For the Fed, It’s Where You Arrive, Not How You Drive

Jeff Buchbinder (00:00):

Hello and welcome to LPL Market Signals. Jeff Buchbinder here with my friend and colleague Lawrence Gillum to kick off Thanksgiving week. Lawrence, I think you're going to talk a little bit about the holiday here in a minute, but first I got to share this. When our personal lives and our market lives match, I find it really fascinating. So, I had a cold last week. My cough was really bad Wednesday, Thursday, that's when the market was bad. I recovered on Friday. That's when the market recovered. What do you think, coincidence or not?

Lawrence Gillum (00:40):

I feel like I should say something about correlation not being causation here, but who knows these days, stranger things have happened. Maybe you were the cure to the markets.

Jeff Buchbinder (00:50):

Maybe so, or maybe the markets just affect my health. Maybe that's the causation. So hope everybody has a great holiday. I'll start with that upfront, I guess, Lawrence, you we talked a little bit before we jumped on here about Thanksgiving plans. You and I aren't really doing anything too exciting.

Lawrence Gillum (01:13):

We're not, yeah, we have no plans this year, which I'm actually looking forward to. I have family in Florida and then in Northern Virginia. And normally we would be driving to both of those locations, but this year we're not doing that. We're going to do that for Christmas instead. So this Thanksgiving though, we're going to be here in Fort Mill and just watching football and enjoying the family time.

Jeff Buchbinder (01:38):

Very good. Well, hopefully enjoying a Chief's win. My plans are similar. We're just getting over this cold. We passed it around all four members of the family, not the dog, but all four members of my family got this thing. We took turns now my wife Debbie has it, but hopefully she'll be better by Thursday. And we can do Thanksgiving with the in-laws. So staying local. So we got a good show for you today. It's we got some great topics, even though it's bond market related. It's exciting. I know Lawrence, you'll agree. But we'll mix in some earnings talk too. We just finished third quarter earnings season. That's the topic of the Weekly Market Commentary for this week, which you could find on lpl.com. So we'll do that too. In addition to recapping the week last week, and previewing the week ahead. I titled this "Stale Data, Fresh Turkey."

Jeff Buchbinder (02:34):

But really I think the key to keep in mind with stale data is that the Fed has limited visibility. We'll get to that in a bit. Alright, starting with the market recap. I called it a whirlwind of a week because we had that massive reversal in the stock market on Thursday, initially at the open, market loved what it had heard from NVIDIA on Wednesday, got a rally north of 1%, but then intraday these worries about whether all these AI bills will be paid, started to really reverberate. And you ended up not only you, you know, causing all those gains to evaporate, but then down another 1%. So the S&P 500 went reversed negatively by about 3.6% I think intraday. So it was a huge, it was a huge move. One of the top three biggest intraday sell-offs from that high point to that low point that we've ever seen.

Jeff Buchbinder (03:43):

So you know, certainly some of the technicians are, including our own, Adam Turnquist, are calling that a little bit of a near-term negative signal, we'll have to see. But if you go back and look at history after those reversals, if you kind of widen the pool and look at maybe the biggest 30 reversals ever from big gains to big losses, the returns from that point forward in subsequent months tend to be pretty good, similar to the market on average. So we're not too worried about that, but we do think there might be a little bit more downside in the near term before we get the Santa Claus rally. The S&P did end up down 2% for the week. The Nasdaq did a little bit worse, down almost 3%, which makes sense when you have worries about AI.

Jeff Buchbinder (04:29):

So you see tech down almost five for the week. You see consumer discretionary, which of course has Amazon and Tesla, tech-like, those were quite weak. On the flip side though, Alphabet, AKA Google was a huge winner last week. The Berkshire Hathaway stake, certainly helping there. So comm services actually leading, it's our favorite sector, actually leading the market last week. And kind of dampening, I guess the whole tech sell-off narrative just a bit. International markets lagged last week, the EAFE and the emerging market indexes were down almost 4%. The strong dollar was certainly part of that. And then we had some jitters in Japan around potentially overspending. This is your world, Lawrence. Yen weakness, maybe too inflationary, too much spending, budget troubles, kind leaking in there. And then some tough talk from the new prime minister there about Taiwan certainly didn't help. So you see some weakness in Japan and in the Hong Kong slash China equity markets. Turning to bonds and commodities, currencies. So, Lawrence good week for bonds. You know, AI was one story and that reversal on Thursday. But I think the other big story last week was just all the Fed whipsaw. I mean, we're going to get a December cut or not, you know, who's speaking? <Laugh>, right? Is it the doves or the hawks?

Lawrence Gillum (06:12):

Yeah, that's right. It's a very divided Federal Reserve right now, which we'll talk more about in just a second. But we did get a decent rally out of the bond market last week after the regional Fed President John Williams from the New York Fed discussed his views on the potential for rate cuts. And he came out on the affirmative side. And that you know, bond markets liked that narrative. And it looks like we're still going to keep fighting back and forth between the hawks and the doves until we get closer to this December meeting. But last week we did get some relief out of the rates market. We did see Treasury yields across the curve move lower. The result was about a 50 basis points return out of the aggregate bond index.

Lawrence Gillum (06:58):

Pretty broad based, mortgages up 40 basis points. Investment grade corporates up about 40 basis points. I always like to focus on the year to date returns, especially since I tend to go after the equity markets. And equity markets are always, you know, you have these big numbers but this year's been a pretty decent year out of the fixed income markets to get an 8% type return out of AAA-rated mortgage-backed securities. So it's been a good year now. We probably pulled some of these returns forward from 2026. We won't go into our outlook. You know, that's to be determined. We're going to have our Outlook released here in a couple weeks, so more to come on that. But this year has been a good year particularly after a lot of these other challenging years that we've seen post-2022

Lawrence Gillum (07:47):

So just real quick on the muni side, munis underperformed last week but we're around this 4% type return out of munis. So even the you know, the, I guess the tax free and the taxable markets are all higher this year, which is something that we like to see. So a lot of good places to invest if you're a fixed income investor this year. We'll see how the rest of the year plays out given the give and take between the doves and the hawks. But like I said, December tends to be a pretty short week with all the holidays and everything, so I might actually declare 2025 over and just take these year-to-date returns as given for the year.

Jeff Buchbinder (08:31):

Yeah, 7%, not bad at all. And certainly even a little bit better there in EM debt. You're not losing returns today. Let's see, bond 10-year yield down two bps. It's Monday, November 24 right after lunch as we're recording this, like we always do, or almost always 4.04 on the 10-year. That is a very comfortable level. And then we're getting an equity rally here. It's a variety of factors I would say, but anyway, up 1.6% on the S&P 500. I think one of the reasons we're getting this rally is prospects for a Russia-Ukraine peace deal, which is bringing down oil prices, which is good for consumer spending, good for inflation. You've also got another continued, or a continued rally in Alphabet on that Buffet stake. And some more positive AI headlines as people reconsider maybe what they heard last week from NVIDIA.

Jeff Buchbinder (09:32):

So really a nice bounce back today for the equity markets and continued strength in bonds. You see here, the crude oil down to 58, that is clearly a price that is reflecting increased chances of more oil flowing out of Russia. Natural gas has actually been rallying sharply here. You see almost 20% higher over the last three months. Of course, we're now into winter heating season, that is more of a local market. It's not really our natural gas prices aren't trading on Russia, Ukraine. So you see nice, nice rally there in that, although we don't want that to go too far, it helps companies, it doesn't help consumers who are heating their homes. Here you see the dollar, I priced this this morning, so the week over week change in the dollar is up 0.7%.

Jeff Buchbinder (10:27):

It's a pretty big move for the greenback in a week that, again, trimmed international equity returns. I would just call that a little bit of a flight to safety. We are going to talk about the dollar in our Outlook. I'll just say that it's going to be really important. It always is, but it's going to be especially important in 2026 in terms of the decision to overweight or underweight international equities. So that's what I want to say there. Let's look at the S&P 500 chart. So when we're in a pullback, I pull this chart out instead of my usual Adam Turnquist look at the S&P 500. And you see here, we're down about three and a half percent as of, well, this was 10:00 AM east coast time this morning after the strong open, the pullback got to a little over five on Thursday before the bounce back on Friday.

Jeff Buchbinder (11:22):

But, you know, half, almost half of that is now gone <laugh>. So I mean, it's still a pullback, but minimal drawdown, first 5% pullback since May. We were due for one. We've been saying that for a long time, at least a couple of months, I would say probably started in earnest maybe in August here, where we started to get a little bit concerned about a pullback being overdue. September, October, typically week seasonally, didn't get it then. We're just getting it a little bit later. So the fundamental picture hasn't really changed all that much, frankly. It's just you know, market got a little ahead of its ahead of its skis and we had to take some of the froth out. So certainly the biggest gainers in the AI complex is where you saw some of the biggest weakness, and certainly anything related to cryptocurrencies tended to experience outside losses in this sell-off as well.

Jeff Buchbinder (12:21):

So that's all exciting stuff, of course, Lawrence, but not as exciting as the varied viewpoints in the bond market. I don't think I've ever been more interested in the Fed, and I'm not being sarcastic here, than I am right now. It is fascinating <laugh>, right? And I'm not just talking about who's going to get fired or who Trump's going to try to fire that's been interesting, or who the next chair is. That's interesting. We might know something there in a couple of weeks. We'll see. But the divergence between the hawks and the doves is just massive. I found it interesting.

Lawrence Gillum (13:00):

Yeah, and it's interesting. It is almost like a daytime soap opera given all the diverging reality show movies out there,

Jeff Buchbinder (13:08):

Reality show idea. There you go.

Lawrence Gillum (13:10):

<Laugh>, every, I don't know who would watch, I'd watch that, but I don't know how many other people would watch a reality show about the Fed. But I certainly would. But that, you know, I think it is fascinating and it is actually driving a lot of the volatility out of the bond market as we just talked about with rates coming down after John Williams spoke last week. But we've been getting kind of, you know, this no clear direction out of the Fed. And the reason why we are aren't getting that clear direction is because these Fed officials all have different views on what to do over the next 12 months as it relates to cutting rates or even potentially hiking rates. So what we're showing here is this is called a spectrometer. This is, or spectrometer this is from Bloomberg.

Lawrence Gillum (13:56):

This is from the economics team over there at Bloomberg. They do a lot of great work. But when you think about the Federal Reserve, the Federal Open Market Committee, in particular, it's made up of the Board of Governors plus five voting members from these regional districts. And what this table shows is just kind of who's been reliably dovish, who's been reliably hawkish and you're starting to get some folks that are on polar opposites of each other. If you look at Michelle Bowman, for example, she's a negative two according to this analysis, which means she's one of the uber doves on the committee. But then you've got Jeffrey Schmidt from the Kansas City Fed, who is a plus two, which means he's an uber hawk on this committee. And there's a number of other folks that kind of fit in that similar pattern.

Lawrence Gillum (14:45):

And it's been, as far as I can remember, the most divergent perspectives from this FOMC in quite some time. And it makes sense, right? We just came out of a global pandemic, not just, but we came out of a global pandemic. We saw the inflationary dynamic that we haven't seen since the 70s, 80s, and, you know, an aggressive rate hiking campaign followed by this need or want to lower interest rates. And not everyone on the committee is fully convinced that the inflationary story is over. So we're getting all kinds of different answers here. If you look at recent statements, and I've never been a big fan of Fedspeak, I think it kind of muddies the water and introduces additional volatility to markets. But if you consider the most recent comments from the 12 voting members on this FOMC, the Federal Open Market Committee, so far, five had said that they are in favor of a cut in December. Five have said that they are not in favor of a cut in December, where two haven't really made their decision clear.

Jeff Buchbinder (15:57):

Well, that clears things up.

Lawrence Gillum (15:59):

It, right, exactly right. So if you're keeping score at home, which we are, five vote for a cut, five say no cuts, and two, Jerome Powell and Philip Jefferson, they have yet to kind of declare where they you know, where they come out on a cut for December. So this could be a 6-6 tie in terms of the vote in December. I don't think there's ever been a 6-6 tie as it relates to the committee, there was a 7-5 vote back in 1983. So it's been a long time since we've seen this type of diverging viewpoints as it relates to monetary policy. Our view is, my view anyway, I still think that they're going to cut in in December. Now, it's going to be a lot more challenging because of the lack of data.

Lawrence Gillum (16:59):

But I do think that you know, given the kind of bias, I think Jerome Powell is going to lean towards a cut in December. So I think we get a maybe a 7-5, 8- 4 vote. But it's going to be close. And until we get further clarification on that, we're going to see additional volatility in the markets. The other challenge too is that the Federal Reserve goes into its self-imposed blackout on, I think it's Saturday. So we'll have a couple weeks without Fed officials, without real, you know, updated hard data. So markets are really left to their own devices on what's going to happen post or during that blackout period before the Fed meets on December 9 and 10.

Jeff Buchbinder (17:45):

Yeah, they will be flying a little bit blind with the lack of, at least the primary data that they normally rely on. By the way, I can't take credit for this, I got to give credit to Jeff Roach who quoted Ben Bernanke saying they, he used to refer to this as the Federal Open Mouth Committee. I think <laugh>, I think that is hysterical because yeah, these Fed speakers, they probably don't need to talk so much. I don't think Bernanke wanted him to talk so much. No. Even though he did continue the shift toward more transparency from Greenspan to today. But clearly we've gone past where he thinks <laugh> we should be in terms of you know, Fed speak. So all right, so continuing the discussion on the Fed and the December cut, what's the market saying?

Lawrence Gillum (18:36):

Yeah, this is the volatility that we just talked about. So this is the probability of a December rate cut per the fed futures funds market, fed funds futures market. And we got as low as a, about a 30% chance of a cut, call it 24 point or 24.5% probability of a cut, back around on the 20th. But after the conversation by John Williams, it shot up, or down, shot up to like, almost a 70% chance of a cut for December. So I think it's going to be pretty volatile. And if Jerome Powell, for example, he doesn't have any upcoming speeches that I'm aware of, but if he were to come out and say, you know, he's not in favor of a cut, I think we would probably retrace these probabilities pretty sharply.

Lawrence Gillum (19:27):

So I think we're at this point where one or two people, if they change their mind, we're going to get this additional volatility out of the rates market, and the potential for kind of a sell-off in the rates market as markets adjust to these new probability of rate cuts in December. Again, I still think that they go for a cut in December, but my conviction is pretty low on that. But if you go to the next chart, I would say that none of this matters, despite all this, all this ongoing discussion you

Jeff Buchbinder (20:00):

Just wasted,

Lawrence Gillum (20:01):

If you take a longer

Jeff Buchbinder (20:03):

Fast forward button, fast forward button

Lawrence Gillum (20:05):

<Laugh>, yeah. If you take a longer-term view, markets still think the Fed is going to cut the fed funds rate to around 3%. So whether they cut in December or January or what have you, markets are convinced that the fed funds rate by the end of 2026 is going to be around 3%. And, you know, we agree with that as well. So, again, it's one of these things where the Fedspeak, I think is doing a lot more harm than good in terms of just all these Fed officials out here debating monetary policy in the public. But I will say too, on the other hand, it does reduce the, you know, there was a big narrative about the potential loss of independence by the Federal Reserve you know, earlier this year and talks about how Lisa Cook should be fired, Jerome Powell should be fired.

Lawrence Gillum (20:58):

I think it this, if we continue to get this lack of group think, if you will, if everyone's kind of doing their own thing and kind of voting how they think that they should vote, this committee becomes more of a larger committee versus just the opinions of one or two people, right? So I think if you know, we do have a 7-5 vote, I think the credibility of the Federal Reserve increases because it's not just about one person anymore or two people anymore, it's about the entire 12 person voting committee. So it makes it that much harder to politicize the Federal Reserve, which I think is a good thing.

Jeff Buchbinder (21:39):

Yeah, absolutely. The, I mean, the way I look at it is just Powell's going to essentially break the log jam. He's been guiding a little bit more to a cut, so we're probably going to get a cut. At least that's my interpretation. Yeah, I think that's fair, consistent with the market's interpretation too here, but I love that you put this chart in here because I still want people to focus on six months to a year out and the big picture, and not just try to gain one Fed meeting. It's just, now granted, it moved the markets late last week, consistent with, you know, the volatility we saw in fed funds market, but it's clearly not the end all be all. Fundamentals of the market matter, equities and bonds matter much more than just one Fed meeting.

Lawrence Gillum (22:31):

That's right.

Jeff Buchbinder (22:32):

So we mentioned the name Greenspan already, so here you go again. So you recently wrote a piece about how the Greenspan put, as you call it, affected the correlation of stocks versus bonds. We talk a lot about the 60/40, right? You want your bonds to zig when your equities are zagging. So what is your key message here?

Lawrence Gillum (22:54):

Yep. So this is some you know, some self-promotion here if you will. I did write a publication recently, Rate and Credit View, for our LPL advisors on the Resource Center. I do talk about how monetary policy, I think, is the bigger driver of the stock-bond correlation, particularly post the 1987 episode where we, you know, we had the Black Friday was it Black Monday episode where markets were down 22%. I think the reaction from Alan Greenspan kind of changed the narrative in terms of how markets should be thinking about monetary policy. If you think about the way monetary policy was conducted pre-Greenspan, it was really this, you know, lender of last resort, things were not as vocal as they are currently, as we just talked about.

Lawrence Gillum (23:51):

It was more of a, you know, the Fed provided this lifeline to a lot of these institutions, these banking institutions when they needed these things. Now, if you think about monetary policy, it's much more systemic. It's much more vocal. And you know, we've seen that because of what took place in 1987, again in 1997 with the Asian financial crisis. And that was further reinforced after what took place in the long-term capital management kind of bailout, if you will. And that's where really when you saw these stock/bond correlations flip from mostly positive to mostly negative. So you know, in the article I write that bonds have never been negatively, perfectly negatively correlated to equities. They just, they haven't, they have been, you know, correlated to the business cycle, in particular, the growth shocks that occur because of this countercyclical monetary policy response that took place post Black Monday with Alan Greenspan.

Lawrence Gillum (24:52):

So I think it's important on a go forward basis, if this relationship is going to hold, if we're going to get back into this negative stock-bond correlation, particularly during growth shocks, I think it's important that you have a very credible Fed, a very credible Federal Reserve. So, the comment I just made about potentially having less group think, more dynamic discussions, less focused on one or two people, I think that actually improves the credibility of the Federal Reserve, which should allow that stock-bond correlation to go back down to more negative levels. But you know, I think the conversation around 2022, 2023 as this stock-bond correlation shift sharply positive, you know, I don't think that's enough, at least in my mind, to suggest the stock-bond correlation is irreversibly broken.

Lawrence Gillum (25:46):

Because what we saw back in 2022 and 2023 was an inflation shock and not a growth shock. Obviously, bonds aren't going to do well in an inflationary environment like that. But as you can see, as these rate cuts have started to come through, we're starting to see that stock-bond correlation kind of shift lower as well, meaning less strongly positive correlated to each other. And I think that trend continues as the Fed credibly cuts interest rates over the course of the next year or so. Now, if the Fed starts cutting aggressively into a still high inflationary environment, then all bets are off. I think bonds aren't going to do well in that environment because as we just talked about during inflationary shocks you know, the bond market doesn't react well to that type of environment, but it should if we get past, or once we get past these inflationary dynamics, if we get back into a more normal inflationary environment you know, I think that we will go back to that negative stock-bond correlation that we've enjoyed for the past, you know, 30 years almost.

Jeff Buchbinder (26:52):

Yeah. So if the inflation side cooperates, we could still have, you know, a good bond market and a good stock market. But if you have a growth scare, because yields are higher, tell me if I'm phrasing this right, you should see lower rates. So in other words, bonds up and stock's down. So, so bonds would provide some cushion against equity market volatility in that case. Did I get that right?

Lawrence Gillum (27:22):

Right. Yep, that's right. And the great thing about, you know, the current setup for fixed income is that you're also getting paid to wait in case something, if that ever were to happen, you're still getting pretty attractive income levels, right? So you can build a portfolio yielding, you know, five-ish percent out of high-quality fixed income, maybe a little bit less than 5%, but around 5% for high-quality fixed income that could, I think, will still provide that ballast during a growth shock.

Jeff Buchbinder (27:49):

Very good. So stick with your bonds. They can work for you, you'll want them when you need them.

Lawrence Gillum (27:56):

That's right.

Jeff Buchbinder (27:57):

Very good. So thanks for that, Lawrence. I'll whip through the Weekly Market Commentary quickly and then we'll get to the week ahead. Although we can do the week ahead pretty quickly too, because I'm not sure we know what data we're going to get and when because of the shutdown delays. So "Corporate America Clears the High Bar, Hat Tip to Profit Margins." I actually think the expansion in profit margins is the biggest surprise this quarter. And talking about Q3 and the most impressive achievement, I'll show you that here in a minute. But first here's your growth rates. If you include Meta's $15.9 billion tax charge, you still are growing 13.5% year over year S&P 500 earnings in Q3. That is even with that drag, which is two points, almost double the expectation when earnings season began in early October. Of course, if you take that charge out, you've more than doubled the initial expectation.

Jeff Buchbinder (29:02):

That is a very big upside surprise at this stage of the earnings cycle. Typically, as the bar keeps getting raised and raised and raised, which certainly it has been during the last couple quarters, the surprises tend to get smaller. Well, that didn't happen in Q3 and what's most impressive, the reason I'm underscoring this is because tariffs came through in Q2 and Q3 and more were paid in Q3. So despite that ramp, companies were still able to generate some margin expansion and this therefore really strong earnings growth rate. Of course, the Mag Seven was a big part of it. About half of the earnings growth came from those names, again, ex that Meta charge. It looks like chances are good, we're going to a string of double digit earnings growth in S&P 500 for I think nine quarters.

Jeff Buchbinder (30:03):

I don't know about, I mean, early 2027's hard to call at this point, but it looks like we've got a really good chance at a nine quarter double digit earnings streak. The tricky part's going to be Q4 current quarter, where we're going to need a few points of upside. I still think we get it, especially with the capex from AI names, but it's certainly not in the bag because we'll need that upside to come through. Here's your big driver, the Mag Seven earnings growth. Mag Seven, if you factor in NVIDIA and take out the Meta charge, you're at 30% plus. But with all the numbers in, you know, 28, still a very solid earnings growth number for that group. By the way, the 493, the rest of the S&P 500 grew earnings about 10%. So it's not shabby at all. But clearly the most earnings growth and the biggest driver is coming from big tech. And even if you look at 20 26 numbers, still 20% plus capex in tech is going to grow 20% plus with all this data center build out and all the AI chips and all that. So there's upside to these kind of 20% numbers next year. But even if we only grow earnings in the Mag Seven by 20% next year, that's pretty good.

Jeff Buchbinder (31:27):

So as I mentioned, tariffs were absorbed in Q3 more than in Q2. We've actually absorbed about 11 points already. So maybe there's a couple points more to go. We'll see. Maybe not because we've got more exemptions. It's hard to say where some of these higher rates go in terms of negotiations. India, Brazil, I think Switzerland, we already got a compromise. So there's potentially more tariffs to come, but not a ton. Maybe we'll end up landing in the 12, 13% range. Clearly the market or companies were not bothered very much in Q3 because here you see, it wasn't much, but you got a little bit of operating margin expansion Q2 to Q3, and then we're expected to see more over the next several quarters as AI productivity gains come through and the tariff drag diminishes, right? Because once it's absorbed, then your comparisons against those numbers are easier going forward.

Jeff Buchbinder (32:26):

It's really the period where you absorb them, that's the toughest on margins. So we're going to call that a big win. Lastly, earnings growth. Estimates rose during earnings season, which is rare. I feel like I've been talking a lot about this over the last couple of years as this AI spend has come through. Consensus right now about 305 on 2026 earnings that provides a strong foundation if we can actually get it. This is just really impressive. Remember, estimates typically fall during earnings season. So strong foundation underneath this market, even though stocks are a little expensive, if earnings can grow, this is a 14% earnings growth number, by the way. We don't think we're going to get that, but we're going to get close to what we think. Anything in the double digits is probably enough to support stock prices at current valuations, especially if Lawrence's bond market cooperates, which is going to require some help from the Fed and some help from inflation.

Jeff Buchbinder (33:27):

Alright, so that's a quick summary of the Weekly Market Commentary. Again, you can find that on lpl.com under the Research tab. Just a recap of earnings season with some comments from Adam Turnquist about the tactical environment. In terms of the week ahead, "Stale Data, Fresh Turkey, Limited Visibility". Lawrence, what are you watching this week? I know we're going to be done with Fedspeak pretty soon here. Any of this data do you think actually comes through and does it matter? Well, I mean, it's stale, so we, it, maybe I answered my own question.

Lawrence Gillum (34:04):

Yeah, I think that was, yeah, that was the takeaway, at least as far as I, you know, I'm thinking about the data. This is September data, we're almost through the end of November. Doesn't look like we're going to get any sort of October data as it relates to job data, et cetera. So the Beige Book, the Fed Beige Book is interesting. I think that comes out this week on what day is that Wednesday? So maybe there's some additional information there. But, you know, yeah, I think a lot of this data is going to be just potentially looked over because of just the fact that it is stale. One thing that's not on here though, that I know as a fixed income person that I'll obviously be paying attention to, is that we do have, despite a holiday shortened week this week, we do have over $200 billion of Treasury auctions that are coming to market this week.

Lawrence Gillum (35:00):

We had a two-year auction today just at one o'clock Eastern today. And it was fine. But you'd expect that with a two-year auction. So there's not a lot of interest rate volatility there. But we do have a five-year and a seven-year auction as well. So we'll have to see how the seven-year auction goes to determine demand for these longer maturity securities. The 10-year and the 30-year auction a couple weeks ago were objectively meh, I think is what the kids say, meh. It wasn't, they weren't great, they weren't horrible, but they were just kind of, there wasn't a ton of demand for these longer maturity securities. So that continues to be a challenge for fixed income markets. It is just there's not a lot of demand for these longer maturity securities, not only in the U.S. but in Japan and elsewhere. So we'll have to see how this week plays out for Treasury auctions.

Jeff Buchbinder (35:55):

Yeah, thanks for bringing that to our attention, I guess holiday volume's just going to thin out. People are going to continue to pay attention to the private data as long as it's timely, right? So I think, or it's so timely that the government can provide it as usual, right? So they can't do the unemployment rate, but they can do payrolls. So I guess once we get payrolls, it will be timely. Initial jobless claims will be timely. The Fed Beige Book obviously will be timely. But a lot of this stuff is just like retail sales. I don't think it matters, right? It's, again, it's stale. It'll be interesting to see what the consumer was doing in September, but we've heard more recently from corporate American earnings season and what six, seven weeks has passed since then. So I think what's happened in the last six, seven weeks, or what's going to happen in the next month matters more with holiday shopping and Black Friday and all of that.

Jeff Buchbinder (36:55):

There is correlation between the stock market and holiday shopping. So I think you'll probably end up with a nice holiday season. I don't have a forecast, but I would be surprised if it's not north of four in terms of percent year over year Black Friday or a holiday shopping season versus last year. There's, it's a pretty, even though confidence is down, even though maybe the job market's a little bit weaker, you still have low unemployment, you have a really strong stock market, you still have a pretty strong housing market, we're probably going to get a little bit of an uptick from last year. So I think that's all I've got to watch this week. Other than that, everybody start getting ready for your Thanksgiving plans. I certainly will do my part and eat a lot, Lawrence, I'm guessing that you'll be able to do the same.

Jeff Buchbinder (37:49):

But most importantly, just everybody enjoy time with friends and family. That's of course what it's all about. I'll speak for you, Lawrence. I think we both have a lot to be thankful for and certainly wish everybody a really nice holiday. So thanks Lawrence for the update on the bond market, really, again, Fed is as interesting as it's ever been, I think right now. So appreciate your insights there and we'll talk to you next time. Thanks everybody for listening to Market Signals. Have a great holiday and we'll see you in a week. <Silence>.