Job cuts surge

U.S. companies announced over 150,000 layoffs in October, the highest monthly total in more than twenty years, according to Challenger, Gray & Christmas. Year-to-date job cuts have now exceeded one million, reflecting a sharp increase from the prior two years. Tech firms continue to lead the reductions, but financial and consumer sectors are catching up as executives focus on cost control and margin protection. Many employers cite automation, AI integration, and slowing consumer demand as drivers. While payroll data remains distorted by the ongoing federal shutdown, the trend suggests the labor market’s remarkable resilience is starting to erode.

• The speed of job-cut acceleration is notable; corporate caution has returned
• Cost cuts may boost near-term margins but risk undercutting consumer strength later
• A softer labor backdrop typically leads to slower wage growth and spending
• Given the government shutdown, we still lack official data on the labor market
• If we receive negative data about the labor market when the government is back at work, it would bolster the case for the Fed to continue easing

Consumer confidence falls

The University of Michigan’s preliminary November consumer sentiment index dropped to 50.3, down from 53.6 in October and the lowest reading since mid-2022. The “Current Conditions” component fell to 52.3 while “Expectations” slipped to 49.0. Near-term inflation expectations ticked up to 4.7%, while long-term expectations eased to 3.6%. The survey cited the government shutdown, high living costs, and layoff headlines as primary drags on sentiment. Confidence weakened across income levels and political groups, highlighting a broad-based unease among consumers.

• It is becoming clearer that the continued government shutdown is beginning to take a toll on the real economy
• While the index isn’t the lowest in history, it is only slightly higher than the lowest reading ever (2022)
• Inflation expectations suggest consumers are feeling the affordability issues that served as a key reason for this week’s elections being swept by democrats
• Sentiment this weak historically foreshadows slower retail spending
• Spending downshifts typically filter into corporate earnings within a quarter or two

MAG7 stocks pull back in the midst of strong earnings season

After powering much of 2025’s equity rally, the MAG7: Nvidia, Apple, Microsoft, Amazon, Meta, Alphabet, and Tesla, have all pulled back in recent days and weeks. Nvidia briefly crossed the $5 trillion market-cap mark but has since retreated amid valuation concerns. Tesla, Nvidia, Microsoft, and Meta are each down over 10% from their highs.  This price action comes near the end of last quarter’s earnings season, during which 83% of companies beat earnings expectations, and overall earnings growth came in at mid-teens, higher than anticipated.

• The narrow leadership that carried markets may be losing steam
• AI-related names are over-owned, leading us to believe this move is largely due to positioning
• This is also on the back of the stellar performance of the MAG7 prior to the pullback
• A modest rotation into other sectors and small/mid-caps would be healthy long-term

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