Breadth narrows as bulls hold the line
October ended near all-time highs, even as fewer names power the market. With a trade truce, Fed cuts, and AI spending ramping, dips still look like opportunity.
The market closed October just shy of record highs. A strong finish to a volatile month. But last week’s mild pullback reminded investors that even bull markets need breathers.
The bigger issue right now isn’t price, it’s breadth. The number of S&P 500 stocks trading above their 50-day moving average has been declining since July, signaling that fewer names are driving the gains.
Unless we get a breakthrough on the government shutdown or another round of blockbuster earnings, markets may chop sideways in the near term.
U.S.–China trade truce
After months of posturing, the U.S. and China announced a limited trade agreement last week.
According to Reuters, the deal includes:
The U.S. rolling back some tariffs on Chinese goods,
China lifting export controls on key rare earth minerals, and
Both countries pledging to curb fentanyl precursor shipments.
We’ve been saying for months that a deal was in both nations’ best interests and this agreement removes one of the biggest geopolitical overhangs on the market. While it’s not a full resolution, it’s a constructive step toward stability.
The Fed finally moves
The Federal Reserve lowered interest rates last week, but stopped short of committing to another cut in December. True to form, the Fed seems late to the game.
Layoff announcements are accelerating across sectors, and the labor market continues to show signs of cooling.
Our take: while the timing may vary, rates are likely to trend lower over the next year as the Fed responds to weakening job data and easing inflation. That remains a supportive backdrop for equities.
Silver short squeeze?
Short interest in the iShares Silver Trust (SLV) just hit an all-time high. Meanwhile, precious metals have softened as the dollar regains strength.
In the short term, silver could see more downside but we continue to view any major pullback as a buying opportunity.
The long-term fundamentals remain extremely bullish given industrial demand and the expanding role of silver in electrification and clean energy.
Kratos ($KTOS): Drone milestone
Kratos announced that its GEK-800 unmanned jet successfully completed its first flight, marking a major step forward in its tactical drone program.
This success demonstrates Kratos’ continued leadership in affordable, high-performance defense technologies. The milestone strengthens its position as a key partner for the Pentagon’s next-generation drone initiatives and adds further credibility to the long-term defense buildout theme we’ve been following.
We’re sitting on a gain of 170% since our buy point, and while the long-term thesis remains firmly intact, there’s nothing wrong with taking some risk off the table after a run like this. Trimming a bit into strength lets you lock in gains while staying positioned for continued upside as defense spending continues to ramp.
SoFi ($SOFI): Thesis validated
SoFi reported strong Q3 results, beating expectations on both revenue and earnings.
Key highlights from the earnings call:
Record membership growth, up 38% year-over-year.
Deposits reached $24 billion, up 23% from Q2.
Net income turned positive for the second consecutive quarter.
Management emphasized continued diversification away from student loans, with banking and investment products driving growth.
The bottom line: SoFi continues to evolve into a full-fledged digital financial platform with improving profitability and a growing customer base.
Final thought
While headlines focus on politics and the Fed, the real story remains the ongoing AI infrastructure boom.
Google raised its 2025 CapEx forecast to $91 billion,
Microsoft’s CEO highlighted “sustained and growing demand” as a driver of continued investment, and
Meta said it will spend at least $70 billion this year on AI, with much higher spending planned for 2026.
This arms race in AI spending continues to power the broader market narrative. With fundamentals holding firm, liquidity improving, and secular growth stories intact, there’s still plenty of opportunity ahead for disciplined investors.