Buffett Would Raise an Eyebrow at This

Key Takeaways

1. Rate cuts loom: The Fed and ECB are easing as inflation cools but growth softens.

2. Markets defy logic: Stocks hit highs even during the U.S. government shutdown.

3. AI bubble watch: Circular financing among Nvidia, CoreWeave, and Big Tech raises red flags.

4. Value holds firm: Defensive sectors quietly outperform amid pricey growth names.

5. Consumers tighten up: Spending shifts toward essentials as EU regulators pile on new rules.

The Federal Reserve now has a 66% chance of cutting rates by 25 basis points at its October 29 meeting. Inflation cooled to 2.8%, job growth softened, and the median year-end rate target slid to 3.6%. That’s central-bank-speak for “we’re worried, but not panicking yet.” Across the pond, the European Central Bank already took the plunge, lowering its deposit rate to 3.25%. Meanwhile, the Euro promptly slid into a mild depression, proving once again that currency traders have the emotional range of a toddler. Global inflation looks more manageable, but we’re still hovering above pre-pandemic levels — the kind of “better but not great” story that keeps markets twitchy.

In a twist only Wall Street could love, stocks hit new highs during the ongoing U.S. government shutdown. Apparently, nothing says investor confidence like a dysfunctional Congress. Defensive hedges and volatility plays are quietly back in vogue, but growth junkies haven’t noticed yet. The S&P 500 and Nasdaq’s resilience tells us that liquidity still trumps logic. Bonds, on the other hand, stayed calm, and the dollar drifted sideways — like it too is waiting to see if anyone remembers what fiscal responsibility means.

If you’ve ever wanted to watch financial déjà vu in real time, just look at the AI infrastructure deals. Nvidia is now backing CoreWeave with a $6.3 billion safety net, while CoreWeave turns around and inks $14 billion worth of contracts with Meta, OpenAI, and Microsoft — all using Nvidia hardware. That’s not just synergy, it’s a closed-loop system with more circular financing than a merry-go-round. Analysts are starting to use the “B word” again (bubble, not Buffett), and the comparisons to the dot-com era are uncomfortably accurate. When company A lends to company B so B can buy from A, someone’s eventually left holding the GPU bag.

While the AI crowd grabs headlines, value stocks continue quietly outperforming on fundamentals. Large-caps are trading about 3–4% above fair value, and the market’s top ten mega-cap AI names now make up a ridiculous 40% of total market cap. That’s not diversification; that’s an episode of “Who Wants to Be the Next Overvalued Darling?” Healthcare, energy, and real estate still look like the adults in the room — not flashy, but profitable and built to last. A modern value investor might call that “boring compounding,” but as Buffett would remind us, boring tends to pay the bills.

Oil’s sitting around $62 a barrel, and OPEC+ is taking its sweet time unwinding production cuts. U.S. output is at record highs, and renewables have officially overtaken coal for the first time ever — China and India led that charge, interestingly enough. Wheat’s drowning in oversupply, canola’s holding strong, and gold’s having its “main character” moment, up nearly 12% in September. In short: the energy world is slowly rebalancing, but traders are still treating it like a soap opera.

Global shoppers are in “do more with less” mode. The latest trend is toward hybrid, multi-use products — and secondhand luxury is suddenly cool again. With savings rates scraping decade lows, people are choosing practicality over brand slogans. At the same time, the EU’s new wave of tech and AI regulation is tightening the screws. Between the AI Act, the Data Act, and the Cyber Resilience Act, compliance teams have plenty to keep them busy. Maybe the real artificial intelligence here is figuring out how to read EU legal documents.

Here’s the bottom line: we’re in a market that’s both overconfident and uneasy at the same time. Central banks are easing, valuations are rich, and the hottest growth stories are now financed in circles. But the fundamentals haven’t changed — quality, durability, and real cash flow will always matter. As Buffett said, “You only find out who’s been swimming naked when the tide goes out.” Right now, the water still looks warm, but it’s definitely receding. Stay rational, stay patient, and don’t let the headlines do your thinking for you.

Happy investing!
Josh

The information is provided for educational purposes only and does not constitute financial advice or recommendation and should not be considered as such. Do your own research.