Rumours of a possible agreement to end the US Government Shutdown are propelling the markets higher. Earnings were very strong once again; multiples remain elevated. NVDA to report on November 19. The Fed is in a dovish mode, but this Thursday’s CPI can give hints on how low it can go, and whether the December cut can be confirmed. The biggest tail risk is the US Economy falling into a recession (15% chance in 2025), resurging inflation, revenues/earnings not matching forecasts, the unfolding of the AI capex trade, the Fed not delivering on its easing cycle, or a surge in long bond yields, followed by damages done by tariffs/government policies, adverse geopolitical outcomes, and valuations (very high multiples).

Major market events 10th – 14th November 2025

Economic data highlights of the week

Sun: CN CPI (10/25), CN PPI (10/25)

Mon: 

Tue: CA – Holiday, UK Unemployment Rate (9/25), EU ECB President Lagarde Speaks, CN New Loans (10/25), DE ZEW Economic Sentiment (11/25), EU ZEW Economic Sentiment (11/25)

Wed: DE CPI (10/25), IN CPI (10/25)

Thu: UK GDP (9/25), UK Manufacturing Production (9/25), CH PPI (10/25), US CPI (10/25), US Initial Jobless Claims, US Fed’s Balance Sheet

Fri: FR CPI (10/25), SP CPI (10/25), EU GDP (3Q25), US Atlanta Fed GDPNow (4Q25)

Performance Review

Source: Google

InflectionPoint reports:

* Dear readers, once again it’s time for me to eat humble pie – and for good reason. I am truly sorry for the missed updates of the past week, but I will strive to continue to keep this a weekly edition. Back to the markets, there’s a lot to talk about. I’ll start with the US shutdown, presently the longest in history at 40 days today (the previous longest one, as you might guess, happened under President Trump’s first presidency, and topped at 35 days). The ongoing discussion centers on further funding for the Affordable Care Act (aka Obamacare), which the Democrats want extended, and which the Republicans oppose. Back in 2019, the then-President had to budge, as the people were mostly blaming him for the shutdown and all that entails (cuts on air traffic mandated by the FAA are probably the most irritating aspect of the shutdown, although statistics elaborated by the departments of treasury and commerce are also sorely missed).  There is substantial damage to the economy, too, estimated at around $15 Bn per week by the White House’s Council of Economic Advisors, with some of that deemed to be permanent. I definitely hope that the advisors to the President will push him to end the shutdown, which is a big cloud at the moment for the market, particularly as last week there were concerns of massive layoffs in the US, even though at a time when the Atlanta Fed is forecasting growth in 3Q25 by 4%. Needless to say, the publication of GDP data, too, had been delayed by the shutdown. Talking about what happened last week centers on two major topics: the perceived overvaluation of AI (and this has also depended on Palantir’s reporting not being enough to stop a near 10% fall in the stock) and on the perceived layoffs in the US due to signs of the labour market cooling, which mean that the much invoked slowdown is here with us. Obviously, the bears were out talking about a correction to happen any time soon, and driven by any negative shock, such as a prolonged shutdown, a worse-than-expected labor market slowdown, or an AI-related earnings disappointment. I continue to be constructive, and also note the positive close of the S&P 500 on Friday, on a particularly gloomy day – yes, the last week was a negative one, but the damage was limited compared to what could have been. Earnings continue to be very solid; Nvidia, which will report on November 19 will be the last highly relevant company to add its numbers – and even more importantly, its guidance – to the market. While the Fed did cut in October, in a recent speech, Chairman Powell highlighted that a cut in December, highly anticipated by markets, is not on a preset course. It might be more difficult for him to keep consensus at the US Central Bank, as there are several FOMC members who said that another cut is possible: Christopher Waller and Lisa Cook. Anyway, the speech through markets in disarray, and the forecasts for another reduction on the 10th of December have completely changed, even though the majority is still in favour of a cut. We shall see. The economic forecasts continue to be good, and if there is no recession, rate cuts are equities’ best friend. It is still very important that the independence of the Fed is preserved, as a guarantee of the US’s own credibility. Recent examples of rates being set by the government (such as in the UK in the 1990s) didn’t produce a great outcome. The President is hell bent to fire all those whom he perceives as enemies, but the US Central Bank, independent since 1951, is a delicate topic. Let’s see if he can impress markets again, just like when he appointed the team in his current administration. Returning to the economy, the most important data to watch will change: less inflation, more jobs. The more general risk is related to a game of musical chairs with AI capex. It is difficult to assess at which stage we are in the development of AI, but if I have to guess, I would say we are in the third inning. Sundar Pichai is more bullish, thinking that we will see the real potential of AI in 10-20 years. As it has the ability to touch many more sectors than just communication, which was optical networking’s specialty, I think that the technology will be much more resilient and last for a longer period of time. The dark memory of the 1998-00 optical networking (and technology) craze is that employment vanished immediately after the first preannouncements, so yes, it pays to keep attention to earnings. With so strong Capex numbers from the likes of Microsoft, Alphabet, and Meta, among others, it is difficult to imagine that demand will fall off a cliff, but we should pay attention to any reductions and see if these represent a potential trend. It is also very important to witness any signs of these companies making AI profitable in order to continue to invest. The overall feeling is that earnings were much, much better than investors thought, and the fear of the slowdown didn’t quite materialise – so far. The USD has had a terrific run that brought it to barely break 1.1580 once again, and is now trading at 1.156. Keeping equities to buy (with the famous 3% weekly stop), keeping US bonds to hold, and European bonds to buy (with the notable exception of France). Valuation matters: Japan has really impressed with its performance under new PM Sanae Takaichi, and it would be well worth considering to include the Asian country in portfolios. I will aim to publish a new portfolio of Japanese Equities by November.

* GDP forecasts for 3Q25 seem to be good, with the Atlanta and New York Fed finally in agreement on a positive direction. The current P/E ratio of 22.7x is above the average P/E ratio of the last 5 years at 20.0x and the 10-year average at 18.6x. David Kostin believes that the multiple can hold over the next 12 months; it is the same assumption I had back in 1999, when the multiple was 24x. That multiple lasted for the good part of almost two years, and despite the fall in 1H00, technology stayed strong through the summer, until the Intel preannouncement in September sealed their demise and gave way to 2 years of bear market. Given the capitulation early this year,  I would think that we have seen the lows in 2025, leaving room to grow back to those targets that were floated at the beginning of the year, and even with a multiple that begins with a 2, but please continue to diversify and use prudent risk management. One of the major differences of the current cycles relative to the dot.com boom is that then many companies were thriving on expectations of future sales and no earnings, now companies, even startups (if we can call Palantir in that way), do have tangible revenues and earnings, so the market, whatever happens, is on a much sounder footing now than then. 

*  The Federal Reserve made the second cut of the year in October, as widely forecasted, and reduced the rate to 3.75-4.00%, even though a huge discussion now centres on what will happen in December, after Chairman Powell made some very cautious comments. The forecast for December 2025 currently prices in the third cut of the year with a 66.5% chance, with rates ranging from 3.50% to 3.75%, and obviously, there’s no trace of a jumbo cut. Goldman Sachs thinks the US Central Bank is going to cut three times in 2025, once per meeting. If we look at December 2026, at the moment the forecast sees rates at 3.00-3.25%, hence with 2 more cuts during the next year. Be cautious of aggressive Fed cuts, as they may signal an impending recession; non-recessionary interest rate cuts are generally welcomed by equities. We need (lower) yields and (higher) earnings to support some of the highest multiples since my heyday (the fated 1999-2000), but it is increasingly difficult to get these in the US. You can look forward to these in Europe, even though the European Central Bank might finish its easing cycle later this year. There have been a lot of discussions on whether the ECB will cut again this year; I personally believe they will have one more cut by December 31. 

* Yields on US 10-year Treasuries have reached 4.09%, and were stable last week, while most European government bond yields rose. While in 1999 yields were even higher, and the Fed was hiking, not easing, we definitely need yields to return below 4% to have a more constructive scenario, albeit gradually and not through a crash. We seem to be getting there, although I cannot yet recommend the US Debt on their public spending plans. The 2025 S&P 500 bottom-up earnings estimate has continued its strong bounce to 269.64 and is ahead of the original forecast by Goldman Sachs of $268 per share, while being well clear of the revised top-down estimate of 262. In 1Q25, earnings were strong; more of the same, so far, for 2Q25. 3Q25 has absolutely followed in synch; I cannot say anything on GDP yet, but earnings were plentiful once again, and firmly in double digits, also lifting the averages for 2025 and even 2026. There is now a concern that a slowdown may be imminent, so let’s closely monitor both the GDP estimates and the earnings estimates for 3Q25, as well as any data that can assess the spending power of the US Consumer, such as retail sales. I remain optimistic, particularly on technology (the main driver for the S&P 500). Estimates for 2026 also seem to be on the rise and well above David Kostin’s forecast of $280 per share, representing a 7% growth from his revised forecast of $262 for 2025. If we applied the same growth to his original forecast of $268, we would get a target of $286. He has now acknowledged that his forecasts can be two-sided, showing a possible upside relative to when they were first made. 

Source: FactSet

* The US GDP closed 2Q25 with a reading of 3.8%, according to the third and final estimate released last week. The Atlanta Fed GDPNow model starts its forecast for 3Q25 in positive territory, with a current forecast of 4.0%, stable from last week, and as usual, ahead of the Blue Chips consensus, which is currently around 2.5%, and moving upwards. The New York Fed’s Nowcast model has a current forecast of 2.31%, lower than 2.35% last week. I believe it is prudent to make an average of those two forecasts to get to the real number; it is particularly good that these are now converging. Introducing a forecast for 3Q25, with earnings expected to climb by 13.1%, compared with a forecast of 7.9% as of September 30th, and with revenues growing by 8.3% vs 6.3% as of September 30th. For 2025, earnings growth is forecasted at 11.6% vs 10.6% as of September 30th, with revenues coming in at 6.8% vs 6.1% as of September 30th. Finally, it’s worth noting that the chance of a recession in the next 12 months, as calculated from the yield curve, according to the Federal Reserve Bank of Cleveland, is presently (September 2026) 23.29%. The peak was 68.76% in April 2024, and it was the only time since 1960 in which a recession did not materialise given such a forecast. The current level is not too far from what economists are currently predicting: a 25% chance of a recession in the next 12 months.

Source: Blue Chip Economic Indicators and Blue Chip Financial Forecasts; Federal Reserve Bank of Atlanta

Source: Federal Reserve Bank of New York, New York Fed Staff Nowcast

Source: Federal Reserve Board, Federal Reserve Bank of Cleveland, Haver Analytics

Earnings, What’s Next?

The reporting season for 3Q24 is now ending. Here’s a list of companies reporting this week. Highlights include Cisco Systems (Wednesday, After Close), and Disney (Thursday, Before Open).

Source: Earnings Whispers

Market Considerations

Source: Carson Investment Research, YCharts, ISABELNET.com

Source: BLS, Haver Analytics, Deutsche Bank Research, ISABELNET.com

Revenue growth estimates for 2025 are forecasted to grow by 6.8% (6.1% on September 30th), and earnings growth estimates for 2025 are predicted to grow by 11.6% (10.6% on September 30th), so the future looks bright. Introducing forecasts for 2026, which sound again very positive, with revenue to grow by 6.9% (6.6% on September 30th) and earnings to grow by 13.7% (13.8% on September 30th). As mentioned, the Fed has cut its rates by 100bp in 2024, 50bp in 2025, and will continue easing. Apart from the cut from quite high levels, which will probably help make these lofty multiples seem more bearable than offering a real stimulus to the economy, it will be important to see the extent to which central banks are willing to cut rates and their timeframe.  

Two highlights this week. First, we have a chart from Carson Investment Research, which shows that most years have a double-digit return for the S&P 500, albeit with an average drawdown of 14%. Volatility is the price we pay for those returns. The secret is to never sell in a drawdown, but patiently wait for the market to recover. The second chart, from Deutsche Bank, points to improvement in productivity since COVID, which is bullish for the market and should propel the indexes to new highs. Definitely, there will be future improvements in productivity with the help of AI.  

For equities, be careful not to fall into ‘Buffett’s trap’. He famously said that there were moments when Berkshire Hathaway’s stock was down more than 50%, and nothing was wrong with the company at the same time. Timing and risk management are key. In particular, I have noted that Berkshire Hathaway is losing the Buffett premium, having recently had a hit on valuation and a meaningful underperformance vs the S&P 500. Of course, I remain optimistic in the long term; I have faith in the new CEO, but to follow the Oracle means filling very, very big shoes. The stock seems to have a reverse performance relative to the AI trade: it’s up when the market is down, and vice versa. The late Angelo Abbondio, a legendary Italian investor, used to say that you can rely on fundamental analysis and on technical analysis, but the most difficult thing was to decide when to prioritise the first and when the second. In general, no stock can outperform all the time; some volatility has to be expected. Those who performed better earlier may not perform so well later, and vice versa.

Due to the persistent stickiness of inflation, monetary policy is again taking centre stage. Obviously, we should not overlook geopolitical scenarios in Ukraine and the Middle East: this will dominate the news for a while. Any escalation would be negative for the markets.  

I now recommend a long position in equities and a neutral position on US bonds. For EU Bonds, I advise going long (with the notable exception of France), while I still suggest putting together a portfolio that focuses on the safety of German Bunds, which are to be preferred in my view, given increased yields and reduced spreads. Are 75bps more worth swapping an AAA security for a BBB+?  

There are five main headline risks to what is otherwise a constructive view for 2025: i) revenue/earnings not matching forecasts, particularly in technology; ii) any damage to the economy and trade done from Trumponomics, tariffs, and resurging inflation; iii) any negative geopolitical outcome (which could see an expansion of the current conflicts); iv) a negative fed shock if it does not meet the market’s expectations on easing; and v) valuations, which are nearing levels only seen once before (at least during my lifetime!). 

Japan reached an all-time high for the Nikkei 225 after the election of a new political leader for the leading party, the LDP. The choice was between Sanae Takaichi and Shinjiro Koizumi, and the first one prevailed. Takaichi was a protege of the late Shinzo Abe and now champions loose monetary and fiscal policy. The leading index shot up the week after her election, on the perspective that her pro-growth agenda would revive Japan’s economy. Her election, however, doesn’t bode well for the JPY and for JGBs. Already, an adviser has said that October is too soon for an interest rate hike, which is music to the ears of BOJ Governor Kazuo Ueda, who is dovish. Remember that Japan, as well as Europe, has a valuation much more compelling (=lower) than that of the US, and could be a useful way to diversify, as UBS was advising not so long ago. managed to reach new highs last week. I am now very positive on the country, although I would definitely hedge the JPY.

Portfolios

Finally, I want to introduce three portfolios that Tom and I published on Wikifolio. Tom’s a multi-asset portfolio, whereas the one I manage (with substantial input from Tom) is a global income and growth with a heavy US tilt. The third one is on Italian Equities. Check them out!

https://www.wikifolio.com/en/int/w/wf00inf8ig

Tom’s Multi-Asset Portfolio is up 23.7% in about 1 3/4 years, with a Sharpe Ratio of 1.1

https://www.wikifolio.com/en/int/w/wf000ipggi

Our Global Income and Growth Portfolio is up 30.1% in about 1 3/4 years, with a Sharpe Ratio of 0.8. Obviously, the devaluation of the USD had a big impact as all stocks are priced in EUR.

https://www.wikifolio.com/en/int/w/wf00ipiteq

My Italian Equities Portfolio is up 45.1% in about 1 1/2 years and has outperformed the FTSE MIB Index by 1335+ bp in this timeframe, with a Sharpe Ratio of 1.5

Consulting

Finally, I have officially become an Italian Independent Financial Consultant (Consulente Finanziario Autonomo), registered with the Italian OCF since 19 March 2024 (protocol 2425). If you are interested in my financial advice or simply want more information, please contact me at giorgio.vintani@inflectionpoint.blog

Consulting accounts usually start from EUR 100,000. Please note that you should be based in Italy to avail yourself of this service. If you are interested, please drop me an email. I am happy to send you my presentation and track record upon request.

Happy trading, and see you next week!

InflectionPoint

Disclaimer

All views expressed on this site are my own and do not represent the opinions of any entity with which I have been, am now, or will be affiliated. I assume no responsibility for any errors or omissions in the content of this site, and there is no guarantee for completeness or accuracy. The content is food for thought, and it is not meant to be a solicitation to trade or invest. Readers should perform their own investment analysis and research and/or seek the advice of a licensed professional with direct knowledge of the reader’s specific risk profile characteristics.