Markets lacked direction to start November, unsure of how to proceed after last week’s post-Fed gains. Traders rotated out of blue-chips and back toward growth. The Dow fell -0.48%, while the S&P 500 and Nasdaq Composite eked out modest gains of 0.17% and 0.46%, respectively. Gold and crude stayed firm near $4,016 and $61, suggesting lingering demand for real assets even as yields held steady around 4.09%.

The morning started optimistic, but that didn't last very long. After Friday’s upbeat finish and fresh momentum around AI names, investors opened Monday focused on Palantir and AMD ahead of earnings. But midday profit-taking in industrials and banks capped broader gains, leaving the day’s leadership narrow again. The megacap trade remains dominant (Nvidia’s trillion-dollar gravity still defining the index) but beneath the surface, breadth continues to fade.

Macro context from this morning’s briefing set up the same tug-of-war that played out intraday: a Fed in “quiet-support” mode, policy easing that’s steady but not generous, and earnings still running hot at +10.7% year-over-year. Yet the government shutdown’s 34th day and political gridlock in Washington reminded traders that policy tailwinds have limits. Internationally, OPEC’s planned production pause for early 2026 and Europe’s north-south fiscal inversion, with a stronger Spain and Portugal, and a weaker Germany and France, kept global sentiment cautious

The upshot: the week opened not with panic but with fatigue. Investors are still long liquidity and AI, but conviction costs extra.

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This piece from Tker Capital revisits a lurking valuation signal: the S&P 500’s forward P/E is hovering near levels last seen in August 2020… which was mid-pandemic, stimulus-driven, and full of optimism. Historical charts show that forward multiples were in the low 30s back then. Today the index sits around the 20-25 range per most data, but the behavioral parallel is the point: when growth expectations are rich and yield tailwinds thin, the risk-return trade-off tightens.

The article argues that squaring today’s higher multiples with a backdrop of slower growth, lower margins and elevated capex means the market is either pricing in near-perfect execution or dismissing tail risk. That gap matters. Valuations alone won’t force a sell-off, but they limit the margin for surprise. If earnings disappoint, or inflation creeps up, reaction curves will be sharper.

For traders this means two things. First, don’t view valuation as a ceiling, but treat it as a leash. With multiples already elevated, upside requires strong catalysts; downside needs only a miss. Second, focus on sectors where the multiple discount still exists: mid-caps, international equities, non-AI-related cyclical plays. The market may still climb, but at these valuations a misstep won’t get ignored.

In this episode of Macro Musings, Bryan Cutsinger revisits the late-19th-century era of “growth-driven deflation” and draws parallels to today’s surge in AI productivity. The core takeaway: rapid gains in supply and innovation can suppress prices while lifting output, creating a scenario where deflation doesn’t signal collapse… it signals reinvention.

Cutsinger walks through his cross-country analysis of the gold-standard era, showing that positive supply shocks often reduced price levels modestly but did not invariably lead to banking or monetary crises. For example, many countries studied maintained healthy nominal interest rates and financial intermediation despite deflation. He argues this historical insight matters now as AI promises similarly disruptive gains in productivity.

For investors, the lens shifts: instead of treating deflation as the enemy, this episode suggests asking whether we’re entering a productivity-led regime shift. If so, the tradable implications are subtle but profound… expect inflation to behave oddly, markets to reward scale and automation, and traditional playbooks for growth vs value to blur.

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Tuesday will test whether earnings or exhaustion wins out. Palantir exploded through expectations late in the day as Q3 revenue hit ~$1.18 billion, ahead of consensus, and the company raised its full-year sales outlook to $4.40 billion thanks to strong AI demand. That, plus AMD headlines later in the day have markets watching whether both can serve to justify 2025’s parabolic AI trade. Guidance tone will set the direction of semis and software alike.

On the macro front, ISM Services PMI and JOLTS arrive in the morning, the first major reads since the Fed’s second rate cut. A cooling labor-openings number could reignite easing bets; a surprise uptick would confirm Powell’s “not a foregone conclusion” warning from last week. Bond desks will also watch whether 10-year yields slip further below 4.1%, a technical line that could invite more equity rotation if broken.

On the news and narrative front, attention turns to early reaction to the Virginia and New Jersey elections, both seen as sentiment proxies for 2026 policy risk. For now, futures point to cautious stability… risk appetite intact, but buyers being selective. The next 24 hours belong to earnings credibility: The November rally may still have legs. If not, traders could start trimming risk into mid-week data.