THE DEAN’S LIST: Oil Takes The Wheel.

The S&P 500 slipped 0.47%, the Nasdaq Composite fell 0.71%, and small caps jumped 2.00%. That looks calm, but a sharp AI selloff on Thursday and an oil spike on Friday kept everyone on edge. The Single-Digit Millionaire portfolio, a model portfolio, lost 0.34% and held up about 0.1 percentage point better than the S&P 500 fund it owns. Gold had the biggest percentage loss among its holdings. The scorecard is at the bottom of this letter.

Dean’s note:
Stocks ended the week close to where they started, and that hides a lot. Equal weight, which gives every company the same weight, gained 1.14%. The Russell 2000 gained 2.00%. Communication services lost 4.36% and the Nasdaq Composite lost 0.71%. Small caps and equal weight outperformed, which is consistent with the rotation we have been expecting. That is why we hold equal weight and small caps next to the S&P 500 fund.

Thursday was the ugly day. The S&P 500 fell 1.2% to 7,663.43, its worst day since July. The Nasdaq Composite fell 2.6%. Meta had reported Wednesday after the close and investors were annoyed by its gargantuan AI spending forecast. Everyone wondered where the money comes from. Revenue grew 26%, and the stock fell 7.0% Thursday. What does each new dollar of capital spending earn? Monday, Meta answered part of the funding question. It announced about $35 billion of stock and preferred offerings and a planned program of up to $60 billion more in non-voting shares, starting as early as 2027. 

Then oil took the wheel. December Brent settled Friday at $116.72, the highest settle since April 29. Friday’s rally came as worries about escalation with Iran grew and a tanker was struck by an unknown projectile near Oman. Saturday, the Houthis, Yemen’s Iran-aligned group, claimed new attacks on Saudi energy sites. Saudi officials have not confirmed damage to oil facilities. Last week I wrote that if crude stayed near $100, we would probably miss our inflation mark. WTI settled at $103.27. This continues to annoy our inflation call.

The bond market sent two seemingly conflicting messages. Long-term Treasury yields fell Thursday as tech sold off, which fits a run to safety. They rose Friday alongside crude, which fits an inflation worry. Just shows you prices can be messy in the short-term, even with boring assets. It’ll be a while before we figure out if bipolar bonds are more worried about inflation or growth.

The Fed meets Tuesday and Wednesday, and the decision lands Wednesday, October 28. A hold is the base case. On Thursday, White House spokesperson Anna Kelly told ABC News, “The United States will not be attacking Iran at any time prior to the midterm elections.” Friday, President Trump said, “We may do another little Epic Fury, or they'll agree.” Sunday, Qatari mediators traveled to Tehran. 

A calm start, a hot oil Friday, and a Thursday that reminded everyone what AI spending costs.

Monday (October 19): The S&P 500 rose 0.4% to 7,690.73 and the Nasdaq Composite rose 1.1% to 26,430.89. The Houthis said they hit Saudi targets, including an Aramco site at Yanbu and the Shaybah oilfield. 

Tuesday (October 20): The Russell 2000 gained 1.7% to 2,773.42. The S&P 500 rose 0.3% to 7,712.57 and the Nasdaq Composite was flat. Brent touched $111 in the morning, its highest since May, then fell below $109.

Wednesday (October 21): The S&P 500 rose 0.6% to 7,757.17, within 0.8% of its record. The Nasdaq Composite rose 1.1% to 26,702.86. SpaceX and Capital One posted strong profits and Netflix fell on growth worries. After the close, Tesla and Meta reported.

Thursday (October 22): The S&P 500 fell 1.2% to 7,663.43 and the Nasdaq Composite fell 2.6% to 26,008.86. Meta fell 7.0%. Weekly jobless claims came in at 194,000 against 200,000 expected. Treasury yields fell, and Brent hit its highest level since May.

Friday (October 23): The S&P 500 fell 0.5% to 7,623.68, the Nasdaq Composite fell 0.2% to 25,955.34. Energy was the only clear gainer. Brent settled at $116.72. Chips bounced. AT&T and T-Mobile dropped about 8% on a report about SpaceX.

Monday : Stocks opened higher, with the S&P 500 up about 0.7% mid-day. Oil fell about 2% after Qatari mediators traveled to Tehran Sunday. Iran called Washington’s demands “complete surrender.” Meta announced about $35 billion of offerings to fund AI spending, and Anthropic filed to list on Nasdaq under the ticker ANT. Verizon reported 406,000 postpaid phone net additions and raised its outlook, though revenue of $34.3 billion missed estimates. 

Thursday gave the AI worry a number. The Nasdaq Composite had its biggest one-day drop since June, and the chip group, measured by the SMH fund, fell 6.0% in a single session. It was the second straight week of chip losses. Lam Research, which makes chipmaking equipment, lost 12.82% on the week after guidance. CoreWeave’s five-year credit default swap, the price of insuring its debt, stood at 1,129 basis points Friday. Traders treat 1,000 as distressed. That is a price for risk, not a default.

Meta reported Wednesday after the close. Revenue rose 26% to $64.6 billion, above estimates of about $63.3 billion, and advertising revenue also grew 26%. Profit took a $9.89 billion legal charge tied to its August agreement with 52 state attorneys general. The charge is recorded now, while the payments run over time. Meta raised the floor of its 2026 capital-spending guidance to $135 billion, narrowing the range to $135 billion to $145 billion. Free cash flow was negative $2.12 billion for the quarter. Shares fell 7.0% Thursday and 9.4% on the week.

Dean’s note:
Revenue grew 26% and the stock fell. So the story is spending, cash flow and expectations, not sliding demand. Keep three questions apart. Meta’s advertising growth shows strength in its core business. Whether its AI investment earns an adequate return is a separate question, and that is what the market asked Thursday. And what does the price already assume? That changes every day. Our view is that this is a repricing of returns on capital spending, not a verdict on AI itself.

Microsoft, Alphabet and Amazon report this week, so expect more of the same questions. We have watched capex booms before. In our experience the technology usually wins. The people who paid the wrong price to finance it often do not. But Zuckerberg is the founder at the helm; one of only a handful out there capable of true brilliance. We don’t recommend betting against him.

December Brent settled Friday at $116.72, up 3.1% on the day, 6.2% on the week, and the highest settle since April 29. December WTI settled at $103.27, up about 4.3% from last Friday’s December settle of $99.02. Friday’s gains came as escalation worries grew and a tanker was struck by an unknown projectile near Oman. Then Saturday, Houthi spokesman Yahya Saree listed Aramco’s Yanbu facilities, the Rabigh refinery, pumping stations and the East-West Pipeline as targets. No Saudi official or independent source has confirmed a hit on oil infrastructure. The Saudi-led coalition said it intercepted missiles aimed at Yanbu and Taif.

Yanbu matters because of the pipeline. The East-West Pipeline has capacity of about 7 million barrels a day, including about 2 million for domestic refineries, and it is Saudi Arabia's main route to the Red Sea. Capacity is not measured export flow. ING analysts told Reuters that the risk premium would likely fade slowly if oil keeps flowing. Gasoline drove more than half of September’s monthly CPI rise, so oil sits at the center of the inflation story, though food, services, shelter and last year’s base effects matter too.

Dean’s note:
Crude is stubbornly above $100. We still think inflation cools, but maybe later, and only if oil comes down and barrels visibly keep moving. The market is pricing a heck of a risk premium based on sabre rattling that may or may not turn out to be real. Nobody knows. Watch the barrels, not the statements.

The Fed meets Tuesday and Wednesday. The statement lands Wednesday, October 28, at 2:00 pm ET, with Chair Kevin Warsh’s press conference at 2:30. The funds rate sits at 3.75% to 4.00% after September’s hike. Futures priced about a 90% chance of a hold at Friday’s close, and Kalshi, a prediction market, showed 92%. For December, CME FedWatch implied about 71% for a hike, and Yardeni Research put it near 84%. 

The data lean hot. S&P Global’s flash composite PMI was 57.6, down from 58.4, and its output price gauge rose to 59.8. Manufacturing hit 56.0, the highest in 53 months. The University of Michigan’s October reading put one-year inflation expectations at 4.7% and five-to-ten-year expectations at 3.5%. Housing is the soft spot. Starts fell 5.2% to a 1.221 million annual pace against 1.305 million expected, and builder sentiment sank to its lowest since June 2012. Third-quarter GDP and September PCE both arrive Thursday, October 29, the day after the decision. Big help they will be! 

Dean’s note:
Precision pays here. A hold is the base case. A hold is not a cut, and the December odds say the live debate is about a hike. Our read is that Warsh keeps December open and gives nothing away Wednesday. A 57.6 PMI and 4.7% inflation expectations are what a hawkish Fed worries about. Weak housing is what rate-sensitive sectors feel first. Both can be true at once, and I think they are. The Fed targets PCE inflation. Thursday’s September report arrives after this meeting and will feed the December outlook alongside jobs, CPI, and other evidence. Looking at one data point can make you myopic, so be careful.

Friday, U.S. envoy Tom Barrack told commentator Mario Nawfal that a strike on Iran could come as early as the weekend, answering “Absolutely.” He added that Washington remained open to a deal. Hours later Trump said, “We may do another little Epic Fury, or they’ll agree.” The day before, the White House had told ABC News it would not attack before the midterms. Press reports citing the Financial Times describe the talks as stalled. Sunday, Trump told reporters, “There will not be a strike today,” and no U.S. strike had been reported as of Monday morning.

Saturday, Iran’s Revolutionary Guards Navy said two supertankers carrying over 4.5 million barrels hit mines on a southern route Tehran considers unauthorized. That claim had not been independently confirmed, and monitors have rejected similar claims before. Noam Raydan, a senior fellow at the Washington Institute, counted at least 28 attacks on ships in the Strait of Hormuz region in October through October 22, per Stars and Stripes, against 19 confirmed in March. One analyst, Andrew Lipow, said oil transit out of the strait has increased but could change at any minute.

Dean’s note:
We think a brokered arrangement that reopens the strait before the midterms is possible, and we still rate it less likely than not, meaning below 50%. By reopen, I mean commercial transits measurably returning toward normal. This week gave us threats and a calendar. A pause that lasts through the election would not, by itself, establish a durable agreement.

Evidence that would raise the odds: a public agreement on sequencing, and rising weekly transit counts from independent monitors. Evidence that would lower them: resumed U.S. strikes, or confirmed damage to Saudi export capacity. I have seen deadlines focus minds before. I have also seen them harden positions. The point is a deal can happen at any moment, even when it looks the least likely.

Tesla reported Wednesday after the close. Revenue was $28.05 billion, flat from a year ago and about in line with the $28.06 billion consensus, per Electrek citing FactSet. Adjusted earnings of $0.48 a share beat $0.45. GAAP profit fell 43% to $787 million. Gross margin rose while operating margin fell to 2.6% from 5.8%. Free cash flow plunged as capital spending more than doubled to $4.73 billion. Deliveries of 486,532 fell 2.1% from a year ago and beat the 461,974 consensus, and automotive revenue fell 3%. 

American Express raised its profit forecast Friday and said it will cut about 5% of its workforce. The stock fell 3.7%. Telecom took a different kind of hit. AT&T and T-Mobile each fell about 8% on a report that SpaceX is seeking cell sites for a fourth wireless carrier. Crown Castle rose 9.1% and American Tower 4.1%. 

Dean’s note:
Tesla's deliveries beat forecasts but fell from a year earlier, and automotive revenue fell too. Operating margin shrank, and free cash flow fell as spending doubled. The initiation of Elon’s quest to hide Tesla inside of SpaceX is no big mystery for us. Until the robot future is upon us, it can no longer see the light of day on public markets. Amex tells a different story. It raised its forecast and the stock fell. The telecom drop is a reaction to a report. Wait for the filings. A great company and a great stock are not the same thing, and a good headline and a good quarter are not the same either.

A quiet index can hide a loud week. Know which evidence you are waiting for.

Here is what I am watching this week.

•   The Fed on Wednesday at 2:00 pm ET. Listen for how Warsh talks about December and about oil.

•   Microsoft and Alphabet report Wednesday after the close, and Amazon reports Thursday. After Meta, every capex line will be read as a bill.

•   Thursday’s GDP and PCE, and whether Saudi officials confirm or deny any damage to export sites. Confirmation matters more than another claim.

•   The long bond. If yields rise while stocks fall, the adult in the room is saying something different from last week.

•   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 19.45. It is the market’s expected 30-day volatility for the S&P 500, expressed as an annualized percentage and implied by option prices. It estimates the size of moves, not their direction, and it does not directly measure oil or credit risk.

•   Midterms on Tuesday, November 3. Markets do not wait for a vote, and neither should your plan.

Mix matters. Through Friday this year, equal weight is up 13.0%, and small caps are up 12.0%, ahead of the S&P 500 fund’s 11.4%. Developed foreign stocks (our IEFA holding) trail at 6.9%. These are figures directly from the portfolio dashboard. This week, equal weight gained 1.14% and small caps gained 1.96%, while the Nasdaq-100 Index fund lost 0.79%. Despite the headlines about a few huge stocks, diversification is doing its work. No single sleeve leads every week, which is the reason to own several.

- Dean

P.S. Gold fell 4.1% in a week when a war was in the headlines and oil jumped 6%. That surprised plenty of people. Gold does not reliably rise whenever geopolitical risk increases. It often trades against real yields, the yield left after inflation. But that does not explain this week. Treasury’s 10-year real yield fell to 2.66% Friday from 2.74% a week earlier, which would normally help gold. A stronger dollar, selling to cover losses elsewhere, or a fading war premium could all have played a part, and I cannot tell you which. We own gold as ballast, at a 5% weight. This week it had the biggest percentage loss in the portfolio, and it can fall hard.

And one more thought. Size the dip. The S&P 500 sits about 2.5% below its record close, and the Nasdaq Composite about 6.0% below its October 6 record of 27,599.79. A 10% drop is the conventional line for a correction, and neither index is there. Chips have gone further, and that is one group. Do not confuse a correction in one group for a collapse in the market. Small caps and equal weight outperformed again, which is consistent with rotation rather than money leaving stocks. When the calendar is this crowded, noise starts to look like signal. Stay invested. Stay selective. That is our approach, not advice for your situation.

👉 Model portfolio returns, using the portfolio dashboard’s data through October 23 with four stored closing prices corrected to market closes (VOO, IWM, RSP and IAU): the portfolio fell 0.34% for the week, against 0.43% for VOO, the S&P 500 fund that makes up half of it. Small caps (up 1.96%), equal weight (up 1.14%), and cash (up 0.08%) helped. Gold (down 4.07%) had the largest percentage loss, and weighted by size, it and VOO were the two largest drags, at about 0.2 percentage points each. Emerging markets (down 1.37%), developed foreign stocks (down 0.88%), and Ethereum (down 0.79%) also held it back. For the year, the model is up 8.19% against 11.39% for VOO, a gap of 3.20 percentage points. These are not an investor's realized returns. Among our holdings, equal-weight small caps and emerging markets lead VOO this year. Diversification does not eliminate losses in a broad selloff. Gold can fall hard, and this week it did. 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 in the 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.