November Economic Update

Market Summary

Last month saw more tariff threats which were eventually back-pedaled, a Fed announcement with lowering interest rates and a cautionary outlook, and official data flows interrupted by a federal funding impasse, which leaves the outlook for the U.S. economy clouded. Aside from some positive earnings reports from the largest US tech companies, many other earnings reports raised yellow flags. Despite all of this, the major market averages gained spurring more valuation and bubble concerns. The S&P 500 gained 2.29%, the Nasdaq 100 4.8%, and the Russell 2000 added 1.76%. (1)

Tariffs

Tensions have eased between the US and China as Trump backed down from his previous threat. On October 10^th, the Administration threatened a 100% increase for Chinese imports set to begin on November 1st. Just days before the deadline, Treasury Secretary Scott Bessent said trade negations were progressing and that the additional tariff increase was taken off of the table. So for now, it appears this was yet another bluff by the Administration and they were likely never serious about imposing such egregiously high tariffs. (2)

Economic Indicators

The Bureau of Labor Statistics (BLS) was forced to delay the normal monthly jobs report (and other series) due to the federal government shutdown. The absence of timely labor-market data is complicating the outlook for employment and policy-making. The government did manage to release the monthly CPI number which came in at 3.0% year-over-year which was one tenth of a percent higher than the previous month. (3)

The Fed

At the Federal Reserve Board’s meeting on October 29, the Fed cut its target range for the federal funds rate by 25 basis points, bringing it to a range of 3.75 - 4.00 %, which was expected. The policy statement explicitly flagged the shutdown’s data blackout as a risk: “Available indicators suggest… job gains have slowed this year… inflation has moved up… uncertainty about the economic outlook remains elevated.” Fed Chair Jerome Powell noted that a December rate cut is “not a foregone conclusion” which was not anticipated by the market. (4)

Looking Forward…

With many market valuation metrics at or near all-time extremes, there is legitimate concern for a market bubble. Much of the growth we’ve seen over the past couple years has been fueled by speculative investing into AI companies with those valuations skyrocketing – in many cases with price/earnings ratios exceeding 200 when a typical growth company usually trades around a 40 P/E. While a few of these valuations may be justified with lofty growth forecast in the sector, there are many other companies who simple don’t earn enough to rationalize these prices.

Another concern is AI itself replacing jobs, with we have touched on in prior newsletters. With companies such as Target, Amazon, IBM, Microsoft, and others recently announcing laying offs, the question around job replacement is becoming more of a concern with each day that passes. In addition, consumer sentiment continues to fall with the University of Michigan’s sentiment index dropped to near all-time lows, signaling stress on “main street” (the average person).

All of that said, there is a scenario that has been floating around has been named the “K” shape economy, where the top 10% wealthiest individuals continue to prosper and hold up the markets while the bottom 90% struggle with inflation, jobless, and falling real incomes. This is a classic scenario in late-stage capitalism and something on the forefront of our minds with AI potentially being the catalyst for such a scenario.

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Monthly Financial Tip:

Are your antiques and collectibles worth more than they used to be? Their current value should be accurately stated on your homeowner insurance policy. Otherwise, an insurer may not reimburse you for their full value if they are lost or damaged.

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Citations:

1. Schwab, Oct 31, 2025

2. Business Insider Oct 26, 2025

3. Investing.com Oct 24, 2025

4. Federal Reserve, Oct 29, 2025

Disclaimers:

This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.