The information and opinions included in this document are for background purposes only, are not intended to be full or complete, and should not be viewed as an indication of future results. The information sources used in this letter are WSJ.com, Jeremy Siegel, Ph.D. (Jeremysiegel.com), Goldman Sachs, J.P. Morgan, Empirical Research Partners, Value Line, BlackRock, Ned Davis Research, First Trust, Citi research, and Nuveen.
IMPORTANT DISCLOSURE
Past performance may not be indicative of future results.
Different types of investments and wealth management strategies involve varying degrees of risk, and there can be no assurance that their future performance will be profitable, equal to any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.
The statements made in this newsletter are, to the best of our ability and knowledge, accurate as of the date they were originally made. But due to various factors, including changing market conditions and/or applicable laws, the content may in the future no longer be reflective of current opinions or positions.
Any forward-looking statements, information, and opinions including descriptions of anticipated market changes and expectations of future activity contained in this newsletter are based upon reasonable estimates and assumptions. However, they are inherently uncertain, and actual events or results may differ materially from those reflected in the newsletter.
Nothing in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice. Please remember to contact Signet Financial Management, LLC, if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and/or services. No portion of the newsletter content should be construed as legal, tax, or accounting advice.
A copy of Signet Financial Management, LLC’s current written disclosure statements discussing our advisory services, fees, investment advisory personnel, and operations are available upon request.
Spending remains solid, but the Fed grows cautious — a reminder for investors to stay balanced
US economics, inflation, jobs and the Fed
The U.S. consumer is proving resilient. Sentiment has weakened in recent months over tariff and inflation worries. However, shoppers are still spending at a healthy clip according to Value Line. As the National Retail Federation reports, spending in November and December is forecasted to exceed $1 trillion this year. Given that personal consumption accounts for two-thirds of the gross domestic product (GDP), the economy still appears to be healthy.
The Federal Reserve is taking a wait-and-see approach regarding monetary policy. The central bank will end its bond-selling program on December 1st, which will keep more liquidity in the financial system. However, another interest-rate cut next month is now far less certain after a few Fed officials expressed hesitation to reduce rates, given the still-stubborn inflation backdrop.
The Fed’s more-measured approach also may be due to the lack of available inflation and labor market data. In fact, due to the recently ended government shutdown, no employment report for October will be released. That said, the economic releases are expected to pick up in the coming weeks ahead of the next Federal Open Market Committee (FOMC) meeting, which could quickly change the lead bank’s perspective. The U.S. economy will be a focus of the Fed. That is because with ongoing concerns about inflation and the labor market, policymakers want to avoid causing a notable slowing in growth that might precipitate a period of stagflation according to Value Line. Stagflation, as seen in the U.S. in the 1970s and more recently in Japan, is hard to solve, as economic tools have opposing effects.
Global economy
In its latest Global Research JP Morgan (JPM) indicates that global expansion has reached an important juncture. GDP growth has proved resilient this year, but significant imbalances have formed. Demand has rotated toward capex and productivity has picked up. Meanwhile, job gains have stalled, moderating labor income growth. While front-loaded tariff avoidance and a rising wave of new technology applications contribute to capex strength, JPM views a softening in business sentiment — reflecting trade war concerns and a narrow demand engine — as the prime drag on hiring.
A key element of the bank’s macro-outlook is that “a house divided against itself cannot stand.” JPM’s baseline forecast sees resilience and policy support enabling the global economy to absorb the sentiment shock that’s depressing labor demand. If JPM is right, both job growth and sentiment will pick up next year and support both solid GDP and job growth. The realignment of US labor demand and overall growth comes, however, in an environment of weak labor supply. JPM thus looks for US labor markets to begin tightening next year, promoting sticky inflation and shifting the balance of risks at the Fed away from easing. The economy has not yet absorbed this year’s shock, and it would be a mistake to ignore the still material near-term downside growth risks. Nevertheless, the bank forecasts global GDP to grow by a 2.7% annual rate this year and by a 2.5% annual rate in 2026.
Stock market
Third-quarter earnings season showcased a strong corporate America. More than 90% of the S&P 500 companies had reported results, with an overwhelming majority exceeding revenue and profit prognostications. Earnings growth was averaging around 13%, which would mark the fourth consecutive quarter of double-digit gains according to Value Line. Nevertheless, the markets have been jittery in the last couple of weeks.
As Professor Siegel puts it:
“Markets traded with an unusual mix of strong micro data and fragile macro sentiment last week and nowhere was that clearer than the reaction to Nvidia’s excellent earnings. The fundamentals showed strong demand, a robust product cycle, and clean forward guidance — yet the stock slumped after an early surge. That tells me the market is wrestling less with Nvidia’s numbers and more with crosscurrents and lingering anxiety about whether the extraordinary AI capex cycle ultimately pays off. This is reminiscent of the late-1990s fiber-optic buildout — demand was real, but there turned out to be massive excess capacity. The good news is that this reset is washing out speculative excess rather than undermining the leaders of the cycle. That’s healthy. There is also an evident Bitcoin–NASDAQ correlation that is striking again with the Bitcoin selloff cascading into some of leading tech stocks as positioning unwinds.
The broader macro hinge remains AI adoption. Consumers love AI as a personal assistant, but the trillion-dollar question is enterprise integration: Are firms deploying these tools, and are they realizing productivity gains large enough to justify the capex surge? Full-self-driving, robotics, and automation could free 6–8 million transportation jobs over time, unleashing major efficiency gains — but the diffusion timeline matters. Markets will continue oscillating between enthusiasm for the long-term payoff and fear of short-term overbuilding. I still believe this volatility is a healthy occurrence.”
The information and opinions included in this document are for background purposes only, are not intended to be full or complete, and should not be viewed as an indication of future results. The information sources used in this letter are WSJ.com, Jeremy Siegel, Ph.D. (Jeremysiegel.com), Goldman Sachs, J.P. Morgan, Empirical Research Partners, Value Line, BlackRock, Ned Davis Research, First Trust, Citi research, and Nuveen.
IMPORTANT DISCLOSURE
Past performance may not be indicative of future results.
Different types of investments and wealth management strategies involve varying degrees of risk, and there can be no assurance that their future performance will be profitable, equal to any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.
The statements made in this newsletter are, to the best of our ability and knowledge, accurate as of the date they were originally made. But due to various factors, including changing market conditions and/or applicable laws, the content may in the future no longer be reflective of current opinions or positions.
Any forward-looking statements, information, and opinions including descriptions of anticipated market changes and expectations of future activity contained in this newsletter are based upon reasonable estimates and assumptions. However, they are inherently uncertain, and actual events or results may differ materially from those reflected in the newsletter.
Nothing in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice. Please remember to contact Signet Financial Management, LLC, if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and/or services. No portion of the newsletter content should be construed as legal, tax, or accounting advice.
A copy of Signet Financial Management, LLC’s current written disclosure statements discussing our advisory services, fees, investment advisory personnel, and operations are available upon request.
LET'S GET ACQUAINTED