Outside the Box

No News Means a Lots of News: After 40 days of a U.S. government shutdown, the news floodgates are about to open. Markets should brace themselves, it’s about to feel like drinking from a firehose. Expect robust GDP growth around +4%, persistent inflation near +3%, and sluggish-but-slightly-positive job gains. All of this will give the Fed plenty to debate at its next meeting on December 9–10. What do you think the Fed does in December?

Socialism vs. Capitalism: In the same week New York City elected its first Socialist mayor and Tesla approved a $1 trillion CEO retention package, highlighting disconnect between corporate boardrooms and political sentiment on the left. Politics matter more than ever for corporate America since it shapes regulation, tax policy, global trade, fiscal spending, and even monetary policy despite independence. The American Dream reflects the belief that freedom provides the right to choose one’s own path with the opportunity to build a meaningful life that enables hard work, integrity, and shared responsibility allowing an individual to prosper while contributing to a society where progress is possible for all. This vision asks us to think beyond division, to see freedom, economic prosperity, and security not as partisan goals, but as enduring values that unite us in the pursuit of a better future.

All I want for Christmas: This weekend as I was walking through Rockefeller Center, workers were hoisting the 75’ Norway Spruce X-Mas tree, and I stopped to view the tree, look around at all the people, I reflected on the contrast of our K-shaped consumer-based economy that is running strong while so many people are struggling (those with stock portfolios, strong FICO scores, homeowners vs. those with no net-savings, student loans, large credit card balances). We see this dynamic playing out in the credit markets every day, especially in consumer lending businesses and the ABL market. We also see this in the equity market as fast-food restaurants and the consumer staples sector are having a challenging year (Chipotle, Wendy’s, Restoration Hardware, Dollar Tree all down 50%-plus y-t-d). In contrast, big-tech is having another big year, despite the recent pull-back which is most likely a healthy correction. This K-shaped economy impacts both consumers and publicly listed companies. For Christmas, traders will likely buy their favorite stocks that are on sale, despite the fact that most hedge funds and day traders prefer to buy momentum.

What do you want for Christmas? I suspect, many young Americans want the government to forgive their student debt ($40k average). At the other end of the extreme, the Mag-7 hyperscaler probably wants just a 1-Gigawatt datacenter ($40 billion total cost) with ample access to power.