The Market Outlook for the Week Ahead, or A Friday Afternoon Surprise

It was looking like just another boring Friday afternoon ahead of a three-day weekend, with bond markets closed on Monday for Columbus Day.

I was sitting in front of my screens at my Lake Tahoe mansion, trying to untie the persistent knot in my pajama bottoms with a can opener. I have lost so much weight this year that they kept falling down around my ankles.

Then suddenly, the Dow Average ($INDU) gapped down 1,000 points, the S&P 500 (SPY) gave up 2%, gold (GLD) gapped up, bonds (TLT) rocketed $1.25, and oil (USO) finally broke $60 a barrel. The Volatility Index $VIX) soared by 40% to $22.50 in seconds. Bitcoin fell 8%, three times the (SPY) hit, showing that it is anything but a flight-to-safety asset.

I also saw a 24-point decline in the Mad Hedge Market Timing Index, the sharpest one-day decline in many years, putting it firmly in “BUY” territory.

Something happened.

Trading this synchronized into RISK OFF positions can only be algorithmically driven. Humans cannot act on that fact and coordinate. A quick search of keywords led to the president’s private social media account, which threatened a massive escalation of the trade war with China.

China cut off rare earth exports once again and refused to buy a single soybean (SOYB). China, in fact, has cut its promised soybean purchases from the US this year from $12 billion to zero. Massive tariff increases were threatened by the White House, along with a cancellation of a pending summit.

A global recession beckons.

There was only one thing for me to do. I immediately sent out an emergency alert to my Concierge members telling them to “Buy the dip.” I went into this swoon with 70% cash. Now it was time to put it to work. I foresee an aggressive 100% fully invested model portfolio for the November 21 option expiration….soon!

Like all geopolitical shocks, this will be short-term and is a great buying opportunity. You play with fire, you get burned. Every pro in the market knew that we were long overdue for this kind of move. One of my Concierge members quipped that “I didn’t even know the stock market was allowed to go down.”

The 23X price earnings multiple for the (SPY) is no more. The year-end melt-up is still on. Those trying to save their jobs by playing catch-up were just given a gift.

Trump can’t afford another “Liberation Day” and the 20% stock market decline it brought. So expect the happy talk to resume shortly. TACO will ride again. China is doing the same thing it did in April: let the stock market do the negotiating for it.

If this is a mini crash, it will be one that lasts only hours, if not a few days. Buy everything that was winning until Friday morning, before the fatal tweet ruined our days.

It looks like 2025 is going to be the year of a black swan a month. The good news is that we probably won’t get another black swan for another month. It’s soon time to go pedal to the metal, full RISK ON, and bet the ranch all at once. But just not yet.

Another tell was something interesting that I noticed. When the (SPY) was down 2.20%, Goldman Sachs (GS), where I have substantial long positions, was taking only a 1.59% haircut. If this were a real crash, those numbers should be reversed. The SPY has a historic volatility of only a lowly 17%, while (GS) stands at a lofty 33%. A single stock always has double or more the volatility of an index. That means the next move in (GS) should be up.

In the meantime, the bleeding by the economy continues, even if we can’t see it in the data, thanks to the shutdown. Every week the government is closed, it shrinks the US economy by 0.1%. Worst case, the shutdown could extend into 2026. Some 22 states are already in recession, all rural red ones.

If Medicaid health care isn’t restored to 18 million, half the rural hospitals in the country will have to go bankrupt. Many marginal ones have already given notice of closure. A lot of counties have a single hospital that is about to go out of business. It invites a health care crisis of epic proportions. I have a feeling that this isn’t going to happen, but at this point, it could go either way.

My other big move last week was that I sold all my gold and silver at the all-time high on Wednesday. Gold has just had its best year since 1979, when it hit a multi-decade top.

The gold rally up until Wednesday exactly matched the size of the rally in the spring, or $500 an ounce, a great time to take profits. Gold ETF inflows hit a one-month low of only $2 billion last week.

I’m looking to get back in on a 10% correction with more deep-in-the-money call spreads, so the time decay is working for me in case we get another multi-month flat line like we did for four months during April to August. My medium-term target is still $5,000.

Uncertainty is still extremely high. The shift out of U.S. Treasury bills and US bonds into gold continues unabated. Gold is still viewed as a safe-haven asset. Central banks are moving out of the US dollar (UUP) out of fear of future out-of-the-blue Trump sanctions.

I’ll reveal to you some data points that I fell out of my chair when I heard them. Options trading volume is absolutely exploding. Some 63% of all trading is now accounted for by same-day expiring S&P 500 (SPY) options. Another 23% is in Tesla (TSLA) options alone.

Why the dominant player in the options market, Thomas Peterffy’s Interactive Brokers (IBKR), which owns a massive 63% of the company, hasn’t doubled from here is beyond me. (IBKR) should double off of my commissions alone, as these days, I am regularly bumping up against position limits.

Options position limits restrict the number of options contracts a trader can hold to prevent market manipulation. Traders have to maintain fair trading practices, with limits set by exchanges based on the underlying security’s outstanding shares and trading volume.

These limits are applied on a “same side of the market” basis, combining all long calls and short puts (bullish) or short calls and long puts (bearish) into a single quantity, and are enforced on an intraday basis in terms of the equivalent underlying shares.

Me manipulating the market? Imagine that!

Undoubtedly, the highlight of the week, at least among us strategists, was the interview on CNBC with hedge fund legend Paul Tudor Jones, where he laid out his multiyear views for all financial assets. I have known Paul for 40 years.

He was so good at trading that he was banned at Morgan Stanley because we always lost money trading against him. Like all of us, Paul is sometimes wrong. But he is right enough that you ignore him at your peril. The bottom line: liquidity will drive all asset classes to new highs at least for the rest of this year. After that, the risk of a major crash is rising.

To hear the interview in full, please click here.

October is down -1.08% so far. That takes us to a year-to-date profit of +54.87%. My trailing one-year return rose to +95.96%. That takes my average annualized return to +50.89%, and my performance since inception reaches a new all-time high of +805.68%. These are all non-compounded numbers.

I am going into the October 17 options expiration with a cautious 30% invested and 70% in cash. I am long Goldman Sachs (GS), and Strategy (MSTR), and short Tesla (TSLA). Tesla shares conveniently dove $50 after Musk made some ill-considered political comments about Netflix (NFLX), one of our favorite stocks and a big money maker for us.

Some 63 of my 70 round-trip in 2023, or 90%, were profitable. Some 74 of 94 trades were profitable in 2024, and several of those losses were really break-evens. That is a success rate of +78.72%.

Try beating that anywhere.

The September Consumer Price Index to be Released on October 24, after the Bureau of Labor Statistics staff were called back from the government shutdown. The BLS is currently leaderless. The Fed is now flying blind, and the government doesn’t want to do anything to delay the next interest rate cut on October 28.

Fed Minutes Tank Financials, and all other interest rate-sensitive sectors, indicating that several members voted against an interest rate cut in September. The minutes from the September 16-17 meeting showed that steadily rising inflation, which may accelerate in the months ahead, was the main concern. Several members voted against a rate cut back then. No rate cut at the upcoming October 28-29 meeting might finally give stocks a long-needed correction. That’s why all of my current options positions expire on October 27. Buy all financials on this dip.

Glencore Gets a $394 Million Copper Subsidy from the Australian government to keep operating its Mt. Isa smelter and Townsville mine. Mt Isa is the only copper smelter in the country and is essential for solar panels, wind turbines, and the growth of the power grid. The goal is to reduce reliance on copper imports from China during the coming copper boom.

Copper Prices Hit a New High, as I expected. Copper prices hit $11,000 per metric ton on Thursday, a level not seen in over 16 months, as widespread disruption at mines sparks fears of a shortage of supply and attracts speculative inflows. Benchmark three-month copper on the London Metal Exchange rose 3.1% to hit the $11,000 mark, within striking distance of its all-time high of $11,104.50 set in May 2024, before pulling back to $10,970. The golden age of copper is here. Buy (FCX) on dips, the world’s largest producer.

Rare Earth Prices Soar on China Supply Clampdown, fueling market speculation that the Trump administration will move more aggressively to invest in building out a domestic supply chain. Ramco Resources (METC) soared 12%, Energy Fuels (UUUU) surged nearly 8%, USA Rare Earth (USAR) jumped more than 7%, and MP Materials (MP) rallied more than 6%. Most affected are the supplies of Holmium, Erbium, Thulium, Europium, and Ytterbium. China supplies 90% of the world’s rare earth magnets, essential for most electronics applications. Every trade war comes with a high price.

U.S. Consumer Sentiment was Steady in October, according to the University of Michigan. Households are appearing to shrug off a partial shutdown of the government, though worries about the labor market and inflation lingered. The Surveys of Consumers on Friday noted that pocketbook issues like high prices and weakening job prospects remain at the forefront of consumers’ minds. Interviews with respondents showed little evidence that the shutdown has moved consumers’ views of the economy thus far.

The Jobs Crash Tanks Stocks. Wall Street’s main indexes declined on Tuesday after a report from the New York Federal Reserve highlighted worries over the job market, halting a rally that had pushed the S&P 500 and the Nasdaq to record closing highs a day earlier. Private sources at the Carlyle Group suggest that only 17,000 jobs were gained in September. After seven days of a government shutdown in the U.S. hindering key data releases, the September report from the NY Fed showed that the expected level of inflation a year from then was 3.4%, compared with 3.2% in August.

AMD Soars 30% on OpenAI’s Purchase of a 10% Stake. OpenAI will deploy 6 gigawatts of AMD’s Instinct graphics processing units over multiple years and across multiple generations of hardware, the companies said Monday. It will kick off with an initial 1-gigawatt rollout of chips in the second half of 2026. Buy (AMD) on tips.

Fifth Third Buys Comerica for $10.9 Billion. I warned you that a transaction like this was headed our way in my September 15 letter. Regional lenders have outperformed large banks, but both have lagged the S&P 500 since the Pandemic. There have been 118 regional bank mergers so far this year, worth $23 billion compared to 500 in 1998. Bank analysts cite the following as cash cows ripe for takeover: Prime targets include Salt Lake City-based Zions Bancorp (ZION), Maryland’s Eagle Bancorp (EGBN), Texas-based First Foundation (FFWN), and Tulsa-based BOK Financial (BOKF).

Nikkei Soars 5% on Election Result, with the country’s first female prime minister winning the election. The Japanese Yen fell sharply. PM Takaichi supports more fiscal and monetary stimulus, with the latter punching up against the BoJ’s desire to continue to raise interest rates, albeit slowly, and the elevated inflation in the country.

Investors are Pouring Back into the Housing Market. Real estate investors, both individual and institutional, bought one-third of all single-family residential properties sold in the second quarter of 2025. That is an increase from 27% in the first quarter, and the highest percentage in the last five years. Investors accounted for 25.7% of residential home sales in 2024. The bull market in housing is back!

The Government Shutdown has Delayed 87,254 Flights this Week, on top of 2,538 cancellations. Some 13,000 air traffic controllers are set to miss their first paycheck on October 14 but must still turn up for work during the shutdown despite not being paid, along with about 50,000 Transportation Security Administration officers. The hit to the economy is growing by the day. Watch out for the coming air traffic controller sick-out.

Emerging Markets are on Fire, up 36% in 2025 and beating the US by a large margin. Investors view it as a short-dollar play and a diversification away from the dollar. That’s why it’s trading like gold. (EEM) is making up for a lost decade in short order. Buy (EEM) on dips.

Tesla Launches Cheaper Models, a stripped-down Model Y under $40,000 and Model 3 under $35,000. These two models account for 97% of the company’s total EV sales. This time, Tesla has to compete against 41 other EV models from Europe, South Korea, Japan, and the US. The stock was unchanged on the news.

My Ten-Year View – A Reassessment

We have to substantially downsize our expectations of equity returns over the next four years. My new American Golden Age, or the next Roaring Twenties, is now looking at multiple gale-force headwinds. The economy will completely stop decarbonizing. Technology innovation will slow. Trade wars will exact a high price. Inflation will return. The Dow Average will rise by 600% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old. My Dow 240,000 target has been pushed back to 2035.

On Monday, October 13, the shutdown government will release no economic data.

On Tuesday, October 14, at 8:30 AM EST, the shut down government will release no economic data.

On Wednesday, October 15, at 8:30 AM, we would get a key inflation report, the CPI, if the government were open.

On Thursday, October 16, the government will release no economic data. We would get the PPI if it were open.

On Friday, October 17, at 5:30 AM EST, we would learn Housing Starts if the government were open. At 10:00 AM EST, we obtain the Baker Hughes Rig Count. At 4:15 PM, we get an options expiration.

As for me, with all the hiking I have been doing lately, I have been listening to a lot of WWII audio history books. That reminds me of an old friendship I had with Toshiro Mifune, then the most famous movie star in Japan.

Mifune was drafted into the Japanese army during WWII, where he served as an aerial reconnaissance photographer. After the war, it led him to work as a cameraman at Toho Productions, then the largest movie company in Japan.

A friend submitted his photo with an application for a casting call without his knowledge, and Toshiro, a good-looking guy, was one of the 48 picked out of 4,000. He then met the legendary director, Akira Kurosawa, and the two launched the golden age of Japanese cinema in the late 1940s.

In just a couple of years, they produced blockbuster classic films like The Seven Samurai, Rashomon, and Throne of Blood, all of which are today required viewing for every American film school student, and in which Mifune demonstrated his impressive skills with a sword he picked up in the army.

I met Toshiro late in his career when he was cast as Admiral Isoroku Yamamoto for the 1976 Universal movie Midway. The problem was that Mifune couldn’t speak a word of English. I was brought in to bring Toshiro up to par with a crash course held at his west Tokyo mansion every afternoon, seven days a week. We became good friends.

After a heroic effort, Mifune’s English was still awful, so the producers brought in a voice actor to dub Mifune’s part in Midway. That was Paul Frees, who provided the voice for Disneyland’s Haunted Mansion and Pirates of the Caribbean rides, as well as the cartoon Boris Badenov. His voice is still attached to those rides today, and I recognize it every time I take the kids.

Midway was a huge success, and Mifune’s next big role was to play Commander Mitamura in Steven Spielberg’s 1941. He followed that up with a role as Toranaga in James Clavell’s 1980 miniseries, Shogun, another old friend. (Clavell is a story for another day). My tutoring skills came back into demand once again, with better results.

Mifune died in 1997 at 77, and I miss him still.