Summary of "Market Outlook for Oct 26, 2025 - Retail is Number 2"
Market Outlook for Oct 26, 2025 - Retail is Number 2
Macroeconomic and Market Context
Interest Rates & Yields
- US 10-year Treasury yield at 4.02%, higher than French 10-year at 3.46% despite France’s debt and governance issues.
- French stock market up 26% year-to-date (YTD) vs US equities up 15%.
- Market pricing for Federal Reserve (Fed) rate cuts is inconsistent:
- Money markets and equities price in rate cuts.
- ZQ futures push back, pricing out cuts.
- FOMC meeting expected Wednesday, Oct 30, with a likely 25 basis points (bps) rate cut.
- Bank of Canada also expected to cut rates earlier the same day.
- Balance sheet runoff may end soon, potentially adding $20 billion purchasing power for Treasuries.
- Reverse repo balances near cycle lows ($2.44 billion), indicating shrinking excess liquidity.
- Treasury General Account (TGA) at $95 billion, elevated due to government shutdown, effectively reducing reserves.
- Mortgage rates at 6.19%, down 8 bps in one week; housing market remains under pressure.
- Consumer Price Index (CPI) data lighter than expected:
- Goods inflation at 1.5% year-over-year (YoY).
- Services inflation at 3.5% YoY.
- Shelter inflation at 3.6% YoY, expected to linger due to higher rates constricting supply.
- Medical care services inflation at 3.9%, largely immune to interest rate effects.
- Energy inflation mixed:
- Energy commodities up 3.8% month-over-month (MoM).
- Utility services up 11.7% YoY.
- Core inflation (excluding food and energy) at 2.27% YoY.
- “Super core” inflation (imputed prices) may be biased upward.
- Deflationary pressures expected due to AI-driven productivity gains and China’s manufacturing overcapacity.
- US trade protectionism limits Chinese imports domestically, but Chinese goods flood other emerging markets, pressuring global inflation downward.
- Political and fiscal risks remain:
- $2 trillion annual debt growth, including $1 trillion interest expense.
- Unlikely government spending cuts.
- Fed expected to eventually cut rates back to near zero due to economic and political realities.
Labor Market & Employment
- Layoff announcements accelerating, notably Amazon predicting 500,000–600,000 job reductions over coming years due to AI and robotics.
- AI seen as a major structural disruptor, reducing the need for human labor and impacting inflation and employment dynamics.
Geopolitical & Political Events
- Potential Trump-Xi meeting on Oct 30 at APEC summit; possible impact on trade discussions.
- Supreme Court hearing on legality of Trump tariffs scheduled for Nov 5; no immediate decision expected.
Company and Sector Highlights
General Motors (GM)
- Stock hit all-time high near $70, up from approximately $56 at last report.
- Viewed positively with continued momentum expected.
- Electric vehicle (EV) sales growing at double-digit rates, profitable per vehicle despite tariffs.
Tesla (TSLA)
- Market capitalization around $1.44 trillion, viewed as overvalued.
- Q3 revenues: $20.38 billion (3-month), but 9-month revenues down 10% YoY ($53.8B to $49B).
- Automotive regulatory credits declining ($739M to $417M).
- Automotive sales roughly flat; energy storage growing modestly ($7B to $9B).
- Gross profit $5B on $20.5B automotive sales; net income $1.389B vs $2.189B prior year.
- Concerns about CEO’s communication and execution timelines.
- Valuation skepticism: fair value suggested closer to 20% of current price (~$84/share).
- Robotics ambitions (humanoid robots) seen as highly speculative and unlikely to justify valuation.
Lidar Industry & Ouster (OUST)
- Ouster is a pre-profit lidar company with revenues around $120 million run rate.
- Focus on multiple verticals: automotive, industrial robotics, smart infrastructure.
- Q2 2025 shipments: 5,500 sensors, +33% YoY.
- Gross margins approximately 33–37.5%; operating expenses around $39 million per quarter.
- Cash on hand $229 million; cash burn manageable but profitability not expected for 5+ years.
- Significant share-based compensation (~27% of operating expenses).
- Regulatory tailwinds include US Department of Defense certification for aerial systems.
- Competitive landscape favors multi-sensor fusion (lidar + radar + cameras) over Tesla’s camera-only approach.
- Design wins include Kamatsu (mining) and Motion (robo taxis).
- Larger opportunity seen in smart infrastructure than automotive.
Other Companies Reporting Earnings This Week
- Electronic Arts, Keurig, Dr. Pepper, Revity, Arch Coal, NXP, Corning, PayPal, UPS, Sherwin Williams, Booking Holdings, Boston Properties, Seagate, Pterodine (robotics division), Visa, Caterpillar, ADP, Boeing, Garmin, Verizon, Mastercard, Amazon, Coinbase, Apple, Meta, Microsoft, Starbucks, eBay, Biogen, Bristol Myers, Hershey, International Paper, Kimberly Clark, ExxonMobil, Colgate Palmolive, Chevron, Dominion Energy, Berkshire Hathaway.
- Earnings season active with 172–176 companies reporting.
- Earnings Vault strategy: author played 14 earnings trades last week, with 12 winners.
Market Metrics and Instruments
Indices
- S&P 500 near all-time high at 3,677.25.
- Nasdaq 100 (QQQ) at all-time high 6,171.0.
- Russell 2000 (IWM) near but below all-time high.
- Volatility dropping: 13-week implied volatility percentile at 55th (down from 97th).
- Forward 4-quarter operating earnings for S&P 500: 294.
- Forward price-to-earnings (P/E) multiple: ~23 on operating earnings, ~27–28 on reported EPS.
Fixed Income
- 10-year US Treasury yield: 4.02%.
- Mortgage rates: 6.19%, down 8 bps last week.
- Reverse repo balances near cycle lows ($2.44 billion).
- Fed effective funds rate at 4.11%.
- ZQ futures pricing in about two rate cuts by January 2026.
Commodities
- Gold down 3.5%, silver down 6.6% — high volatility likened to meme stock behavior.
- Energy commodities mixed with rising gasoline prices but falling energy services inflation.
Investing and Trading Strategies
Risk Management Focus
- Emphasis on managing risk over chasing returns.
- Portfolio construction should focus on risk profiles, not just assets.
- Retail investors often lack discipline and risk management, leading to a high failure rate (~95% of accounts blow up).
- Advice: never sell on red days; buy on red days.
- Importance of moving delta toward zero when trades go against you to limit losses.
- Institutional trading involves strict trade approvals and exit plans, unlike retail.
Applied Asset Management & CFA Training
- Two verticals: CFA candidates/institutional focus and retail investors.
- Retail now accounts for the second-largest share of assets under management, surpassing active institutional management.
- CFA applied training includes sector studies, financial modeling, risk management, factor portfolios, carry trades, curve trades, market neutral setups, and derivatives.
- Derivatives covered include energy (CL, NG, HO, RB), metals, grains, livestock, and spreads (crack, crush).
- Retail portfolios tend to be smaller and capital constrained; focus on volatility and momentum trades.
- Live sessions planned for retail traders (Sunday pre-week, Monday–Friday pre-market) to provide timely market insights and risk management guidance.
- Trading manuals and sector studies tailored differently for retail vs institutional.
Learning Methodology
- Shift from linear video learning to “mosaic” or “point-in-time” learning using AI prompt libraries.
- Sector, industry, subindustry, and company-level prompts help build customized research.
- Example given with AMD in semiconductors: 10 sector prompts, 30 subindustry prompts, 40 company prompts.
- AI tools (e.g., ChatGPT) used to elaborate on prompts for deeper understanding.
- Financial modeling skills becoming obsolete as AI automates model building; emphasis shifting to CFA-level conceptual expertise.
Disclosures & Recommendations
- Not financial advice; opinions and analysis shared for educational purposes.
- Author is offering paid seminars in Costa Rica (Nov 16–22 and Nov 23–29), limited to 3 participants per week.
- Applied asset management subscription pricing:
- $425 full price.
- Discounts for markmelder.com subscribers ($50 off) and CFA members ($100 off).
- $275 effective price for CFA members.
- Planned $25/month option for live sessions only starting Q1 2026.
- Earnings Vault strategy described with clear risk controls (avoiding unwanted assignments).
Presenters / Source
- Content from a single presenter, presumably a market analyst affiliated with applied analysis and asset management education platforms.
- Presenter references own products: Applied Level (CFA and retail education), Sector Studies, Earnings Vault, and trading manuals.
- Uses AI tools (Google Deep Think, ChatGPT) for research and analysis.
- Active on markmelder.com and offers direct contact via email.
Summary
This comprehensive market outlook for late October 2025 highlights an unusual macro environment with US yields higher than France’s despite France’s fiscal issues, mixed signals on Fed rate cuts, and persistent inflation pressures in shelter and medical care. Tesla’s valuation is critiqued and contrasted with GM’s stronger fundamentals. The emerging lidar industry is explored through a detailed case study on Ouster, emphasizing its growth potential and challenges. The presenter stresses risk management over return chasing, especially for retail investors, and introduces a sophisticated, AI-enhanced educational framework for both institutional and retail investors. Earnings season is active with many notable companies reporting. The overall tone is cautious, emphasizing structural changes from AI, geopolitical risks, and the need for disciplined portfolio management.
Tickers / Assets Mentioned
- Equities: GM, TSLA, OUST, Electronic Arts, Keurig, Dr. Pepper, Revity, Arch Coal, NXP, Corning, PayPal, UPS, Sherwin Williams, Booking Holdings, Boston Properties, Seagate, Pterodine, Visa, Caterpillar, ADP, Boeing, Garmin, Verizon, Mastercard, Amazon, Coinbase, Apple, Meta, Microsoft, Starbucks, eBay, Biogen, Bristol Myers, Hershey, International Paper, Kimberly Clark, ExxonMobil, Colgate Palmolive, Chevron, Dominion Energy, Berkshire Hathaway.
- Indices: S&P 500 (SPY), Nasdaq 100 (QQQ), Russell 2000 (IWM).
- Fixed Income: US 10-year Treasury, French 10-year, ZQ futures, mortgage rates.
- Commodities: Gold, Silver, Oil (CL), Natural Gas (NG), Heating Oil (HO), Gasoline (RB).
Methodologies / Frameworks Shared
- Portfolio risk management prioritized over asset return focus.
- Earnings Vault strategy with strict trade entry/exit and assignment rules.
- Use of AI prompt libraries for sector, industry, and company research.
- Financial modeling focus shifting to conceptual understanding over Excel skills.
- Trading setups include carry trades, curve trades, market neutral, factor portfolios.
- Mosaic/point-in-time learning model replacing linear video learning.
- Live session schedule for retail traders focusing on risk and market events.
This summary captures the key finance-specific content, market context, company analysis, and educational methodologies from the video.
Category
Finance
