Comments based on information available as of 5:35am CT on 10/16/2025

Growth: Confirmation Bias Run Amok

When reliable data is scarce, prior beliefs tend to persist. While government statistics offer the most comprehensive and dependable insights, alternative sources—though less robust—are still available. For example, ADP’s job numbers suggest the economy gained traction in September even as the Conference Board’s Consumer Confidence index painted a less optimistic picture. Until a clear trend emerges or official data provides confirmation, people will likely cherry-pick whichever figures best support their existing views.

Inflation: No Services Spillover, Yet

A few years ago, the San Francisco Federal Reserve estimated that only about 11% of consumer spending is directly or indirectly tied to imports. Tariffs do affect consumer prices, but likely less than many assume. Goods inflation remains above trend and shows no signs of easing, yet services account for more than three times the spending on goods. This past summer, Fed officials were surprised by indications of rising service-sector inflation, but September data suggests that concern may have been a false alarm.

Policy: Short Shelf-Life

Fiscal, monetary, and trade policies can quickly change. The government shutdown is affecting travel and other government functions, but an agreement could be reached quickly. Chair Powell said a December rate cut is not a foregone conclusion, but it’s also not a “definitely not.” The US-China trade truce is encouraging, but it can also change on a dime.  Some policies spark investor optimism, while others fuel concern. When investors talk about “fundamentals,” they often mean earnings or cash flow, but government policy is a powerful fundamental force shaping markets.

Looking Ahead: Un-Seasonality

Historical data since 1926 shows September as the only month with a negative average return, while November and December typically post the highest averages. But seasonal patterns can be misleading. For instance, this past September delivered its strongest performance since 2013. In reality, markets rarely deliver “average” returns—they’re usually better or worse. Trading based on seasonality can be costly, both in transaction fees and in misjudging markets that turn out to be unseasonably hot or cold.