Here's the Deal

This is one of the most important weeks of 2025. Inflation is still climbing, the Fed is preparing another rate cut, and global trade tensions are hitting a critical moment as Trump and Xi meet for the first time since 2019. Yet despite all the noise, markets keep marching higher. A powerful late-cycle strength that tells us the bull trend remains very much alive.

This is a moment to enjoy the upside while staying laser-focused on where we are in the bigger credit-cycle story.

CPI Continues to Grow Every Month Since “Liberation Day”

We finally received some insight into the inflation situation in September this week with the release of CPI and Core CPI. Which, regardless of the current government shutdown, had to be published by law so Social Security could calculate its annual cost-of-living adjustment.

On the surface, the slight drop in Core CPI looks like good news. But context matters.

Oil and gasoline prices have fallen steadily since mid-2022. With both down more than 50% from their post-pandemic highs, and roughly 20% and 15% lower than a year ago, respectively. With energy prices this low, one would expect Core CPI to be cooling more noticeably. The fact that it isn’t tells us may offer us some insight.

Oil and gasoline now appear to be forming early-stage bottoming patterns, suggesting prices could soon rise again. If that happens while businesses are still in the beginning phases of passing on higher tariff-related costs to consumers, inflation pressures could re-accelerate. The exact opposite of what the economy needs right now.

As for CPI, it has now climbed for five consecutive months, reaching its highest rate since May 2024. Every month since new tariff rates were introduced on “Liberation Day” in April has brought higher inflation, reaffirming what history has shown repeatedly: Tariffs are either inflationary — or, if consumers can’t absorb the higher costs, they crush demand and trigger recessions or worse.

Businesses have only begun to pass on their increased costs to consumers. But the percentage of cost increases from tariffs paid by the consumer is now up to 37% and rising. According to Goldman Sachs, that is expected to rise to 55% by year-end.

The Personal Consumption Expenditures (PCE) report is scheduled for release this Friday, October 31st, but it will likely be postponed due to the ongoing government shutdown.

It’s Fed Week: Expect Another 25bps Cut

Expect another another 25-basis-point rate cut, lowering the federal funds rate to a 3.75%–4.00% target range this Wednesday, Oct 29th.

According to CME FedWatch, markets are pricing in a 98% probability of that outcome, with another 25-basis-point cut currently anticipated for the December 10th meeting.

The labor market’s steady deterioration continues to be the main catalyst for renewed rate cuts, even as inflation remains above target and trending higher for five consecutive months.

Private-sector surveys and ADP data continue to show job losses, while official September employment numbers remain unavailable due to the ongoing government shutdown.

New Fed Governor Stephen Miran will more than likely once again argue for a 50-basis-point cut, despite inflation’s persistent rise. His recent comment — “Excessive data dependence is inappropriate where there are reasons to be confident in the forecast” (CNBC’s Invest in America forum, Oct. 15) — reveals a fundamental misunderstanding of how sound analysis works.

Miran’s statement is like a salesperson telling their boss, “The customer hasn’t shown any interest in buying, but I’m confident they will.”

Confidence without supporting data isn’t analysis, it’s wishful thinking. Or, as it is referred to in my former career: Hopes, Lies, and Bullshit.

This mindset is one of the most common rookie errors in analysis of any kind: letting belief override evidence.

Fed Chair Jerome Powell is expected to maintain a data-dependent stance and avoid committing to a long-term easing cycle. With limited official data available during the shutdown and uncertainty surrounding inflation trends, the Fed will likely stress flexibility.

The most important element to watch during Powell’s press conference will be any discussion of Quantitative Tightening (QT).

If the Fed hints at ending QT, or formally announces a wind-down later this year or early next year, it could spark further risk-on sentiment for markets in both equities and bonds.

Conversely, if Powell emphasizes caution about persistent inflation or the fiscal outlook, the result could lead to some cold water being thrown on the markets.

Trump and Xi to Meet in South Korea This Week

On Thursday, October 30, 2025, President Donald Trump and Chinese President Xi Jinping are set to meet in South Korea, coinciding with the Asia-Pacific Economic Cooperation (APEC) Summit. This will be their first in-person meeting since 2019, and it comes at a pivotal moment in the escalating U.S.–China trade conflict.

Both Washington and Beijing are striking an optimistic tone following recent trade discussions. Treasury Secretary, Scott Bessent, continues to lead and prove to be President Trump’s most competent and important economic advisors. While now on a clear path to possibly becoming one of the more legendary US diplomats in US history. He described the preparatory talks as having produced a “very successful framework” for the upcoming meeting. Chinese officials echoed that sentiment, reporting that a “consensus framework” has been reached on several key issues.

Sunday morning brought much more positive news as Bessent stated that China has agreed to delay rare earths rules by a year AND resume buying US soybeans. Both of which were major sticking points for a deal and the reason for the additional 100% tariffs on China which were scheduled to take effect on November 1st.

This is a monumental development as this moment represents a potential inflection point in the global trade landscape. The tone and outcomes of this meeting could influence not only inflation and commodity markets but also broader investor sentiment heading into the final months of 2025.

US Vs. Canada: More Bluster than Reality

Tensions flared again this past week after Ontario’s government aired an anti-tariff ad styled like a Reagan-era campaign spot. The ad drew a sharp response from President Trump, who blasted it as “a fraud” and announced on Truth Social that:

“Based on their egregious behavior, ALL TRADE NEGOTIATIONS WITH CANADA ARE HEREBY TERMINATED.”

By Saturday night, Trump doubled down after another airing of the commercial during Game 2 of the World Series, posting:

“Because of their serious misrepresentation of the facts, and hostile act, I am increasing the Tariff on Canada by 10% over and above what they are paying now.”

While Trump claims that President Ronald Reagan “loved tariffs,” that couldn’t be further from the truth.

For decades, Republicans have abhorred tariffs as both anti-business and anti-consumer. Protectionism hasn’t been a conservative economic principle since before World War II, and for good reason: the protectionist policies of the 1930s deepened and prolonged the Great Depression.

Only in recent years have some in the party tried to rewrite that history, pretending tariffs align with conservative values. They do not. Economic history is clear on this point because tariffs hurt growth, reduce trade, raise prices for everyone, and are anti-business. Most importantly, tariffs hurt small businesses the most. Small-businesses are the backbone and lifeblood of the US Economy, and have long been a key voting demographic for Republicans.

Despite the heated rhetoric, this latest spat is unlikely to have a significant economic impact.

Roughly 80%–85% of U.S. imports from Canada already qualify as tariff-free under the USMCA.

So while the headlines and rhetoric sound overly dramatic, the practical effect is minimal. In reality, this is more about political posturing than meaningful policy change.

Earnings Season: Week 3 of 6

According to FactSet, about 29% of S&P 500 companies have now reported third-quarter results, and the numbers continue to impress.

Roughly 87% have beaten earnings-per-share (EPS) expectations, well above the five-year average of 78%. The strongest performances have come from Big Tech, autos, and industrials.

Both Ford $F ( ▼ 1.36% ) and General Motors $GM ( ▼ 0.67% ) delivered strong Q3 earnings, reflecting healthy U.S. auto demand and continued consumer resilience. While at the same time flashing late-cycle signals.

• Consumer resilience: Ford and GM’s strong revenues and pricing power show that Americans are still spending on big-ticket items, despite higher financing costs.

• Capital discipline: Their shift toward margin preservation and reduced EV investment is a move away from growth and towards efficiency as executives brace for slower demand in 2026. Classic late-cycle corporate behavior.

• Tariff exposure: Ford’s comments on tariff and materials-cost pressures preview how trade frictions and supply risks could weigh on U.S. manufacturing even if domestic demand remains steady.

In contrast, Netflix and Tesla disappointed investors with weaker margins and softer demand commentary.

In defense, General Dynamics and Lockheed Martin posted solid results thanks to robust government spending, while Honeywell and RTX lagged slightly.

Capital One and several regional banks reported modest loan growth, signaling that the recent credit stress may be easing barring any further stress in credit markets.

Earnings continue to show corporate resilience despite softer labor data and a cooling industrial backdrop. The combination of solid profits and falling yields could help extend the bull market through 2025.

But make no mistake, the cracks in credit and labor markets continue to suggest that 2026 may bring about the end of the current credit cycle.

This week, all eyes will be on Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), and Apple (AAPL) for signals on whether enterprise cloud and AI demand remain strong despite a cooling economic backdrop.

Any slowdown here would ripple through not just tech valuations but also the broader market narrative that’s driven 2025’s rally.

Apple, Amazon, Visa, Mastercard, and PayPal will reveal how real consumer spending is holding up under the weight of higher borrowing costs and increasing prices.

Exxon Mobil (XOM) and Chevron (CVX) will close out the week, offering a snapshot of industrial demand, refining spreads, and global growth momentum heading into winter.

Markets:

In last week’s Here’s the Deal, we were watching a wedge pattern for clues about the market’s next move. We got our answer immediately.

After a strong gap-up breakout on Monday, SPY delivered a textbook trendline retest on Wednesday — and then blasted higher into the close of the week, printing another new all-time high.

This is a perfect reminder of why technical analysis matters. It isn’t “voodoo.” It’s a real-time map of supply and demand. Anyone ignoring charts today is working with a 20+-year-old playbook.

This last pullback was barely a 2% retracement. Hardly a meaningful correction. It once again highlights the remarkable resilience in equity markets.

Last week, I also pointed out that the VIX may have already been offering clues that the worst was behind us.

That was indeed the case as the VIX continues to fall and is now firmly below 20, reinforcing the risk-on backdrop.

Interestingly, oil and gasoline appear to be forming early-stage bottoming patterns.
Why does that matter?

• If energy prices had continued tumbling → it was more than likely that a recession had begun.

• Bottoming instead → things are ripe for markets to continue to rip higher into the end of the year.

Should Fed Chairman Powell indicate an end to Quantitative Tightening (QT), and a smooth and productive Trump/Xi meeting in South Korea, then it definitely looks like clear skies for the next several weeks for markets. I wouldn’t want to bet against them should this remain to be the case. Especially as it is abundantly clear that retail is leading the charge and they are buying even the smallest of dips.

And since it now appears that trade tensions are winding down, bitcoin is once again approaching $118K as it consolidates in the current broadening formation.

At this point I am looking for Bitcoin to break above $118K and go on to hit $125K-ish, test $118K-ish, and then head for new all-time highs into next year.

$SPY ( ▼ 1.1% ) S&P 500

Since market couldn’t retrace more than ~2% before once again hitting highs, it’s hard not to see SPY hitting at least $700 before the end of the year.

$DIA ( ▼ 0.29% ) Dow Jones Industrial Average:

$QQQ ( ▼ 1.53% ) Nasdaq:

$IWM ( ▼ 0.81% ) Russell 2000 (Small Caps):

The strength we’re seeing in markets right now is genuinely remarkable. This kind of momentum doesn’t come around often. But it also fits perfectly with what we expect in the later stages of a credit cycle, especially one still unfolding within the final stretch of a secular bull market.

History gives us a clear parallel: the Dot-Com surge. Breathtaking gains right before the secular tide fully turned.

That’s why the message here is simple:

Ride the wave while it’s rolling.

Markets like this are as good as it gets.

Just remember, late-cycle rallies can be both powerful and fleeting. Stay focused, disciplined, and aware of where we are in the bigger economic story.

WTF of the Week

This reinforces an important truth: most of America’s economic challenges aren’t the result of “getting screwed on free trade.” It stems from our own choices by prioritizing consumption and lifestyle signaling over saving, investing, and productive growth.

The problem isn’t that other countries are taking advantage of us. It’s that Americans too often choose pleasure and peacocking today over prosperity tomorrow.

Quote of the Week:

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