Good morning to the smartest corner of the internet. The US Bureau of Labor Statistics forecasts October Job Openings and Labor Turnover Survey (JOLTS) to rise 7.52 million.

That report is due at 10 a.m. ET this morning — before that, let’s talk froth.

UBS: 4 reasons markets aren’t frothy

The S&P 500’s 28% year-to-date surge hasn’t yet crossed into froth territory, according to Jason Draho, head of asset allocation in the Americas for UBS Global Wealth Management. 

He anticipates another 9% climb for the index before the end of 2025 based on fundamentals rather than animal spirits. 

“While there are isolated signs of market frothiness, they are far from broad and it will likely take awhile before it’s accurate to describe market sentiment [as] exuberant or euphoric,” Draho wrote in a note to clients Monday. 

Despite record-setting gains in 2024 and rising risk-taking among investors, Draho outlined four reasons why markets are still grounded. 

1. Disconnect with the real economy

As excitable as investors seem about equities, crypto, and leveraged ETFs, bullishness stops there. 

Consumer and business sentiment indicators are still below peaks from prior cycles, and inflation continues to cut into the affordability crisis for many Americans.

That subdued sentiment, Draho said, is also reflected among small businesses facing high financing costs and restrained growth, which run counter to past market booms. 

“While this isn’t a necessary condition for market frothiness, investor euphoria is hard to achieve and sustain when public sentiment about the economy is not similarly optimistic,” he said.

2. Measured positioning

Investors may be bullish, but their positioning suggests relative constraint, the UBS team said.

The bull-to-bear ratio from the American Association of Individual Investors, for one, just fell to a six-month low, and the VIX remains muted. 

Plus: 

3. Quiet private markets

Another strike against the frothiness argument: Neither IPOs nor mergers and acquisitions have ramped up to levels seen during past market bubbles. 

Generally, dealmaking is a sign of confidence in a company’s standing within the economy. A lukewarm market for deals suggests the opposite, Draho explained. 

“M&A has increased in 2024,” he said, “but the total value of all deals as a percentage of total market capitalization remains below the historical average.”

4. Minimal speculation

Unlike past speculative booms, the market today lacks transformative narratives that justify extreme valuations, Draho said. 

The AI theme is an obvious candidate here, but Magnificent Seven stocks have lagged in recent months, just like semiconductor names.

Even Nvidia and its meteoric valuation can indeed back it up with astronomical profits and earnings. 

Meanwhile, unprofitable tech stocks that skyrocketed at the start of the pandemic remain well below their peaks, further underscoring the absence of speculative excess.

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Elsewhere:

🎁 December starts with new record highs. Both the Nasdaq and S&P 500 closed at all-time levels on Monday, with investors focused on a slate of jobs numbers in the week ahead. Big Tech names also climbed, with Apple rising to a fresh record, too.

🏦 Fed officials sounded off Monday. Fed Governor Chris Waller said he’s inclined to vote for another rate cut later this month, though incoming data could lead to a pause. Meanwhile, Atlanta Fed President Raphael Bostic said he’s still undecided on whether another rate cut is the move for December. (WSJ)

🥾Intel’s CEO is out. The company’s board lost confidence in chief executive Pat Gelsinger and forced him out of the chipmaker. He was reportedly given the option to retire or be removed, and he chose to announce the end of his career at Intel. The firm’s executive VP and CFO have stepped up as interim co-CEOs. (Bloomberg)

Interview:

I sat down with Anthony Pompliano to discuss what assets could outperform bitcoin in 2025, the potential pitfalls to the crypto outlook, and how the Fed eliminated risks for investors:

Rapid-fire:

Last thing:

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