U.S. Macro Thoughts 21-Nov-2025
Overview
As of November 21, 2025, the U.S. macro environment sits at a critical inflection point. A softer labor market, sticky core inflation, a gradually uninverting yield curve, and ongoing fiscal strain define the month. Dollar depreciation has slowed, equities remain elevated on liquidity optimism, and political pressure on the Federal Reserve intensifies ahead of the 2026 election cycle. Market behavior signals complacency; underlying data suggests divergence between perception and productivity. The system is in transition—from forced growth to structural recalibration.
Themes Under Observation
1. Dollar and Global Flows
The dollar’s decline has stabilized after an eight-month slide. The EUR/USD trades at 1.1685, roughly flat month-over-month, while the DXY sits near 98.4, its weakest level since early 2022. Against gold, the dollar has lost ~58% YTD, with gold reaching $4,380 per ounce, fueled by persistent geopolitical hedging and central bank diversification away from U.S. reserves.
The trajectory resembles late-cycle currency fatigue: the U.S. is still the core reserve, but faith in its policy coherence is weakening. The dollar isn’t collapsing; it’s decentralizing.
2. Trade and Fiscal Fractures
October’s goods trade deficit widened again to $93.7 billion, reversing two months of modest improvement. Imports surged on pre-tariff inventory stockpiling, while exports stagnated under retaliatory constraints. Fiscal spending remains expansionary, with the FY2025 deficit surpassing $2.3 trillion, or roughly 8.4% of GDP, its largest peacetime shortfall in decades.
The U.S. is attempting to stimulate its way through structural imbalance—using debt to mask declining productive surplus. Protectionism has not yielded reshoring; it has merely shifted inefficiency home.
3. Interest Rates and Policy Posture
At the October FOMC meeting, the Fed delivered a 25 bp cut, bringing the funds rate to 3.75–4.00%, while maintaining a conditional easing bias. Fed funds futures now imply two additional 25 bp cuts by mid-2026. Markets are pricing the Powell transition as a dovish pivot, with speculation centered around a replacement from the growth-favorable camp (Waller, Hassett, or Bowman).
However, long-term yields remain sticky: the 10-year Treasury yield sits near 4.02%, while the 2-year is at 3.68%—a mild, “healing” inversion. The structure implies policy is shifting toward accommodation even as the economy resists it.
4. Market Structure and Speculative Momentum
Equities continue their late-year rally. The S&P 500 closed at 6,812, up 14.6% YTD, while the Nasdaq Composite is up 19.2% on renewed AI enthusiasm and liquidity hopes. The rally is thin: fewer than 35% of stocks outperform the index. Retail flows have reentered meme and small-cap trades, with SPAC issuance reappearing in Q4 for the first time since 2022.
Crypto markets mirror this speculative tone. Bitcoin trades at $118,540, propelled by ETF inflows and algorithmic market-making. Yet on-chain activity is subdued, reflecting speculative positioning rather than adoption. The disconnect between enthusiasm and utility widens.
5. Commodities and Energy
Gold maintains its parabolic ascent at $4,380, while silver trades above $52 per ounce, its highest since 2011. Crude oil remains range-bound between $84–$89, pressured by slowing demand and record shale output. Agricultural commodities are softening, aided by bumper harvests and logistical normalization. Commodities now act less as inflation hedges and more as liquidity thermometers—rising when trust erodes, stabilizing when hope returns.
Economic Data
Labor Market
October data showed further cooling. Unemployment rose to 4.4%, with only +37,000 nonfarm jobs added. Downward revisions for August and September totaled –162,000. Labor participation remains steady at 62.6%, suggesting a slower but still functional market. The slowdown is uneven—tech, finance, and logistics are contracting; healthcare and energy remain stable. A “controlled descent” phase has begun.
Inflation Metrics
Core CPI printed 3.0% YoY, moderating slightly from 3.1% in August. Shelter (+0.3%) and medical (+0.5%) remain sticky. Core PCE—the Fed’s preferred gauge—registered 2.8%, signaling progress but not resolution. Tariff passthroughs continue to distort headline data. The inflation problem has migrated: from goods to services, from external to internal.
Interpretation and Positioning
The macro system is self-correcting through drag rather than crash. Real yields remain elevated, fiscal anchors are weak, and politics are increasingly interventionist. Liquidity injections (both fiscal and rhetorical) keep asset prices high, but the true economy is plateauing.
This phase rewards resilience over aggression and clarity over conviction. Investors and builders alike should:
Prioritize real cash flow and yield over narrative momentum.
Keep exposure modular and hedged, acknowledging that policy stability is an illusion until 2026.
Focus on systems that produce value cyclically—agriculture, energy storage, logistics, and skill-based services—rather than purely synthetic financial returns.
Hold liquidity as optionality, not idleness. In systems turbulence, dry powder is a strategic asset.
Bottom Line:
The U.S. economy is still functional but increasingly dissonant. Markets are trading confidence; the system is trading entropy. The next six months are not about direction—they’re about durability.
Year-to-Date Performance of Key U.S. Macro Indicators (Jan–Oct 2025)
This chart tells the story of a market that feels invincible while the real economy quietly weakens underneath.
The S&P 500 (green) keeps pushing higher—up more than 30 percent this year—as investors chase liquidity and AI-driven narratives. The 10-year yield (blue) has fallen all year, a quiet signal that bond markets see slower growth ahead. Unemployment (red) is edging higher, showing a cooling labor market, and core inflation (orange) refuses to fall much further.
The picture is clear: equities are celebrating, bonds are warning, and the economy is caught somewhere in between. Optimism is loud, fundamentals are soft.
Systems Insight
This is what a late-cycle expansion looks like in human terms. Collective psychology is still chasing euphoria while the deeper system prepares to rebalance. Markets often climb the wall of denial before truth re-enters the room. The key now is to stay observant, not reactive—grounded enough to see through the noise but agile enough to move when gravity returns.
So the visual takeaway is clear:
Stocks are euphoric.
Bonds are cautious.
Inflation is sticky.
Labor is softening.
That’s the divergence defining this cycle. The financial system is celebrating, while the real economy is exhaling.
