Key Takeaway
- Macro: Inflation remains sticky but manageable, enough to keep the Fed easing and markets optimistic.
- Equities: Valuations remain reasonable given profits and cash flow strength. AI is a productivity driver, not in a bubble (yet).
- Crypto: Steadying after a sharp correction, waiting for Fed confirmation. Q4 historically brings positive momentum.
- Gold: Short-term pullback, long-term hedge intact.
Markets are entering a “goldilocks” zone, not too hot, not too cold.
AI driven productivity gains, growing profits, steady inflation, and central bank (Fed rate cuts) support continue to underpin risk assets. Unless macro data deteriorates sharply, both stocks and crypto could have room to run into year-end.
CPI Data: Inflation Steady, Markets Cheer
Today's release of September CPI showed that consumer prices rose 0.3% month-over-month and 3.0% year-over-year, up slightly from 2.9% in August but below expections.
Economists had expected higher numbers (0.4% MoM and 3.1% YoY), so the lower-than-expected CPI reading was viewed as a relief.
Investors focused on what this means for the Fed: with inflation steady at 3% and jobs data weakening in recent months, another Fed rate cut next week now looks very likely.
Goldman Sachs and other major strategists expect further easing in December as well.
This CPI release was especially important because it’s the only official economic report this month, due to the ongoing government shutdown.
Stocks: No Bubble, Just Earnings and AI
While some investors continue to warn of an AI-driven stock bubble, fundamentals tell a different story.
Mega-cap tech leaders: Nvidia, Apple, Microsoft, and Google trade at around 30x forward earnings, far below the sky-high valuations of the dot-com era when Cisco and Oracle hit 120x.
These companies are producing hundreds of billions in free cash flow and remain the key drivers of economic growth.
Historically, S&P 500 gains an average of 4.2% in Q4, with nearly 80% positive closes over the past 75 years.
Combined with Fed easing and strong corporate earnings, that seasonality could extend the current uptrend into year-end.
Crypto: Sideways Before the Next Macro Catalyst
Crypto markets appear to have found support at current levels, after a sharp (flash crash) correction on Oct 10th.
Bitcoin (BTC) stayed above its 200-day Moving Average, which keeps the Uptrend intact.
Investors are waiting for two triggers:
- Confirmation of a Fed rate cut next week, which could weaken the dollar and boost crypto assets.
- Fresh inflows into spot Bitcoin ETFs, which have slowed slightly but remain net positive.
Macro stability, falling yields, and improving liquidity conditions remain bullish tailwinds for digital assets heading into Q4.
Gold: Sharp Drop to $4,050
After a stellar run earlier this month, gold prices dropped nearly 14% from it's peak of $4,800 to $4,050, marking their steepest decline in years.
The pullback reflects profit-taking and easing geopolitical fears, combined with expectations of continued Fed cuts, which paradoxically support both risk assets and the U.S. dollar, pressuring gold in the short-term.
Analysts say the long-term uptrend remains intact, with the next strong support zone near $3,950. A rebound could follow if rate cuts accelerate or new geopolitical risks emerge.
