Please join Doug Noland and David McAlvany this coming Thursday, October 30th, at 4:00 pm Eastern/2:00 pm Mountain Time for the McAlvany Wealth Management Tactical Short Q3 recap conference call, “Loose Conditions, Excess and Fed Accommodation.” Click here to register.
Future readers will struggle to comprehend how crazily unsettled things became – the markets, finance, economic function, societies, politics, and geopolitics. Stocks at new records this week, though not without more tremors forewarning of a major quake. Most have grown comfortable with, and dismissive of, the stirring drumbeat of Foreshocks. But some of us are darned worried about increasingly fragile fault lines and the eventuality of “the big one.”
The dichotomy between late-cycle speculative and liquidity excess versus a deteriorating Credit environment was front and center this week. From central bankers to bankers to Credit investors and rating agencies - perceptions are shifting. Discussions of weak underwriting and problematic market structure are no more confined to private conversations. The word “Bubble” is no longer lunatic fringe. Newfound scrutiny and resulting Credit tightening will prove problematic for scores of vulnerable borrowers and economic prospects more generally. But major impacts materialize over time.
Meanwhile, liquidity overabundance persists in key markets. In the near-term, incipient Credit problems have triggered a bond rally and declining market yields. Global markets generally remain highly over-liquefied. It’s as if festering U.S. Credit issues and rallying Treasuries have provided a meaningful jolt to global bond leveraged speculation and liquidity. Notable liquidity-generating short squeezes have unfolded in U.S., French and UK bonds. Additionally, a more general unwind of hedges (against rising global market yields) provides a further liquidity boost.
The Japanese yen dropped another 1.5% this week, boosting October losses versus the dollar to 3.2%. The weaker yen and the prospect of a more dovish BOJ could promote aggressive yen “carry trade” leveraging and resulting liquidity creation.
October 23 – Bloomberg (Liza Tetley and Nishant Kumar): “Assets in the global hedge fund industry have surged to a record $5 trillion as investors poured money into alternatives and funds posted solid gains. Hedge funds saw net inflows of nearly $34 billion in the three months through September, according to… Hedge Fund Research… That’s the most in any quarter since 2007, before the global financial crisis. The surge in assets also came from investment performance, with total returns across all strategies averaging 5.4% over the quarter.”
It's worth noting that Money Market Fund Assets (MMFA) inflated another $30 billion this past week to a record $7.398 TN (1-yr growth $900bn, or 13.7%). MMFA surged $191 billion over the past eight weeks, further extending historic monetary inflation that I link to the expansion of leveraged speculation and attendant “repo” borrowings. This dynamic has expanded into a global phenomenon over recent years.
Indicative of liquidity excess, major equities index gains this week included South Korea 5.1% (up 64.3% y-t-d), Japan 3.6% (23.6%), Hong Kong 3.6% (30.4%), and China 2.9% (17.9%). Europe’s gains included the UK 3.1% (18.0%), Germany 1.7% (21.8%), Spain 1.7% (36.8%), Italy 1.7% (24.3%), and Sweden 3.2% (12.2%). Notably outperforming, the (Hong Kong) Hang Seng China Financial Index’s 4.2% surge increased y-t-d gains to 31.9%. This week’s advances pushed Europe’s STOXX 600 Bank Index to a 43.4% y-t-d gain, and Italian bank stock gains to 45.9%.
Lately, not much seems to irk Treasuries, including the Atlanta Fed GDPNow forecast, which remains elevated at 3.89%. The preliminary October Manufacturing PMI was reported Friday at a slightly ahead-of-expectations 52.2, as the Services PMI added a point to a robust 55.2 (3-month high and 2nd highest reading over 10 months). At 54.2, the composite PMI New Orders subcomponent was the strongest back to December 2024.
Friday’s slightly better-than-forecast CPI report (up 3.0% y-o-y) notwithstanding, elevated inflation risks live on. Many Americans are now learning of significant increases to 2026 health insurance premiums, which go along with rising home and auto insurance costs. Rising prices for so many things (i.e., imported goods, electricity, beef, coffee, food generally…) explain the (October final) University of Michigan Consumer Survey’s highly elevated 4.6% expected one-year inflation rate – along with 3.9% five-to-10-year expected inflation (rising from preliminary 3.7%).
Friday afternoon Drudge headlines: “Govt Claims Inflation ‘3%’”; “Real or Fake?”; “Companies Shielded Buyers from Tariffs. Not for long…” “Poll: Cost-of-Living Worries Haunt Americans…” and “Beef Prices Soar…” From Bloomberg: “US Inflation Comes in Soft, Building Case for More Fed Cuts.”
Treasury yields have declined 16 bps this month – and are now down 44 bps from July highs – to trade at one-year lows. Market inflation expectations (5-yr “breakeven” rate) closed Monday at 2.32% - down 23 bps from the August high to near the low since April’s downdraft. Interestingly, the five-year breakeven rate was back up to 2.40% by week’s end.
Replaying previous Bubble cycle dynamics, lower market yields have helped ameliorate incipient Credit concerns. Expectations for a more assertive Fed rate-cutting cycle support the bullish narrative. From my perspective, fledgling issues at the “periphery,” which ensure looser policies, are underpinning the booming “core.” Investment-grade spreads to Treasuries at 75 bps, are up only three bps from the multi-year lows of three weeks ago. These are below where they began 2025 (80bps) and significantly down from April highs (119bps).
Meanwhile, “periphery” leveraged loan prices have barely recovered from First Brands-related selling. Beginning the month at 97.06 (down from July’s 97.58 peak) and trading to 96.35 on October 14th, leveraged loan prices ended the week at 96.55.
October 24 – Bloomberg (Jeannine Amodeo): “US leveraged-loan activity rebounded some from one of the slowest weeks of 2025, but this week is still poised to fall short of $10 billion in volume as leveraged - finance activity remains muted following a sizzling summer… Amid the market’s broader sluggishness, loan funds had their first back-to-back weekly outflows since April, LSEG Lipper data show.”
October 24 – Bloomberg (Kyle Ashworth and Dorothea Quallis): “The bankruptcy of First Brands and Tricolor Holdings has forced leveraged loan investors to pare risk. The Bloomberg US Leveraged Loan Index (Loan Index) is heading for its first loss since April, as companies and consumers buckle under the impact of tariffs and rising costs. The selective default rate for the benchmark has quadrupled in the past two years. Managers of collateralized loan obligations are responding to accelerating credit rating downgrades by selling distressed issuers.”
October 24 – Bloomberg (Gowri Gurumurthy): “US junk bonds are headed for modest weekly gains after yields fell by a mere two bps in the last four sessions and risk premium by just five basis points… The US junk bond rally also lost some momentum as jittery investors pulled $970m from high-yield mutual funds, excluding exchange-traded funds, for the week ended Wednesday… the second straight week of cash outflows from US junk bond mutual funds... The two weeks combined resulted in an outflow of $1.73b… After a sudden burst of issuance this summer and a supply boom that made it the busiest September on record, the primary market has slowed, with issuance almost grinding to a halt.”
October 20 – Bloomberg (Rachel Graf and Olivia Fishlow): “Exchange-traded funds that hold bundles of corporate loans last week notched their first outflows since April, in the latest sign that investor concerns over credit quality are mounting. ETFs of collateralized loan obligations experienced an outflow of about $516 million last week, marking the first investor exodus in about six months, analysts at JPMorgan… wrote… That compares to a weekly average of about $421 million of inflows over the past year…”
While mitigated in the markets by liquidity abundance and exuberance, there are important indications of heightened risk aversion and tighter underwriting for high-risk lending. It might be too early to assert a decisive reversal of speculative finance away from the “periphery,” though it’s moving in that direction.
October 20 – Financial Times (Ortenca Aliaj and Robert Smith): “JPMorgan… has said that credit worries from the First Brands and Tricolor bankruptcies have driven up banks’ funding costs, with investors concerned about lenders’ hidden exposure to private capital firms and hedge funds. The JPMorgan analysts made Monday’s comments about the implied cost of equity after last week’s sell-off of bank stocks, which was sparked by disclosures by two US regional lenders that they were exposed to alleged fraud by borrowers. The high-profile collapses of car parts maker First Brands Group and subprime auto lender Tricolor Holdings within weeks of each other have highlighted the complex and often opaque financial arrangements between banks and ‘non-depository financial institutions’. JPMorgan said banks’ lack of transparency about lending to such so-called NDFIs — a broad category that includes private equity groups, private credit firms and hedge funds — was pushing investors to demand higher compensation for owning their shares. ‘The recent global banks sell-off was triggered by poor risk management, in our view, as shown by First Brands supply-chain exposures but more importantly, very poor disclosure in relation to [NDFIs] globally across the banking system,’ JPMorgan analysts said…”
“High-profile collapses… have highlighted the complex and often opaque financial arrangements between banks and ‘non-depository financial institutions’.” “Lack of transparency,” “poor risk management” and “very poor disclosure.” A key passage from the above Bloomberg article:
“Regulators have become increasingly concerned about the interconnectedness of banks and NDFIs. The IMF earlier this month warned of the need for greater oversight of the sector. US and European banks are estimated to have $4.5tn of exposure to the wider category of non-bank financial institutions, equal on average to approximately 9% of total loan books. The collapse of First Brands and Tricolor has shown how banks remain exposed to corporate crashes even when a company’s borrowing is largely outside the domain of traditional bank lending.”
Breakneck growth in leveraged lending, “private Credit,” and “junk” issuance constitutes a historic boom in high-risk lending. It has been conspicuous – a Bubble that those responsible for safeguarding financial and system stability have disregarded. As is too often the case, such excess is initially dismissed as fleeting financial folly without systemic ramifications – only for Bubbles to then inflate to the point where no one dares to risk triggering a destabilizing bust. Behind the scenes, there must have been heightened concerns, discussions, and perhaps even consternation – which finally enter public discourse after widening cracks reveal roach colonies.
October 21 – Financial Times (Martin Arnold and Ortenca Aliaj): “Bank of England governor Andrew Bailey has said ‘alarm bells’ are ringing over risky lending in the private credit markets following the collapse of First Brands and Tricolor, as he drew a parallel with practices before the 2008 financial crisis. The comments from Bailey underline the concern among regulators that the rapid demise of US car parts supplier First Brands and subprime auto lender Tricolor in recent weeks are a sign of financial strains in the complex private credit markets. Referring to how repackaged financial products have in the past obscured the risk of the underlying assets, Bailey said: ‘We certainly are beginning to see, for instance, what used to be called slicing and dicing and tranching of loan structures going on, and if you were involved before the financial crisis then alarm bells start going off at that point.’”
I am compelled to further underscore Martin Arnold and Ortenca Aliaj’s important article:
“Private credit markets have become a critical source of funding for consumers and businesses as traditional banks have retreated since the financial crisis.”
“Wall Street’s practice of packaging subprime mortgages into asset-backed bonds fuelled the 2008 financial crisis, with years of loose lending standards leading to a crash in the value of these assets when US house prices fell. In the run-up to the crisis, bankers and investors had regarded many such complicated financial products as virtually riskless. The perception encouraged large institutions to borrow heavily against their holdings…”
Andrew Bailey: “If you go back to before the financial crisis when we were having a debate about subprime mortgages in the US, people were telling us it was too small to be systemic. That was the wrong call. I’m not saying therefore the call should be the same this time but it underlines why the question is apposite.”
“Bailey’s comments follow a warning last week from the IMF that US and European banks’ $4.5tn exposure to hedge funds, private credit groups and other non-bank financial institutions could amplify any downturn and transmit stress to the wider financial system.”
“Sarah Breeden, deputy governor for financial stability… ‘We can see the vulnerabilities here, the opacity, the leverage, the weak underwriting standards, the interconnections. We can see parallels with the global financial crisis. What we don’t know is how macro-significant those issues are.’”
Undoubtedly, “those issues” are of utmost macro-significance. High-risk “private Credit” is said to have ballooned to $1.7 TN, though it’s surely much larger. Besides, “private Credit” is only one component of this cycle’s high-risk lending boom.
Most importantly, this most protracted Credit Bubble has altered market, financial and economic structures. In short, it has played an instrumental role in fostering today’s unprecedented wealth disparities. This structure creates unappreciated systemic fragilities, including that the more unfortunate that have taken on so much debt during this cycle. Then there are the financially fortunate that have benefited tremendously from asset inflation, whose borrowing and spending is now integral to sustaining asset Bubbles and the U.S. Bubble Economy more generally.
October 22 – Reuters (Arasu Kannagi Basil): “U.S. banks’ loans to private credit providers have surged to nearly $300 billion, Moody’s said…, and the ratings agency warned that smaller lenders could face heightened risks if underwriting standards weaken. Loans to non-depository financial institutions (NDFIs) are now 10.4% of total bank loans, nearly three times the 3.6% exposure a decade ago, the report said. The aggressive growth outpaced all other lending activities since 2016, it added… Besides exposure to private credit providers, there was a further $285 billion in loans to private equity funds as of June, and $340 billion in unutilized commitments available to these borrowers…”
October 23 – Bloomberg (Jeannine Amodeo): “Banks are preparing to launch a $38 billion debt offering as soon as Monday that will help fund data centers tied to Oracle Corp. in what would be the largest such deal for artificial intelligence infrastructure to come to market, according to people with knowledge... JPMorgan... and Mitsubishi UFJ Financial Group are among banks leading the deal…”
A Bloomberg Intelligence headline earlier in the week: “AI Needs Push 2025 Tech Bond Issuance Toward Record $200 billion.”
The ongoing booming “core” has so far lavishly accommodated AI arms race financing demands. Importantly, the all-powerful Bubble at the “core” of AI finance continues to underpin riskier AI borrowings, albeit through leveraged loans, “private Credit,” bank lending and such. Moreover, AI manias and Bubbles have become integral to the markets (equities and debt) and U.S. and global economies more generally. These dynamics create extraordinary vulnerability to any surprise market de-risking/deleveraging and associated liquidity issues. There is no escaping today’s reality of unprecedented speculative leverage – especially prominent throughout equites (tech in particular), crypto, corporate Credit, derivatives and, of course, the Trillions of egregiously levered “basis trades” and “carry trades.”
Under the headline, “Fed’s Portfolio Unwind Gains Urgency as Markets Flash Warnings:”
October 24 – Bloomberg (Alexandra Harris): “When Federal Reserve officials meet next week to decide whether to cut interest rates again, they’ll face another question that’s becoming increasingly urgent — how soon they should stop shrinking the bank’s $6.6 trillion portfolio of securities. Money markets have been flashing warnings for several weeks that the process, known as quantitative tightening, may have run its course. Now, Wall Street strategists say, stress signals have gathered such momentum that the Fed may be forced to end QT as soon as this month. Since the central bank started reducing its portfolio in June 2022, more than $2 trillion in funds have left the financial system. This has nearly emptied its main liquidity barometer — the reverse repurchase facility — just as a deluge of short-term debt issuance is luring more cash away. In turn, a variety of interest rates used among banks to borrow and lend to each other have risen, while a tool introduced to dampen market pressures has seen regular use over the past week.”
More from Alexandra Harris’ insightful article: Quoting Mark Cabana, head of US interest rate strategy at Bank of America: “You can make the case that there’s not just a risk that the Fed is at the in-between stage, but they’re there. There’s a very small echo of 2019 and that the Fed over-drained cash and likely knows it.”
From Cabana and colleague Katie Craig: “Money markets at current or higher levels should signal to the Fed that reserves are no longer ‘abundant. By some metrics the Fed may also judge that reserves are no longer ‘ample’.”
And from JPMorgan strategists, led by Teresa Ho: “The September 2019 turmoil revealed that the Fed has less tolerance for volatility in the fed funds rate and the ‘constellation of money market funds,’ committing the same mistake twice could have significant ramifications.”
Recent unusual upward pressure on overnight “repo” rates has Wall Street clamoring for the end of “QT” – the winding down of Fed balance sheet contraction in preparation for more QE. Repo market instability in the summer of 2019 saw the Fed aggressively restart QE months ahead of the pandemic. It’s worth noting that the Fed’s balance sheet bottomed at $3.76 TN in late-August 2019 - ending the year at $4.166 TN and on its way to $7.165 TN by early June and an April 2022 peak of $8.965 TN. Fed Assets are today $6.59 TN, which is apparently, in the eyes of Wall Street, increasingly insufficient.
Recent “repo” market tightness is a critical piece of today’s puzzle. Is it, as it was in the summer of 2019, an initial sign of vulnerability and risk aversion within a leveraged speculating community way too far out on its skis?
October 24 – Bloomberg (Justina Lee and Denitsa Tsekova): “Behind the scenes of placid Wall Street markets, drama is unfolding for some heavy-hitting professional investors. Quantitative funds are suffering this month amid reversals in crowded and previously money-minting positions. The risks in stretched momentum trades were laid bare this week in sessions like Wednesday, when high-flying gold, tech shares and crypto were torpedoed all at once. Quant long-short funds are down 1.7% in October, posting their first losses since another big bout of volatility in July… The $20 billion Renaissance Institutional Equities Fund lost about 15% through Oct. 10… In one brutal example, a long-short Morgan Stanley basket tracking momentum stocks slid 11.3% over the five days ending Wednesday, the sharpest decline since March… A Goldman basket of the market’s most-shorted stocks saw its October month-to-date gains reach 21% at one point — likely hurting hedge funds…”
From the above article, a quote from Richard Craib, founder of hedge fund Numerai: “‘Junk rallies’ hurt quants because they are often short low-quality stocks and long high-quality stocks. If the damage gets big enough, quant funds start to delever to cover their shorts, making matters worse and leading to a deleveraging cascade.”
The Goldman Sachs Most Short Index jumped 2.5% Friday, extending an 11-session stretch of remarkable volatility. Over the previous 10 sessions, the index rose 2.0%, dropped 4.5%, fell 2.7%, surged 4.1%, dropped 2.8%, sank 4.7%, jumped 4.3%, rose 2.4%, surged 5.8%, and sank 4.1%. Not healthy.
Market action suggests quant fund deleveraging. There is potential for “a deleveraging cascade.” But in speculative marketplaces – the current backdrop in particular – signs of a short squeeze provide a rallying cry to aggressively buy stocks, ETFs, and, for the best bang for the buck, call options. Free money. At October 16th highs, the GS Short Index had surged 37% in six weeks - and was 122% above April lows. If one was envisaging a scenario for a major top, we’re seeing it.
Between extraordinary happenings in Credit, “repo,” “quants,” short stocks, the metals markets, and global equities, there are clearly acute instabilities festering below the markets’ “resilient” veneer. Pressures are building. I’m on liquidity and “earthquake” watch. It has that feel of de-risking and deleveraging Foreshocks.
Between the Fed and the Trump/Xi meeting, next week will be another interesting one. I find myself this evening pondering whether the President’s deployment of our largest aircraft carrier and strike group as a show of force in Latin America, new Russian sanctions, and his Canada Reagan “fraud” tantrum have Xi Jinping either more or less inclined to give Trump a trade negotiation win next week in South Korea. Things get more alarming and destructive by the week.
For Posterity:
Friday from the President:
“THE STOCK MARKET IS STRONGER THAN EVER BEFORE BECAUSE OF TARIFFS!”
“THE UNITED STATES IS WEALTHY, POWERFUL, AND NATIONALLY SECURE AGAIN, ALL BECAUSE OF TARIFFS! THE MOST IMPORTANT CASE EVER IS IN THE UNITED STATES SUPREME COURT. GOD BLESS AMERICA!!!”
“CANADA CHEATED AND GOT CAUGHT!!! They fraudulently took a big buy ad saying that Ronald Reagan did not like Tariffs, when actually he LOVED TARIFFS FOR OUR COUNTRY, AND ITS NATIONAL SECURITY. Canada is trying to illegally influence the United States Supreme Court in one of the most important rulings in the history of our Country. Canada has long cheated on Tariffs, charging our farmers as much as 400%. Now they, and other countries, can’t take advantage of the U.S. any longer. Thank you to the Ronald Reagan Foundation for exposing this FRAUD. MAKE AMERICA GREAT AGAIN!!!”
CNN’s Erin Burnett (October 22, 2025): “When the White House says this ballroom is just another renovation… just one in a long line, is there any truth in that?”
Edward Lengel, former Chief Historian, White House Historical Association: “First of all, I’ve got a lot of attention from media outlets all around the world who are very interested – and very upset – by what’s going on. So, we’re sending the wrong image abroad. But the administration’s talking point that this is like any other change is absolutely disingenuous. And it’s a misdirection, because they’re suggesting anybody who criticizes this is just a stick in the mud – they don’t want change. The issue is that this addition turns the White House and the Executive Mansion into something that it is not. It is no longer the People’s House. It is no longer in tune with what the founders intended. And it’s no longer in tune with the history of our country. It sends the wrong message.”
For the Week:
The S&P500 gained 1.9% (up 15.5% y-t-d), and the Dow rose 2.2% (up 11.0%). The Utilities slipped 0.4% (up 20.7%). The Banks rallied 3.6% (up 17.6%), and the Broker/Dealers jumped 2.5% (up 29.9%). The Transports declined 1.4% (down 2.8%). The S&P 400 Midcaps rose 2.3% (up 5.7%), and the small cap Russell 2000 jumped 2.5% (up 12.7). The Nasdaq100 advanced 2.2% (up 20.7%). The Semiconductors jumped 2.9% (up 40.1%). The Biotechs gained 1.1% (up 14.8%). With bullion retreating $139, the HUI gold index dropped 7.4% (up 114.1%).
Three-month Treasury bill rates ended the week at 3.7575%. Two-year government yields increased two bps to 3.48% (down 76bps y-t-d). Five-year T-note yields added a basis point to 3.61% (down 78bps). Ten-year Treasury yields slipped one basis point to 4.00% (down 57bps). Long bond yields dipped a basis point to 4.59% (down 19bps). Benchmark Fannie Mae MBS yields declined two bps to 5.01% (down 84bps).
Italian 10-year yields increased four bps to 3.42% (down 11bps y-t-d). Greek 10-year yields rose five bps to 3.28% (up 6bps). Spain's 10-year yields gained five bps to 3.16% (up 10bps). German bund yields rose five bps to 2.63% (up 26bps). French yields jumped seven bps to 3.43% (up 24bps). The French to German 10-year bond spread widened two to 80 bps. U.K. 10-year gilt yields sank 10 bps to 4.43% (down 14bps). U.K.'s FTSE equities index surged 3.1% (up 18.0% y-t-d).
Japan's Nikkei 225 Equities Index jumped 3.6% (up 23.6% y-t-d). Japan's 10-year "JGB" yield gained three bps to 1.66% (up 56bps y-t-d). France's CAC40 added 0.6% (up 11.4%). The German DAX equities index gained 1.7% (up 21.8%). Spain's IBEX 35 equities index rose another 1.7% (up 36.8%). Italy's FTSE MIB index also rose 1.7% (up 24.3%). EM equities were mostly higher. Brazil's Bovespa index gained 1.9% (up 21.5%), while Mexico's Bolsa index declined 0.9% (up 23.6%). South Korea's Kospi surged 5.1% (up 64.3%). India's Sensex equities index increased 0.3% (up 7.3%). China's Shanghai Exchange Index jumped 2.9% (up 17.9%). Turkey's Borsa Istanbul National 100 index surged 7.2% (up 11.3%).
Federal Reserve Credit was little changed last week at $6.545 TN. Fed Credit was down $2.345 TN from the June 22, 2022, peak. Over the past 319 weeks, Fed Credit expanded $2.818 TN, or 76%. Fed Credit inflated $3.734 TN, or 133%, over 676 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt declined another $8.1 billion last week to $3.061 TN - a $142 billion 10-week decline to the low back to February 2012. "Custody holdings" were down $214 billion y-o-y, or 7.8%.
Total money market fund assets (MMFA) jumped $30.4 billion to a record $7.398 TN (8-wk gain $191bn). MMFA were up $900 billion, or 13.7%, y-o-y - and ballooned a historic $2.813 TN, or 61%, since October 26, 2022.
Total Commercial Paper rose $9.1bn to $1.321 TN. CP has expanded $233 billion y-t-d and $163 billion, or 14.1%, y-o-y.
Freddie Mac 30-year fixed mortgage rates fell eight bps to a one-year low 6.19% (down 35bps y-o-y). Fifteen-year rates dropped eight bps to 5.44% (down 27bps). Bankrate's survey of jumbo mortgage borrowing costs had 30-year fixed rates down four bps to 6.50% (down 72bps).
Currency Watch:
For the week, the U.S. Dollar Index gained 0.4% to 98.952 (down 8.8% y-t-d). On the upside, the South African rand increased 0.6%, the Swedish krona 0.6%, the Norwegian krone 0.5%, the New Zealand dollar 0.4%, the Brazilian real 0.4%, the Australian dollar 0.2%, and the Canadian dollar 0.2%. On the downside, the Japanese yen declined 1.5%, the South Korean won 1.2%, the British pound 0.9%, the Mexican peso 0.4%, the Swiss franc 0.3%, the Singapore dollar 0.3% and the euro 0.2%. The Chinese (onshore) renminbi increased 0.06% versus the dollar (up 2.48% y-t-d).
Commodities Watch:
The Bloomberg Commodities Index gained 1.7% (up 8.7% y-t-d). Spot Gold retreated 3.3% to $4,113 (up 56.7%). Silver dropped 6.3% to $48.629 (up 63.3%). WTI crude rallied $3.96, or 6.9%, to $61.50 (down 14%). Gasoline inflated 4.6% (down 5%), and Natural Gas jumped 9.8% to $3.304 (down 9%). Copper rose 3.1% (up 27%). Wheat recovered 1.7% (down 7%), and Corn increased 0.2% (down 8%). Bitcoin rallied $3,670, or 3.4%, to $111,107 (up 18.6%).
Market Instability Watch:
October 20 – Bloomberg (Geoffrey Morgan and Bernard Goyder): “Flaring trade tensions have options traders piling into protection against big stock-market swings in late October, when US President Donald Trump and Chinese President Xi Jinping are set to meet. Implied volatility in the S&P 500 futures expiring on Oct. 31 — which capture the risk around the meeting — is sitting near 20, higher than the contracts before or after the date. The Cboe VIX Index curve shows a similar ‘kink’ at the end of the month.”
October 20 – Reuters (Anusha Shah and Ruchika Khanna): “A group of U.S. banks, including JPMorgan…, Bank of America and Goldman Sachs, is hesitant to lend $20 billion to Argentina without guarantees or collateral, the Wall Street Journal reported… U.S. Treasury Secretary Scott Bessent said last week that the department was working with banks and investment funds to create a $20 billion facility to invest in the South American country’s sovereign debt. Bankers are waiting on guidance from the Treasury Department on what collateral Argentina would be able to provide for them or if Washington would plan to backstop the facility on its own…”
October 22 – Financial Times (Joseph Cotterill, Costas Mourselas and Amelia Pollard): “Investors are betting that Argentina will sharply devalue its currency after midterm elections this weekend, despite the US’s $40bn rescue package for President Javier Milei. Offshore bets on the Argentine peso imply a 12% drop in the currency over the next three months, which would signal an end to Milei’s efforts to bring down inflation by propping up the currency — a cornerstone of his efforts to overhaul the country’s economy. Sunday’s elections are viewed as make or break for Milei’s economic reform programme.”
October 20 – Bloomberg (Geoffrey Morgan): “Further signs of strain in the credit market risk provoking another broad equities rout as long-only investors, including pension funds, will be compelled to sell, according to strategists at Bank of America Corp. ‘If private lending hiccups continue, pensions etc. may be forced sellers of index funds to avoid punitive private asset marks and meet ongoing obligations,’ said Savita Subramanian, head of US equity and quantitative strategy at BofA Securities. Passive investment ‘dominates the S&P 500,’ so a downturn would push funds that track indexes to sell equities, she wrote…”
October 24 – Reuters (Gaurav Dogra): “Global equity funds attracted the largest weekly inflow in three weeks in the week through October 22… Investors acquired a net $11.03 billion worth of global equity funds during the week, the most for a week since October1… U.S. equity funds saw a net $9.65 billion worth of inflows following two successive weeks of outflows.”
U.S. Credit Trouble Watch:
October 18 – Bloomberg (Olivia Fishlow and Davide Scigliuzzo): “One of private credit’s favorite fund structures has emerged as a new battleground for traders and Wall Street executives looking for signs of weakness in the market. Publicly traded business development companies, which bundle private credit loans in a fund that can be traded like stocks, are getting hit in the wake of the bankruptcies of Tricolor Holdings and First Brands Group. That’s reigniting fears about underwriting standards and valuations across the $1.7 trillion private credit industry. While Tricolor and First Brands both raised significant financing in the public markets and were backed by banks, problems for both companies originated in opaque and complex funding instruments that drew investor skepticism and put markets on edge over other problems that could be lurking. BDCs have become a place to express those fears.”
October 21 – Bloomberg (Kyle Ashworth): “The K-shaped nature of the US economy — in which banks post bumper profits while subprime auto lenders go bankrupt — is starting to show up in asset-backed debt markets. Consumer credit stress is widening ABS spreads, with the serious delinquency rate for auto loans at a 15-year high. Both subprime and prime auto collateral is deteriorating, even as a woeful credit-card situation improves slightly… The overall and auto loan serious delinquency rate has risen to near 3% as of June 30, while it rocketed to 12.9% for student loans. The situation for credit card rates is leveling off after topping 7%, while picking up to 1.3% for mortgages. ‘Car payments are getting harder to manage,’ Bloomberg Intelligence ABS Strategist Rod Chadehumbe wrote.”
October 21 – Bloomberg (Annika Inampudi): “Zions Bancorp NA Chief Executive Officer Harris Simmons warned that the speedy expansion of private credit could lead to risks down the line, adding to the debate between banks and private lenders over who’s responsible for a series of recent high-profile collapses. ‘If I think there’s a risk out there, I think it’s probably in private credit,’ Simmons said… ‘When you get something growing as quickly as that’s been growing and with the magnitude of the size of that sector — at least there’s a kind of a yellow flag.’”
October 23 – Financial Times (Antoine Gara): “Blackstone has said the era of excess returns in private credit has ended, with a golden age of mid-teens returns on private lending having given way to more muted investment results. The world’s largest private capital group… said that returns earned by its credit business were declining as central banks cut interest rates. ‘Base rates and spreads have come down, so the absolute returns reflect that,’ Blackstone president Jonathan Gray told the FT. ‘Some of that excess return, when you were getting mid-teens returns as a lender in senior credit two-and-a-half years ago, has gone away. So, yes, there has been some loss of absolute return,’ he added.”
October 22 – Bloomberg (Rene Ismail and Dani Burger): “Private credit investors should be prepared for lower returns in the future with more interest rate cuts expected and credit spreads tightening, according to Sixth Street Partners Co-Chief Investment Officer Josh Easterly. Investors are likely to see underwhelming returns compared to what they were expecting versus outright losses, Easterly said… Bank and private credit chiefs have pointed fingers at each other in the wake of a duo of collapses in the credit market, with both sides posturing that they are better positioned to weather any sort of downturn. Business development companies, a popular fund structure for pooling private credit, are also getting hit by a selloff, prompting fears about valuations and weakness in the market. ‘Private credit can disappoint, maybe there are managers that will disappoint given the proliferation of the asset class,’ Easterly said. At the same time, banks are ‘trying to protect their big profit pool on high-yield, leveraged loan underwriting,’ he said.”
October 23 – Bloomberg (Silas Brown): “Blackstone Inc. has amassed $508 billion of assets in credit as the private capital giant targets higher-grade debt investing. The… firm announced an 18% year-on-year increase in assets under management for its overall credit strategy… Much of that growth stems from its push into higher-grade financing, with the private investment grade strategy growing 33% year-on-year to $123 billion.”
October 19 – Bloomberg (Allison McNeely and Dani Burger): “Carlyle Group Inc.’s Harvey Schwartz said recent volatility in credit markets is on his ‘worry list’ as the firm’s chief executive officer, but so far he sees nothing that suggests conditions are deteriorating. Looking at Carlyle’s portfolio companies, ‘data suggests that companies are growing, employment is steady, inflation is a little sticky, but there’s nothing in the immediate horizon that suggests that things are crumbling,’ Schwartz said... ‘Having said that, late cycle, it should be on a worry list.’”
October 21 – Bloomberg (Silla Brush): “Insurers overseeing $23 trillion plan to add even more to their private market holdings as part of a strategy to smooth long-term returns, according to a BlackRock Inc. survey. Of 463 senior insurance executives surveyed by BlackRock, 93% said they expect to increase their exposure to private assets in response to market movements over the next 12 months… Only 3% expect to reduce private investments…”
October 22 – Bloomberg (Eliza Ronalds-Hannon and Victor Swezey): “PrimaLend Capital Partners filed for bankruptcy after months of negotiations with creditors following missed interest payments on its debt, the latest sign of stress in a pocket of the US economy catering to low-income consumers.”
First Brands Ramifications Watch:
October 20 – Axios (Madison Mills): “The blowups of First Brands and Tricolor… have still rattled investors already jittery over an uncertain economy. If bad loans like those at the two collapsed companies emerge elsewhere, investors are likely to accelerate a move away from risk. And that could be the straw that breaks this bull market’s back. Institutional investors who rushed to put money to work without doing as much due diligence as they would have in a tighter credit environment ‘are scrambling to look at their risk, at their portfolios, at their exposure,’ Alberto Gallo, chief investment officer at Andromeda Capital Management, tells Axios. ‘There is a rush to risk discovery.’ Meghan Robson, head of U.S. credit strategy at BNP Paribas, tells Axios that the reaction of market participants is ‘part of being later in the credit cycle.’
October 22 – Financial Times (Stephen Foley): “The chief executive of BDO USA has promised to fight ‘falsehoods and innuendos’ surrounding its audit of the bankrupt auto parts manufacturer First Brands. In a statement…, Wayne Berson said the audit firm expected potentially years of scrutiny over its work for First Brands and was taking ‘decisive action to protect our reputation’, including threatening legal proceedings against an accounting industry blog. BDO gave First Brands’ financial statements a clean bill of health just months before it collapsed into bankruptcy with $12bn of debt, much of which was not clearly shown on the company’s balance sheet. ‘No one has accused the firm of doing anything wrong in connection with our role as auditors,’ Berson wrote…”
October 22 – Bloomberg (Scott Carpenter, Rachel Graf, and Laura Benitez): “Money manager Anthelion Capital Partners had an unusually concentrated position in loans of now-bankrupt car-parts supplier First Brands, a blow for an investor that had touted the ability of its AI-driven platform to pick up on subtle market signals. Anthelion, as of last month, owned about $5 million of First Brands debt as part of a roughly $400 million investment vehicle known as a collateralized loan obligation…”
Global Credit and Financial Bubble Watch:
October 21 – Bloomberg (Tom Rees and Laura Noonan): “The Bank of England warned of parallels between the $1.7 trillion private credit boom and the subprime debt crisis, as UK officials confirmed plans to subject the market to stress tests. BOE Governor Andrew Bailey told a Parliament committee… that ‘alarm bells’ were ringing in the sector. He cited conversations with industry figures who assured him that ‘everything was fine in their world, apart from the role of the rating agencies,’ in an echo of the confusion over the quality of debt in subprime debt securitizations almost two decades ago.”
October 21 – Financial Times (Antoine Gara and Oliver Barnes): “US buyout groups Blackstone and TPG have struck a $18.3bn takeover of healthcare technology company Hologic, the latest in a wave of large corporate buyouts that underscores how abundant financing is stoking private equity deals… Last month, Silver Lake and Affinity Partners struck a $55bn takeover of video gaming company Electronic Arts… The EA deal capped off a 42% year-over-year increase in private equity takeover activity in the third quarter led by large deals exceeding $1bn, according to S&P Global Market Intelligence. In the EA, Hologic and Dayforce transactions, private equity buyers turned to banks to arrange large debt packages as borrowing costs for deals dropped. JPMorgan led the financing of a more than $25bn debt package for the EA takeover. A group of five lenders led by Citi and Bank of America have arranged a more than $12bn financing package for Blackstone and TPG’s Hologic takeover…”
October 21 – Bloomberg (Andrew Atkinson and Philip Aldrick): “Britain’s government borrowed £7.2 billion ($9.6bn) more than forecast in the first six months of the fiscal year, highlighting the challenge facing Chancellor of the Exchequer Rachel Reeves to get the public finances back on track in her upcoming budget. The budget deficit climbed to £99.8 billion… Borrowing in September alone was £20.2 billion, the highest for the month since the pandemic and second highest on record, with the deterioration driven by a sharp increase in debt-interest costs…”
Trump Administration Watch:
October 21 – Bloomberg (Emily Birnbaum and Jennifer A Dlouhy): “President Donald Trump urged Senate Republicans to hold the line as the US government shutdown extended into its 21st day, warning Democrats that they would bear the political fallout for the impasse if they did not vote quickly to approve funding. ‘Our message has been very simple: We will not be extorted on this crazy plot of theirs,’ Trump said… at an event in the White House’s Rose Garden, where he hosted Senate Republicans for lunch… Later Tuesday, Trump said he would meet with Democratic congressional leaders Chuck Schumer and Hakeem Jeffries, but only after the shutdown ends.”
October 21 – Wall Street Journal (William A. Galston): “Ahead of the past weekend’s No Kings rallies across the country, the Trump administration and its congressional allies warned that protests would be ugly. Treasury Secretary Scott Bessent said that they would feature the ‘most unhinged in the Democratic Party.’ Transportation Secretary Sean Duffy said they were ‘part of antifa.’ Press secretary Karoline Leavitt alleged that ‘the Democrat Party’s main constituency are made up of Hamas terrorists, illegal aliens, and violent criminals.’ House Speaker Mike Johnson wrapped up this bill of particulars with a prediction during a press conference... ‘We call it the Hate America Rally that will happen Saturday,’ Mr. Johnson said. ‘Let’s see who shows up for that. I bet you you’ll see Hamas supporters, I bet you’ll see antifa types, I bet you’ll see the Marxists in full display, the people who don’t want to stand and defend the foundational truths of this republic.’ The speaker lost this bet.”
October 21 – Associated Press (Ali Swenson and Linley Sanders): “Most U.S. adults are worried about health care becoming more expensive, according to a new AP-NORC poll, as they make decisions about next year’s health coverage and a government shutdown keeps future health costs in limbo for millions. About 6 in 10 Americans are ‘extremely’ or ‘very’ concerned about their health costs going up in the next year… — a worry that extends across age groups and includes people with and without health insurance… The poll found that about 4 in 10 Americans are ‘extremely’ or ‘very’ concerned about not being able to pay for health care or medications they need, not being able to access health care when they need it, or losing or not having health insurance.”
October 22 – ABC News (Karen Travers, Rachel Scott, Hannah Demissie, and Michelle Stoddart): “Demolition continued Wednesday at the White House to make way for President Donald Trump's $250 million ballroom, but the renovation is far more extensive than he has let on. While Trump had said back in July that the ballroom would not ‘interfere’ with the existing building -- would be ‘near it but not touching it’ -- a White House official confirmed to ABC News that the ‘entirety of the East Wing will be modernized’.”
October 21 – Bloomberg (Jennifer A Dlouhy): “US President Donald Trump predicted an upcoming meeting with his Chinese counterpart, Xi Jinping, would yield a ‘good deal’ on trade — while also conceding that the highly anticipated talks may not happen. ‘I have a great relationship with President Xi. I expect to be able to make a good deal with him,’ Trump said… ‘I want him to make a good deal for China — but it’s got to be fair.’ While Trump foresaw the sit-down as being ‘very successful,’ he said the possibility remains that it could fail to materialize.”
October 22 – Reuters (Leila Miller): “When U.S. President Donald Trump last week conditioned a hefty financial bailout of Argentina on President Javier Milei triumphing in upcoming midterm elections, he handed the country's opposition a new rallying cry. On social media, #PatriaOColonia - motherland or colony - trended after Trump’s comments… Jorge Taiana, a former defense minister and leading Peronist opposition candidate in the province of Buenos Aires, demanded on X that Trump ‘stop extorting the Argentine people!’ And outside a Buenos Aires apartment where powerful opposition leader and former President Cristina Kirchner is under house arrest for corruption, packed crowds listened to a blasted audio recording where she said that ‘the Argentine economy is being managed with a remote control by the Treasury of the United States.’”
October 21 – Wall Street Journal (Brian Schwartz): “The Trump administration is pushing officials in Argentina to limit China’s influence over the distressed South American nation at the same time the U.S. and Wall Street banks are working on a $40 billion lifeline for Buenos Aires. Treasury Secretary Scott Bessent has spoken in recent weeks with Luis Caputo, Argentina’s economic minister, about curbing China’s ability to access the country’s resources, including critical minerals.”
October 20 – Associated Press (Christopher Megerian): “President Donald Trump said the United States could buy Argentine beef in an attempt to bring down prices for American consumers. ‘We would buy some beef from Argentina,’ the Republican president told reporters... ‘If we do that, that will bring our beef prices down.’ Trump promised days earlier to address the issue as part of his efforts to keep inflation in check.”
October 22 – CNBC (Kevin Breuninger): “President Donald Trump… said U.S. cattle ranchers ‘don’t understand’ how they have benefitted from his tariffs, adding that they ‘have to get their prices down.’ The admonition came after some ranchers have openly criticized Trump’s proposal to import beef from Argentina in order to bring down prices... Trump claimed that those ranchers ‘don’t understand that the only reason they are doing so well, for the first time in decades, is because I put Tariffs on cattle coming into the United States.’ He highlighted the 50% tariff he imposed in early August on imports from Brazil… ‘If it weren’t for me, they would be doing just as they’ve done for the past 20 years — Terrible!’ Trump wrote…”
October 22 – Associated Press (Josh Funk): “The Agriculture Department will reopen about 2,100 county offices all across the country Thursday despite the ongoing government shutdown to help farmers and ranchers get access to $3 billion of aid from existing programs. The USDA said each Farm Service Agency office will have two workers who will be paid even though the government remains shutdown. These offices help farmers apply for farm loans, crop insurance, disaster aid and other programs. Thousands of other federal employees like air traffic controllers are working without pay during the shutdown.”
October 19 – Bloomberg (Patricia Laya and Skylar Woodhouse): “Donald Trump accused Colombian President Gustavo Petro of being an ‘illegal drug leader,’ saying the US will halt all aid to the country and impose fresh tariffs in a dramatic escalation of tensions with one of Washington’s closest security partners in Latin America. Trump claimed drug trafficking ‘has become the biggest business in Colombia’ and said Petro ‘does nothing to stop it’ despite years of US funding. ‘AS OF TODAY, THESE PAYMENTS... WILL NO LONGER BE MADE,’ the US president wrote…”
October 20 – Wall Street Journal (Vera Bergengruen, Juan Forero and Alex Leary): “President Trump’s vow to intervene against drug smugglers in Colombia widened a U.S. counternarcotics campaign in Latin America that began with military strikes on oceangoing boats but is increasingly focused on threatening governments in the region. His broadside against Colombia came in a social-media post Sunday that branded its President Gustavo Petro an ‘illegal drug leader,’ pledging to halt U.S. aid to Bogotá and to take unilateral action unless Petro closed ‘these killing fields immediately.’ Trump told reporters he would announce new tariffs on Colombia as soon as Monday. The threats turned one of Washington’s most critical security partners into a target…”
October 19 – The Hill (Ellen Mitchell): “The abrupt retirement of the four-star Navy admiral overseeing the U.S. military’s strikes against boats in the Caribbean is raising alarms as to the validity of the attacks and the Trump administration’s broader plans in the region. In a surprise move, Defense Secretary Pete Hegseth… announced that U.S. Southern Command head Adm. Alvin Holsey would step down at the end of the year, two years ahead of schedule. Southcom oversees all operations in Central and South America, and multiple outlets have reported that Holsey and Hegseth were at odds over the U.S. mission in the Caribbean… ‘Everything we’re seeing is setting off alarm bells,’ said Brian Finucane, a national security lawyer with the International Crisis Group…”
October 20 – Reuters (Ismail Shakil): “U.S. President Donald Trump's administration is ‘opportunistically evaluating’ a public offering for Fannie Mae and Freddie Mac, possibly as soon as end-2025, Federal Housing Finance Agency (FHFA) Director William Pulte said... ‘President Trump made the right decision not to take Freddie and Fannie public during his first term and is opportunistically evaluating an offering this time around, which could be as early as the end of 2025,’ Pulte said on X.”
October 23 – Associated Press (Will Weissert and Alan Suderman): “President Donald Trump has pardoned Binance founder Changpeng Zhao, who created the world’s largest cryptocurrency exchange and served prison time for failing to stop criminals from using the platform to move money connected to child sex abuse, drug trafficking and terrorism. The pardon caps a monthslong effort by Zhao, a billionaire commonly known as CZ in the crypto world and one of the biggest names in the industry. He and Binance have been key supporters of some of the Trump family’s crypto enterprises.”
China Trade War Watch:
October 22 – Bloomberg (Daniel Ten Kate): “When US-China trade talks broke down during Donald Trump’s first term, Xi Jinping sought inspiration at a memorial commemorating the Communist Party’s so-called Long March that eventually helped secure its victory in the country’s civil war. ‘This is a new Long March, and we must set out again!’ Xi declared to cheering onlookers during the May 2019 visit, widely seen as a rallying cry in the US trade war. While that line captured most of the headlines, it was Xi’s stop earlier in the day that’s now roiling the world economy. Alongside his top trade negotiator in the US talks, Xi toured JL Mag Rare-Earth Co., a leading producer of rare-earth magnets used to make goods such as smartphones, electric vehicles and missiles. He called the critical minerals an ‘important strategic resource.’ Soon after, the official Xinhua News Agency warned that China might cut off access to them if Trump went too far in the trade war.”
October 19 – Associated Press (Didi Tang): “China likes to condemn the United States for extending its arm too far outside of its borders to make demands on non-American companies. But when it sought to hit back at the U.S. interests this month, Beijing did exactly the same… For anyone familiar with U.S. trade practice, China is simply borrowing a decades-long U.S. policy: the foreign direct product rule. It extends the reach of U.S. law to foreign-made products, and it has been used regularly to restrict China’s access to certain U.S. technologies made outside of the United States, even when they are in the hands of foreign companies… ‘China is learning from the best,’ said Neil Thomas, a fellow on Chinese politics at Asia Society Policy Institute’s Center for China Analysis. ‘Beijing is copying Washington’s playbook because it saw firsthand how effectively U.S. export controls could constrain its own economic development and political choices.’”
October 20 – Financial Times (Gideon Rachman): “Like boxers before a championship bout, America and China are trash talking each other. Last week, Scott Bessent, the US Treasury secretary, said that when it comes to the great punch-up over trade: ‘This is China versus the world.’ If Beijing does not retract its threat to restrict the export of rare earth minerals, according to Bessent, the world will have to decouple from China. For its part, Beijing called the Trump administration’s threat to impose 100% tariffs on China, ‘a typical example of US double standards.’ At an earlier stage in the tariff conflict, the Chinese foreign ministry put out a video of Mao Zedong during the Korean war, proclaiming: ‘No matter how long this war will last. We will never yield’… There are clear signs that President Trump is looking for a deal… America’s eagerness for a deal probably reflects a dawning realisation that — if the two sides really begin to trade blows — it is China that has the greater chance of putting its opponent on the canvas.”
October 19 – Bloomberg (Skylar Woodhouse, Philip Glamann and Colum Murphy): “President Donald Trump listed rare earths, fentanyl, soybeans and Taiwan as the US’s top issues with China, underlining the divisive topics the two sides plan to tackle at the negotiating table as a fragile trade truce nears its expiration. ‘I don’t want them to play the rare earth game with us,’ Trump said… Days earlier, the US leader threatened an additional 100% tariff on Chinese products after Beijing vowed to exert broad controls on the minerals. Trump also said the US wanted China ‘to stop with the fentanyl,’ a reference to his accusation that the Chinese government has failed to curb exports of the drug and its precursor chemicals… Another key demand was for the world’s No. 2 economy to resume soybean purchases. Trump followed those comments on Monday by saying he anticipated discussing China’s territorial ambitions regarding the self-governing island of Taiwan when he meets with his counterpart, Xi Jinping, next week at the Asia-Pacific Economic Cooperation summit in South Korea.”
October 19 – Reuters (Ella Cao and Lewis Jackson): “China imported no soybeans from the U.S. in September, the first time since November 2018 that shipments fell to zero, while South American shipments surged from a year earlier, as buyers shunned American cargoes during the ongoing trade dispute between the world's two largest economies.”
October 21 – Reuters (Joe Cash): “China’s exports of rare earth magnets fell in September, reigniting fears that the world's top supplier could wield its dominance over a component key for U.S. defence firms and makers of items from cars to smartphones as leverage in trade talks. In April and May, Beijing squeezed global automakers with export curbs on a range of rare earths items and related magnets, while negotiators faced off over triple-digit U.S. tariffs…”
October 24 – Bloomberg: President Xi Jinping’s stranglehold on rare earths will give China unprecedented leverage to win concessions from the US during talks this weekend in Kuala Lumpur. Sitting in Beijing’s reserve is control over an even more vital supply chain: medicine. China’s power rests on its grip over the global supply of active pharmaceutical ingredients, or APIs, which are core components of commercial drugs. Beijing’s broad sway extends upstream to the raw chemicals, solvents and reagents known as ‘key starting materials’ needed to make the APIs themselves.”
October 22 – Reuters (Alexandra Alper, Michael Martina, Jeffrey Dastin and Karen Freifeld): “The Trump administration is considering a plan to curb a dizzying array of software-powered exports to China, from laptops to jet engines, to retaliate against Beijing’s latest round of rare earth export restrictions, according to a U.S. official and three people briefed by U.S. authorities. While the plan is not the only option on the table, it would make good on President Donald Trump's threat earlier this month to bar ‘critical software’ exports to China by restricting global shipments of items that contain U.S. software or were produced using U.S. software. On October 10, Trump said in a social media post that he would impose additional tariffs of 100% on China’s U.S.-bound shipments, along with new export controls on ‘any and all critical software’ by November 1 without further details.”
October 23 – New York Times (Ana Swanson): “The Trump administration is preparing to file a trade investigation into China’s failure to uphold the terms of a trade deal signed in President Trump’s first term, according to a person familiar…, a move that could result in more tariffs and increased tensions between the United States and China… The investigation… would be filed by the United States Trade Representative under Section 301 of the Trade Act of 1974, which allows the administration to investigate the trade practices of foreign countries.”
October 20 – Associated Press (Didi Tang): “President Donald Trump said… the U.S. commands ‘great respect’ from Beijing and that he will reach a ‘fantastic deal’ with Chinese President Xi Jinping when the two leaders meet soon… ‘I think we’re going to end up having a fantastic deal with China,’ Trump said. ‘It’s going to be a great trade deal. It’s going to be fantastic for both countries, and it’s going to be fantastic for the entire world.’”
October 24 – Bloomberg (Donato Paolo Mancini, Samy Adghirni and Jorge Valero): “French President Emmanuel Macron told European Union leaders to consider using the bloc’s most powerful trade tool against China if they aren’t able to find a resolution to Beijing’s planned export controls on critical raw materials. Macron said they need to weigh using all options available against China, including the EU’s so-called anti-coercion instrument…”
October 21 – Bloomberg (Alberto Nardelli and Jorge Valero): “The European Union is working on trade options to counter China’s planned export controls on critical raw materials should the bloc fail to reach a diplomatic solution with Beijing. The European Commission is preparing a list of trade measures by the end of the month that can later be deployed against China to boost its negotiating leverage… The commission is also developing a plan to protect critical supplies in the short-term and secure other sources.”
October 22 – Bloomberg (Augusta Saraiva, Daniel Carvalho and Hadriana Lowenkron): “Donald Trump is interested in meeting Brazil’s Luiz Inacio Lula da Silva and officials are discussing a possible meeting while the pair are in Malaysia for the Association of Southeast Asian Nations, according to a White House official. Brazil is hoping the resumption of dialogue between the two countries will convince the US to lower the punitive levies facing key Brazilian goods, including coffee and meat.”
Trade War Watch:
October 22 – Bloomberg (Thomas Seal): “Prime Minister Mark Carney laid out a strategy to double Canada’s exports to markets outside the US within a decade to net an extra C$300 billion ($214bn) in trade. The former central banker announced that target in a rare prime-time televised speech…”
October 24 – Bloomberg (Hyonhee Shin and Shinhye Kang): “South Korea and the US remain ‘sharply’ divided over the cash portion of a $350 billion investment pledge, South Korea’s Industry Minister Kim Jung-kwan said…, hinting that a deal may not be reached in time for a summit meeting. ‘From our perspective, we believe the amount should be smaller, while the US maintains that it needs to be larger,’ Kim said, referring to the cash element.”
Constitution Watch:
October 22 – Axios (Herb Scribner): “Congress has been left in the dark about the U.S. military strikes off the coast of Venezuela, Sen. Todd Young (R-Ind.) said… The U.S. has conducted multiple strikes in the Caribbean Sea as part of an operation aimed at stopping drugs and possibly toppling Venezuelan President Nicolás Maduro, but some in Congress have questioned the strikes. The seven strikes have killed at least 32 people and have mostly been announced by President Trump and Defense Secretary Pete Hegseth soon after they happened. ‘Congress isn't hearing enough — in any form, including a public forum,’ Young told Axios’ Stef Kight…Young said the legal ramifications of military actions need to be discussed with lawmakers.”
October 22 – Axios (April Rubin): “Seven of the nine universities approached by the Trump administration have declined an agreement that would have given them preferential funding in exchange for changes to their policies. The institutions’ unwillingness to acquiesce to President Trump’s policy demands could set the stage for another round of higher ed retaliation from the administration. The ‘Compact for Academic Excellence in Higher Education,’ terms are in line with Trump’s education priorities. The pact requires universities to cap enrollment of international students, commit to strict definitions of gender, freeze tuition for five years, conduct merit-based faculty hiring, and ban race and gender in admissions decisions.”
Budget Deficit Watch:
October 22 – Associated Press (Fatima Hussein): “In the midst of a federal government shutdown, the U.S. government’s gross national debt surpassed $38 trillion Wednesday, a record number that highlights the accelerating accumulation of debt on America’s balance sheet. It’s also the fastest accumulation of a trillion dollars in debt outside of the COVID-19 pandemic — the U.S. hit $37 trillion in gross national debt in August this year. The $38 trillion update is found in the latest Treasury Department report, which logs the nation’s daily finances.”
U.S./Russia/China/Europe/Iran Watch:
October 23 – Reuters (Chen Aizhu, Florence Tan and Siyi Liu): “Chinese state oil majors have suspended purchases of seaborne Russian oil after the United States imposed sanctions on Rosneft and Lukoil, Moscow's two biggest oil companies, multiple trade sources said… The move comes as refiners in India, the largest buyer of seaborne Russian oil, are set to sharply cut their crude imports from Moscow, to comply with the U.S. sanctions imposed over the Kremlin's invasion of Ukraine.”
October 23 – Bloomberg: “US sanctions on Russia’s energy giants are sending shockwaves deep into the heart of China’s oil industry, where both state and private refiners face heightened pressure to keep up supplies while steering clear of penalties. As much as 20% of China’s crude imports — about 2 million barrels a day in the first nine months of this year — come from Russia, making it one of the country’s leading sources of oil for processing into products such as diesel, gasoline and plastics.”
October 23 – Reuters (Andrew Osborn, Jeff Mason and Timothy Gardner): “Russian President Vladimir Putin remained defiant… after U.S. President Donald Trump hit Russia’s two biggest oil companies with sanctions to pressure the Kremlin leader to end the war in Ukraine, a move that pushed global oil prices up 5%... Putin derided the sanctions as an unfriendly act, saying they would not significantly affect the Russian economy and talked up Russia’s importance to the global market... ‘This is, of course, an attempt to put pressure on Russia,’ Putin said. ‘But no self-respecting country and no self-respecting people ever decides anything under pressure.’ Asked about Putin comment that the new sanctions would not have significant impact, Trump told reporters… ‘I’m glad he feels that way. That’s good. I’ll let you know about it in six months from now.’”
October 23 – Bloomberg (Rakesh Sharma and Serene Cheong): “Flows of Russian oil to major Indian refiners — a boon for both countries’ economies over the past three years — are expected to fall to near zero after the US imposed sanctions on crude giants Rosneft PJSC and Lukoil PJSC. Senior executives at the processors said the blacklisting of Russia’s largest producers would make it all but impossible for that supply to continue.”
October 22 – Reuters (Dmitry Antonov, Pavel Polityuk and Simon Johnson): “Russia said… it had conducted a major training exercise involving nuclear arms and the U.S. appeared poised to announce new sanctions against Moscow, a day after plans for a summit between Donald Trump and Vladimir Putin were put on hold. The Kremlin released video showing General Valery Gerasimov, head of the General Staff, reporting to Putin on the drills. Russia said it fired missiles from ground launchers, submarines and aircraft, including intercontinental ballistic weapons capable of striking the United States.”
October 23 – Associated Press (Lorne Cook): “The European Union… heaped more economic sanctions on Russia, adding to U.S. President Donald Trump’s new punitive measures the previous day against the Russian oil industry. Russian officials and state media dismissed the Western measures, saying they are largely ineffective. The sanctions are intended as part of a broadened effort to choke off the revenue and supplies that fuel Moscow’s invasion of Ukraine and compel Russian President Vladimir Putin to negotiate an end to the war. The measures are a triumph for Ukrainian President Volodymyr Zelenskyy… ‘We waited for this. God bless, it will work. And this is very important,’ Zelenskyy said…”
October 22 – Axios (Colin Demarest): “Vladimir Putin’s invasion of Ukraine is ‘not only about territory’ but also about rewiring global norms and ‘reestablishing a Russian vision of how things should be run,’ Estonia's ambassador to the U.S. told Axios. There has long been concern about Russia not stopping its bloody march at Ukraine’s borders, particularly within NATO’s eastern bloc. ‘We firmly believe that this war is not just about Ukraine,’ ambassador Kristjan Prikk said… ‘If this war was to end with an outcome that would for Putin and his supporters in a way verify or vindicate what they have done, this is a recipe for further trouble.’”
New World Order Watch:
October 23 – Financial Times (Edward White and Thomas Hale): “China’s Communist party leaders have vowed to accelerate the country’s push towards self-reliance in cutting-edge technology amid rising tensions with the US. The statement came as the party’s elite central committee met… for the four-day ‘fourth plenum’, to lay the groundwork for the country’s 15th five-year plan… ‘The country should achieve greater self-reliance and strength in science and technology,’ the meeting concluded, according to state media. China would pursue policies aimed at markedly increasing its ‘economic strength, scientific and technological capability, national defence capacity, overall national power and international influence’ by 2035…”
October 21 – Bloomberg (Peter Martin): “China has spent two decades building a globe-spanning port network that offers it commercial reach — and potential strategic leverage. Chinese companies now own or operate terminals at more than 90 deep-water ports overseas, including 34 of the world’s 100 busiest. Holdings range from Europe’s fifth-largest container port to South America’s first Pacific deep-sea hub capable of handling ultra-large container vessels, and interests in more than one-third of Africa’s commercial ports.”
October 22 – New York Times (Ana Swanson): “The Trump administration is pursuing an array of unconventional measures to shore up mineral supplies that are vital for makers of cars, jet engines, weaponry and data centers, as the Chinese government leverages its control of rare earth exports in ways that could cripple global industry. In recent months, the administration has taken stakes in several mining and minerals firms. It has talked of establishing a strategic reserve of rare earths, and supporting domestic producers with price controls and tariffs. On Monday, the United States announced a strategic agreement with Australia to invest billions of dollars to develop mineral supplies.”
October 21 – Reuters (Nick Carey and Christina Amann): “Global automakers are scouring the globe for crucial rare earths ahead of looming Chinese export controls, with executives worried they could lead to parts shortages and plant closures. Rare earth magnets power motors in car parts such as side mirrors, speakers, oil pumps, windshield wipers and fuel leakage and braking sensors. They play an even bigger role in EVs. While a U.S.-China deal diverted a supply threat, stockpiles were depleted by similar restrictions earlier this year, while Beijing has also made it harder to get export licenses. China has since dramatically expanded export curbs, with companies facing global supply shortages. Consultancy AlixPartners estimates China controls up to 70% of global rare-earths mining, 85% of refining capacity and about 90% of rare-earths metal alloy and magnet production.”
October 23 – Financial Times (William Sandlund and Haohsiang Ko): “China’s overseas lending in renminbi is soaring, as Beijing steps up its efforts to expand the currency’s role in international finance and reduce the country’s exposure to the US dollar. External renminbi loans, deposits and bond investments by Chinese banks quadrupled to more than Rmb3.4tn ($480bn) over the past five years, as policymakers more aggressively pursue their long-term goal of reducing the centrality of the dollar in global financial flows.”
October 22 – Reuters (Rene Wagner and Maria Martinez): “China overtook the U.S. as Germany’s largest trading partner in the first eight months of 2025, regaining the top spot as higher tariffs weighed on German exports to the United States… German imports and exports with China totalled 163.4 billion euros ($190.7bn) from January to August, while trade with the U.S. amounted to 162.8 billion euros…”
Ukraine War Watch:
October 21 – Wall Street Journal (Alexander Ward, Robbie Gramer and Alex Leary): “President Trump said… meeting with Russian President Vladimir Putin would be a waste and that he would reveal his new thinking on the Ukraine war within two days. ‘I don’t want to have a wasted meeting. I don’t want to have a waste of time till I’ll see what happens,’ he said… Putin wants the war to end, he said, as does Ukrainian President Volodymyr Zelensky. ‘I think it’s going to end,’ he said.”
October 19 – Reuters (Moscow Buro and Tamara Vaal): “The Orenburg gas processing plant, the largest facility of its kind in the world, has been forced to suspend its intake of gas from Kazakhstan after a Ukrainian drone attack, Kazakhstan's energy ministry said… Orenburg regional governor Yevgeny Solntsev had said earlier on Sunday that the plant had been partially damaged and that the drone strike had caused a fire to break out at a workshop at the plant. The fire was later put out…”
October 19 – Financial Times (Christopher Miller, Max Seddon, Henry Foy and Amy Mackinnon): “Donald Trump urged Volodymyr Zelenskyy to accept Russia’s terms for ending its war in a volatile White House meeting on Friday, warning that Vladimir Putin had said he would ‘destroy’ Ukraine if it did not agree. The meeting between the US and Ukrainian presidents descended many times into a ‘shouting match’, with Trump ‘cursing all the time’, people familiar… said. They added that the US president tossed aside maps of the front line in Ukraine, insisted Zelenskyy surrender the entire Donbas region to Putin, and repeatedly echoed talking points the Russian leader had made in their call a day earlier. Though Trump later endorsed a freeze of the current front lines, the acrimonious meeting appeared to reflect the US president’s shifting position on the war and his willingness to endorse Putin’s maximalist demands.”
October 19 – Associated Press (Chris Megerian): “President Donald Trump said Sunday that the Donbas region of Ukraine should be ‘cut up,’ leaving most of it in Russian hands, to end a war… ‘Let it be cut the way it is,’ he told reporters… ‘It’s cut up right now,’ adding that you can ‘leave it the way it is right now.’ ‘They can negotiate something later on down the line,’ he said. But for now, both sides of the conflict should ‘stop at the battle line — go home, stop fighting, stop killing people’.”
AI Bubble/Arms Race Watch:
October 21 – Wall Street Journal (Jonathan Weil): “‘Circularity’ has become a buzzword in artificial-intelligence deals. Some investors have drawn comparisons between the megadeals of today and some excesses of the original dot-com bubble. Today the dollars at stake are exponentially bigger, the deals are more complex, and the money trail is often harder to follow. But some similarities are real. One risk: If enthusiasm for spending money on data centers wanes, companies such as Nvidia and Microsoft could be hit twice—with less revenue coming in and declining values for their equity investments in customers. Broadly speaking, circular financing often goes something like this: One company pays money to another as part of a transaction, and then the other company turns around and buys the first company’s products or services. Without the initial transaction, the other company might not be able to make the purchase. The funding mechanism could take the form of an investment, a loan, a lease or something else.”
October 21 – Bloomberg (Carmen Reinicke): “The artificial intelligence trade that has driven the S&P 500 Index to one record after another over the past few years is transforming traditionally sleepy utilities stocks into booming growth plays. Since the end of 2023, the utilities sector is up about 43%, making it the third best-performing group in the S&P 500, behind only communications services and information technology. Those three also lead this year, with utilities gaining 20%. Prior to this run, the S&P 500 Utilities index, which has hit numerous all-time highs in the past few months alone, had never posted 20% gains in back-to-back years…”
October 22 – Bloomberg (Alastair Marsh): “The amount of energy required to supply the data centers powering artificial intelligence is so vast that meeting that need may be more than a lifetime away, according to a senior executive at Apollo Global Management Inc. ‘The gap between what AI is demanding and what we have everywhere in the world on the grid in terms of generation and transmission is huge and will not be closed in our lifetime,’ Dave Stangis, who has led and developed Apollo’s sustainability strategy over the past four years, said…”
October 24 – Bloomberg (Jennifer A. Dlouhy and Naureen S. Malik): “The Trump administration is pushing regulators to dramatically accelerate the process of allowing the booming data-center sector to connect to power grids. US Energy Secretary Chris Wright urged the Federal Energy Regulatory Commission… to grant expedited reviews for data-center grid connections… Under a draft proposed rule Wright sent to the agency, those reviews would be limited to 60 days, a seismic shift for a process that currently can drag on for years.”
October 21 – Wall Street Journal (Matt Wirz): “BlackRock was among the biggest investors in the $27 billion private-debt deal backing construction of Meta Platforms’ data center in Louisiana, highlighting the scale of the artificial-intelligence buildout and its insatiable demand for capital. BlackRock bought more than $3 billion of bonds issued last week to finance the data center, which is called Hyperion… The project is 80%-owned by private-credit manager Blue Owl Capital, while Facebook parent Meta owns the remaining 20% stake, according to S&P Global Ratings. The bond sale was arranged by Morgan Stanley.”
October 22 – Bloomberg (Natalia Kniazhevich): “A wave of successful initial public offerings is driving a surge of interest in private companies, as investors clamor for exposure to artificial intelligence-related firms before they hit public markets. Platforms offering accredited investors the chance to invest in pre-IPO names are fielding more inquiries and executing more trades after AI bets such as cloud computing firm CoreWeave Inc. and design software company Figma Inc. delivered outsize gains soon after listing. Trading volume on the private secondary market run by EquityZen Securities more than doubled in the third quarter versus a year ago…”
October 21 – Wall Street Journal (Edith Hancock): “The huge demand for energy to power data centers will be a key focus for antitrust regulators in the future, a former top official at the U.S. Justice Department’s trustbusting division said. Tech giants are pouring billions of dollars into data centers to cope with unrelenting demand, particularly as more people use power-hungry artificial-intelligence tools. Overall capital investment in U.S. data centers by Alphabet’s Google, Microsoft and Amazon.com was higher than that of the country’s oil and gas industry in 2023, according to an October 2024 report from the International Energy Agency.”
October 22 – Axios (Megan Morrone): “OpenAI isn’t satisfied with being the top chatbot. It’s making a play for total tech supremacy, one platform at a time. Tuesday’s launch of OpenAI's new browser — Atlas — is a fast follow to the company's Sora social media app, app store-like developer tools, commerce plays, plus rumors of future hardware devices with still-unknown form factors. OpenAI doesn't just want ChatGPT to be the everything app. It wants to be the everything company and knock all of its competitors aside.”
October 23 – Bloomberg (Saritha Rai, Loni Prinsloo and Helen Nyambura): “Earlier this year, in a conference room at the Nairobi headquarters of a social impact startup named Qhala, a group of executives from tech firms across the continent gathered to hear a presentation about the promise of AI. The speaker was Harrison Li, chief solutions architect for Huawei Cloud in sub-Saharan Africa, and the subject was DeepSeek… Huawei Technologies Co. and DeepSeek’s parent, High-Flyer, started collaborating a couple years ago, and now, Huawei is bundling access to the large language model with its own storage and cloud computing services. Li’s pitch is that China’s DeepSeek is capable of matching Silicon Valley’s OpenAI for a fraction of the cost and it can run on less-expensive hardware. ‘DeepSeek is so hot,’ Li said during the gathering… ‘No one wants to talk about anything else.’”
Bubble and Mania Watch:
October 21 – Financial Times (Katie Martin): “A couple of months ago, warning about a bubble in the world’s most important stock market was largely the preserve of oddballs and attention-seekers. Uttering the B-word is the financial markets equivalent of shouting ‘fire’ in a crowded cinema, and it is generally used sparingly. But as with so many aspects of life in 2025, it turns out you can get used to pretty much anything. And all of a sudden, the warnings are coming from all sides… In sum, bubble talk has broken confinement. Investors are already talking about what they may be able to salvage from it when it bursts. And still, markets are humming along just fine. This is not complacency, as such. That implies a lack of awareness about the horrors lurking in the darkness. It is more of an explicit decision to ignore the obvious potential downsides and carry on regardless. If one more fund manager recounts to me the adage about Chuck Prince and the need to keep on dancing while the music is playing, I swear I will scream.”
October 23 – Bloomberg (Annika Inampudi): “The Wall Street bonus pool is expected to break records this year… Profits at the 130 firms that belong to the New York Stock Exchange reached $30.4 billion in the first half of the year and will hit the highest level on record if that pace continues, New York State Comptroller Thomas DiNapoli said… Compensation expenses increased by almost 10% in the first half of 2025 from the prior year, suggesting bonuses could balloon after already hitting a record last year, when the average annual bonus reached $244,700.”
October 21 – Bloomberg (Ben Scent): “Deep-pocketed sovereign wealth funds are helping drive a resurgence in dealmaking that’s taken global M&A volumes past $3.5 trillion this year. State-backed funds from the Middle East and Asia provided firepower for some of the year’s biggest transactions.”
October 23 – Bloomberg (Bailey Lipschultz): “The final year of Donald Trump’s first presidency kicked off a boom in so-called special purpose acquisition companies, with hundreds reaching the market. When Joe Biden moved into the White House and cracked down on the murky investments, the frenzy subsided, but with Trump’s return to power SPACs are back. Founders have raised more than $24 billion since the November election, easily exceeding the past two years combined. A sizable number of them have ties to Trump’s inner circle. Brandon Lutnick, son of the US secretary of commerce; Devin Nunes, chief executive officer of Trump Media & Technology Group Corp. and a former GOP representative; and Chamath Palihapitiya, a big-time donor who hosts a podcast with the president’s crypto czar, have all founded SPACs.”
October 22 – Associated Press (Alan Suderman): “A marketer of shark-repellant sunscreen. A maker of chocolate-flavored whiskey. A seller of a drink that promises to quickly lower blood-alcohol levels. Until recently, these businesses had significant losses and floundering stock prices in common. Now, they’re members of a legion of publicly traded companies helping to power one of the biggest trends in markets and the crypto industry. So far this year, billions of dollars have flowed into companies that have reinvented themselves by making the buying and holding of cryptocurrency their main focus. More than 200 public companies have announced plans to hold crypto on their balance sheets as so-called digital asset treasury companies, or DATs.”
October 22 – Bloomberg (Judy Lagrou): “The issuance of over 13 million individual memecoins in 2025 signals crypto’s regulatory vacuum and its need for US market structure legislation to pass, according to a16z crypto, Andreessen Horowitz’s digital asset venture capital fund. In their 2025 State of Crypto report…, a16z crypto highlights the need for regulation to provide a path to establishing clearer frameworks for crypto builders and investors alike.”
October 23 – Bloomberg (Isabelle Lee and Suvashree Ghosh): “21shares spent years building its crypto franchise outside Wall Street’s orbit. From Zurich, it launched exchange-traded products that gave European investors access to Bitcoin and Ether long before the US would allow them. Now, in selling itself to FalconX — a crypto prime broker backed by Tiger Global and Singapore’s GIC — the company is trading autonomy for scale as crypto moves closer to the financial mainstream. The deal underscores a broader shift: crypto specialists are entering traditional investment channels through regulated products… Crypto M&A topped $10 billion for the first time in the third quarter, a more than thirty-fold increase from a year earlier…”
October 21 – Bloomberg (Hannah Levitt): “JPMorgan Chase & Co.’s new multibillion-dollar Manhattan headquarters is officially open. Longtime Chief Executive Officer Jamie Dimon cut the ribbon at 270 Park Ave... ‘When I say it’s a physical labor of love, it was,’ Dimon said. ‘And now you have something that’s permanent — will be here for 50 or 100 years.’ The 60-story building, which will fit about 10,000 employees, anchors a multi-block campus the biggest US bank has been piecing together.”
October 22 – Bloomberg (Kai Blatnicky, Kazem Ghaoucha and Daniella Goncalves): “The debate over whether Elon Musk deserves a $1 trillion pay package — two proxy advisers say no — depends on whether the focus is a soaring valuations or falling earnings per share. Tesla stock has doubled in the past year, even as EPS declined. Analysts are trimming sales outlooks for autos, batteries, self-driving and ‘other’ (which includes robots). Their 12-month target price for the stock implies a 21% drop.”
Inflation Watch:
October 22 – Wall Street Journal (Anna Wilde Mathews and Ruth Simon): “The cost of health insurance rose steeply for a third year in a row in 2025, reaching just under $27,000 for a family plan, according to an annual survey from the nonprofit KFF, which provides the broadest picture of U.S. employer health coverage. That is a 6% increase from the year before, and builds on two prior years of 7% gains. The cost is rising faster than inflation, and economists and business leaders said it could bite into employment and wage growth. ‘If healthcare costs go up faster than the economy in general, that means there’s less money left over to go to wages,’ said Gary Claxton, a senior vice president at KFF.”
October 21 – New York Times (Reed Abelson): “Family health insurance coverage for the vast majority of American workers reached an average of $27,000 this year, with little relief expected next year, according to a survey released Wednesday by KFF, a health research group. Employers picked up about three-quarters of the cost. But workers have been sharing the burden, with sharp increases in deductibles and premiums. Employees contributed $6,850 — nearly $600 a month — toward family coverage. Many pay higher deductibles that can result in thousands of dollars in out-of-pocket costs if they become seriously ill or have an accident.”
October 24 – New York Times (Lydia DePillis and Kailyn Rhone): “Since the Trump administration started imposing steep tariffs on goods from the rest of the world, the Treasury Department has been taking in about $30 billion a month in customs duties. On paper, American companies pay those bills... But figuring who ultimately absorbs the costs is more complicated… Companies had passed along about 37% of new tariffs to consumers, forced 9% onto their suppliers and absorbed 51% through August, according to Goldman Sachs. That is a big hit to shoppers’ wallets… But it is milder than it would have been if companies were charging consumers as much as they had at the same point in the last burst of tariffs during President Trump’s first term. Mostly that is because the tariffs are much higher and more widespread than in 2018, making them too difficult for consumers to digest all at once.”
October 23 – Axios (Jim VandeHei and Mike Allen): “America faces an economy-shaping energy jam: We’ve never needed more of it more urgently to meet rising consumer and business demand. We produce and export more energy than at any point in history. But the data centers powering the AI boom suck up so much energy, so fast, it’s increasingly jacking up prices for nearby ordinary residents. This dynamic — surging demand and finite supply — is playing out in community after community. It creates a difficult tension for President Trump, who wants both to accelerate AI and slow energy spikes for consumers. Campaigning in a barn in Pennsylvania last year, Trump said: ‘Your energy bill, within 12 months, will be cut in half. ...We have more energy under our feet than any other country. I call it liquid gold.’ Yet the AI frenzy is juicing demand for energy-hungry data centers, which have raised wholesale electricity prices for tens of thousands of cities, towns and suburbs around the U.S."
October 24 – Associated Press (Fatima Hussein): “The Social Security Administration’s annual cost-of-living adjustment will go up by 2.8% in 2026, translating to an average increase of more than $56 for retirees every month… The benefits increase for nearly 71 million Social Security recipients will go into effect beginning in January. And increased payments to nearly 7.5 million people receiving Supplemental Security Income will begin on Dec. 31.”
October 23 – Bloomberg (Ilena Peng): “Coffee futures rose to a fresh record… as US tariffs and crop concerns keep supplies constrained, risking further price hikes at cafes and supermarkets. Prices of arabica, the variety favored by chains such as Starbucks Corp. for specialty brews, climbed as much as 4.1% to an all-time high of $4.3795 a pound.”
U.S. Economic Bubble Watch:
October 21 – New York Times (Lydia DePillis): “The economic effect of past government shutdowns has been straightforward. The economy loses some activity for a few weeks, then gains it back after the government reopens. The net cost is basically zero. This time, the math may not be so benign. As Washington’s stalemate continues into its fourth week with no end in sight, it’s looking like this could become one of America’s longest funding lapses. During the previous record-holder, a 34-day closure in 2018, Congress passed enough appropriations bills to keep more of the government funded. This time, none have been passed.”
October 20 – New York Times (Sydney Ember): “More Americans are struggling to make their monthly car-loan payments, a sign that lower-income consumers are under growing financial pressure. The share of subprime auto loans that were 60 days or more past due reached a high of nearly 6.5% in January and has lingered near that level, according to Fitch Ratings. Repossessions have swelled, more drivers are trading in vehicles that are worth less than they owe and lenders such as CarMax and Ally Financial have warned investors about auto loan performance.”
October 22 – Axios (Neil Irwin): “Many of the world’s best and brightest want to work in the United States. But U.S. immigration policy does a bad job of enabling them to do so — undermining the nation’s economic growth, a paper… argues. Top engineering, research, and entrepreneurial talent generate outsize economic gains. But the structure of visa programs that allow new workers in isn’t optimized to select for that talent, researchers argue, so potential gains in productivity and growth are lost. There is ‘a grave mismatch between the scale of America’s national ambitions for technological leadership and the way it governs high-skilled immigration, its single most reliable comparative advantage,’ wrote Jeremy Neufeld in a paper from the Aspen Economic Strategy Group.”
China Watch:
October 23 – Wall Street Journal (Yoko Kubota): “China will seek to become more self-sufficient technologically over the coming five years, the ruling Communist Party said in a new economic blueprint, signaling no respite in its intensifying rivalry with Washington. In an outline of the country’s next five-year plan, which will guide the world’s second-largest economy through the rest of the decade, Communist leaders drew a connection between the complex challenges the country faces and their drive to fortify the country through increased investments in technology and advanced manufacturing. The blueprint signals how competition between Beijing and Washington is only likely to escalate, with China looking to further reduce its reliance on the U.S. while advancing its own technological ambitions.”
October 20 – Bloomberg: “China’s factories kept the country on track to reach this year’s growth target, powered by an export boom that’s papering over deeper vulnerabilities as leaders meet to chart the nation’s next half-decade. The world’s second-largest economy grew 4.8% in the third quarter compared with a year earlier, slightly above estimates. That laid a ‘solid foundation’ for achieving the full-year expansion goal of around 5%...”
October 19 – Bloomberg: “China’s home prices fell more steeply in September, despite recent easing measures introduced by major cities to revive the struggling property market. New-home prices in 70 cities, excluding state-subsidized housing, dropped 0.41% from August, the biggest decline in 11 months... Resale home values fell 0.64%, the steepest slide in a year… ‘The property market remains in the doldrums,’ Kelvin Lam, senior China economist at Pantheon Macroeconomics, wrote... ‘A recovery in prices is unlikely until 2027, when inventories fall to more reasonable levels.’ Used-home prices fell in all 70 major cities monitored for the first time in a year.”
October 23 – Bloomberg: “After President Xi Jinping ousted a group of top generals whose careers overlapped for decades, state media accused them of ‘severely undermining’ the Communist Party’s highest echelons of authority. China sacked nine senior military officials from the ruling party on Oct. 17 in a high-profile purge that removed several commanders and a member of the 24-man Politburo. The disgraced generals had challenged ‘the system where the CMC chairman bears ultimate responsibility,’ the People’s Liberation Army Daily wrote in a front-page editorial, referring to Xi.”
October 22 – Bloomberg: “Chinese banks helped clients offload overseas currencies at the fastest pace since 2020 last month… Lenders sold a net $51.8 billion of foreign exchange on behalf of their customers in September, the largest monthly amount since December 2020… The clients include exporters, importers and some investors in overseas financial assets.”
France/Europe Watch:
October 24 – Bloomberg (Alexander Weber): “Business activity in the euro area unexpectedly reached its highest level since May 2024 as outperformance by Germany helped offset weakness in France. The Composite Purchasing Managers’ Index compiled by S&P Global increased to 52.2 in October from 51.2 in September…”
October 24 – Bloomberg (Alexander Weber): “German private-sector activity unexpectedly jumped to its highest level since May 2023, putting Europe’s biggest economy on a firm footing at the start of the fourth quarter. S&P Global’s Composite Purchasing Managers’ Index rose to 53.8 from 52… The services sector was behind the surprise, with its index coming in at 54.5.”
Japan Watch:
October 21 – Bloomberg (Sakura Murakami and Alastair Gale): “Sanae Takaichi, the pro-stimulus conservative who has become Japan’s first female prime minister, is an energetic nationalist with a soft spot for the hard-nosed politics of Iron Lady Margaret Thatcher and the heavy metal music of Iron Maiden. Takaichi broke the glass ceiling to become the nation’s leader after a parliamentary vote on Tuesday. Her choice as leader is essentially a bet by the ruling Liberal Democratic Party that a swing back to the right will attract the younger voters who have flocked to smaller populist outfits, including the arch-conservative Sanseito party.”
October 21 – Bloomberg (Yoshiaki Nohara and Erica Yokoyama): “Japanese Prime Minister Sanae Takaichi has ordered a fresh package of economic measures aimed at easing the burden of inflation on households and companies. Takaichi… did not specify the size of the package or indicate whether additional bond issuance would be needed to finance it. A supplementary budget will be compiled to finance the measures, according to an order from Takaichi to compile the package. Details will follow, but the order suggests that the package will include subsidies for electricity and gas charges during the winter, along with regional grants to ease price pressures. It also encourages small and medium-sized businesses to raise wages and increase capital investment.”
October 23 – Wall Street Journal (Megumi Fujikawa): “Japan’s new finance minister doesn’t see the need to comment on the direction of central bank policy, she said…, noting Bank of Japan Gov. Kazuo Ueda’s commitment to supporting the economy by keeping monetary conditions accommodative. ‘Gov. Ueda himself has said that it’s important to maintain an accommodative financial environment and support economic activity,’ Satsuki Katayama said… Prime Minister Sanae Takaichi’s preference for loose monetary policy has led many economists and investors to think that the bar for interest-rate hikes is now higher… She echoed Takaichi’s view that it is necessary for the administration and the BOJ to maintain close contact as monetary policy must be consistent with government policy.”
October 19 – Reuters (Leika Kihara): “Bank of Japan Governor Kazuo Ueda likely left Washington last week with little conviction that global headwinds will allow the central bank to raise interest rates as soon as this month, with finance officials from around the world warning of downside risks… But the resilience of the global economy… also gives him cover to proceed with a near-term rate hike if a hawkish-leaning BOJ board prefers to move sooner rather than later. Ueda, as a result, left his options open by offering few clues on the timing of a rate hike, which markets bet will happen by January of next year.”
October 23 – Reuters (Leika Kihara): “Japan’s stock market is showing early signs of overheating, the central bank said…, warning of the risk that uncertainty over U.S. trade policy could cause sharp corrections and hit financial institutions. The Nikkei stock index closed at a record high on Tuesday after Sanae Takaichi, a supporter of fiscal stimulus, clinched a parliamentary vote to become the nation’s first female prime minister. The index has surged nearly 24% so far this year.”
October 23 – Bloomberg (Toru Fujioka): “Japan’s key price measure picked up pace on higher energy costs, keeping the Bank of Japan on track for further rate hikes and underscoring a key challenge facing new Prime Minister Sanae Takaichi. Consumer prices excluding fresh food rose 2.9% from a year earlier in September, up from 2.7% in August and accelerating for the first time in four months…”
October 20 – Wall Street Journal (Megumi Fujikawa): “Bank of Japan policy board member Hajime Takata called for an interest-rate increase, saying that tariff-related concerns have eased and that the central bank’s inflation goal is nearly met. ‘I have come to believe that it is vital to address the situation focusing on the level of headline inflation, which has already remained at 2% and above for the past three and a half years’’ Takata said... ‘I believe that now is a prime opportunity to raise the policy interest rate.’”
October 21 – Associated Press (Yuri Kageyama): “Japan’s exports grew 4.2% in September…, on robust shipments to Asia that offset a decline in exports to the U.S., which were impacted by President Donald Trump’s tariffs. Japan’s exports to Asia jumped 9.2% last month compared to the same period a year earlier… Exports to the U.S. dropped 13.3%, marking the sixth straight month of on-year declines, while those to China surged 5.8% compared to last year. Auto shipments to the U.S. dropped 24.2% in September.”
Emerging Market Watch:
October 20 – Financial Times (Joseph Cotterill, Michael Pooler and Beatriz Langella): “A series of blow-ups in Brazil’s corporate bond market has pushed up dollar borrowing costs across Latin America’s biggest economy, drawing parallels with the jitters in US credit following the collapse of auto parts group First Brands. Bonds issued by waste manager Ambipar, petrochemicals behemoth Braskem and biofuels maker Raízen have slumped in price over the past month, sending a chill through Brazil’s corporate credit market. While investors say all three moves have been driven by issues specific to the companies, the speed and timing of the sell-offs reflect nervousness in global credit markets following the failures at First Brands and subprime auto lender Tricolor. The US backdrop had reminded investors that ‘accidents can happen anywhere in credit markets’, said Jeff Grills, head of US cross markets and emerging markets debt at Aegon Asset Management.”
October 22 – Bloomberg (Martha Viotti Beck and Giovanna Bellotti Azevedo): “Brazil’s government sees the recent spate of blowups in the nation’s corporate credit markets as isolated cases that do not pose a systemic risk, people familiar… said. The economic team is monitoring a series of setbacks that sent Brazilian corporate bonds spiraling over the past few weeks, the people said…”
October 23 – Bloomberg (Vinicius Andrade and Kelsey Butler): “Mexico has become the top borrower among developing countries in a standout year for emerging market bond sales, as it ramps up efforts to prop up indebted state oil company Petroleos Mexicanos. The country has raised just over $41 billion in hard-currency sovereign bonds so far this year — a record for Mexico and more than double the amount issued by Saudi Arabia, the next most-prolific borrower…”
Levered Speculation Watch:
October 23 – Wall Street Journal (Jack Pitcher): “Risky leveraged exchange-traded funds are booming. Their performance over the past year highlights their pitfalls. The funds, accessible to anyone through most brokerage accounts, use derivative contracts or borrowed money to amplify the return of an underlying asset… Those single-stock funds have grown rapidly in number, and gained a following among individual investors who yearn for even bigger returns than what a record-setting stock-market rally has offered. By mid-October, leveraged single-stock ETFs had accumulated some $40 billion in assets… Leveraged ETFs typically collect about 1% on the assets they manage, well above the 0.3% fee averaged by active funds. Roughly 200 leveraged equity ETFs have been launched in 2025 alone, bringing the total number to 701 funds…”
October 22 – Financial Times (George Steer, Costas Mourselas and Amelia Pollard): “Traders betting against runaway US stocks are blaming indiscriminate retail investors for their worst year of returns in half a decade. A basket of the 250 US stocks most popular with short sellers has surged 57% this year, hurting the traders betting on those shares’ decline, according to calculations by data group S3 Partners. That marks the best run for heavily shorted US stocks since 2020, when the basket gained 85%.”
October 24 – Bloomberg (Annika Inampudi): “Jane Street, Citadel Securities and other nonbank firms now command a fifth of global trading revenue, with their market share poised to hit 30% by the end of the decade as they eat into banks’ business, according to… Boston Consulting Group. Growth in trading among so-called nonbank financial institutions, or NBFIs, has surged over the past two decades. Their market share is up from just 1.6% in 2010…”
Social, Political, Environmental, Cybersecurity Instability Watch:
October 20 – Axios (Emily Peck): “Amazon Web Services, the biggest cloud computing provider, went down Monday morning — crippling thousands of services from some of the biggest companies on earth. For all its complexity and size, the global economy is fragile — breaking just one weak link drives big disruptions, online and in the real world. Amazon's East Coast region, responsible for a lot of the internet, was the culprit. Zoom, Venmo, WhatsApp and many gaming, banking, social media and consumer sites saw large spikes in reported outages, according to tracker Downdetector. The site said more than 11 million people worldwide reported issues with more than 2,500 companies… — and this was the biggest AWS outage of the year.”
October 22 – Bloomberg (Lauren Rosenthal): “The US saw more than $101 billion in losses from severe storms and fires in the first half of 2025, setting a record. That’s according to a database of billion-dollar disasters that a nonprofit has re-launched since the Trump administration formally abandoned work on it in May. In a new analysis…, scientists tallied damage from severe weather events through June, which has become the costliest such period in 45 years of records.”
October 21 – New York Times (Sachi Kitajima Mulkey): “The world is not moving quickly enough to achieve global goals to reduce methane emissions by the end of the decade, a United Nations report found. Four years ago, over 100 countries signed a pledge to cut global methane emissions by 30% by 2030. The greenhouse gas is released by the burning of fossil fuels, leaky landfills and industrial agriculture. It warms the planet up to 80 times more than carbon dioxide over two decades and is responsible for roughly a third of all planetary warming.”
October 22 – Wall Street Journal (Leandro Narloch and Carlos Poggio): “The American left and right look increasingly like their Latin American counterparts. Democratic mayoral nominee Zohran Mamdani wants New York City to open five municipally owned grocery stores to lower food prices. The plan may sound modern and progressive, but to anyone from Latin America, it sounds eerily familiar… On the right, meanwhile, President Trump’s brand of protectionism mirrors Latin American trade policies. When the White House imposes tariffs and vows to shield American industry from foreign competition, Brazilians must feel a sense of déjà vu. This is the same ‘import substitution’ strategy that Brazilian governments have embraced for the past 60 years…”
Geopolitical Watch:
October 20 – Financial Times (Andy Bounds): “The Netherlands has curtailed intelligence co-operation with the US over fears the Trump administration could use it to violate human rights or assist Russia. The heads of civilian and military intelligence said in a joint interview with Dutch newspaper de Volkskrant that they had become more cautious in what they share given the ‘politicisation of our intelligence’. It is the frankest admission by a foreign spy agency about the consequences of US President Donald Trump’s interference in intelligence matters.”