Thoughts from Themes: From Fog to Focus

Markets enter the week navigating a mix of short-term turbulence and long-term promise. The recent pullback across AI, mega-cap tech and crypto has sparked correction fears, but much of the weakness reflects profit-taking, valuation resets, and October’s leverage unwinding, not a break in fundamentals. At the same time, the end of the government shutdown is unleashing a rush of delayed economic data that will quickly clarify trends in labor, inflation, and consumer demand ahead of year-end. Despite cyclical pressure, structural momentum remains intact. AI capex is still accelerating, crypto adoption continues to broaden, and earnings in key growth sectors are holding steady. With Nvidia reporting this week and seasonal tailwinds approaching, the setup suggests recalibration rather than rupture, and a cautiously constructive path forward.

Market Minute

The recent downturn in the market and talks about a larger correction are best viewed through the lens of a new paradigm of market volatility that is illustrated by massive innovation in a new technological frontier, with signs of weakness more symbolic of profit-taking and a case for optimism and the potential for better entry points.

Sure, recent market action has some investors scared, particularly in high-growth sectors like AI, mega-cap tech, and crypto. Valuation compression, waning momentum, and profit-taking have triggered a bit more than a modest pullback, raising questions about whether this marks the onset of a broader correction. Technical indicators such as declining breadth, elevated volatility, and sector rotation into defensives suggest caution. Moreover, macro headwinds, including potential sticky inflation, geopolitical tensions, and uncertainty around central bank policy have added pressure to risk assets. Plus, some high-profile investors are trying to recreate former glory by announcing large short bets in prominent high growth AI stocks, citing overvaluations.

Yet despite these tremors, the broader investment landscape remains constructive. The underlying economy continues to show resilience, with labor markets stabilizing and consumer spending holding firm. Corporate earnings, while mixed, have generally exceeded expectations, and forward guidance in key sectors like semiconductors, cloud infrastructure, and cybersecurity remains robust.

Importantly, the AI buildout is far from over and capital expenditures in data centers, chips, and software are accelerating, laying the groundwork for long-term productivity gains.

The recent downturn in crypto and mega tech appears more cyclical than structural. These sectors run hot, and a healthy reset may be necessary

to sustain the next leg higher. Regulatory clarity in digital assets, improving token utility, and institutional adoption are likely to support a rebound. Don't forget, we are still dealing with the leveraged unwinding that took place in October, and major crypto players are recapitalizing as the old whale investors finally realize massive gains. Similarly, mega-cap tech firms continue to dominate their respective ecosystems with strong balance sheets and innovation pipelines that position them well for renewed leadership.

As we approach year-end, seasonal tailwinds, including tax-loss harvesting, portfolio rebalancing, and the historical strength of Q4 could provide a lift. This week will be a big inflection point with Nvidia announcing earnings. If capex spending from the hyperscalers has indeed gone its way, it will be hard to believe that Nvidia has any chance of underperformance. For the first time, it really doesn't matter what the Fed does with rates this December. Maintaining rates where they are means inflation is in check and labor markets are stable. The alternative is a reduction, which makes risk assets fly.

While vigilance is warranted, the current weakness should be viewed as an opportunity to accumulate quality assets at more attractive valuations. The market’s recent softness reflects short-term recalibration rather than a fundamental breakdown. With innovation, earnings strength, and macro stabilization on the horizon, the path to recovery remains intact.

Eyes on the Backlog

With the U.S. government shutdown now resolved, a backlog of delayed economic data is set to hit markets, offering both clarity and potential volatility. Investors should brace for a data-heavy stretch that could recalibrate expectations for growth, inflation, and monetary policy.

The 43-day federal shutdown, the longest in U.S. history, disrupted the release of critical economic reports, including two monthly jobs reports, CPI, retail sales, and Q3 GDP. Now, as agencies like the Bureau of Labor Statistics and the Commerce Department resume operations, a compressed release schedule is expected to deliver weeks of data in rapid succession. This could create short-term noise but also provide overdue insight into the health of the economy.

Key indicators to watch include:

• Nonfarm payrolls and unemployment rate: These will reveal whether labor market cooling has continued, a key input for Fed policy.
• Consumer Price Index (CPI): Markets will scrutinize inflation trends to assess the likelihood of rate cuts in December and early 2026.
• Retail sales and personal consumption data: These will gauge consumer resilience amid elevated borrowing costs.
• Q3 GDP: Offers a backward-looking but important snapshot of economic momentum heading into year-end.

The Federal Reserve will no longer be able to use its "driving in the fog" analogy, as they will have all the usual information they need to make an informed decision. Market response will hinge on how these data align with expectations. A softening labor market and moderating inflation could reinforce the case for Fed easing, boosting equities, crypto, and other risk assets. Conversely, hotter-than-expected inflation or resilient wage growth may revive rate hike fears, pressuring bonds and growth stocks. Despite near-term volatility, the broader outlook remains constructive. With the shutdown over, data clarity returning, and the Fed potentially pivoting in 2026, investors may find renewed confidence. The coming weeks could mark a turning point — not just in data flow, but in sentiment. Regardless of the Fed decision, there are reasons to be bullish on the market, whether it decreases rates or stands at current levels.

Bitcoin: Fatigue and Fanfare

There is no fatigue in Bitcoin from those who believe, but certainly from the media and those who are speculating as price momentum has been aggressively lower over the past month, starting with the October unwind of leverage and selling by long-term holders that finally decided, in unison, to realize profits. That said, the fundamentals of the Bitcoin ecosystem are still very solid, and enthusiasm from institutions, governments, and corporate treasuries continues to gain.

Let's state the obvious: Bitcoin has massive growth potential. With that comes massive volatility. Historically, every time Bitcoin hits a new high, there have been sellers shortly thereafter trying to time the top of the market and profit. But those who have maintained their positions have had outsized returns over time. Thus far, Bitcoin is still in a trend of higher highs and higher lows, which means that the long-term trend is still intact.

Heading into next week, the crypto market remains under pressure following a sharp correction that pushed Bitcoin below $100,000 and dragged altcoins deeper into bear territory. Analysts expect continued weakness in altcoins, with Bitcoin dominance likely to rise as capital consolidates into perceived safer assets. The recent $20 billion liquidation event and macro uncertainty have sidelined many traders, reducing leverage and dampening sentiment. However, the broader outlook into year-end and 2026 is more constructive. Institutional inflows remain strong, with crypto ETFs attracting over $28 billion in 2025, and total market capitalization up nearly 10% year-to-date despite volatility. Long-term investors are strategically accumulating assets, particularly in Bitcoin and Ethereum, and Strategy chairman Michael Saylor mentioned that they have continued to buy Bitcoin during this latest price correction, with an announcement of $835M in Bitcoin purchases on Monday, November 17th. While short-term caution is warranted, the structural bull case for crypto remains intact into 2026.

Not to Burst Your Bubble…

There is a difference between being in a bubble and being in a bubble that is about to burst. Like a water balloon, there is a period of massive expansion as you attach

it to a hose and fill it. And just because it fills and swells doesn't mean it will definitively burst. For it to burst it needs to be filled far beyond capacity, to the point of overcapacity, forcing it to break apart.

Comparing that scenario to where we are in the stage of the AI infrastructure buildout today, I would say the balloon is on the spout and we have just begun to fill it with water. Famed investor Michael Burry made an incredible call in 2008, predicting the financial crisis, shorting the housing market, and profiting very handsomely from that position. But his purchase of put options with strike prices into 2027 on Palantir and Nvidia, based on future depreciation concerns, doesn't mean that the AI trade is about to burst.

Earnings calls should matter more, and what we learned is that AI capex spending continues to grow, demand for high computing chips can't be met at current production levels, and most of the economic progress through autonomous driving, robotics, large language models, and crypto and blockchain, depends on continue investment in the buildout of all things AI.

So, much of this sentiment is media-driven, click-driven, and ultimately healthy for the broader AI sector over time. Bubbles only happen when no one is concerned, and the level of fear and skepticism in the market is another proof point that the AI balloon still has a lot more capacity to fill before it reaches a bursting point.

This Week’s Major US Economic Reports & Speakers

Monday, November 17

8:30 AM Empire State manufacturing survey

9:00 AM Federal Reserve Vice Chair Philip Jefferson speaks

10:00 AM Construction spending

1:00 PM Minneapolis Fed President Neel Kashkari speaks

3:35 Federal Reserve governor Christopher Waller speaks

Tuesday, November 18

8:30 AM *Import Price Index

8:30 AM *Import price index minus fuel

9:15 AM * Industrial production

9:15 AM * Capacity Utilization

10:00 AM Factory Orders

10:00 AM Home builder confidence index

10:00 AM Business inventories

10:30 AM Federal Reserve governor Michael Barr speaks

Wednesday, November 19

8:30 AM Philadelphia Fed manufacturing survey

8:30 AM Housing starts

8:30 AM Building permits

8:30 AM US trade deficit

2:00 PM Minutes of Fed’s October FOMC meeting

Thursday, November 20

8:30 AM US employment report

8:30 AM US unemployment rate

8:30 AM US hourly wages

8:30 AM Hourly wages year over year

8:30 AM Initial jobless claims

10:00 AM Existing home sales

10:00 AM * US leading economic indicators

11:00 AM Federal Reserve governor Lisa Cook speaks

1:40 PM Chicago Fed President Austan Goolsbee speaks

6:45 PM Philadelphia Fed President Anna Paulson speaks

Friday, November 21

8:30 AM Federal Reserve governor Michael Barr welcoming remarks

8:45 AM Federal Reserve Vice Chair Philip Jefferson speaks

9:00 AM Dallas Fed President Lorie Logan speaks

9:45 AM S&P flash US services PMI

9:45 AM S&P flash US manufacturing PMI

10:00 AM Consumer sentiment (final)

* Data may be subject to delay due to government shutdown from Oct 1- Nov 14

Disclosures:

All data sourced from Bloomberg as of November 14, 2025, unless otherwise cited.

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