Weekly Newsletter: November 10, 2025
“Don’t know what you’ve got till it’s gone” can be Wall Street’s lament regarding the various economic reports. Friday marked the second month without jobs data. For all the handwringing about the accuracy of the report, the large amounts of restating past months, and complaints about potential gaming of the data, analysts are left using data with less robust historical data. This week should be the inflation data, which lacks “ancillary” reports to triangulate a good guess as to what inflation might be during October. Many complain the inflation “basket” has changed over the years and assumes lower inflation from technology gains or switching to cheaper goods. While many complain about how the reports are generated, the lack of data means everyone is licking their finger and raising it in the air to gauge the economic winds. The longer the government stays closed, it increases the possibility of no reports for the past few months. The Fed will have very little information with which to justify a change in interest rates, which was alluded to by Chair Powell at his last press conference. Markets were expecting another cut in December, and that is more likely to be a pause without strong data to make a different decision. The longer the government shutdown lasts, the potential grows for more permanent damage to the economy that may never be recovered.
The lack of “official” jobs data made all the other jobs reports more important, even though in “normal” times, they are barely considered. One that got everyone’s attention was the Challenger job layoff report. The report was the worst in 20 years as companies from tech to fast casual restaurants announced layoffs over the past month. Of course, the report has a few caveats that may have been missed in the announcement. Many layoffs, especially in the tech sector, do not happen immediately, but are planned layoffs that may/may not occur over the course of a few months. Also, while the announcement is for US companies, those getting laid off are not necessarily all domestic. The data series goes back to 2000, so it does capture some tumultuous times. But it is not, on its own, a good predictor of changes in the jobs market. This report was in contrast with a good ADP employment report. ADP data only goes back to 2010 and captures private sector (non-government) employment. Given the short data history, it is hard to determine how it “performs” during economic changes. Earnings data slows down this week and then gets serious the following week as retailers and Nvidia report their earnings. Retailers should provide additional color on the health of the consumer and the Nvidia earnings on the projections for AI growth.
The bond market remains well-behaved, as yields have been rangebound since the “Liberation Day” announcement. The various models for the fair value of the 10-year bond indicate that the 10-year is priced properly. Short-term rates are driven by the Fed rather than inflation worries. With the Fed likely on hold through year-end, short-term rates should be nailed down at current levels. One potential concern is the increasing spread between high-yield and treasury bonds. Historically, those spreads widen as worries about economic stresses increase. The increasing amount of debt issuance from tech companies related to the AI buildout worries investors as well. Historically, tech companies have funded growth from earnings and cash flow, tapping the debt market infrequently.
There are some warning signs that the markets may be taking a break from the frantic run higher over the past six months. More stocks falling, even as the averages rise, and more stocks below their short and intermediate-term average prices than above are signs of fatigue. That does not mean stocks drop dramatically from here, but they may trade down 5-10%, which historically occurs a few times each year. If and until signs of a recession show up (which is not yet the case), a market decline should be nothing more than corrective. One looming issue is the valuation of the overall market, especially technology stocks, which remain at the top 1% of their historical range. It is possible to see tech fall much more than the rest of the market, similarly to the rise in the market that was tech lead vs. the rest of the market.
Earnings season continues, and little economic data may keep investors on their heels. Continued voting on legislation to open the government will be watched closely for potential changes in positions. This was the first week of market declines in a while, and this year has been followed by good returns. This time could be different.
The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable but are opinions and do not constitute a guarantee of present or future financial market conditions.