THE DEAN’S LIST: The Long Bond Took The Wheel.

The Fed did not meet this week, but the 10-year Treasury yield kept making everyone uncomfortable. The 30-year closed Friday at its highest since 2004. The S&P 500 still gained about 1.2%. Two weeks ago, the front end took the hike. This week, the long end took the wheel back. The Single-Digit Millionaire portfolio had a quieter week than the index, and the scorecard is at the bottom of this letter.

Dean’s note:

There was no new Fed decision this week, but the bond market shifted expectations all on its own. The 10-year yield rose from 5.01% to 5.17%. While the entire curve moved higher, stocks took it in stride. The Nasdaq set record closes on Monday and Tuesday and finished the week up about 2.1%. This is the warm blanket investors get to hug for now.

Two weeks ago, the front end did the moving, because the Fed had just hiked and the 2-year was repricing for more. This week the long end led. A 30-year yield carries expected short rates, growth, inflation expectations, term premium, and Treasury supply all at once, and one week cannot pull those apart. Our read is that Wednesday’s hot business survey and a hawkish speech from Fed Governor Michael Barr gave investors a reason to demand more. That is a house view, and the first dive lays out the case.

Now on to Hormuz. Since Edition 34, our base case has been a brokered deal to reopen the strait before the November midterms. This week it lost some ground. On Saturday, President Trump told reporters he had rejected Iran’s seven-day proposal. The Wall Street Journal, citing officials it did not name, reported he expects a new bombing campaign after the November midterm elections. So a pre-midterms deal is now less likely, but not totally ruled out. We know how negotiations can flutter between triumph and disaster before a positive outcome.

Three other things moved this week, and each one gets a dive. Meta’s new AI agent, Muse, took off. A survey of American businesses hit its strongest reading in over five years, while consumer sentiment slid to a four-month low. And Costco and Nike reminded us, from opposite ends, why the line item matters more than the headline.

Five sessions, no Fed meeting, and a bond market that did most of the talking.

Monday (September 21): Stocks rallied as oil kept sliding and yields eased. The S&P 500 rose 1.5% to 7,764.70, within about 0.4% of its record. The Nasdaq jumped 2.3% to a record 27,122.09. Meta rose about 11% as its Muse AI agent sat atop the app charts.

Tuesday (September 22): The Nasdaq notched a second straight record at 27,244.28 while the S&P 500 finished flat. Stories about the stock market being in trouble if it not for the Mag 7 are back in fashion. Oil fell after reports that Iran could reopen the Strait of Hormuz within seven days if Washington eased military pressure. At the UN, Trump said Iran was stalling to see how he does in the midterms, and that he would give the election no credence when it comes to Iran.

Wednesday (September 23): S&P Global’s flash composite survey hit 58.4, its highest in more than five years, and Governor Barr said further policy adjustments are likely to be needed. The 10-year yield rose to 5.11% and the 2-year to 4.85%. The S&P 500 fell 0.8% and the Nasdaq fell 1.1%. Oil turned higher.

Thursday (September 24): Yields kept climbing. The 10-year reached 5.18% and the 30-year 5.47% in the Treasury's daily data. Stocks were flat. Oracle fell about 5% after issuing a force majeure notice on its New Mexico data center project. WTI settled at $94.61 and Brent at $106.60. After the close, Costco reported its fiscal fourth quarter.

Friday (September 25): The S&P 500 rose about 0.5% to 7,743.41 and the Nasdaq about 0.5% to 27,068.72. The University of Michigan final September sentiment reading fell to 48.1. Bank of America cut Nike to Underperform. Oil fell more than 2%, with WTI settling at $92.41 and Brent at $104.32. The Saudi-led coalition said it intercepted Houthi drones headed for Riyadh.

Monday (September 28): This is the first full session since Trump said he rejected Iran’s proposal. Saudi Arabia also said it intercepted another Houthi missile over the weekend. Oil and stock futures were still finding their level as this went out, but stocks were pointing lower as yields rose again.

In the Treasury’s daily constant-maturity data, the 10-year yield rose from 5.01% on September 18 to 5.17% on Friday. The 30-year rose from 5.34% to 5.49%, its highest since 2004. The 2-year rose from 4.76% to 4.81%. The gap between the 10-year and the 2-year widened to 36 basis points from 25.

Two things landed on Wednesday. S&P Global’s flash survey showed the fastest business growth in over five years with inflationary undertones, and Governor Barr said further policy adjustments are likely to be needed. Market odds of an October hike rose with them. Central Bank Watch put those odds near 62% on Friday, and other trackers ran closer to 70% midweek.

Dean’s note:
We have been telling you the long bond is the one to watch, and this week it moved on its own. A long yield carries expected short rates, growth, inflation expectations, term premium, and Treasury supply all mixed together. The front end did its Fed repricing two weeks ago. This week’s steepening looks more like investors asking to be paid for stronger growth, stickier inflation risk, and a lot of long-dated supply.

Looking at it day by day can make you myopic, so be careful. The market has spoken. Equal weighted S&P 500 and Russell 2000 have both given back about 5% from August highs. Nothing to panic over just yet, but worth watching. Small caps have now given back all their year-to-date outperformance versus the S&P 500.

Iran’s foreign minister, Abbas Araghchi, offered a plan to reopen the Strait of Hormuz within seven days if the US lifted its naval blockade, ended oil sanctions, and released about $12 billion in frozen assets. On Saturday, President Trump told reporters, "They have made a proposal, and I rejected it." Separately, the Wall Street Journal, citing officials it did not name, reported that he expects to carry out a new bombing campaign after the November midterm elections. That second part is not on the record.

Two things have not changed. Talks are still running through Qatar. And on September 19, Admiral Brad Cooper of US Central Command said crude, cargo, and LNG volumes over the prior two weeks were higher than at any point in the past six months. That compares the strait with its own disrupted recent past, not with normal prewar traffic.

Dean’s note:
Here is the honest version. Our confidence in a deal before the November 3 midterms is lower than it was a week ago. The rejection is on the record, and the reported strike plan points past Election Day. What would move us back is sequencing, a public agreement on who goes first between blockade relief and reopening the strait.

What would push the call out further is renewed strikes or a clear drop in transit. Until one of those shows up, we keep doing what we have done since July. Watch the transit counts and the war-risk insurance premiums, not the leaks.

Two weeks ago, the heads of Anthropic and OpenAI called for slowing frontier AI development, and chip stocks sold off. This week, Meta’s Muse agent held the top spot on Apple’s US App Store, where it has sat since September 18. Sensor Tower estimated more than 3.4 million downloads as of Thursday. Meta rose about 11% on Monday alone.

On Thursday, Nvidia’s Jensen Huang and Tesla’s Elon Musk attended a White House state dinner. Presidents Trump and Xi also agreed to set up a new AI safety channel, while making little progress on trade.

Dean’s note:
Downloads are not usage, and usage is not profit. Muse is early, and the count depends on who is counting. My read is that the dinner signals the administration wants the chip build-out to keep going. That is an inference from access and attention, not a spending commitment.

The bigger lesson is the whiplash. In two weeks, the mood swung from cautious chief executives to a hit app and a state dinner. The trade still rests on a handful of companies spending at an extraordinary rate. That is not a reason to avoid it. It is a reason to know exactly what you own inside it.

S&P Global’s flash composite reading rose to 58.4 in September from 56.0 in August, the fastest growth in over five years. The same release showed hiring at its strongest pace since June 2022 and input-cost inflation at its highest since October 2022, driven by fuel and transport. The firm’s chief business economist said the data point to roughly 4% growth for the third quarter.
Later that week, on Friday, the University of Michigan’s final September sentiment reading fell to 48.1 from 51.7 in August. Year-ahead inflation expectations rose to 4.6% from 4.0%, the highest since June.

Dean’s note:
These are different measures, not rival verdicts. Firms report more orders and more hiring. Households report more worry about what things cost. Both can be true, and my read is how the fuel bill connects them. This survey also complicates two of our standing views. Faster hiring cuts against the idea that AI lifts profits without adding jobs, at least this month. Hotter input costs cut against inflation cooling in the back half. One flash survey does not settle either one, and we are not dropping them on a single print. But it is the strongest pushback we have seen in a while, and October’s numbers now matter more.

Costco’s fiscal-year net sales rose 10.1% to $297.2 billion. Comparable sales rose 8.4%, or 6.6% with gas prices and currency stripped out. Full-year earnings per share rose to $20.76 from $18.21. Fourth-quarter earnings per share of $6.75 included a net benefit of $0.15 per share from tariff refunds, after the company reinvested part of them in member value.

Bank of America cut Nike to Underperform from Neutral and lowered its price target to $30 from $47. The bank pointed to North American wholesale growth running ahead of sell-through, meaning shipments to stores outpacing what shoppers actually buy, and it now expects negative sales growth through fiscal 2027.

Dean’s note:
Read the line item, not the headline. At Costco, the sales growth and the tariff refund are two separate things. The refund helped earnings per share. It did nothing for comparable sales, and it will not repeat. At Nike, shipments running ahead of sell-through is a demand signal as much as a company problem, so I would not pin it on management alone. A great company and a great stock are not the same thing. Nike is a reminder of what happens when a turnaround takes longer than the share price assumed.

No Fed meeting, a jumpy long bond, a rejected Iran proposal, and stocks still finished higher. Here is what I am carrying forward.

• Watch the 30-year. It closed at 5.49%, its highest since 2004. Our read is growth and supply as much as policy. We can’t read the bond market’s mind.

• October 28 is live. That is the next scheduled Fed decision, and the odds of a hike rose this week. Our base case is still one more move and then a long pause.

• Hormuz moves from base case to live possibility. We will tell you plainly if the evidence turns back, and we have told you what that evidence would look like.

• Downloads are not profits. Muse is a real hit so far. Judge it by usage and revenue over the next few quarters, not by app rankings.

• The business survey complicates our views on jobs and inflation. We are not dropping them on one print. We are watching the next ones closely.

• Where your plan, your cash flow, and your emergency reserves support it, a jumpy bond market is not, on its own, a reason to stop contributing to your 401(k). The 2026 elective deferral limit is $24,500. A super catch-up of $11,250 takes 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 prior-year wages from that employer topped $150,000, your catch-up generally has to go in on a Roth basis where the plan offers it. Ask your plan administrator, not me.

A week without a Fed meeting moved Treasury yields more than the hike week did, and stocks still finished higher. That gap is where money gets made and lost, and I keep pointing at it for that reason. The VIX ended at 14.87, about where it started. Remember, it only measures expected S&P 500 volatility over roughly the next month, nothing wider. And breadth is still doing its job this year. Through Friday, the equal-weighted S&P 500 was up about 10%, the Russell 2000 about 14%, and emerging markets about 24%, per the benchmark table on the portfolio dashboard.

- Dean

P.S. The number I keep coming back to is 4.6%. That is where year-ahead inflation expectations landed in Michigan’s final September survey, and it sits well above the 3.4% reading from February, before the Iran conflict began. Households are not reading the Fed’s projections. They are reading gas prices and grocery receipts. The Fed targets a different measure, and one survey is not a trend. But expectations that keep climbing are exactly what a committee weighs when it decides whether one more quarter point is enough.

And one more thought. The AI headline that stuck with me this week was not Muse. It was Oracle. On Thursday, the company issued a force majeure notice on its New Mexico data center project, citing construction delays. A force majeure clause lets a company delay its obligations when events outside its control disrupt the work. It is one project and one notice, so do not make it a trend. But it is a reminder that the AI build-out runs on concrete, power, and labor, not just chips. Money can be committed a lot faster than buildings can be finished. The next time you read about hundreds of billions in AI spending, ask how much of it is already standing.

👉 The portfolio rose 0.66% this week through Friday’s close, against 1.28% for the S&P 500 fund at its core. Bitcoin and Ethereum, 5% of the mix combined, did the most work, up 3.37% and 1.96%. Gold fell 1.91% as yields climbed, and small caps slipped 1.07%. For the year, the portfolio is up 10.69%, which trails the S&P 500 by 2.65 points. That gap is the cost of owning cash, gold, small caps, and foreign stocks alongside the big index, and we would rather pay it than bet everything on one market. Gold can fall hard. Crypto can halve. Cash costs you when stocks run. 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.