We take a detour into the Dickensian in evaluating the state of the economy. First, the recent inflation print, which showed a significant decline in the level of price increases, was a fiction worthy of Dickens, with the majority of the data simply made up as a result of the government shutdown. Setting that aside, since 2021, wage growth has not kept pace with inflation for food, shelter, and services, though we can count our blessings that at least alcohol prices have not increased as much…

Challenges face the Fed chair (both current and yet to come), and managing a deteriorating labor market and persistently higher prices presents a conundrum. The Fed is simply not getting what it wants at present in terms of rate cuts translating to a lower yield on the 10-year Treasury, and with deficits soaring in spite of a growing economy, some tough choices will have to be made.

However, stocks have proven remarkably resilient, and predictions from most Wall Street firms argue for a continued move higher supported by AI, solid growth, fiscal stimulus from tax policy, and further rate cuts. However, the math is a little challenging; to cite one example:

• The S&P reaches over 7,700 by this time next year (around 13% above where we are now)
• Earnings grow around 9% (this seems achievable, and maybe even a little conservative)
• Multiples expand to 26x earnings (this would be at peak dot com levels)

We think you might get this level of earnings growth (or better), but that multiple seems a little rambunctious. Even if we do get there, expect some market shenanigans on the way, as history shows mid-term election years tend to see large drawdowns; think back no further than 2022. The average midterm drawdown is around 18%, though the range is very wide.

Will brings it home with a reading from a speech given by Scrooge's nephew Fred so we end on a positive note celebrating the season.

After Thanksgiving, we take a look at poultry, especially how dove-ish the Fed is now expected to be, a sharp reversal from a few weeks ago. We also discuss the odds-on favorite for the next Fed chair and how his political leanings may (or may not) influence which direction the Fed takes. Recent employment data has been lackluster, to put it mildly, which is forcing the Fed's hand as it relates to continued cuts. To wit:

• Total change in private employment – Negative 32k
• Manufacturing and construction – Negative 27k
• Small businesses – Negative 100k

Wage growth, especially for lower income households, is rapidly slowing, and those households spend, on average, over 70% of income on food, shelter, and transportation, all of which are seeing price increases that exceed wage growth. It seems like more pressure could be imminent on both wages and employment as AI continues to make inroads.

We take a detour away from economics into the carnage in the cryptocurrency space and what it may mean for certain types of companies that have built their business models on owning crypto.

In the second half of the show, we juxtapose the threat of AI for employees with the opportunity for employers. AI has been the savior in terms of growth and price appreciation for the stock market. Since the launch of ChatGPT in late 2022, earnings for technology and communications stocks have grown 121% versus a mere 27% for all other sectors. That trend is expected to continue in 2026, with the Mag 7 forecasted to grow over 20% versus 11% for the other 493 stocks. We also discuss just how big the Mag 7 are, with some individual members of the group larger than entire sectors of the economy from a market cap perspective. We discuss whether that is healthy (or sustainable) and why a broadening market is potentially overdue (not to mention healthy).

Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.

After a long hiatus (no, not related to the government shutdown) we return with a look at the economy and markets. On the economic front, despite a lack of formal data, signs point to a weakening labor market. Consumers in the bottom 80% have spending post-Covid that has barely kept pace with inflation, with prices higher by around 25% since 2020. Unemployment has climbed to over 9% for those between 20 and 24 years of age. All these are signs of a K-shaped economic recovery, with a strong stock market supporting higher spending for those in the top 20% of incomes. The Fed faces a challenge with a weakening labor market but inflation near 3%; the odds of a December rate cut have fallen to 50%.

In terms of the equity market, we have also seen a K-shape. While overall market performance has been narrow (only 158 out of 500 stocks in the S&P are outperforming YTD), it has been the Mag 7, which have seen strong earnings growth, and very speculative stocks, fueled by retail traders both in and outside the U.S. For the former, this growth comes with a caveat that their once strong free cash flows are being siphoned off (and bolstered by debt) to fuel the massive capital expenditure required to build out AI infrastructure. For the latter, a form of tribalism has united retail speculators, who are treating stocks much like sports wagering, which has also seen massive volume growth. It is important to note that despite stocks favored by retail investors performing well this year that, since 2021, the average Robinhood account is estimated to have declined in value while the S&P 500 is up substantially.

Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.