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QI Research Dashboard 11.10.25

QUICK QUILL — The Treasury market’s rally showed it wasn’t sold on the “surprise” September job gain. This said, there wasn’t enough shock value to change the Fed’s mind about not cutting in December. Downward payroll revisions, cyclical employment pressures, a higher-than-expected unemployment rate, and upward jobless risks, though, do not argue for an extended pause.

TAKEAWAYS

  1. Private NFPs ex-Education and Healthcare rose by 38,000 in September, the first gain in five months, but downward revisions to July and August totaled -41,000; every NFP print this year being revised down from the first print putting September’s 119,000 headline at risk
  2. Continuing claims rose to 1.974 million in the week ended November 8th while Permanent Job Losers rose to 2.023 million, both fresh cycle highs; meanwhile, the private workweek remained at a historically low 34.2 hours, a level inconsistent with periods of expansion
  3. The Philly Fed Mfg New Orders-Inventories spread fell to -11.3 in November, equating to a -1.65 z-score; Philly Fed Mfg Backlogs on a four-month losing streak poses further risk for Mfg & Transport/Warehousing NFPs, which have already fallen for seven straight months

LONG MACRO

Recession probability to rise into 2025’s second half as private demand underperforms. The tariff shock should generate greater risks for a downshift in business investment and a more challenging environment for consumer cyclicals vis-à-vis consumer non-branded noncyclicals.

Manic shifts in U.S. politics harken first a deflationary gully to cross followed by the threat of impeachment and ultimately, a fourth change in administrations in as many U.S. presidential elections, a first in sequential terms since the precipice of the U.S. Civil War. The subsequent pendulum swing will manifest as Universal Basic Income/Modern Monetary Theory, and with it, the secular rise in inflation being prematurely predicted today by those positioned to profit from being short Treasuries.

Saturday Intelligence Briefing— 11.8.25

Though the idea was enough to get those who don tin foil hats in the wee hours hot under the collar, it was not the storied Plunge Protection Team. As for thresholds that resonate among investors, it wasn’t the yield on the 10-year Treasury or a critical level on the S&P 500. No…it was bitty. While unambiguously dismissive of hunger and safety and schizophrenic on sanctions and tariffs, the one line that couldn’t be crossed was Bitcoin. The president, his boys and his buddies have too much riding on the cryptocurrency to have let it dip below $100,000 in Friday trading. The minute bitty bounced, risk assets bounced off their lows; the broad market even scraped by a close in the green.

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TACTICAL

RATES:

Short-end and Belly best opportunities for total return. Rally keys off weaker macro. Challenged private demand, higher unemployment and lower core inflation raise Fed rate cut probabilities.

Long-end holds at elevated levels with de facto caps at 4.5% for the 10-year & 5% for the long bond with the term premium supported by fiscal malfeasance exacerbated by falling sovereign revenues and despite diminishing stimulus to the U.S. consumer.

Curve view – Bull steepener in 2025’s second half.

USD:

A sidelined Fed contrasting with most global central banks easing catalyzed a selloff in the greenback. A Fed forced to play catchup could easily thin the massively crowded trade, especially as global trade weakness impairs an open global economy vs. its closed U.S. counterpart.

CREDIT:

•  Underweight HY, overweight strong cash-flow IG

•  Lower-rated buckets at risk of dispersion with Fed Higher for Longer

•  Jobless claims deterioration makes a cautious Street rethink already-wider-spreads 2025 expectations, i.e., up default estimates as bankruptcy cycle speeds up and size

•  Fitch’s acknowledgement of cyclical consumer sector “deteriorating” fits this view

EQUITIES:

OW     Utilities
OW     Fossil Fuel Energy
OW     Senior Living

UW     Consumer Staples
UW     Consumer Discretionary
UW     Large & Midsize Banks

OTHER ASSETS:

•  USD view supports UW commodities & EM

•  Oil is a different story with geopolitical risk ramping (Israel v Iran)

•  Long MOVE to capitalize on runaway lending to Nondepository Financial Institutions triggering a credit event