JD Straight Up - 29Sep25 - Shut Down

Shut Down

Drulard Family Capital Fund

Fortnightly Macro View

JD Straight Up:

S&P 500 at 6661 – up 1% from 6617 two weeks ago

VIX at 15 – flat from 15 two weeks ago

10yr Treasury yielding 4.19% (up 3% from 4.06% two weeks ago)

Agg (US Aggregate Bond Index) at 100.26 – flat from 100.64 two weeks ago

Gold at 3857 per oz (up 4% from 3700 two weeks ago) - all time high

Crude Oil (WTI) at 63 per barrel (down 2% from 64 two weeks ago)

Bitcoin at 114k (down 1% from 115k two weeks ago)

JPM shares at 316 (up 2% from 309 two weeks ago) - all time high

Deutsche Bank shares at 35.31 (down 6% from 37.67 two weeks ago)

Truist shares at 45.92 (up 2% from 45.06 two weeks ago)

Blackstone shares at 176.14 (down 4% from 183.77 two weeks ago)

Magnificent 7 Index at 408 (up 1% from 404 two weeks ago)

US unemployment: at 231,000 in latest claims – down 12% from 263,000 two weeks ago

EUR at 1.18 USD (flat from 1.18 two weeks ago)

GBP at 1.35 USD (down 1% from 1.36 two weeks ago)

Macro Environment

US inflation continues its rise to 2.9% and away from the 2% target, while US Fed lowers Fed Funds Rate by 25bps.  US consumer confidence erodes while US unemployment remains steady at 4.3%.  EU inflation rate is 2.4% while EU GDP growth is 0.2% and unemployment is 5.9%.  US government shutdown looms and is seen as increasingly likely.  War persists in Ukraine and Gaza.  US continues to apply tariffs and negotiate trade deals.  US asset prices and indices continue to climb despite uncertainty and pressure.

Macro View

The US administration will use a government shutdown to do what DOGE could not do.  It will aim to show that many government jobs are unnecessary and can be cut.  Markets have seen this posturing well in advance and have already factored it in.  Investors are in a glass half full and bull market mentality where they are looking for positives in any news, buying dips, and rationalizing further increases.  At some point, this mentality will turn, but at the moment there is a strong set of animal instincts driving behavior.  There is a majority in power and in action that want to believe that cuts to government, regulation, and rates will drive a golden era of investment and growth.  That majority forms a narrative of government shutdowns being a positive for the country where the last major shutdowns were met with fear and concern.  Shutdowns are now a rallying cry the same way that blocking immigration through 100k H1B visas is.  It does not need to make fiscal or rational sense.  It is a soundbite and a meme and that is enough to keep money pouring into risk assets.

Relevance

Extend the narrative to the more extreme perspectives espoused by some US politicians and you can see your way to the $38trn US national debt resolving itself through the stablecoin phenomena where stablecoin issuers buy up trillions of US treasuries to back their coins and the demand for treasuries provides an active bid for the $12trn of new treasury sales required to roll debt and also brings down the yield so it becomes cheaper and cheaper for the government to fund itself.  This narrative threads in seamlessly to the one on paring back government spending through a shutdown in order to usher in the roaring twenties of our century.  It is a faith based market and economy.

Head Scratchers

1 - What happens when tariffs, shutdowns, relatively high rates, failing PE, and a stalled commercial and residential property market manifest in the statistics?  Will faith be enough?  Will the animal instincts turn from greed to fear?  Or will the government just see to it that those statistics are no longer produced or are re-calibrated to align with the roaring twenties narrative?  Do not forget how the Gatsby roaring twenties ended...

Drulard Family Capital Fund

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#26- 29Sep25