JD Straight Up - 24Nov25 - Risk Spectrum

Risk Spectrum

Drulard Family Capital Fund

Fortnightly Macro View

JD Straight Up:

S&P 500 at 6697 – down 2% from 6796 two weeks ago

VIX at 21 – up 11% from 19 two weeks ago

10yr Treasury yielding 4.05% (down 1% from 4.09% two weeks ago)

Agg (US Aggregate Bond Index) at 100.54 – flat from 100.18 two weeks ago

Gold at 4096 per oz (flat from 4103 two weeks ago)

Crude Oil (WTI) at 58 per barrel (down 3% from 60 two weeks ago)

Bitcoin at 87k (down 17% from 105k two weeks ago)

JPM shares at 298 (down 6% from 316 two weeks ago)

Deutsche Bank shares at 34.00 (down 10% from 37.55 two weeks ago)

Truist shares at 45.52 (up 1% from 44.96 two weeks ago)

Blackstone shares at 141.57 (down 2% from 144.68 two weeks ago)

Magnificent 7 Index at 413 (down 2% from 423 two weeks ago)

US unemployment: at 220,000 in latest claims – down 4% from 228,000 two weeks ago

EUR at 1.15 USD (flat from 1.15 two weeks ago)

GBP at 1.31 USD (down 1% from 1.32 two weeks ago)

Macro Environment

US inflation continues at 3% despite 2% target.  US employment continues strong with unemployment at 4.4% though consumer sentiment degrades at record rates.  EU inflation is at 2.1%.  War continues in Ukraine while discussions about ceasefire progress.  Ceasefire is in place in Gaza though reports of its violation proliferate.

Macro View

Headlines and corporate leadership comments adopt 'affordability' as a key point.  Cumulative inflation in the US in the last five years exceeds 25%.  Wages have not kept pace.  The percent of the population benefitting from asset price rallies in any meaningful way is less than half.  The top ten percent of US households own about 90% of market assets.  The impact of compounding inflation is felt more acutely in the bottom half of the populace based on net worth.

Relevance

We are deep into an historic bull market run rife with speculation, leverage and a typical envy economy with FOMO behavior.  It is natural for this run to adjust first at the far ends of the risk spectrum.  Crypto is still seen as largely a speculative asset.  Its uses and utility outside of anonymity and dark market activity are less than compelling.  The entry of meme coins, levered ETFs and other instruments of speculation further this drive as something that provides no yield grows readily from nothing to exceed $3trn in market value.  It should not be a surprise that this asset class (if you call it that) should experience volatility first.  Next on the spectrum is private markets given their use of leverage and the relative opacity that 'private' entails.  Look at the chart of BX above for an indication how private markets entities are trading.  On the other end of the spectrum are treasuries and highly liquid benchmark equities.  These have traded on a plateau since september as investors adjust and wait to see what happens on the risky end of the spectrum.  This is all typical market behavior.  One potential issue here is connectivity or contagion.  If providers of leverage (e.g. money-center banks) end up tangled in a reset on the speculative end of the spectrum, then the risk will start shifting its way across the spectrum to what was previously perceived as less risky - see JPM and DB above.  Further, if the 30% drop in crypto value in a two month period triggers selling of other assets to cover cash needs, the risk could spread anywhere.  Hence, most of the charts above show a wait and see plateau.

The uncertainty on rates via central bank actions and on the ability of the US to manipulate treasury rates either through Fed activity (rate cuts, QE, stopping QT, etc.) or through administration actions leaves investors in a challenging period.

Compounding all of this is the rapid development and adoption of AI and AI infrastructure and the concern that the infrastructure will depreciate far faster than any accounting models recognize it so that there will be a serious earnings reckoning in the near future.

It all makes it really difficult to determine where you want to be on the risk spectrum right now.

Head Scratchers

1 - Is it normal in any stable historical period in a democratic environment for 10% of the populace to account for 50% of the consumption?  Or does this only happen before unrest or revolution?  How long can this disparity of wealth be supported?

Drulard Family Capital Fund

Drulard Family Charitable Fund

www.drulardfund.com

#30- 24Nov25