So what do I expect in the financial markets over the next couple of weeks? I expect a gradual drifting lower for stock prices and a gradual move upward in oil prices as analysts report on how lng it’ going to take to restore supply. I’m not looking for a big plunge or correction–more like a reconsideration of today’s enthusiasm.
Last week saw deleveraging everywhere you looked. will next week see another week of deleveraging–which translates into selling–or not?
Prices for memory chips are forecast to soar in 2026. but what just as bad/even worse it looks like chip customers are looking at serious supply shortages during the year.
Higher prices and supply shortages could be enough to put earnings at risk at some high multiple cloud and AI companies.
The latest Bank of America Global Fund Manager Survey has gone extremely bullish. The bank’s Bull & Bear Indicator has climbed to 9.4, a “hyper‑bull” reading that the bank sees as a contrarian sell signal and a warning to add hedges rather than increase risk.
It’s not surprising to me that the Chicago Mercantile Exchange’s decision to hike margin requirements for gold and silver trading not once but twice in a week took a bite out of gold and silver prices. What is surprising to me is how small the drop in prices for gold and silver have been relative to the historic gains the two metals recorded in 2025. I’d buy, especially silver, on the dip.
I hope you’ve done well in the stock market in 2025. As of the close on December 29, the gain for the Standard & Poor’s 500 for 2025 was 19%. Which makes it especially important to search for any potential candidates for tax loss selling to off set any realized gains you took in 2025. (Like, for example, if you traded in and out and in again on Nvida (NVDA) or Broadcom (AVGO).)
The rules for generating a tax loss give you just two more days to sell in 2025.
I expect the huge 2025 rally in gold and silver to finish the year strong. But with the possibility of volatility as institutional investors try to game the next move in precious metals. In case you’re not up to date on this rally, gold was up 76% for 2025 as of December 26. Silver was up 160%. Gains like those inevitably fill investors heads with thoughts of corrections and reversions to the mean. But I think selling now is premature.
In the aggregate a K-shaped economy can deliver pretty good aggregate numbers in a situation like this. No matter what pressures and pain individuals or classes of consumers are feeling. An aggregate like GDP growth, for example, can still look pretty solid and reassuring to economists, Wall Street strategists, and central bankers.
As long that is, as the pain and the reduced spending in the lower 40% on consumers by income doesn’t increase by enough to overwhelm the positive spending trends by the top 10%. (The other danger in a K-shaped is that something will go wrong that discourages spending by the upper 10%. Like a big drop–more than a 5% dip–in stock prices. More on that danger in a coming post.) Right now, energy prices are climbing fast and far enough put more pressure on the most pressed of consumers. Could higher energy prices be the dollars that breaks the K-shaped economy?
Sure, deep worries about growth, profits, and soaring capital spending in the AI sectors were a major contributors to the market sell off. But let’s not forget the extraordinary reversal in investor sentiment about the likelihood of another 25 basis point cut in interest rates at the Fed’s December 10 meeting. On October 17, the CME FedWatch Tool calculated that the Fed Funds Futures market had priced in a 93.6% chance of another 25-basis point cut in interest rates. Today November 19, the market was pricing in only 32.8% odds of a cut. the odds of the Fed doing nothing to cut rates on December 10 had climbed to 67.2%. AI worries aside, that big a shift in expectations–when investors had just about decided that the Fed would cut again–puts strong downward pressure on stock prices.
As a reminder of how the ground has shifted in just a few weeks, today, November 19, the Federal Reserve released the minutes of its October 29 meeting.
This is a very difficult stock market. Even as stocks climb to new record highs. On the one hand, even investors who are all in, maybe even overweight to the long side, worry that this rally isn’t sustainable for much longer. By most historical standards valuations are off the charts. I get a steady stream of stories and posts asking whether XYZ stock has climbed to faro fast. Volatility on somedays can be downright scary with relatively minor events leading to big market moves. It’s simply very hard to stay on board this rally. On the other hand, it’s very hard to get off the train. I see lots of Wall Street analysts cutting recommendations from “buy” to “hold” on valuation fears, but I see almost no one saying “sell.” FOMO–fear of missing out–is just too strong. Which is totally understandable. The Standard & Poor’s 500 index was up 25.02% in 2024 and was up another 18.11% in 2025 to date through October 27. Market leaders have racked up even bigger gains. AI chip icon Nvidia (NVDA) was up 171% in 2024 and has gained another 39% in 2025 through October 27. It’s insanely difficult to walk away from those kinds of gains. So what’d you do?
It’s been hard to tell what the individual announcements mean. Starbucks fired 900 corporate employees in September, but the chain had already done a February culling as part of new management’s drive to get the company back on track. In October, Target Corp. eliminated 1,800 roles to help the beleaguered retailer move faster. Amazon cut 14,000 corporate jobs and blamed artificial intelligence. But we’re starting to see signs of a worrying trend. After a labor market that seemed frozen in place–low hire but low fire–September seems to have brought job cuts across the economy. A report from outplacement firm Challenger, Gray & Christmas showed almost 950,000 U.S. job cuts this year through September, the highest year-to-date total since 2020. And that was before the heavy October run of cuts.
No slowdown on plans for AI capital spending in earnings results this past week from Big Tech. Alphabet/Google (GOOG) said it was increasing what it planned to spend on A.I. data center projects this year by $6 billion, after spending nearly $64 billion over the past nine months. Microsoft (MSFT) said it had spent $35 billion in its latest quarter, $5 billion more than it had told investors to expect just a few months ago.
Amazon (AMZN) said it would be “very aggressive” in adding more data centers and would spend $125 billion this year-— and even more next year. Meta Platforms (META) raised its spending forecast to at least $70 billion by the end of the year, which would be nearly double what it spent last year. The stock market reaction wasn’t unalloyed joy. Investors seemed generally positive on spending plans from Alphabet, Microsoft, and Amazon. And skeptical of Meta’s strategy and spending.
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