US Reverses Tariffs Amid China's Deepening Deflation Crisis; Sonder's Collapse Roils Travel Sector
Market Snapshot
- 📉 S&P 500: 6,734.11 (-0.05%)
- 📉 Dow Jones Industrial Average Futures: -0.03%
- 📈 NASDAQ 100 Futures: +0.15%
- 📉 US 10-Year Treasury: 4.139% (-0.217%)
- 📉 Bitcoin: <$96,000 (-5.00% weekly)
US Economic and Political Landscape
Investor uncertainty is high as markets weigh the future of Federal Reserve policy. The probability of an interest rate cut at the December meeting is now considered a 'coin flip', down from a two-thirds chance just a week ago. Market participants are keenly awaiting the minutes from the October Fed meeting for further guidance. Adding to the complex picture, an ethics report revealed that former Federal Reserve Governor Adriana Kugler broke the central bank’s stock trading rules, including making trades during prohibited “blackout periods”.
In a more positive development, the Fed plans to end its quantitative tightening programme by 1 December. This, along with the recent conclusion of the government shutdown, is expected to provide a moderate, bullish tailwind by reducing liquidity drag from the Treasury. This week, market focus will turn to the delayed September jobs report and key earnings reports from major retailers to better gauge the health of the US consumer and the balance between the labour market and inflation.
US Reverses Stance on Tariffs
The Trump administration is enacting a significant shift in trade policy by rolling back tariffs on a range of goods to lower consumer prices. A deal has been reached with Switzerland to reduce duties on Swiss exports from 39% to 15% in return for a $200 billion investment in the U.S. by 2028. Tariffs are also being lifted on imports from several Latin American countries, including Ecuador, Argentina, Guatemala, and El Salvador, targeting items like coffee and bananas. Domestically, tariffs on certain goods such as coffee, fruits, and some beef products are also being reversed.
Travel Sector Recovers from Shutdown
The Federal Aviation Administration has ended mandated flight cuts at 40 major airports, which were imposed due to air traffic controller staffing concerns during the government shutdown. The restrictions resulted in over 5 million travellers experiencing cancellations or delays. While the shutdown is over, the years-long air traffic controller shortage remains a significant issue, and airline executives are calling on lawmakers to ensure airport employees are paid in any future government closures.
US Cannabis Industry Faces Legislative Threat
A new restriction included in a recent US funding bill threatens to disrupt the $28 billion American cannabis market. The rule mandates that every package must contain less than 0.4 mg of THC. Industry leaders warn this could effectively ban 95% of current hemp products, potentially leading to widespread layoffs, a surge in black-market activity, and substantial losses in state tax revenue if not revised.
Global Economic Outlook
China's Worsening Economic Situation
China is grappling with a deepening deflationary crisis that poses a significant threat to its economy and the global market. Falling prices are squeezing corporate profits, shrinking payrolls, and weakening household spending. More than a quarter of publicly traded Chinese firms are now losing money, the highest proportion in at least 25 years, and the International Monetary Fund anticipates China's consumer inflation will average zero this year. The slowdown is already affecting global firms like Apple and Volkswagen, which have reported declining sales in the region.
This economic pressure is compounded by geopolitical tensions. A White House memo reportedly accused Alibaba of assisting the Chinese military, a claim the company denies. Concurrently, Japan is dispatching an envoy to China to ease diplomatic friction that has hurt tourism-related stocks.
Japan's Economy Contracts
Japan's economy has shown signs of weakness, contracting by 1.8% on an annualised basis in the third quarter. This marked its first quarterly decline in six quarters, though the decrease was smaller than analysts had expected due to modest growth in private and government consumption.
Long-Term Investment Projections
A 10-year investment outlook from Goldman Sachs suggests a potential shift in market leadership away from the U.S. after years of outperformance. The report projects weaker returns for US stocks, with the S&P 500 expected to return only 6.5% annually. In contrast, Artificial Intelligence and emerging markets, particularly in Asia, are forecast to post stronger gains. Asia ex-Japan is expected to return 10.3% annually, positioning these areas as defining investment themes for the next decade.
Corporate and Sector News
Tech Sector in the Spotlight
Nvidia's upcoming earnings report is a focal point for the market, with investors looking for reassurance in the artificial intelligence trade amid growing scepticism and a potential end to the Nasdaq's seven-month winning streak. While analysts expect a 56% year-over-year revenue jump, the company's outlook on future AI demand will be critical. CEO Jensen Huang has fuelled high expectations, stating the company has “half a trillion” dollars in chip orders for 2025 and 2026.
In other major tech news, Warren Buffett's Berkshire Hathaway acquired a $4.3 billion stake in Google-parent Alphabet in the third quarter, making it one of the firm's top ten holdings. During the same period, the company reduced its exposure to other major holdings, selling $10.6 billion worth of Apple shares and $1.9 billion of its Bank of America stock.
Elsewhere, Verizon is set to cut approximately 15,000 jobs, or 15% of its workforce, in a major restructuring. In contrast, eBay has seen its shares rise 75% since 2020 after successfully integrating new AI features, including a shopping chatbot.
Retail and Payments Sector in Transition
Walmart, the world's largest retailer, faces a period of uncertainty. CEO Doug McMillon is set to retire in early 2026, with his successor, John Furner, preparing to take over as the company navigates cautious spending from middle- and lower-income households. Both Walmart and its rival Target are expected to report weaker same-store sales in upcoming earnings reports. Other major retailers including Home Depot and Lowe's are also due to report this week.
In the fintech space, Venmo has introduced a new debit card rewards programme. Meanwhile, a legal settlement involving Visa and Mastercard will allow merchants to refuse certain high-fee rewards cards or add surcharges of up to 3% based on card type, signalling a potential long-term shift in the power dynamic between retailers and card networks over interchange fees.
Automotive Industry Updates
After six consecutive years of declining domestic sales, Jeep is aiming for a comeback. The SUV maker has struggled with leadership changes and a dry product pipeline but recently saw its best quarterly sales growth in over two years and is rolling out new models. Meanwhile, Ford has ceremonially opened its new 2.1-million-square-foot facility in Dearborn, Michigan, which replaces its previous headquarters.
Hospitality Turmoil: Sonder's Bankruptcy
The short-term rental company Sonder has filed for bankruptcy, causing significant disruption for travellers after its partner, Marriott, terminated their booking management agreement. Travellers were left stranded and forced to vacate properties, complicated by reports that Sonder had failed to pay rent in some locations.
IPO Market Shows Strength
This year has been strong for initial public offerings, with 191 IPOs raising capital through mid-November, a 48% increase from the previous year. Despite market disruptions, conditions appear favourable for a continued resurgence, with major offerings from companies like Medline, Databricks, and potentially OpenAI anticipated.
Digital Assets Enter 'Extreme Fear'
The cryptocurrency market has slipped into a state of 'Extreme Fear', with the Fear & Greed Index plunging to 10, a level unseen since late February. The shift in sentiment follows a more than 5% weekly drop in Bitcoin's price to below $96,000. The sell-off is attributed to a combination of long-term holder profit-taking, institutional outflows, and macro uncertainty surrounding the Fed's interest rate plans. However, some analysis suggests that despite the short-term volatility, Bitcoin's longer-term bull market structure remains intact.
Institutional Movements
Despite the market fear, institutional adoption continues. Harvard University's $57 billion endowment tripled its spot bitcoin ETF exposure in the third quarter, making its $443 million holding of BlackRock's IBIT one of its largest declared US positions. In another development, data from Artemis shows that Ethereum has now surpassed Bitcoin in the percentage of total supply held by digital asset treasuries.
DeFi and Stablecoin Innovation
The decentralised finance (DeFi) space continues to evolve. Aerodrome and Velodrome, two major protocols, are merging into a single entity named Aero. In the payments sector, MoonPay has launched an enterprise-grade platform to allow partners to issue their own app-specific, interoperable stablecoins.
Regulation and Technical Frontiers
On the regulatory front, renewed progress on the Clarity Act in the US signals a positive step towards clearer rules for digital assets. Conversely, a new law in the UAE has sparked controversy, with critics arguing its broad language could effectively ban self-custodial Bitcoin wallets for citizens without a Central Bank licence. In technology, a new framework known as the 'dAI stack' is emerging to allow autonomous AI agents to transact and coordinate with on-chain resources using stablecoins.
NOTE: This content is for informational and educational purposes only and does not constitute financial advice. Always do your own research. Not financial advice (NFA).