November 2025 Market Strategy
The primary risk remains that markets continue to overweight inflation concerns while underpricing the probability of a deflationary turn.
In my October 2025 Market Strategy, I argued that we are currently at or close to the peak of the Debasement Trade which chases investors into an asset overexposure to protect against anticipated monetary debasement. The path of most pain (which is typically the path of least resistance) would be a faster than expected decline of interest rates, disappointing economic growth and underperformance of equities.
TLDR Summary
Traditional macro indicators still point to solid US economic momentum. In contrast, withheld tax receipts in the Treasury’s daily financial statements suggest emerging weakness in the labor market.
Inflation expectations are easing, but not yet enough to provide firm support for the bond market.
Federal deficit spending has dropped sharply over the past month, though this likely reflects shutdown-related distortions. We need a few more months of data to determine whether this is signal or noise.
The primary risk remains that markets continue to overweight inflation concerns while underpricing the probability of a deflationary turn.