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With the Fed cutting interest rates and government spending like crazy, is it possible to have any type of slowdown? It is clear that our policy makers are doing what they can to run the economy VERY hot!
The beneficiaries of government spending and artificial intelligence capex are doing great, while the rest of the economy is sputtering along.
| | Market Update - November 2025 | |
- The US Dollar looks like it has bottomed for now. This is bearish for gold, silver and international securities.
- Bonds continued to slow grind higher; yields are falling as the Fed continues to cut interest rates.
- Large cap technology stocks continue to lead the indexes higher as they respond to higher capital expenditures on AI, lower interest rates and the announcement of new trade deals.
- Inflation remains muted at 3%, but well above the Fed's 2% target.
| | Table 1: Market performance estimates as of 10/31/2025 (LIMW) | | Interest rate cuts keep the party going | | |
The bull market in stocks continued to advance, with large cap technology names leading the market higher. The China trade deal, Fed interest rate cuts and more spending on artificial intelligence boosted sentiment among investors.
Figure 1: S&P 500 performance 2020-2025 (LIWM)
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There is an old trading adage on Wall Street that retail investors buy the most at the top and the least at the bottom. One could argue that the institutional investors are subject to this same behavioral trap, perhaps even more so.
However, it is important to note that retail buying and excitement have been rising dramatically over the last few years, with a pause in April 2025 and the big dip in 2023. This is not a timing tool, but a contrarian indicator for the stock market bulls.
Figure 2: Retail trading buy imbalance 2019-2025 (UBS)
| | Gold goes crazy, but what does it all mean? | | |
Just as with bitcoin investors, we now have gold investors pointing to their gains as justification for their investment thesis. Here is a brief rundown of what the typical gold-bug is saying:
- Central banks and their national sponsors are printing money like crazy.
- The United States is contemplating a return to the gold standard.
- Bitcoin is the only investment that will protect you when the dollar system collapses.
It is VERY difficult to trade gold and bitcoin. There don't seem to be any fundamental drivers like inflation or international cash flows that account for the activity in these two asset classes. "I like it because it may go up" is not the best way to pick an investment; that is a very naive way to invest.
Let's address some of the bullish arguments. First, central banks and their governments DID print money like crazy during the pandemic, but in recent years have been cutting back that same stimulus. Second, there is no way the US government will return to a gold standard; this takes away enormous flexibility on the part of the Treasury department and Federal Reserve to manage the economy. Third, the dollar based trade system is not in imminent danger of collapse: our trade partners BENEFIT from not having the reserve currency and use their currencies AGAINST us to facilitate trade. Additionally, past hyperinflations like that of Weimar Germany and Zimbabwe were usually preceded by a war (World War I and Rhodesian civil war, respectively).
So, the gold story is complicated. Here are some interesting charts on the gold market.
Let's first meet the WORST gold traders in the history of the world: our central banks. In the following chart, you can see the years when they were net sellers and net buyers of the yellow metal. Surely, with their superior research and long-term time horizon, they would buy-low and sell-high. However, in practice, they do the opposite. Note that they were selling heavily in the 1980s and 1990s, during a period of price weakness. Today, they are buying like crazy during a period of high prices.
Figure 3: Central bank buying and selling of gold 1970-2025 (Bank of America)
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If gold and bitcoin really were a reflection of broad based currency debasement, wouldn't we see similar price behavior in other commodity markets? After all, if the US Dollar goes down in value, theoretically, all commodities should rise by like amount, more or less.
That is not what we see in the markets. Except for gold, commodities say "some inflation, but not out of control inflation."
| | Figure 4: Commodity prices 2005-2025 (LIWM) | | |
So, be careful if you are tempted to chase gold here. If the central banks decide they have enough gold and stop buying, we may see some very different price action.
Finally, some commentators are pointing out that gold is a superior investment to stocks. Here are the actual numbers that show gold has done great, but not THAT great. You were much better off having an overweight in the Nasdaq technology index than owning gold.
Figure 5: Broad asset class performance 1, 3, 5, and 10 years trailing (LIWM)
| | Broad economy muddles along, still | | |
The Institute for Supply Management survey data continues to give us a lukewarm measurement for the broad economy. The cries for lower interest rates are coming from many voices in the non-tech sectors. The key take-away here is that things aren't great, but they aren't that bad either.
Figure 6: Service and Manufacturing sector ISM readings (LIWM)
| | Consumer confidence shows very little confidence | | |
Not that anyone in power cares, but the broad middle and lower classes are struggling with a weak job market and rising inflation, especially with non-cyclical expenses like health care, insurance and other services. Note that confidence is at levels we saw during the financial crisis, so the pressure on the consumer is real.
A large component of this inflation is from government spending on immigrants who have been given generous spending stipends, free healthcare and subsidized residences. It is unclear if this will continue going forward.
Figure 7: Consumer Sentiment (University of Michigan surveys)
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Speaking of immigrants and their spending in the economy, here is an interesting analysis of non-resident immigrant's use of interest rate loan locks as part of an FHA mortgage approval. It looks like immigrants' usage of this service rose dramatically post-pandemic before a rule change pushed them out.
It is unclear if this behavior change will affect home prices, yet.
Figure 8: FHA Loan Locks to immigrants (John Burns research)
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Additionally, there are some problems with the consumer loan space, especially in loans tied to automobiles and their supply chains. The recent collapse of US auto parts supplier First Brands Group and subprime auto lender Tricolor have triggered significant concern over risks in the private credit market, prompting regulators and financial institutions to reassess the stability of unregulated financing structures.
The failures, which occurred in September 2025, have exposed widespread use of opaque, off-balance-sheet financing and raised alarms about systemic vulnerabilities, particularly in the rapidly expanding $3 trillion private credit sector. Regional bank Jeffries (ticker: JEF) has been closely associated with some of these problems and the market fears there may be some contagion.
This is an echo of events that preceded the 2008 financial crisis. If you are wondering how the regulators could let this happen again, the markets never learn.
Figure 9: Private credit loan firms versus the S&P 500 (anonymous author)
| | Inflation readings settling in at 3% | | |
The latest inflation readings appear to be stabilizing at around 3%, significantly above the Fed's 2% target. Despite this fact, they are pressing ahead with their plan to cut interest rates.
Figure 10: Recent inflation readings (Goldman Sachs)
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There is a strong narrative that the central banks have created irreversible debasement of the global currency base. However, across the board, major central banks have been reducing their bond holdings and supporting their local economies. Even Japan is playing ball.
Historically, this type of coordinated contraction EVENTUALLY affects the banking system and real economy. For now, there seems to be plenty of growth, but beware of the lagged effects of central bank policy.
That being said, interest rate cuts are stimulative for the economy and stock market.
Figure 11: Global Central Bank asset metrics (RBA)
| | Watch technology capital expenditures | | |
Most investors are aware of the remarkable activity surrounding the artificial intelligence space. Open AI, ChatGPT and Grok are now household names and helpers for those trying to do research.
The providers of these services are investing hundreds of billions of dollars in the hopes that they will have a first mover advantage in a nascent industry. For now, revenue is scarce with promises aplenty.
Additionally, there is quite a bit of circular business between the players. Nvidia, for example, sells the chips that AI runs on, but also invests in the companies that buy their products. During the 2000 tech bubble, similar arrangements were in place among large telecommunications providers that helped accentuate the stock market top and aggravate the fall when the business cycle turned.
Figure 12: The Artificial Intelligence ecosystem (Bloomberg)
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We are watching the capital expenditures of the large players quite closely. If these should turn down, for ANY reason, the euphoria surrounding these stocks will begin to deflate.
Figure 13: Capital spending of 4 large tech companies (Bloomberg)
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Stocks and bonds continue to grind higher as we face the last two months of the year. At this time, there doesn't seem to be a catalyst to stop the current action. However, as mentioned before, stocks are objectively expensive and much of the economic growth we see is supported by massive government spending, AI capex and falling interest rates.
As always, we welcome your feedback and are happy to discuss our research and how it applies to your situation.
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Rob 281-402-8284
Chris 281-547-7542
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Christopher Lloyd, CFP ®
Vice President and Senior Wealth Planner
Lloyds Intrepid Wealth Management
1330 Lake Robbins Dr., Suite 560
The Woodlands, TX 77380
281-547-7542
Chris.Lloyd@lloydsintrepid.com
www.lloydsintrepid.com
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