Macro Memo: Mo-vember

The Upshot

In our last Macro Memo, we expected:

Slowing Without Breaking - labor market weakens but doesn’t collapse; further wage growth and rent inflation slowdown offsetting goods reflation.

K-Shaped Economy Deepens - Lower-end consumer struggles (negative real wages, credit stress); wealthy cohort’s spending keeps aggregate consumption stable enough to avoid slowdown.

China Tensions Peak Then Ease - Tit-for-tat escalation through October, then deal-making talk resumes with each seeking off-ramps amidst escalatory rhetoric. In a follow-up message on Substack, we further expressed high confidence that the US and China were highly motivated to quickly find a resolution to the export controls.

Bull Market Continues - Not over; expect 5-10% pullback in near-term but significant upside remains longer-term.

Fiscal Support Until Midterms - Trump administration will backstop markets/economy ahead of midterms with policy stimulus that will show up in 2026.

For the next four weeks, we expect:

The US job market continues to deteriorate based on private data.

A deluge of post-shutdown economic data will unleash volatility over the next few weeks.

End of government shutdown and QT to improve funding market liquidity.

The Fed leaves the policy rate unchanged in December out of caution, STIR prices in more cuts to 2026.

Risk-off sentiment continues to hit speculative areas, such as crypto, quantum and bitcoin miners, out to mid-December.

We see a resolution of fears expected to lead to a Santa Rally as fiscal expansion is priced in for 2026.

Before we get to our trades, a quick review of the economic developments since we last published…

US Economy and Job Market

How is the US economy doing?

Because the federal government has been in a shutdown since Oct 1, we are missing many macro data points. In our last macro memo, for the US Economy and the Job Market section, we said

“ With the U.S. federal government shut down, last month’s public macroeconomic data ar…