November 24, 2025

 Happy Thanksgiving!

“Thanksgiving is a time of togetherness and gratitude.”

Nigel Hamilton

On a personal note, all of us at Hinsdale Associates are very thankful for you and the confidence and trust you place in us and our work on your behalf, have a most joyous holiday with your friends and family.

Another volatile week but first here are the numbers, here are the numbers The S&P 500 finished down 2%, The Dow Jones Industrial Average lost 1.75%, The Nasdaq was off 2.26%. Internationally, The FTSE 100 surrendered 1.64% and the MSCI-EAFE lost 2.8%. The 2-year treasury yield was 3.51% and the 10-year paid 4.06%.

So, as we move into this holiday shortened week, expect low volume and nervousness to continue. In a word, Volatility is back. Of course, volatility means prices went down fewuse the term when prices go up!! There was actually a faint whiff of panic in the air lastThursday after the market started to roll over despite exceptional earnings from NVIDIA the night before. (As all were holding their breath awaiting Nivida’s earnings which were very good!) Even a decent unemployment report, released last Thursday morning, did little to put a dent in the dark side. Investors were left confused at the relative lack of news driving the selling, so some started to grab at the proverbial straw. There was a flurry of articles early Thursday morning that claimed that NVIDIA’s earnings release put a stake in the heart of the bearish thesis about overbuilding in the AI space. But once the market rolled over, there was another flurry of articles (some by the same authors!!), claiming that NVIDIA’s earnings really highlighted how fragile the AI trade was.

What did we learn? This was a great example of how the news typically follows the price action, rather than the other way around. Rising prices create their own bullish narrative – price declines create the opposite. But the more balanced take on this week’s market action is probably the most appropriate – Ed Yardeni from Gemmer Asset Management summed things up pretty well on Friday: “The stock market pullback that we expected at the start of this month may be turning into an outright correction, especially for the Nasdaq. The S&P 500 is down 5.1% from its October 29 record high. The Nasdaq is down 7.8% over this period (chart). Both fell below their 50-day moving averages today. We doubt that either will fall to their 200-day moving averages, currently at 6,157.70 and 20,158.34.” This certainly isn’t the case in 2025, at least so far.

Obviously, we haven’t seen much on the economic statistics front during the shutdown, but what we do have to go on looks ok. Thursday’s payroll release for September was decent. Payrolls were up 119K, well above the gain of 50K economists expected. August’s number was revised to a loss of 4K. The unemployment rate rose slightly to 4.4% as nearly half a million people joined the labor force. Economists expected the unemployment rate to hold at 4.3%. The takeaway is there’s nothing here to suggest a major retrenchment, but the numbers that come out over the next couple of months are going to be all over the place due to the shutdown. Interestingly, we are being told that the payroll number of October will never be released, while November’s will only be published after the Federal Reserve meeting on December 10th.

The Federal Reserve is hell bent on sending mixed signals as the decision on interest rates seems to have two decidedly different camps equally divided, all while the administration continues to voice frustration with the Feds bipolar behavior. Investors have been left scratching their heads about the catalysts behind this week’s losses, there is also growing confusion about what the Fed will do at its final meeting of the year in a couple of weeks. Up until today there was a consensus building that the Fed would sit tight. The odds of a quarter-point cut stood at roughly 25%. But last Friday morning, New York Federal Reserve President John Williams said he expects the central bank can lower its key interest rate from here as labor market weakness poses a bigger economic threat than higher inflation. His specific comment: “I view monetary policy as being modestly restrictive, although somewhat less so than before our recent actions…Therefore, I still see room for a further adjustment in the near term to the target range for the federal funds rate to move the stance of policy closer to the range of neutral, thereby maintaining the balance between the achievement of our two goals.” Huh? Clear as mud! But the odds of a cut spiked to 64% almost instantly.

Consumer sentiment has dropped but the National Retail Federation expects retail sales in November and December to grow from 3.7% to 4.2%, compared with the same period a year ago. That growth would be comparable to last year, when sales in the period rose 4.3%. For all the handwringing over tariffs and a wobbling economy, shoppers are spending where they perceive value as evidenced by strong recent financial results from Walmart, Gap and others. A good sign is that the economy still has good strength going forward.

What’s ahead?  Treasury Secretary Scott Bessent says entire US economy not at risk of recession in a NBC’s ‘Meet the Press’ Interview over the weekend, he was optimistic about growth prospects next year given easing interest rates and tax cuts.

Bessent told NBC’s “Meet the Press” program that parts of the U.S. economy that are sensitive to interest rates, including housing, had been in recession, but he did not see the entire economy at risk of negative growth. He blamed the services economy, not U.S. President Donald Trump’s sweeping tariffs, for inflation and added that he expected lower energy prices to drive down prices more broadly. Trump has focused intensely on affordability. The key point, Bessent struck an upbeat tone, despite recent data showing a slowdown in U.S. factory activity as higher prices caused by tariffs on imports restrained demand. The University of Michigan’s consumer survey released on Friday also showed frustration among consumers about higher prices. “I am very, very optimistic on 2026. We have set the table for a very strong, non-inflationary growth economy,” Bessent said. Energy prices dropped in October while home sales rose, Bessent said, adding that the administration was continuing to work hard to bring down inflation, now running at 3% annually.

On top of that, National Economic Council Director Kevin Hassett told Fox News’s “Sunday Morning Futures” that he expected 2026 to be “an absolute blockbuster year,” although there would be a “hiccup” in the fourth quarter of this year because of the longest government shutdown. Expectations for the fourth quarter have been halved, he said, forecasting growth of 1.5% to 2%, with an expected rise in manufacturing jobs to boost the scenario for 2026.

So, as we move into 2026, Despite the fireworks good things are on the horizon, at least according to the policymakers who have delivered on a record stock market.

Mike