Week 42 was defined by a hot inflation print and a sharp reversal in US equities, which snapped a historic stretch of market calm. After digesting a complex backdrop of mixed bank earnings, sticky macroeconomic data, and renewed concerns over AI financing costs, the broad market sold off late in the week. Against this backdrop, our portfolio remains in a steady holding pattern. We are maintaining our current investments and waiting for the third-quarter earnings season to provide the next major fundamental updates for our core positions.
Week 42 Recap
US Equities and the Streak Snapper
The stock market experienced a sharp reversal during the week of October 12th to October 16th. Following a mid-week selloff on Wednesday, October 14th, the S&P 500 officially snapped its remarkable 53-session streak without a 1% or greater daily decline—the longest such stretch of calm since January 2020. Selling pressure resumed on Friday, October 16th, as AI and semiconductor stocks tumbled. The S&P 500 closed Friday at 7,659.44, down 1.09% on the day and 1.95% for the week, marking its worst weekly performance since June. The Nasdaq Composite fared worse, dropping 2.15% on Friday and 4.48% over the five-day stretch amid renewed concerns over tech valuations, AI capital expenditure financing, and interest rates. Interestingly, the Dow managed to log a 0.67% weekly gain, highlighting a clear rotation out of high-multiple growth and into more defensive, value-oriented sectors. This price action confirms that the market is grappling with the reality of a "higher for longer" rate environment, which heavily impacts the duration-sensitive tech stocks that led the Q3 rally.
Macro Data: Hot Inflation and Resilient Nominal Spending
The economic calendar delivered several crucial data points this week, reinforcing the Federal Reserve's restrictive policy path.
- Tuesday, October 13th: The Q3 earnings season kicked off with major US banks—including JPMorgan, Goldman Sachs, Wells Fargo, and Citigroup—reporting mixed results. While trading and investment banking desks performed well for firms like Goldman Sachs, bank executives warned that persistent inflation, large fiscal deficits, and higher borrowing costs are increasingly pressuring the broader consumer landscape.
- Wednesday, October 14th: The September Consumer Price Index (CPI) was released, showing a hot 0.6% month-on-month increase (pushing headline inflation to 3.7% year-over-year and core CPI to 2.6%). Driven heavily by a surge in energy and gasoline prices, this sticky inflation print immediately crushed any lingering hopes for near-term dovishness from the Fed.
- Thursday, October 15th: Weekly initial jobless claims ticked up by just 1,000 to 199,000, confirming that the labor market remains exceptionally tight despite the high-rate environment.
- Thursday, October 15th (Retail Sales): Released alongside jobless claims, September retail sales rose 0.8% month-over-month, easily beating consensus expectations of 0.3%. While a 6.4% jump at gas stations accounted for much of the nominal surge, core retail sales still advanced, signaling to the Fed that aggregate demand has not cooled fast enough to bring inflation back to target effortlessly.
Bonds and Gold: Flight to Safety
The US 10-Year Treasury yield experienced notable two-way volatility during the week. Following Wednesday's hot CPI print, yields initially held near 5.20% before sliding as investors fled to the safety of government bonds amid the late-week equity market selloff. By Friday, October 16th, the 10-year yield stabilized, edging up 1 basis point on the day to settle at 5.09%—finishing the week down roughly 15 basis points from the prior Friday's 5.24% close.
The precious metals complex traded with high volatility before recovering into the weekend. Spot gold lifted on Friday, moving back toward the $4,200 resistance area as Treasury yields and the US dollar retreated from their weekly peaks. Gold futures opened around $4,192 per troy ounce on Friday and settled near $4,181, while spot gold hovered in the $4,164 to $4,174 range. Our gold and silver miner positions have held up remarkably well against this macroeconomic turbulence. The fundamental thesis remains entirely intact: major miners continue to generate substantial free cash flow at current spot prices, and we view any yield-driven weakness as an opportunity rather than a reason to exit.
China Internet and Portfolio Holdings
Chinese tech stocks faced minor headwinds this week, with Alibaba (BABA) and Tencent (TCEHY) continuing to consolidate following their recent volatility. Both names remain heavily undervalued relative to their intrinsic worth and future AI monetization potential. From a technical standpoint, momentum indicators for BABA have begun to stabilize following earlier pullbacks, signaling a potential base formation. Neither stock faced material negative news flow this week, and this lack of headline volatility is precisely what we want to see as we approach their respective earnings cycles.
Week 43 Outlook
Week 43 (October 19th to October 25th) brings a critical stretch for mega-cap tech earnings and global manufacturing data. Market focus shifts squarely to the intersection of AI capital expenditure and margin compression, as two of the market's most influential companies report their quarterly results.
Key Events
- Wednesday, October 21st: This is a pivotal day for the technology sector. Both Tesla (TSLA) and Meta Platforms (META) will report their third-quarter earnings after the market close. Tesla's results will provide a crucial read on EV automotive margins, energy storage, and China demand, while Meta's report will offer vital insights into whether digital advertising revenue growth can continue to outpace massive AI infrastructure spending. These prints will set the tone for the broader Nasdaq ahead of the hyperscaler cloud reports the following week.
- Thursday, October 22nd: Weekly initial jobless claims will be released, providing another high-frequency read on labor market conditions.
- Friday, October 23rd: The Flash PMIs for October will be released. This will provide the first comprehensive look at whether the US manufacturing and services sectors are maintaining their expansionary footing against the backdrop of 5%+ Treasury yields.
- Looking Ahead to Week 44: The market is already positioning for the Wednesday, October 28th earnings releases from Alphabet (GOOGL) and Microsoft (MSFT). The capital expenditure guidance and cloud monetization metrics from these two hyperscalers will ultimately dictate the broader AI narrative, with spillover effects for our tech-adjacent China internet holdings.
Positioning Into Week 43
Should short-term downward pressure accelerate in the coming sessions, we will consider selectively re-opening the short-put positions we previously closed after they expired worthless. We will deploy this strategy opportunistically if attractive strike prices and premiums present themselves.
Broadly speaking, we are maintaining our current investments, allowing the macroeconomic data to play out, and waiting for fundamental data from the upcoming Q3 earnings releases to dictate our next move. We will continue to let the market do the work.