Federal spending reached $6.8 trillion in FY 2024, with mandatory programs like Social Security ($1.4 trillion) and Medicare ($870 billion) dominating. Discretionary spending, including defense, comprises just 6.3% of GDP. With such entrenched spending allocations, cuts won’t come easily. Outlays for Social Security and Medicare are projected to surge as a share of GDP amid an aging population. Major reforms are politically treacherous, leaving fiscal deficits under immense pressure. Social Security, Medicare, and Medicaid account for nearly 70% of mandatory spending. With these programs largely “untouchable,” any meaningful budget cuts face steep political barriers. Outlays for Social Security and Medicare are projected to surge as a share of GDP amid an aging population. More S&P 500 stocks have reached new one-year lows, with the index near its high, which typically precedes a period of market weakness.

 

Source: SentimenTrader

 

From its 1996 peak to 2022, the number of publicly listed U.S. companies declined by 43%, in stark contrast to international markets.

 

 

Comparing historical asset price booms to the Magnificent 7 tech stocks:

 

Source: Alpine Macro

 

Treasury yields continue to climb.

 

 

Small-cap underperformance has intensified in recent weeks. The top ten stocks in the S&P 500 now account for 40% of the index’s market cap, reflecting worsening concentration.

 

Economy:

 

Consumer spending on durable goods surged in November,as Americans sought to front-run tariff-driven price hikes. Companies are also gearing up for higher tariffs. Durable goods orders fell more than anticipated in November, driven by a decline in aircraft production. Big tech capital expenditures are projected to continue rising over the next couple of years. Gains in real income and household wealth have supported consumption growth.

 

The Fed

 

Expectations for next year’s Fed rate cuts increased after softer inflation numbers were released last week.

 

Great Quotes

 

“One should train in three degrees of merit – generosity, a balanced life and developing a loving mind – those things will yield a long lasting happiness.” – Buddha

 

Picture of the Week

 

Pristine Lake, WA State

 

 

All content is the opinion of Brian Decker