Good morning,
Although rising volatility typically manifests as fear, selling, and lower prices, it can occasionally cut both ways. Thursday’s sharp intra-day plunge—driven by concerns over the scale (leverage) and eventual payoff of AI investment—was swiftly reversed on Friday following comments from the New York Fed’s John Williams, who suggested that rates may be too high.
Markets turned on a dime. Williams, a long-established dove at the Fed, triggered a major repricing of December rate-cut expectations and ignited a broad rally that erased much of the week’s earlier losses. By Friday’s close, the S&P 500 was down only -1.94% for the week.
As we enter Thanksgiving week, the focus shifts to a flood of economic data due Tuesday and Wednesday. It’s a shortened trading week, but a deluge of reports. How a jumpy market digests 24 hours of questionable, post-shutdown data—while most investors are already mentally checked out for the four-day holiday—remains anyone’s guess.
When we return next week, we’ll face the final month of the year with stretched valuations and strong year-to-date gains that have many analysts cautioning about elevated risk. Yet with a friendly Fed and easy financial conditions, it still feels too soon to call an end. Perhaps most telling from a timing standpoint: sentiment indicators are flashing mixed signals—hardly the unanimity one typically sees at major peaks.
Happy Thanksgiving – have a great holiday.
Be well,
Mike