A November Market Note
If you stack the headlines from last month, it is clear why investors might feel off balance. Analysts warn of a looming public debt crisis in the U.S. and a handful of other wealthy countries, rooted in the tension between interest rates and nominal growth. Economic strategy appears to rely on tariffs and AI-driven bets, which the market considers high-risk gambles. A record-long government shutdown, with Congress struggling to agree on basic spending bills, reinforces the sense that the U.S. is operating with high debt, little political margin, and a growing reliance on the Fed to smooth the edges. Underneath it all, the battle against inflation was not fully won, and affordability has become the central economic anxiety for many households.
This seesaw can create low-level unease, yet the real question is where we position ourselves financially over the long term. How do we make a commitment with our capital without gambling away our purchasing power, or freezing our assets until the world feels “safer” again?
Today’s Monetary Strategy
Let’s start with the debt story. Rich countries have built up debts that are difficult to reverse through taxes or spending cuts. A familiar alternative is the post-WWII playbook: Let nominal growth run faster than interest costs so that debt shrinks relative to GDP. This works, but only by allowing inflation to erode the real value of what savers are owed.
Now we can see how the actions of the Federal Reserve fit that pattern. With signs of a softening labor market, the Fed has made two quarter-point rate cuts this year, in September and in October, bringing the federal funds rate down to the 3.75% to 4.00% range. Over the past two years, the central bank lowered rates from their peak, watched long-term yields fall, and ended quantitative tightening in favor of an “ample reserves” approach. The Fed is signaling a shift, not necessarily toward aggressive easing, but toward preserving market plumbing. Whatever the official rationale, the effect is clear: Government borrowing gets easier, financial conditions loosen, and risk assets—especially equities—are supported.
But someone pays. When inflation outpaces the return on safe savings, wealth shifts from holders of cash and fixed-rate bonds toward borrowers and owners of real assets. We could call this a modern version of Keynes’s “arbitrary rearrangement of riches,” when redistribution happens not because of productivity, merit, or policy, but simply because price levels moved.
Meanwhile, households face intense affordability pressures from housing, healthcare, education, and job insecurity. That human backdrop shapes how Fed policy is felt on the ground and why voters’ economic anxiety remains so high.
A Casino Economy?
Worries about a “casino-like” economy stem from how much the market now depends on a small group of AI-focused companies and the huge money pouring into data centers and chips. A lot of investors are betting on big productivity gains that may or may not materialize, governments are making bold, high-stakes policy bets, and many assume the Fed will step in if anything breaks.
This is why there is so much talk of a potential bubble. As an investor in this environment, it’s tempting to either lean into speculation or retreat entirely into cash “until it all blows over.” Neither extreme is a sound long-term plan.
Recent market data actually looks far more ordinary than the casino imagery suggests. Over the past month, global equities rose in a broadly diversified advance: U.S. stocks were up a little over 2%, emerging markets rallied more than 4%, and developed international markets posted gains as well. Within the U.S., large-cap growth and information technology led, but sectors outside the AI cluster, such as value stocks in developed markets, also turned in solid year-to-date results. The pattern is strong but not obviously bubble-like.
Fixed income tells a similarly conventional story. Treasury yields drifted lower, supporting modest positive returns in the broad U.S. bond market. Mortgage-backed securities outperformed, municipal bonds delivered gains of more than 1%, and inflation expectations eased slightly. In other words, risk assets continued to do their job, bonds stabilized after a difficult period, and cash remained stable in nominal terms. Taken together, these statistics describe a market with pockets of normal volatility and areas of enthusiasm, but recent performance is broadly consistent with a constructive environment, not with an all-or-nothing speculative mania you have to either chase or run away from.
Elections and Political Pressures
Political polarization amplifies economic pressures, and economic pressures in turn make politics more reactive and less predictable. That unpredictability feeds back into consumer spending, business confidence, and asset prices.
Recent elections show how fast affordability can move from a background worry to the defining issue, shaping how people spend, save, vote, and judge whether the system is working for them. As the U.S. enters another election cycle, debates over the cost of living, job security in an AI-driven economy, and who should bear the economic adjustment are likely to dominate.
This has a ripple effect. Markets will react to whatever combination of tax policy, spending decisions, trade rules, and regulation emerges, but the broader risk is structural. For investors, the danger is not which party wins, but a policy environment that leans even more heavily on familiar tools, such as managed interest rates and steady inflation, to hold the system together.
It helps to step away from Washington and Wall Street and focus on what really matters: your own future spending. That includes groceries, travel, healthcare, support for family, and gifts to causes you care about. No matter who runs the Fed or what the data say, these are real, inflation-linked cash flows—the true cost of the goods and services you’ll actually need.
Building a Portfolio That Fits Your Needs
The abstract discussion of debt, inflation, interest rates, and the economy becomes concrete when you think about a simple household balance sheet. Compare two long-term investors starting with the same amount of money and a 15-year plan. One investor keeps everything in Treasury bills, while the other holds a balanced 50/50 mix of large-company stocks and Treasury bills.
Over a single year, the all-cash investor looks wiser. Treasury bills rarely show big losses, yields are clear, and the memory of past crises makes stability comforting. By contrast, the 50/50 investor lives with more short-term noise. In some one-year windows, the stock side of the portfolio is negative, and it is easy in those moments to wonder why you are taking equity risk at all.
Over longer horizons, the odds flip. Using U.S. data from 1926 to 2019, a 50/50 portfolio has beaten an all-cash portfolio in roughly 90% of rolling 15-year periods. That is the math behind the old line that “time in the market” matters more than “timing the market.”
The effect of compounding makes the difference even larger. Over 11-year spans, large-company stocks have historically doubled the cumulative return of Treasury bills. Over 17-year spans, they have grown to roughly three times as much.
Time also changes what you should worry about. In the short run, volatility dominates. In the long run, the real threat is inflation quietly eroding the purchasing power of cash and low-yield bonds, especially if policymakers hold real rates below zero to manage public debt. In that environment, the fixed-income portion of your portfolio is priced first for stability and liquidity, with income secondary and real growth appearing only in rare periods when yields rise meaningfully above inflation.
The goal is not to turn cautious investors into thrill-seekers, but to be clear about which risks you are willing to carry, and over what time frame. If you have near-term spending needs or real anxiety about market swings, holding more in short-term Treasuries and cash is entirely rational. But if most of your important spending lies 10 to 20 years ahead—retirement, health care, legacy goals—a stronger equity anchor is almost always necessary to preserve purchasing power.
That, ultimately, is what portfolio construction is about. Cash, bonds, stocks, and alternative assets aren’t abstractions. They absorb policy and economic shocks in different ways. And when governments rely on inflation and managed yields to contain their debts, your mix of assets determines how much of that cost you bear.
Where You Fit In
We do not pretend to forecast the Fed, the election, or one company’s success. We assume there will be surprises, messy policy, and periodic overreactions. The goal is resilience, not clairvoyance.
We have a simple division of labor. Your job is to be clear about goals, spending needs, and risk tolerance. Our job is to translate it into a plan and portfolio that will carry you through.
If any of this raises questions about your own allocation—how much safety, growth, and inflation protection—I welcome that conversation. Please reach out.
Regards,
John Gorlow
President
Cardiff Park Advisors
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