THE DEAN’S LIST: Record Stocks, Restless Bonds.

Open your brokerage app and last week looks calm. The S&P 500 gained about 1.15% and set its first record close since August. Look one layer down. Chips fell about 4%. The 10-year Treasury yield touched its highest level since 2002 in intraday trading. By Saturday, Riyadh’s airport was shut after an attack Saudi officials blamed on the Houthis. Our view on Hormuz stands. The Dean’s List portfolio gained 0.27% and trailed the S&P 500 fund it holds. The scorecard is at the bottom of this letter.

Dean’s note:
If you own an S&P 500 fund, last week paid dividends. The index finished at 7,811.54 and set a record close on Tuesday. Underneath, leadership shifted. One weekly review had utilities up about 4%, consumer staples 3.6%, and health care 2.8%. It had the chip index down about 4.3%. The equal-weight S&P 500, which gives every company the same weight, beat the regular index after losing ground most of September.

The bond market had the loudest week. The 10-year yield touched about 5.35% intraday on Wednesday morning, its highest level since 2002. Then a $39 billion auction cleared at 5.30%, and yields eased. The 10-year finished the week down 4 basis points. Records in stocks next to a 24-year high in the 10-year yield look like a contradiction. They are not. Stocks reflect expected profits and the rate used to value them. A long yield reflects the expected path of short rates, plus a term premium, which is the extra pay investors want for holding longer debt. Strong profit expectations can lift stocks while those forces lift yields. Higher yields can also weigh on stock valuations, so the two markets can pull on each other.

The Fed did not meet, but its minutes spoke. All participants backed the September hike, and most said another would likely be appropriate by year-end. The dive below sorts out who said what.

Thursday was the week’s sharpest drop for tech. The Financial Times reported that OpenAI told investors its annualized revenue was about $50 billion at the end of September, below figures near $68 billion that had circulated. The Nasdaq fell about 1.3%, and Nvidia lost 2.9%. The third dive separates the measures that got mixed together.

Then came the weekend. A Houthi attack on Riyadh’s airport Saturday killed at least 13 people, and Brent sits near $106 this morning, a two-week high. Iran says the U.S. reply to its seven conditions is insufficient, and also says Washington accepted some of them. Public statements are not an agreement. The fourth dive names what would change our Hormuz view.

One standing view of ours faces a test. We expect inflation to cool in the second half. Last week’s surveys pushed the other way. The ISM services prices index, a survey reading and not an inflation rate, hit 74.0, its highest since July 2022. Michigan’s year-ahead inflation expectation, what consumers expect and not what prices did, rose to 4.7%. September CPI arrives Wednesday.

Records early, a bond scare midweek, and a weekend that put oil back in charge.

Monday (October 5): Stocks opened the week higher. The S&P 500 rose 0.66% to 7,773.99, and the Nasdaq Composite closed at a record 27,477.31. ISM services came in at 54.9, down from 55.4 in August, with its price gauge at a four-year high.

Tuesday (October 6): The S&P 500 gained 0.58% to a record 7,818.93, its first record close since August. The Nasdaq Composite rose 0.45% to 27,599.79, a second straight record. Google signed a 20-year nuclear power deal with Constellation Energy, and Constellation shares jumped.

Wednesday (October 7): The Fed’s September minutes arrived at 2 pm ET. The 10-year touched about 5.35% in the morning, then a strong auction pulled it back. The S&P 500 slipped 0.22% to 7,801.77, and the Russell 2000 lost 1.31%.

Thursday (October 8): The OpenAI report hit tech. The Nasdaq fell 1.3% and the S&P 500 fell 0.5%. Weekly jobless claims fell to 197,000. Waller and Musalem both spoke on rates, and a $22 billion 30-year auction cleared at 5.62%. Brent jumped about 4% on tanker attacks, reports that the U.S. might resume major operations in Iran, and Hurricane Isaias. Late that night, Trump said the U.S. will not attack Iran before the midterms.

Friday (October 9): The S&P 500 rose 0.6%. SpaceX’s spectrum deal sank T-Mobile, AT&T, and Verizon, and Humana rose about 12% on better Medicare Advantage ratings. Delta cut its outlook on fuel costs. Michigan sentiment fell to 46.3. Trump said Russia will supply diesel, and diesel futures dropped about 4.6%.

Monday (October 12, yesterday): As of about 11:50 am ET, the S&P 500 is flat, and the Nasdaq is down about 0.2%, with memory chip stocks lower again. The bond market is closed for Columbus Day. The Riyadh airport toll has risen to 13, and CBS counts at least 20 killed in a week of Houthi attacks on Saudi airports. Saudi Energy Minister Prince Abdulaziz bin Salman said the kingdom’s response must be “equally serious.” Trump said Saturday the U.S. “may” join strikes on the Houthis, then said Sunday that Saudi Arabia can defend itself. Big banks report Tuesday.

The 10-year ended Friday at 5.24%, down from 5.28% a week earlier. Its daily peak was 5.31% on Monday. The 30-year closed at 5.60% against 5.63% and peaked at 5.67% on Wednesday. The 2-year ended at 4.80%, so the 10-year sat 44 basis points above it. Two auctions tested demand. The $39 billion 10-year sale cleared at 5.30% with a bid-to-cover ratio of 2.77. The $22 billion 30-year sale cleared at 5.62% with a bid-to-cover of 2.54 against an average of 2.41. 

Dean’s note:
A long yield carries expected short rates, inflation expectations, term premium, and Treasury supply all at once. A good auction shows demand for that issue at those terms. It does not show 5.6% is a fair price or that the debt path is sustainable. We think the long end wants more pay for lending to a government that keeps borrowing, and for the risk that inflation outlasts the Fed’s projections. Stocks can set records meanwhile if profit expectations hold. Both markets can misprice risk. Neither one has to give in.

The September minutes show a committee that agreed on direction and not on timing. All participants supported the quarter-point hike to 3.75% to 4.00%. Most said another increase would likely be appropriate by year-end, with decisions depending on incoming information. Many said the longer energy prices stay elevated, the greater the risk of broader price pressure. Some worried that after more than five years above target, inflation could start to shape wage and price setting. Several said high energy costs weigh most on lower- and moderate-income households.

One passage touches on our AI view. Participants said the AI buildout is boosting business investment and could push demand ahead of supply over the medium term, adding inflation pressure. Thursday, Governor Christopher Waller spoke about additional hikes and said there is “some flexibility about when those hikes will occur.” St. Louis Fed President Alberto Musalem, who does not vote this year, said that if getting inflation back to target takes 18 months, rates ought to go up further. He said he has not prejudged October.

Dean’s note:
Precision pays here. A hike by December is where most officials leaned in September. October 28 is live and not a favorite. CME FedWatch readings in the high teens to about 20% have circulated, and they move daily. The next decisions land October 28 and December 9. Now our inflation call. We expect headline CPI, year over year, to run below August’s 3.4% by the December report. Wednesday’s September CPI cannot settle that, but it is evidence. Previews put it near 3.6% to 3.7% headline year-over-year, up from August. That would lean against us. Our AI view also has limits. We think AI can lift profits at some firms without adding jobs there. We do not claim that is happening across the whole economy. The minutes add a wrinkle, since the same buildout can lift prices.

On Thursday, the Financial Times reported that OpenAI told investors its annualized revenue was about $50 billion at the end of September. A figure near $68 billion had circulated since a September 29 report. Oracle fell about 5% and CoreWeave about 8%. Nvidia lost 2.94% to $230.48. The PHLX semiconductor index lost about 4.3% on the week.

Three measures are tangled here. A run rate takes a short stretch of revenue and multiplies it up to a year, so it is not revenue earned. OpenAI’s annualized run rate grew 77% during the third quarter. Reporting also says partner sales are counted differently across the two figures, with one appearing to include revenue that flows through partners and the other reporting net. A separate report says OpenAI expects about $70 billion in annualized revenue by year-end. 

Dean’s note:
Keep two ideas apart. Our AI view is about profits and jobs. This story is about how fast demand for AI computing grows. A $50 billion run rate is a very large business, and 77% run-rate growth is not a stall. The gap between the two numbers does not, by itself, show weaker demand. Investors had fair reasons to reassess. The figures may not be comparable, funding needs are large, and valuations were high. A great company and a great stock are different things, and one week of news does not settle either.

Late Thursday, President Trump wrote on Truth Social, “We will not be attacking Iran at any time prior to the midterm elections.” He also said the U.S. is having productive discussions with Tehran. On Sunday, Mohsen Rezaei, a senior Iranian security official, told state media the U.S. reply to Iran’s seven conditions was “insufficient.” He said Washington accepted some of them and others remain unresolved. Monday, Iran’s foreign ministry said it is still reviewing the reply, and Foreign Minister Abbas Araghchi urged Saudi Arabia to pursue diplomacy. The U.S. reply has not been published.

The ships tell part of the story. Kpler data cited by CNBC showed crude transits through Hormuz averaging 8.5 million barrels a day for the week ending October 7, about 40% below normal. Over the weekend, the IRGC Navy said a supertanker hit a mine, and UKMTO reported a drone hit a tanker near Oman and another tanker was damaged in the strait. Those are claims from the parties and monitors involved. No independent party has confirmed who fired. CENTCOM said it disabled a cargo vessel to enforce the U.S. blockade. Brent settled Friday at $104.72, up 2.4% on the week.

Dean’s note:
Our forecast: a brokered arrangement that reopens the strait before November 3 is possible, and we rate it less likely than not, meaning below 50%. By reopen, I mean a measurable return of commercial transits toward normal, not a headline. This week gave the forecast something to work with. Trump said he will not strike before the midterms, which lowers one escalation risk and does not remove it.

Iran says the U.S. accepted some of its terms. It also gave the forecast less. Iran says talks will not proceed until its conditions are met, though that does not mean every channel is closed. The National reports the U.S. rejects joint Iran-Oman management of the strait. Saudi Arabia vows a response to the Riyadh attack, and Trump says he is looking at joining it. Evidence that would raise the odds: a public agreement on sequencing, and weekly transit counts rising. Evidence that would lower them: the Qatar and Pakistan channels breaking down, or another jump in ship attacks. Watch the transit counts, not the speeches.

Delta reported adjusted earnings of $1.72 a share Friday, below the range of estimates. Fuel expense rose 62% to $4.1 billion. Delta now expects 2026 adjusted EPS of $5.10 to $5.60, down from $6.50 to $7.50, and says its fuel bill will rise about $6 billion. CEO Ed Bastian said, “Demand remains strong.” The stock opened down about 2.9%.

The same day, SpaceX said it will buy Grain Management’s 800 MHz spectrum, in a deal CNBC puts at about $8 billion and that needs FCC approval. T-Mobile fell 13.3%, AT&T 9.8%, and Verizon 8.8%. SpaceX says it plans to launch a mobile service in late 2027. Some analysts expect real disruption to take longer than that date. AT&T CEO John Stankey called SpaceX’s plan to put small base stations at homes “not a viable strategy.”

Dean’s note:
Delta’s revenue grew 16%, and its adjusted operating margin fell to 9.4% from 11.1%. Fuel was the biggest pressure on that margin, and not the only one, since non-fuel unit costs rose too. That is mostly a cost story, with demand holding up on the numbers Delta gave. United reports October 20 and will show whether airlines can pass fuel through to fares. The carriers’ drop is a different story. Investors repriced the risk of a competitor roughly a year away. A spectrum deal alone does not build a network, but Elon is a scary adversary. This could be Uber vs. taxi, and we know who won that war.

Records and rate worries can share a week. Know which evidence you are waiting for.

Stocks set records, the 10-year touched a 24-year high, and a Saudi airport went dark over the weekend. Here is what I am watching this week.

•  The long bond. Both auctions cleared, and yields sit near 24-year highs. Our read is that supply and inflation risk matter here. 

•  Wednesday’s September CPI, our first test of the back-half inflation view. Fed Chair Kevin Warsh speaks at the IMF meetings in Bangkok late Thursday.

•  Hormuz transit counts. They say more than the speeches.

•  Tuesday’s bank earnings from JPMorgan, Goldman Sachs, Citigroup, and Wells Fargo. Earnings are evidence, so wait for them.

•  Where your plan, your cash flow, and your emergency reserves support it, a choppy week is not, on its own, a reason to stop contributing to your 401(k). The 2026 elective deferral limit is $24,500. If you are 50 or older, a standard catch-up of $8,000 is generally allowed. A super catch-up of $11,250 replaces it, taking the total to $35,750, but only if you turn 60, 61, 62, or 63 during 2026 and only if your plan permits catch-up contributions. If your 2025 Social Security wages from that employer topped $150,000, your catch-up generally has to go in as Roth. If your plan does not offer a Roth option, ask whether you can make catch-up contributions at all. Confirm your eligibility with your plan administrator.

The VIX closed Friday at 14.84. It is the market’s expected 30-day volatility for the S&P 500, implied by option prices and expressed as an annualized volatility percentage. It estimates the size of moves, not their direction and not the odds of a crash.

Returns across markets stay uneven. Through Friday this year, per the benchmark table on the portfolio dashboard, emerging markets are up about 22% and the Nasdaq 100 about 22.3%, ahead of the S&P 500 fund’s 14.1%. Small caps (13.3%), equal weight (11.2%), and developed foreign stocks (7.7%) trail it. Small caps led the S&P 500 fund a week ago and slipped behind it this week.

- Dean

P.S. The number I keep coming back to is 46.3. That is the University of Michigan’s preliminary October consumer sentiment index, down from 48.1 and below forecasts of about 47.6 to 47.8, depending on provider. Stocks sit near a record while households report a mood near a five-month low. Director Joanne Hsu said, “Frustration over cost-of-living continues to mount.” Stock ownership skews toward higher-income households, so both can be true. That is an inference, and survey data is noisy.

And one more thought. Ask which barrel. Friday, Trump posted that Russia will supply diesel, 300,000 tons first. Ultra-low-sulfur diesel futures fell about 4.6% to $4.73 a gallon, per DTN. Brent rose anyway. Sunday he posted an “energy ceasefire” between Russia and Ukraine. Ukraine’s President Zelensky told Axios it was “news for me,” and Moscow has not commented. Here is a split that looks like a contradiction and is not. Kpler counts crude moving through Hormuz about 40% below normal. Separately, Gulf exports excluding Iran ran at about 91% of prewar levels for crude and condensate in September, and about 60% for refined fuels including LPG. Those are different measures of different flows. Crude can recover while diesel stays tight. Prices can move on a post, and they can move back. Ask which barrel, and ask who confirmed it.

👉 On the portfolio dashboard, the portfolio rose 0.27% from October 2 through October 9, against 1.14% for VOO, the S&P 500 fund that makes up half of it. Those are the dashboard's own figures, and I have not independently audited its inputs.

For the week, the dashboard shows asset returns of ethereum down 7.19%, bitcoin down 2.47%, emerging markets down 1.17%, and small caps down 0.92%, against equal weight up 1.58% and gold up 1.18%. Those are asset returns, not weighted contributions to the portfolio, so a big move in a small holding can matter less than a modest move in a big one.

For the year the portfolio is up 10.41% against 14.11% for VOO, a gap of 3.70 percentage points. Among the portfolio’s holdings, only emerging markets lead VOO this year. Cash, gold, bitcoin, ethereum, equal weight, small caps, and developed foreign stocks all trail it. A mix of assets can help or hurt over any stretch. Owning several does not by itself lower the risk of a loss in a broad selloff. Gold can fall hard. Crypto can halve. Cash costs you when stocks run. Small caps and foreign stocks can lag for years. See every holding, every weight, and the reasoning behind them at My Single-Digit Millionaire portfolio.

This newsletter is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results. Consult with a qualified financial advisor before making any investment decisions.