About this episode Cut through the noise with 'Wall Street Unfiltered,' your weekly deep dive into the most significant shifts in the US market. We strip away the hype to reveal the true drivers behind earnings reports, macroeconomic indicators, and sector performance, providing a clear, analytical perspective on what happened and, more importantly, why. Tune in to gain actionable insights and a nuanced understanding of market dynamics, empowering you to make informed decisions.
0:00 Costco just posted thirty billion dollars in net sales for September.0:04 That's a thirteen percent jump, year-over-year, in a market everyone says is slowing down.0:09 Last week, we talked about sorting the winners from the losers on Wall Street.0:14 Well, Costco just made it very clear which side of that line it stands on.0:19 Their e-commerce sales alone were up nineteen percent.0:22 The consumer isn't just surviving.0:24 In some places, they're thriving.0:26 But that’s not the whole story this week.0:29 Not by a long shot.0:30 Let's get to the headlines.0:32 First, the geopolitical risks are getting louder.0:35 Lockheed Martin is now under a Pentagon investigation because sensitive parts from an F-35 fighter jet went missing.0:42 These weren't just any parts; they had radar-absorbing coatings.0:46 The Pentagon says they were "unserviceable," but the concern is that China could get its hands on them and reverse-engineer our stealth technology.0:55 This is a major security breach, and it puts Lockheed directly in the hot seat.1:00 At the same time, the cybersecurity firm CrowdStrike identified A.I.-assisted cyberattacks targeting banks in South Korea.1:08 The likely source?1:09 Financially motivated actors based in China.1:12 This isn't just random hacking.1:14 This is sophisticated, A.I.-driven financial warfare.1:17 You have a physical security breach with the F-35 and a digital one with the banks.1:22 The common denominator is clear.1:24 On the market itself, Friday saw some big individual moves.1:28 Humana and South Plains Financial were two of the biggest movers, showing there's still volatility under the surface.1:35 And looking ahead to third-quarter earnings, analysts are upgrading their expectations for consumer discretionary stocks.1:42 Think apparel, retail, and automobiles.1:45 It’s another signal, just like the Costco numbers, that the consumer spending story is more resilient than the bears want you to believe.1:53 But the biggest story, the one that connects everything, is the Federal Reserve.1:58 They've raised interest rates again, and the market is now pricing in two to three more hikes over the next year.2:05 This is where you need to pay close attention.2:08 Before we go deeper, a quick reminder: this is for informational purposes only.2:13 It is not financial or investment advice.2:16 So, the Fed is hiking rates.2:17 The immediate reaction from most people is fear.2:20 Fear of a recession.2:22 Fear that higher rates will crush the economy.2:25 That’s the wrong way to look at it.2:27 Here's the key.2:28 You have to ask WHY rates are rising.2:30 The common assumption is that the Fed is fighting inflation.2:34 But inflation expectations have been flat for about four years.2:38 So what's really happening?2:39 Former Western Asset Management Chief Economist Scott Grannis put it plainly.2:44 He said, "The recent rise in interest rates is not due to higher inflation expectations...2:50 What's changed is that real yields have been rising." Let me translate.2:54 Real yield is the interest rate minus inflation.2:57 When that number goes up, it means investors are demanding a better return on their money because they believe the economy is getting STRONGER.3:06 The market is sensing that economic growth is picking up, not slowing down.3:11 Productive assets are becoming more valuable, so the price of borrowing money to buy them goes up.3:17 This isn't a sign of sickness.3:19 It's a sign of health.3:20 We've seen this pattern before — the Fed raises rates and everyone predicts doom.3:25 But the analogy breaks down this time.3:27 In past cycles, the Fed was often chasing runaway inflation.3:31 This time, they're responding to genuine, underlying economic strength.3:36 The market is leading the Fed, not the other way around.3:39 Of course, not everything wins in this environment.3:42 The Cohen and Steers Limited Duration fund, ticker LDP, is a perfect example.3:47 It's a fund that holds preferred stocks, and it’s getting hammered.3:51 It's down year-to-date and trading at a nearly eleven percent discount to its net asset value.3:57 Why?3:57 Because its fixed-income holdings don't have inflation protection, and rising rates punish assets like that.4:04 It's a direct casualty of the Fed's policy.4:07 The weak housing market is another sector threatened by higher rates.4:11 But even that has a silver lining: it could finally lead to more affordable housing prices, which would actually push inflation down.4:19 So what does it all add up to?4:21 You have a market that is fundamentally misreading the biggest economic signal of the year.4:27 This week sets up a clear battle.4:29 On one side, you have the powerful engine of a surprisingly strong US consumer and a market signaling real economic growth.4:37 On the other, you have rising geopolitical friction and targeted security threats that could destabilize everything.4:44 The story for the next quarter turns on which of these forces wins out.4:48 Don't watch the headlines.4:50 Watch the data.4:51 The real story is right there in the numbers.
