-based lending. *** Used as a basis for determining mortgages. INTEREST RATE EXPECTATIONS: Where will the Fed Funds interest rate be after the next rate-setting meeting on October 28th? * 0.25% higher than now .. 53% probability (42% a week ago) * Unchanged from now .. 47% probability (51% a week ago) * 0.25% lower than now .. 0% probability (7% a week ago) Where is the Fed Funds interest rate most commonly expected to be this time next year? * 0.75% higher than now, 32% probability (a week ago: 0.75% higher, 29% probability) Data courtesy of the CME FedWatch Tool and is derived from futures market pricing as of Friday’s market close based on the current Fed Funds interest rate of 3.875%. FEAR & GREED INDEX: “Be fearful when others are greedy and be greedy when others are fearful.” Warren Buffett. Data courtesy of CNN Business as of Friday’s market close. The Fear & Greed Index from CNN Business can be used as an attempt to gauge whether or not stocks are fairly priced and to determine the mood of the market. It is a compilation of seven of the most important indicators that measure different aspects of stock market behavior. They are: market momentum, stock price strength, stock price breadth, put and call option ratio, junk bond demand, market volatility and safe haven demand. Extreme Fear readings can lead to potential opportunities as investors may have driven prices “too low” from a possibly excessive risk-off negative sentiment. Extreme Greed readings can be associated with possibly too-frothy prices and a sense of “FOMO” with investors chasing rallies in an excessively risk-on environment . This overcrowded positioning leaves the market potentially vulnerable to a sharp downward reversal. 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