A shift in the Fed’s December stance resulted in a very strong rally for equities worldwide. It is important to pay close attention to the current Fed Chairman Powell in his speech on Tuesday; President Trump seems to have decided who to appoint as his successor, and the pick might be made known before Christmas. Trouble in crypto is extending risk-off sentiment to global markets, even though revenue and earnings are there, and even the multiples contracted a bit (while still being very high). 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 coupled with a USD crash, followed by damages done by tariffs/government policies, adverse geopolitical outcomes, and valuations (very high multiples).

Major market events 1st – 5th December 2025

Economic data highlights of the week

Mon: PT – Holiday, FR Manufacturing PMI (11/25), DE Manufacturing PMI (11/25), EU Manufacturing PMI (11/25), UK Manufacturing PMI (11/25), US ISM Manufacturing PMI (11/25), US Atlanta Fed GDPNow (4Q25)

Tue: US Fed Chair Powell Speaks, EU CPI (11/25), US JOLTS Job Openings (9/25)

Wed: AU GDP (3Q25), JP Services PMI (11/25), CH CPI (11/25), EU ECB President Lagarde Speaks. FR Services PMI (11/25), DE Services PMI (11/25), EU Services PMI (11/25), UK Services PMI (11/25), EU PPI (10/25), US ADP Nonfarm Employment Change (11/25), EU ECB President Lagarde Speaks, US Industrial Production (9/25), US Services PMI (11/25), US ISM Non-Manufacturing PMI (11/25)

Thu: EU Retail Sales (10/25), US Initial Jobless Claims

Fri: IN RBA Interest Rate Decision, EU GDP (3Q25), US Core PCE Price Index (9/25),  Retail Sales (10/25), DE Services PMI (11/25), EU Services PMI (11/25), UK Services PMI (11/25), US Manufacturing PMI (11/25), US Services PMI (11/25)

Performance Review

Source: Google

InflectionPoint reports:

* If something bad happens, you drink in an attempt to forget, wrote Charles Bukowski. It was with this thought in mind that I have witnessed, on board a long-haul flight, the shocking course of events which followed Nvidia’s solid report on November 19th. Astonished by the +2% to -2% performance swing of the Nasdaq on that fateful day, and once I arrived at my destination, I decided to put that famous quote to the test by ordering an aptly named cocktail, ‘Don’t give up the Ship’, apparently based on an American recipe from the 1940s. I don’t know if the punch from the market’s loss the day before or from the cocktail’s strength was worse, but on the following day, I was surprised to notice that the market did actually close in the black on Friday. That was actually the end of November’s market correction, which, however, left many stocks worse for wear. Eventually, the possibility of the Fed cutting rates in December changed once again, and this – coupled with the fact that President Trump might appoint his next Fed Chairman (Kevin Hassett?) before Christmas – managed for the market to turn up again, and recover considerable ground, even though this was a month in which the Nasdaq had a negative performance. Also, the release of Gemini 3, Google’s acclaimed AI new model, contributed to some of the newfound enthusiasm and to Broadcom’s own fortunes, since it has been designed to use chips made by the number 2 player in AI Semiconductors. Nvidia’s still king, wrote Mizuho, and I agree: perhaps what has been an uncontested monopoly will turn over to be a duopoly, but early days still. President Trump has yet to make a decision on the sale of advanced chips to China, which have been championed, among others, by Nvidia’s CEO Jensen Huang – this could be a catalyst for the stock in a moment where some market pundits are asking themselves if this is as good as it can get, and the party is over. No, says JP Morgan, which came out with an aggressive target price of 8,000 for the S&P 500 by the end of 2026, fuelled by the Fed cuts. It will be interesting to see how forecasts can change once the new FOMC Chairman is in place. The bond market definitely noticed, with the yield on the 10-year Treasury just around 4%. With the 3Q25 reporting season almost over, it is time to focus on 4Q25, as Oracle is expected to publish its results likely in the second week of December. While the stock had a blowout after its last report, it has since lost all of that performance – and then some – on worries about excessive spending to compete in the AI race against Microsoft and Amazon, negative cash flow, and low margins. Hopefully, the new announcement can put to rest all these concerns and fuel a recovery for its stock.  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 (with the latest CPI figures slightly better than expected, even though they were at 3%), and 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 can 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 lost some of its earlier gains and is now just hovering above 1.16. 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). Valuations matter: 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 in the next two weeks.

* 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 21.5x is above the average P/E ratio of the last 5 years at 20.0x and the 10-year average at 18.7x. 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. Furthermore, then the Fed was hiking rates, and had reached the peak by the end of 2000, with the famous out-of-meeting jumbo cut on January 3, 2001, in response to the rapid deterioration of the economy due to the dot.com crash. Were AI to crash, we could probably expect more of the same. Anyway, this time around, i) rates are lower and ii) the Fed is a tailwind (December or no December), not a headwind.

*  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 a huge swing in forecasts: the cut was on, then it wasn’t, and maybe it’s back on once again. Chairman Powell will speak again on Tuesday, and it could be make-or-break for the December meeting. The forecast currently prices in the third cut of the year with a 87.4% chance, with rates ranging from 3.50% to 3.75%, with only a 12.6% chance that the US Central Bank will stay put (it pays to check again after the Chairman’s speech). 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 2.75-3.00%, hence with 3 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 4.03%, and were lower last week, in line with European government bond yields. While in 1999 they 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 270.61 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 followed in sync; I cannot comment on GDP yet, but earnings were plentiful once again, firmly in double digits, also lifting the averages for 2025 and even 2026. 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 3.9%, slightly down from 4.1% 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%, stable from 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 13.4%, compared with a forecast of 7.9% as of September 30th, and with revenues growing by 8.4% vs 6.3% as of September 30th. For 2025, earnings growth is forecasted at 11.8% vs 10.5% 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 (October 2026) 21.44%. 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 Salesforce.com (Wednesday, After Close).

Source: Earnings Whispers

Market Considerations

Source: FactSet

Source: SG Cross Asset Research/Quant, FactSet, ISABELNET.com

Source: Topdown Charts, LSEG, 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 11.8% (10.5% on September 30th), so the future looks bright. Introducing forecasts for 2026, which sound again very positive, with revenue to grow by 7.0% (6.6% on September 30th) and earnings to grow by 14.3% (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.  

Three highlights this week. First, we have a chart from FactSet, which shows how much the revenue growth rate has improved over the last few months, to a recent peak of +8.4%, which is the highest growth since 3Q22, in the last three years. This testifies that, despite the lofty multiples, numbers seem to be there. The second chart, from SG, shows that 35% of the S&P 500’s stocks (175) had to cope with a loss of at least 20% since their most recent highs. Many include technology companies and high flyers (Oracle would be a great example). Notwithstanding the very meaningful recovery this past week, many stocks are indeed licking their wounds. The third chart from Topdown Research looks at returns in the month of December on average in the last 60 years, finding that America’s leading index rose an average of 1.2% and was positive 70% of the time. Enough to have a drink, or two. Charles Bukowski continues: if something good happens, you drink in order to celebrate; and if nothing happens, you drink to make something happen. 

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. 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 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.

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 earlier in November 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 24.0% in 2 years, with a Sharpe Ratio of 1.2

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

Our Global Income and Growth Portfolio is up 29.8% in 2 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 47.1% in about 1 3/4 years and has outperformed the FTSE MIB Index by 1400+ 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.