JD Straight Up - 22Dec25 - Year of No Fear

Year of No Fear

Drulard Family Capital Fund

Fortnightly Macro View

JD Straight Up:

S&P 500 at 6875 – flat from 6859 two weeks ago - up 16% YTD - hitting all time highs

VIX at 14 – down 18% from 17 two weeks ago - no volatility = no risk = no fear

10yr Treasury yielding 4.15% (flat from 4.14% two weeks ago)

Agg (US Aggregate Bond Index) at 99.76 – flat from 99.75 two weeks ago

Gold at 4472 per oz (up 6% from 4221 two weeks ago) - up 72% YTD - all time high

Crude Oil (WTI) at 58 per barrel (down 2% from 59 two weeks ago)

Bitcoin at 89k (flat from 90k two weeks ago)

JPM shares at 322 (up 2% from 315 two weeks ago) - up 36% YTD - all time high

Deutsche Bank shares at 38.72 (up 6% from 36.69 two weeks ago) - up 126% YTD

Truist shares at 50.50 (up 6% from 47.71 two weeks ago)

Blackstone shares at 155.71 (up 3% from 151.53 two weeks ago)

Magnificent 7 Index at 427 (up 1% from 425 two weeks ago) - up 26% YTD

US unemployment: at 224,000 in latest claims – up 17% from 191,000 two weeks ago - renormalization after thanksgiving anomaly

EUR at 1.18 USD (up 1% from 1.16 two weeks ago)

GBP at 1.35 USD (up 1% from 1.33 two weeks ago)

Macro Environment

US inflation at 2.7% and unemployment at 4.6%.  EU inflation at 2.4% and unemployment at 6.0%.  Affordability continues in headlines and debates.  Ceasefire persists in Gaza and war in Ukraine.  US continues to intercept alleged drug boats from Venezuela while using force to maintain embargos.  AI infrastructure investment continues at record pace.

Macro View

10Yr Treasury reached a temporary plateau around 4%.  The critical move to come will determine everything.  If it goes up to 6.5% or higher, the US will risk a widening deficit, stagflation and difficult times.  If it drifts down to 2.5%, the party will go on.  The Fed has lost control of rates other than the short end of the curve.  That is not the part that matters.  The bond market is what matters.  The 10yr is the key determinant and it is set not by the Fed but by the market.  It is a global market with trillions of it sitting with non-US investors and sovereigns.  JPM buying $350bn of Treasuries is a form of QE on its own, but represents a weak indirect effort by the Fed to control the mid to long end of the curve.  It will not be enough.  It will buy temporary stability at 4%, but it will not be able to keep it there.  If all of the money center banks join the charade, it might hold that 4% plateau for another quarter or two.  The real and non-artificial market will be set by faith in the US government and its willingness to address its fiscal situation and its rapidly compounding debt load.  If there is no sign of this willingness, investors and governments will rightly demand higher compensation for funding the more highly levered country.

Relevance

Productivity gains from AI will be transformational for society and economies.  Some companies and countries will derive enormous benefits.  The timing of the transformation beyond surface level improvements for daily tasks is unclear.  The timing of hundreds of billion dollars of infrastructure investment and trillions of dollars of sovereign and corporate debt needing to be refinanced is very  clear.  It is unlikely that the productivity gains are realized quickly enough to fend off or lessen the debt tsunami.  Fiddling with the fed funds rate is merely playing at the fringes.  Printing more money through QE (or the stopping of QT) will feed inflation.  Timing is everything for the next turn of the cycle and it is currently very challenging to predict and impossible to forecast effectively.  All of that said, if 2026 looks anything like 2025 and you are stuck on the sidelines fearing risk assets, you will fall further behind your invested peers.

Head Scratchers

1 - Trump Media merges with TAE Nuclear Fusion company.  What next?  Meme stocks + NFTs + crypto + retail levered ETFs + retail private credit + SPACs = utter nonsense.  You have to go back 300 years to 1720 to find a comparable offering of "A company for carrying on an undertaking of great advantage, but nobody to know what it is".  Two thousand pounds was reportedly raised in a morning for this mystery venture before immediately disappearing.  At least the merger above is willing to share its plan to pivot from delivering a social media empire to a crypto one to solving for the commercialization of nuclear fusion.  What could be more natural?

Happy Holidays and New Year.

Drulard Family Capital Fund

Drulard Family Charitable Fund

www.drulardfund.com

#32- 22Dec25