I was away for a day. JUST ONE DAY. And yet, that was enough to (almost) push all-time highs everywhere and, most importantly, bring back exaggerated optimism from all sides. However, if we base ourselves on the macroeconomic data we’ve had to digest over the past 72 hours, there’s certainly reason to raise an eyebrow when comparing performance to economic reality! But actually: NO! No, because the great thing about finance and the fascinating world of investment is that it’s not economic reality that matters—it’s how we make it say what we want!
The Facts Are Here
But let’s start at the beginning. The beginning of economic reality. What we’ve known since Wednesday, and especially since yesterday, is that inflation is picking up again. Wednesday’s CPI came in at 3%—above expectations—and yesterday’s PPI also exceeded expectations. And if we look ahead to next month, we can already assume that CPI won’t be going down, because PPI comes before CPI.
In simple terms: if PPI is strong, since it represents production prices, and production comes before consumption, it’s easy to see that if producers are paying more to produce and don’t want to cut into their margins, then ultimately, the consumer (you and me) will end up footing the bill—probably within the next month.
So, no matter how we spin it—whether we say it gently while tossing rose petals in the air, or write it in pastel colors with soft background music—the reality is this: inflation is rising again. And if inflation is rising again, then the prospect of lower U.S. interest rates is becoming more science fiction than a realistic economic objective that could be integrated into a so-called “Global Macro” investment strategy (if we want to sound fancy).
Beyond that, the economic data from recent days suggests that Powell won’t feel the need to change his tone much. His message essentially remains: “There’s no urgency to cut rates.”
This is worrying, because the narrative of the past 18 months has been based on a simple equation:
“Inflation is falling → Powell will cut rates → Consumers will have more money → People will rush to Walmart and Apple → BUY the market, especially Apple and Walmart.”
Now, if inflation starts rising again, that theory becomes MUCH weaker.
But hey, no need to panic! In the wonderful world of investing, we always find a rational explanation to justify our actions. And to maintain our permanent Bull Market, the solution is simple: we just need to INTERPRET things the right way.
A New Era
Until Tuesday morning, the main concern was ensuring that inflation was under control and slowly returning to 2%—as planned by the Fed—so that interest rates could decline accordingly.
But after the latest data, it’s become clear that 2% inflation isn’t happening anytime soon, not this year, and probably not even in 2026.
So, we’re left with three investment strategy alternatives:
Panic—realize that inflation is no longer “transitory” and is completely out of control, leading us all to financial doom.
Rationalization—convince the masses that a strong economy comes with strong inflation, that growth doesn’t happen without inflation, and that a little inflation never hurt anyone. (Some might even argue that the Fed should raise its inflation target by 1.5%.) If we accept this, then everything we’ve believed for the past 18 months is BS.
Smoke and Mirrors—probably the easiest solution, and the one currently in play. Maybe with a bit of option #2 mixed in.
Because let’s be honest—did you see what happened yesterday? Markets soared because Trump announced his new tariff reciprocity strategy—essentially, he plans to tax foreign countries the same way they’ve been taxing the U.S. for years.
But here’s the catch: this will take time, analysis, and reflection. Meaning tariffs won’t be implemented anytime soon, so there’s nothing to worry about. Inflation won’t be “boosted” by tariffs (and anyway, who cares about inflation? We’re too busy finding reasons to ignore it).
On top of that, markets decided yesterday that Trump’s tariff plan is about as threatening as a barking dog with a muzzle, locked in a cage made of adamantium bars.
Admission
Awareness of customs duties might not have been enough to boost the market—especially since we’d been saying the same thing for over a week. So, we had to load the boat with something more captivating, something more motivating. What better than to discreetly announce that Trump and Putin are expected to meet in Saudi Arabia to resolve the war issue? A brief statement, whose source is unknown, was enough to make us feel completely relieved that the war might soon come to an end.
Of course, not everyone is pleased—starting with Zelensky, who isn’t even sure he’ll get a stool in the negotiation room. Nor are European politicians, who find themselves instantly ejected from the discussions.
Just look at Gabriel Attal’s messages—he holds no government position but already acts like an elected president, displaying his outrage like a war leader meant to strike fear into Russia and the US. Anyway, that’s not the topic here, but I couldn’t resist mentioning how pathetic he and his peers are.
From a market perspective, you give them a little breathing room by no longer talking about inflation (even though you’ve been drumming it into their ears—I say ears to stay polite—for four years), you tell them a beautiful fairy tale with colorful characters about the war in Ukraine, you neatly package the customs duty story by saying that AFTER ALL, IT’S NOT THAT BAD (especially since no one cares about inflation! Yes, yes, I just told you)… And in the end, you have the S&P 500 closing ALMOST at an all-time high. The DAX is at an all-time high. The CAC is ALMOST at an all-time high. The SMI is ALMOST at an all-time high, and the SOX is still stuck in its lateral range, refusing to break out.
Everything is fine in the best of all possible worlds, and it’s all thanks to Trump!
And now???
This morning, China and Hong Kong are rising because everyone wants Chinese and Hong Kong stocks to bet on cheap Chinese AI. Japan is down 0.8% because the yen is strengthening, which exporters don’t like. Oil is back at $71, as predicted by the President of the Free World, Donald Trump. Gold is near its all-time highs, and Bitcoin is heading toward $97,000.
On the news front, Intel is going wild since mini-Trump JD Vance declared that semiconductors should be made in the US. The stock has jumped 25% in three sessions. Nvidia gained another 3% yesterday because they were present at the JP Morgan conference, where they claimed growth is still their best friend. So, expect a major surge in 10 days when quarterly earnings are released. Nvidia has risen 20% since DeepSeek.
Meanwhile, AppLovin exceeded expectations. This marketing platform—a hybrid between an ad network, a game publisher, and a tech company specializing in data and AI for mobile app monetization—surprised everyone and surged 24%. The stock was worth $60 last August, and now it’s $470. Everything is fine, and there’s no overheating whatsoever. Cisco reported better-than-expected figures, Deere slightly disappointed, and Tesla rebounded—more on technical factors than fundamentals.
One key point: If Airbnb and Roku had released their quarterly results before the market opened instead of after it closed, the S&P 500 would have hit an ALL-TIME HIGH. Airbnb crushed expectations and aims to become THE travel platform where you can do everything—you’ll soon be able to rent an apartment, a plane, and a car all in one place. The stock soared 14% after hours. Roku also smashed expectations, gaining 11% after 10 PM.
And then there was Nestlé yesterday. In short, they performed better than expected for 2024. But they fear shrinking margins in 2025. They posted the weakest sales growth in 20 years. Profits and sales declined year-over-year, but the stock jumped 6.2% because it was less bad than expected—and because nobody expects much from Nestlé anymore.
And since we’re talking about Nestlé’s margin pressures and inflationary pressures that nobody cares about, let’s also mention that coffee is at an all-time high. And—what else?—sugar is at a two-month high. That should help with Chocapic prices.
In the End, the Bulls Win
To sum it all up, I think there’s one key takeaway: everything is not fine. Quite the opposite. But when you manage to overlook certain things, it turns out things aren’t that bad. And that’s pretty much how the market is operating right now. How long will this last? No idea. But for now, we don’t care—as long as prices keep rising, that’s more than enough.
As for today’s numbers, we have the PPI in Switzerland, the CPI in Spain, GDP in Europe, and retail sales in the US. Not sure if that’s enough to counterbalance the gentle madness coming from Trump, but at least it’ll give us something to talk about over the weekend!
Have a great Friday, a great weekend, and see you on Monday as usual. One last week before the holidays.
