Market Insights Recap — Week of November 10, 2025

Hello, I'm Steve Orr, Chief Investment Officer for Texas Capital’s Private Bank.

Three topics today: big picture, company health, can we do it? What do they mean for our portfolios? And what should we be thinking about? 

Now markets dug a small hole in their 2025 performance last week. Not much. S&P 500 dropped about 1.5%, and the Magnificent Seven pulled the Nasdaq down about 3% loss. Is it the start of a bear? There's no sign of fur on our trading desk. Just plenty of longer-term bull out there. So quick review. The Fed is slowly lowering short-term interest rates. Third quarter earnings are looking very good. And there's still only five major wars. Tariff revenue is below forecasts and companies are coping. Noise factors that distract investors though: government shutdown, AI concerns, sapping sentiment. Tariff negotiations, far from over. Layoffs at several big companies do add to the Wall of Worry.

So let's talk about that AI concern first. Artificial intelligence buildout and cryptocurrency hype have been rally drivers for the last six months. Now, Wall Street analysts have been asking if all those data center plans are actually going to make money. Certainly some of them will. But consumers have been hit with big electric bills on the East Coast from new and existing data centers. Now, the spending on data centers is adding at least a half a percent to GDP this year and next, and pencil in 2.25% to 2.5% growth this year. A solid first-gear economy, nowhere near recession. So big picture? Better than the news folks are telling you. Stay invested. 

Now public companies report sales and earnings every three months. There are favorite weeks of each quarter because stock markets tend to perform better when there is good earnings news. And we've had better-than-expected news this season. Year-over-year growth in S&P 500 earnings is running at 13%. That makes the fourth quarter in a row of double digit gains in earnings. 2026 earnings forecast running at or above 11%, depending on which analyst shop you look at. Tariff uncertainty and deregulation are top of mind in these earnings calls. And of course, finding labor is still a challenge. 

We think there's a three-phase labor cycle going on right now. Think about just after shutdowns. It was hire, hire. And then in '22 to '23, early '25 even, it was low hire, low fire. And now we're entering this phase of fire, fire as companies are trying to find their way through the noise and rightsize their employment. Now that down performance by the major indices last week did worry some folks. And there's definitely a change in sentiment with the 41-plus-day shutdown.

If you take a step back, we've had a six-month rally run in the S&P 500, and there's 24 cases in the modern era since World War II, where we've had the six-month runs. Well, two-thirds of the time those go to seven months. And when we look at these rallies six months later, there's only six cases of those 24 where stocks are lower. So strength begins strength. And when we look at a year later, there's only five of those cases where stocks are lower. We're going to have a little bit of relief rally once that shutdown is over with the government continuing resolution is signed probably at the end of this week. And then we think the bull gets going again after that relief rally. 

So, wrap it up. Economy's on firm footing, not running at top speed. They still need clarity on tariffs. Inflation is hurting everybody. It's not going away. It's still going to stay at 3% or higher. But stocks are still in a medium- and long-term bull; 'til next time.