I’ve been up half the night thanks to snoring dogs, so let’s call it what it is: a foggy morning in a market that’s finally waking up to reality. The Fed’s “we might not cut” bombshell just cracked open the narrative—and liquidity’s starting to sweat.
Key Takeaways
Fed takes away the punch bowl
- Powell didn’t commit to a December cut, pushing “no cut” odds from 3% to 31% in 24 hours.
- Markets hate uncertainty, and this one’s got it in spades—liquidity stress is showing up in SOFR and the banking sector.
Banks showing stress fractures
- The triple-levered financial bear ETF just broke its 50-day average—never a great omen.
- Regional banks (KRE, DPST) are slipping again; watch for injections or quiet backstops if things tighten further.
Tech still pulling the weight
- Microsoft and Alphabet split paths: one stumbles, the other surges. CapEx spending is the story—AI is fueling earnings but torching margins.
- CapEx bloat could become the biggest misallocation of capital since the dot-com era if revenue doesn’t catch up.
Momentum unwinding in small caps
- Russell 2000 momentum flipped red; over 60% of components are down 5% or more this month.
- Cruise lines, casinos, and consumer cyclicals are bleeding—not from demand, but from pure liquidity rotation.
What I’m Watching
The story now is balance sheet gravity. The Fed’s ending QT in December, but the question is whether the market can handle it without fresh liquidity. SPY and QQQ still look technically fine, but KRE and the Russell are the pressure valves. CapEx-heavy names like NVDA, META, and MSFT could be next if AI margins don’t stabilize. Gold remains weak, the dollar’s rebounding, and defensives might finally start earning that label again.
Liquidity’s the only thing keeping this market in one piece—and it’s showing cracks. When capital stops chasing performance, fundamentals start mattering again. Might not be today. Might not be next week. But it’s coming.
Until next time,
Garrett Baldwin
TheoTRADE