For those of you who would prefer to listen:
The rally just keeps on keeping on. Wall Street keeps putting up big numbers. The S&P 500 reached 6800 Friday for the first time ever. The Dow cleared 47K. America’s Stock Market, as measured by the S&P, is now worth $57 Trillion. Friday’s trigger to new highs: Inflation is cooler than expected. This, according to the September Consumer Price Index (CPI) report. That was music for the Bulls. 2-Year Treasury yields immediately fell. Stocks rallied. Another rate cut seems guaranteed next week. The Market is assigning a 96.7% probability of just that.
The Federal Government was able to release the CPI report despite the shutdown which has reached day 24. Inflation is running at a 3% clip. That’s definitely higher than the Fed’s target of 2%. But it was lower than the Street was anticipating. The CPI report showed softer pricing in rents, airline tickets and groceries. Those are welcome reprieves to what has been nagging inflation since Covid. But importantly, prices are not coming down. They’re just not increasing as fast as they had prior. American consumers still feel the strain.
Earnings Season has been a bright spot. Revenues and profits thus far are growing faster than expected. Next week will be the big tell, as the Tech Titans come to bat. The AI-trade is still intact. Big numbers are expected. Nvidia continues to be the most valuable company in America at $4.5 Trillion. Microsoft, Apple and Google come next, each north of $3 Trillion. In fact, the Top 10 companies are all worth over $1 Trillion each. That has certainly never happened before.
The US Federal debt cleared $38 Trillion this week. It is now rising by $1 Trillion every 71 days. For perspective, that’s $14 Billion per day. It’s $4.1 Million per minute. It’s $63K per second. Think about that; America’s debt increases by $63K every second. And it will cost $1.2 Trillion in interest payments this year to service that debt.
How about some more perspective on these big numbers:
A Million seconds ago was October 11th.
A Billion seconds ago was 1993
A Trillion seconds ago was 30,000 B.C.
A Million seconds from now will be November 5th.
A Billion seconds from now will be the year 2057.
A Trillion seconds from now will be 33,725 A.D.
Here’s another way to think about America’s mountain of debt. If you laid 38 Trillion $1 bills end-to-end horizontally, they would stretch around the Earth’s equator approximately 15,000 times.
How about this: Lake Tahoe is estimated to contain roughly 39 Trillion gallons of water. This volume of water at Tahoe is so large that if drained, it could cover the state of California to a depth of approximately 14.5 inches! The Golden State would be more than a foot under water. Obviously the hills and the mountains would not. But you get the point.
Want to think about Trillions in burger terms? It’s estimated that McDonald’s has served over 1 Trillion hamburgers since its 1940 opening in San Bernardino. According to the company, 75 McDonald’s hamburgers are sold every second globally. 75 burgers per second. That calculates to approximately 2.4 Billion burgers per year. Here’s how to think about these numbers in Coke terms. 2.2 Billion Cokes are consumed every day across 200 countries around the world. That translates to over 800 Billion Cokes in a year. It’s not a Trillion for Coca-Cola yet. But it sure is close.
The World Series begins tonight. It’s the Dodgers and the Blue Jays. The Los Angeles Dodgers have a team payroll of $321 Million per year. That’s not even the highest in baseball. That honor goes to the New York Mets, with a payroll of $323 Million. The Mets have little to show for it. The Toronto Blue Jays come in at 5th with $240 Million per year. The A’s, formerly known as Oakland, and the Miami Marlins are at the bottom with $73 Million and $67 Million team payrolls respectively. In fact, Shohei Ohtani, the superstar on the Dodgers makes $70 Million per year himself. That’s more than the whole Miami team!
Back to the Market:
Even though the Stock Market keeps hitting fresh, all-time highs, the American people are far away from enthusiasm. Consumer sentiment, as measured by the University of Michigan, just hit a multi-year low in October. It’s fallen 24 points from a year ago. Consumers tend to tighten their wallets when they’re concerned about the future. So far, it’s the wealthier Americans that have kept up the spending. Retailer reports reflect it. The government shutdown has reduced the economic data releases. The big one is always the Job Report. It hasn’t been released for September due to the shutdown. It would probably lean weak. Labor has shown some softness for a while. That has provided the impetus for the Fed to cut rates. The Market likes that.
A quieter Capitol Hill has not slowed the rally. The Market certainly has not cared about the Government shutdown. The S&P has actually gained 2% during this period. Our Washington sources don’t see an end to the standoff anytime soon. Both political parties seem to think they are winning this shutdown fight. Neither side has had to pay a political price. Blame continues to fall down party lines. Government workers missing another paycheck next week might stir the pot more, forcing Congress to deal. I argue nobody wins with a government shutdown. The Market doesn’t seem to take our politicians seriously. That speaks volumes, in and of itself.
There’s so much going on and these are some really big numbers that are thrown around every day. $38 Trillion in debt with no plans to pay it off will ultimately be a problem. It just keeps getting kicked down the road. Washington has proven near flawless at that. Trillions and Trillions can be hard for we mortals to fathom. 1 Trillion seconds is over 31,000 years from now. So, what’s 38 Trillion seconds from now? That is 1.2 Million years. 38 Trillion is a really big number. Next stop must be Quadrillion. At this rate, without action from Congress, that’s for our kids and grandkids to deal with. Both parties are complicit in this. And make no mistake, those interest payments would be substantial.
Despite all of the issues at home and around the Globe, the Stock Market keeps chugging higher. Its strength and resilience have confounded so many. The wide political divide tends to influence American sentiment. Politics have permeated pretty much everything these days. That’s unfortunate, in so many ways. But the Market doesn’t play politics. It definitely pays attention. But it doesn’t believe everything it sees and hears.
Explaining the relentless rally for the Stock Market is actually quite simple. Earnings growth with a combination of the resilient Economy and interest cuts has kept a consistent bid under the Market. It’s a good backdrop for assets. Volatility has certainly crept back in of late. But the defined trend is undeniably higher. And as long as these inputs continue to manifest, the uptrend is likely to last into 2026.
Have a nice weekend. We’ll be back, dark and early on Monday.
Mike
